THE PHOENIX EDGE SERIES FUND
SUPPLEMENT DATED FEBRUARY 24, 2000
TO PROSPECTUS DATED DECEMBER 20, 1999
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THE FOLLOWING LANGUAGE REPLACES THE SECOND PARAGRAPH UNDER THE SECTION TITLED
"THE ADVISOR" ON PAGE 60 OF THE PROSPECTUS:
Roger Engemann & Associates, Inc. ("Engemann") is the investment subadvisor
to the Series and is located at 600 North Rosemead Boulevard, Pasadena,
California 91107. Engemann acts as advisor to 6 mutual funds, as subadvisor to 4
other mutual funds and acts as investment advisor to institutions and
individuals. As of December 31, 1998, Engemann had $5.9 billion in assets under
management. Engemann has been an investment advisor since 1969.
Subject to the direction of the Fund's Board of Trustees, PIC is
responsible for managing the Series' investment program and the general
operations of the Series. Engemann, as subadvisor, is responsible for the
day-to-day management of the Series' portfolio. Engemann manages the Series'
assets to conform with the investment policies as described in this prospectus.
The Series pays PIC a monthly investment management fee that is accrued
daily against the value of the Series' net assets at the following rates.
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THE FOLLOWING LANGUAGE REPLACES THE PARAGRAPH UNDER THE SECTION TITLED
"PORTFOLIO MANAGEMENT" ON PAGE 60 OF THE PROSPECTUS:
Roger Engemann, James E. Mair and John S. Tilson head the team that is
primarily responsible for the day-to-day management of the Series. Each is a
managing director, Equities of PIC. Mr. Engemann has been president of Engemann
since its inception in 1969.
Messrs. Mair and Tilson are both executive vice presidents of portfolio
management of Engemann and both have been with Engemann since 1983. Messrs.
Engemann and Mair have been chartered financial analysts ("CFAs") since 1972,
and Mr. Tilson has been a CFA since 1974.
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THE FOLLOWING LANGUAGE REPLACES THE SECOND PARAGRAPH UNDER THE SECTION TITLED
"THE ADVISOR" ON PAGE 98 OF THE PROSPECTUS:
Seneca Capital Management LLC ("Seneca") is the investment subadvisor to
the Series and is located at 909 Montgomery Street, San Francisco, California
94133. Seneca acts as a subadvisor to 9 other mutual funds and as investment
advisor to institutions and individuals. As of December 31, 1998, Seneca had
$5.9 billion in assets under management. Seneca has been (with its predecessor,
GMG/Seneca Capital Management LP ("GMG/Seneca")) an investment advisor since
1989.
Subject to the direction of the Fund's Board of Trustees, PIC is
responsible for managing the Series' investment program and the general
operations of the Series. Seneca, as subadvisor, is responsible for day-to-day
management of the Series' portfolio. Seneca manages the Series' assets to
conform with the investment policies as described in this prospectus.
The Series pays PIC a monthly investment management fee that is accrued
daily against the value of the Series' net assets at the following rates.
TF569 2/2000
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THE FOLLOWING LANGUAGE REPLACES THE PARAGRAPH UNDER THE SECTION TITLED
"PORTFOLIO MANAGER" ON PAGE 98 OF THE PROSPECTUS:
Investment and trading decision for the Series are made by a team of
managers and analysts headed by Gail P. Seneca. The team leaders, which include
Ms. Seneca, Richard D. Little and Ronald K. Jacks, are primarily responsible
for the day-to-day decisions related to the Series.
Gail P. Seneca has served as co-manager of the Series since April 1999. She
also serves as co-manager of the Phoenix-Seneca Equity Opportunities Fund of the
Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid-Cap Fund of
the Phoenix Multi-Portfolio Fund. Ms. Seneca also serves as a team leader for
each of the Phoenix-Seneca Funds. Ms. Seneca has been the chief executive and
investment officer of Seneca or GMG/Seneca since November 1989. From October
1987 until October 1989, she was senior vice president of the Asset Management
Division of Wells Fargo Bank, and from October 1983 to September 1987, she was
investment strategist and portfolio manager for Chase Lincoln Bank, heading the
Fixed Income Division.
Richard D. Little has served as co-manager of the Series since April 1999.
He also serves as co-manager of the Phoenix-Seneca Equity Opportunities Fund of
the Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap Fund
of the Phoenix Multi-Portfolio Fund. Mr. Little also serves as a portfolio
manager for Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"SM Fund
of Phoenix-Seneca Funds. Mr. Little has been director of Equities with Seneca or
GMG/Seneca since December 1989. Before he joined GMG/Seneca, Mr. Little held
positions as an analyst, board member and regional manager with Smith Barney,
NatWest Securities and Montgomery Securities.
Ronald K. Jacks has served as co-manager of the Series since April 1999. He
also serves as co-manager of the Phoenix-Seneca Equity Opportunities Fund of the
Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap Fund of
the Phoenix Multi-Portfolio Fund. Mr. Jacks also serves as a portfolio manager
for Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"SM Fund of
Phoenix-Seneca Funds. Mr. Jacks was Secretary of the Phoenix-Seneca Funds from
February 1996 through February 1998. Mr. Jacks was a trustee of Phoenix-Seneca
Funds from February 1996 through June 1997. Mr. Jacks has been a portfolio
manager with Seneca or GMG/Seneca since July 1990.
TF569 2/2000
<PAGE>
THE PHOENIX EDGE SERIES FUND
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
101 Munson Street MAIL OPERATIONS ("VPMO"):
Greenfield, Massachusetts P.O. Box 8027
Boston, MA 02266-8027
STATEMENT OF ADDITIONAL INFORMATION
December 20, 1999
as Supplemented February 24, 2000
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus. Accordingly, this Statement should be read
together with the Fund's current Prospectus, dated December 20, 1999, as
supplemented February 24, 2000 which may be obtained by calling Variable
Products Operations ("VPO") at 800/541-0171, or by writing to VPMO.
