<PAGE>
SEMI-ANNUAL REPORT
PHOENIX
THE PHOENIX EDGE SERIES FUND
JUNE 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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................................................... 31
Phoenix Real Estate Securities Series..................................... 38
Phoenix Strategic Theme Series............................................ 42
Phoenix Aberdeen New Asia Series.......................................... 47
Phoenix Research Enhanced Index Series.................................... 53
Engemann Nifty Fifty Series............................................... 61
Seneca Mid-Cap Growth Series.............................................. 65
Phoenix Growth and Income Series.......................................... 69
Phoenix Value Equity Series............................................... 76
Schafer Mid-Cap Value Series.............................................. 81
Notes to Financial Statements............................................. 85
</TABLE>
Not FDIC Insured No Bank Guarantee May Lose Value
<PAGE>
MONEY MARKET SERIES
INVESTOR PROFILE
The Phoenix Money Market Series is designed for investors seeking high
current income with minimal risk of capital. The Fund is neither insured nor
guaranteed by the U.S. Government and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $10.00 per share.
INVESTMENT ADVISER'S REPORT
The Phoenix Money Market Series' seven-day current yield was 4.96% compared
with an average yield of 4.92% as reported in IBC's Money Market Insight for
first-tier money market funds.* 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.
Ongoing concerns about the turmoil in Southeast Asia and unstable markets
globally persisted throughout the six-month reporting period. As a result,
short-term money markets continued to experience high volatility. Moderate to
strong domestic growth in the first and second quarters of 1998 prompted the
Federal Reserve to move from a neutral policy position to a bias toward
tightening.
As market volatility continued during this time, we maintained a market
neutral strategy, looking for trading opportunities in variable-rate and
corporate securities. We continue to emphasize high-quality commercial paper and
variable-rate securities to enhance yield. The Fund's average credit quality
remains A1/P1. This rating is based solely on the creditworthiness of the
investments held and does not apply to the stability or safety of the Fund.
OUTLOOK
Volatility in the short-term money market sector will likely continue as
investors question whether the strong economy and low unemployment figures will
ultimately lead to higher inflation. Furthermore, the market seems to have mixed
views on whether the effects of the Asian turmoil will result in slower domestic
growth.
* The average yield is for 286 first-tier money market funds as reported in
IBC's Money Market Insight.
2
<PAGE>
MONEY MARKET SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
VALUE INTEREST MATURITY
(000) DESCRIPTION RATE DATE VALUE
- ------- --------------------------------------------- -------- --------- ------------
<C> <S> <C> <C> <C>
FEDERAL AGENCY SECURITIES--4.6%
$ 100 FHLB......................................... 5.72% 9/24/98 $ 100,009
1,650 FNMA......................................... 5.51 12/14/98 1,649,589
2,000 FNMA......................................... 5.54 4/9/99 2,018,200
2,000 FNMA......................................... 5.57 4/9/99 1,999,792
------------
TOTAL FEDERAL AGENCY SECURITIES............................................ 5,767,590
------------
<CAPTION>
RESET
DATE
---------
<C> <S> <C> <C> <C>
FEDERAL AGENCY SECURITIES--VARIABLE (b)--14.3%
3,500 FFCB (final maturity 4/1/99)................. 5.44 7/1/98 3,500,000
4,500 FFCB (final maturity 7/24/00)................ 5.79 7/1/98 4,501,048
2,227 SBA (final maturity 7/1/98).................. 6.00 7/1/98 2,226,599
285 SBA (final maturity 1/25/21)................. 6.00 7/1/98 284,392
479 SBA (final maturity 5/25/21)................. 6.00 7/1/98 478,424
1,994 SBA (final maturity 4/25/22)................. 6.00 7/1/98 1,994,139
1,954 SBA (final maturity 10/25/22)................ 6.00 7/1/98 1,951,274
1,000 SLMA (final maturity 2/22/99)................ 5.33 7/7/98 1,000,000
500 FFCB (final maturity 10/1/98)................ 5.60 10/1/98 499,911
1,500 SLMA (final maturity 11/10/98)............... 5.26 11/16/98 1,499,714
------------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE.................................. 17,935,501
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S MATURITY
DESCRIPTION RATING DATE
------------------------------------- -------- ---------
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER--74.1%
3,000 Exxon, Inc........................... A-1+ 6.20 7/1/98 3,000,000
600 Merrill Lynch & Co., Inc............. A-1+ 6.02 7/1/98 600,000
2,980 Pitney Bowes Credit Corp............. A-1+ 6.25 7/1/98 2,980,000
1,250 Greenwich Funding Corp............... A-1+ 5.58 7/2/98 1,249,807
2,565 Potomac Electric Power Co............ A-1 5.65 7/6/98 2,563,005
800 Merrill Lynch & Co., Inc............. A-1+ 5.61 7/7/98 799,252
1,020 Potomac Electric Power Co............ A-1 5.60 7/7/98 1,019,048
2,500 Schering Corp........................ A-1+ 5.80 7/7/98 2,497,583
1,000 Asset Securitization Cooperative
Corp................................. A-1+ 5.95 7/8/98 998,843
1,230 Deutsche Bank Financial Corp......... A-1 5.63 7/8/98 1,228,653
500 Enterprise Funding Corp.............. A-1 5.66 7/8/98 499,450
1,900 Greenwich Funding Corp............... A-1+ 5.58 7/8/98 1,897,938
400 Albertson, Inc....................... A-1 5.75 7/9/98 399,489
1,740 Corporate Receivables Corp........... A-1 5.53 7/9/98 1,737,862
600 Marsh & McLennan Co., Inc............ A-1 5.63 7/9/98 599,249
2,000 Corporate Asset Funding Co., Inc..... A-1+ 5.55 7/10/98 1,997,225
1,783 Enterprise Funding Corp.............. A-1+ 5.57 7/10/98 1,780,517
2,000 Preferred Receivables Funding
Corp................................. A-1 5.55 7/13/98 1,996,300
1,450 Preferred Receivables Funding
Corp................................. A-1 5.59 7/13/98 1,447,298
1,815 Koch Industries, Inc................. A-1 5.65 7/15/98 1,811,012
700 CXC, Inc............................. A-1+ 5.53 7/16/98 698,387
1,000 CXC, Inc............................. A-1+ 5.55 7/22/98 996,762
2,500 Potomac Electric Power Co............ A-1 5.50 7/22/98 2,491,979
1,200 Potomac Electric Power Co............ A-1 5.52 7/22/98 1,196,136
700 Potomac Electric Power Co............ A-1 5.58 7/22/98 697,721
1,125 General Electric Capital Corp........ A-1+ 5.55 7/23/98 1,121,184
1,660 Merrill Lynch & Co., Inc............. A-1+ 5.53 7/24/98 1,654,135
675 Potomac Electric Power Co............ A-1 5.51 7/27/98 672,314
2,050 Private Export Funding Corp.......... A-1+ 5.60 7/27/98 2,041,709
1,687 Potomac Electric Power Co............ A-1 5.50 7/28/98 1,680,041
2,500 Receivables Capital Corp............. A-1+ 5.57 7/28/98 2,489,556
1,592 Receivables Capital Corp............. A-1+ 5.59 7/28/98 1,585,326
1,410 Enterprise Funding Corp.............. A-1 5.50 7/29/98 1,403,968
504 Vermont American Corp................ A-1+ 5.65 7/29/98 501,785
1,765 Preferred Receivables Funding
Corp................................. A-1 5.62 7/30/98 1,757,009
2,435 Private Export Funding Corp.......... A-1+ 5.36 8/3/98 2,423,036
2,400 Private Export Funding Corp.......... A-1+ 5.52 8/5/98 2,387,120
</TABLE>
See Notes to Financial Statements
3
<PAGE>
MONEY MARKET SERIES
<TABLE>
<CAPTION>
FACE STANDARD
VALUE & POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- -------------------------------------------- -------- -------- --------- ------------
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER--CONTINUED
$ 2,500 Private Export Funding Corp.......... A-1+ 5.50% 8/7/98 $ 2,485,868
1,000 Preferred Receivables Funding
Corp................................. A-1 5.42 8/10/98 993,978
1,450 Enterprise Funding Corp.............. A-1 5.54 8/11/98 1,440,851
1,840 CXC, Inc............................. A-1+ 5.60 8/19/98 1,825,975
575 General Re Corp...................... A-1+ 5.52 8/20/98 570,592
1,000 General Re Corp...................... A-1+ 5.52 8/26/98 991,413
1,910 General Re Corp...................... A-1+ 5.51 8/27/98 1,897,645
2,750 General Re Corp...................... A-1+ 5.52 8/27/98 2,725,965
2,000 Kimberly-Clark, Inc.................. A-1+ 5.55 8/31/98 1,981,192
1,500 CXC, Inc............................. A-1+ 5.47 9/16/98 1,482,450
2,500 Corporate Asset Funding Co., Inc..... A-1+ 5.53 9/17/98 2,470,046
500 Beta Finance, Inc.................... A-1+ 5.44 9/24/98 493,578
2,000 Beta Finance, Inc.................... A-1+ 5.46 9/30/98 1,972,397
2,500 Corporate Receivables Corp........... A-1 5.53 10/16/98 2,458,909
3,000 Greenwich Funding Corp............... A-1+ 5.52 12/31/98 2,915,820
575 General Electric Capital Corp........ A-1+ 8.10 1/26/99 582,116
2,000 Marsh & McLennan Co., Inc............ A-1 5.50 2/8/99 1,932,167
2,000 Deutsche Bank Financial Corp......... A-1+ 5.75 3/5/99 1,999,352
2,500 Beta Finance, Inc.................... A-1+ 5.73 3/16/99 2,500,282
2,500 General Electric Capital Corp........ A-1+ 5.55 6/4/99 2,498,751
------------
TOTAL COMMERCIAL PAPER..................................................... 93,120,046
------------
MEDIUM-TERM NOTES--5.6%
1,500 Associates Corporation of North
America.............................. AA- 6.38 8/15/98 1,500,804
2,000 Associates Corporation of North
America.............................. AA- 6.50 9/9/98 2,002,343
1,000 Pitney Bowes Credit Corp............. AA 6.31 9/23/98 1,001,146
1,000 Associates Corporation of North
America.............................. AA- 5.75 11/15/98 999,712
1,500 Associates Corporation of North
America.............................. AA- 5.65 6/15/99 1,497,675
------------
TOTAL MEDIUM-TERM NOTES.................................................... 7,001,680
------------
TOTAL INVESTMENTS--98.6%
(Identified cost $123,824,817)........................................... 123,824,817(a)
Cash and receivables, less liabilities--1.4%............................. 1,818,367
------------
NET ASSETS--100.0%......................................................... $125,643,184
------------
------------
</TABLE>
(a) Federal Income Tax information: At June 30, 1998, 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
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$123,824,817)............................................. $ 123,824,817
Receivables
Fund shares sold.......................................... 1,856,376
Interest.................................................. 300,322
-------------
Total assets............................................ 125,981,515
-------------
LIABILITIES
Payables
Custodian................................................. 72,299
Fund shares repurchased................................... 159,071
Investment advisory fee................................... 38,798
Financial agent fee....................................... 10,413
Trustees' fee............................................. 8,282
Accrued expenses.......................................... 49,468
-------------
Total liabilities....................................... 338,331
-------------
NET ASSETS.................................................. $ 125,643,184
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 125,643,184
-------------
NET ASSETS.................................................. $ 125,643,184
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 12,564,317
-------------
-------------
Net asset value and offering price per share................ $ 10.00
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 3,226,391
-------------
Total investment income................................. 3,226,391
-------------
EXPENSES
Investment advisory fee................................... 235,380
Financial agent fee....................................... 39,599
Custodian................................................. 24,066
Printing.................................................. 16,368
Professional.............................................. 9,991
Trustees.................................................. 7,791
Miscellaneous............................................. 6,046
-------------
Total expenses.......................................... 339,241
Less expenses borne by investment adviser............... (14,087)
-------------
Net expenses............................................ 325,154
-------------
NET INVESTMENT INCOME....................................... 2,901,237
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,901,237
-------------
-------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- ------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income.................................................... $ 2,901,237 $ 6,261,529
------------- ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... 2,901,237 6,261,529
------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................................... (2,901,240) (6,261,529)
------------- ------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................ (2,901,240) (6,261,529)
------------- ------------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (16,289,660 and 35,987,251 shares,
respectively).......................................................... 162,895,964 359,872,496
Net asset value of shares issued from reinvestment of distributions
(290,059 and 626,153 shares, respectively)............................. 2,901,240 6,261,528
Cost of shares repurchased (16,676,071 and 37,088,873 shares,
respectively).......................................................... (166,760,711) (370,888,736)
------------- ------------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS........................... (963,507) (4,754,712)
------------- ------------------
NET DECREASE IN NET ASSETS............................................... (963,510) (4,754,712)
NET ASSETS
Beginning of period...................................................... 126,606,694 131,361,406
------------- ------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0
AND $3, RESPECTIVELY).................................................. $125,643,184 $ 126,606,694
------------- ------------------
------------- ------------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............. 0.24(1) 0.50 0.50 0.56 0.38(1) 0.28(1)
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 0.24 0.50 0.50 0.56 0.38 0.28
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.24) (0.50) (0.50) (0.56) (0.38) (0.28)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.24) (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 $ 10.00
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 2.44%(3) 4.99% 4.98% 5.55% 3.77% 2.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $125,643 $126,607 $131,361 $102,943 $94,586 $72,946
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.55%(4) 0.55% 0.55% 0.53%(2) 0.55% 0.55%
Net investment income............. 4.93%(4) 5.07% 4.89% 5.57% 3.85% 2.84%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001, $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.
(3) Not annualized.
(4) Annualized.
See Notes to Financial Statements
6
<PAGE>
GROWTH SERIES
INVESTOR PROFILE
The Phoenix Growth Series is appropriate for investors seeking long-term
appreciation through investments in common stocks.
INVESTMENT ADVISER'S REPORT
For the six-month reporting period that ended June 30, 1998, the Fund earned
16.28% compared with a return of 17.75% for the S&P 500 Index.* All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
After posting impressive double-digit gains in the first quarter, U.S.
equities markets were mixed during the second quarter as investors refocused
their attention on Asia and the prospects for slower corporate profit growth. As
we have stated for some time, investors' preference for liquidity and earnings
stability has led to strong demand and a willingness to pay significant premiums
(higher P/E multiples) for large-cap growth companies, which are noted for these
positive attributes. Although many of these blue-chip stocks look expensive by
most historical valuation measures, we do not foresee any major catalysts that
would sway investor sentiment toward smaller-cap issues over the near term.
Stocks that performed well in the second quarter focused on the
upbeat/confident U.S. consumer. While the news from the Pacific Rim continued to
be gloomy, economic growth in the United States was exceptionally robust. A rosy
employment picture, record home sales, and the "wealth effect" from this long
bull market all contributed to a dramatic increase in consumer spending. Retail,
auto, entertainment and other consumer-oriented stocks led the market. At the
same time, excess capacity and slackened Asian demand led to poor performance
among basic commodity industries, such as oil, steel, precious metals and paper.
Our decision to overweight the portfolio in health-care and technology
stocks contributed positively to performance. Strong stock selection within the
communication services sector (most notably Airtouch Communications and
Ericsson), the consumer staples group (specifically Liberty Media Group and
Safeway), and the health-care area (Watson Pharmaceutical and Medtronic) also
boosted overall results. A major negative to performance was our exposure to the
poorly performing energy group. While we have modestly reduced our position in
this volatile sector for the near term, longer-term fundamentals for energy
services companies remain positive in our opinion, and we would add to these
stocks if crude oil prices begin to show real signs of stabilization.
OUTLOOK
Moving into the second half of 1998, we have not made any dramatic revisions
to our outlook for the U.S. economy and financial markets. Although recent
economic data has been rather strong, we believe that growth will slow later
this year as the impact of the "Asian flu" begins to take hold in the United
States. In fact, corporate earnings growth has already begun decelerating, and
we expect this trend to continue over the next several quarters. While we are
not forecasting the end to this long bull market or the start of the next
recession, we would not be surprised to see the stock market take a
well-deserved rest over the near term.
With regard to stock selection, we remain strongly biased toward large-cap
growth companies that have limited Asian exposure and whose earnings are less
economically sensitive. The portfolio is currently overweighted (versus the S&P
500 Index) in such traditional growth sectors as health-care, technology, and to
a lesser degree, communication services. Because of the present speculative
merger and acquisition environment in the financial services arena, we believe
that some stocks in this group have become overbought and have elected to
selectively take profits in this sector. Given their value and cyclical
orientation, the portfolio also has little or no exposure to basic materials,
transportation, and utilities.
* The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The Index is not available for direct investment.
7
<PAGE>
GROWTH SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
COMMON STOCKS--94.3%
AEROSPACE/DEFENSE--1.0%
Boeing Co............................................... 370,300 $ 16,501,494
----------------
BANKS (MAJOR REGIONAL)--4.2%
Banc One Corp........................................... 279,130 15,578,943
BankBoston Corp......................................... 230,400 12,816,000
Mellon Bank Corp........................................ 188,700 13,138,237
U.S. Bancorp............................................ 699,100 30,061,300
----------------
71,594,480
----------------
BANKS (MONEY CENTER)--3.9%
BankAmerica Corp........................................ 248,000 21,436,500
Citicorp................................................ 80,700 12,044,475
First Chicago NBD Corp.................................. 183,100 16,227,237
NationsBank Corp........................................ 228,400 17,472,600
----------------
67,180,812
----------------
BROADCASTING (TELEVISION, RADIO & CABLE)--4.1%
CBS Corp................................................ 817,700 25,961,975
Capstar Broadcasting Corp. (b).......................... 148,700 3,736,087
Chancellor Media Corp. (b).............................. 380,900 18,914,066
Clear Channel Communications, Inc. (b).................. 190,600 20,799,225
----------------
69,411,353
----------------
CHEMICALS (DIVERSIFIED)--1.7%
Monsanto Co............................................. 521,500 29,138,812
----------------
COMPUTERS (HARDWARE)--5.8%
Compaq Computer Corp.................................... 531,500 15,081,312
International Business Machines Corp.................... 728,100 83,594,981
----------------
98,676,293
----------------
COMPUTERS (NETWORKING)--1.2%
Cisco Systems, Inc. (b)................................. 217,050 19,982,166
----------------
COMPUTERS (PERIPHERALS)--0.8%
EMC Corp. (b)........................................... 298,800 13,389,975
----------------
COMPUTERS (SOFTWARE & SERVICES)--8.0%
America Online, Inc. (b)................................ 93,200 9,879,200
BMC Software, Inc. (b).................................. 486,600 25,272,787
Comdisco, Inc........................................... 234,200 4,449,800
Computer Associates International, Inc.................. 575,000 31,948,437
Compuware Corp. (b)..................................... 634,700 32,449,037
Edwards (J.D.) & Co. (b)................................ 299,400 12,855,487
Microsoft Corp. (b)..................................... 104,200 11,292,675
Sterling Commerce, Inc. (b)............................. 194,401 9,428,448
----------------
137,575,871
----------------
CONSUMER FINANCE--1.9%
Household International, Inc............................ 246,500 12,263,375
MBNA Corp............................................... 634,000 20,922,000
----------------
33,185,375
----------------
CONTAINERS (METAL & GLASS)--0.5%
Owens-Illinois, Inc. (b)................................ 209,300 9,366,175
----------------
DISTRIBUTORS (FOOD & HEALTH)--1.3%
Cardinal Health, Inc.................................... 238,900 22,396,875
----------------
ELECTRICAL EQUIPMENT--1.7%
General Electric Co..................................... 323,800 29,465,800
----------------
ELECTRONICS (INSTRUMENTATION)--0.4%
Linear Technology Corp.................................. 111,500 6,724,844
----------------
ELECTRONICS (SEMICONDUCTORS)--1.3%
Intel Corp.............................................. 306,200 22,697,075
----------------
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
ENTERTAINMENT--2.6%
Liberty Media Group (b)................................. 744,900 $ 28,911,431
Walt Disney Co. (The)................................... 146,600 15,402,163
----------------
44,313,594
----------------
FINANCIAL (DIVERSIFIED)--1.5%
FHLMC................................................... 548,300 25,804,369
----------------
HEALTH CARE (DIVERSIFIED)--4.9%
Bristol-Myers Squibb Co................................. 375,300 43,136,044
Warner-Lambert Co....................................... 580,200 40,251,375
----------------
83,387,419
----------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--5.5%
Pfizer, Inc............................................. 318,200 34,584,363
Schering-Plough Corp.................................... 412,700 37,813,638
Watson Pharmaceuticals, Inc. (b)........................ 454,500 21,219,469
----------------
93,617,470
----------------
HEALTH CARE (HOSPITAL MANAGEMENT)--2.2%
HBO & Co................................................ 1,079,400 38,048,850
----------------
HEALTH CARE (LONG TERM CARE)--1.3%
HEALTHSOUTH Corp. (b)................................... 839,600 22,406,825
----------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.8%
Medtronic, Inc.......................................... 473,800 30,204,750
----------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.2%
Colgate-Palmolive Co.................................... 233,500 20,548,000
Procter & Gamble Co..................................... 189,500 17,256,344
----------------
37,804,344
----------------
INSURANCE (LIFE/HEALTH)--0.5%
UNUM Corp............................................... 145,100 8,053,050
----------------
INSURANCE (MULTI-LINE)--2.4%
American International Group, Inc....................... 167,500 24,455,000
ReliaStar Financial Corp................................ 176,900 8,491,200
Travelers Group, Inc.................................... 136,500 8,275,313
----------------
41,221,513
----------------
INSURANCE (PROPERTY-CASUALTY)--0.9%
Allstate Corp........................................... 170,700 15,629,719
----------------
MANUFACTURING (DIVERSIFIED)--2.4%
Thermo Electron Corp. (b)............................... 223,900 7,654,581
Tyco International Ltd.................................. 519,000 32,697,000
----------------
40,351,581
----------------
OIL & GAS (DRILLING & EQUIPMENT)--4.0%
Cooper Cameron Corp. (b)................................ 135,500 6,910,500
Diamond Offshore Drilling, Inc.......................... 127,600 5,104,000
Global Industries, Ltd. (b)............................. 208,700 3,521,813
Halliburton Co.......................................... 325,400 14,500,638
Schlumberger Ltd........................................ 382,100 26,102,206
Transocean Offshore, Inc................................ 272,200 12,112,900
----------------
68,252,057
----------------
OIL & GAS (REFINING & MARKETING)--1.3%
Tosco Corp.............................................. 756,600 22,225,125
----------------
RETAIL (BUILDING SUPPLIES)--1.8%
Home Depot, Inc......................................... 363,050 30,155,841
----------------
RETAIL (COMPUTERS & ELECTRONICS)--0.5%
Tandy Corp.............................................. 172,900 9,174,506
----------------
RETAIL (DRUG STORES)--3.9%
CVS Corp................................................ 836,600 32,575,113
</TABLE>
See Notes to Financial Statements
8
<PAGE>
GROWTH SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
RETAIL (DRUG STORES)--CONTINUED
Rite Aid Corp........................................... 924,700 $ 34,734,044
----------------
67,309,157
----------------
RETAIL (FOOD CHAINS)--2.4%
Safeway, Inc. (b)....................................... 1,024,800 41,696,550
----------------
RETAIL (GENERAL MERCHANDISE)--4.6%
Borders Group, Inc. (b)................................. 379,500 14,041,500
Consolidated Stores Corp. (b)........................... 453,100 16,424,875
Meyer (Fred), Inc. (b).................................. 299,390 12,724,075
Sears, Roebuck & Co..................................... 264,100 16,126,606
Staples, Inc. (b)....................................... 681,550 19,722,353
----------------
79,039,409
----------------
RETAIL (SPECIALTY-APPAREL)--0.6%
TJX Companies, Inc. (The)............................... 429,800 10,368,925
----------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.9%
Airtouch Communications, Inc. (b)....................... 856,000 50,022,500
----------------
TELECOMMUNICATIONS (LONG DISTANCE)--4.4%
AT&T Corp............................................... 832,800 47,573,700
MCI Communications Corp................................. 473,500 27,522,188
----------------
75,095,888
----------------
WASTE MANAGEMENT--1.9%
USA Waste Services, Inc. (b)............................ 644,400 31,817,250
----------------
TOTAL COMMON STOCKS
(Identified cost $1,330,979,604)...................................... 1,613,288,092
----------------
FOREIGN COMMON STOCKS--4.6%
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.6%
Elan Corp. PLC Sponsored ADR (Ireland) (b).............. 166,100 10,682,306
----------------
HOUSEHOLD FURN. & APPLIANCES--2.5%
Royal Philips Electronics NV NY Registered Shares
(Netherlands)......................................... 500,600 42,551,000
----------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.5%
Telefonaktiebolaget LM Ericsson Sponsored ADR
(Sweden).............................................. 312,800 8,953,900
----------------
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
TELEPHONE--1.0%
Telecomunicacoes Brasileiras SA Sponsored ADR
(Brazil).............................................. 162,500 $ 17,742,969
----------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $76,170,955)......................................... 79,930,175
----------------
TOTAL LONG-TERM INVESTMENTS--98.9%
(Identified cost $1,407,150,559)...................................... 1,693,218,267
----------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.0%
COMMERCIAL PAPER--0.8%
Cargill, Inc. 6.10%, 7/1/98..................... A-1+ $ 635 635,000
Greenwich Funding Corp. 5.58%, 7/8/98........... A-1+ 2,805 2,801,956
Preferred Receivables Funding Corp. 5.65%,
7/10/98....................................... A-1 3,855 3,849,555
Private Export Funding Corp. 5.50%,
7/27/98....................................... A-1+ 5,000 4,980,139
Enterprise Funding Corp. 5.54%, 8/11/98......... A-1+ 250 248,133
General Electric Capital Corp. 5.55%,
6/4/99........................................ A-1+ 1,000 999,296
---------------
13,514,079
---------------
FEDERAL AGENCY SECURITIES--0.2%
FHLMC 5.45%, 7/29/98............................ 2,655 2,643,746
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $16,158,319)................................................ 16,157,825
---------------
TOTAL INVESTMENTS--99.9%
(Identified cost $1,423,308,878)............................................. 1,709,376,092(a)
Cash and receivables, less liabilities--0.1%................................. 1,166,612
---------------
NET ASSETS--100.0%............................................................. $ 1,710,542,704
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $320,836,923 and gross
depreciation of $35,010,724 for federal income tax purposes. At June 30,
1998, the aggregate cost of securities for federal income tax purposes was
$1,423,549,893.
(b) Non-income producing.
See Notes to Financial Statements
9
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$1,423,308,878)........................................... $ 1,709,376,092
Receivables
Investment securities sold................................ 18,427,032
Fund shares sold.......................................... 1,378,775
Dividends and interest.................................... 1,031,457
---------------
Total assets............................................ 1,730,213,356
---------------
LIABILITIES
Payables
Custodian................................................. 3,205
Investment securities purchased........................... 17,174,502
Fund shares repurchased................................... 1,401,200
Investment advisory fee................................... 776,122
Financial agent fee....................................... 41,737
Trustees' fee............................................. 6,846
Accrued expenses.......................................... 267,040
---------------
Total liabilities....................................... 19,670,652
---------------
NET ASSETS.................................................. $ 1,710,542,704
---------------
---------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 1,343,995,666
Undistributed net investment income....................... 846,350
Accumulated net realized gain............................. 79,633,474
Net unrealized appreciation............................... 286,067,214
---------------
NET ASSETS.................................................. $ 1,710,542,704
---------------
---------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 79,157,120
---------------
---------------
Net asset value and offering price per share................ $ 21.61
-------
-------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 6,212,276
Interest.................................................. 1,362,976
Foreign taxes withheld.................................... (28,199)
-------------
Total investment income................................. 7,547,053
-------------
EXPENSES
Investment advisory fee................................... 4,916,356
Financial agent fee....................................... 440,246
Custodian................................................. 59,690
Professional.............................................. 16,726
Printing.................................................. 14,769
Trustees.................................................. 7,614
Miscellaneous............................................. 28,423
-------------
Total expenses.......................................... 5,483,824
-------------
NET INVESTMENT INCOME....................................... 2,063,229
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 80,228,217
Net change in unrealized appreciation (depreciation) on
investments............................................. 161,289,136
-------------
NET GAIN ON INVESTMENTS..................................... 241,517,353
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 243,580,582
-------------
-------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income.............................................................. $ 2,063,229 $ 8,821,110
Net realized gain.................................................................. 80,228,217 208,505,196
Net change in unrealized appreciation (depreciation)............................... 161,289,136 44,027,962
-------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................... 243,580,582 261,354,268
-------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................................................. (2,092,240) (8,665,448)
Net realized gains................................................................. (49,702,093) (236,146,906)
-------------- ---------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.......................... (51,794,333) (244,812,354)
-------------- ---------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (6,552,857 and 12,502,677 shares, respectively)...... 136,010,335 253,355,592
Net asset value of shares issued from reinvestment of distributions (2,390,541 and
12,750,840 shares, respectively)................................................. 51,794,333 244,812,354
Cost of shares repurchased (8,355,289 and 12,075,426 shares, respectively)......... (174,616,066) (244,536,540)
-------------- ---------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS..................................... 13,188,602 253,631,406
-------------- ---------------
NET INCREASE IN NET ASSETS......................................................... 204,974,851 270,173,320
NET ASSETS
Beginning of period................................................................ 1,505,567,853 1,235,394,533
-------------- ---------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $846,350 AND
$875,361, RESPECTIVELY).......................................................... $1,710,542,704 $1,505,567,853
-------------- ---------------
-------------- ---------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 19.16 $ 18.89 $ 18.13 $ 15.69 $ 16.59 $ 15.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income............. 0.03 0.13 0.19 0.20 0.23(1)(3) 0.16(3)
Net realized and unrealized
gain............................ 3.10 3.70 2.10 4.60 0.02 2.77
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 3.13 3.83 2.29 4.80 0.25 2.93
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.03) (0.13) (0.18) (0.17) (0.23) (0.15)
Dividends from net realized
gains........................... (0.65) (3.43) (1.35) (2.19) (0.92) (1.20)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.68) (3.56) (1.53) (2.36) (1.15) (1.35)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 2.45 0.27 0.76 2.44 (0.90) 1.58
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 21.61 $ 19.16 $ 18.89 $ 18.13 $ 15.69 $ 16.59
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 16.28%(5) 21.07% 12.58% 30.85% 1.48% 19.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $1,710,543 $1,505,568 $1,235,395 $985,389 $616,221 $446,368
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.68%(4) 0.74% 0.72% 0.75%(2) 0.80% 0.79%
Net investment income............. 0.26%(4) 0.64% 1.03% 1.12% 1.38% 0.97%
Portfolio turnover rate............. 56%(5) 284% 167% 173% 185% 185%
</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) Annualized.
(5) Not annualized.
See Notes to Financial Statements
11
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
INVESTOR PROFILE
The Phoenix Multi-Sector Fixed Income Series is designed for long-term
investors seeking high current income and long-term capital appreciation by
investing in all sectors of the bond market, including emerging-market debt and
high-yield issues. Investors should note that foreign investments pose
additional risks, such as currency fluctuations, less public information, and
political and economic risks, and high-yield securities have more risk than
higher quality, lower yielding issues.
INVESTMENT ADVISER'S REPORT
For the six months ended June 30, 1998, the Fund returned 1.20% compared
with 3.93% for the Lehman Brothers Aggregate Index.* All performance figures
assume reinvestment of dividends and exclude the effect of sales charges.
The Fund's underperformance was due to an overweighted position in foreign
debt, particularly Eastern Europe and Latin America. Although short-term
performance of foreign debt issues has been weak, we believe the long-term
outlook will again be positive once the IMF package for Russia is fully
implemented, stabilization in Japan occurs, and global investor confidence is
restored.
Positive contributors to performance included our position in commercial
mortgage-backed securities, non-agency residential mortgage-backed issues, and
domestic high-yield corporate bonds.
OUTLOOK
We continue to believe foreign bonds, especially emerging-market debt, offer
the potential for above-average returns. We will continue to look at all sectors
of the bond market and maintain a well-diversified portfolio, taking a team
approach to identify the most attractive values.
* The Lehman Brothers Aggregate Index is an unmanaged, commonly used measure of
bond market total return performance. The Index is not available for direct
investment.