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TABLE OF CONTENTS
PAGE
----
The Phoenix Edge Series Fund ........................................ 2
Investment Policies ................................................. 2
Investment Restrictions.............................................. 17
Portfolio Turnover................................................... 19
Management of the Fund .............................................. 19
The Investment Advisors ............................................. 26
Custodian ........................................................... 30
Foreign Custodian ................................................... 31
Independent Accountants ............................................. 31
Brokerage Allocation ................................................ 31
Determination of Net Asset Value .................................... 32
Investing In the Fund ............................................... 32
Redemption of Shares ................................................ 33
Taxes ............................................................... 33
Disclaimer........................................................... 33
Financial Statements ................................................ 34
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THE PHOENIX EDGE SERIES FUND
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The Phoenix Edge Series Fund (the "Fund") is an open-end, diversified
investment company as defined in the Investment Company Act of 1940. It was
formed on February 18, 1986 as a Massachusetts business trust and commenced
operations on December 5, 1986. Shares in each Series of the Fund are available
only to certain insurance company separate accounts.
The Phoenix Home Life Variable Accumulation Account is a separate account of
Phoenix Home Life Mutual Insurance Company ("Phoenix") created on June 21, 1982.
The Phoenix Home Life Variable Universal Life Account is a separate account
of Phoenix created on June 17, 1985.
The PHL Variable Accumulation Account is a separate account of PHL Variable
Insurance Company ("PHL Variable") formed on December 7, 1994.
The PHL Variable Universal Life Account is a separate account of PHL
Variable formed on September 10, 1998.
The Phoenix Life and Annuity Variable Universal Life Account is a separate
account of Phoenix Life and Annuity Company ("PLAC") formed in March 1996.
The executive offices of the Accounts, Phoenix, PHL Variable and PLAC are
located at One American Row, P.O. Box 5056, Hartford, Connecticut 06102-5056.
The Accounts own the majority of the shares of the Fund.
INVESTMENT POLICIES
The investment objectives and policies of the Series are described in each
Series' "Investment Risk and Return Summary" and "Investment Strategies"
sections. The following supplements the information contained in those sections.
MONEY MARKET INSTRUMENTS
Certain money market instruments used extensively by the Phoenix-Goodwin
Money Market, Phoenix-Federated U.S. Government Bond and Phoenix-Oakhurst
Strategic Allocation Series are described below. They also may be used by the
Phoenix-Aberdeen International, Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Seneca Strategic Theme, Phoenix Research Enhanced Index and
Phoenix-Aberdeen New Asia Series and may be used by the other Series to a very
limited extent to invest otherwise idle cash, or on a temporary basis for
defensive purposes. The Phoenix-Morgan Stanley Focus Equity Series may invest up
to 100% of its assets in cash and certain short- and medium-term fixed income
securities for temporary defensive purposes.
Repurchase Agreements. Repurchase Agreements are agreements by which a
Series purchases a security and obtains a simultaneous commitment from the
seller (a member bank of the Federal Reserve System or, to the extent permitted
by the Investment Company Act of 1940, a recognized securities dealer) that the
seller will repurchase the security at an agreed upon price and date. The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. In fact, such a
transaction is a loan of money to the seller of the securities.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the accounts of the custodian of the Fund
maintained in a central depository or book-entry system or by physical delivery
of the securities to the Fund's custodian in return for delivery of the purchase
price to the seller. Repurchase transactions are intended to be short-term
transactions with the seller repurchasing the securities, usually within 7 days.
Even though repurchase transactions usually do not impose market risks on
the purchasing Series, if the seller of the repurchase agreement defaults and
does not repurchase the underlying securities, the Series might incur a loss if
the value of the underlying securities declines, and disposition costs may be
incurred in connection with liquidating the underlying securities. In addition,
if bankruptcy proceedings are commenced regarding the seller, realization upon
the underlying securities may be delayed or limited, and a loss may be incurred
if the underlying securities decline in value.
U.S. Government Obligations. Securities issued or guaranteed as to principal
and interest by the United States Government include a variety of Treasury
securities, which differ only in their interest rates, maturities and times of
issuance. Treasury bills have a maturity of one year or less. Treasury notes
have maturities of 1 to 7 years, and Treasury bonds generally have maturity of
greater than 5 years.
Agencies of the United States Government which issue or guarantee
obligations include, among others, Export-Import Bank of the United States,
Farmers Home Administration, Federal Housing Administration, Government National
Mortgage Association, Maritime Administration, Small Business Administration and
The Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others, the
Federal National Mortgage Association, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Banks for
Cooperatives and the U.S. Postal Service. Securities issued or guaranteed by the
Export-Import Bank of the United States, Farmers Home Administration, Federal
Housing Administration, Government National Mortgage Association, Maritime
Administration and Small Business Administration are supported by the full faith
and credit of the U.S. Treasury. Securities issued or guaranteed by Federal
National Mortgage Association and Federal Home Loan Banks are supported by the
right of the issuer to borrow from the Treasury. Securities issued or guaranteed
by the other agencies or
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instrumentalities listed above are supported only by the credit of the issuing
agency.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which
negotiable certificates are not received.
Bankers' Acceptances. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of 6 months or less and are traded in
secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding 9 months.
Corporate Debt Securities. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded as
money market securities.
All of the Phoenix-Goodwin Money Market Series' investments will mature in
397 days or less and will have a weighted average age of not more than 90 days.
By limiting the maturity of its investments, the Series seeks to lessen the
changes in the value of its assets caused by market factors. This Series,
consistent with its investment objective, will attempt to maximize yield through
portfolio trading. This may involve selling portfolio instruments and purchasing
different instruments to take advantage of disparities of yields in different
segments of the high grade money market or among particular instruments within
the same segment of the market. It is expected that the Series' portfolio
transactions generally will be with issuers or dealers in money market
instruments acting as principal. Accordingly, this Series will normally not pay
any brokerage commissions.
The value of the securities in the Phoenix-Goodwin Money Market Series'
portfolio can be expected to vary inversely to changes in prevailing interest
rates, with the amount of such variation depending primarily on the period of
time remaining to maturity of the security. Long-term obligations may fluctuate
more in value than short-term obligations. If interest rates increase after a
security is purchased, the security, if sold, could be sold at a loss. On the
other hand, if interest rates decline after a purchase, the security, if sold,
could be sold at a profit. If, however, the security is held to maturity, no
gain or loss will be realized as a result of interest rate fluctuations,
although the day-to-day valuation of the portfolio could fluctuate. Substantial
withdrawals of the amounts held in the Phoenix-Goodwin Money Market Series could
require it to sell portfolio securities at a time when a sale might not be
favorable. The value of a portfolio security also may be affected by other
factors, including factors bearing on the credit-worthiness of its issuer. A
more detailed discussion of amortized cost is contained under "Determination of
Net Asset Value."