12
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------------ -------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--4.7%
U.S. TREASURY BONDS--3.4%
U.S. Treasury Bond Strip, P.O., 0%, 2/15/19.......... Aaa $ 12,000 $ 3,705,480
U.S. Treasury Bond Strip, P.O., 0%, 11/15/21......... Aaa 8,300 2,191,282
U.S. Treasury Bond 6.125%, 11/15/27.................. Aaa 1,250 1,339,388
-------------
7,236,150
-------------
U.S. TREASURY NOTES--1.3%
U.S. Treasury Notes 5.625%, 5/15/08.................. Aaa 2,700 2,735,856
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $9,457,176).................................................. 9,972,006
-------------
AGENCY MORTGAGE-BACKED SECURITIES--0.7%
GNMA 8%, '06......................................... Aaa 164 171,590
GNMA 6.50%, '23-'26.................................. Aaa 1,388 1,391,723
-------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $1,535,904).................................................. 1,563,313
-------------
MUNICIPAL BONDS--10.8%
COLORADO--1.0%
Denver City & County School District 01 Taxable
6.76%, 12/15/07.................................... Aaa 2,000 2,087,500
-------------
CALIFORNIA--2.2%
California State Department Water System Series S 5%,
12/1/29............................................ Aa 1,850 1,799,125
Orange County Pension Obligation Series A Taxable
7.67%, 9/1/09...................................... Aaa 2,620 2,927,850
-------------
4,726,975
-------------
FLORIDA--1.2%
Palm Beach Waste Revenue Project B Taxable 10.50%,
1/1/11 (e)......................................... NR 1,500 1,170,000
University of Miami Exchangeable Revenue Series A
Taxable 7.65%, 4/1/20.............................. Aaa 1,290 1,377,075
-------------
2,547,075
-------------
ILLINOIS--1.4%
Illinois Educational Facilities Authority
Revenue--Loyola University Series A 5.70%,
7/1/24............................................. Aaa 1,200 1,252,500
Illinois Educational Facilities Authority
Revenue--Loyola University Series A 7.84%,
7/1/24............................................. Aaa 1,600 1,770,000
-------------
3,022,500
-------------
MASSACHUSETTS--2.9%
Massachusetts Port Authority Revenue Taxable 6.35%,
7/1/06............................................. Aa 1,500 1,516,875
Massachusetts State Turnpike Authority Metropolitan
Highway System Revenue Series A 5%, 1/1/27......... Aaa 2,125 2,058,594
Massachusetts State Water Authority Series D 5%,
8/1/24............................................. Aaa 2,500 2,431,250
-------------
6,006,719
-------------
PENNSYLVANIA--1.0%
Pittsburgh Pension Taxable B 6.35%, 3/1/13........... Aaa 2,000 2,022,500
-------------
VIRGINIA--0.4%
Newport News Series B Taxable 7.05%, 1/15/25......... Aa 750 768,750
-------------
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------------ -------- -------------
<S> <C> <C> <C>
WASHINGTON--0.7%
Washington State Series E Taxable 5%, 7/1/22......... Aa $ 1,545 $ 1,514,100
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $21,960,837)................................................. 22,696,119
-------------
ASSET-BACKED SECURITIES--3.5%
Continental Airlines 97-2D, 7.522%, 6/30/01.......... Ba 2,600 2,652,000
Green Tree Financial Corp. 94-1, B2 7.85%, 4/15/19... Baa 3,000 3,013,594
Morgan Stanley Capital 1 6.77%, 6/15/08.............. A(c) 1,700 1,730,281
-------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $7,429,816).................................................. 7,395,875
-------------
CORPORATE BONDS--23.1%
AUTOMOBILES--1.2%
Titan Tire 144A 7%, 2/11/00 (b)...................... NR 2,500 2,456,250
-------------
BANKS (MAJOR REGIONAL)--1.2%
BNP U.S. Funding LLC, 144A, 7.738%, 12/31/49
(b)(d)............................................. A 2,500 2,515,977
-------------
BEVERAGES (NON-ALCOHOLIC)--1.0%
Coca-Cola Enterprises 6.95%, 11/15/26................ A 2,000 2,082,500
-------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.0%
Poland Communications, Inc. B 9.875%, 11/1/03........ B 2,200 2,169,750
-------------
COMPUTERS (SOFTWARE & SERVICES)--1.7%
Computer Association International 144A 6.375%,
4/15/05 (b)........................................ Baa 3,500 3,521,875
-------------
CONSUMER FINANCE--1.5%
Household Finance Corp. EMTN, 6.40%, 6/17/08......... A 3,150 3,147,574
-------------
GAMING, LOTTERY & PARIMUTUEL COS.--0.5%
Mashantucket Pequot 144A 6.91%, 9/1/12 (b)........... Aaa 1,100 1,149,500
-------------
HEALTH CARE (DRUGS & MAJOR PHARMACEUTICALS)--1.0%
Schein Pharmaceutical 144A 8.576%, 12/15/04 (b)(d)... B 2,055 2,055,000
-------------
MANUFACTURING (DIVERSIFIED)--1.1%
Tyco International Group SA 7%, 6/15/28.............. Baa 2,250 2,269,688
-------------
OIL & GAS (EXPLORATION & PRODUCTION)--6.4%
Benton Oil & Gas Co. 11.625%, 5/1/03................. B 1,000 1,062,500
Benton Oil & Gas Co. 144A 9.375%, 11/1/07 (b)........ B 1,500 1,466,250
Forcenergy, Inc. 8.50%, 2/15/07...................... B 4,325 4,108,750
Lomak Petroleum, Inc. 8.75%, 1/15/07................. B 1,750 1,736,875
Ocean Energy, Inc. 8.875%, 7/15/07................... B 3,000 3,142,500
Snyder Oil Corp. 8.75%, 6/15/07...................... B 2,000 2,015,000
-------------
13,531,875
-------------
OIL & GAS (REFINING & MARKETING)--1.4%
PDVSA Finance Ltd. 98-1, 144A 7.50%, 11/15/28 (b).... A 3,000 3,000,000
-------------
SERVICES (COMMERCIAL & CONSUMER)--0.0%
ARA Services, Inc. 10.625%, 8/1/00................... Baa 54 57,983
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.3%
Orion Network Systems Inc. 12.50%, 1/15/07........... B 1,000 750,000
</TABLE>
See Notes to Financial Statements
13
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------------ -------- -------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--CONTINUED
Sprint Spectrum L.P. 12.50%, 8/15/06................. Ba $ 2,325 $ 1,987,875
-------------
2,737,875
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.6%
RCN Corp. 144A 0%, 2/15/08 (b)(d).................... B 2,000 1,220,000
-------------
TELEPHONE--2.7%
Global Crossing Holdings Ltd. 144A 9.625%, 5/15/08
(b)................................................ NR 1,400 1,461,250
Intermedia Communication Series B, 144A 11.25%,
7/15/07 (b)........................................ B 2,000 1,467,500
Interamericas Communication Corp. 144A 14%, 10/27/07
(b)................................................ NR 1,830 1,811,700
Pathnet, Inc. UNIT, 144A 12.25%, 4/15/08 (b)......... NR 1,000 1,085,000
-------------
5,825,450
-------------
TRUCKERS & MARINE--0.5%
Hvide Marine, Inc. 144A 8.375%,
2/15/08 (b)........................................ B 1,000 955,000
-------------
TOTAL CORPORATE BONDS
(Identified cost $48,176,527)................................................. 48,696,297
-------------
NON-AGENCY MORTGAGE BACKED SECURITIES--21.7%
BTC Mortgage Investors Trust 97-S1, D 144A 6.95%,
12/31/09 (b)....................................... BBB(c) 1,750 1,769,141
Contimortgage Home Equity Loan Trust 98-1, B 7.86%,
4/15/29............................................ Baa 4,000 4,062,500
CS First Boston Mtg. Securities Corp. 97-SPCE, D 144A
7.332%, 4/20/08 (b)................................ BBB(c) 1,800 1,820,812
CS First Boston Mtg. Securities Corp. 97-IR, 1M4 144A
7.355%, 2/28/22 (b)................................ Baa 2,798 2,816,880
DLJ Mortgage Acceptance Corp. 97-CF2, B2 144A 7.14%,
11/15/08 (b)....................................... Baa 2,200 2,252,250
First Chicago/Lennar Trust 97-CHL1, D 144A 8.130%,
5/19/08 (b)........................................ BB(c) 2,000 2,020,625
First Union Lehman Brothers 98-C2, D 6.778%,
3/18/13............................................ Baa 3,000 2,942,812
General Electric Mortgage Services, Inc. 96-8, 2A5
7.50%, 5/25/26..................................... AAA(c) 981 1,007,978
General Growth Properties 1, D2 144A 6.992%, 11/15/07
(b)................................................ Baa 2,000 2,006,250
Green Tree Financial Corp. 97-4, M1 7.22%, 2/15/29... Aa 2,500 2,566,797
IMC Home Equity Loan Trust 98-1, B 7.87%, 6/20/29.... Baa 2,000 2,031,250
Impac CMB Trust 98-2, M3 7.25%, 4/25/28.............. A(c) 1,061 1,061,085
Residential Asset Securitization Trust 96-A4, A13
7.50%, 9/25/26..................................... AAA(c) 1,000 1,022,812
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26........................................... AAA(c) 781 785,154
Residential Funding Mtg. Securities I 94-S7, M3
6.50%, 3/25/24..................................... Ba 4,045 3,891,324
Ryland Mortgage Securities Corp. III 92-A, 1A 8.235%,
3/29/30............................................ A- 818 830,025
Securitized Asset Sales, Inc. 95-6, B3 144A 7%,
12/25/10 (b)....................................... NR 1,302 1,247,618
Securitized Asset Sales, Inc. 95-A, M 7.53%,
3/25/24............................................ Aa 1,784 1,844,837
Structured Asset Securities Corp. 95-C1, D 7.375%,
9/25/24............................................ BBB(c) 2,000 2,016,250
Structured Asset Securities Corp. 93-C1, B 6.60%,
10/25/24........................................... A+(c) 2,250 2,235,234
Structured Asset Securities Corp. 95-C4, 7%,
6/25/26............................................ BBB(c) 1,900 1,903,563
Team Fleet Financing Corp. 96-1, B 144A 7.10%,
12/15/02 (b)....................................... BBB(c) 1,975 2,000,305
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------------ -------- -------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE BACKED SECURITIES--CONTINUED
Wilshire Funding Corp. 97-WFC1, M3 7.25%, 8/25/27.... Baa $ 1,564 $ 1,561,198
-------------
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(Identified cost $44,579,837)................................................. 45,696,700
-------------
FOREIGN GOVERNMENT SECURITIES--16.2%
BRAZIL--1.7%
Republic of Brazil C Bond, PIK interest
capitalization 8%, 5/15/14......................... B 4,844 3,566,304
-------------
BULGARIA--1.0%
Bulgaria FLIRB Series A Bearer Euro 2.25%, 7/28/12
(d)................................................ B 3,500 2,161,250
-------------
CROATIA--1.6%
Croatia Series B 6.50%, 7/31/06 (d).................. Baa 1,849 1,673,251
Croatia Series A 6.50%, 7/31/10 (d).................. Baa 2,000 1,740,000
-------------
3,413,251
-------------
DOMINICAN REPUBLIC--0.2%
Dominican Republic PDI Bearer 6.688%, 8/30/09 (d).... B+(c) 490 389,552
-------------
ECUADOR--1.0%
Ecuador Bearer PDI Euro, PIK interest capitalization
6.625%, 2/27/15 (d)................................ B 695 400,735
Ecuador Global Bearer PDI 3.25%, 2/27/15............. B 2,225 1,282,352
Ecuador Registered PDI Euro, PIK interest
capitalization 5.252%, 2/27/15 (d)................. B 835 480,882
-------------
2,163,969
-------------
KOREA--1.5%
Republic of Korea 8.75%, 4/15/03..................... Ba 1,750 1,645,000
Republic of Korea 8.875%, 4/15/08.................... Ba 1,750 1,601,250
-------------
3,246,250
-------------
MEXICO--1.8%
United Mexican States Global Bond 11.50%, 5/15/26.... Ba 3,400 3,870,900
-------------
PANAMA--0.5%
Republic of Panama 8.875%, 9/30/27................... Ba 1,000 945,250
-------------
PERU--0.5%
Peru PDI 4%, 3/7/17 (d).............................. BB(c) 1,550 959,062
-------------
POLAND--2.4%
Poland PDI Bearer 4%, 10/27/14 (d)................... Baa 3,500 3,157,656
Poland Global Reg's RSTA 3.75%, 10/27/24............. Baa 2,500 1,778,125
-------------
4,935,781
-------------
RUSSIA--1.8%
Russia IAN US FRB 144A 6.719%, 12/15/20 (b)(d)....... B 137 76,116
Russia Principal Loan 6.719%, 12/15/20............... NR 7,800 3,705,000
-------------
3,781,116
-------------
SOUTH AFRICA--1.4%
Republic of South Africa 8.50%, 6/23/17.............. Baa 3,000 2,868,750
-------------
VENEZUELA--0.8%
Republic of Venezuela 9.25%, 9/15/27................. Ba 2,250 1,747,688
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $37,186,771)................................................. 34,049,123
-------------
FOREIGN CORPORATE BONDS--14.4%
ARGENTINA--3.2%
CIA Radiocomunic Moviles 144A 9.25%, 5/8/08 (b)...... Ba 3,200 3,072,000
Bridas Corp. 12.50%, 11/15/99........................ Ba 1,600 1,680,000
</TABLE>
See Notes to Financial Statements
14
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------------ -------- -------------
<S> <C> <C> <C>
ARGENTINA--CONTINUED
Telefonica de Argentina 144A 9.125%, 5/7/08 (b)...... Ba $ 2,000 $ 1,920,000
-------------
6,672,000
-------------
BERMUDA--0.9%
AES China Generating Co. Yankee 10.125%, 12/15/06.... Ba 2,161 1,793,630
-------------
BRAZIL--1.7%
Globo Communicacoes Part 144A 10.625%, 12/5/08 (b)... B 1,500 1,350,000
RBS Participacoes SA 144A 11%
4/1/07 (b)......................................... BB-(c) 2,500 2,250,000
-------------
3,600,000
-------------
CHILE--2.2%
Compania Sud America Vapore 7.375%, 12/8/03.......... BBB(c) 2,000 1,940,000
Empresa Nacional Electric 7.75%, 7/15/08............. Baa 2,710 2,647,128
-------------
4,587,128
-------------
GREECE--0.9%
Fage Dairy Industries SA 9%, 2/1/07.................. B 2,000 1,957,500
-------------
INDONESIA--0.4%
Asia Pulp & Paper, 144A 12%, 12/29/49 (b) ........... Caa 1,090 798,425
-------------
JAPAN--1.5%
IBJ Preferred Capital Company LLC, 144A 8.79%,
12/29/49 (b)(d).................................... Baa 330 302,114
SB Treasury Co. LLC, 144A, 9.40%, 12/29/49 (b)(d).... Baa 3,000 2,962,500
-------------
3,264,614
-------------
MEXICO--1.5%
Copamex Industries SA Series B 11.375%, 4/30/04...... NR 3,000 3,116,250
-------------
NETHERLANDS--2.1%
PTC International Finance BV WI 144A 10.75%, 7/1/07
(b)(d) ............................................ NR 6,500 4,493,125
-------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $31,217,543)................................................. 30,282,672
-------------
CONVERTIBLE BONDS--1.1%
OIL & GAS (DRILLING & EQUIPMENT)--1.1%
Loews Corp. 3.125%, 9/15/07.......................... A 2,400 2,178,000
-------------
TOTAL CONVERTIBLE BONDS
(Identified cost $2,400,000).................................................. 2,178,000
-------------
FOREIGN CONVERTIBLE BONDS--2.0%
CANADA--0.3%
Petersburg Long Distance Telekom 144A 9%, 6/1/06
(b)................................................ NR 600 630,000
-------------
RUSSIA--1.7%
Lukinter Finance BV RegS 3.50%, 5/6/02............... B 3,950 3,570,010
-------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $5,664,725).................................................. 4,200,010
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
PREFERRED STOCKS--0.5%
PAPER & FOREST PRODUCTS--0.5%
SD Warren Co. B Pfd. PIK 14%................................... 30,000 $ 1,043,479
-------------
TOTAL PREFERRED STOCKS
(Identified cost $607,500)............................................... 1,043,479
-------------
WARRANTS--0.0%
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.0%
Orion Network Systems, Inc. Warrants (e)....................... 1,000 10,000
-------------
TOTAL WARRANTS
(Identified cost $0)..................................................... 10,000
-------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS
-------------
<S> <C> <C> <C>
OPTIONS--0.0%
Brazil ET call option 8/12/98 $87.69
(Par subject to call $1,940,000)......................... 2 --
Bulgaria IAB call option 7/20/98 $79.75
(Par subject to call $1,500,000)......................... 1.5 --
Ecuador PDI call option 9/17/98 $59.50
(Par subject to call $3,059,843)......................... 2.75 67,444
Russian Principal call option 7/23/98 $62.38
(Par subject to call $1,000,000)......................... 1 200
Venezuela DCB call option 8/13/98 $89.19
(Par subject to call $2,000,000)......................... 2 91
Venezuela call option 7/23/98 $89.10
(Par subject to call $2,500,000)......................... 2.5 28
-------------
TOTAL OPTIONS
(Identified cost $289,480)................................................. 67,763
-------------
TOTAL LONG-TERM INVESTMENTS--98.7%
(Identified cost $210,506,116)............................................. 207,851,357
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
---------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.3%
COMMERCIAL PAPER--1.3%
Cargill, Inc. 6.10%, 7/1/98.......................... A-1+ $ 2,775 2,775,000
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,775,000)................................................. 2,775,000
-------------
TOTAL INVESTMENTS--100.0%
(Identified cost $213,281,116)............................................... 210,626,357(a)
Cash and receivables, less liabilities--0.0%................................. 65,935
-------------
NET ASSETS--100.0%............................................................. $ 210,692,292
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $4,801,052 and gross
depreciation of $7,462,157 for income tax purposes. At June 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$213,287,462.
(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 June 30, 1998,
those securities amounted to a value of $57,953,463 or 27.5% 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.
See Notes to Financial Statements
15
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$213,281,116)............................................. $ 210,626,357
Cash........................................................ 40,450
Receivables
Investment securities sold................................ 1,244,161
Fund shares sold.......................................... 97,897
Interest and dividends.................................... 2,582,811
-------------
Total assets............................................ 214,591,676
-------------
LIABILITIES
Payables
Investment securities purchased........................... 2,465,262
Fund shares repurchased................................... 1,208,611
Investment advisory fee................................... 86,662
Financial agent fee....................................... 15,987
Trustees' fee............................................. 10,665
Accrued expenses.......................................... 112,197
-------------
Total liabilities....................................... 3,899,384
-------------
NET ASSETS.................................................. $ 210,692,292
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 210,658,140
Undistributed net investment income....................... 125,782
Accumulated net realized gain............................. 2,563,129
Net unrealized depreciation............................... (2,654,759)
-------------
NET ASSETS.................................................. $ 210,692,292
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,928,223
-------------
-------------
Net asset value and offering price per share................ $ 10.07
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 8,023,616
Dividends................................................. 39,987
------------
Total investment income................................. 8,063,603
------------
EXPENSES
Investment advisory fee................................... 509,075
Financial agent fee....................................... 66,696
Printing.................................................. 57,642
Custodian................................................. 18,400
Professional.............................................. 11,888
Trustees.................................................. 10,791
Miscellaneous............................................. 4,517
------------
Total expenses.......................................... 679,009
------------
NET INVESTMENT INCOME....................................... 7,384,594
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 2,807,785
Net realized loss on foreign currency transactions........ (226,507)
Net change in unrealized appreciation (depreciation) on
investments............................................. (7,460,362)
------------
NET LOSS ON INVESTMENTS..................................... (4,879,084)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,505,510
------------
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 7,384,594 $ 11,667,589
Net realized gain......................................... 2,581,278 4,695,405
Net change in unrealized appreciation (depreciation)...... (7,460,362) 390,571
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 2,505,510 16,753,565
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (7,594,954) (11,945,923)
Net realized gains........................................ (1,251,674) (4,694,394)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (8,846,628) (16,640,317)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (4,352,320 and 8,085,010
shares, respectively)................................... 45,468,809 84,607,552
Net asset value of shares issued from reinvestment of
distributions (868,477 and 1,609,511 shares,
respectively)........................................... 8,846,628 16,640,317
Cost of shares repurchased (2,748,187 and 5,265,201
shares, respectively)................................... (28,908,611) (54,778,943)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 25,406,826 46,468,926
-------------- --------------
NET INCREASE IN NET ASSETS................................ 19,065,708 46,582,174
NET ASSETS
Beginning of period....................................... 191,626,584 145,044,410
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $125,782 AND $336,142, RESPECTIVELY).......... $ 210,692,292 $ 191,626,584
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 10.38 $ 10.34 $ 10.22 $ 8.98 $ 10.27 $ 9.58
INCOME FROM INVESTMENT OPERATIONS
Net investment income............. 0.37 0.75(1) 0.79(1) 0.83(1)(2) 0.72(1)(2) 0.66(1)(2)
Net realized and unrealized gain
(loss).......................... (0.24) 0.34 0.43 1.22 (1.28) 0.84
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 0.13 1.09 1.22 2.05 (0.56) 1.50
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.38) (0.77) (0.78) (0.81) (0.73) (0.66)
Dividends from net realized
gains........................... (0.06) (0.28) (0.32) -- -- (0.15)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.44) (1.05) (1.10) (0.81) (0.73) (0.81)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... (0.31) 0.04 0.12 1.24 (1.29) 0.69
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 10.07 $ 10.38 $ 10.34 $ 10.22 $ 8.98 $ 10.27
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 1.20%(5) 10.93% 12.42% 23.54% (5.47)% 15.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $210,692 $191,627 $145,044 $109,046 $74,686 $79,393
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.67%(4) 0.65% 0.65% 0.65%(3) 0.66% 0.65%
Net investment income............. 7.25%(4) 7.25% 7.80% 8.55% 7.62% 6.71%
Portfolio turnover rate............. 91%(5) 151% 191% 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.
(4) Annualized
(5) Not annualized
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 ADVISER'S REPORT
For the six-month reporting cycle ended June 30, 1998, the Phoenix Strategic
Allocation Series returned 10.22%. The return for the S&P 500 Index was 17.75%.*
All performance figures assume reinvestment of dividends and exclude the effect
of sales charges.
The U.S. stock market continued to reward equity investors handsomely over
the last six months, with the S&P 500 Index posting another double-digit gain.
Technology, health-care, and consumer cyclical stocks led the market during this
latest reporting period, while the energy and transportation sectors brought up
the rear. The divergence between large- and small-cap performance continued to
widen as investors craved the earnings stability and liquidity of blue-chip
companies. As measured by the Russell 2000 Index,** small-company stocks
returned a relatively disappointing 4.9% over this semiannual reporting cycle.
Aided by a strong U.S. equity market, Phoenix Strategic Allocation Series
posted a gain over the latest fiscal reporting period. Positive contributors to
equity performance included the Fund's overweighted position in the health-care
sector as well as strong stock selection in capital goods, consumer staples and
communication services. Individual stocks which produced exceptional gains
included such names as PFIZER, AIRTOUCH COMMUNICATIONS, CISCO SYSTEMS, BMC
SOFTWARE, STAPLES and TYCO INTERNATIONAL. On the other side of the equation,
negative contributors over the last six months included the portfolio's exposure
to the poorly performing energy group and weakness in some of our technology
holdings.
The fixed-income portion of the Fund benefited from the trend of falling
interest rates. Performance was also helped by our high-quality government
securities.
OUTLOOK
Moving into the second half of 1998, we have not made any dramatic revisions
to our outlook for the U.S. economy and its financial markets. Although recent
economic data has been rather robust, we believe that growth will slow later
this year as the impact of the "Asian flu" begins to take hold in the United
States. In fact, corporate earnings growth has already begun decelerating and we
expect this trend may continue for the remainder of 1998. While we are not
forecasting the end to this long bull market or the start of the next recession,
we would not be surprised to see the stock market take a well-deserved rest over
the near-term.
With regard to stock selection, we remain strongly biased toward large-cap
growth companies that have limited Asian exposure and whose earnings are less
economically sensitive. The Fund is currently overweighted (versus the S&P 500
Index) in such traditional growth sectors as health-care and technology, and to
a lesser degree, communication services. Because of the present speculative M&A
environment in the financial services arena, we believe that some of this group
has become overbought and have elected to selectively take profits in this
sector. Given their value and/or cyclical orientation, the Fund also has little
or no exposure to basic materials, transportation and utilities.
The bond market is likely to remain volatile as the market continues to
question whether the economy and low unemployment will ultimately lead to higher
inflation or whether the effects of the Asian turmoil will result in slower
domestic growth, which could keep inflation in check.
As of June 30, 1998, the Fund's asset allocation was 67% equities, 29%
fixed-income and 4% cash equivalents.
* The S&P 500 Index is an unmanaged, commonly used measure of common stock
total return performance. The Index is not available for direct investment.
** The Russell 2000 Index is an unmanaged, commonly used measure of small
company total return performance. The Index is not available for direct
investment.
18
<PAGE>
STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- --------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--11.0%
U.S. TREASURY BONDS--0.5%
U.S. Treasury Bonds 6.125%, 11/15/27...................... AAA $ 2,000 $ 2,143,020
-------------
U.S. TREASURY NOTES--10.5%
U.S. Treasury Notes 5.625%, 10/31/99...................... AAA 800 800,896
U.S. Treasury Notes 5.50%, 2/29/00........................ AAA 15,000 14,996,399
U.S. Treasury Notes 5.75%, 11/15/00....................... AAA 4,950 4,972,423
U.S. Treasury Notes 5.75%, 11/30/02....................... AAA 1,630 1,642,746
U.S. Treasury Notes 5.50%, 1/31/03........................ AAA 12,425 12,406,486
U.S. Treasury Notes 5.50%, 2/28/03........................ AAA 7,000 6,989,289
U.S. Treasury Notes 5.75%, 4/30/03........................ AAA 3,725 3,758,189
U.S. Treasury Notes 5.50%, 2/15/08........................ AAA 2,550 2,546,328
-------------
48,112,756
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $50,129,586).................................................. 50,255,776
-------------
MUNICIPAL BONDS--3.4%
CALIFORNIA--1.6%
California State Department Water System Series S 5%,
12/1/29................................................. AA 415 403,587
Kern County Pension Obligation Taxable 7.26%, 8/15/14..... AAA 1,500 1,648,125
Long Beach Pension Obligation Taxable 6.87%, 9/1/06....... AAA 840 877,800
Los Angeles County Public Works 5.125%, 12/1/29........... AAA 630 620,941
San Bernardino County Pension Obligation Revenue Taxable
6.87%, 8/1/08........................................... AAA 410 429,987
San Bernardino County Pension Obligation Revenue Taxable
6.94%, 8/1/09........................................... AAA 1,110 1,172,437
Sonoma County Pension Taxable 6.625%, 6/1/13.............. AAA 925 952,750
Ventura County Pension Obligation Taxable 6.54%,
11/1/05................................................. AAA 975 999,375
-------------
7,105,002
-------------
FLORIDA--1.0%
Florida State Department of Transportation Series A 5%,
7/1/27.................................................. AA+ 500 488,125
Miami Beach Special Obligation Taxable 8.60%, 9/1/21...... AAA 3,210 3,647,363
University of Miami Exchangeable Revenue Series A Taxable
7.65%, 4/1/20........................................... AAA 540 576,450
-------------
4,711,938
-------------
MASSACHUSETTS--0.3%
Massachusetts State Port Authority Revenue 6.05%,
7/1/02.................................................. AA 835 835,000
Massachusetts State Water Authority 5%, 8/1/24............ AAA 500 486,250
-------------
1,321,250
-------------
NEW YORK--0.3%
New York State Dorm Authority Revenue Taxable 6.90%,
4/1/03.................................................. BAA 725 743,125
New York State Environmental Facilities Corp. Revenue
Taxable 6.70%, 3/15/08.................................. AAA 670 696,800
-------------
1,439,925
-------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- --------- -------------
<S> <C> <C> <C>
TEXAS--0.1%
Houston Water & Sewer System Refunding, Jr. Lien, Series D
5%, 12/1/25............................................. AAA $ 630 $ 615,038
-------------
WASHINGTON--0.1%
Washington State Series E Taxable 5%, 7/1/22.............. AA+ 630 617,400
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $15,293,782).................................................. 15,810,553
-------------
ASSET-BACKED SECURITIES--1.4%
AESOP Funding II LLC 97-1, A2 144A 6.40%, 10/20/03
(d)(f).................................................. AAA 2,000 2,033,750
Capita Equipment Receivables Trust 97-1, B 6.45%,
8/15/02................................................. AA 720 729,225
Chase Credit Card Master Trust 97-2, A 6.30% 4/15/03...... AAA 2,000 2,022,600
Fleetwood Credit Corp. 96-B, A 6.90%, 3/15/12............. AAA 663 669,954
Green Tree Financial Corp. 96-2, M1 7.60%, 5/15/27........ AA 1,075 1,129,758
-------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $6,466,307)................................................... 6,585,287
-------------
CORPORATE BONDS--2.2%
BANKS (MONEY CENTER)--0.2%
First Union Corp. 6.40%, 4/1/08........................... A 900 903,375
-------------
COMPUTERS (SOFTWARE & SERVICES)--0.4%
Computer Associates International 144A 6.375%, 4/15/05
(d)..................................................... BAA 1,350 1,358,437
Equifax, Inc. 6.30%, 7/1/05............................... A 400 397,000
-------------
1,755,437
-------------
CONSUMER FINANCE--0.1%
Ford Motor Credit Co. 6%, 1/14/03......................... A 650 645,937
-------------
HEALTH CARE (DIVERSIFIED)--0.6%
Tenet Healthcare Corp. 144A 8.125%, 12/1/08 (d)........... BA 1,875 1,889,063
McKesson Corp. 6.40%, 3/1/08.............................. A 900 896,625
-------------
2,785,688
-------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.2%
Boston Scientific Corp. 6.625%, 3/15/05................... Baa(c) 900 894,375
-------------
INVESTMENT BANKING/BROKERAGE--0.2%
Merrill Lynch & Co. 6%, 2/12/03........................... Aa(c) 875 871,719
-------------
MANUFACTURING (DIVERSIFIED)--0.1%
Tyco International Group SA 6.375%, 6/15/05............... Baa(c) 500 500,625
-------------
PAPER & FOREST PRODUCTS--0.1%
Buckeye Cellulose Corp. 9.25%, 9/15/08.................... BA 350 368,375
-------------
RETAIL (FOOD CHAINS)--0.1%
Meyer (Fred), Inc. 7.45%, 3/1/08.......................... Ba(c) 650 654,063
-------------
TELEPHONE--0.1%
Century Telephone Enterprises 6.30%, 1/15/08.............. BAA 670 663,300
-------------
TRUCKS & PARTS--0.1%
Cummins Engine, Inc. 6.45%, 3/1/05........................ BAA 320 322,800
-------------
TOTAL CORPORATE BONDS
(Identified cost $10,308,720).................................................. 10,365,694
-------------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- --------- -------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE BACKED SECURITIES--3.6%
CS First Boston Mortgage Securities Corp. 95-AE, B 7.182%,
11/25/27................................................ AA- $ 1,350 $ 1,361,391
First Union Lehman Bros. 97-C1, B 7.43%, 4/18/29.......... Aa(c) 850 905,250
G.E. Capital Mortgage Services, Inc. 96-8, M 7.25%,
5/25/26................................................. AA 245 251,718
Lehman Large Loan 97-LL1, B 6.95%, 3/12/07................ AA 645 671,002
Mortgage Capital Funding 96-MC2, A3 7.01%, 9/20/06........ Aaa(c) 1,800 1,868,062
NAVOT 98-A, 5.94%, 11/15/98............................... AAA 1,300 1,300,000
Nationslink Funding Corp. 96-1, B 7.69%, 12/20/05......... AA 450 479,391
Norwest Asset Securities Corp. 7.75%, 1/25/27............. AAA 900 927,281
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26................................................ AAA 424 426,460
Residential Funding Mortgage Securities I 96-S1, A11
7.10%, 1/25/26.......................................... AAA 1,500 1,526,484
Residential Funding Mortgage Securities I 96-S4, M1 7.25%,
2/25/26................................................. AA 977 997,662
Securitized Asset Sales, Inc. 93-J, 6.807%, 11/28/23...... A 971 973,835
Structured Asset Securities Corp. 93-C1, B 6.60%,
10/25/24................................................ A 1,150 1,142,547
Structured Asset Securities Corp. 95-C4, B 7%, 6/25/26.... AA 1,650 1,665,984
Triangle Funding Ltd. 97-3A, 1B 5.846%, 10/15/05.......... AA 2,000 1,996,875
-------------
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(Identified cost $16,198,779).................................................. 16,493,942
-------------
FOREIGN GOVERNMENT SECURITIES--2.5%
ARGENTINA--0.3%
Republic of Argentina Bearer 6.625%, 3/31/05.............. Ba(c) 1,036 915,770
Republic of Argentina 9.75%, 9/19/27...................... Ba(c) 490 453,862
-------------
1,369,632
-------------
BRAZIL--0.2%
Republic of Brazil NMB-L 6.688%,
4/15/09 (e)............................................. B 1,185 905,044
-------------
BULGARIA--0.1%
Republic of Bulgaria FLIRB Series A Bearer Euro 2.25%,
7/28/12 (e)............................................. B 810 500,175
-------------
COLOMBIA--0.2%
Republic of Colombia Yankee 7.25%, 2/23/04................ BAA 1,000 925,000
-------------
CROATIA--0.2%
Croatia Series B 6.50%, 7/31/06 (e)....................... Baa(c) 485 439,229
Croatia Series A 6.50%, 7/31/10 (e)....................... Baa(c) 550 478,500
-------------
917,729
-------------
ECUADOR--0.1%
Ecuador Bearer PDI Euro, PIK interest capitalization
6.625%, 2/27/15 (e)..................................... B(c) 751 432,833
-------------
KOREA--0.2%
Republic of Korea 8.875%, 4/15/08......................... Ba(c) 1,095 1,001,925
-------------
MEXICO--0.3%
United Mexican States Global Bond 11.50%, 5/15/26......... Ba(c) 1,175 1,337,737
-------------
PANAMA--0.2%
Republic of Panama 8.875%, 9/30/27........................ Ba(c) 965 912,166
-------------
PERU--0.1%
Peru PDI 4%, 3/7/17 (e)................................... BB 730 451,687
-------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- --------- -------------
<S> <C> <C> <C>
POLAND--0.3%
Poland PDI Bearer 4%, 10/27/14 (e)........................ Baa(c) $ 1,475 $ 1,330,727
-------------
RUSSIA--0.2%
Russia IAN Series U.S. 144A 6.625%, 12/15/15 (d)(e)....... NR 709 394,139
Russia Principal Loan, PIK interest capitalization 6.625%,
12/15/20 (e)............................................ NR 750 356,250
-------------
750,389
-------------
VENEZUELA--0.1%
Republic of Venezuela 9.25%, 9/15/27...................... Ba(c) 530 411,678
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $11,602,747).................................................. 11,246,722
-------------
FOREIGN CORPORATE BONDS--0.5%
ARGENTINA--0.1%
Movicom 144A 9.25%, 5/8/08 (d)............................ BA 450 432,000
-------------
CHILE--0.1%
Compania Sud Americana de Vapores SA 7.375%, 12/8/03...... BBB 140 135,800
Petropower I Funding Trust 144A 7.36%, 2/15/14 (d)........ BBB 500 453,160
-------------
588,960
-------------
JAPAN--0.3%
IBJ Preferred Capital Co. 144A 8.79%, 12/29/49 (d)(e)..... Baa(c) 830 759,862
SB Treasury Co. 144A 9.40%, 12/29/49 (d)(e)............... Baa(c) 830 818,070
-------------
1,577,932
-------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $2,740,253)................................................... 2,598,892
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
COMMON STOCKS--67.0%
AEROSPACE/DEFENSE--0.7%
Boeing Co........................................................... 73,300 3,266,431
-------------
BANKS (MAJOR REGIONAL)--2.9%
Banc One Corp....................................................... 55,230 3,082,524
BankBoston Corp..................................................... 42,600 2,369,625
Mellon Bank Corp.................................................... 38,300 2,666,637
U.S. Bancorp........................................................ 123,900 5,327,700
-------------
13,446,486
-------------
BANKS (MONEY CENTER)--2.8%
BankAmerica Corp.................................................... 48,400 4,183,575
Citicorp............................................................ 14,100 2,104,425
First Chicago NBD Corp.............................................. 35,000 3,101,875
NationsBank Corp.................................................... 45,400 3,473,100
-------------
12,862,975
-------------
BROADCASTING (TELEVISION, RADIO & CABLE)--2.9%
CBS Corp............................................................ 156,400 4,965,700
Capstar Broadcasting Corp. (b)...................................... 22,400 562,800
Chancellor Media Corp. (b).......................................... 76,800 3,813,600
Clear Channel Communications, Inc. (b).............................. 37,400 4,081,275
-------------
13,423,375
-------------
CHEMICALS (DIVERSIFIED)--1.2%
Monsanto Co......................................................... 97,100 5,425,462
-------------
COMPUTERS (HARDWARE)--4.1%
Compaq Computer Corp................................................ 102,900 2,919,787
International Business Machines Corp................................ 136,500 15,671,906
-------------
18,591,693
-------------
COMPUTERS (NETWORKING)--0.8%
Cisco Systems, Inc. (b)............................................. 41,650 3,834,403
-------------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------
<S> <C> <C> <C>
COMPUTERS (PERIPHERALS)--0.5%
EMC Corp. (b)....................................................... 55,500 $ 2,487,094
-------------
COMPUTERS (SOFTWARE & SERVICES)--5.7%
America Online, Inc. (b)............................................ 21,000 2,226,000
BMC Software, Inc. (b).............................................. 91,000 4,726,312
Comdisco, Inc....................................................... 42,000 798,000
Computer Associates International, Inc.............................. 108,200 6,011,862
Compuware Corp. (b)................................................. 122,500 6,262,812
Edwards (J.D.) & Co................................................. 52,600 2,258,512
Microsoft Corp. (b)................................................. 19,600 2,124,150
Sterling Commerce, Inc. (b)......................................... 37,300 1,809,050
-------------
26,216,698
-------------
CONSUMER FINANCE--1.4%
Household International, Inc........................................ 46,100 2,293,475
MBNA Corp........................................................... 118,000 3,894,000
-------------
6,187,475
-------------
CONTAINERS (METAL & GLASS)--0.4%
Owens-Illinois, Inc. (b)............................................ 43,000 1,924,250
-------------
DISTRIBUTORS (FOOD & HEALTH)--0.9%
Cardinal Health, Inc................................................ 45,600 4,275,000
-------------
ELECTRICAL EQUIPMENT--1.2%
General Electric Co................................................. 61,600 5,605,600
-------------
ELECTRONICS (INSTRUMENTATION)--0.3%
Linear Technology Corp.............................................. 21,400 1,290,687
-------------
ELECTRONICS (SEMICONDUCTORS)--0.9%
Intel Corp.......................................................... 58,400 4,328,900
-------------
ENTERTAINMENT--1.8%
Liberty Media Group (b)............................................. 143,800 5,581,237
Walt Disney Co. (The)............................................... 26,400 2,773,650
-------------
8,354,887
-------------
FINANCIAL (DIVERSIFIED)--1.1%
Freddie Mac......................................................... 103,400 4,866,262
-------------
HEALTH CARE (DIVERSIFIED)--3.4%
Bristol-Myers Squibb Co............................................. 69,300 7,965,169
Warner-Lambert Co................................................... 108,500 7,527,188
-------------
15,492,357
-------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--3.9%
Pfizer, Inc......................................................... 62,100 6,749,494
Schering-Plough Corp................................................ 78,500 7,192,563
Watson Pharmaceuticals, Inc. (b).................................... 84,100 3,926,419
-------------
17,868,476
-------------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.6%
HBO & Co............................................................ 211,300 7,448,325
-------------
HEALTH CARE (LONG TERM CARE)--0.9%
HEALTHSOUTH Corp. (b)............................................... 160,500 4,283,344
-------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.2%
Medtronic, Inc...................................................... 88,600 5,648,250
-------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.6%
Colgate-Palmolive Co................................................ 46,500 4,092,000
Procter & Gamble Co................................................. 35,600 3,241,825
-------------
7,333,825
-------------
INSURANCE (LIFE/HEALTH)--0.4%
UNUM Corp........................................................... 29,000 1,609,500
-------------
INSURANCE (MULTI-LINE)--1.8%
American International Group, Inc................................... 32,600 4,759,600
ReliaStar Financial Corp............................................ 35,600 1,708,800
Travelers Group, Inc................................................ 25,700 1,558,063
-------------
8,026,463
-------------
<CAPTION>
SHARES VALUE
--------- -------------
<S> <C> <C> <C>
INSURANCE (PROPERTY-CASUALTY)--0.6%
Allstate Corp....................................................... 32,000 $ 2,930,000
-------------
MANUFACTURING (DIVERSIFIED)--1.6%
Thermo Electron Corp. (b)........................................... 42,800 1,463,225
Tyco International Ltd.............................................. 96,000 6,048,000
-------------
7,511,225
-------------
OIL & GAS (DRILLING & EQUIPMENT)--2.8%
Cooper Cameron Corp. (b)............................................ 23,700 1,208,700
Diamond Offshore Drilling, Inc...................................... 23,900 956,000
Global Industry Ltd. (b)............................................ 40,600 685,125
Halliburton Co...................................................... 59,200 2,638,100
Schlumberger Ltd.................................................... 71,200 4,863,850
Transocean Offshore, Inc............................................ 50,300 2,238,350
-------------
12,590,125
-------------
OIL & GAS (REFINING & MARKETING)--1.0%
Tosco Corp.......................................................... 146,700 4,309,313
-------------
RETAIL (BUILDING SUPPLIES)--1.3%
Home Depot, Inc..................................................... 68,900 5,723,006
-------------
RETAIL (COMPUTERS & ELECTRONICS)--0.4%
Tandy Corp.......................................................... 32,700 1,735,144
-------------
RETAIL (DISCOUNTERS)--0.6%
Consolidated Stores Corp. (b)....................................... 78,700 2,852,875
-------------
RETAIL (DRUG STORES)--2.8%
CVS Corp............................................................ 157,800 6,144,338
Rite Aid Corp....................................................... 172,900 6,494,556
-------------
12,638,894
-------------
RETAIL (FOOD CHAINS)--2.4%
Meyer (Fred), Inc. (b).............................................. 59,250 2,518,125
Safeway, Inc. (b)................................................... 204,100 8,304,319
-------------
10,822,444
-------------
RETAIL (GENERAL MERCHANDISE)--2.1%
Borders Group, Inc. (b)............................................. 72,700 2,689,900
Sears, Roebuck & Co................................................. 52,200 3,187,463
Staples, Inc. (b)................................................... 135,700 3,926,819
-------------
9,804,182
-------------
RETAIL (SPECIALTY-APPAREL)--0.5%
TJX Companies, Inc.................................................. 90,600 2,185,725
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.1%
Airtouch Communications, Inc. (b)................................... 161,400 9,431,813
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.1%
AT&T Corp........................................................... 159,600 9,117,150
MCI Communications Corp............................................. 89,100 5,178,938
-------------
14,296,088
-------------
WASTE MANAGEMENT--1.3%
U.S.A. Waste Services, Inc. (b)..................................... 121,300 5,989,188
-------------
TOTAL COMMON STOCKS
(Identified cost $279,411,312)................................................. 306,918,240
-------------
FOREIGN COMMON STOCKS--3.4%
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.4%
Elan Corp. PLC Sponsored ADR (Ireland) (b).......................... 30,600 1,967,962
-------------
HOUSEHOLD FURN. & APPLIANCES--1.8%
Royal Philips Electronics NV NY Registered Shares (Netherlands).....