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: MARKET
SEGMENT INVESTMENTS AND TRADING
Market Segment Investments. The Phoenix-Oakhurst Strategic Allocation Series
seeks to achieve its investment objective by investing in the 3 market segments
of stocks, bonds and money market instruments described below.
[diamond] STOCK--common stocks and other equity-type securities such as
preferred stocks, securities convertible into common stock and
warrants;
[diamond] BONDS--bonds and other debt securities with maturities generally
exceeding one year, including:
[bullet] publicly-offered straight debt securities having a rating
within the 4 highest grades as determined by Moody's
Investors Service, Inc. (Aaa, Aa, A or Baa) or Standard &
Poor's Corporation (AAA, AA, A or BBB) or, if unrated, those
publicly-offered straight debt securities which are judged by
the Account to be of equivalent quality to securities so
rated;
[bullet] obligations issued, sponsored, assumed or guaranteed as to
principal and interest by the U.S. Government or its agencies
or instrumentalities;
[bullet] obligations (payable in U.S. dollars) issued or guaranteed as
to principal and interest by the Government of Canada or of a
Province of Canada or any instrumentality or political
subdivision thereof, provided such obligations have a rating
within the highest grades as determined by Moody's (Aaa, Aa
or A) or Standard & Poor's (AAA, AA or A) and do not exceed
25% of the Phoenix-Oakhurst Strategic Allocation Series'
total assets;
[bullet] publicly offered straight debt securities issued or
guaranteed by a national or state bank or bank holding
company (as defined in the Federal Bank Holding Company Act,
as amended) having a rating within the 3 highest grades as
determined by Moody's (Aaa, Aa or A) or Standard & Poor's
(AAA, AA or A), and certificates of deposit of such banks;
and
[bullet] high yield, high risk fixed income securities (commonly
referred to as "junk bonds") having a rating below Baa by
Moody's Investors Service, Inc. or BBB by Standard & Poor's
Corporation or unrated securities of comparable quality
provided such securities do not exceed 5% of the
Phoenix-Oakhurst Strategic Allocation Series' total assets.
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[diamond] MONEY MARKET--money market instruments and other debt securities with
maturities generally not exceeding one year, including:
[bullet] those money market instruments described in this Statement of
Additional Information; and
[bullet] reverse repurchase agreements with respect to any of the
foregoing obligations. Reverse repurchase agreements are
agreements in which the Series, as the seller of the
securities, agrees to repurchase them at an agreed time and
price. This transaction constitutes a borrowing of money by
the seller of the securities. The Series will maintain
sufficient funds in a segregated account with its custodian
to repurchase securities pursuant to any outstanding reverse
repurchase agreement. The Series is required to maintain
asset coverage of at least 300% at all times for all
obligations under reverse repurchase agreements.
Trading. In order to achieve the Series' investment objective, the timing
and amounts of purchases and sales of particular securities and particular types
of securities (i.e., common stock, debt, money market instruments) will be of
significance. As a result, the Phoenix-Oakhurst Strategic Allocation Series
intends to use trading as a means of managing the portfolio of the Series in
seeking to achieve its investment objective. Trading is used primarily in
anticipation of, or in response to, market developments or to take advantage of
yield disparities. The advisor will engage in trading when it believes that the
trade, net of transaction costs, will improve interest income or capital
appreciation potential, or will lessen capital loss potential. Whether these
goals will be achieved through trading depends on the advisor's ability to
evaluate particular securities and anticipate relevant market factors, including
interest rate trends and variations. Such trading places a premium on the
advisor's ability to obtain relevant information, evaluate it properly and take
advantage of its evaluations by completing transactions on a favorable basis. If
the advisor's evaluations and expectations prove to be incorrect, the Series'
income or capital appreciation may be reduced and its capital losses may be
increased. Portfolio trading involves transaction costs but, as explained above,
will be engaged in when the advisor believes that the result of the trading, net
of transaction costs, will benefit the Series. Purchases and sales of securities
will be made, whenever necessary in the advisor's view, to achieve the total
return investment objective of the Series without regard to the resulting
brokerage costs.
In addition to the traditional investment techniques for purchasing and
selling and engaging in trading, the Phoenix-Oakhurst Strategic Allocation
Series may enter into financial futures and options contracts.
PHOENIX RESEARCH ENHANCED INDEX SERIES
The investment strategy of the Phoenix Research Enhanced Index Series is to
earn a total return modestly in excess of the total return performance of the
S&P 500 (including the reinvestment of dividends) while maintaining a volatility
of return similar to the S&P 500. The Series is appropriate for investors who
seek a modestly enhanced total return relative to that of large- and
medium-sized U.S. companies typically represented in the S&P 500. The portfolio
intends to invest in securities of approximately 350 issuers, which securities
are rated by the Series' subadvisor to have above-average expected returns.
The Series seeks to achieve its investment objective through fundamental
analysis, systematic stock valuation and disciplined portfolio construction.
[diamond] Fundamental research: The subadvisors of the Series--approximately 25
domestic equity analysts, each an industry specialist with an average
of approximately 12 years experience, follow over 900 predominantly
large- and medium-sized U.S. companies--approximately 550 of which
form the universe for the Series' investments. A substantial majority
of these companies are issuers of securities which are included in the
S&P 500. The analysts' research goal is to forecast normalized,
longer-term earnings and dividends for the companies that they cover.
[diamond] Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by a dividend discount model, which
calculates those expected returns by solving for the rate of return
that equates the company's current stock price to the present value of
its estimated long-term earnings power. Within each sector, companies
are ranked by their expected return and grouped into quintiles; those
with the highest expected returns (Quintile 1) are deemed the most
undervalued relative to their long-term earnings power, while those
with the lowest expected returns (Quintile 5) are deemed the most
overvalued.
[diamond] Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Sector weightings
will generally approximate those of the S&P 500. The Series will
normally be principally comprised, based on the dividend discount
model, of stocks in the first 4 quintiles. Finally, the Series holds a
large number of stocks to enhance its diversification.
Under normal market circumstances, the Series' advisor will invest at least
80% of its net assets in equity securities consisting of common stocks and other
securities with equity characteristics such as trust interests, limited
partnership interests, preferred stocks, warrants, rights and securities
convertible into common stock. The Series' primary equity investments will be
the common stock of large- and medium-sized U.S. companies with market
capitalizations above $1 billion. Such securities will be listed on a national
securities exchange or traded in the over-the-counter market. The Series may
invest in similar securities of foreign corporations, provided that the
securities of such corporations are included in the S&P 500.
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The Series intends to manage its portfolio actively in pursuit of its
investment objective. Since the Series has a long-term investment perspective,
it does not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take advantage
of short-term trading opportunities that are consistent with its objective.
FINANCIAL FUTURES AND RELATED OPTIONS
Phoenix-Oakhurst Strategic Allocation, Phoenix-Hollister Value Equity,
Phoenix-Oakhurst Growth and Income, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Morgan Stanley
Focus Equity and Phoenix-Oakhurst Balanced Series. These Series may enter into
financial futures contracts for the purchase or sale of debt obligations which
are traded on exchanges that are licensed and regulated by Commodity Futures
Trading Commission.
A futures contract on a debt obligation is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery, during a particular month, of obligations having a standard face value
and rate of return. By entering into a futures contract for the purchase of a
debt obligation, a Series will legally obligate itself to accept delivery of the
underlying security and pay the agreed price. Futures contracts are valued at
the most recent settlement price, unless such price does not reflect the fair
value of the contract, in which case such positions will be valued by or under
the direction of the Board of Trustees of the Fund.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in a
profit or loss. While futures positions taken by a Series usually would be
liquidated in this manner, it may instead make or take delivery of the
underlying securities whenever it appears economically advantageous for it to do
so.
The purpose of hedging in debt obligations is to establish more certainty
than otherwise would be possible in the effective rate of return on portfolio
securities. A Series might, for example, take a "short" position in the futures
markets by entering into contracts for the future delivery of securities held by
it in order to hedge against an anticipated rise in interest rates that would
adversely affect the value of such securities. When hedging of this type is
successful, any depreciation in the value of securities will be substantially
offset by appreciation in the value of the futures position. On the other hand,
a Series might take a "long" position by entering into contracts for the future
purchase of securities. This could be done when the Series anticipates the
future purchase of particular debt securities but expects the rate of return
then available in the securities market to be less favorable than rates that are
currently available in the futures markets.
A Series will incur brokerage fees in connection with its financial futures
transactions, and will be required to deposit and maintain funds with its
custodian in its own name as margin to guarantee performance of its future
obligations.
While financial futures would be traded to reduce certain risks, futures
trading itself entails certain other risks. One risk arises because of the
imperfect correlation between movements in the price of the futures contracts
and movements in the price of the debt securities which are the subject of such
contracts. In addition, the market price of futures contracts may be affected by
certain factors, such as the closing out of futures contracts by investors
through offsetting transactions, margin, deposit and maintenance requirements,
and the participation of speculators in the futures market. Another risk is that
there may not be a liquid secondary market on an exchange or board of trade for
a given futures contract or at a given time, and in such event it may not be
possible for the Series to close a futures position. Finally, successful use of
futures contracts by a Series is subject, where applicable, to the advisor's or
subadvisor's ability to correctly predict movements in the direction of interest
rates and other factors affecting the market for debt securities. Thus, while a
Series may benefit from the use of such contracts, the operation of these risk
factors may result in a poorer overall performance for the Series than if it had
not entered into any futures contract.
A Series is required to maintain, at all times, an asset coverage of at
least 300% for all of its borrowings, which include obligations under any
financial futures contract on a debt obligation or reverse repurchase agreement.
In addition, immediately after entering into a futures contract for the receipt
or delivery of a security, the value of the securities called for by all of the
Series' futures contracts (both for receipts and delivery) will not exceed 10%
of its total assets. The Phoenix-Morgan Stanley Focus Equity Series will limit
its use of all derivative products, including futures contracts, for non-hedging
purposes to 33-1/3% of its total assets measured by the aggregate notional
amount of outstanding derivative products. A futures contract for the receipt of
a debt obligation will be offset by any asset, including equity securities and
noninvestment grade debt so long as the asset is liquid, unencumbered and marked
to market daily held in a segregated account with the custodian bank for the
Series in an amount sufficient to cover the cost of purchasing the obligation.
Phoenix-Aberdeen International, Phoenix Research Enhanced Index,
Phoenix-Hollister Value Equity, Phoenix-Seneca Mid-Cap Growth, Phoenix-Oakhurst
Growth and Income, Phoenix-Federated U.S. Government Bond, Phoenix-Janus Growth,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Morgan
Stanley Focus Equity and Phoenix-Aberdeen New Asia Series. Each of these Series
may enter into
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financial futures contracts and related options as a hedge against anticipated
changes in the market value of its portfolio securities or securities which it
intends to purchase or sell in the exchange rate of foreign currencies. Hedging
is the initiation of an offsetting position in the futures market which is
intended to minimize the risk associated with a position's underlying securities
in the cash market. The Phoenix-Morgan Stanley Focus Equity series may also
enter into financial futures contracts for non-hedging purposes to further the
Series' investment objective and enhance returns. The Series, however, will not
use financial, futures contracts or other derivative products in a manner that
creates leverage, except to the extent expressly permitted by the Series'
investment policies.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to deliver,
and the purchaser to take delivery of, the interest rate securities called for
in the contract at a specified future time and at a specified price. A foreign
currency futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the foreign currency called for in the
contract at a specified future time and at a specified price. A securities index
assigns relative values to the securities included in the index, and the index
fluctuates with changes in the market values of the securities so included. A
securities index futures contract is a bilateral agreement pursuant to which 2
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. An option on a financial futures contract gives the purchaser
the right to assume a position in the contract (a long position if the option is
a call and a short position if the option is a put) at a specified exercise
price at any time during the period of the option.
Each Series may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase or sell put
and call options on financial futures contracts.