95,300 8,100,500
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.4%
Telefonaktiebolaget LM Ericsson Sponsored ADR (Sweden)..............
60,300 1,726,088
-------------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------
<S> <C> <C> <C>
TELEPHONE--0.8%
Telecomunicacoes Brasileiras SA Sponsored ADR (Brazil)..............
32,000 $ 3,494,000
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $15,368,440).................................................. 15,288,550
-------------
TOTAL LONG-TERM INVESTMENTS--95.0%
(Identified cost $407,519,926)................................................. 435,563,656
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.2%
COMMERCIAL PAPER--4.2%
Asset Securitization Cooperative Corp. 6%, 7/1/98......... A-1+ $ 1,725 1,725,000
Pitney Bowes Credit Corp. 6%, 7/1/98...................... A-1+ 2,625 2,625,000
DuPont (E.I.) de Nemours & Co. 5.50%, 7/7/98.............. A-1+ 4,815 4,809,850
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- --------- -------------
<S> <C> <C> <C>
COMMERCIAL PAPER--CONTINUED
Potomac Electric Power Co. 5.60%, 7/7/98.................. A-1 $ 3,445 $ 3,441,785
Campbell Soup Co. 5.53%, 7/10/98.......................... A-1+ 1,490 1,487,940
Vermont American Corp. 5.52%, 7/16/98..................... A-1+ 1,770 1,765,929
Asset Securitization Cooperative Corp. 5.53%, 8/13/98..... A-1+ 2,500 2,480,238
Beta Finance, Inc. 5.44%, 9/24/98......................... A-1+ 750 740,296
-------------
19,076,038
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $19,079,359).................................................. 19,076,038
-------------
TOTAL INVESTMENTS--99.2%
(Identified cost $426,599,285)................................................. 454,639,694(a)
Cash and receivables, less liabilities--0.8%................................... 3,740,158
-------------
NET ASSETS--100%................................................................. $ 458,379,852
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $34,577,053 and gross
depreciation of $6,759,575 for income tax purposes. At June 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$426,822,216.
(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 June 30, 1998,
these securities amounted to a value of $8,138,481 or 1.8% of net assets.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(f) All or a portion segregated as collateral.
See Notes to Financial Statements
22
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$426,599,285)............................................. $ 454,639,694
Cash........................................................ 1,765,718
Receivables
Investment securities sold................................ 3,848,553
Interest and dividends.................................... 1,952,396
Fund shares sold.......................................... 285,213
-------------
Total assets............................................ 462,491,574
-------------
LIABILITIES
Payables
Investment securities purchased........................... 3,400,962
Fund shares repurchased................................... 375,696
Investment advisory fee................................... 207,805
Financial agent fee....................................... 24,248
Trustees' fee............................................. 7,829
Accrued expenses.......................................... 95,182
-------------
Total liabilities....................................... 4,111,722
-------------
NET ASSETS.................................................. $ 458,379,852
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 398,527,384
Undistributed net investment income....................... 836,906
Accumulated net realized gain............................. 30,975,153
Net unrealized appreciation............................... 28,040,409
-------------
NET ASSETS.................................................. $ 458,379,852
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 30,783,302
-------------
-------------
Net asset value and offering price per share................ $ 14.89
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 5,336,333
Dividends................................................. 1,129,288
-------------
Total investment income................................. 6,465,621
-------------
EXPENSES
Investment advisory fee................................... 1,281,460
Financial agent fee....................................... 135,733
Custodian................................................. 28,736
Professional.............................................. 10,123
Trustees.................................................. 7,791
Printing.................................................. 4,473
Miscellaneous............................................. 7,812
-------------
Total expenses.......................................... 1,476,128
-------------
NET INVESTMENT INCOME....................................... 4,989,493
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 31,378,420
Net realized gain on foreign currency transactions........ 1,286
Net change in unrealized appreciation (depreciation) on
investments............................................. 7,169,469
-------------
NET GAIN ON INVESTMENTS..................................... 38,549,175
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 43,538,668
-------------
-------------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 4,989,493 $ 8,442,610
Net realized gain......................................... 31,379,706 63,639,021
Net change in unrealized appreciation (depreciation)...... 7,169,469 3,449,569
------------- -----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 43,538,668 75,531,200
------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (4,185,083) (8,832,503)
Net realized gains........................................ (15,719,656) (52,948,379)
------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (19,904,739) (61,780,882)
------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,267,852 and 3,408,140
shares, respectively)................................... 18,356,231 50,911,029
Net asset value of shares issued from reinvestment of
distributions (1,333,571 and 4,363,884 shares,
respectively)........................................... 19,904,739 61,780,882
Cost of shares repurchased (2,200,580 and 4,807,163
shares, respectively)................................... (32,517,163) (71,683,788)
------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 5,743,807 41,008,123
------------- -----------------
NET INCREASE IN NET ASSETS................................ 29,377,736 54,758,441
NET ASSETS
Beginning of period....................................... 429,002,116 374,243,675
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $836,906 AND $32,496, RESPECTIVELY)........... $458,379,852 $429,002,116
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
06/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 14.12 $ 13.65 $ 13.63 $ 12.68 $ 13.71 $ 12.86
INCOME FROM INVESTMENT OPERATIONS
Net investment income............ 0.17 0.32 0.32 0.45 0.36(1)(3) 0.23(3)
Net realized and unrealized gain
(loss)......................... 1.27 2.46 0.91 1.84 (0.56) 1.17
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS................... 1.44 2.78 1.23 2.29 (0.20) 1.40
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.14) (0.33) (0.31) (0.45) (0.37) (0.23)
Dividends from net realized
gains.......................... (0.53) (1.98) (0.90) (0.89) (0.46) (0.32)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............ (0.67) (2.31) (1.21) (1.34) (0.83) (0.55)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE.......... 0.77 0.47 0.02 0.95 (1.03) 0.85
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD..... $ 14.89 $ 14.12 $ 13.65 $ 13.63 $ 12.68 $ 13.71
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return....................... 10.22%(5) 20.73% 9.05% 18.22% (1.45)% 11.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)...................... $458,380 $429,002 $374,244 $353,838 $289,083 $256,011
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses............... 0.65%(4) 0.71% 0.70% 0.67%(2) 0.74% 0.74%
Net investment income............ 2.21%(4) 2.09% 2.26% 3.28% 2.71% 1.82%
Portfolio turnover rate............ 117%(5) 368% 287% 170% 220% 269%
</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) Annualized.
(5) Not annualized.
See Notes to Financial Statements
24
<PAGE>
INTERNATIONAL SERIES
INVESTOR PROFILE
Phoenix International Series is appropriate for investors seeking long-term
capital appreciation. Investors should note that foreign investing poses
additional risks, such as currency fluctuations, less public information, and
political and economic uncertainty.
INVESTMENT ADVISER'S REPORT
For the six months ended June 30, 1998, Phoenix International Series earned
30.02% compared with a return of 16.08% for the Morgan Stanley Capital
International (MSCI) EAFE Index.* All performance figures assume reinvestment of
dividends and exclude the effect of sales charges.
Western economies and stock markets continued to prosper despite the
accelerating decline in the Far East with much of the region, including Japan,
in recession. In general, Europe was seen as benefiting from developments in the
Far East with the impact on inflation and hence interest rates more than
offsetting the decline in demand.
The Fund has particularly benefited from its overweighted position in Europe
and minimal exposure to Japan and Asia. European markets have performed well.
The advent of the Euro currency set to be launched in January 1999 has given
European institutions access to a much greater pool of domestic currency
investments. Also, European markets have attracted significant levels of foreign
investment attracted by a region whose economies have much further to go in the
current economic cycle and a paucity of investment opportunities elsewhere.
This, coupled with the need for corporations to restructure in order to be
prepared for a new (and more competitive) pan-European market and an emerging
trend of improving shareholder returns, has combined with the global market
environment to enable the European equity market to post particularly strong
returns.
The currency-led collapse in the Pacific Basin has left the region's markets
in tatters and investors are nursing heavy losses. Only a determined effort by
the IMF and the U.S. to establish credible recovery plans contained the crisis
mostly within the region, allowing a selective market recovery in the first
quarter of this year. Even this, however, petered out as investors' relief that
the worst was over gave way to the realization that there was still much deeper
economic pain to endure. Even supposed "safe havens," such as Hong Kong and
Singapore, saw their stock markets fall heavily.
For much of the past year, Japan has been struggling to avoid a recession.
Recent data, however, show an economic contraction nearly as bad as that
experienced during the first oil crisis. Investors have been correctly cynical
of a series of fiscal packages and totally inadequate attempts to reform the
banking system. It is only with the recent rapid depreciation of the yen and
stock market that the government is being forced into more concrete action.
OUTLOOK
Western markets have once again quickly shaken off their immediate concerns
as liquidity and corporate activity reasserted themselves. A setback in European
markets remains as elusive as ever with fleeting one/two day corrections in
response to Wall Street fluctuations. With such limited competition from other
equity markets, Europe remains the main focus for most strategists and fund
managers.
It is essential for Japan's economy to recover, as the implications of this
for the region as a whole are immense with no upturn in the Pacific Basin likely
without Japan's assistance. Fundamental valuations for good long-term businesses
are looking increasingly compelling, however, with short selling distorting the
picture. Given the scale of recent declines we could see a bounce in Asian
markets on improved sentiment in the near term.
In conclusion, while financial markets are proving to be extremely volatile,
many of the past year's trends remain in place. Even with a further
deterioration in the Far East, confidence in the ability of Western markets to
withstand the squalls remains intact. The reasons for this continued bullishness
remain low interest rates, low inflation, ample liquidity and merger and
acquisition activity overcoming worries on valuation and earnings issues. These
arguments have carried all before them for such a long time now that it is
difficult to bet against them continuing.
* The Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged,
commonly used measure of total return foreign stock performance. The Index is
not available for direct investment.
25
<PAGE>
INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--91.6%
AUSTRALIA--0.4%
Westpac Banking Corporation Ltd. (Banks (Major
Regional)).................................... 176,000 $ 1,073,530
-------------
BELGIUM--1.0%
KBC Bancassurance Holdings NV (Banks (Major
Regional)).................................... 29,000 2,595,269
-------------
BRAZIL--0.8%
Telecommunicacoes Brasilieras SA Sponsored ADR
(Telephone)................................... 17,900 1,954,456
-------------
CANADA--1.1%
Bank of Montreal (Banks (Money Center))......... 49,200 2,710,025
-------------
FINLAND--3.1%
Merita PLC class A (Banks (Major Regional))..... 126,200 832,672
Rasio Group PLC (Foods) (b)..................... 260,500 4,729,043
Tieto Corp. class B (Computers Software &
Services)..................................... 26,400 2,006,532
-------------
7,568,247
-------------
FRANCE--12.5%
Alcatel Alsthom (Telecommunications
(Cellular/Wireless)).......................... 26,100 5,314,082
Alstom (Manufacturing (Specialized))............ 73,500 2,419,191
Atos SA (Computers Software & Services) (b)..... 6,800 1,630,822
Axa-UAP (Insurance (Multi-Line))................ 33,369 3,753,028
Banque Nationale de Paris (Banks (Money
Center))...................................... 74,300 6,070,794
Coflexip SA (Oil & Gas (Drilling &
Equipment))................................... 13,800 1,689,042
Galeries Lafayette (Insurance (Multi-Line))..... 1,730 1,725,413
Pinault-Printemps Redoute SA (Retail (General
Merchandise))................................. 1,560 1,305,584
Rhodia SA (Chemicals)........................... 10,000 278,861
Scor SA (Insurance (Multi-Line))................ 19,300 1,224,200
Societe Generale (Banks (Major Regional))....... 26,100 5,426,321
-------------
30,837,338
-------------
GERMANY--5.9%
Adidas AG (Textiles (Apparel)).................. 10,150 1,768,489
Bayerische Motoren Werke AG (Automobiles)....... 2,100 2,123,233
Bayerische Motoren Werke AG New (Automobiles)... 630 628,244
Deutsche Lufthansa AG Registered Shares
(Airlines).................................... 152,150 3,831,082
Mannesmann AG (Manufacturing (Specialized))..... 30,000 3,083,051
Muenchener Rueckversicherungs Gesellschaft AG
(Insurance (Life/Health))..................... 6,600 3,276,178
-------------
14,710,277
-------------
HONG KONG--0.0%
Henderson China Holding Ltd. (Real Estate)...... 828 323
-------------
HUNGARY--0.6%
Matav Rt. Sponsored ADR (Telecommunications
(Long Distance)) (b).......................... 50,200 1,477,762
-------------
IRELAND--0.5%
Elan Corp. PLC Sponsored ADR (Health Care
(Diversified)) (b)............................ 19,315 1,242,196
-------------
ITALY--9.0%
Banca Fideuram SPA (Financial (Diversified)).... 249,900 1,424,847
Banca Popolare di Brescia (Financial
(Diversified))................................ 95,000 1,795,730
Ericsson SPA (Communications Equipment)......... 42,000 2,488,031
Istituto Mobiliare Italiano SPA (Banks
(Major Regional))............................. 179,100 2,821,186
La Fondiaria Assicurazioni (Insurance
(Multi-Line)) (b)............................. 221,700 1,273,414
Mediaset SPA (Publishing) (b)................... 332,400 2,121,503
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
ITALY--CONTINUED
Mediolanum SPA (Financial (Diversified))........ 84,000 $ 2,665,241
Telecom Italia Mobile RNC (Communications
Equipment).................................... 406,000 1,370,425
Telecom Italia Mobile SPA (Telecommunications--
(Cellular/Wireless)).......................... 600,000 3,669,095
Telecom Italia SPA (Communications Equipment)... 356,000 2,620,607
-------------
22,250,079
-------------
MEXICO--2.4%
Cemex SA de C.V. (Building Materials)........... 190,550 839,722
Coca-Cola Femsa SA Sponsored ADR (Beverages
(Non-Alcoholic)) (c).......................... 109,800 1,907,775
Grupo Financiero Bancomer SA de C.V. (Banks
(Major Regional))............................. 1,560,000 581,569
Telefonos de Mexico SA Sponsored ADR
(Telephone)................................... 56,700 2,725,144
-------------
6,054,210
-------------
NETHERLANDS--9.0%
AKZO Nobel (Chemicals) (b)...................... 16,300 3,623,433
Getronics NV (Computers (Software &
Services)).................................... 49,000 2,541,269
IHC Caland NV (Oil & Gas (Drilling &
Equipment))................................... 37,700 2,122,017
ING Groep NV (Financial (Diversified)).......... 68,000 4,452,616
VNU-Verenigde Bezit (Publishing)................ 131,800 4,788,086
Vedior NV (Retail (General Merchandise)) (b).... 71,839 2,030,627
Vendex NV (Retail (General Merchandise))........ 72,800 2,737,757
-------------
22,295,805
-------------
NORWAY--1.3%
Merkantildata ASA (Computers
(Software & Services))........................ 256,000 3,236,055
-------------
PERU--0.9%
Telefonica del Peru SA Sponsored ADR
(Telephone)................................... 109,000 2,227,688
-------------
POLAND--0.2%
Amica Wronki SA (Manufacturing (Specialized))
(b)........................................... 47,629 472,599
-------------
PORTUGAL--2.6%
Brisa-Auto Estradas de Portugal SA (Engineering
& Construction)............................... 4,400 188,177
Portugal Telecom SA (Communications
Equipment).................................... 58,400 3,095,149
Telecel-Comunicacoes Pessoais SA
(Telecommunications--(Cellular/Wireless))
(b)(c)........................................ 17,800 3,160,675
-------------
6,444,001
-------------
SPAIN--5.7%
Banco Popular Espanol SA (Banks (Major
Regional)).................................... 44,400 3,793,533
Banco Santander SA (Banks (Money Center))....... 192,600 4,937,977
Telefonica de Espana (Telephone)................ 117,054 5,421,077
-------------
14,152,587
-------------
SWEDEN--2.2%
Forenings Sparbanken AB (Banks (Major
Regional)).................................... 40,400 1,215,807
Mandamus AB (Real Estate)....................... 2,020 12,665
Skandia Forsakrings AB (Insurance
(Multi-Line))................................. 287,500 4,109,744
-------------
5,338,216
-------------
SWITZERLAND--7.3%
Novartis AG Registered Shares (Health Care
(Drugs-- Major Pharmaceuticals)).............. 4,010 6,672,714
Schweizerische Lebensversicherungs (Insurance
(Life/ Health))............................... 4,030 3,411,449
Schweizerische Rueckersicherungs (Insurance
(Multi-Line))................................. 500 1,264,496
</TABLE>
See Notes to Financial Statements
26
<PAGE>
INTERNATIONAL SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
SWITZERLAND--CONTINUED
Zurich Versicherungs-Gesellschaft Registered
Shares (Financial (Diversified)).............. 10,510 $ 6,707,287
-------------
18,055,946
-------------
UNITED KINGDOM--25.1%
British Aerospace PLC (Aerospace/Defense)....... 622,000 4,773,918
Cable & Wireless Communications PLC
(Telecommunications (Cellular/Wireless))
(b)........................................... 560,700 5,673,984
Compass Group PLC (Lodging--Hotels)............. 388,000 4,466,914
GKN PLC (Engineering & Construction)............ 234,000 2,963,360
Granada Group PLC (Leisure Time Products)....... 80,000 1,473,621
Kingfisher PLC (Retail (General Merchandise))... 66,800 1,082,237
Legal & General Group PLC (Insurance
(Life/Health))................................ 464,000 4,947,042
Lloyds TSB Group PLC (Financial
(Diversified))................................ 471,600 6,586,065
Misys PLC (Computers (Software & Services))..... 54,200 3,082,854
National Express Group (Railroads).............. 77,000 1,244,277
Next PLC (Retail (General Merchandise))......... 337,000 2,901,392
Norwich Union PLC (Insurance (Life/Health))..... 190,000 1,383,772
Rentokil Initial PLC (Services (Facilities &
Environmental))............................... 544,000 3,916,575
Sema Group PLC (Telecommunications (Cellular/
Wireless)).................................... 120,400 1,431,324
Siebe PLC (Electrical Equipment)................ 120,000 2,400,641
Smithkline Beecham PLC (Health Care
(Drugs--Major Pharmaceuticals))............... 100,620 1,224,719
Stagecoach Holdings PLC (Transportation) (b).... 142,700 3,076,190
Vodafone Group PLC (Telephone).................. 368,200 4,675,146
WPP Group PLC (Services
(Advertising/Marketing))...................... 421,500 2,774,414
Williams PLC (Manufacturing (Specialized))...... 324,100 2,095,451
-------------
62,173,896
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $156,386,719).............................. 226,870,505
-------------
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
FOREIGN PREFERRED STOCKS--4.6%
GERMANY--4.6%
SAP AG Vorzug Pfd. (Computers (Software &
Services)).................................... 16,800 $ 11,401,473
-------------
TOTAL FOREIGN PREFERRED STOCKS
(Identified cost $4,087,384)................................ 11,401,473
-------------
TOTAL LONG-TERM INVESTMENTS--96.2%
(Identified cost $160,474,103).............................. 238,271,978
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- ----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.0%
COMMERCIAL PAPER--4.0%
Greenwich Funding Corp. 6.30%
7/1/98.............................. A-1+ $ 5,250 5,250,000
Greenwich Funding Corp. 5.66 7/8/98... A-1+ 740 739,186
Receivables Capital Corp. 5.80%
7/10/98............................. A-1+ 2,470 2,466,418
Dupont (E.I) de Nemours & Co. 5.55%
7/29/98............................. A-1+ 1,500 1,493,525
-------------
9,949,129
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $9,949,129)................................ 9,949,129
-------------
TOTAL INVESTMENTS--100.2%
(Identified cost $170,423,232).............................. 248,221,107(a)
Cash and receivables, less liabilities--(0.2%).............. (634,359)
-------------
NET ASSETS--100.0%............................................ $247,586,748
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $79,754,898 and gross
depreciation of $2,598,981 for income tax purposes. At June 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$171,065,190.
(b) Non-income producing.
(c) All or a portion segregated as collateral.
See Notes to Financial Statements
27
<PAGE>
INTERNATIONAL SERIES
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense..................................................... 2.0%
Airlines.............................................................. 1.6
Automobiles........................................................... 1.2
Banks (Major Regional)................................................ 7.7
Banks (Money Center).................................................. 5.8
Beverages (Non-Alcoholic)............................................. 0.8
Building Materials.................................................... 0.4
Chemicals............................................................. 1.6
Communications Equipment.............................................. 4.0
Computers (Software & Services)....................................... 10.0
Electrical Equipment.................................................. 1.0
Engineering & Construction............................................ 1.3
Financial (Diversified)............................................... 10.0
Foods................................................................. 2.0
Health Care--(Diversified)............................................ 0.5
Health Care (Drugs--Major Pharmaceuticals)............................ 3.3
Insurance (Life/Health)............................................... 5.5
Insurance (Multi-Line)................................................ 5.6
Leisure Time (Products)............................................... 0.6
Lodging--Hotels....................................................... 1.9
Manufacturing (Specialized)........................................... 3.4
Oil & Gas (Drilling & Equipment)...................................... 1.6
Publishing............................................................ 2.9
Railroads............................................................. 0.5
Real Estate........................................................... 0.0
Retail (General Merchandise).......................................... 4.2
Services (Advertising/Marketing)...................................... 1.2
Services (Facilities & Environmental)................................. 1.6
Telecommunications (Cellular/Wireless)................................ 8.1
Telecommunications (Long Distance).................................... 0.6
Telephone............................................................. 7.1
Textiles (Apparel).................................................... 0.7
Transportation........................................................ 1.3
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$170,423,232)............................................. $ 248,221,107
Cash........................................................ 3,772
Receivables
Fund shares sold.......................................... 134,410
Dividends and interest.................................... 326,136
Tax reclaim............................................... 233,263
-------------
Total assets............................................ 248,918,688
-------------
LIABILITIES
Payables
Closed forward currency contracts......................... 780,991
Fund shares repurchased................................... 256,509
Investment advisory fee................................... 150,242
Financial agent fee....................................... 16,966
Trustees' fee............................................. 8,784
Accrued expenses.......................................... 118,448
-------------
Total liabilities....................................... 1,331,940
-------------
NET ASSETS.................................................. $ 247,586,748
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 162,080,323
Undistributed net investment income....................... 188,174
Accumulated net realized gain............................. 7,524,901
Net unrealized appreciation............................... 77,793,350
-------------
NET ASSETS.................................................. $ 247,586,748
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 13,242,545
-------------
-------------
Net asset value and offering price per share................ $ 18.70
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 2,532,168
Interest.................................................. 182,863
Foreign taxes withheld.................................... (5,224)
-------------
Total investment income................................. 2,709,807
-------------
EXPENSES
Investment advisory fee................................... 837,434
Financial agent fee....................................... 72,392
Custodian................................................. 99,806
Printing.................................................. 30,291
Professional.............................................. 13,190
Trustees.................................................. 10,791
Miscellaneous............................................. 13,854
-------------
Total expenses.......................................... 1,077,758
-------------
NET INVESTMENT INCOME....................................... 1,632,049
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 8,230,035
Net realized gain on foreign currency transactions........ 540,408
Net change in unrealized appreciation (depreciation) on
investments............................................. 47,229,212
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... (400,431)
-------------
NET GAIN ON INVESTMENTS..................................... 55,599,224
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 57,231,273
-------------
-------------
</TABLE>
See Notes to Financial Statements
29
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 1,632,049 $ 1,372,460
Net realized gain......................................... 8,770,443 13,881,538
Net change in unrealized appreciation (depreciation)...... 46,828,781 5,898,443
------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 57,231,273 21,152,441
------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- (2,638,818)
Net realized gains........................................ (2,609,343) (18,496,435)
In excess of accumulated net realized gains............... -- (204,295)
------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (2,609,343) (21,339,548)
------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,655,086 and 3,308,827
shares, respectively)................................... 28,798,706 50,646,953
Net asset value of shares issued from reinvestment of
distributions
(139,926 and 1,433,541 shares, respectively)............ 2,609,343 21,339,548
Cost of shares repurchased (1,909,346 and 3,280,469
shares, respectively)................................... (32,551,706) (50,358,574)
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (1,143,657) 21,627,927
------------- -----------------
NET INCREASE IN NET ASSETS................................ 53,478,273 21,440,820
NET ASSETS
Beginning of period....................................... 194,108,475 172,667,655
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $188,174 AND ($1,443,875),
RESPECTIVELY)........................................... $247,586,748 $194,108,475
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 14.53 $ 14.52 $ 12.70 $ 11.85 $ 12.21 $ 8.82
INCOME FROM INVESTMENT OPERATIONS
Net investment income............. 0.12(1) 0.12(1) 0.11(1) 0.12(1) 0.08(1) 0.07(4)(1)
Net realized and unrealized gain
(loss).......................... 4.25 1.61 2.25 1.02 (0.07) 3.32
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 4.37 1.73 2.36 1.14 0.01 3.39
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... -- (0.22) (0.19) (0.04) (0.03) --
Dividends from net realized
gains........................... (0.20) (1.50) (0.33) (0.25) (0.34) --
In excess of net investment
income.......................... -- -- (0.02) -- -- --
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.20) (1.72) (0.54) (0.29) (0.37) --
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 4.17 0.01 1.82 0.85 (0.36) 3.39
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 18.70 $ 14.53 $ 14.52 $ 12.70 $ 11.85 $ 12.21
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 30.02%(3) 12.04% 18.65% 9.59% 0.03% 38.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $247,587 $194,108 $172,668 $134,455 $134,627 $61,242
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.97%(2) 1.01% 1.04% 1.07% 1.10% 1.15%
Net investment income............. 1.46%(2) 0.72% 0.80% 0.95% 0.64% 0.49%
Portfolio turnover rate............. 40%(3) 184% 142% 249% 172% 193%
</TABLE>
(1) Computed using average shares outstanding.
(2) Annualized.
(3) Not annualized.
(4) Includes reimbursement of operating expenses by investment adviser of $0.05.
See Notes to Financial Statements
30
<PAGE>
BALANCED SERIES
INVESTOR PROFILE
The Balanced Series is appropriate for investors seeking long-term
appreciation through investments in a combination of stocks and bonds, including
foreign debt and high-yield securities. Investors should note that foreign
investing involves special risks, such as currency fluctuations, less public
disclosure, and economic and political risks, and high-yield securities have
more risk than higher quality, lower yielding issues.
INVESTMENT ADVISER'S REPORT
For the six-month reporting period that ended June 30, 1998, the Fund earned
10.56% compared with a return of 11.29% for a composite Balanced Index.* All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
Although the "Asian crisis" continued, the domestic picture was quite
positive. Employment numbers remained robust, home sales were strong, and the
"wealth effect" from this long bull market all contributed to a dramatic
increase in consumer spending. Retail, auto, entertainment and other
consumer-oriented stocks led the market. At the same time, excess capacity and
slackened Asian demand led to poor performance among basic commodity industries,
such as oil, steel, precious metals and paper.
An overweighted position in health-care and technology stocks contributed
positively to performance as did strong stock selection within the communication
services group, the consumer staples, and the health-care area. Our exposure to
the energy group detracted from performance. We have reduced our position in
this sector, but consider the longer-term fundamentals very positive.
The bond portion of the portfolio was negatively affected by our
overweighting in the credit-sensitive sectors of the market, such as our
exposure to emerging-market debt and high-yield issues. Non-agency
mortgage-backed securities were also poor performers as prepayments continued to
accelerate. Our commercial mortgage-backed holdings and taxable municipals were
positive contributors to performance.
We continued to reduce our position in U.S. Treasuries, reallocating funds
to more attractively valued sectors of the market. We have maintained a
well-diversified and relatively conservative position in emerging-market debt.
We are currently underweighted in Asia and overweighted in Latin America,
primarily in Brazil, Venezuela, and Panama.
OUTLOOK
We believe that growth will slow later this year as the impact of the "Asian
flu" begins to take hold in the United States. While we are not forecasting the
end to this long bull market or the start of the next recession, we would not be
surprised to see the stock market take a well-deserved rest over the near term.
With regard to stock selection, we remain strongly biased toward large-cap
growth companies that have limited Asian exposure and whose earnings are less
economically sensitive, such as health-care, technology, and to a lesser degree,
communication services. Because of the present speculative merger and
acquisition environment in the financial services arena, we believe that some
stocks in this group have become overbought and have elected to selectively take
profits in this sector. Given their value and cyclical orientation, the
portfolio also has little or no exposure to basic materials, transportation, and
utilities.
We believe the bond portion of the portfolio is well-structured to take
advantage of current market conditions. Although yields remain at historically
low levels, we believe the non-traditional sectors represent excellent value. We
will continue to emphasize credit-sensitive sectors, given continued low
inflation and strong demand for dollar-denominated securities from global
investors.
* The composite Balanced Index is comprised of 55% S&P 500 Index, 35% Lehman
Brothers Aggregate Bond Index, and 10% 90-day Treasury bills. The Index is not
available for direct investment.