Each Series other than the Phoenix-Morgan Stanley Focus Equity Series, will
engage in transactions in financial futures contracts and related options
primarily for hedging purposes. The Phoenix-Morgan Stanley Focus Equity Series
will limit its use of derivative products, including financial futures contracts
and related options, for non-hedging purposes to 33-1/3% of its total assets
measured by the aggregate notional amount of outstanding derivative products. In
addition, each Series will not purchase or sell any financial futures contract
or related option for purposes other than bona fide hedging. If, immediately
thereafter, the sum of the cash or U.S. Treasury bills committed with respect to
its existing futures and related options positions and the premiums paid for
related options would exceed 5% of the market value of its total assets
(contracts and options relating to the Series' non-bona fide hedging
activities). At the time of the purchase of a futures contract or a call option
on a futures contract, any asset --either including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the futures contract, minus
the initial margin deposit with respect thereto--will be deposited in a
segregated account with the Fund's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged. The extent to which the
Series may enter into financial futures contracts and related options also may
be limited by requirements of the Internal Revenue Code of 1986 (the "Code") for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the advisor or
subadvisor could be incorrect in its expectations as to the direction or extent
of various interest rate movements or foreign currency exchange rates, in which
case the Series' return might have been greater had the futures transaction not
taken place. There also is the risk that a liquid secondary market may not
exist. The risk in purchasing an option on a financial futures contract is that
the Series will lose the premium it paid. Also, there may be circumstances when
the purchase of an option on a financial futures contract would result in a loss
to the Series while the purchase or sale of the contract would not have resulted
in a loss.
The Phoenix-Seneca Strategic Theme and Phoenix-Bankers Trust Dow 30 Series
may use financial futures contracts and related options to hedge against changes
in the market value of its portfolio securities which it intends to purchase.
Hedging is accomplished when an investor takes a position in the futures market
opposite to his cash market position. There are 2 types of hedges--long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with cash market prices, and prices in the
futures market have maintained a fairly predictable relationship to prices in
the cash market. Thus, to a considerable extent, a decline in the market value
of securities in a Series' portfolio may be protected against by gains realized
on futures contracts sales. Similarly, it is possible to protect against an
increase in the market price of securities which a Series may wish to buy in the
future by purchasing futures contracts.
The Phoenix-Seneca Strategic Theme and Phoenix-Bankers Trust Dow 30 Series
may purchase or sell any financial futures contracts which are traded on a
recognized exchange or board of trade. Financial futures contracts consist of
interest rate futures contracts and securities index futures contracts. A public
market presently exists in interest rate futures contracts covering long-term
U.S. Treasury bonds, U.S. Treasury notes, 3-month U.S. Treasury bills and GNMA
certificates. Securities index
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futures contracts are currently traded with respect to the S&P 500. A clearing
corporation associated with the New York Stock Exchange ("NYSE") or board of
trade on which a financial futures contract trades assumes responsibility for
the completion of transactions and guarantees that open futures contracts will
be performed.
In contrast to the situation when such Series purchases or sells a security,
no security is delivered or received by the Series upon the purchase or sale of
a financial futures contract. Initially, this Series will be required to deposit
in a segregated account with its custodian bank an amount of cash, U.S. Treasury
bills or liquid high grade debt obligations. This amount is known as initial
margin and is in the nature of a performance bond or good faith deposit on the
contract. The current initial deposit required per contract is approximately 5%
of the contract amount. Brokers may establish deposit requirements higher than
this minimum. Subsequent payments, called variation margin, will be made to and
from the account on a daily basis as the price of the futures contract
fluctuates. This process is known as marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. In the case of a call, this amount will be equal to the amount by which
the market price of the futures contract at the time of exercise exceeds, or, in
the case of a put, is less than the exercise price of the option on the futures
contract. For more information regarding options, see below.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
A Series will pay commissions on financial futures contracts and related
options transactions. These commissions may be higher than those which would
apply to purchases and sales of securities directly.
OPTIONS
Phoenix-Goodwin Money Market, Phoenix-Engemann Capital Growth,
Phoenix-Oakhurst Balanced, Phoenix-Aberdeen International, Phoenix-Goodwin
Multi-Sector Fixed Income, Phoenix-Oakhurst Strategic Allocation, Phoenix-Seneca
Strategic Theme, Phoenix Research Enhanced Index, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Oakhurst Growth and Income, Phoenix-Hollister Value Equity,
Phoenix-Morgan Stanley Focus Equity, Phoenix-Janus Growth, Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income, Phoenix-Federated U.S. Government Bond
and Phoenix-Aberdeen New Asia Series.
Writing Covered Call Options. These Series may write (sell) covered call
options on securities owned by them, including securities into which convertible
securities are convertible, provided that such call options are listed on a
national securities exchange.
A call option gives the holder the right to buy a security at a specified
price (the exercise price) for a stated period of time. Prior to the expiration
of the option, the seller of the option has an obligation to sell the underlying
security to the holder of the option at the original price specified regardless
of the market price of the security at the time the option is exercised. The
seller of the call option receives a cash payment (premium) at the time of sale,
which premium is retained by the seller whether or not the option is exercised.
The premium represents consideration to the seller for undertaking the
obligations under the option contract and thereby foregoing the opportunity to
profit from an increase in the market price of the underlying security above the
exercise price (except insofar as the premium represents such a profit).
A call option may be purchased to terminate a call option previously
written. The premium paid in connection with the purchase of a call option may
be more than, equal to or less than the premium received upon writing the call
option which is being terminated.
When a Series writes a covered call option, an amount equal to the premium
received by it is included in assets of the Series offset by an equivalent
liability. The amount of the liability is subsequently marked to reflect the
current market value of the written option. Market value is the last sale price
of the options on the NYSE on which it is traded or, in absence of a sale, the
mean between last bid and offer prices. If an option which the Series has
written either ends or enters into a closing purchase transaction, the Series
realizes a gain (or loss if the cost of a closing purchase transaction exceeds
the premium received when the option was sold) without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option concludes.
Premium income earned with respect to a qualified covered call option which
lapses or experiences gain or loss from such an option which is closed out
(other than by
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exercise) generally will be short-term capital gain or loss. Further, gain or
loss with respect to the exercise of such an option generally will be short-term
or long-term depending upon the actual or deemed holding period of the
underlying security. However, any loss realized from writing a "qualified
covered call option" which has a strike price less than the applicable security
price (defined in Section 1092(c)(4)(G) of the Code) will be treated as a
long-term capital loss, if gain from the sale of the underlying security at the
time the loss is realized would be long-term capital gain. Also, with respect to
such options, the holding period of the underlying security will not include any
period during which the Fund has an outstanding written option.
Buying Call and Put Options. The Phoenix-Oakhurst Strategic Allocation,
Phoenix-Oakhurst Balanced, Phoenix Research Enhanced Index, Phoenix-Hollister
Value Equity, Phoenix-Oakhurst Growth and Income, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Morgan Stanley Focus Equity, Phoenix-Janus Growth, Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income, Phoenix-Federated U.S. Government Bond
and Phoenix-Seneca Strategic Theme Series may buy national exchange-traded call
and put options on equity and debt securities and on various stock market
indices. The Phoenix-Goodwin Money Market, Phoenix-Engemann Capital Growth and
Phoenix-Goodwin Multi-Sector Fixed Income Series may only purchase a call option
to terminate a previously-written call option. (See "Writing Covered Call
Options.")
A put option on equity or debt securities gives the holder the right to sell
such a security at a specified price (the exercise price) for a stated period of
time. Prior to the expiration of the option, the seller of the option has an
obligation to buy the underlying security from the holder of the option at the
original price specified regardless of the market price of the security at the
time the option is exercised.
Call and put options on stock market indexes operate the same way as call
and put options on equity or debt securities except that they are settled in
cash. In effect, the holder of a call option on a stock market index has the
right to buy the value represented by the index at a specified price and for a
stated period of time. Conversely, the holder of a put option on a stock market
index has the right to sell the value represented by the index for a specified
price and for a stated period of time. To be settled in cash means that if the
option is exercised, the difference in the current value of the stock market
index and the exercise value must be paid in cash. For example, if a call option
was bought on the XYZ stock market index with an exercise price of $100
(assuming the current value of the index is 110 points, with each point equal to
$1.00), the holder of the call option could exercise the option and receive $10
(110 points minus 100 points) from the seller of the option. If the index equals
90 points, the holder of the option receives nothing.
The seller of an option receives a cash payment or premium at the time of
sale which is retained by the seller whether or not the option is exercised.
This premium represents consideration to the seller for undertaking the
obligation under the option contract. In the case of call options, the premium
compensates the seller for the loss of the opportunity to profit from any
increase in the value of the security or the index. The premium to a seller of a
put option compensates the seller for the risk assumed in connection with a
decline in the value of the security or index.
A Series may close an open call or put option position by selling a call
option, in the case of an open call position, or a put option, in the case of an
open put option, which is the same as the option being closed. The Series will
receive a premium for selling such an option. The premium received may be more
than, equal to or less than the premium paid by the Series when it bought the
option which is being closed.
Immediately after entering into an opening option position, the total value
of all open option positions based on exercise price will not exceed 10% of the
Phoenix-Oakhurst Strategic Allocation or Phoenix-Oakhurst Balanced Series' total
assets. The premium paid by the Series for the purchase of a call or a put
option and the expiration or closing sale transaction with respect to such
options are treated in a manner analogous to that described above, except there
is no liability created to the Series. The premium paid for any such option is
included in assets and marked to the market value on a current basis. If the
options expire, the Series will realize a short-term loss on the amount of the
cost of the option. If a purchased put or call option is closed out by the
Series entering into a closing sale transaction, the Series will realize a
short-term gain or loss, depending upon whether the sale proceeds from the
closing sale transaction are greater or less than the cost of the put or call
option.
Phoenix-Aberdeen International, Phoenix-Seneca Strategic Theme, Phoenix
Research Enhanced Index, Phoenix-Seneca Mid-Cap Growth, Phoenix-Hollister Value
Equity, Phoenix-Oakhurst Growth and Income, Phoenix-Morgan Stanley Focus Equity,
Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Federated U.S. Government Bond and Phoenix-Aberdeen New Asia
Series.
To promote their objectives, these Series may write covered call and put
options and purchase call and put options on securities and securities indices.
In addition, the Series may enter into option transactions on foreign currency.
Writing (Selling) Call and Put Options. A call option on a security or a
foreign currency gives the purchaser of the option, in return for the premium
paid to the writer (seller), the right to buy the underlying security or foreign
currency at the exercise price at any time during the option period.
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Upon exercise by the purchaser, the writer of a call option has the obligation
to sell the underlying security or foreign security, except that the value of
the option depends on the weighted value of the group of securities comprising
the index and all settlements are made in cash. A call option may be terminated
by the writer (seller) by entering into a closing purchase transaction in which
it purchases an option of the same Series as the option previously written.
A put option on a security or foreign currency gives the purchaser of the
option, in return for the premium paid to the writer (seller), the right to sell
the underlying security or foreign currency at the exercise price at any time
during the option period. Upon exercise by the purchaser, the writer of a put
option has the obligation to purchase the underlying security or foreign
currency at the exercise price. A put option on a securities index is similar to
a put option on an individual security, except that the value of the options
depends on the weighted value of the group of securities comprising the index
and all settlements are made in cash.
The Series may write exchange-traded call options on its securities. Call
options may be written on portfolio securities, securities indices and foreign
currencies. The Series may, with respect to securities and foreign currencies,
write call and put options on an exchange or over the counter. Call options on
portfolio securities will be covered since the Series will own the underlying
securities or other securities that are acceptable for escrow at all times
during the option period. Call options on securities indices may be written to
hedge in an economically appropriate way portfolio securities which are not
otherwise hedged with options or financial futures contracts and will be
"covered" by identifying the specific portfolio securities being hedged. Call
options on foreign currencies and put options on securities and foreign
currencies will be covered by securities acceptable for escrow. The Series,
other than the Phoenix-Morgan Stanley Focus Equity Series, may not write options
on more than 50% of its total assets. Management presently intends to cease
writing options if and as long as 25% of such total assets are subject to
outstanding options contract. The Phoenix-Morgan Stanley Focus Equity Series
will limit its use of derivative products, including options, for non-hedging
purposes to 33-1/3% of its total assets measured by the aggregate notional
amount of outstanding derivative products.
The Series will write call and put options in order to obtain a return on
its investments from the premiums received and will retain the premiums whether
or not the options are exercised. Any decline in the market value of portfolio
securities or foreign currencies will be offset to the extent of the premiums
received (net of transaction costs). If an option is exercised, the premium
received on the option will effectively increase the exercise price or reduce
the difference between the exercise price and market value.