31
<PAGE>
BALANCED SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--8.7%
U.S. TREASURY NOTES--5.3%
U.S. Treasury Notes 5.375%, 1/31/00....................... AAA $ 6,475 $ 6,459,589
U.S. Treasury Notes 5.5%, 3/31/00......................... AAA 750 749,805
U.S. Treasury Notes 6.875%, 3/31/00....................... AAA 3,100 3,168,262
U.S. Treasury Notes 6.00%, 8/15/00........................ AAA 1,700 1,715,657
U.S. Treasury Notes 6.375%, 5/15/99....................... AAA 1,775 1,787,443
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $13,923,930)................................................. 13,880,756
-------------
AGENCY MORTGAGE-BACKED SECURITIES--3.4%
GNMA 6.50%, 11/15/23...................................... AAA 1,561 1,569,489
GNMA 6.50%, 12/15/23...................................... AAA 562 565,165
GNMA 6.50%, 2/15/24....................................... AAA 2,714 2,727,999
GNMA 6.50%, 6/15/28....................................... AAA 3,980 3,971,294
-------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $8,689,740).................................................. 8,833,947
-------------
MUNICIPAL BONDS--7.1%
CALIFORNIA--1.8%
California State Department of Water Resources Revenue
Series S 5%, 12/1/29.................................... AA 450 437,625
Fresno County Pension Taxable 6.21%, 8/15/06.............. AAA 1,000 1,003,750
Kern County Pension Obligation Taxable 7.26%, 8/15/14..... AAA 420 461,475
Long Beach Pension Obligation Taxable 6.87%, 9/1/06....... AAA 230 240,350
Los Angeles County, Public Works 5.125%, 12/1/29.......... AAA 685 675,150
Orange County Pension Series A Taxable 7.62%, 9/1/08...... AAA 650 721,500
San Bernardino County Pension Obligation Revenue Taxable
6.87%, 8/1/08........................................... AAA 110 115,362
San Bernardino County Pension Obligation Revenue Taxable
6.94%, 8/1/09........................................... AAA 300 316,875
Sonoma County Pension Obligation 6.625%, 6/1/13........... AAA 495 509,850
Ventura County Pension Obligation Taxable 6.54%,
11/1/05................................................. AAA 260 266,500
-------------
4,748,437
-------------
FLORIDA--0.7%
Florida State Dept. of Transportation Series A 5%,
7/1/27.................................................. AA+ 545 532,056
Miami Beach Special Obligation Taxable 8.60%, 9/1/21...... AAA 875 994,219
University of Miami Exchangeable Revenue Series A Taxable
7.65%, 4/1/20........................................... AAA 270 288,225
-------------
1,814,500
-------------
ILLINOIS--0.6%
Illinois Educational Facilities Authority Revenue-Loyola
University Series A Taxable 7.84%, 7/1/24............... AAA 1,500 1,659,375
-------------
MASSACHUSETTS--0.4%
Massachusetts State Port Authority Revenue 6.05%,
7/1/02.................................................. AA 450 450,000
Massachusetts State Water Authority Series D 5%, 8/1/24... AAA 545 530,013
-------------
980,013
-------------
NEW YORK--1.1%
N.Y.C. Metropolitan Transportation Authority 5%, 4/1/23... AAA 760 739,100
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
NEW YORK--CONTINUED
New York State Dorm Authority Pension Obligation Revenue
Taxable 6.90%, 4/1/03................................... BBB+ $ 650 $ 666,250
New York State Taxable Series C 6.35%, 3/1/07............. AAA 1,500 1,520,625
-------------
2,925,975
-------------
PENNSYLVANIA--0.8%
Pittsburgh Pension Taxable 6.50%,
3/1/17.................................................. AAA 1,250 1,259,375
Pittsburgh Water & Sewer Authority 5.05%, 9/1/25.......... AAA 760 746,700
-------------
2,006,075
-------------
TEXAS--1.0%
Dallas-Fort Worth Taxable 6.40%, 11/1/07.................. AAA 1,000 1,017,500
Houston Water & Sewer Refunding, Jr Lien, Series D 5%,
12/1/25................................................. AAA 685 668,731
Texas State Taxable-Veterans Series B 6.10%, 12/1/03...... AA 1,000 1,002,500
-------------
2,688,731
-------------
VIRGINIA--0.4%
Newport News Taxable Series B 7.05%, 1/15/25.............. AA 1,000 1,025,000
-------------
WASHINGTON--0.3%
Washington State Series E Taxable 5%, 7/1/22.............. AA+ 685 671,300
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $18,074,272)................................................. 18,519,406
-------------
ASSET-BACKED SECURITIES--1.8%
AESOP Funding II LLC 97-1, A2 144A, 6.40%, 10/20/03 (c)... AAA 1,200 1,220,250
Capital Equipment Receivables Trust 97-1B 6.45%,
8/15/02................................................. Aa(d) 770 779,866
Chase Credit Card Master Trust 97-2, A 6.30%, 4/15/03..... AAA 350 353,955
Discover Card Master Trust I 98-4, A 5.75%, 10/16/03...... Aaa(d) 1,200 1,194,375
Fleetwood Credit Corp. 96-B, A 6.90%, 3/15/12............. AAA 496 501,500
Green Tree Financial Corp. 96-2, M1 7.60%, 5/15/27........ AA 675 709,383
-------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $4,691,625).................................................. 4,759,329
-------------
CORPORATE BONDS--4.4%
CONSUMER FINANCE--0.3%
Ford Motor Credit 6%, 1/14/03............................. A 950 944,062
-------------
BANKS (MONEY CENTER)--0.4%
First Union Corp. 6.40%, 4/1/08........................... A 1,000 1,003,750
-------------
COMPUTERS (SOFTWARE & SERVICES)--0.6%
Computer Associates International 144A 6.375%, 4/15/05
(c)..................................................... Baa(d) 1,135 1,142,094
Equifax, Inc. 6.30%, 7/1/05............................... A 400 397,000
-------------
1,539,094
-------------
HEALTH CARE (DIVERSIFIED)--0.6%
Tenet Healthcare Corp. 8.125%, 12/1/08.................... BB- 1,475 1,486,062
-------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.4%
Boston Scientific Corp. 6.625%, 3/15/05................... A- 975 968,906
-------------
</TABLE>
See Notes to Financial Statements
32
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
INDUSTRIAL--0.4%
Mckesson Corp. 144A 6.40%, 3/1/08 (c)..................... A- $ 1,000 $ 996,250
-------------
INVESTMENT BANKING/BROKERAGE--0.4%
Merrill Lynch & Co., 6%, 2/12/03.......................... Aa(d) 950 946,438
-------------
MANUFACTURING (DIVERSIFIED)--0.2%
Tyco International Group 6.375%,
6/15/05................................................. A- 600 600,750
-------------
PAPER & FOREST PRODUCTS--0.3%
Buckeye Cellulose Corp. 8.50%, 12/15/05................... BB- 700 717,500
-------------
RETAIL (FOOD CHAINS)--0.3%
Meyer (Fred), Inc. 7.45%, 3/1/08.......................... BB+ 775 779,844
-------------
TELEPHONE--0.4%
Century Telephone Enterprises 6.30%, 1/15/08.............. BBB+ 1,000 990,000
-------------
TRUCKERS--0.1%
Teekay Shipping Corp. 8.32%, 2/1/08....................... BB 230 237,475
-------------
TRUCKS & PARTS--0.1%
Cummins Engine Company, Inc. 6.45%, 3/1/05................ BBB+ 350 353,063
-------------
TOTAL CORPORATE BONDS
(Identified cost $11,532,746)................................................. 11,563,194
-------------
NON-AGENCY MORTGAGE BACKED SECURITIES--7.2%
CS First Boston Mortgage Securities Corp. 97-C2, B 6.72%,
11/17/07................................................ Aa(d) 2,000 2,041,875
CS First Boston Mortgage Securities Corp. 95-AE, B,
7.182%, 11/25/27........................................ AA- 425 428,586
Case Equipment Loan Trust 1998-A A4, 2/15/05.............. AAA 1,750 1,750,367
DLJ Mortgage Acceptance Corp. 96-CF1, A1B 144A 7.58%,
3/13/28 (c)............................................. AAA 1,400 1,501,062
First Union Lehman Bros. 97-C1, B 7.43%, 4/18/07.......... Aa(d) 930 990,450
G.E. Capital Mortgage Services, Inc. 96-8, M 7.25%,
5/25/26................................................. AA 245 251,711
Lehman Large Loan 97-LL1, B 6.95%, 3/12/07................ AA 825 858,258
Mortgage Capital Funding 96-MC2, A3 7.008%, 9/20/06....... AAA(d) 2,000 2,075,625
Nationslink Funding Corp. 96-1, B 7.69%, 12/20/05......... AA 450 479,391
Navistar Financial Corp. Owner Trust 98-AA 5.94%,
11/15/04................................................ Aaa(d) 1,072 1,071,878
Newcourt Receivables Asset Trust 1997-1 A3 6.11%,
5/20/01................................................. AAA 190 190,416
Norwest Asset Securities Corp. 7.75% 1/25/27.............. AAA(d) 2,000 2,060,625
Premier Auto Trust 98-1, A4 5.70%,
10/6/02................................................. AAA 500 498,515
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26................................................ AAA 274 274,804
Residential Funding Mortgage Securities Corp. I 96-S8, A4
6.75%, 3/25/11.......................................... AAA 635 641,558
Residential Funding Mortgage Securities Corp. I 96-S1, A11
7.10%, 1/25/26.......................................... AAA 1,000 1,017,656
Residential Funding Mortgage Securities Corp. I 96-S4, M1
7.25%, 2/25/26.......................................... AA 976 996,283
Structured Asset Securities Corp. 93-C1, B 6.60%,
10/25/24................................................ A+ 525 521,598
Wings Commercial Loan Trust I 98-A2, 144A 5.918% 3/20/08
(c)..................................................... AAA 1,000 1,000,000
-------------
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(Identified cost $18,385,848)................................................. 18,650,658
-------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
FOREIGN GOVERNMENT SECURITIES--6.2%
ARGENTINA--0.8%
Republic of Argentina 9.75%, 9/19/27...................... BB $ 715 $ 662,269
Republic of Argentina Bearer FRB 6.688%, 3/31/05.......... Ba(d) 1,507 1,332,930
-------------
1,995,199
-------------
BRAZIL--0.5%
Republic of Brazil DCB-L Euro 6.688%, 4/15/12 (e)......... BB- 425 297,500
Republic of Brazil NMB-L 6.688%, 4/15/09 (e).............. BBB- 920 702,650
Republic of Brazil NMB-L Series RG 6.688%, 4/15/09 (e).... BB- 390 297,862
-------------
1,298,012
-------------
BULGARIA--0.3%
Republic of Bulgaria FLIRB Series A Bearer Euro 2.25%,
7/28/12................................................. B(d) 1,165 719,387
-------------
COLOMBIA--0.5%
Republic of Colombia Global Bond 7.25%, 2/15/03........... BBB- 610 575,306
Republic of Colombia Global Bond 7.25%, 2/23/04........... BBB- 825 763,125
-------------
1,338,431
-------------
CROATIA--0.5%
Croatia Series B 6.50%, 7/31/06........................... BBB- 693 627,469
Croatia Series A 6.50%, 7/31/10........................... BBB- 775 674,250
-------------
1,301,719
-------------
ECUADOR--0.2%
Ecuador Bearer PDI Euro, PIK interest capitalization
6.625%, 2/27/15......................................... B(d) 1,085 625,203
-------------
KOREA--0.5%
Republic of Korea 8.875%, 4/15/08......................... Ba(d) 1,490 1,363,350
-------------
MEXICO--0.8%
United Mexican States Global Bond 11.50%, 5/15/26......... BB 1,700 1,935,450
-------------
PANAMA--0.5%
Republic of Panama 8.875%, 9/30/27........................ BB+ 1,395 1,318,624
-------------
PERU--0.3%
Peru PDI 4%, 3/7/17....................................... BB 1,050 649,687
-------------
POLAND--0.7%
Poland Bearer PDI 4%, 10/27/14............................ BBB- 1,450 1,308,172
Poland Discount Euro 6.780%, 10/27/24..................... BBB- 600 591,375
-------------
1,899,547
-------------
RUSSIA--0.4%
Russia IAN Series US 144A 6.719%, 12/15/15 (c)(e)......... NR 1,023 569,004
Russia Principal Loan, PIK interest capitalization 6.625%,
12/15/20................................................ NR 1,090 517,750
-------------
1,086,754
-------------
VENEZUELA--0.2%
Republic of Venezuela 9.25%, 9/15/27...................... Ba(d) 770 598,098
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $16,679,957)................................................. 16,129,461
-------------
FOREIGN CORPORATE BONDS--1.1%
ARGENTINA--0.2%
Movicom 144A, 9.25%, 5/8/08 (c)........................... BBB- 300 288,000
Telefonica de Argentina 144A 9.125%, 5/7/08 (c)........... Ba(d) 290 278,400
-------------
566,400
-------------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
CHILE--0.2%
Compania Sud Americana de Vapores SA 7.375%, 12/08/03..... BBB $ 120 $ 116,400
Petropower I Funding Trust LLC 144A, 7.36%, 2/15/14 (c)... BBB 350 317,212
-------------
433,612
-------------
JAPAN--0.7%
IBJ Preferred Capital Co. LLC 144A 8.79%, 12/29/49
(c)(e).................................................. Baa(d) 910 833,101
SB Treasury Co. 144A 9.125%, 12/29/49 (c)(e).............. BBB- 910 896,921
-------------
1,730,022
-------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $2,869,824).................................................. 2,730,034
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------
<S> <C> <C> <C>
COMMON STOCKS--56.5%
AEROSPACE/DEFENSE--0.6%
Boeing Co........................................................... 34,200 1,524,037
-------------
BANKS (MAJOR REGIONAL)--2.5%
Banc One Corp....................................................... 25,120 1,402,010
BankBoston Corp..................................................... 20,600 1,145,875
Mellon Bank Corp.................................................... 17,200 1,197,550
U.S. Bancorp........................................................ 64,300 2,764,900
-------------
6,510,335
-------------
BANKS (MONEY CENTER)--2.4%
BankAmerica Corp.................................................... 25,500 2,204,156
Citicorp............................................................ 7,200 1,074,600
First Chicago NBD Corp.............................................. 16,500 1,462,312
NationsBank Corp.................................................... 20,600 1,575,900
-------------
6,316,968
-------------
BROADCASTING (TELEVISION, RADIO & CABLE)--2.4%
CBS Corp. (b)....................................................... 73,900 2,346,325
Capstar Broadcasting Corp. (b)...................................... 13,600 341,700
Chancellor Media Corp. (b).......................................... 35,000 1,737,969
Clear Channel Communications, Inc. (b).............................. 17,200 1,876,950
-------------
6,302,944
-------------
CHEMICALS (DIVERSIFIED)--1.0%
Monsanto Co......................................................... 47,700 2,665,237
-------------
COMPUTERS (HARDWARE)--3.5%
Compaq Computer Corp................................................ 54,000 1,532,250
International Business Machines Corp................................ 64,800 7,439,850
-------------
8,972,100
-------------
COMPUTERS (NETWORKING)--0.6%
Cisco Systems, Inc. (b)............................................. 17,850 1,643,316
-------------
COMPUTERS (PERIPHERALS)--0.4%
EMC Corp. (b)....................................................... 25,900 1,160,644
-------------
COMPUTERS (SOFTWARE & SERVICES)--4.8%
America Online, Inc. (b)............................................ 8,400 890,400
BMC Software, Inc. (b).............................................. 43,900 2,280,056
Comdisco, Inc....................................................... 21,800 414,200
Computer Associates International, Inc.............................. 52,100 2,894,806
Compuware Corp. (b)................................................. 57,800 2,955,025
Edwards (J.D.) & Co................................................. 24,900 1,069,144
Microsoft Corp. (b)................................................. 9,400 1,018,725
Sterling Commerce, Inc. (b)......................................... 17,400 843,900
-------------
12,366,256
-------------
CONSUMER FINANCE--1.2%
Household International, Inc........................................ 22,200 1,104,450
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
CONSUMER FINANCE--CONTINUED
MBNA Corp........................................................... 58,400 $ 1,927,200
-------------
3,031,650
-------------
CONTAINERS (METAL & GLASS)--0.3%
Owens-Illinois, Inc. (b)............................................ 18,900 845,775
-------------
DISTRIBUTORS (FOOD & HEALTH)--0.8%
Cardinal Health, Inc................................................ 21,600 2,025,000
-------------
ELECTRICAL EQUIPMENT--1.1%
General Electric Co................................................. 31,500 2,866,500
-------------
ELECTRONICS (INSTRUMENTATION)--0.2%
Linear Technology Corp.............................................. 10,000 603,125
-------------
ELECTRONICS (SEMICONDUCTORS)--0.8%
Intel Corp.......................................................... 28,100 2,082,912
-------------
ENTERTAINMENT--1.5%
Liberty Media Group (b)............................................. 67,100 2,604,319
Walt Disney Co. (The)............................................... 13,400 1,407,837
-------------
4,012,156
-------------
FINANCIAL (DIVERSIFIED)--0.9%
Freddie Mac......................................................... 49,400 2,324,887
-------------
HEALTH CARE (DIVERSIFIED)--2.8%
Bristol-Myers Squibb Co............................................. 32,900 3,781,444
Warner-Lambert Co................................................... 51,900 3,600,562
-------------
7,382,006
-------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--3.3%
Pfizer, Inc......................................................... 28,300 3,075,856
Schering-Plough Corp................................................ 37,900 3,472,587
Watson Pharmaceuticals, Inc. (b).................................... 40,300 1,881,506
-------------
8,429,949
-------------
HEALTH CARE (LONG TERM CARE)--0.9%
HEALTHSOUTH Corp. (b)............................................... 85,400 2,279,112
-------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.1%
Medtronic, Inc...................................................... 42,800 2,728,500
-------------
HEALTH CARE (SPECIALIZED SERVICES)--1.3%
HBO & Co............................................................ 96,800 3,412,200
-------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.4%
Colgate-Palmolive Co................................................ 24,500 2,156,000
Procter & Gamble Co. (b)............................................ 17,500 1,593,594
-------------
3,749,594
-------------
INSURANCE (LIFE/HEALTH)--0.3%
UNUM Corp........................................................... 13,100 727,050
-------------
INSURANCE (MULTI-LINE)--1.5%
American International Group, Inc................................... 15,400 2,248,400
ReliaStar Financial Corp............................................ 15,800 758,400
Travelers Group, Inc................................................ 12,500 757,813
-------------
3,764,613
-------------
INSURANCE-(PROPERTY-CASUALTY)--0.6%
Allstate Corp....................................................... 15,700 1,437,531
-------------
MANUFACTURING (DIVERSIFIED)--1.2%
Thermo Electron Corp. (b)........................................... 20,500 700,844
Tyco International Ltd.............................................. 47,800 3,011,400
-------------
3,712,244
-------------
OIL (DOMESTIC INTERGRATED)--0.8%
Tosco Corp.......................................................... 70,100 2,059,188
-------------
OIL & GAS (DRILLING & EQUIPMENT)--2.4%
Cooper Cameron Corp. (b)............................................ 12,100 617,100
Diamond Offshore Drilling, Inc...................................... 11,500 460,000
Global Industry Ltd. (b)............................................ 19,100 322,313
</TABLE>
See Notes to Financial Statements
34
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)--CONTINUED
Halliburton Co...................................................... 32,200 $ 1,434,913
Schlumberger Ltd.................................................... 34,800 2,377,275
Transocean Offshore, Inc............................................ 22,900 1,019,050
-------------
6,230,651
-------------
RETAIL (BUILDING SUPPLIES)--1.0%
Home Depot, Inc..................................................... 31,750 2,637,234
-------------
RETAIL (COMPUTERS & ELECTRONICS)--0.3%
Tandy Corp.......................................................... 15,800 838,388
-------------
RETAIL (DISCOUNTERS)--0.6%
Consolidated Stores Corp. (b)....................................... 41,700 1,511,625
-------------
RETAIL (DRUG STORES)--2.3%
CVS Corp............................................................ 72,800 2,834,650
Rite Aid Corp....................................................... 83,400 3,132,713
-------------
5,967,363
-------------
RETAIL (FOOD CHAINS)--1.5%
Safeway, Inc. (b)................................................... 93,000 3,783,938
-------------
RETAIL (GENERAL MERCHANDISE)--2.3%
Borders Group, Inc. (b)............................................. 39,400 1,457,800
Meyer (Fred), Inc. (b).............................................. 26,970 1,146,225
Sears, Roebuck & Co................................................. 24,000 1,465,500
Staples, Inc. (b)................................................... 60,950 1,763,741
-------------
5,833,266
-------------
RETAIL (SPECIALTY-APPAREL)--0.4%
TJX Companies, Inc.................................................. 40,000 965,000
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.7%
Airtouch Communications, Inc. (b)................................... 76,700 4,482,156
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.7%
AT&T Corp........................................................... 79,600 4,547,150
MCI Communications Corp............................................. 42,900 2,493,563
-------------
7,040,713
-------------
WASTE MANAGEMENT--1.1%
U.S.A. Waste Services, Inc. (b)..................................... 57,400 2,834,125
-------------
TOTAL COMMON STOCKS
(Identified cost $122,461,154)................................................ 147,060,288
-------------
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--3.0%
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.4%
Elan Corp. PLC Sponsored ADR (Ireland) (b).......................... 16,600 $ 1,067,587
-------------
HOUSEHOLD FURN. & APPLIANCES--1.6%
Royal Philips Electronics NV NY Registered Shares (Netherlands).....
48,300 4,105,500
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.3%
Telefonaktiebolaget LM Ericsson Sponsored ADR (Sweden)..............
28,000 801,500
-------------
TELEPHONE--0.7%
Telecomunicacoes Brasileiras SA Sponsored ADR
(Brazil).......................................................... 16,100 1,757,919
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $7,201,328).................................................. 7,732,506
-------------
TOTAL LONG-TERM INVESTMENTS--96.0%
(Identified cost $224,510,424)................................................ 249,859,579
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.5%
COMMERCIAL PAPER--2.4%
Asset Securitization Cooperative Corp. 6%, 7/1/98......... A-1+ $ 3,655 3,655,000
Receivables Capital Corp. 5.57%, 7/28/98.................. A-1+ 2,500 2,489,556
-------------
6,144,556
-------------
FEDERAL AGENCY SECURITIES--1.1%
FHLMC 6%, 7/1/98.......................................... 3,000 3,000,000
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $9,144,556).................................................. 9,144,556
-------------
TOTAL INVESTMENTS--99.4%
(Identified cost $233,654,980)................................................ 259,004,135(a)
Cash and receivables, less liabilities--0.6%.................................. 1,470,287
-------------
NET ASSETS--100.0%.............................................................. $ 260,474,422
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $29,555,300 and gross
depreciation of $4,206,145 for Federal income tax purposes. At June 30,
1998, the aggregate cost of securities for federal income tax purposes was
$233,654,980.
(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 June 30, 1998,
these securities amounted to a value of $9,042,294 or 3.5% 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
35
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$233,654,980)............................................. $ 259,004,135
Cash........................................................ 1,939
Receivables
Investment securities sold................................ 1,704,932
Fund shares sold.......................................... 193,475
Interest and dividends.................................... 1,424,703
-------------
Total assets............................................ 262,329,184
-------------
LIABILITIES
Payables
Investment securities purchased........................... 1,437,464
Fund shares repurchased................................... 205,180
Investment advisory fee................................... 115,208
Financial agent fee....................................... 16,135
Trustees' fee............................................. 7,538
Accrued expenses.......................................... 73,237
-------------
Total liabilities....................................... 1,854,762
-------------
NET ASSETS.................................................. $ 260,474,422
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of benefical interest........... $ 226,926,420
Undistributed net investment income....................... 256,855
Accumulated net realized gain............................. 7,941,992
Net unrealized appreciation............................... 25,349,155
-------------
NET ASSETS.................................................. $ 260,474,422
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,162,344
-------------
-------------
Net asset value and offering price per share................ $ 12.92
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 3,521,735
Dividends................................................. 568,035
Foreign taxes withheld.................................... (3,350)
-------------
Total investment income................................. 4,086,420
-------------
EXPENSES
Investment advisory fee................................... 674,105
Financial agent fee....................................... 77,156
Custodian................................................. 16,710
Professional.............................................. 10,058
Trustees.................................................. 10,791
Printing.................................................. 6,947
Miscellaneous............................................. 5,479
-------------
Total expenses.......................................... 801,246
-------------
NET INVESTMENT INCOME....................................... 3,285,174
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 7,975,902
Net change in unrealized appreciation (depreciation) on
investments............................................. 13,567,666
-------------
NET GAIN ON INVESTMENTS..................................... 21,543,568
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 24,828,742
-------------
-------------
</TABLE>
See Notes to Financial Statements
36
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 3,285,174 $ 6,313,137
Net realized gain......................................... 7,975,902 28,928,777
Net change in unrealized appreciation (depreciation)...... 13,567,666 398,108
------------- -----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 24,828,742 35,640,022
------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (3,080,871) (6,626,999)
Net realized gains........................................ (9,082,295) (25,653,795)
------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (12,163,166) (32,280,794)
------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,058,890 and 2,522,290
shares, respectively)................................... 26,676,582 32,463,957
Net asset value of shares issued from reinvestment of
distributions
(939,282 and 2,611,513 shares, respectively)............ 12,163,166 32,280,794
Cost of shares repurchased (1,697,022 and 3,214,459
shares, respectively)................................... (22,210,721) (41,209,392)
------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 16,629,027 23,535,359
------------- -----------------
NET INCREASE IN NET ASSETS................................ 29,294,603 26,894,587
NET ASSETS
Beginning of period....................................... 231,179,819 204,285,232
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $256,855 AND
$52,552, RESPECTIVELY).................................. $ 260,474,422 $231,179,819
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/98 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.26 $ 12.06 $ 12.30 $ 10.53 $ 11.31 $ 10.77
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.17 0.38 0.36 0.40(2) 0.38(1)(2) 0.32(1)(2)
Net realized and unrealized gain
(loss).............................. 1.12 1.73 0.89 2.02 (0.70) 0.60
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... 1.29 2.11 1.25 2.42 (0.32) 0.92
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.16) (0.40) (0.35) (0.40) (0.36) (0.32)
Dividends from net realized gains..... (0.47) (1.51) (1.14) (0.25) (0.10) (0.06)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.63) (1.91) (1.49) (0.65) (0.46) (0.38)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... 0.66 0.20 (0.24) 1.77 (0.78) 0.54
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 12.92 $ 12.26 $ 12.06 $ 12.30 $ 10.53 $ 11.31
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return............................ 10.56%(5) 17.93% 10.56% 23.28% (2.80)% 8.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $260,474 $231,180 $204,285 $193,302 $161,105 $158,144
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 0.65%(4) 0.71% 0.68% 0.65%(3) 0.69% 0.70%
Net investment income................. 2.68%(4) 2.92% 2.93% 3.44% 3.44% 3.16%
Portfolio turnover rate................. 72%(5) 181% 229% 223% 171% 161%
</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) Annualized.
(5) Not annualized.
See Notes to Financial Statements
37
<PAGE>
REAL ESTATE SECURITIES SERIES
INVESTOR PROFILE
Phoenix Real Estate Securities Series is designed for investors seeking
portfolio diversification and investment in real assets. The Fund's objective is
to emphasize appreciation and current yield equally. Real estate investing
involves certain risks, including refinancing, economic impact on the industry,
changes in the value of properties owned, dependency on management skills and
liquidity risks similar to those linked with small company investing.
INVESTMENT ADVISER'S REPORT
For the six months ended June 30, 1998, Phoenix Edge Real Estate Securities
Series provided a return of -6.70% compared with -5.04% for the NAREIT Equity
Total Return Index.* All performance figures assume reinvestment of dividends
and exclude the effect of sales charges.
At the end of the first six months of 1998 the REIT (real estate investment
trusts) sector, while exhibiting strong earnings growth and good fundamentals,
continued to lag the price strength seen in the broader equity market. The S&P
500 Index** was up 17.75% and the Russell 2000 Index gained 4.93%.*** In
comparison, REITs at the end of the first six months, according to the NAREIT
Equity Total Return Index had a loss of -5.04%. In June the NAREIT Equity Total
Return Index fell -0.68%, while the S&P 500 rose 4.07%.
First-quarter numbers indicated average growth in Funds From Operations
(similar to a price-to-earnings ratio) above 13%, meeting and exceeding
expectations. However, investors have been focused on the following factors: (1)
continued high volume of equity and debt offerings that are running ahead of
demand; (2) new record highs in the broader equity market, which has attracted
capital away from the REIT sector to highly valued "growth" companies; (3) lower
expected growth earnings rates; (4) the uncertainty about modifications to the
REIT structure proposed by the Administration and being worked through Congress;
(5) higher prices paid for acquisitions and overbuilding concerns in the hotel,
office, and industrial sectors; and (6) defensive investors' preference for
utilities.
As REITs experience price weakness, the number of equity offerings should
decline. In addition, the number of management teams that implement equity
repurchase programs is likely to increase. We also expect to see an increase in
the recycling of capital as management teams sell "fully valued" real estate
holdings to reinvest the capital in those that offer greater upside.
OUTLOOK
We continue to believe the broader market will moderate this year, leaving
investors looking for diversification and defensive investments supported by
dividend yield. Historically, REITs have demonstrated a low and declining
correlation with the broader equity market, which ultimately provides a
diversification benefit. Secondly, the dividend yield of the NAREIT Equity Total
Return Index was 6.13% at the end of June. This compares favorably to a yield of
4.3% for the S&P Utilities Index**** and a yield of 5.45% on a 10-year Treasury
bond at month end. We believe REITs offer excellent dividend protection and
believe a large number of REITs will increase their dividends this year at the
rate of their earnings growth. Many REITs are paying out only 60-65% of their
cash flow in dividends right now and approaching minimum payout levels. Should
Funds From Operations growth slow to 8-9% from current levels, we would still
find that an attractive rate, given the consensus 1998 earnings growth estimate
for the S&P 500 is less than 7%.
Concerns regarding modifications to the REIT tax structure by Congress are
overblown, in our opinion. Only four equity REITs will have to adjust their
future real estate acquisition structure to match that of the 179 other equity
REITs if required to de-link real estate operations from ownership.
Cap rates on acquisitions have come down as the real estate cycle across
most sectors has moved closer to equilibrium. In certain submarkets (the
Southeast, for example) and certain sectors (rural, extended stay, or mid- to
low-priced hotels, for example), we have seen overbuilding and have avoided
these areas in the portfolio. However, as a percentage of existing real estate,
we are not concerned about development and believe that overall, it is
warranted.
* The NAREIT (National Association of Real Estate Investment Trusts) Equity
Total Return Index is an unmanaged, commonly used measure of the real
estate equity market. The Index is not available for direct investment.
** The S&P 500 Index is an unmanaged, commonly used measure of common stock
total return performance. The Index is not available for direct investment.
*** The Russell 2000 Index is an unmanaged, commonly used measure of small
company total return performance. The Index is not available for direct
investment.
**** The S&P Utilities Index is a capitalization-weighted index of all stocks
designed to measure the performance of the utility sector of the S&P 500
Index. The Index is not available for direct investment.
38
<PAGE>
REAL ESTATE SECURITIES SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
COMMON STOCKS--99.8%
REAL ESTATE INVESTMENT TRUSTS--98.7%
COMMERCIAL--33.7%
OFFICE/INDUSTRIAL--31.9%
Boston Properties, Inc....................................... 95,500 $ 3,294,750
Duke Realty Investments, Inc................................. 61,600 1,459,150
Equity Office Properties Trust............................... 34,173 969,659
First Industrial Realty Trust, Inc........................... 52,600 1,673,337
Highwoods Properties, Inc.................................... 59,900 1,935,519
Mack-Cali Realty Corp........................................ 47,200 1,622,500
Reckson Associates Realty Corp............................... 57,200 1,351,350
Spieker Properties, Inc...................................... 68,200 2,642,750
Weeks Corp................................................... 30,500 964,562
---------------
15,913,577
---------------
STORAGE--1.8%
Storage USA, Inc............................................. 25,900 906,500
---------------
TOTAL COMMERCIAL............................................................... 16,820,077
---------------
DIVERSIFIED--14.6%
Colonial Properties Trust.................................... 36,700 1,137,700
Crescent Real Estate Equities Co............................. 109,900 3,695,387
Vornado Realty Trust......................................... 62,200 2,468,562
---------------
7,301,649
---------------
HEALTH CARE--3.7%
Health Care Property Investors, Inc.......................... 5,650 203,753
Nationwide Health Properties, Inc............................ 47,900 1,143,612
OMEGA Healthcare Investors, Inc.............................. 14,000 491,750
---------------
1,839,115
---------------
HOTELS--14.4%
Patriot American Hospitality, Inc............................ 91,800 2,197,463
Starwood Hotels and Resorts.................................. 64,900 3,135,481
Sunstone Hotel Investors, Inc................................ 140,000 1,863,750
---------------
7,196,694
---------------
NET LEASE--4.6%
TriNet Corporate Realty Trust, Inc........................... 68,000 2,312,000
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
RESIDENTIAL--18.0%
APARTMENTS--15.0%
Avalon Bay Communities, Inc.................................. 63,900 $ 2,428,200
Equity Residential Properties Trust.......................... 65,600 3,111,900
Essex Property Trust, Inc.................................... 30,700 951,700
Irvine Apartment Communities, Inc............................ 33,500 969,406
---------------
7,461,206
---------------
MANUFACTURED HOMES--3.0%
Manufactured Home Communities, Inc........................... 33,800 815,425
Sun Communities, Inc......................................... 21,300 705,563
---------------
1,520,988
---------------
TOTAL RESIDENTIAL.............................................................. 8,982,194
---------------
RETAIL--9.7%
COMMUNITY/NEIGHBORHOOD--1.6%
Developers Diversified Realty Corp........................... 20,000 783,750
---------------
FACTORY OUTLET--3.0%
Chelsea GCA Realty, Inc...................................... 37,600 1,504,000
---------------
REGIONAL MALLS--5.1%
Macerich Company (The)....................................... 44,300 1,298,544
Simon Debartolo Group, Inc................................... 17,796 578,370
Urban Shopping Centers, Inc.................................. 21,700 683,550
---------------
2,560,464
---------------
TOTAL RETAIL................................................................... 4,848,214
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $45,360,857)................................................ 49,299,943
---------------
REAL ESTATE OPERATING COMPANIES--1.1%
HEALTH CARE--0.1%
Omega Worldwide, Inc. (b).................................... 4,641 35,098
---------------
OFFICE/INDUSTRIAL--0.2%
Reckson Services Industries, Inc. (b)........................ 27,456 90,948
---------------
REGIONAL MALLS--0.8%
Rouse Co..................................................... 12,500 392,969
---------------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $348,893)................................................... 519,015
---------------
TOTAL COMMON STOCKS
(Identified cost $45,709,750)................................................ 49,818,958
---------------
TOTAL INVESTMENTS--99.8%
(Identified cost $45,709,750)................................................ 49,818,958(a)
Cash and receivables, less liabilities--0.2%................................. 104,963
---------------
NET ASSETS--100.0%............................................................. $ 49,923,921
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,698,038 and gross
depreciation of $1,588,830 for income tax purposes. At June 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$45,709,750.
(b) Non-income producing.
See Notes to Financial Statements
39
<PAGE>
REAL ESTATE SECURITIES SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$45,709,750).............................................. $ 49,818,958
Receivables
Dividends and interest.................................... 278,308
Fund shares sold.......................................... 37,053
Investment securities sold................................ 213,200
------------
Total assets............................................ 50,347,519
------------
LIABILITIES
Payables
Custodian................................................. 336,849
Fund shares repurchased................................... 39,211
Investment advisory fee................................... 11,238
Trustees' fee............................................. 8,500
Financial agent fee....................................... 5,763
Accrued expenses.......................................... 22,037
------------
Total liabilities....................................... 423,598
------------
NET ASSETS.................................................. $ 49,923,921
------------
------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 44,903,834
Undistributed net investment income....................... 483,407
Accumulated net realized gain............................. 427,470
Net unrealized appreciation............................... 4,109,210
------------
NET ASSETS.................................................. $ 49,923,921
------------
------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 3,318,276
------------
------------
Net asset value and offering price per share................ $ 15.05
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 1,332,997
Interest.................................................. 44,402
------------
Total investment income................................. 1,377,399
------------
EXPENSES
Investment advisory fee................................... 194,455
Financial agent fee....................................... 19,180
Professional.............................................. 11,999
Trustees.................................................. 8,791
Custodian................................................. 3,029
Printing.................................................. 2,866
Miscellaneous............................................. 1,384
------------
Total expenses.......................................... 241,704
------------
NET INVESTMENT INCOME....................................... 1,135,695
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 434,654
Net change in unrealized appreciation (depreciation) on
investments............................................. (5,347,751)
------------
NET LOSS ON INVESTMENTS..................................... (4,913,097)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ ($ 3,777,402)
------------
------------
</TABLE>
See Notes to Financial Statements
40
<PAGE>
REAL ESTATE SECURITIES SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 1,135,695 $ 1,402,058
Net realized gain......................................... 434,654 1,766,075
Net change in unrealized appreciation (depreciation)...... (5,347,751) 5,041,754
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. (3,777,402) 8,209,887
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (732,671) (1,330,417)
Net realized gains........................................ (52,530) (1,843,915)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (785,201) (3,174,332)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (889,521 and 2,796,827
shares, respectively)................................... 14,254,733 42,663,506
Net asset value of shares issued from reinvestment of
distributions (51,427 and 196,112 shares,
respectively)........................................... 785,201 3,174,332
Cost of shares repurchased (959,163 and 1,242,092 shares,
respectively)........................................... (15,212,419) (18,924,144)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (172,485) 26,913,694
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (4,735,088) 31,949,249
NET ASSETS
Beginning of period....................................... 54,659,009 22,709,760
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $483,407 AND $80,383, RESPECTIVELY)........... $ 49,923,921 $ 54,659,009
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED YEAR ENDED INCEPTION
06/30/98 DECEMBER 31, 5/1/95 TO
(UNAUDITED) 1997 1996 12/31/95
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 16.38 $ 14.32 $ 11.33 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.34 0.50(3) 0.50(3) 0.33(3)
Net realized and unrealized gain
(loss).............................. (1.43) 2.62 3.14 1.42
----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... (1.09) 3.12 3.64 1.75
----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.22) (0.48) (0.50) (0.33)
Dividends from net realized gains..... (0.02) (0.58) (0.15) (0.06)
Tax return of capital................. -- -- -- (0.03)
----------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.24) (1.06) (0.65) (0.42)
----------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... (1.33) 2.06 2.99 1.33
----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 15.05 $ 16.38 $ 14.32 $ 11.33
----------- --------- --------- ---------
----------- --------- --------- ---------
Total return............................ (6.70)%(2) 22.05% 33.09% 17.79%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $49,924 $54,659 $22,710 $8,473
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 0.92%(1) 1.00% 1.00% 1.00%(1)
Net investment income................. 4.31%(1) 3.59% 4.36% 4.80%(1)
Portfolio turnover rate................. 6%(2) 41% 21% 10%(2)
</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.
See Notes to Financial Statements
41
<PAGE>
STRATEGIC THEME SERIES
INVESTOR PROFILE
Phoenix Strategic Theme Series is designed for investors seeking long-term
capital appreciation.
INVESTMENT ADVISER'S REPORT
The Phoenix Strategic Theme Series had strong performance for the six-month
reporting period ended June 30, 1998. The Fund returned 13.36% compared with a
return of 17.75% for the S&P 500 Index.* All performance figures assume
reinvestment of dividends and exclude the effect of sales charges.
The first six months of the year witnessed strong performance from large-cap
stocks, leaving small- and mid-cap stocks significantly lagging. However, this
outperformance has been driven by both new fund flows and foreign buying since
large-cap stocks can easily accommodate the liquidity. Recognizing this shift,
the Fund began shifting to large-cap stocks early this year. Previously, we had
focused on the mid-cap arena, which we believe offers more opportunities for
thematic investing, higher earnings growth rates, and more attractive valuations
compared with large-cap stocks. Yet, large-cap stocks are maintaining their
leadership.
The Fund's strong performance was generated by both new and existing themes.
INTERNET COMMERCE IGNITION, a theme introduced in the past year, 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 DEREGULATING FINANCIAL SERVICES theme
represents banks, insurance companies, and brokerages, which we believe will
continue to witness above-average earnings growth and industry consolidation.