During the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security or
currency above the exercise price. It retains the risk of loss should the price
of the underlying security or foreign currency decline. Writing call options
also involves risks relating to the Series' ability to close out options it has
written.
During the option period, the writer of a put option has assumed the risk
that the price of the underlying security or foreign currency will decline below
the exercise price. However, the writer of the put option has retained the
opportunity for any appreciation above the exercise price should the market
price of the underlying security or foreign currency increase. Writing put
options also involves risks relating to a portfolio's ability to close out
options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights. The
Phoenix-Aberdeen International, Phoenix-Seneca Strategic Theme, Phoenix Research
Enhanced Index, Phoenix-Oakhurst Growth and Income, Phoenix-Morgan Stanley Focus
Equity, Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income and Phoenix-Aberdeen New Asia Series may invest up to an
aggregate of 5% of its total assets in exchange-traded or over-the-counter call
and put options on securities, securities indices and foreign currencies (the
Phoenix-Morgan Stanley Focus Equity Series will be subject to the 33-1/3%
derivatives limitation for non-hedging purposes discussed in the preceding
section). Purchases of such options may be made for the purpose of hedging
against changes in the market value of the underlying securities or foreign
currencies. The Series may invest in call and put options whenever, in the
opinion of the advisor or subadvisor, a hedging transaction is consistent with
its investment objectives. The Series may sell a call option or a put option
which it has previously purchased prior to the purchase (in the case of a call)
or the sale (in the case of a put) of the underlying security or foreign
currency. Any such sale would result in a net gain or loss depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid on the call or put which is sold. Purchasing a call or
put option involves the risk that the Series may lose the premium it paid plus
transaction costs.
Warrants and stock rights are almost identical to call options in their
nature, use and effect except that they are issued by the issuer of the
underlying security, rather than an option writer, and they generally have
longer expiration dates than call options. The Phoenix-Aberdeen International,
Phoenix-Seneca Strategic Theme, Phoenix Research Enhanced Index,
Phoenix-Oakhurst Growth and Income and Phoenix-Aberdeen New Asia Series intend
to invest up to 5% of their respective net assets in warrants and stock rights,
but no more than 2% of its net assets in warrants and stock rights not listed on
the NYSE or the American Stock Exchange.
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Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of nonperformance by the
dealer. However, the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities and foreign currencies, and in a
wider range of expiration dates and exercise prices than exchange-traded
options. Since there is no exchange, pricing is normally done by reference to
information from a market maker. This information is carefully monitored or
caused to be monitored by the advisor or subadvisor and verified in appropriate
cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options, there
can be no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Series may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Series writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which it originally wrote the option. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security or foreign currency until the option expires or the
option is exercised. Therefore, the writer of a covered OTC call option may not
be able to sell an underlying security even though it otherwise might be
advantageous to do so. Likewise, the writer of a secured OTC put option may be
unable to sell the securities pledged to secure the put for other investment
purposes while it is obligated as a put writer. Similarly, a purchaser of an OTC
put or call option also might find it difficult to terminate its position on a
timely basis in the absence of a secondary market.
The Fund understands the position of the staff of the Securities and
Exchange Commission ("SEC") to be that purchased OTC options and the assets used
as "cover" for written OTC options are illiquid securities. Although the dealers
with which a Series will engage in OTC options transactions are generally
agreeable to and capable of entering into closing transactions, the Fund has
adopted procedures for engaging in OTC options transactions for the purpose of
reducing any potential adverse effect of such transactions upon the liquidity of
the Series.
A Series will engage in OTC options transactions only with dealers that meet
certain credit and other criteria established by the Board of Trustees of the
Fund. The Fund and the advisor believe that the approved dealers present minimal
credit risks to the Fund and, therefore, should be able to enter into closing
transactions if necessary. A Series currently will not engage in OTC options
transactions if the amount invested by the Series in OTC options, plus a
"liquidity charge" related to OTC options written by the Series in illiquid
securities plus any other portfolio securities considered to be illiquid, would
exceed 10% of the Series' total assets (15% of the net assets of the
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth
and Phoenix-Morgan Stanley Focus Equity Series). The "liquidity charge" referred
to above is computed as described below.
The Series anticipates entering into agreements with dealers to which the
Series sells OTC options. Under these agreements a Series would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow a Series to repurchase a specific OTC
option written by the Series, the "liquidity charge" will be the current market
value of the assets serving as "cover" for such OTC option.
FOREIGN SECURITIES
The Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia Series will
purchase foreign securities as discussed above. In addition, the other Series
may invest up to 25% (up to 35% for the Phoenix-Seneca Strategic Theme Series,
20% for the Phoenix-Seneca Mid-Cap Growth and Phoenix-Schafer Mid-Cap Value
Series and typically less than 5% for the Phoenix-Engemann Nifty Fifty Series)
of total net asset value in foreign securities. The Phoenix-Goodwin Multi-Sector
Fixed Income Series may invest up to 50% of total net asset value in foreign
debt securities. Each Series, other than the Phoenix-Aberdeen International,
Phoenix-Seneca Strategic Theme, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Morgan Stanley Focus Equity and Phoenix-Aberdeen New Asia Series, will
purchase foreign debt securities only if issued in U.S. dollar denominations.
The Phoenix Research Enhanced Index Series may invest in securities of foreign
corporations, provided that such securities are included in the S&P 500 or
traded on a U.S. exchange. The Phoenix-Morgan Stanley Focus Equity,
Phoenix-Janus Growth, Phoenix-Janus Equity Income and Phoenix-Janus Flexible
Income Series may invest 100% of total net asset value in foreign securities,
although such would be a very unlikely event.
The foreign debt securities in which the Series may invest are issued by
foreign issuers in developed countries considered creditworthy by the advisor or
subadvisor, as applicable, and in so-called emerging market countries. The
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Series will invest in government obligations supported by the authority to levy
taxes sufficient to ensure the payment of all principal and interest due on such
obligations. Because foreign government obligations, like U.S. government
obligations, are generally guaranteed for principal and interest by the
government issuing the security, the principal risk of investing in foreign
government obligations is that the foreign government will not or will be unable
to meet its obligations. The Series also may purchase securities of
nongovernmental issuers considered creditworthy by the advisor or subadvisor, as
applicable.