The 21ST CENTURY MEDICINE theme continues to be attractive due to remarkable
advances in gene-mapping, biotechnology, and non-invasive surgical techniques,
which are changing the way medicine is practiced and enhancing the quality of
life.
The Fund's performance was hindered by its exposure to ENERGY TECHNOLOGY,
which suffered a setback with Asia's economic woes and the subsequent decline in
oil prices. We have eliminated our weighting in this theme in favor of the
themes listed above.
OUTLOOK
Moving forward, we believe that the Fund is well-positioned for the current
investment climate, which is characterized by worries of the "Asian flu" and the
threat of a global economic slowdown. Our driving investment themes and
large-cap focus should serve us well in this environment.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Short-Terms & Equivalents 16.99%
Deregulating Financial Services 12.94%
21st Century Medicine 10.94%
Retail Revival 10.89%
Internet Commerce Ignition 10.37%
Special Situations 6.78%
Next Destination Data 6.25%
Home As Headquarters 4.56%
Power Plays 3.79%
Capital Goods - The Long Wave 2.99%
Software Solutions 2.72%
Hybrid Network 2.68%
Wireless Wave 2.51%
Biotech Breakthroughs 2.04%
Global Consumer 1.74%
Satellite Sky 1.09%
Office Ergonomics 0.72%
</TABLE>
* The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The Index is not available for direct investment.
42
<PAGE>
STRATEGIC THEME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
COMMON STOCKS--81.2%
BANKS (MONEY CENTER)--2.9%
BankAmerica Corp............................................. 9,500 $ 821,156
Chase Manhattan Corp......................................... 11,000 830,500
---------------
1,651,656
---------------
COMPUTERS--HARDWARE--2.7%
International Business Machines Corp......................... 13,500 1,549,969
---------------
COMPUTERS--LOCAL NETWORKS--4.5%
Cisco Systems, Inc. (b)...................................... 28,000 2,577,750
---------------
COMPUTERS--MEMORY DEVICES--1.4%
EMC Corp. (b)................................................ 19,000 851,437
---------------
COMPUTERS--SOFTWARE--ENTERPRISES--1.2%
Citrix Systems, Inc. (b)..................................... 10,500 717,937
---------------
COMPUTERS--SOFTWARE--INTERNET--8.6%
America Online, Inc. (b)..................................... 24,700 2,618,200
Lycos, Inc. (b).............................................. 9,500 716,062
Yahoo!, Inc. (b)............................................. 10,500 1,653,750
---------------
4,988,012
---------------
COSMETICS/PERSONAL CARE--.8%
Gillette Co.................................................. 8,000 453,500
---------------
ELECTRIC--SEMICONDUCTOR MFG.--1.5%
Sanmina Corp. (b)............................................ 20,000 867,500
---------------
ELECTRICAL EQUIPMENT--3.1%
General Electric Co.......................................... 19,000 1,729,000
Federated Investors, Inc..................................... 3,000 55,500
---------------
1,784,500
---------------
FINANCIAL--SERVICES--MISCELLANEOUS--6.7%
American Express Co.......................................... 7,900 900,600
Capital One Financial Corp................................... 7,000 869,312
Morgan Stanley, Dean Witter & Co............................. 10,500 959,438
Newcourt Credit Group........................................ 12,000 590,250
SunAmerica, Inc.............................................. 10,000 574,375
---------------
3,893,975
---------------
FINANCE--MORTGAGE & RELATED SERVICES--1.0%
FHLMC........................................................ 12,000 564,750
---------------
INSURANCE--DIVERSIFIED--2.4%
Travelers Group, Inc......................................... 12,500 757,812
Equitable Companies, Inc..................................... 8,000 599,500
---------------
1,357,312
---------------
INSURANCE--PROPERTY/CASUALTY/TITLE--1.0%
Progressive Corp. (The)...................................... 3,900 549,900
---------------
LEISURE--SERVICES--1.0%
Carnival Cruise Lines........................................ 14,000 554,750
---------------
MEDICAL--BIOMED/GENETICS--2.0%
Amgen, Inc. (b).............................................. 18,000 1,176,750
---------------
MEDICAL--DRUGS/DIVERSIFIED--1.0%
Warner-Lambert Co............................................ 8,000 555,000
---------------
MEDICAL--ETHICAL DRUGS--4.9%
Merck & Company, Inc......................................... 4,500 601,875
Pfizer, Inc.................................................. 10,500 1,141,219
Schering Plough Corp......................................... 12,000 1,099,500
---------------
2,842,594
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
MEDICAL--GENERIC DRUGS--1.9%
Watson Pharmaceuticals, Inc. (b)............................. 12,500 $ 583,594
Mylan Laboratories, Inc...................................... 17,000 511,062
---------------
1,094,656
---------------
MEDICAL--INSTRUMENTS--1.5%
Medtronic, Inc............................................... 14,000 892,500
---------------
MEDICAL--PRODUCTS--1.6%
Becton Dickinson & Co........................................ 12,000 931,500
---------------
OFFICE SUPPLIES MFG.--0.7%
Knoll, Inc. (b).............................................. 14,000 413,000
---------------
RETAIL--APPAREL/SHOE--1.1%
Nordstrom, Inc............................................... 8,000 618,000
---------------
RETAIL--DEPARTMENT STORES--3.6%
Kohl's Corp. (b)............................................. 29,000 1,504,375
Sears, Roebuck & Co.......................................... 9,000 549,563
---------------
2,053,938
---------------
RETAIL--MAIL ORDER & DIRECT--1.7%
Amazon.Com, Inc. (b)......................................... 10,000 997,500
---------------
RETAIL--MAJOR DISCOUNT CHAINS--6.3%
Costco Companies, Inc. (b)................................... 9,000 567,563
Kmart Corp. (b).............................................. 29,000 558,250
Dollar General Corp.......................................... 13,000 514,313
Wal-Mart Stores, Inc......................................... 32,500 1,974,375
---------------
3,614,501
---------------
RETAIL--RESTAURANTS--2.4%
McDonalds Corp............................................... 20,000 1,380,000
---------------
RETAIL/WHOLESALE--BUILDING PRODS--4.5%
Home Depot, Inc.............................................. 17,500 1,453,594
Lowe's Companies, Inc........................................ 29,000 1,176,313
---------------
2,629,907
---------------
SERVICES--ADVERTISING/MARKETING--0.9%
Young & Rubicam, Inc. (b).................................... 16,000 512,000
---------------
TELECOMMUNICATIONS--CELLULAR--2.0%
Airtouch Communications, Inc. (b)............................ 16,000 935,000
General Motors Corp. Class H................................. 5,000 235,625
---------------
1,170,625
---------------
TELECOMMUNICATIONS--SERVICES--2.5%
AT&T Corp.................................................... 18,000 1,028,250
Communications Satellite Corp................................ 14,000 396,375
---------------
1,424,625
---------------
UTILITY--ELECTRIC POWER--3.8%
Consolidated Edison, Inc..................................... 6,200 285,587
Duke Energy Corp............................................. 9,000 533,250
FPL Group, Inc............................................... 9,000 567,000
PECO Energy Co............................................... 18,000 525,375
Public Service Enterprise.................................... 8,000 275,500
---------------
2,186,712
---------------
TOTAL COMMON STOCKS
(Identified cost $42,382,217)................................................ 46,856,756
---------------
FOREIGN COMMON STOCKS--1.9%
FOOD--1.0%
Unilever PLC (United Kingdom)................................ 7,000 552,563
---------------
</TABLE>
See Notes to Financial Statements
43
<PAGE>
STRATEGIC THEME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
TELECOMMUNICATIONS--EQUIPMENT--0.9%
Telefonaktiebolaget LM Ericsson Class B ADR (Sweden)......... 18,000 $ 515,250
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,066,197)................................................. 1,067,813
---------------
TOTAL LONG-TERM INVESTMENTS--82.9%
(Identified cost $43,448,414)................................................ 47,924,569
---------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--17.0%
COMMERCIAL PAPER--13.2%
Emerson Electric Co. 6%, 7/1/98................. A-1+ $ 2,000 2,000,000
Du Pont (E.I.) de Nemours & Co. 5.52%, 7/7/98... A-1+ 965 964,112
Merrill Lynch Co. 5.61%, 7/7/98................. A-1+ 1,320 1,318,766
Greenwich Funding Corp. 5.60%, 7/10/98.......... A-1+ 867 865,786
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ------------- ---------------
<S> <C> <C> <C>
COMMERCIAL PAPER--CONTINUED
Preferred Receivables Funding Corp. 5.65%,
7/10/98....................................... A-1 $ 1,570 $ 1,567,782
Corporate Receivables Corp. 5.53%, 10/16/98..... A-1 935 918,914
---------------
7,635,360
---------------
FEDERAL AGENCY SECURITIES--3.8%
FHLMC 5.60%, 7/1/98.......................................... 2,220 2,220,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $9,856,079)................................................. 9,855,360
---------------
TOTAL INVESTMENTS--100.1%
(Identified cost $53,304,493)................................................ 57,779,929(a)
Cash and receivables, less liabilities--(0.1)%............................... (38,350)
---------------
NET ASSETS--100.0%............................................................. $ 57,741,579
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,141,860 and gross
depreciation of $666,424 for federal income tax purposes. At June 30, 1998,
the aggregate cost of securities for federal income tax purposes was
$53,304,493.
(b) Non-income producing.
See Notes to Financial Statements
44
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$53,304,493).............................................. $ 57,779,929
Cash........................................................ 3,839
Receivables
Fund shares sold.......................................... 47,428
Interest and dividends.................................... 20,419
-------------
Total assets............................................ 57,851,615
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 40,759
Investment advisory fee................................... 8,891
Financial agent fee....................................... 8,578
Trustees' fee............................................. 7,711
Accrued expenses.......................................... 44,097
-------------
Total liabilities....................................... 110,036
-------------
NET ASSETS.................................................. $ 57,741,579
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 49,885,268
Undistributed net investment income....................... 45,326
Accumulated net realized gain............................. 3,335,548
Net unrealized appreciation............................... 4,475,437
-------------
NET ASSETS.................................................. $ 57,741,579
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 4,504,884
-------------
-------------
Net asset value and offering price per share................ $ 12.82
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 199,251
Dividends................................................. 129,923
-------------
Total investment income................................. 329,174
-------------
EXPENSES
Investment advisory fee................................... 194,579
Financial agent fee....................................... 21,451
Custodian................................................. 7,971
Professional.............................................. 3,034
Printing.................................................. 3,036
Trustees.................................................. 8,791
Miscellaneous............................................. 799
-------------
Total expenses.......................................... 239,661
-------------
NET INVESTMENT INCOME....................................... 89,513
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 4,940,937
Net change in unrealized appreciation (depreciation) on
investments............................................. 1,580,133
-------------
NET GAIN ON INVESTMENTS..................................... 6,521,070
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 6,610,583
-------------
-------------
</TABLE>
See Notes to Financial Statements
45
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 89,513 $ 161,027
Net realized gain......................................... 4,940,937 4,293,916
Net change in unrealized appreciation (depreciation)...... 1,580,133 1,374,168
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 6,610,583 5,829,111
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (44,187) (161,027)
Net realized gains........................................ -- (5,484,196)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (44,187) (5,645,223)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (843,713 and 2,325,529
shares, respectively)................................... 10,188,226 27,902,960
Net asset value of shares issued from reinvestment of
distributions (3,512 and 504,343 shares,
respectively)........................................... 44,187 5,645,223
Cost of shares repurchased (550,513 and 987,193 shares,
respectively)........................................... (6,676,741) (12,084,569)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 3,555,672 21,463,614
-------------- --------------
NET INCREASE IN NET ASSETS................................ 10,122,068 21,647,502
NET ASSETS
Beginning of period....................................... 47,619,511 25,972,009
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $45,326 AND $0, RESPECTIVELY)................. $ 57,741,579 $ 47,619,511
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
SIX MONTHS INCEPTION
ENDED YEAR 1/29/96
06/30/98 ENDED TO
(UNAUDITED) 12/31/97 12/31/96
----------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 11.32 $ 10.98 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................... 0.01 0.05(3) 0.04(3)
Net realized and unrealized gain........... 1.50 1.82 0.99
----------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS......... 1.51 1.87 1.03
----------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.01) (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...................... (0.01) (1.53) (0.05)
----------- --------- ---------
CHANGE IN NET ASSET VALUE.................... 1.50 0.34 0.98
----------- --------- ---------
NET ASSET VALUE, END OF PERIOD............... $ 12.82 $ 11.32 $ 10.98
----------- --------- ---------
----------- --------- ---------
Total return................................. 13.36%(2) 17.16% 10.33%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $57,742 $47,620 $25,872
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.93%(1) 1.00% 1.00%(1)
Net investment income...................... 0.35%(1) 0.42% 0.64%(1)
Portfolio turnover rate...................... 299%(2) 642% 391%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.02
and $0.02 per share, respectively.
See Notes to Financial Statements
46
<PAGE>
ABERDEEN NEW ASIA SERIES
INVESTOR PROFILE
Phoenix Aberdeen New Asia Series is designed for investors seeking long-term
capital appreciation. Investors should note that foreign investing poses
additional risks, such as currency fluctuations, less public information, and
political and economic uncertainty.
INVESTMENT ADVISER'S REPORT
For the six months ended June 30, 1998, Phoenix Aberdeen New Asia Series was
down 13.59% compared with a negative return of 17.23% for the Morgan Stanley
Capital International All Country Asia Pacific ex Japan Index.* All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
After last year's currency devaluations, the level of tumult in Asia has
continued at a very fast pace. The year began with very brisk rallies in
regional stock markets, which had ended last year at historically low levels.
Most attention in the early part of the year was focused on the International
Monetary Fund's (IMF) activities in Korea, Thailand and Indonesia. Korea elected
a new president, and Thailand a new prime minister. These changes at the top
facilitated the adoption of more reform-minded policies in these countries.
However, in Korea's case, militant unions and the conglomerates were resistant
to change and have managed to create a standoff. Thailand remains held back by
its banking sector, which has further to go in working out its non-performing
assets and is going through recapitalizing its dented balance sheets. Though
leading banks such as Bangkok Bank has managed to issue $1 billion in new
capital, we feel they will require more.
Further south, Malaysia's prime minister remained adamant that the country's
economic weakness was mainly caused by overseas culprits. There was disagreement
over remedial policies as well, with his deputy advocating IMF-style tight
monetary policies to control the problems in the banking sector, whereas the
prime minister prioritizes keeping interest rates low to help keep troubled
companies afloat. Another long ruling leader, Suharto of Indonesia was even more
skillful in his obfuscation on economic policy. Having repeatedly reneged on
promises made to the IMF, the country spiraled into economic paralysis, with the
currency collapsing and exporters unable to export with international banks
refusing to honor letters of credit by Indonesian banks. With prices of basic
foodstuffs skyrocketing along with inflation, hitherto mostly peaceful protests
sparked riots after several students were shot to death at a campus rally.
Following a very tense spate of rioting, which saw widespread looting, targeting
the entrepreneurial Chinese minority, the president was forced to step down.
Subsequently, his successor, former Vice President Habibie has managed to
consolidate his position with the backing of the armed forces. However,
Indonesia's challenges remain formidable. Though its foreign currency reserves
and government finances are the strongest in the world, Singapore is vulnerable
to such large changes in its neighboring countries and expects its economy to
stop growing by the end of 1998.
China announced a wide-ranging reform program for its creaking state finance
sector. This is crucial for the country this year as these lending institutions
carry a huge burden of non-performing loans made to state owned enterprises.
With exports slowing down and domestic structural problems, the economy has
decelerated, and we are expecting only 5% growth this year, well below the 8%
that the government believes is required to maintain equilibrium. Hong Kong's
economy also faces tough times, the economy has been shrinking and its property
dependent nature has been a vicious blow, high interest rates and economic
uncertainty has cut around 40% from property prices. Taiwan remains the
sturdiest economy in the region, though its large electronics industry appears
more and more vulnerable to cost competition from the region and cyclical
problems in the U.S.
The Indian subcontinent, which managed to escape most of the economic
upheaval in the rest of Asia, sadly shot itself in the foot with an escalation
of military tensions. India conducted a public show of its nuclear capability,
spurring Pakistan to do the same. The resulting sanctions from the U.S. and
Japan are expected to have serious impact on Pakistan's economy, though India's
more diversified economy may feel less of a pinch.
Australia has remained relatively stable. The natural resource sector has
suffered from the Asian downturn, but our exposure has been solely to the
industrial sector. Growth will slow too in Australia but transparency and
quality are being rewarded.
Our portfolio in Asia avoids companies that rely on political patronage for
their well-being. Especially in Indonesia, these have been the worst hit by the
public backlash against years of corruption and favoritism. In Malaysia,
politically connected companies, which were aggressively gearing up their
expansion plans during the good times have now realized that they are
precariously perched on a huge pile of debt. We have also mostly shunned banks,
as they will need fresh injections of capital to remain viable.
47
<PAGE>
ABERDEEN NEW ASIA SERIES
OUTLOOK
It is essential for Japan's economy to recover, as the implications of this
for the region as a whole are immense, with no upturn in the Pacific Basin
likely without Japan's assistance. Fundamental valuations for good long term
businesses are looking increasingly compelling, however, with short selling
distorting the picture. Given the scale of recent declines we could see a bounce
in Asian markets on improved sentiment in the near term.
Looking ahead, the road to recovery will be a slow and painful one, but we
believe that our portfolio of high quality, well-managed companies will
eventually prevail.
* Morgan Stanley Capital International All Country Asia Pacific (excluding
Japan) Index is an unmanaged, commonly used measure of total return
performance of Asia and the Pacific Basin. The Index is not available for
direct investment.
48
<PAGE>
ABERDEEN NEW ASIA SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--93.8%
AUSTRALIA--14.6%
Australian Gas Light Co., Ltd (Natural Gas).................. 25,000 $ 156,360
BRL Hardy Ltd. (Beverages (Alcoholic))....................... 100,000 322,009
Commonwealth Bank of Australia (Banks (Major Regional))......
12,000 140,000
Pacifica Group Ltd. (Manufacturing (Diversified))............ 80,000 183,298
QBE Insurance Group Ltd. (Insurance (Multi-Line))............ 70,000 247,080
Telstra Corp. (Communications Equipment)..................... 85,000 217,914
---------------
1,266,661
---------------
HONG KONG--21.0%
CDL Hotels International Ltd. (Lodging--Hotels).............. 850,000 252,304
Citybus Group Ltd. (Truckers)................................ 750,000 99,696
Giordano International Ltd. (Retail (General
Merchandise)).............................................. 550,000 111,440
Hongkong Electric Holdings Ltd. (Electric Companies)......... 130,000 402,654
National Mutual Asia Ltd. (Insurance (Multi-Line))........... 524,000 334,745
Smartone Telecommunications (Telephone)...................... 120,000 292,699
Swire Pacific Ltd. Class B (Diversified Miscellaneous)....... 550,000 330,061
---------------
1,823,599
---------------
INDIA--8.5%
BSES, Ltd. (Electrical Equipment) (b)........................ 17,000 175,525
Industrial Credit & Investment Corporation of India Ltd.
Sponsored GDR (Financial (Diversified)).................... 20,000 204,500
Mahanagar Telephone Nigam Ltd. GDR (Telephone) (b)........... 20,000 209,500
Ranbaxy Laboratories, Ltd. GDR (Health Care (Medical Products
& Supplies))............................................... 9,000 144,000
---------------
733,525
---------------
INDONESIA--2.8%
PT Bank Bali (Banks (Major Regional))........................ 531,000 30,497
PT Indosat TBK (Communications Equipment).................... 180,000 209,189
---------------
239,686
---------------
MALAYSIA--6.6%
Carlsberg Brewery Berhad (Building Materials)................ 48,000 145,823
Malaysian Oxygen Berhad (Chemicals).......................... 100,000 221,820
Muhibbah Engineering (M) Berhad (Engineering &
Construction).............................................. 150,000 57,866
Sime UEP Properties Berhad (Services (Commercial &
Consumer))................................................. 250,000 143,460
---------------
568,969
---------------
NEW ZEALAND--2.2%
Telecom Corporation of New Zealand Ltd. (Telecommunications
(Cellular/Wireless))....................................... 45,000 185,470
---------------
PHILIPINES--8.2%
Ayala Land, Inc. Class B (Engineering & Construction)........ 690,000 198,561
Bank of the Philippine Islands Banks (Major Regional)........ 50,000 101,918
La Tondena Distillers, Inc. (Beverages (Alcoholic)).......... 175,000 88,129
Philippine Long Distance Telephone Co. Sponsored ADR
(Telephone)................................................ 14,000 316,750
---------------
705,358
---------------
SINGAPORE--11.2%
Clipsal Industries Ltd. (Electrical Equipment)............... 175,000 156,625
Robinson & Co. Ltd. (Retail (General Merchandise))........... 108,000 274,878
Rothmans Industries Ltd. (Tobacco)........................... 50,000 221,962
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
SINGAPORE--CONTINUED
Singapore Press Holdings Ltd. (Publishing
(Newspapers)).............................................. 20,000 $ 133,769
United Overseas Bank Ltd. (Banks (Money Center))............. 59,000 183,340
---------------
970,574
---------------
SOUTH KOREA--3.1%
Pohang Iron & Steel Ltd. (Iron & Steel)...................... 5,000 141,296
Samsung Electronics Sponsored GDR 144A Non-Voting Shares
(Electronics (Instrumentation)) (c)........................ 16,252 130,016
---------------
271,312
---------------
SRI LANKA--2.4%
John Keells Holdings Ltd. (Manufacturing (Specialized))
(b)........................................................ 35,000 101,682
National Development Bank Ltd. (Building Materials).......... 55,000 105,122
---------------
206,804
---------------
TAIWAN--4.0%
Standard Foods Taiwan Ltd. GDR RegS (Retail (Food Chains))
(b)........................................................ 30,000 345,750
---------------
THAILAND--4.1%
Bangkok Bank Public Co. Ltd. (Banks (Major Regional))........ 30,000 36,879
Phatra Insurance Public Co., Ltd. (Insurance (Multi-Line))...
71,600 208,198
Ruam Pattana Fund II (Financial (Diversified))............... 1,250,000 109,338
---------------
354,415
---------------
UNITED KINGDOM--5.1%
HSBC Holdings PLC (Banks (Major Regional))................... 12,000 304,535
Rowe Evans Investments Group PLC (Agricultural Products).....
125,000 140,780
---------------
445,315
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $12,694,156)................................................ 8,117,438
---------------
WARRANTS--0.0%
THAILAND--0.0%
Siam Commercial Bank Public Co., Ltd. (Diversified
Miscellaneous)............................................. 26,666 0
---------------
TOTAL WARRANTS
(Identified cost $0)......................................................... 0
---------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
-------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--8.1%
REPURCHASE AGREEMENT--8.1%................................... $ 700 700,000
Brown Brothers Harriman & Co., repurchase agreement, 5.25%,
dated 6/30/98 due 7/1/98, repurchase price $700,102
collateralized by U.S. Treasury Note 5.50%, 3/31/00, market
value $704,781
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $700,000)................................................... 700,000
---------------
TOTAL INVESTMENTS--101.9%
(Identified cost $13,394,156)................................................ 8,817,438(a)
Cash and receivables, less liabilities--(1.9)%............................... (165,935)
---------------
NET ASSETS--100.0%............................................................. $ 8,651,503
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $290,417 and gross
depreciation of $4,949,635 for federal income tax purposes. At June 30,
1998, the aggregate cost of securities for federal income tax purposes was
$13,476,656.
(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 June 30, 1998,
these securities amounted to a value of $130,016 or 1.5% of net assets.
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)
<TABLE>
<S> <C>
Agricultural Products.............................. 1.7%
Banks (Major Regional)............................. 7.3
Banks (Money Center)............................... 2.3
Beverages (Alcoholic).............................. 5.1
Building Materials................................. 3.1
Chemicals.......................................... 2.7
Communications Equipment........................... 5.3
Diversified Miscellaneous.......................... 4.1
Electric Companies................................. 5.0
Electrical Equipment............................... 4.1
Electronics (Instrumentation)...................... 1.6
Engineering & Construction......................... 3.2
Financial (Diversified)............................ 3.9
Health Care (Medical Products & Supplies).......... 1.8
Insurance (Multi-Line)............................. 9.7
Iron & Steel....................................... 1.7
Lodging--Hotels.................................... 3.1
Manufacturing (Diversified)........................ 2.3
Manufacturing (Specialized)........................ 1.3
Natural Gas........................................ 1.9
Publishing (Newspapers)............................ 1.6
Retail (Food Chains)............................... 4.3
Retail (General Merchandise)....................... 4.8
Services (Commercial & Consumer)................... 1.7
Telecommunications (Cellular/Wireless)............. 2.3
Telephone.......................................... 10.2
Tobacco............................................ 2.7
Truckers........................................... 1.2
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
50
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$13,394,156).............................................. $ 8,817,438
Cash........................................................ 25,558
Receivables
Investment securities sold................................ 90,005
Fund shares sold.......................................... 66,658
Dividends and interest.................................... 26,603
Adviser................................................... 3,820
Tax reclaim............................................... 988
-------------
Total assets............................................ 9,031,070
-------------
LIABILITIES
Payables
Investment securities purchased........................... 307,566
Fund shares repurchased................................... 8,050
Trustee fee............................................... 8,387
Financial agent fee....................................... 2,849
Accrued expenses.......................................... 52,715
-------------
Total liabilities....................................... 379,567
-------------
NET ASSETS.................................................. $ 8,651,503
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... 15,138,360
Undistributed net investment loss......................... (66,629)
Accumulated net realized loss............................. (1,851,983)
Net unrealized depreciation............................... (4,568,245)
-------------
NET ASSETS.................................................. $ 8,651,503
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 1,554,698
-------------
-------------
Net asset value and offering price per share................ $ 5.56
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 137,778
Interest.................................................. 23,786
Foreign taxes withheld.................................... (6,015)
-------------
Total investment income................................. 155,549
-------------
EXPENSES
Investment advisory fee................................... 49,897
Financial agent fee....................................... 5,411
Custodian................................................. 33,338
Professional.............................................. 18,003
Printing.................................................. 11,773
Trustees.................................................. 8,387
Miscellaneous............................................. 3,544
-------------
Total expenses.......................................... 130,353
Less expenses borne by investment adviser............... (67,974)
-------------
Net expenses............................................ 62,379
-------------
NET INVESTMENT INCOME....................................... 93,170
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (1,333,079)
Net realized loss on foreign currency transactions........ (4,987)
Net change in unrealized appreciation (depreciation) on
investments............................................. (176,698)
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... 12,906
-------------
NET LOSS ON INVESTMENTS..................................... (1,501,858)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ ($ 1,408,688)
-------------
-------------
</TABLE>
See Notes to Financial Statements
51
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 93,170 $ 211,171
Net realized loss......................................... (1,338,066) (526,096)
Net change in unrealized appreciation (depreciation)...... (163,792) (4,381,851)
------------- -----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS...... (1,408,688) (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 (1,334,158 and 1,188,914
shares, respectively)................................... 16,085,916 10,623,009
Net asset value of shares issued from reinvestment of
distributions (0 and 66,703 shares, respectively)....... -- 438,534
Cost of shares repurchased (1,334,918 and 862,809 shares,
respectively)........................................... (16,042,427) (7,494,737)
------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 43,489 3,566,806
------------- -----------------
NET DECREASE IN NET ASSETS................................ (1,365,199) (1,568,504)
NET ASSETS
Beginning of period....................................... 10,016,702 11,585,206
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT LOSS
AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF
($66,629) AND ($159,799), RESPECTIVELY)................. $ 8,651,503 $10,016,702
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FROM INCEPTION
06/30/98 YEAR ENDED 9/17/96 TO
(UNAUDITED) 12/31/97 12/31/96
----------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 6.44 $ 9.96 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................... 0.06(1) 0.15(1) 0.05(1)
Net realized and unrealized gain (loss).... (0.94) (3.36) (0.04)
----------- ---------- -------
TOTAL FROM INVESTMENT OPERATIONS......... (0.88) (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.................... (0.88) (3.52) (0.04)
----------- ---------- -------
NET ASSET VALUE, END OF PERIOD............... $ 5.56 $ 6.44 $ 9.96
----------- ---------- -------
----------- ---------- -------
Total return................................. (13.59)%(3) (32.39)% 0.16%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $8,652 $10,017 $11,585
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 1.25%(2) 1.25% 1.25%(2)
Net investment income...................... 1.76%(2) 1.63% 2.40%(2)
Portfolio turnover rate...................... 33%(3) 27% 2%(3)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.04,
$0.07 and $0.03 per share, respectively.
(2) Annualized.
(3) Not annualized.
See Notes to Financial Statements
52
<PAGE>
RESEARCH ENHANCED INDEX SERIES
INVESTOR PROFILE
The Research Enhanced Index Series is designed for investors seeking
long-term capital appreciation.
INVESTMENT ADVISER'S REPORT
For the latest six months, the Fund has returned 19.41%, outperforming the
S&P 500 Index, which returned of 17.75% for the same period.* All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
Favorable stock selection drove the Fund's above-average performance,
particularly consumer cyclical stocks, which were especially strong. Chrylser
had the greatest impact on performance on news that the company had agreed to
merge with Daimler-Benz. Stock selection among telephone stocks was also
beneficial. The portfolio was underweighted in Worldcom, whose shares rose on
news of an agreement having been reached with EU regulators that would allow
Worldcom's proposed merger with MCI to proceed. At the same time, the portfolio
was underweighted in AT&T, which fell as the company announced a dilutive
takeover of cable giant TCI. However, in the services industry, Comcast, another
of our holdings and the fourth largest cable company, benefited from the
acquisition of TCI by AT&T.
Stock selection among retailers detracted from overall performance. Toys R
Us continued to languish, and Federated Department Stores, while higher for the
period, was weak compared with sector gains of slightly over 12%. The portfolio
also trailed the S&P 500 Index in the technology sector. The positive impact
from holdings in EMC Corp. and Bay Networks was not sufficient to offset the
heavily negative effect of our underweighting in Lucent, Microsoft, and Dell.
OUTLOOK
The sustainability of domestic economic momentum amid global disinflationary
developments has been impressive. Still, growth in corporate profits, mute
relative to earlier estimates, seems unlikely to rebound to 1997 levels in view
of softened global demand, a stronger dollar, domestic capacity growth, and
increasing wage pressures.
As always, we remain fully invested and largely sector neutral. Amid
continued turmoil resulting from the Asian economic crisis, basic industry
stocks have been among the hardest hit. Recovery in these markets appears
distant, and near-term earnings uncertainty is extremely high. However, our
disciplined investment approach has helped to identify a handful of companies in
this sector whose stocks have declined disproportionately to their long-term
earnings and cash flow prospects.
* The S&P 500 Index is an unmanaged, commonly used measure of common stock total
return performance. The Index is not available for direct investment.
53
<PAGE>
RESEARCH ENHANCED INDEX SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--0.2%
U.S. TREASURY NOTES--0.2%
U.S. Treasury Note 5.75%, 12/31/98.............. AAA $ 100 $ 100,209
------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $100,406)......................................... 100,209
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
COMMON STOCKS--93.4%
AEROSPACE/DEFENSE--0.9%
Boeing Co................................................. 11,000 490,187
Precision Castparts Corp.................................. 100 5,337
------------
495,524
------------
AGRICULTURAL PRODUCTS--0.1%
Pioneer HI Bred International............................. 1,400 57,925
------------
AIR FREIGHT--0.0%
FDX Corp. (b)............................................. 300 18,825
------------
AIRLINES--0.1%
Southwest Airlines Co..................................... 1,300 38,512
------------
ALUMINUM--0.4%
Aluminum Company of America............................... 2,300 151,656
Reynolds Metals Co........................................ 1,000 55,937
------------
207,593
------------
AUTO PARTS & EQUIPMENT--0.8%
Cooper Tire & Rubber Co................................... 900 18,562
Dana Corp................................................. 1,000 53,500
Echlin, Inc............................................... 1,000 49,062
Genuine Parts Co.......................................... 2,100 72,581
Goodyear Tire & Rubber Co................................. 1,800 115,987
ITT Industries, Inc....................................... 1,400 52,325
Lear Corp. (b)............................................ 1,000 51,312
------------
413,329
------------
AUTOMOBILES--1.5%
Chrysler Corp............................................. 7,700 434,087
Ford Motor Co............................................. 2,100 123,900
General Motors Corp....................................... 3,300 220,481
------------
778,468
------------
BANKS (MAJOR REGIONAL)--3.8%
Associated Banc-Corp...................................... 400 15,050
Banc One Corp............................................. 3,700 206,517
Charter One Financial, Inc................................ 1,000 33,687
City National Corp........................................ 300 11,081
Colonial BancGroup, Inc................................... 300 9,675
Compass Bankshares, Inc................................... 400 18,050
Crestar Financial Corp.................................... 700 38,194
Dime Bancorp, Inc......................................... 700 20,956
First American Corp....................................... 700 33,687
First Commerce Corp....................................... 500 34,719
First Tennessee National Corp............................. 1,000 31,563
First Union Corp.......................................... 6,600 391,238
Firstar Corp.............................................. 1,100 41,800
Fleet Financial Group, Inc................................ 1,700 141,950
Hibernia Corp. Class A.................................... 800 16,150
Huntington Bancshares, Inc................................ 1,300 43,550
KeyCorp................................................... 2,900 103,312
M & T Bank Corp........................................... 100 55,400
Marshall & Ilsley Corp.................................... 700 35,744
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
BANKS (MAJOR REGIONAL)--CONTINUED
Mercantile Bancorporation, Inc............................ 900 $ 45,337
Mercantile Bankshares Corp................................ 500 17,406
National Commerce Bancorporation.......................... 200 8,375
Norwest Corp.............................................. 3,100 115,863
Pacific Century Financial Corp............................ 500 12,000
Regions Financial Corp.................................... 600 24,637
Republic New York Corp.................................... 800 50,350
Southtrust Corp........................................... 1,200 52,200
Sovereign Bancorp, Inc.................................... 1,100 17,978
Star Banc Corp............................................ 100 6,387
Trans Financial Bancorp Inc............................... 200 11,475
Union Planters Corp....................................... 600 35,287
Valley National Bancorp................................... 300 8,700
Washington Federal, Inc................................... 200 5,525
Wells Fargo & Co.......................................... 700 258,300
Westamerica Bancorporation................................ 300 9,637
Wilmington Trust Corp..................................... 200 12,175
------------
1,973,955
------------
BANKS (MONEY CENTER)--3.9%
BankAmerica Corp.......................................... 5,500 475,406
Bankers Trust New York Corp............................... 700 81,244
Chase Manhattan Corp...................................... 4,600 347,300
Citicorp.................................................. 3,800 567,150
First Chicago NBD Corp.................................... 1,900 168,387
NationsBank Corp.......................................... 5,400 413,100
------------
2,052,587
------------
BEVERAGES (ALCOHOLIC)--0.3%
Anheuser-Busch Cos., Inc.................................. 3,400 160,437
------------
BEVERAGES (NON-ALCOHOLIC)--2.8%
Coca-Cola Co.............................................. 12,000 1,026,000
PepsiCo, Inc.............................................. 10,300 424,231
------------
1,450,231
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--0.7%
Comcast Corp. Special Class A............................. 4,400 178,612
Cox Communications, Inc. Class A.......................... 500 24,219
MediaOne Group, Inc....................................... 1900 83,481
Tele-Communications Inc. TCI V............................ 4,800 96,300
------------
382,612
------------
BUILDING MATERIALS--0.0%
Owens Corning............................................. 600 24,487
------------
CHEMICALS--1.8%
Dow Chemical Co........................................... 1,600 154,700
Du Pont (E.I.) de Nemours & Co............................ 8,100 604,462
Lyondell Petrochemical Co................................. 500 15,219
Praxair, Inc.............................................. 1,100 51,494
Rohm & Haas Co............................................ 400 41,575
Union Carbide Corp........................................ 1,000 53,375
------------
920,825
------------
CHEMICALS (DIVERSIFIED)--0.7%
Monsanto Co............................................... 6,400 357,600
PPG Industries, Inc....................................... 300 20,869
------------
378,469
------------
CHEMICAL (SPECIALTY)--0.1%
Albermarle Corp........................................... 200 4,412
Crompton & Knowles Corp................................... 500 12,594
Cytec Industries, Inc. (b)................................ 300 13,275
Nalco Chemical Co......................................... 500 17,562
</TABLE>
See Notes to Financial Statements
54
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
CHEMICAL (SPECIALTY)--CONTINUED
Solutia, Inc.............................................. 900 $ 25,819
------------
73,662
------------
COMMUNICATIONS EQUIPMENT--2.0%
Lucent Technologies, Inc.................................. 9,600 798,600
Motorola, Inc............................................. 4,700 247,044
------------
1,045,644
------------
COMPUTERS (HARDWARE)--2.9%
Compaq Computer Corp...................................... 11,400 323,475
Dell Computer Corp. (b)................................... 800 74,250
Hewlett Packard Co........................................ 1,700 101,787
International Business Machines Corp...................... 7,500 861,094
Quantum Corp. (b)......................................... 1,000 20,750
Sun Microsystems, Inc. (b)................................ 3,700 160,719
------------
1,542,075
------------
COMPUTERS (NETWORKING)--1.8%
3 Com Corp. (b)........................................... 2,800 85,925
Bay Networks, Inc. (b).................................... 2,700 87,075
Cabletron Systems, Inc.................................... 1,300 17,469
Cisco Systems, Inc. (b)................................... 8,200 754,912
------------
945,381
------------
COMPUTERS (PERIPHERALS)--0.4%
EMC Corp. (b)............................................. 4,200 188,212
------------
COMPUTERS (SOFTWARE & SERVICES)--3.4%
Autodesk, Inc............................................. 300 11,587
Computer Associates International, Inc.................... 4,600 255,587
Microsoft Corp. (b)....................................... 10,700 1,159,612
Network Associates, Inc. (b).............................. 900 43,087
Oracle Systems Corp. (b).................................. 9,000 221,062
Parametric Technology Co.................................. 2,100 56,962
Sybase, Inc. (b).......................................... 300 2,091
Symantec Corp............................................. 400 10,450
------------
1,760,438
------------
CONSUMER FINANCE--0.5%
Beneficial Corp........................................... 500 76,594
Household International, Inc.............................. 1,800 89,550
MBNA Corp................................................. 2,900 95,700
Provident Financial Group, Inc............................ 300 13,687
------------
275,531
------------
CONTAINERS & PACKAGING (PAPER)--0.2%
Stone Container Corp...................................... 2,700 42,187
Temple-Inland, Inc........................................ 700 37,712
Union Camp Corp........................................... 800 39,700
------------
119,599
------------
ELECTRIC COMPANIES--2.2%
Allegheny Energy, Inc..................................... 1,000 30,125
Baltimore Gas & Electric Co............................... 1,300 40,381
Central & Southwest Corp.................................. 4,700 126,312
Cinergy Corp.............................................. 1,400 49,000
CMS Energy Corp........................................... 900 39,600
Dominion Resources, Inc................................... 1,700 69,275
Duke Energy Corp.......................................... 2,300 136,275
Edison International...................................... 1,100 32,519
Entergy Corp.............................................. 2,100 60,375
GPU, Inc.................................................. 900 34,031
Illinova Corp............................................. 400 12,000
New England Electric System............................... 600 25,950
Northeast Utilities, Inc.................................. 1,200 20,325
Northern States Power Co.................................. 1,400 40,075
PECO Energy Co............................................ 1,900 55,456
PG&E Corp................................................. 2,700 85,219
Potomac Electric Power Co................................. 800 20,050
PP&L Resources, Inc....................................... 1,600 36,300
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
ELECTRIC COMPANIES--CONTINUED
Southern Co............................................... 1,700 $ 47,069
Teco Energy, Inc.......................................... 1,100 29,494
Texas Utilities Co........................................ 2,100 87,412
Union Electric Co......................................... 600 23,850
Wisconsin Energy Corp..................................... 1,100 33,412
------------
1,134,505
------------
ELECTRICAL EQUIPMENT--3.3%
Coltec Industries, Inc.................................... 1,200 23,850
Emerson Electric Co....................................... 3,700 223,387
General Electric Co....................................... 15,300 1,392,300
Rockwell International Corp............................... 1,700 81,706
------------
1,721,243
------------
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.1%
Grainger (W.W.), Inc...................................... 1,000 49,812
------------
ELECTRONICS (DEFENSE)--0.4%
Raytheon Co. Class A...................................... 2,100 121,012
Raytheon Co. Class B...................................... 1,900 112,337
------------
233,349
------------
ELECTRONICS (INSTRUMENTATION)--0.1%
Perkin Elmer Corp......................................... 500 31,094
Sensormatic Electronics Corp.............................. 800 11,200
Tektronix, Inc............................................ 400 14,150
------------
56,444
------------
ELECTRONICS (SEMICONDUCTORS)--2.3%
Advanced Micro Devices, Inc............................... 1,000 17,062
Intel Corp................................................ 12,500 926,562
National Semiconductor Corp. (b).......................... 1,200 15,825
Texas Instruments, Inc.................................... 3,800 221,587
Xilinx, Inc. (b).......................................... 600 20,400
------------
1,201,436
------------
ENGINEERING & CONSTRUCTION--0.0%
Foster Wheeler Corp....................................... 200 4,287
------------
ENTERTAINMENT--1.8%
Time Warner, Inc.......................................... 6,400 546,800
Viacom, Inc. Class B (b).................................. 4,200 244,650
Walt Disney Co............................................ 1,500 157,594
------------
949,044
------------
EQUIPMENT (SEMICONDUCTORS)--0.2%
Applied Materials, Inc. (b)............................... 2,900 85,550
------------
FINANCIAL (DIVERSIFIED)--3.5%
American Express Co....................................... 3,100 353,400
Amresco, Inc. (b)......................................... 200 5,825
Associates First Capital Corp............................. 2,300 176,812
Bear Stearns Cos., Inc.................................... 900 51,187
Capital One Financial Corp................................ 500 62,094
ContiFinancial Corp. (b).................................. 300 6,938
FHLMC..................................................... 4,600 216,487
Finova Group, Inc......................................... 400 22,650
FNMA...................................................... 7,000 425,250
Greenpoint Financial Corp................................. 600 22,575
Lehman Brothers Holdings, Inc............................. 600 46,538
MBIA, Inc................................................. 700 52,413
Morgan Stanley, Dean Witter & Co.......................... 4,000 365,500
PMI Group, Inc. (The)..................................... 200 14,675
TCF Financial Corp........................................ 600 17,700
------------
1,840,044
------------
FOODS--1.8%
Bestfoods................................................. 1,800 104,513
Campbell Soup Co.......................................... 3,200 170,000
Corn Products International, Inc.......................... 100 3,388
General Mills, Inc........................................ 1,100 75,213
</TABLE>
See Notes to Financial Statements
55
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
FOODS--CONTINUED
Heinz (H.J.) Co........................................... 2,600 $ 145,925
Hershey Foods Corp........................................ 500 34,500
Kellogg Co................................................ 2,900 108,931
Nabisco Holdings Corp..................................... 300 10,819
Ralston-Ralston Purina Group.............................. 900 105,131
Sara Lee Corp............................................. 3,300 184,594
------------
943,014
------------
FOOTWEAR--0.1%
Nike, Inc. Class B........................................ 1,200 58,425
Reebok International Ltd. (b)............................. 700 19,381
------------
77,806
------------
GAMING, LOTTERY, & PARIMUTUEL COS.--0.1%
International Game Technology............................. 1,400 33,950
------------
HEALTH CARE (DIVERSIFIED)--5.7%
Abbott Laboratories....................................... 8,300 339,263
American Home Products Corp............................... 11,700 605,475
Bristol-Myers Squibb Co................................... 7,700 885,019
Johnson & Johnson......................................... 8,200 604,750
Warner-Lambert Co......................................... 7,800 541,125
------------
2,975,632
------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--3.4%
Agouron Pharmaceuticals, Inc. (b)......................... 100 3,031
Chiron Corp. (b).......................................... 1,700 26,669
Forest Laboratories, Inc. (b)............................. 800 28,600
Lilly (Eli) & Co.......................................... 2,500 165,156
Merck & Company, Inc...................................... 4,600 615,250
Pfizer, Inc............................................... 6,400 695,600
Schering-Plough Corp...................................... 2,500 229,063
Watson Pharmaceuticals, Inc. (b).......................... 800 37,350
------------
1,800,719
------------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.5%
Columbia/HCA Healthcare, Corp............................. 4,000 116,500
Health Care and Retirement Corp........................... 1,800 19,719
Tenet Healthcare Corp. (b)................................ 3,200 100,000
------------
236,219
------------
HEALTH CARE (MANAGED CARE)--0.3%
Humana, Inc. (b).......................................... 2,200 68,613
United Healthcare Corp.................................... 1,800 114,300
------------
182,913
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.8%
Bausch & Lomb, Inc........................................ 700 35,088
Boston Scientific Corp. (b)............................... 2,100 150,413
Medtronic, Inc............................................ 3,000 191,250
Stryker Corp.............................................. 500 19,188
United States Surgical Corp............................... 600 27,375
------------
423,314
------------
HEALTH CARE (SPECIALIZED SERVICES)--0.1%
Alza Corp. (b)............................................ 800 34,600
------------
HOUSEHOLD FURN. & APPLIANCES--0.3%
Furniture Brands International............................ 600 16,838
Leggett & Platt, Inc...................................... 2,600 65,000
Whirlpool Corp............................................ 900 61,875
------------
143,713
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.0%
Kimberly Clark Corp....................................... 3,900 178,913
Procter & Gamble Co. (b).................................. 9,400 855,988
------------
1,034,901
------------
INSURANCE (LIFE/HEALTH)--0.5%
Aetna, Inc................................................ 1,500 114,188
Torchmark Corp............................................ 1,000 45,750
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
INSURANCE (LIFE/HEALTH)--CONTINUED
Transamerica Corp......................................... 500 $ 57,563
UNUM Corp................................................. 1,000 55,500
------------
273,001
------------
INSURANCE (MULTI-LINE)--2.6%
AMBAC Financial Group..................................... 500 29,250
American International Group, Inc......................... 5,200 759,200
Cigna Corp................................................ 1,600 110,400
Financial Security Assurance Holdings Ltd................. 200 11,750
Hartford Financial Services Group, Inc.................... 500 57,188
Travelers Group, Inc...................................... 6,300 381,938
------------
1,349,726
------------
INSURANCE (PROPERTY--CASUALTY)--1.3%
Allstate Corp............................................. 3,100 283,844
Chubb Corp. (The)......................................... 1,200 96,450
Fremont General Corp...................................... 300 16,256
General Re Corp........................................... 600 152,100
Mercury General Corp...................................... 100 6,444
Ohio Casualty Corp........................................ 200 8,850
SAFECO Corp............................................... 1,000 45,438
St. Paul Co., Inc......................................... 1,700 71,506
Travelers Property Casualty Corp. Class A................. 500 21,438
------------
702,326
------------
INSURANCE BROKERS--0.2%
Marsh & McLennan Cos., Inc................................ 1,950 117,853
------------
INVESTMENT BANKING/BROKERAGE--0.3%
Edwards (A.G.), Inc....................................... 600 25,613
Merrill Lynch & Co., Inc.................................. 800 73,800
Schwab, Charles Corp...................................... 1,500 48,750
------------
148,163
------------
IRON & STEEL--0.1%
Allegheny Teledyne, Inc................................... 2,400 54,909
------------
LEISURE TIME (PRODUCTS)--0.6%
Circus Circus Enterprises (b)............................. 1,000 16,938
Hasbro, Inc............................................... 1,900 74,694
Mattel, Inc............................................... 3,700 156,556
MGM Grand, Inc. (b)....................................... 700 22,094
Mirage Resorts, Inc. (b).................................. 2,200 46,888
------------
317,170
------------
LODGING--HOTELS--0.0%
Extended Stay America, Inc. (b)........................... 500 5,625
Hilton Hotels Corp........................................ 300 8,550
------------
14,175
------------
MACHINERY (DIVERSIFIED)--0.6%
Caterpillar, Inc.......................................... 3,400 179,775
Cooper Industries, Inc.................................... 1,100 60,431
Deere & Co................................................ 1,400 74,025
------------
314,231
------------
MANUFACTURING (DIVERSIFIED)--2.1%
AlliedSignal, Inc......................................... 6,800 301,750
Corning, Inc.............................................. 2,700 93,825
Eaton Corp................................................ 700 54,425
Illinois Tool Works, Inc.................................. 700 46,681
Johnson Controls, Inc..................................... 1,000 57,188
Minnesota Mining & Manufacturing Co....................... 100 8,219
Tenneco, Inc.............................................. 2,000 76,125
Tyco International Ltd.................................... 7,000 441,000
------------
1,079,213
------------
MANUFACTURING (SPECIALIZED)--0.1%
Parker-Hannifin Corp...................................... 700 26,688
------------
</TABLE>
See Notes to Financial Statements
56
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
METALS MINING--0.1%
Phelps Dodge Corp......................................... 600 $ 34,313
------------
NATURAL GAS--0.5%
Columbia Energy Group..................................... 700 38,938
Consolidated Natural Gas Co............................... 800 47,100
Enron Corp................................................ 2,700 145,969
K N Energy, Inc........................................... 400 21,675
Western Resources, Inc.................................... 600 23,288
------------
276,970
------------
OFFICE EQUIPMENT & SUPPLIES--0.1%
Harris Corp............................................... 1,000 44,688
Symbol Technologies, Inc.................................. 300 11,325
------------
56,013
------------
OIL & GAS (DOMESTIC)--0.8%
Atlantic Richfield Co..................................... 2,800 218,750
Occidental Petroleum Corp................................. 1,600 43,200
Phillips Petroleum Co..................................... 2,300 110,831
Unocal Corp............................................... 1,600 57,200
------------
429,981
------------
OIL & GAS (DRILLING & EQUIPMENT)--0.8%
Baker Hughes, Inc......................................... 1,200 41,475
Cooper Cameron Corp. (b).................................. 500 25,500
Diamond Offshore Drilling, Inc............................ 600 24,000
ENSCO International, Inc.................................. 1,200 20,850
Input/Output, Inc. (b).................................... 200 3,563
R & B Falcon Corp......................................... 1,400 31,675
Schlumberger Ltd.......................................... 4,000 273,250
------------
420,313
------------
OIL & GAS (EXPLORATION & PRODUCTION)--0.2%
Anadarko Petroleum Corp................................... 400 26,875
Union Pacific Resources Group............................. 2,100 36,881
Valero Energy Corp........................................ 500 16,625
------------
80,381
------------
OIL & GAS (REFINING & MARKETING)--0.3%
Ashland, Inc.............................................. 700 36,138
El Paso Natural Gas Co.................................... 1,000 38,250
Sun Co., Inc.............................................. 500 19,406
Tosco Corp................................................ 1,300 38,188
------------
131,982
------------
OIL (INTERNATIONAL INTEGRATED)--4.4%
Chevron Corp.............................................. 4,600 382,088
Exxon Corp................................................ 17,000 1,212,313
Mobil Corp................................................ 6,800 521,050
Texaco, Inc............................................... 3,100 185,031
------------
2,300,482
------------
PAPER & FOREST PRODUCTS--0.4%
Boise Cascade Corp........................................ 700 22,925
Bowater, Inc.............................................. 400 18,900
Champion International Corp............................... 1,100 54,106
Georgia-Pacific Group..................................... 1,100 64,831
Louisiana-Pacific Corp.................................... 1,300 23,725
Mead Corp................................................. 1,300 41,275
------------
225,762
------------
PERSONAL CARE--0.8%
Gillette Co............................................... 7,800 442,163
------------
PHOTOGRAPHY/IMAGING--1.2%
Eastman Kodak Co.......................................... 3,800 277,638
Xerox Corp................................................ 3,500 355,688
------------
633,326
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
PUBLISHING--0.1%
Times Mirror Co. Class A.................................. 1,100 $ 69,163
------------
PUBLISHING (NEWSPAPERS)--0.6%
Gannett Co., Inc.......................................... 2,100 149,231
Knight-Ridder, Inc........................................ 400 22,025
Tribune Co................................................ 1,100 75,694
Washington Post Co. Cl B.................................. 100 57,600
------------
304,550
------------
RAILROADS--0.8%
Burlington Northern Santa Fe Corp......................... 1,300 127,644
CSX Corp.................................................. 2,000 91,000
Norfolk Southern Corp..................................... 3,100 92,419
Union Pacific Corp........................................ 2,400 105,900
Wisconsin Central Transportation (b)...................... 200 4,375
------------
421,338
------------
RESTAURANTS--1.0%
McDonald's Corp........................................... 7,300 503,700
------------
RETAIL (BUILDING SUPPLIES)--1.0%
Home Depot, Inc........................................... 5,600 465,150
Sherwin-Williams Co....................................... 1,000 33,125
------------
498,275
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.1%
Circuit City Store, Inc................................... 1,000 46,875
CompUSA, Inc.............................................. 900 16,256
------------
63,131
------------
RETAIL (DEPARTMENT STORES)--0.6%
Dillard's, Inc. Class A................................... 1,000 41,438
Federated Department Stores, Inc. (b)..................... 2,100 113,006
May Department Stores Co.................................. 2,300 150,650
------------
305,094
------------
RETAIL (DRUG STORES)--0.0%
General Nutrition Co., Inc. (b)........................... 800 24,900
------------
RETAIL (FOOD CHAINS)--0.8%
Albertson's, Inc.......................................... 1,200 62,175
American Stores Co........................................ 2,600 62,888
Hannaford Brothers Co..................................... 400 17,600
Kroger Co. (b)............................................ 2,500 107,188
Safeway, Inc. (b)......................................... 4,700 191,231
------------
441,082
------------
RETAIL (GENERAL MERCHANDISE)--2.1%
Best Buy Co., Inc. (b).................................... 1,000 36,125
Corporate Express, Inc. (b)............................... 24 308
Costco Cos., Inc.......................................... 700 44,144
Dayton Hudson Corp........................................ 4,000 194,000
Kmart Corp. (b)........................................... 4,800 92,400
Sears, Roebuck & Co....................................... 3,900 238,144
Wal-Mart Stores, Inc...................................... 8,000 486,000
------------
1,091,121
------------
RETAIL (SPECIALTY)--0.2%
Autozone, Inc. (b)........................................ 1,500 47,906
Toys "R" Us, Inc. (b)..................................... 2,800 65,975
------------
113,881
------------
RETAIL (SPECIALTY--APPAREL)--0.4%
Gap, Inc.................................................. 2,500 154,063
TJX Companies, Inc........................................ 3,200 77,200
------------
231,263
------------
SAVINGS & LOAN COMPANIES--0.5%
Ahmanson (H.F.) & Co...................................... 1,000 71,000
Golden West Financial Corp................................ 400 42,525
Long Island Bancorp, Inc.................................. 500 30,375
</TABLE>
See Notes to Financial Statements
57
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
SAVINGS & LOAN COMPANIES--CONTINUED
Ocwen Financial Corp. (b)................................. 300 $ 8,063
Peoples Heritage Financial Group, Inc..................... 600 14,175
Washington Mutual, Inc.................................... 2,100 91,219
------------
257,357
------------
SERVICES (COMMERCIAL & CONSUMER)--0.3%
Service Corporation International......................... 3,200 137,200
------------
SERVICES (DATA PROCESSING)--0.3%
Equifax, Inc.............................................. 1,800 65,363
First Data Corp........................................... 3,500 116,594
------------
181,957
------------
SPECIALTY PRINTING--0.2%
Donnelley (R.R.) & Sons Co................................ 1,800 82,350
------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.3%
AT&T Corp................................................. 10,000 571,250
MCI Communications Corp................................... 4,200 244,125
Sprint Corp............................................... 600 42,300
WorldCom, Inc. (b)........................................ 7,700 372,969
------------
1,230,644
------------
TELEPHONE--4.1%
Ameritech Corp............................................ 2,600 116,675
Bell Atlantic Corp........................................ 10,000 456,250
BellSouth Corp............................................ 5,800 389,325
Cincinnati Bell, Inc...................................... 1,200 34,350
Frontier Corp............................................. 1,300 40,950
GTE Corp.................................................. 7,400 411,625
SBC Communications Inc.................................... 17,300 692,000
U.S. West, Inc............................................ 100 4,717
------------
2,145,892
------------
TEXTILES (APPAREL)--0.1%
Fruit of the Loom, Inc. Class A (b)....................... 800 26,550
Nine West Group, Inc. (b)................................. 100 2,681
Unifi, Inc................................................ 700 23,975
------------
53,206
------------
TOBACCO--1.2%
Philip Morris Cos., Inc................................... 15,800 622,125
------------
TRUCKERS--0.1%
CNF Transportation Inc.................................... 400 17,000
Ryder System, Inc......................................... 600 18,938
------------
35,938
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
WASTE MANAGEMENT--0.5%
Browning-Ferris Industries, Inc........................... 2,200 $ 76,450
Waste Management, Inc..................................... 5,700 199,500
------------
275,950
------------
TOTAL COMMON STOCKS
(Identified cost $43,065,211)...................................... 48,986,074
------------
FOREIGN COMMON STOCKS--2.0%
ALUMINUM--0.2%
Alcan Aluminum Ltd. (Canada).............................. 3,000 82,875
------------
BEVERAGES (ALCOHOLIC)--0.3%
Seagram Ltd. (Canada)..................................... 4,300 176,031
------------
COMMUNICATION EQUIPMENT--0.0%
Northern Telecom Ltd. (Canada)............................ 400 22,700
------------
FOODS--0.7%
Unilever PLC (Neatherlands)............................... 4,500 355,219
------------
OIL (INTERNATIONAL INTEGRATED)--0.8%
Royal Dutch Petroleum Co. ADR NY Registered
(Netherlands)........................................... 7,400 405,612
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $952,571)......................................... 1,042,437
------------
TOTAL LONG-TERM INVESTMENTS--95.6%
(Identified cost $44,118,188)...................................... 50,128,720
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.1%
COMMERCIAL PAPER--4.1%
Cargill, Inc. 6.10%, 7/1/98..................... A-1+ $ 2,150 2,150,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,150,000)....................................... 2,150,000
------------
TOTAL INVESTMENTS--99.7%
(Identified cost $46,268,188)...................................... 52,278,720(a)
Cash and receivables, less liabilities--0.3%....................... 156,147
------------
NET ASSETS--100.0%................................................... $ 52,434,867
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,115,098 and gross
depreciation of $1,106,917 for federal income tax purposes. At June 30,
1998, the aggregate cost of securities for federal income tax purposes was
$46,270,539.
(b) Non-income producing.
See Notes to Financial Statements
58
<PAGE>
RESEARCH ENHANCED INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$46,268,188).............................................. $ 52,278,720
Cash........................................................ 52,540
Receivable for investment sold.............................. 20,239
Receivables
Fund shares sold.......................................... 107,171
Dividends and interest.................................... 51,748
Tax reclaim............................................... 321
-------------
Total assets............................................ 52,510,739
-------------
LIABILITIES
Payables
Variation margin for futures contracts.................... 15,100
Payable for investments purchased......................... 26,882
Fund shares repurchased................................... 8,441
Trustees' fee............................................. 8,587
Financial agent fee....................................... 5,466
Investment advisory fee................................... 4,087
Accrued expenses.......................................... 7,309
-------------
Total liabilities....................................... 75,872
-------------
NET ASSETS.................................................. $ 52,434,867
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 44,801,453
Undistributed net investment income....................... 115,715
Accumulated net realized gain............................. 1,479,911
Net unrealized appreciation............................... 6,037,788
-------------
NET ASSETS.................................................. $ 52,434,867
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 4,212,836
-------------
-------------
Net asset value and offering price per share................ $ 12.45
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 285,121
Interest.................................................. 50,057
Foreign taxes withheld.................................... (1,687)
-------------
Total investment income................................. 333,491
-------------
EXPENSES
Investment advisory fee................................... 92,221
Financial agent fee....................................... 15,339
Custodian................................................. 24,437
Professional.............................................. 10,328
Trustees.................................................. 9,873
Printing.................................................. 4,897
Miscellaneous............................................. 2,123
-------------
Total expenses.......................................... 159,218
Less expenses borne by investment adviser............... (46,452)
-------------
Net expenses............................................ 112,766
-------------
NET INVESTMENT INCOME....................................... 220,725
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 1,432,475
Net realized gain on futures contracts.................... 59,326
Net change in unrealized appreciation (depreciation) on
investments............................................. 5,205,976
-------------
NET GAIN ON INVESTMENTS..................................... 6,697,777
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 6,918,502
-------------
-------------
</TABLE>
See Notes to Financial Statements
59
<PAGE>
RESEARCH ENHANCED INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
SIX MONTHS JULY 15, 1997
ENDED TO
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income..................................... $ 220,725 $ 155,598
Net realized gain......................................... 1,491,801 296,041
Net change in unrealized appreciation (depreciation)...... 5,205,976 831,812
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 6,918,502 1,283,451
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (114,247) (146,361)
Net realized gains........................................ (170,179) (137,752)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (284,426) (284,113)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,555,559 and 3,153,122
shares, respectively)................................... 30,116,667 31,994,673
Net asset value of shares issued from reinvestment of
distributions (22,972 and 27,107 shares,
respectively)........................................... 284,426 284,113
Cost of shares repurchased (1,308,013 and 237,911 shares,
respectively)........................................... (15,451,674) (2,426,752)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 14,949,419 29,852,034
-------------- --------------
NET INCREASE IN NET ASSETS................................ 21,583,495 30,851,372
NET ASSETS
Beginning of period....................................... 30,851,372 0
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $115,715 AND $9,237, RESPECTIVELY)............ $ 52,434,867 $ 30,851,372
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
06/30/98 7/15/97 TO
(UNAUDITED) 12/31/97
----------- -----------
<S> <C> <C>
Net asset value, beginning of period......... $10.49 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................... 0.06(2) 0.05(2)
Net realized and unrealized gain........... 1.97 0.54
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS......... 2.03 0.59
----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.03) (0.05)
Dividends from net realized gains.......... (0.04) (0.05)
----------- -----------
TOTAL DISTRIBUTIONS...................... (0.07) (0.10)
----------- -----------
CHANGE IN NET ASSET VALUE.................... 1.96 0.49
----------- -----------
NET ASSET VALUE, END OF PERIOD............... $12.45 $10.49
----------- -----------
----------- -----------
Total return................................. 19.41%(3) 5.83%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $52,435 $30,851
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.55%(1) 0.55%(1)
Net investment income...................... 1.08%(1) 1.46%(1)
Portfolio turnover rate...................... 22%(3) 9%(3)
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.02
and $0.02 per share, respectively.
(3) Not annualized.
See Notes to Financial Statements
60
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
INVESTOR PROFILE
The Engemann Nifty Fifty Series is appropriate for investors seeking
long-term capital appreciation through investment in the common stocks of
approximately 50 large-capitalization growth companies.
INVESTMENT ADVISER'S REPORT
The Engemann Nifty Fifty fund got off to a positive start. From its
inception on March 2, 1998, through June 30, 1998, the fund earned 8.70%, 84
basis points over the 7.86% gain for its benchmark, the Russell 1000 Index. The
average general equity mutual fund actually experienced a loss of -0.29% in the
second quarter, according to Lipper Analytical Services, Inc. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
During the past four months, the Fund has been the beneficiary of the
market's narrower focus on a selected group of large-cap stocks. As the Asian
economic crisis contributed to earnings disappointment in a number of U.S.
sectors, investors shifted to solid blue-chip growth sectors. The Fund was
helped by this trend due to its concentration in stable growth sectors, such as
health-care and consumer staples.
Stock selection was another positive factor contributing to performance. For
example, Cisco Systems, Lucent Technologies, and Microsoft in the technology
sector, Kohls Corporation, Lowes Company, and Carnival Corporation in the
consumer cyclical sector, and Pfizer and American Home Products in the
health-care sector significantly outperformed the market and contributed
positively.
Among the stocks with disappointing performance was Schlumberger, one of our
newer holdings. Schlumberger is a petroleum exploration and production services
company that saw its stock decline as a result of depressed oil prices. We feel
this is a temporary situation and are optimistic about the long-term picture for
the company. The worst performer was Cendant, a stock that got off to a great
start early in the year, but fell when accounting irregularities were found in
one of the company's business units. After an audit is completed and the air is
cleared, we believe the stock will resume its earlier climb.
Given the uncertainties over the Asian economic crisis and its impact on
U.S. companies, the Fund increased its exposure to the more stable sectors
within the economy--health-care and consumer staples. For instance, new
additions included such blue-chip names as Eli Lilly & Company, Schering-Plough,
and Kellogg Company.
OUTLOOK
The slowdown in corporate earnings that we've been expecting for some time
looks as if it is becoming a reality in 1998. Over the past few years, corporate
earnings have shown tremendous growth, with earnings for the S&P 500 Index
growing at a compound annual growth rate of 17.6% since 1993--an exceptional
feat when you consider that, since 1942, the long-term earnings growth rate has
been approximately 7.1%.
As we enter the second half of 1998, earnings growth for the S&P 500 is
expected to slow to its historic rate. In contrast, quality large-cap companies
such as those in the Fund have performed well when S&P earnings growth is
slowing. Thus, we believe slower earnings in the months ahead will provide an
attractive setting for the type of stable growth stocks that are in the Fund.
* The Russell 1000 Index is an unmanaged index, generally considered to be
representative of the performance of the 1000 largest U.S. companies. The Index
is not available for direct investment.
61
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
COMMON STOCKS--89.0%
BANKS (MAJOR REGIONAL)--2.7%
Wells Fargo & Co............................................. 425 $ 156,825
---------------
BEVERAGES (NON-ALCOHOLIC)--4.1%
Coca-Cola Co................................................. 1,380 117,990
PepsiCo, Inc................................................. 2,980 122,739
---------------
240,729
---------------
CHEMICALS--1.9%
Du Pont (E.I.) de Nemours & Co............................... 1,460 108,952
---------------
COMMUNICATIONS EQUIPMENT--1.9%
Lucent Technologies, Inc..................................... 570 47,417
Tellabs, Inc. (b)............................................ 870 62,314
---------------
109,731
---------------
COMPUTERS (HARDWARE)--2.2%
Compaq Computer Corp......................................... 1,630 46,251
Hewlett Packard Co........................................... 1,410 84,424
---------------
130,675
---------------
COMPUTERS (NETWORKING)--2.4%
Cisco Systems, Inc. (b)...................................... 1,540 141,776
---------------
COMPUTERS (SOFTWARE & SERVICES)--3.4%
Microsoft Corp. (b).......................................... 1,330 144,139
Oracle Systems Corp. (b)..................................... 2,170 53,301
---------------
197,440
---------------
CONSUMER FINANCE--0.4%
MBNA Corp.................................................... 780 25,740
---------------
ELECTRICAL EQUIPMENT--2.8%
General Electric Co.......................................... 1,810 164,710
---------------
ELECTRONICS (SEMICONDUCTORS)--5.1%
Intel Corp................................................... 2,530 187,536
Texas Instruments, Inc....................................... 1,890 110,211
---------------
297,747
---------------
ENTERTAINMENT--3.1%
Carnival Corp................................................ 2,180 86,383
Walt Disney Co............................................... 910 95,607
---------------
181,990
---------------
FINANCIAL (DIVERSIFIED)--5.0%
American Express Co.......................................... 1,100 125,400
FHLMC........................................................ 2,640 124,245
FNMA......................................................... 690 41,917
---------------
291,562
---------------
FOODS--0.8%
Kellogg Co................................................... 1,260 47,329
---------------
HEALTH CARE (DIVERSIFIED)--6.8%
American Home Products Corp.................................. 3,770 195,097
Bristol-Myers Squibb Co...................................... 785 90,226
Johnson & Johnson............................................ 1,570 115,788
---------------
401,111
---------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--9.7%
Lilly (Eli) & Co............................................. 1,160 76,633
Merek & Co., Inc............................................. 1,380 184,575
Pfizer, Inc.................................................. 2,470 268,458
Schering-Plough Corp......................................... 400 36,650
---------------
566,316
---------------
HEALTH CARE (HOSPITAL MANAGEMENT)--2.0%
Columbia/HCA Healthcare, Corp................................ 4,070 118,539
---------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.0%
Medtronic, Inc............................................... 1,820 116,025
---------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.6%
Colgate-Palmolive Co......................................... 1,030 90,640
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
INSURANCE (MULTI-LINE)--3.8%
American International Group, Inc............................ 1,180 $ 172,280
Travelers Group, Inc......................................... 780 47,288
---------------
219,568
---------------
MANUFACTURING (DIVERSIFIED)--2.7%
Minnesota Mining & Manufacturing Co.......................... 700 57,531
United Technologies Corp..................................... 1,100 101,750
---------------
159,281
---------------
OIL & GAS (DRILLING & EQUIPMENT)--2.1%
Schlumberger Ltd............................................. 1,770 120,913
---------------
PERSONAL CARE--3.6%
Gillette Co.................................................. 3,730 211,444
---------------
RAILROADS--0.7%
Kansas City Southern Industries, Inc......................... 770 38,211
---------------
RESTAURANTS--3.3%
McDonald's Corp.............................................. 2,830 195,270
---------------
RETAIL (BUILDING SUPPLIES)--1.3%
Lowe's Companies, Inc........................................ 1,910 77,474
---------------
RETAIL (DEPARTMENT STORES)--0.6%
Kohl's Corp. (b)............................................. 630 32,681
---------------
RETAIL (DRUG STORES)--1.1%
Walgreen Co.................................................. 1,490 61,556
---------------
RETAIL (GENERAL MERCHANDISE)--3.5%
Sears, Roebuck & Co.......................................... 2,780 169,754
Staples, Inc. (b)............................................ 1,290 37,329
---------------
207,083
---------------
SERVICES (ADVERTISING/MARKETING)--1.0%
Interpublic Group of Cos., Inc............................... 940 57,046
---------------
SERVICES (COMMERCIAL & CONSUMER)--1.5%
Cendant Corp. (b)............................................ 4,320 90,180
---------------
SERVICES (DATA PROCESSING)--0.5%
Automatic Data Processing, Inc............................... 390 28,421
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.9%
WorldCom, Inc. (b)........................................... 3,530 170,984
---------------
TOBACCO--2.5%
Philip Morris Companies, Inc................................. 3,660 144,113
---------------
TOTAL COMMON STOCKS
(Identified cost $4,898,835)................................................. 5,202,062
---------------
FOREIGN COMMON STOCKS--1.3%
PUBLISHING--1.3%
Reuters Holding PLC ADR (United Kingdom)..................... 1,080 73,980
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $72,320).................................................... 73,980
---------------
TOTAL LONG-TERM INVESTMENTS--90.3%
(Identified cost $4,971,155)................................................. 5,276,042
---------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
-------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--6.1%
FEDERAL AGENCY SECURITIES--6.1%
FHLMC 5.6%, 7/1/98 .......................................... $ 355 355,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $355,000)................................................... 355,000
---------------
TOTAL INVESTMENTS--96.4%
(Identified cost $5,326,155)................................................. 5,631,042(a)
Cash and receivables, less liabilities--3.6%................................. 211,410
---------------
NET ASSETS--100.0%............................................................. $ 5,842,452
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $396,441 and gross
depreciation of $91,554 for federal income tax purposes. At June 30, 1998,
the aggregate cost of securities for federal income tax purposes was
$5,326,155.
(b) Non-income producing.
See Notes to Financial Statements
62
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$5,326,155)..................................... $ 5,631,042
Receivables
Fund shares sold................................ 463,387
Adviser......................................... 6,641
Dividends and interest.......................... 3,752
-------------
Total assets.................................. 6,104,822
-------------
LIABILITIES
Payables
Custodian....................................... 206
Investment securities purchased................. 236,867
Fund shares repurchased......................... 689
Trustees' fee................................... 6,846
Financial agent fee............................. 3,322
Accrued expenses................................ 14,440
-------------
Total liabilities............................. 262,370
-------------
NET ASSETS........................................ $ 5,842,452
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 5,582,085
Undistributed net investment income............. 4,117
Accumulated net realized loss................... (48,637)
Net unrealized appreciation..................... 304,887
-------------
NET ASSETS........................................ $ 5,842,452
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 537,494
-------------
-------------
Net asset value and offering price per share...... $ 10.87
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 12,412
Interest.................................................. 4,143
-------------
Total investment income................................. 16,555
-------------
EXPENSES
Investment advisory fee................................... 10,648
Financial agent fee....................................... 3,805
Printing.................................................. 7,499
Professional.............................................. 7,172
Trustees.................................................. 6,846
Custodian................................................. 5,850
Miscellaneous............................................. 1,565
-------------
Total expenses.......................................... 43,385
Less expense borne by investment adviser................ (30,947)
-------------
Net expenses............................................ 12,438
-------------
NET INVESTMENT INCOME....................................... 4,117
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (48,637)
Net change in unrealized appreciation (depreciation) on
investments............................................. 304,887
-------------
NET GAIN ON INVESTMENTS..................................... 256,250
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 260,367
-------------
-------------
</TABLE>
See Notes to Financial Statements
63
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
JUNE 30, 1998
(UNAUDITED)
----------------
<S> <C>
FROM OPERATIONS
Net investment income..................................... $ 4,117
Net realized loss......................................... (48,637)
Net change in unrealized appreciation (depreciation)...... 304,887
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 260,367
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... --
Net realized gains........................................ --
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ --
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (634,098 shares)............ 6,598,587
Net asset value of shares issued from reinvestment of
distributions (0 shares)................................ --
Cost of shares repurchased (96,604 shares)................ (1,016,502)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 5,582,085
----------------
NET INCREASE IN NET ASSETS................................ 5,842,452
NET ASSETS
Beginning of period....................................... 0
----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $4,117)....................................... $ 5,842,452
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
INCEPTION
3/2/98 TO
06/30/98
(UNAUDITED)
------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.01(3)
Net realized and unrealized gain.......................... 0.86
------------
TOTAL FROM INVESTMENT OPERATIONS........................ 0.87
------------
LESS DISTRIBUTIONS
Dividends from net investment income...................... --
Dividends from net realized gains......................... --
------------
TOTAL DISTRIBUTIONS..................................... --
------------
CHANGE IN NET ASSET VALUE................................... 0.87
------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.87
------------
------------
Total return................................................ 8.70%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $5,842
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1)
Net investment income..................................... 0.35%(1)
Portfolio turnover rate..................................... 25%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.02
per share.
See Notes to Financial Statements
64
<PAGE>
SENECA MID-CAP GROWTH SERIES
INVESTOR PROFILE
Seneca Mid-Cap Growth Series is designed for investors seeking long-term
capital appreciation, primarily through investments in mid-capitalization
stocks.
INVESTMENT ADVISER'S REPORT
Seneca Mid-Cap Growth Series returned 13.68% since its inception March 2
through the end of June compared with a return of 1.93% for the S&P 400 MidCap
Index.* Positive stock selection led to those excellent results. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
U.S. equity market performance was quite volatile during the reporting
period. Although large-cap stocks had strong returns, both the small- and
mid-cap indices lost ground. Amidst high market volatility, good stock selection
was key. We focused on companies with above-average earnings growth, strong
company management, and reasonable valuations. McKesson (health-care/drugs),
Outdoor Systems (business equipment and services), and Sun America, Inc.
(insurance) were some of the best performing stocks in the portfolio. Seneca's
positive issue selection within the health-care and consumer stocks yielded
strong results. The cost of goods is declining for many of these companies,
while the purchasing power of U.S. consumers and consumer confidence remains
strong.
OUTLOOK
The Asian turmoil, which has now spread to China and Russia and threatens
Latin America, is a potent deflationary force in the world economy. Amidst world
economic crisis, U.S. assets have become even more attractive to foreign
investors.
The forces that have propelled U.S. stocks to an unprecedented record of
three consecutive years of double-digit gains, and the potential for a fourth
above-average year, are intact. They are: profit growth, low interest rates, and
a powerful flow of funds into the markets. The U.S. economy remains strong, and
retail sales, worker productivity, and consumer confidence continue to rise.
Though market valuations are lofty, we take some comfort in continued low
interest rates, the longevity of the earnings cycle, and the compelling
valuation opportunities, which remain in stocks beyond the mega-capitalization
names.
* The S&P 400 MidCap Index is an unmanaged, commonly used measure of total
return performance of mid-capitalization stocks. The Index is not available
for direct investment.
65
<PAGE>
SENECA MID-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
COMMON STOCKS--90.7%
BANKS (MAJOR REGIONAL)--5.0%
Comerica, Inc....................................................... 1,835 $ 121,569
Northern Trust Corp................................................. 1,320 100,650
-----------
222,219
-----------
BROADCASTING (TELEVISION, RADIO & CABLE)--5.8%
Chancellor Media Corp. (b).......................................... 3,190 158,403
Young Broadcasting Corp. (b)........................................ 1,520 98,800
-----------
257,203
-----------
COMMUNICATIONS EQUIPMENT--0.8%
Tellabs, Inc. (b)................................................... 500 35,812
-----------
COMPUTERS (SOFTWARE & SERVICES)--10.3%
Computer Horizons Corp. (b)......................................... 3,010 111,558
Compuware Corp. (b)................................................. 2,530 129,346
Documentum, Inc. (b)................................................ 2,650 127,200
Veritas Software Co. (b)............................................ 2,145 88,749
-----------
456,853
-----------
CONSUMER FINANCE--2.2%
Providian Financial Corp............................................ 1,260 98,989
-----------
ELECTRONICS (INSTRUMENTATION)--2.1%
Flextronics International Ltd. (b).................................. 2,180 94,830
-----------
ELECTRONICS (SEMICONDUCTORS)--3.5%
Micron Technology, Inc. (b)......................................... 3,400 84,363
Xilinx, Inc. (b).................................................... 2,090 71,060
-----------
155,423
-----------
ENTERTAINMENT--3.1%
Premier Parks, Inc. (b)............................................. 2,090 139,246
-----------
HEALTH CARE (DIVERSIFIED)--6.3%
McKesson Corp....................................................... 1,880 152,750
Mylan Laboratories, Inc............................................. 4,290 128,968
-----------
281,718
-----------
HEALTH CARE (HOSPITAL MANAGEMENT)--3.0%
HBO & Co............................................................ 3,800 133,950
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.9%
Sofamor Danek Group Inc. (b)........................................ 1,490 128,978
-----------
HEALTH CARE (SPECIALIZED SERVICES)--5.7%
Bausch & Lomb, Inc.................................................. 2,460 123,308
Ocular Sciences, Inc. (b)........................................... 4,010 130,325
-----------
253,633
-----------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.6%
Fort James Corp..................................................... 2,560 113,920
-----------
INSURANCE (MULTI-LINE)--2.9%
SunAmerica, Inc..................................................... 2,250 129,234
-----------
MANUFACTURING (SPECIALIZED)--2.2%
Tristar Aerospace Co. (b)........................................... 6,190 95,945
-----------
OFFICE EQUIPMENT & SUPPLIES--2.8%
Miller (Herman), Inc................................................ 5,210 126,668
-----------
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
PERSONAL CARE--2.6%
Windmere Corp....................................................... 3,200 $ 114,600
-----------
RESTAURANTS--2.1%
CKE Restaurants, Inc................................................ 2,250 92,813
-----------
RETAIL (GENERAL MERCHANDISE)--6.3%
Dollar Tree Stores, Inc. (b)........................................ 3,135 127,359
Kmart Corp.......................................................... 7,950 153,038
-----------
280,397
-----------
RETAIL (SPECIALTY--APPAREL)--3.4%
TJX Companies, Inc.................................................. 6,260 151,023
-----------
SERVICES (ADVERTISING/MARKETING)--4.6%
Outdoor Systems, Inc. (b)........................................... 7,095 198,660
-----------
SERVICES (COMMERCIAL & CONSUMER)--2.7%
Cultural Access Worldwide, Inc. (b)................................. 640 6,240
Nova Corp. (b)...................................................... 3,340 119,405
-----------
125,645
-----------
SERVICES (PAYROLL)--3.0%
Staff Leasing, Inc. (b)............................................. 4,580 135,110
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.0%
Amdocs Ltd. (b)..................................................... 5,860 88,633
-----------
TEXTILES (APPAREL)--2.8%
Jones Apparel Group, Inc. (b)....................................... 3,360 122,850
-----------
TOTAL COMMON STOCKS
(Identified cost $3,710,808)................................................... 4,034,352
-----------
FOREIGN COMMON STOCKS--3.9%
BROADCASTING (TELEVISION, RADIO & CABLE)--1.2%
News Corp. Ltd. (Australia)......................................... 1,730 55,576
-----------
COMPUTERS (SOFTWARE & SERVICES)--1.8%
Savill Systems PLC ADR (Ireland) (b)................................ 1,640 82,205
-----------
ELECTRONICS (SEMICONDUCTORS)--0.9%
PMC-Sierra, Inc. (Canada) (b)....................................... 890 41,719
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $167,884)..................................................... 179,500
-----------
TOTAL LONG-TERM INVESTMENTS--94.6%
(Identified cost $3,878,692)................................................... 4,213,852
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--5.8%
FEDERAL AGENCY SECURITIES--5.8%
FHLMC 5.60%, 7/1/98................................................. $ 260 260,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $260,000)..................................................... 260,000
-----------
TOTAL INVESTMENTS--100.4%
(Identified cost $4,138,692)................................................... 4,473,852(a)
Cash and receivables, less liabilities--(0.4%)................................. (19,415)
-----------
NET ASSETS--100.0%............................................................... $ 4,454,437
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $426,987 and gross
depreciation of $91,827 for federal income tax purposes. At June 30, 1998,
the aggregate cost of securities for federal income tax purposes was
$4,138,692.
(b) Non-income producing.
See Notes to Financial Statements
66
<PAGE>
SENECA MID-CAP GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$4,138,692)..................................... $ 4,473,852
Cash.............................................. 4,455
Receivables
Investment securities sold...................... 2,573
Adviser......................................... 6,387
Fund shares sold................................ 5,198
Interest and dividends.......................... 1,734
-------------
Total assets.................................. 4,494,199
-------------
LIABILITIES
Payables
Investment securities purchased................. 13,525
Trustees' fee................................... 6,846
Financial agent fee............................. 3,272
Custodian....................................... 2,250
Accrued expenses................................ 13,869
-------------
Total liabilities............................. 39,762
-------------
NET ASSETS........................................ $ 4,454,437
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 4,078,059
Undistributed net investment income............. 1,853
Accumulated net realized gain................... 39,365
Net unrealized appreciation..................... 335,160
-------------
NET ASSETS........................................ $ 4,454,437
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 391,853
-------------
-------------
Net asset value and offering price per share...... $ 11.37
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 9,218
Dividends................................................. 3,295
-------------
Total investment income................................. 12,513
-------------
EXPENSES
Investment advisory fee................................... 8,107
Financial agent fee....................................... 3,683
Professional.............................................. 7,172
Trustees.................................................. 6,846
Printing.................................................. 6,277
Custodian................................................. 5,053
Miscellaneous............................................. 732
-------------
Total expenses.......................................... 37,870
Less expense borne by investment adviser................ (27,210)
-------------
Net expenses............................................ 10,660
-------------
NET INVESTMENT INCOME....................................... 1,853
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 39,365
Net change in unrealized appreciation (depreciation) on
investments............................................. 335,160
-------------
NET GAIN ON INVESTMENTS..................................... 374,525
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 376,378
-------------
-------------
</TABLE>
See Notes to Financial Statements
67
<PAGE>
SENECA MID-CAP GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
JUNE 30, 1998
(UNAUDITED)
----------------
<S> <C>
FROM OPERATIONS
Net investment income..................................... $ 1,853
Net realized gain......................................... 39,365
Net change in unrealized appreciation (depreciation)...... 335,160
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 376,378
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... --
Net realized gains........................................ --
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ --
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (423,597 shares)............ 4,412,492
Net asset value of shares issued from reinvestment of
distributions (0 shares)................................ --
Cost of shares repurchased (31,744 shares)................ (334,433)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 4,078,059
----------------
NET INCREASE IN NET ASSETS................................ 4,454,437
NET ASSETS
Beginning of period....................................... 0
----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $1,853)....................................... $4,454,437
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
INCEPTION
3/2/98 TO
6/30/98
(UNAUDITED)
------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.01(3)
Net realized and unrealized gain.......................... 1.36
------------
TOTAL FROM INVESTMENT OPERATIONS........................ 1.37
------------
LESS DISTRIBUTIONS
Dividends from net investment income...................... --
Dividends from net realized gains......................... --
------------
TOTAL DISTRIBUTIONS..................................... --
------------
CHANGE IN NET ASSET VALUE................................... 1.37
------------
NET ASSET VALUE, END OF PERIOD.............................. $ 11.37
------------
------------
Total return................................................ 13.68%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $4,454
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1)
Net investment income..................................... 0.18%(1)
Portfolio turnover rate..................................... 49%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.07
per share.
See Notes to Financial Statements
68
<PAGE>
GROWTH AND INCOME SERIES
INVESTOR PROFILE
Phoenix Growth and Income Series is appropriate for investors seeking
long-term capital appreciation by investing in a diversified portfolio of common
stocks.
INVESTMENT ADVISER'S REPORT
The period from March 2, 1998 to June 30, 1998 was an unusually strong
period for common stocks. The S&P 500 Index returned 8.31%.* From the Fund's
inception March 2 to the end of the reporting period, June 30, 1998, the Growth
and Income Series posted a return of 10.32%, 201 basis points ahead of its
benchmark. All performance figures assume reinvestment of dividends and exclude
the effect of sales charges.
Falling interest rates, merger activity and strong cash flows into U.S.
equity mutual funds boosted share prices. The road was bumpy as stocks suffered
negative returns in May due to a perception that a worsening situation in Asia
would negatively impact earnings of U.S. companies.
The Fund is managed using a proprietary model that ranks the 1,500 largest
stocks that trade in the U.S. based on certain valuation criteria, earnings
estimate changes, earnings surprises and other measures. The portfolio is then
structured to resemble the characteristics of the benchmark index, the S&P 500
Index.
During the period, three of our most successful stocks were: Ford Motor
Company (up 52%), Morgan Stanley Dean Witter & Co. (up 31%) and Microsoft (up
28%). Ford has benefited from cost cutting and a more profitable lineup of cars
and sport utility vehicles. Morgan Stanley's return has been driven by strong
trading volume, merger fees and securities underwriting. Microsoft has traded up
on the strength of its new product cycle, which includes Windows 98, a new
version of Windows NT due out next year and a new version of its database
software.
OUTLOOK
At the time of this writing, we have entered a period of stock market
volatility, as well as earnings reporting season for the second quarter.
Troubles in Asian countries like Indonesia and South Korea, slowing S&P 500
earnings growth, and tight labor markets are among the top concerns of market
forecasters. Offsetting these concerns are such factors as: strong flows into
equity mutual funds by aging baby-boomers saving for retirement, merger
activity, low inflation and interest rates, and global competitiveness of large
U.S. corporations.
The portfolio's equity holdings are currently emphasizing the financial
services sector, which is benefiting from a strong fundamental environment and
merger activity, and the consumer cyclical sector, which is benefiting from
strong employment growth and consumer confidence.
* The S&P 500 Index is an unmanaged, commonly used measure of common stock
total return performance. The Index is not available for direct investment.
69
<PAGE>
GROWTH AND INCOME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
COMMON STOCKS--95.3%
AEROSPACE/DEFENSE--1.3%
Cordant Technologies Corp........................................... 800 $ 36,900
General Dynamics Corp............................................... 2,100 97,650
Sundstrand Corp..................................................... 900 51,525
------------
186,075
------------
AIRLINES--1.0%
AMR Corp............................................................ 1,400 116,550
ASA Holdings, Inc................................................... 100 4,962
Continental Airlines, Inc. Class B.................................. 100 6,087
U.S. Air Group, Inc. (b)............................................ 100 7,925
------------
135,524
------------
AUTO PARTS & EQUIPMENT--0.4%
ITT Industries, Inc................................................. 500 18,687
Paccar, Inc......................................................... 600 31,350
------------
50,037
------------
AUTOMOBILES--3.0%
Chrysler Corp....................................................... 800 45,100
Ford Motor Co....................................................... 6,300 371,700
Republic Industries, Inc............................................ 100 2,500
------------
419,300
------------
BANKS (MAJOR REGIONAL)--4.4%
Banc One Corp....................................................... 6,500 362,781
First Union Corp.................................................... 4,200 244,650
SunTrust Banks, Inc................................................. 100 8,131
Valley National Bancorp............................................. 300 8,700
------------
624,262
------------
BANKS (MONEY CENTER)--5.6%
BankAmerica Corp.................................................... 300 25,931
Bankers Trust Corp.................................................. 600 69,637
Chase Manhattan Corp................................................ 4,400 332,200
First Chicago NBD Corp.............................................. 400 35,450
NationsBank Corp.................................................... 4,300 328,950
------------
792,168
------------
BEVERAGES (ALCOHOLIC)--0.1%
Canandaigua Brands, Inc. Class A.................................... 200 9,837
Coors (Adolph) Co. Class B.......................................... 200 6,800
------------
16,637
------------
BUILDING MATERIALS--0.2%
Fleetwood Enterprises, Inc.......................................... 600 24,000
Southdown, Inc...................................................... 100 7,137
------------
31,137
------------
CHEMICALS--0.3%
Dow Chemical Co..................................................... 200 19,337
Lyondell Petrochemical Co........................................... 500 15,219
Olin Corp........................................................... 200 8,337
------------
42,893
------------
CHEMICALS (DIVERSIFIED)--1.6%
Goodrich Co., B.F................................................... 2,700 133,987
Republic Services, Inc.............................................. 3,900 93,655
------------
227,642
------------
COMMUNICATIONS EQUIPMENT--1.2%
Fore Systems, Inc................................................... 100 2,650
Lucent Technologies, Inc............................................ 1,700 141,419
Tellabs, Inc. (b)................................................... 300 21,487
------------
165,556
------------
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
COMPUTER-SERVICES--0.3%
Systems & Computer Technology Corp.................................. 200 $ 5,400
Unisys Corp......................................................... 1,500 42,375
------------
47,775
------------
COMPUTER-SOFTWARE--0.5%
Oracle Systems Corp. (b)............................................ 2,000 49,125
Platinum Technology................................................. 400 11,425
Symantec Corp....................................................... 200 5,225
------------
65,775
------------
COMPUTERS (HARDWARE)--1.1%
Apple Computer, Inc................................................. 1,300 37,294
Dell Computer Corp. (b)............................................. 700 64,969
Gateway 2000........................................................ 300 15,187
International Business Machines Corp................................ 100 11,481
Sun Microsystems, Inc............................................... 600 26,062
------------
154,993
------------
COMPUTERS (NETWORKING)--0.7%
Cisco Systems, Inc. (b)............................................. 1,000 92,062
Xylan Corp.......................................................... 200 5,962
------------
98,024
------------
COMPUTERS (PERIPHERALS)--0.2%
EMC Corp. (b)....................................................... 100 4,481
Storage Technology Corp............................................. 400 17,350
------------
21,831
------------
COMPUTERS (SOFTWARE & SERVICES)--5.6%
Autodesk, Inc....................................................... 1,200 46,350
Cadence Design Systems, Inc......................................... 1,100 34,375
Computer Associates International, Inc.............................. 400 22,225
Computer Horizons Corp.............................................. 100 3,706
Compuware Corp. (b)................................................. 400 20,450
Comverse Technology, Inc............................................ 200 10,375
Electronic Arts..................................................... 300 16,200
Electronic Data Systems Corp........................................ 1,700 68,000
HBO & Co............................................................ 2,200 77,550
Learning Co., Inc. (The) (b)........................................ 100 2,962
Mastech Corp. (b)................................................... 200 5,625
Microsoft Corp. (b)................................................. 3,900 422,662
PeopleSoft, Inc. (b)................................................ 200 9,400
Sterling Software, Inc.............................................. 1,100 32,519
Synopsys, Inc....................................................... 300 13,725
Visio Corp.......................................................... 100 4,775
------------
790,899
------------
CONGLOMERATES--0.1%
Ogden Corp.......................................................... 300 8,306
------------
DIVERSIFIED OPERATIONS--0.9%
Hawaiian Electric Industries........................................ 3,100 123,031
------------
ELECTRIC COMPANIES--2.7%
Allegheny Energy, Inc............................................... 2,300 69,287
BEC Energy.......................................................... 1,600 66,400
Consolidated Edison, Inc............................................ 400 18,425
Edison International................................................ 200 5,912
FirstEnergy Corp.................................................... 1,300 39,975
Minnesota Power & Light Co.......................................... 2,100 83,475
Public Service Company of New Mexico................................ 300 6,806
Sempra Energy....................................................... 3,000 83,250
------------
373,530
------------
ELECTRICAL EQUIPMENT--0.7%
General Electric Co................................................. 1,100 100,100
------------
</TABLE>
See Notes to Financial Statements
70
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
ELECTRONIC-PARTS DISTRIBUTORS--0.1%
CHS Electronics, Inc................................................ 600 $ 10,725
------------
ELECTRONICS (DEFENSE)--0.5%
Raytheon Co. Class B................................................ 1,200 70,950
------------
ELECTRONICS (INSTRUMENTATION)--1.1%
EG & G, Inc......................................................... 2,000 60,000
Linear Technology Corp.............................................. 1,000 60,312
SCI Systems, Inc.................................................... 100 3,762
Thermo Instrument Systems, Inc...................................... 800 21,000
Vitesse Semiconductor Corp. (b)..................................... 100 3,087
------------
148,161
------------
ELECTRONICS (SEMICONDUCTORS)--0.3%
Intel Corp.......................................................... 600 44,475
------------
ENGINEERING & CONSTRUCTION--0.6%
Fluor Corp.......................................................... 700 35,700
Vulcan Materials Co................................................. 400 42,675
------------
78,375
------------
FINANCE-CONSUMER LOANS--0.1%
Countrywide Credit Industries, Inc.................................. 200 10,150
------------
FINANCIAL (DIVERSIFIED)--4.6%
Bear Stearns Companies, Inc......................................... 100 5,687
Concord EFS, Inc.................................................... 200 5,225
FHLMC............................................................... 1,100 51,769
FNMA................................................................ 4,600 279,450
Morgan Stanley, Dean Witter & Co.................................... 3,400 310,675
------------
652,806
------------
FOODS--2.3%
Earthgrains Co...................................................... 500 27,937
Hormel Foods Corp................................................... 300 10,369
Interstate Bakeries................................................. 2,400 79,650
Quaker Oats Co...................................................... 3,000 164,812
Richfood Holdings, Inc.............................................. 600 12,412
Smithfield Foods, Inc............................................... 300 9,150
Suiza Foods Corp.................................................... 300 17,906
Universal Foods Corp................................................ 300 6,656
------------
328,892
------------
FOOTWEAR--0.2%
Payless ShoeSource, Inc............................................. 400 29,475
------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES--0.2%
International Game Technology....................................... 1,000 24,250
------------
HARDWARE & TOOLS--0.2%
Black & Decker Corp................................................. 200 12,200
Kennametal, Inc..................................................... 300 12,525
------------
24,725
------------
HEALTH CARE (DIVERSIFIED)--2.2%
Allergan, Inc....................................................... 100 4,638
Bristol-Myers Squibb Co............................................. 700 80,456
Genentech, Inc...................................................... 1,300 88,238
Johnson & Johnson................................................... 200 14,750
Shared Medical Systems Corp......................................... 100 7,344
Warner-Lambert Co................................................... 1,700 117,938
------------
313,364
------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--4.3%
Eli Lilly & Co...................................................... 500 33,031
Merek & Co., Inc.................................................... 200 26,750
Medicis Pharmaceutical Class A...................................... 400 14,600
Pfizer, Inc......................................................... 2,500 271,719
Schering-Plough Corp................................................ 2,900 265,713
------------
611,813
------------
HEALTH CARE (LONG TERM CARE)--0.0%
Omnicare, Inc....................................................... 100 3,813
------------
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.2%
Allegiance Corp..................................................... 400 $ 20,500
Genzyme Corp........................................................ 200 5,113
Guidant Corp........................................................ 1,700 121,231
Stryker Corp........................................................ 400 15,350
------------
162,194
------------
HOMEBUILDING--0.1%
Centex Corp......................................................... 300 11,325
Pulte Corp.......................................................... 200 5,975
------------
17,300
------------
HOUSEHOLD FURN. & APPLIANCES--1.1%
Whirlpool Corp...................................................... 2,200 151,250
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.4%
Procter & Gamble Co. (b)............................................ 2,200 200,338
------------
INSURANCE (LIFE/HEALTH)--1.6%
Lincoln National Corp............................................... 2,500 228,438
------------
INSURANCE (MULTI-LINE)--3.0%
Travelers Group, Inc................................................ 6,500 394,063
Equitable Companies, Inc............................................ 400 29,975
------------
424,038
------------
INSURANCE (PROPERTY--CASUALTY)--2.4%
Allstate Corp....................................................... 3,500 320,469
Commerce Group, Inc................................................. 300 11,625
------------
332,094
------------
IRON & STEEL--0.8%
Bethlehem Steel Corp................................................ 500 6,219
Harsco Corp......................................................... 1,700 77,881
Nucor Corp.......................................................... 600 27,600
------------
111,700
------------
MACHINERY (DIVERSIFIED)--3.0%
Caterpillar, Inc.................................................... 3,500 185,063
Deere & Co.......................................................... 2,600 137,475
Graco, Inc.......................................................... 300 10,463
Ingersoll-Rand Co................................................... 1,700 74,906
Thermo Electron Corp. (b)........................................... 700 23,931
------------
431,838
------------
MACHINERY-PRINTING TRADE--0.1%
Zebra Technology.................................................... 200 8,550
------------
MANUFACTURING (DIVERSIFIED)--4.1%
Cincinnati Milacron, Inc............................................ 600 14,588
Crane Co............................................................ 200 9,713
National Services Industries, Inc................................... 300 15,263
Pentair, Inc........................................................ 500 21,250
Teleflex, Inc....................................................... 500 19,000
Tyco International Ltd.............................................. 1,700 107,100
United Technologies Corp............................................ 4,300 397,750
------------
584,664
------------
MEDICAL--HOSPITALS--0.0%
Integrated Health Services.......................................... 100 3,750
------------
MEDICAL--WHOLESALE DRUG/SUNDRY--0.3%
Amerisource Health Corp. Class A.................................... 700 45,981
------------
METALS MINING--0.5%
Carpenter Technology Corp........................................... 1,400 70,350
------------
NATURAL GAS--0.1%
Atmosphere Energy Corp.............................................. 600 18,300
UGI Corp............................................................ 100 2,488
------------
20,788
------------
OFFICE EQUIPMENT & SUPPLIES--0.4%
Lexmark International Group......................................... 200 12,200
Pitney Bowes, Inc................................................... 700 33,688
</TABLE>
See Notes to Financial Statements
71
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
OFFICE EQUIPMENT & SUPPLIES--CONTINUED
United Stationers, Inc.............................................. 200 $ 12,950
------------
58,838
------------
OIL & GAS (DRILLING & EQUIPMENT)--2.3%
BJ Services Co...................................................... 200 5,813
Cooper Cameron Corp. (b)............................................ 200 10,200
Dresser Industries, Inc............................................. 1,500 66,094
ENSCO International, Inc............................................ 200 3,475
McDermott International, Inc........................................ 700 24,106
National-Oilwell, Inc. (b).......................................... 2,100 56,306
Rowan Companies, Inc................................................ 200 3,888
Schlumberger Ltd.................................................... 700 47,819
Smith International, Inc. (b)....................................... 400 13,925
Tidewater, Inc...................................................... 300 9,900
Transocean Offshore, Inc............................................ 800 35,600
Varco International, Inc. (b)....................................... 1,800 35,663
Veritas DGC, Inc. (b)............................................... 100 4,994
------------
317,783
------------
OIL & GAS (EXPLORATION & PRODUCTION)--0.2%
MDU Resources Group, Inc............................................ 600 21,413
------------
OIL & GAS (REFINING & MARKETING)--1.4%
Piedmont Natural Gas Co............................................. 3,000 100,875
Sun Co., Inc........................................................ 2,500 97,031
------------
197,906
------------
OIL & GAS-U S INTEGRATED--1.2%
Exxon Corp.......................................................... 2,300 164,019
------------
OIL (DOMESTIC INTERGRATED)--0.2%
Atlantic Richfield Co............................................... 400 31,250
------------
PHOTOGRAPHY/IMAGING--0.3%
Xerox Corp.......................................................... 400 40,650
------------
PUBLISHING--3.1%
Standard & Poor's Depository Receipts............................... 3,900 441,919
------------
PUBLISHING (NEWSPAPERS)--0.1%
Bowne & Co., Inc.................................................... 300 13,500
------------
REAL ESTATE--0.1%
Meditrust Companies................................................. 300 8,381
------------
RETAIL (BUILDING SUPPLIES)--0.3%
Home Depot, Inc..................................................... 500 41,531
Masco Corp.......................................................... 100 6,050
------------
47,581
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.0%
Best Buy Co., Inc................................................... 200 7,225
------------
RETAIL (DEPARTMENT STORES)--0.5%
Federated Department Stores, Inc. (b)............................... 200 10,763
Penny (J.C.) Co., Inc............................................... 900 65,081
------------
75,844
------------
RETAIL (DRUG STORES)--0.1%
CVS Corp............................................................ 400 15,575
------------
RETAIL (FOOD CHAINS)--0.2%
Albertson's, Inc.................................................... 500 25,906
------------
RETAIL (GENERAL MERCHANDISE)--2.8%
Dayton Hudson Corp.................................................. 200 9,700
Fingerhut Companies, Inc............................................ 400 13,200
Kmart Corp. (b)..................................................... 500 9,625
Office Depot, Inc................................................... 1,000 31,563
Ross Stores, Inc.................................................... 200 8,600
Wal-Mart Stores, Inc................................................ 5,300 321,975
------------
394,663
------------
RETAIL (SPECIALTY)--0.1%
Michael's Stores, Inc............................................... 300 10,584
------------
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
RETAIL (SPECIALTY--APPAREL)--0.2%
Gap, Inc. (The)..................................................... 100 $ 6,163
Limited, Inc. (The)................................................. 300 9,938
TJX Companies, Inc. (The)........................................... 600 14,475
------------
30,576
------------
SERVICES (ADVERTISING/MARKETING)--0.6%
Catalina Marketing Corp............................................. 200 10,388
Omnicom Group, Inc.................................................. 1,000 49,875
Snyder Communication Corp. (b)...................................... 100 4,400
True North Communications........................................... 500 14,625
------------
79,288
------------
SERVICES (COMMERCIAL & CONSUMER)--1.5%
Cendant Corp. (b)................................................... 300 6,263
Deluxe Corp......................................................... 3,700 132,506
H & R Block, Inc.................................................... 1,000 42,125
Viad Corp........................................................... 1,000 27,750
------------
208,644
------------
STEEL--PRODUCERS--0.4%
USX-US Steel Group, Inc............................................. 1,700 56,100
------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.2%
AT&T Corp........................................................... 7,900 451,288
------------
TELEPHONE--4.0%
Ameritech Corp...................................................... 600 26,925
Bell Atlantic Corp.................................................. 200 9,125
BellSouth Corp...................................................... 3,100 208,088
SBC Communications, Inc............................................. 1,500 60,000
U.S. West, Inc...................................................... 5,600 263,200
------------
567,338
------------
TEXTILES (APPAREL)--0.8%
Liz Claiborne, Inc.................................................. 600 31,350
Nautica Enterprises, Inc............................................ 100 2,681
Tommy Hilfiger Corp................................................. 100 6,250
VF Corp............................................................. 1,300 66,950
------------
107,231
------------
TOBACCO--1.2%
Philip Morris Companies, Inc........................................ 3,500 137,813
Universal Corp...................................................... 900 33,638
------------
171,451
------------
UTILITY--ELECTRIC POWER--1.8%
Detroit Edison Co................................................... 6,500 262,438
------------
TOTAL COMMON STOCKS
(Identified cost $12,987,825)............................................... 13,428,133
------------
FOREIGN COMMON STOCKS--4.3%
CHEMICALS (DIVERSIFIED)--2.3%
Akzo Nobel NV Sponsored ADR (Netherlands)........................... 3,000 332,625
------------
COMMUNICATIONS EQUIPMENT--0.6%
Northern Telecom Ltd. (Canada)...................................... 1,500 85,125
------------
COMPUTERS (SOFTWARE & SERVICES)--0.1%
Check Point Software Technologies Ltd. (Israel) (b)................. 200 6,550
------------
HOUSEHOLD FURN. & APPLIANCES--0.6%
Philips Electronics NV NY Registered Shares (Netherlands)...........
1,000 85,000
------------
OIL (INTERNATIONAL INTEGRATED)--0.0%
Royal Dutch Petroleum Co. ADR (Netherlands)......................... 100 5,481
------------
RAILROADS--0.3%
Canadian National Railway Co. (Canada).............................. 800 42,500
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.3%
Telefonaktiebolaget LM Ericsson Series B
Sponsored ADR (Sweden)............................................ 1,200 34,350
------------
</TABLE>
See Notes to Financial Statements
72
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)--0.1%
Telecom Corp. (New Zealand)......................................... 500 $ 16,375
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $587,687).................................................. 608,006
------------
TOTAL LONG-TERM INVESTMENTS--99.6%
(Identified cost $13,575,512)............................................... 14,036,139
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.2%
FEDERAL AGENCY SECURITIES--2.2%
FHLMC 5.60%, 7/1/98................................................. $ 315 315,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $315,000).................................................. 315,000
------------
TOTAL INVESTMENTS--101.8%
(Identified cost $13,890,512)............................................... 14,351,139(a)
Cash and receivables, less liabilities--(1.8%).............................. (259,201)
------------
NET ASSETS--100.0%............................................................ $ 14,091,938
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $700,282 and gross
depreciation of $239,655 for income tax purposes. At June 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$13,890,512.
(b) Non-income producing.
See Notes to Financial Statements
73
<PAGE>
GROWTH AND INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$13,890,512).............................................. $ 14,351,139
Cash........................................................ 2,222
Receivables
Investment securities sold................................ 610,001
Fund shares sold.......................................... 142,122
Dividends and interest.................................... 13,041
Adviser................................................... 3,266
-------------
Total assets............................................ 15,121,791
-------------
LIABILITIES
Payables
Investment securities purchased........................... 1,005,351
Financial agent fee....................................... 2,802
Trustees' fee............................................. 6,846
Accrued expenses.......................................... 14,854
-------------
Total liabilities....................................... 1,029,853
-------------
NET ASSETS.................................................. $ 14,091,938
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 13,503,324
Undistributed net investment income....................... 26,961
Accumulated net realized gain............................. 101,026
Net unrealized appreciation............................... 460,627
-------------
NET ASSETS.................................................. $ 14,091,938
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 1,277,448
-------------
-------------
Net asset value and offering price per share................ $ 11.03
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 37,744
Interest.................................................. 8,210
-------------
Total investment income................................. 45,954
-------------
EXPENSES
Investment advisory fee................................... 15,590
Financial agent fee....................................... 4,315
Printing.................................................. 7,988
Custodian................................................. 7,188
Professional.............................................. 7,172
Trustees.................................................. 6,846
Miscellaneous............................................. 1,928
-------------
Total expenses.......................................... 51,027
Less expenses borne by investment adviser............... (32,034)
-------------
Net expenses............................................ 18,993
-------------
NET INVESTMENT INCOME....................................... 26,961
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 101,026
Net change in unrealized appreciation (depreciation) on
investments............................................. 460,627
-------------
NET GAIN ON INVESTMENTS..................................... 561,653
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 588,614
-------------
-------------
</TABLE>
See Notes to Financial Statements
74
<PAGE>
GROWTH AND INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
JUNE 30, 1998
(UNAUDITED)
----------------
<S> <C>
FROM OPERATIONS
Net investment income..................................... $ 26,961
Net realized gain......................................... 101,026
Net change in unrealized appreciation (depreciation)...... 460,627
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 588,614
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... --
Net realized gains........................................ --
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ --
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,408,819 shares).......... 14,921,185
Net asset value of shares issued from reinvestment of
distributions (0 shares)................................ --
Cost of shares repurchased (131,371 shares)............... (1,417,861)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 13,503,324
----------------
NET INCREASE IN NET ASSETS................................ 14,091,938
NET ASSETS
Beginning of period....................................... 0
----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $26,961)...................................... $14,091,938
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
6/30/98
(UNAUDITED)
--------------
<S> <C>
Net asset value, beginning of period......... $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................... 0.02(3)
Net realized and unrealized gain........... 1.01
-------
TOTAL FROM INVESTMENT OPERATIONS......... 1.03
-------
LESS DISTRIBUTIONS
Dividends from net investment income....... --
Dividends from net realized gains.......... --
-------
TOTAL DISTRIBUTIONS...................... --
-------
CHANGE IN NET ASSET VALUE.................... 1.03
-------
NET ASSET VALUE, END OF PERIOD............... $11.03
-------
-------
Total return................................. 10.32%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $14,092
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.85%(1)
Net investment income...................... 1.21%(1)
Portfolio turnover rate...................... 32%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.02
per share.
See Notes to Financial Statements
75
<PAGE>
VALUE EQUITY SERIES
INVESTOR PROFILE
Phoenix Value Equity Series is appropriate for investors seeking long-term
capital appreciation.
INVESTOR ADVISER'S REPORT
Since its inception on March 2, 1998 through the end of this reporting
period, the Fund has earned 5.29% compared with a return of 8.31% for the S&P
500 Index.* All performance figures assume reinvestment of dividends and exclude
the effect of sales charges.
The ongoing deterioration of the Asian economy has dominated world financial
markets in the last few months. Amidst the crisis, market volatility has been
high and sector rotation extreme. The market's advance was highly
selective--among the major indices, only large caps rose, while both the small-
and mid-cap indices lost ground. The disparity in returns was even more
pronounced when we consider the growth versus value categories. The Russell 1000
Growth Index** rose 4.54% for the most recent three months, while the Russell
1000 Value Index*** was up only 0.45% as investors continued to focus on
companies with high earnings visibility.
Our strategy of investing in companies undergoing constructive change that
has not been recognized by the market should serve us well over the long term.
Recently the focus has been fairly narrow, rewarding mega-capitalization
companies in fast-growing markets, and recent valuation levels reflect this. In
contrast, the Fund has emphasized financial services companies, consumer
cyclicals, and the aerospace industry. We believe these areas are quite
attractive based on their valuations and fundamentals.
OUTLOOK
We will continue to follow our disciplined classic value approach, focusing
on companies with favorable valuations and positive prospects. Despite the high
valuation levels of the market as a whole, we remain sanguine about the outlook
for 1998.
* The S&P 500 Index is an unmanaged, commonly used measure of common stock
total return performance. The Index is not available for direct investment.
** The Russell 1000 Growth Index is an unmanaged, commonly used measure of
growth-oriented stocks' total return performance. The Index is not available
for direct investment.
*** The Russell 1000 Value Index is an unmanaged, commonly used measure of
value-oriented stocks' total return performance. The Index is not available
for direct investment.
76
<PAGE>
VALUE EQUITY SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCKS--86.6%
AEROSPACE/DEFENSE--3.7%
Boeing Co........................................................... 3,000 $ 133,687
Sundstrand Corp..................................................... 1,000 57,250
-----------
190,937
-----------
AIR FREIGHT--0.7%
FDX Corp. (b)....................................................... 600 37,650
-----------
ALUMINUM--0.6%
Aluminum Co. America Alcoa.......................................... 500 32,969
-----------
AUTOMOBILES--1.8%
Chrysler Corp....................................................... 1,000 56,375
Ford Motor Co....................................................... 600 35,400
-----------
91,775
-----------
BANKS (MAJOR REGIONAL)--4.0%
BankBoston Corp..................................................... 400 22,250
Fleet Financial Group, Inc.......................................... 700 58,450
Keycorp............................................................. 700 24,937
PNC Bank Corp....................................................... 500 26,906
Wells Fargo & Co.................................................... 200 73,800
-----------
206,343
-----------
BANKS (MONEY CENTER)--8.7%
BankAmerica Corp.................................................... 500 43,219
Bankers Trust Corp.................................................. 700 81,244
Chase Manhattan Corp................................................ 1,200 90,600
Citicorp............................................................ 800 119,400
Morgan (J.P.) & Co., Inc............................................ 400 46,850
NationsBank Corp.................................................... 500 38,250
First Chicago NBD Corp.............................................. 300 26,587
-----------
446,150
-----------
BEVERAGES (ALCOHOLIC)--0.6%
Anheuser-Busch Co., Inc............................................. 700 33,031
-----------
CHEMICALS--0.8%
Praxair, Inc........................................................ 900 42,131
-----------
COMMUNICATIONS EQUIPMENT--1.1%
Motorola, Inc....................................................... 1,100 57,819
-----------
COMPUTERS (SOFTWARE & SERVICES)--1.4%
At Home Corp. (b)................................................... 1,500 70,969
-----------
COMPUTERS (HARDWARE)--1.1%
Compaq Computer Corp................................................ 500 14,187
Sun Microsystems, Inc. (b).......................................... 1,000 43,437
-----------
57,624
-----------
COMPUTERS (NETWORKING)--1.3%
Omnipoint Corp. (b)................................................. 1,100 25,231
SBC Communications, Inc............................................. 1,000 40,000
-----------
65,231
-----------
ELECTRICAL EQUIPMENT--2.4%
Honeywell, Inc...................................................... 1,500 125,344
-----------
ELECTRONICS (DEFENSE)--1.1%
Raytheon Co. (b).................................................... 1,000 59,125
-----------
ENTERTAINMENT--1.6%
Walt Disney Co...................................................... 800 84,050
-----------
FINANCIAL (DIVERSIFIED)--9.6%
American Express Co................................................. 800 91,200
Chicago Title Corp.................................................. 1,900 87,756
Diamonds Trust, Series I............................................ 400 35,787
FHLMC............................................................... 2,000 94,125
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
FINANCIAL (DIVERSIFIED)--CONTINUED
FNMA................................................................ 1,800 $ 109,350
SLM Holding Corp.................................................... 1,500 73,500
-----------
491,718
-----------
FOOTWEAR--0.5%
Genesco, Inc. (b)................................................... 1,500 24,469
-----------
HEALTH CARE (DIVERSIFIED)--2.3%
Foundation Health Systems, Inc...................................... 2,500 65,937
Johnson & Johnson................................................... 700 51,625
-----------
117,562
-----------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--2.8%
Lilly (Eli) & Co.................................................... 1,300 85,881
Pharmacia & Upjohn, Inc............................................. 1,200 55,350
-----------
141,231
-----------
HEALTH CARE (MANAGED CARE)--2.6%
Sun Healthcare Group, Inc. (b)...................................... 1,700 24,862
United HealthCare Corp.............................................. 1,700 107,950
-----------
132,812
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.6%
Baxter International, Inc........................................... 600 32,287
-----------
INSURANCE (LIFE/HEALTH)--0.3%
Aetna, Inc.......................................................... 200 15,225
-----------
INSURANCE (MULTI-LINE)--4.9%
AMBAC, Inc.......................................................... 800 46,800
American International Group, Inc................................... 600 87,600
Cigna Corp.......................................................... 700 48,300
Travelers Group, Inc................................................ 1,100 66,688
-----------
249,388
-----------
INSURANCE (PROPERTY--CASUALTY)--2.5%
Commerce Group, Inc................................................. 400 15,500
General Re Corp..................................................... 300 76,050
Travelers Property Casualty Corp.................................... 900 38,588
-----------
130,138
-----------
INVESTMENT BANKING/BROKERAGE--1.3%
Bear Stearns Companies, Inc......................................... 500 28,437
Merrill Lynch & Co., Inc............................................ 400 36,900
-----------
65,337
-----------
LODGING--HOTELS--0.1%
Marriott International, Inc......................................... 200 6,475
-----------
MACHINERY (DIVERSIFIED)--0.6%
Caterpillar, Inc.................................................... 600 31,725
-----------
MANUFACTURING (DIVERSIFIED)--4.5%
AlliedSignal, Inc................................................... 1,600 71,000
Fortune Brands, Inc................................................. 800 30,750
Illinois Tool Works, Inc............................................ 900 60,019
United Technologies Corp............................................ 750 69,375
-----------
231,144
-----------
MANUFACTURING (SPECIALIZED)--0.4%
Tandy Brand Accessories, Inc. (b)................................... 1,000 18,625
-----------
OFFICE EQUIPMENT & SUPPLIES--0.8%
Pitney Bowes, Inc................................................... 900 43,313
-----------
PHOTOGRAPHY/IMAGING--2.2%
Eastman Kodak Co.................................................... 1,000 73,063
Xerox Corp.......................................................... 400 40,650
-----------
113,713
-----------
</TABLE>
See Notes to Financial Statements
77
<PAGE>
VALUE EQUITY SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
PUBLISHING--4.9%
S & P Depository Receipt............................................ 2,200 $ 249,288
-----------
RAILROADS--1.0%
Union Pacific Corp.................................................. 1,200 52,950
-----------
RESTAURANTS--2.6%
McDonald's Corp..................................................... 1,900 131,100
-----------
RETAIL (DEPARTMENT STORES)--1.9%
Dayton Hudson Corp.................................................. 1,300 63,050
May Department Stores Co............................................ 500 32,750
-----------
95,800
-----------
RETAIL (SPECIALTY)--1.8%
Claire's Stores, Inc................................................ 3,300 67,650
Toys "R" Us, Inc. (b)............................................... 1,100 25,919
-----------
93,569
-----------
SERVICES (ADVERTISING/MARKETING)--0.6%
Omnicom Group, Inc.................................................. 600 29,925
-----------
SERVICES (COMMERCIAL & CONSUMER)--1.8%
GATX Corp........................................................... 700 30,713
Sodexho Marriott Services, Inc...................................... 300 8,700
World Color Press, Inc. (b)......................................... 1,500 52,500
-----------
91,913
-----------
SERVICES (DATA PROCESSING)--1.6%
First Data Corp..................................................... 2,500 83,281
-----------
TELEPHONE--2.0%
BellSouth Corp...................................................... 500 33,563
GTE Corp............................................................ 1,200 66,750
-----------
100,313
-----------
TOBACCO--1.5%
Philip Morris Companies, Inc........................................ 1,500 59,063
RJR Nabisco Holdings Corp........................................... 700 16,625
-----------
75,688
-----------
TOTAL COMMON STOCKS
(Identified cost $4,400,591)................................................ 4,450,137
-----------
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--6.7%
FOODS--4.8%
Nestle SA ADR (Switzerland)......................................... 1,200 $ 128,401
Unilever PLC (United Kingdom)....................................... 1,500 118,407
-----------
246,808
-----------
PAPER & FOREST PRODUCTS--0.4%
Asia Pulp & Paper ADR (Singapore)................................... 2,000 22,500
-----------
TELEPHONE--1.5%
Telecomunicacoes Brasileiras SA Sponsored ADR (Brazil).............. 700 76,431
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $336,359).................................................. 345,739
-----------
TOTAL LONG-TERM INVESTMENTS--93.3%
(Identified cost $4,736,950)................................................ 4,795,876
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--9.9%
FEDERAL AGENCY SECURITIES--9.9%
FHLMC 5.60%, 7/1/98................................................. $ 510 510,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $510,000).................................................. 510,000
-----------
TOTAL INVESTMENTS--103.2%
(Identified cost $5,246,950)................................................ 5,305,876(a)
Cash and receivables, less liabilities--(3.2%).............................. (163,337)
-----------
NET ASSETS--100.0%............................................................ $ 5,142,539
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $190,700 and gross
depreciation of $131,774 for federal income tax purposes. At June 30, 1998,
the aggregate cost of securities for federal income tax purposes was
$5,246,950.
(b) Non-income producing.
See Notes to Financial Statements
78
<PAGE>
VALUE EQUITY SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$5,246,950)............................................... $ 5,305,876
Cash........................................................ 1,725
Receivables
Investment securities sold................................ 126,859
Fund shares sold.......................................... 18,735
Dividends and interest.................................... 6,858
Adviser................................................... 7,967
-------------
Total assets............................................ 5,468,020
-------------
LIABILITIES
Payables
Investment securities purchased........................... 295,616
Fund shares repurchased................................... 173
Custodian................................................. 2,479
Trustees' fee............................................. 6,846
Financial agent fee....................................... 3,322
Accrued expenses............................................ 17,045
-------------
Total liabilities....................................... 325,481
-------------
NET ASSETS.................................................. $ 5,142,539
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 5,024,846
Undistributed net investment income....................... 15,376
Accumulated net realized gain............................. 43,391
Net unrealized appreciation............................... 58,926
-------------
NET ASSETS.................................................. $ 5,142,539
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 488,439
-------------
-------------
Net asset value and offering price per share................ $ 10.53
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 19,924
Interest.................................................. 5,619
Foreign taxes withheld.................................... (659)
---------
Total investment income................................. 24,884
---------
EXPENSES
Investment advisory fee................................... 7,814
Printing.................................................. 7,988
Custodian................................................. 7,188
Professional.............................................. 7,172
Trustees.................................................. 6,846
Financial agent fee....................................... 3,767
Miscellaneous............................................. 1,884
---------
Total expenses.......................................... 42,659
Less expense borne by investment adviser................ (33,151)
---------
Net expenses............................................ 9,508
---------
NET INVESTMENT INCOME....................................... 15,376
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 43,391
Net change in unrealized appreciation (depreciation) on
investments............................................. 58,926
---------
NET GAIN ON INVESTMENTS..................................... 102,317
---------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 117,693
---------
---------
</TABLE>
See Notes to Financial Statements
79
<PAGE>
VALUE EQUITY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
JUNE 30, 1998
(UNAUDITED)
----------------
<S> <C>
FROM OPERATIONS
Net investment income..................................... $ 15,376
Net realized gain......................................... 43,391
Net change in unrealized appreciation (depreciation)...... 58,926
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 117,693
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... --
Net realized gains........................................ --
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ --
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (507,038 shares)............ 5,219,525
Net asset value of shares issued from reinvestment of
distributions (0 shares)................................ --
Cost of shares repurchased (18,599 shares)................ (194,679)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 5,024,846
----------------
NET INCREASE IN NET ASSETS................................ 5,142,539
NET ASSETS
Beginning of period....................................... 0
----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $15,376)...................................... $5,142,539
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
6/30/98
(UNAUDITED)
--------------
<S> <C>
Net asset value, beginning of
period............................ $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............. 0.03(3)
Net realized and unrealized
gain............................ 0.50
-------
TOTAL FROM INVESTMENT
OPERATIONS..................... 0.53
-------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... --
Dividends from net realized
gains........................... --
-------
TOTAL DISTRIBUTIONS............. --
-------
CHANGE IN NET ASSET VALUE........... 0.53
-------
NET ASSET VALUE, END OF PERIOD...... $10.53
-------
-------
Total return........................ 5.29%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $5,143
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.85%(1)
Net investment income............. 1.38%(1)
Portfolio turnover rate............. 28%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.07.
See Notes to Financial Statements
80
<PAGE>
SCHAFER MID-CAP VALUE SERIES
INVESTOR PROFILE
The Schafer Mid-Cap Value Series is appropriate for investors seeking
long-term capital appreciation.
INVESTMENT ADVISER'S REPORT
Since its inception on March 2, 1998, the Fund was down 3.83%. The Fund's
benchmark, the S&P 500 Index, advanced 8.31% over that same period.* All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
While the Fund's performance lagged the S&P 500 during this interim period,
we continue to apply our disciplined value investment approach, investing in
stocks with above-average earnings growth potential that trade at a discount. We
purchase stocks with projected two- to three-year earnings per share growth
rates higher than the S&P 500 and price-to-earnings ratios lower than the S&P
500. This process, coupled with equal initial position weightings has, over the
years, led to strong investment results with relatively low portfolio turnover.
While the S&P 500 Index has continued to advance year-to-date, it has
increasingly been driven by a small number of large-capitalization stocks. We
have noted currently that mid-cap stocks generally offer better value than
large-cap stocks, which have been attaining higher and higher P/E ratios.
Unfortunately for our recent relative performance, large-cap stocks have
continued to outpace the broader market and our portfolio. On the positive side,
stocks held within the portfolio are currently trading at approximately 14 times
their estimated 1998 earnings, and the average 1999 earnings growth for these
stocks is estimated at 15%. Conversely, the S&P 500 tracks at nearly 24 times
projected 1998 earnings and has projected earnings growth of less than 7% in
1999. Shareholders should note that the Fund is actively managed and holdings
are subject to change.
Investors' current preference for large-cap stocks was not the only factor
that affected the performance. Weakness in the economies of Southeast Asia hurt
the performance of our holdings with exposure, both real and perceived, to that
part of the world. Stocks like Arrow Electronics, Harman International, and
Avnet, all involved in the electronics industry, underperformed significantly
because weakness in Asia was expected to slow their business. Cummins Engine and
Boeing, both manufacturers of heavy equipment, also underperformed as Asian
demand for their product lessened.
Declining oil prices, due to increasing supply and reduced demand related to
mild weather and weak Asian economies, were also a factor in the portfolio's
performance. This led to underperformance in our oil-related holdings, including
our refiners, Sun and Ultramar-Diamond Shamrock, and our offshore drilling
companies, R&B Falcon, and Diamond Offshore. Both of the drilling companies have
significant positions in deep-water drilling, which has remained relatively
insulated from oil price declines; consequently, we view them both as good
values at this time.
On the positive side, our financial holdings, especially Chase Manhattan and
Nationsbank, outperformed as the U.S. economy remained strong and interest rates
declined. The same factors helped our holdings in the construction industry.
Champion Enterprises, a manufactured home builder, and Southdown and Lafarge,
both concrete companies, had strong results.
OUTLOOK
While we cannot predict when investor preferences will change, we believe
current investor focus on higher-price, larger-cap stocks will eventually
moderate, and ultimately investors are likely to look for stocks that trade at
more reasonable multiples compared to their underlying earnings growth rate. We
have seen similar circumstances in the past and have noted that in these
situations, investment styles similar to ours tend to experience periods of weak
relative performance followed by strong relative performance, although there is
no guarantee that this pattern will repeat itself.
* The S&P 500 Index is an unmanaged, commonly used measure of total return
stock market performance. The Index is not available for direct investment.
81
<PAGE>
SCHAFER MID-CAP VALUE SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCKS--83.0%
AEROSPACE/DEFENSE--2.7%
Boeing Co........................................................... 3,500 $ 155,969
-----------
AIR FREIGHT--2.5%
FDX Corp. (b)....................................................... 2,300 144,325
-----------
AIRLINES--2.8%
KLM Royal Dutch Airlines............................................ 3,900 159,656
-----------
AUTO PARTS & EQUIPMENT--4.7%
Borge Warner Automotive Corp........................................ 2,400 115,350
Goodyear Tire & Rubber Co........................................... 2,400 154,650
-----------
270,000
-----------
AUTOMOBILES--3.1%
Ford Motor Co....................................................... 3,000 177,000
-----------
BANKS (MAJOR REGIONAL)--4.9%
Keycorp............................................................. 3,600 128,250
NationsBank Corp.................................................... 2,000 153,000
-----------
281,250
-----------
BANKS (MONEY CENTER)--2.5%
Chase Manhattan Corp................................................ 1,900 143,450
-----------
BUILDING MATERIALS--10.7%
Champion Enterprises, Inc. (b)...................................... 4,600 134,550
Lafarge Corp........................................................ 4,300 169,044
Owens Corning....................................................... 3,300 134,681
Southdown, Inc...................................................... 2,400 171,300
-----------
609,575
-----------
COMPUTERS (SOFTWARE & SERVICES)--2.0%
Electronic Data Systems Corp........................................ 2,900 116,000
-----------
ELECTRONICS (INSTRUMENTATION)--7.0%
Arrow Electronics, Inc. (b)......................................... 6,100 132,675
Avnet, Inc.......................................................... 2,300 125,781
Harman International Industries, Inc................................ 3,600 138,600
-----------
397,056
-----------
FOODS--2.3%
IBP, Inc............................................................ 7,100 128,687
-----------
HOUSEHOLD FURN. & APPLIANCES--2.1%
Armstrong World Industries, Inc..................................... 1,800 121,275
-----------
INSURANCE (MULTI-LINE)--4.5%
Berkley (W.R.) Corp................................................. 3,000 120,187
Old Republic International Corp..................................... 4,600 134,837
-----------
255,024
-----------
METALS MINING--4.1%
Carpenter Technology Corp........................................... 2,000 100,500
Cleveland Cliffs, Inc............................................... 2,500 134,062
-----------
234,562
-----------
NATURAL GAS--5.2%
Ultramar Corp....................................................... 4,800 151,500
Western Resources................................................... 3,800 147,488
-----------
298,988
-----------
OIL & GAS (DOMESTIC INTEGRATED)--2.5%
Phillips Petroleum Co............................................... 2,900 139,744
-----------
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)--5.4%
Diamond Offshore Drilling, Inc...................................... 3,800 $ 152,000
R&B Falcon Corp. (b)................................................ 6,900 156,113
-----------
308,113
-----------
OIL & GAS (REFINING & MARKETING)--2.4%
Sun Co., Inc........................................................ 3,500 135,844
-----------
RAILROADS--5.4%
Burlington Northern Santa Fe Corp................................... 1,500 147,281
Kansas City Southern Industries, Inc................................ 3,300 163,763
-----------
311,044
-----------
RETAIL (GENERAL MERCHANDISE)--1.8%
Fabri-Centers of America Class A (b)................................ 3,800 104,025
-----------
TELEPHONE--2.1%
GTE Corp............................................................ 2,100 116,813
-----------
TRUCKS & PARTS--2.3%
Cummins Engine, Inc................................................. 2,600 133,250
-----------
TOTAL COMMON STOCKS
(Identified cost $4,938,295)................................................ 4,741,650
-----------
FOREIGN COMMON STOCKS--13.7%
BANKS (MAJOR REGIONAL)--2.5%
National Bank of Canada (Canada).................................... 7,200 140,255
-----------
HOUSEHOLD FURN. & APPLIANCES--2.4%
Royal Philips Electronics NV ADR NY Registered (Netherlands)........
1,600 136,000
-----------
INSURANCE (MULTI-LINE)--2.2%
PartnerRe Ltd. (Bermuda)............................................ 2,500 127,500
-----------
MACHINERY (DIVERSIFIED)--1.9%
New Holland N.V. (Netherlands)...................................... 5,600 109,900
-----------
METALS MINING--2.3%
Inco Ltd. (Canada).................................................. 9,700 132,163
-----------
OIL & GAS (DRILLING & EQUIPMENT)--2.4%
Repsol SA (Spain)................................................... 2,500 137,500
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $824,363).................................................. 783,318
-----------
TOTAL LONG-TERM INVESTMENTS--96.7%
(Identified cost $5,762,658)................................................ 5,524,968
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--5.2%
FEDERAL AGENCY SECURITIES--5.2%
FHLMC 5.60%, 7/1/98....................................... $ 295 295,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $295,000).................................................. 295,000
-----------
TOTAL INVESTMENTS--101.9%
(Identified cost $6,057,658)................................................ 5,819,968(a)
Cash and receivables, less liabilities--(1.9%).............................. (107,171)
-----------
NET ASSETS--100.0%............................................................ $ 5,712,797
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $170,795 and gross
depreciation of $408,485 for federal income tax purposes. At June 30, 1998,
the aggregate cost of securities for federal income tax purposes was
$6,057,658
(b) Non-income producing.
See Notes to Financial Statements
82
<PAGE>
SCHAFER MID-CAP VALUE SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$6,057,658)............................................... $5,819,968
Cash........................................................ 3,043
Receivables
Fund shares sold.......................................... 15,788
Dividends and interest.................................... 6,854
Adviser................................................... 6,730
----------
Total assets............................................ 5,852,383
----------
LIABILITIES
Payables
Investment securities purchased........................... 98,677
Fund shares repurchased................................... 3,945
Trustees' fee............................................. 6,846
Financial agent fee....................................... 3,322
Custodian fee............................................. 2,381
Accrued expenses.......................................... 24,415
----------
Total liabilities....................................... 139,586
----------
NET ASSETS.................................................. $5,712,797
----------
----------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $5,991,485
Undistributed net investment income....................... 7,961
Accumulated net realized loss............................. (48,959)
Net unrealized depreciation............................... (237,690)
----------
NET ASSETS.................................................. $5,712,797
----------
----------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 594,054
----------
----------
Net asset value and offering price per share................ $ 9.62
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 18,477
Interest.................................................. 4,736
Foreign taxes withheld.................................... (220)
----------
Total investment income................................. 22,993
----------
EXPENSES
Investment advisory fee................................... 13,153
Financial agent fee....................................... 3,815
Printing.................................................. 10,434
Professional.............................................. 7,172
Trustees.................................................. 6,846
Custodian................................................. 6,046
Miscellaneous............................................. 3,536
----------
Total expenses.......................................... 51,002
Less expenses borne by investment adviser............... (35,970)
----------
Net expenses............................................ 15,032
----------
NET INVESTMENT INCOME....................................... 7,961
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (48,959)
Net change in unrealized appreciation (depreciation) on
investments............................................. (237,690)
----------
NET LOSS ON INVESTMENTS..................................... (286,649)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ ($ 278,688)
----------
----------
</TABLE>
See Notes to Financial Statements
83
<PAGE>
SCHAFER MID-CAP VALUE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998
TO
JUNE 30, 1998
(UNAUDITED)
--------------
<S> <C>
FROM OPERATIONS
Net investment income..................................... $ 7,961
Net realized loss......................................... (48,959)
Net change in unrealized appreciation (depreciation)...... (237,690)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS...... (278,688)
--------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... --
Net realized gains........................................ --
--------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ --
--------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (638,116 shares)............ 6,432,693
Net asset value of shares issued from reinvestment of
distributions (0 shares)................................ --
Cost of shares repurchased (44,062 shares)................ (441,208)
--------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 5,991,485
--------------
NET INCREASE IN NET ASSETS................................ 5,712,797
NET ASSETS
Beginning of period....................................... 0
--------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $7,961)....................................... $ 5,712,797
--------------
--------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
6/30/98
(UNAUDITED)
--------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.01(3)
Net realized and unrealized loss.......................... (0.39)
-------
TOTAL FROM INVESTMENT OPERATIONS........................ (0.38)
-------
LESS DISTRIBUTIONS
Dividends from net investment income...................... --
Dividends from net realized gains......................... --
-------
TOTAL DISTRIBUTIONS.....................................
-------
CHANGE IN NET ASSET VALUE................................... (0.38)
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.62
-------
-------
Total return................................................ (3.83%)(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $ 5,713
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.20%(1)
Net investment income..................................... 0.64%(1)
Portfolio turnover rate..................................... 10%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.06
per share.
See Notes to Financial Statements
84
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
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, Research Enhanced Index ("Enhanced Index"),
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Growth and Income, Value Equity
and Schafer Mid-Cap Value 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 the sub-accounts of the
Phoenix Home Life Variable Accumulation Account, Phoenix Home Life Variable
Universal Life Account, PHL Variable Accumulation Account, Phoenix Life and
Annuity Variable Universal Life Account, and 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. The
Engemann Nifty Fifty Series seeks to achieve long-term capital appreciation
investing in approximately 50 different securities which offer the potential
for long term growth of capital. The Seneca Mid-Cap Growth Series seeks
capital appreciation primarily through investments in equity securities of
companies that have the potential for above average market appreciation. The
Growth and Income Series seeks as its investment objective, dividend growth,
current income and capital appreciation by investing in common stocks. The
Value Equity Series seeks to achieve long-term capital appreciation and
income by investing in a diversified portfolio of common stocks which meet
certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Schafer Mid-Cap Value
Series seeks to achieve long-term capital appreciation with current income as
the secondary investment objective by investing in common stocks of
established companies having a strong financial position and a low stock
market valuation at the time of purchase which are believed to offer the
possibility of increase in value.
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.
85
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
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 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
The Multi-Sector Fixed Income, Money Market, Growth, Strategic Allocation,
Balanced, International, Strategic Theme, Enhanced Index, Seneca Mid-Cap
Growth, Growth and Income, Value Equity and Aberdeen New Asia 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,
86
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
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 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 advisory services to the Fund, the Advisers are 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
Engemann Nifty Fifty.............................. 0.90 0.85 0.80
Growth and Income................................. 0.70 0.65 0.60
Value Equity...................................... 0.70 0.65 0.60
Enhanced Index.................................... 0.45 0.45 0.45
Seneca Mid-Cap Growth............................. 0.80 0.80 0.80
Schafer Mid-Cap Value............................. 1.05 1.05 1.05
Aberdeen New Asia................................. 1.00 1.00 1.00
<CAPTION>
RATE FOR FIRST RATE FOR NEXT RATE FOR EXCESS
$1 BILLION $1 BILLION OVER $2 BILLION
-------------- ------------- ------------------
<S> <C> <C> <C>
Real Estate....................................... 0.75 0.70 0.65
</TABLE>
Pursuant to a subadvisory agreement with the Fund, Phoenix Investment
Counsel, Inc. ("PIC") delegates certain investment decisions and research
functions with respect to the following series to the subadvisor indicated,
for which services each is paid a fee by PIC.
<TABLE>
<S> <C>
Enhanced Index Series.................................... J.P. Morgan Investment Management, Inc. ("J.P. Morgan")
Engemann Nifty Fifty Series.............................. Roger Engemann & Associates, Inc. ("Engemann")
Seneca Mid-Cap Series.................................... Seneca Capital Management, LLC ("Seneca")
Schafer Mid-Cap Series................................... Schafer Capital Management, Inc. ("Schafer")
</TABLE>
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. Pursuant to
the subadvisory agreement with the Fund and Engemann, Engemann is paid a
monthly fee at the annual rate of .45% of the average aggregate daily net
asset values of the Engemann Nifty Fifty Series up to $250,000,000, .425% of
such values between $250,000,000 and $500,000,000 and .40% of such values in
excess of $500,000.000. Pursuant to the subadvisory agreement with the Fund
and Seneca, Seneca is paid a monthly fee at the annual rate of .40% of the
average aggregate daily net asset values of the Seneca Mid-Cap Series. In
accordance with the subadvisory agreement with the
87
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
Fund and Schafer, Schafer is paid a monthly fee at the annual rate of .85% of
the average aggregate daily net asset values of the Schafer Mid-Cap Series up
to $175 million and .80% of such value in excess of $175 million.
The investment adviser for the Real Estate Series through March 2, 1998 was
Phoenix Realty Securities, Inc. ("PRS"). PRS is an indirect, wholly-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"). For its
services, PRS was 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 subadvisory
agreement with the Series, PRS delegates certain investment decisions and
research functions to Duff & Phelps Investment Management Co. ("DPIM"), a
subsidiary of Phoenix Investment Partners, Ltd. ("PXP"). PXP is a majority
owned subsidiary of PHL. On March 2, 1998 DPIM purchased the management
rights for the Real Estate Series from PRS and PRS' contract was assigned to
DPIM. For its services, DPIM is entitled to a fee at an annual rate of 0.75%
of the average daily net assets for the first $1 billion, 0.70% on the next
$1 billion and 0.65% thereafter.
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 Asset
Management 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
subadvisory 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 subadvisory 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, Enhanced Index and Seneca Mid-Cap 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, Enhanced
Index and Seneca Mid-Cap Series pay other operating expenses up to 0.40%,
0.25%, 0.25%, 0.25%, 0.10% and .25% respectively, of its average net assets.
Expenses above these limits are paid by the Advisers (PIC, DPIM, PAIA), 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 through May 31, 1998 for bookkeeping, administrative and pricing
services.
Effective June 1, 1998, PEPCO receives a financial agent fee equal to the sum
of (1) the documented cost of fund accounting and related services provided
by PFPC, Inc. (subagent to PEPCO), plus (2) the documented cost to PEPCO to
provide financial reporting, tax services and oversight of subagent's
performance. The current fee schedule of PFPC, Inc. ranges from 0.085% to
0.0125% of the average daily net asset values of the Fund. Certain minimum
fees and fee waivers may apply.
At June 30, 1998, PHL and affiliates held shares in The Phoenix Edge Series
Fund which had the following aggregate value:
<TABLE>
<S> <C>
Growth Series.................................... $8,178,636
Real Estate Series............................... 5,133,100
Aberdeen New Asia Series......................... 1,716,282
Research Enhanced Index Series................... 9,212,692
Engemann Nifty Fifty Series...................... 2,165,246
Seneca Mid-Cap Growth Series..................... 2,264,472
Growth and Income Series......................... 2,197,604
Value Equity Series.............................. 2,097,268
Schafer Mid-Cap Value Series..................... 1,915,508
</TABLE>
88
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
NOTE 4--PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities during the period ended June 30, 1998
(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.......................... $880,100,179 $881,974,768
Multi-Sector Fixed Income Series....... 354,144,063 181,215,000
Strategic Allocation Series............ 769,775,028 442,124,927
International Series................... 87,585,616 96,487,480
Balanced Series........................ 193,389,850 166,215,744
Real Estate Series..................... 9,691,779 3,252,842
Strategic Theme Series................. 136,708,960 136,857,850
Aberdeen New Asia Series............... 3,115,174 3,554,246
Research Enhanced Index Series......... 22,862,062 8,875,152
Engemann Nifty Fifty Series............ 6,035,551 1,015,759
Seneca Mid-Cap Growth Series........... 5,147,749 1,298,413
Growth and Income Series............... 16,073,840 2,599,354
Value Equity Series.................... 5,687,192 993,650
Schafer Mid-Cap Value Series........... 6,061,234 249,645
</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 period
ended June 30, 1998 aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Multi-Sector Fixed Income Series..... $49,832,647 $59,185,028
Strategic Allocation Series.......... 74,098,070 51,883,815
Balanced Series...................... 44,156,304 54,164,732
</TABLE>
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, Enhanced Index, Engemann Nifty-Fifty, Seneca Mid-Cap
Growth, Growth and Income, Value Equity and Schafer Mid-Cap Value Series.
At June 30, 1998, 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.............. 1 $ 274,800 $ 285,750 $10,950
Standard & Poor's 500 Index.............. 1 278,175 285,750 7,575
Standard & Poor's 500 Index.............. 1 281,375 285,750 4,375
Standard & Poor's 500 Index.............. 1 287,925 285,750 (2,175)
Standard & Poor's 500 Index.............. 1 288,125 285,750 (2,375)
Standard & Poor's 500 Index.............. 2 573,850 571,500 (2,350)
Standard & Poor's 500 Index.............. 1 274,494 285,750 11,256
--- ---------- ---------- ------------
8 $2,258,744 $2,286,000 $27,256
--- ---------- ---------- ------------
--- ---------- ---------- ------------
</TABLE>
NOTE 5--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 6--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
89
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
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 7--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.
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.
90
<PAGE>
THE PHOENIX EDGE SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
BOARD OF TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
John F. Sharry, Executive Vice President
J. Roger Engemann, Senior Vice President
Ron K. Jacks, Senior Vice President
Richard D. Little, Senior Vice President
James E. Mair, Senior Vice President
David K. Schafer, Senior Vice President
Gail P. Seneca, Senior Vice President
John S. Tilson, Senior Vice President
James D. Wehr, Senior Vice President
Hugh Young, Senior Vice President
David L. Albrycht, Vice President
Christian C. Bertelsen, Vice President
Steven L. Colton, Vice President
Timothy Devlin, Vice President
John D. Kattar, Vice President
William E. Keen, III, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Julie L. Sapia, Vice President
Michael Schatt, Vice President
Pierre 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
Duff & Phelps Investment Management Co.
(Real Estate Securities Series)
55 East Monroe Street
Chicago, Illinois 60603
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, Research Enhanced Index Series, Engemann Nifty
Fifty Series, Seneca Mid-Cap Growth Series, Phoenix Growth and Income Series,
Phoenix Value Equity Series and Schafer Mid-Cap Value 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
- --------------------------------------------------------------------------------
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>
Phoenix Home Life Mutual Insurance Company
[LOGO] Statutory Home Office: East Greenbush, New York
http://www.phl.com
OL2531S (C)1998 Phoenix Home Life Mutual Insurance Company 8-98
700.04
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000792359
<NAME> THE PHOENIX EDGE SERIES FUND
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 123825
<INVESTMENTS-AT-VALUE> 123825
<RECEIVABLES> 2157
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125982
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 339
<TOTAL-LIABILITIES> 339
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125643
<SHARES-COMMON-STOCK> 12564
<SHARES-COMMON-PRIOR> 12661
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 125643
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3226
<OTHER-INCOME> 0
<EXPENSES-NET> (325)
<NET-INVESTMENT-INCOME> 2901
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2901
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2901)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16290
<NUMBER-OF-SHARES-REDEEMED> (16676)
<SHARES-REINVESTED> 290
<NET-CHANGE-IN-ASSETS> (964)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 235
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 339
<AVERAGE-NET-ASSETS> 118719
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> THE PHOENIX EDGE SERIES FUND
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<CIK> 0000792359
<NAME> THE PHOENIX EDGE SERIES FUND
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<NAME> PHOENIX GROWTH AND INCOME SERIES
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<CIK> 0000792359
<NAME> THE PHOENIX EDGE SERIES FUND
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<CIK> 0000792359
<NAME> THE PHOENIX EDGE SERIES FUND
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