While the Phoenix-Aberdeen International, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Seneca Strategic
Theme, Phoenix-Goodwin Multi-Sector Fixed Income and Phoenix-Aberdeen New Asia
Series may purchase foreign debt securities denominated in foreign currencies
("non-U.S. dollar securities"), the amount invested in such non-U.S. dollar
securities may vary depending on the relative yield of such securities, the
relative strength of the economies and the financial markets of such countries,
the relative interest rates available in such countries and the relationship of
such countries' currencies to the U.S. dollar. Investments in non-U.S. dollar
securities and currency will be evaluated on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate forecasts,
balance of payments status, and economic policies) as well as technical and
political data.
FOREIGN CURRENCY TRANSACTIONS
For each Series investing in foreign securities, the value of the assets of
such Series as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Series may incur costs in connection with conversions between
various currencies. A Series will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed 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 (usually large commercial banks) and
their customers. At the time of the purchase of a forward foreign currency
exchange contract, any asset, including equity securities and non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily equal to the market value of the contract, minus the Series' initial
margin deposit with respect thereto, will be deposited in a segregated account
with the Fund's custodian bank to collateralize fully the position and thereby
ensure that it is not leveraged.
When a Series enters into a contract for the purchase or sale of a security
denominated in or exposed to a foreign currency, it may want to establish the
United States dollar cost or proceeds. By entering into a forward contract in
United States dollars for the purchase or sale of the amount of foreign currency
involved in the underlying security transaction, a Series may be able to protect
itself against a possible loss between trade and settlement dates resulting from
an adverse change in the relationship between the United States dollar and such
foreign currency. However, this tends to limit potential gains which might
result from a positive change in such currency relationships. The
Phoenix-Aberdeen International, Phoenix-Morgan Stanley Focus Equity,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth
and Phoenix-Aberdeen New Asia Series also may hedge their foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the advisor or subadvisor believes that the currency of a particular
foreign country may suffer a substantial decline against the United States
dollar, it may enter into a forward contract to sell an amount of foreign
currency approximating the value of some or all of a Series' portfolio
securities denominated in or exposed to such foreign currency. The forecasting
of short-term currency market movement is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary for
a Series to purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Series is obligated to deliver when a decision is
made to sell the security and make delivery of the foreign currency in
settlement of a forward contract. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the Series
is obligated to deliver.
If the Series retains the portfolio security and engages in an offsetting
transaction, it will incur a gain or a loss to the extent that there has been
movement in forward contract prices. If the Series engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline during the period between the
Series' entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign
currency, the Series would realize gain to the extent the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Series would suffer a loss to the
extent the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
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Although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase. The Series will
have to convert holdings of foreign currencies into United States dollars from
time to time. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
ZERO AND DEFERRED COUPON DEBT SECURITIES
The Phoenix-Goodwin Multi-Sector Fixed Income, Phoenix-Janus Growth,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Morgan
Stanley Focus Equity, Phoenix-Federated U.S. Government Bond and Phoenix-Seneca
Mid-Cap Growth Series may invest in debt obligations that do not make any
interest payments for a specified period of time prior to maturity ("deferred
coupon" obligations) or until maturity ("zero coupon" obligations). Because
deferred and zero coupon bonds do not make interest payments for a certain
period of time, they are purchased by the Series at a deep discount and their
value fluctuates more in response to interest rate changes than does the value
of debt obligations that make current interest payments. The degree of
fluctuation with interest rate changes is greater when the deferred period is
longer. Therefore, there is a risk that the value of the Series' shares may
decline more as a result of an increase in interest rates than would be the case
if the Series did not invest in deferred or zero coupon bonds.
REAL ESTATE INVESTMENT TRUSTS
As described in the Prospectus, under normal conditions, the Phoenix-Duff &
Phelps Real Estate Securities Series intends to invest in real estate investment
trusts ("REITs"). REITs pool investors' funds for investment primarily in
income-producing commercial real estate or real estate related loans. A REIT is
not taxed on income distributed to shareholders if it complies with several
requirements relating to its organization, ownership, assets and income and a
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year.
REITs generally can be classified as follows:
[diamond] Equity REITs, which invest the majority of their assets directly in
real property and derive their income primarily from rents. Equity
REITs can also realize capital gains by selling properties that have
appreciated in value.
[diamond] Mortgage REITs, which invest the majority of their assets in real
estate mortgages and derive their income primarily from interest
payments.
[diamond] Hybrid REITs, which combine the characteristics of both equity REITs
and mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies which rely on professional managers to supervise their
investments. A shareholder in the Phoenix-Duff & Phelps Real Estate Securities
Series should realize that by investing in REITs indirectly through the Series,
he will bear not only his proportionate share of the expenses of the Series but
also, indirectly, similar expenses of underlying REITs.
DEBT SECURITIES
Up to 25% of the Phoenix-Duff & Phelps Real Estate Securities Series total
assets may be invested in debt securities (which include for purposes of this
investment policy convertible debt securities which Duff & Phelps Investment
Management ("DPIM") believes have attractive equity characteristics). The
Phoenix-Duff & Phelps Real Estate Securities Series may invest in debt
securities rated BBB or better by S&P or Baa or better by Moody's or, if not
rated, are judged to be of comparable quality as determined by DPIM. In choosing
debt securities for purchase by the Series, DPIM will employ the same analytical
and valuation techniques utilized in managing the equity portion of the
Phoenix-Duff & Phelps Real Estate Securities Series holdings and will invest in
debt securities only of companies that satisfy DPIM's investment criteria.
The value of a Series' investments in debt securities will change as
interest rates fluctuate. When interest rates decline, the values of such
securities generally can be expected to increase, and when interest rates rise,
the values of such securities generally can be expected to decrease. The
lower-rated and comparable unrated debt securities described above are subject
to greater risks of loss of income and principal than are higher-rated fixed
income securities. The market value of lower-rated securities generally tends to
reflect the market's perception of the creditworthiness of the issuer and
short-term market developments to a greater extent than is the case with more
highly rated securities, which reflect primarily functions in general levels of
interest rates.
CONVERTIBLE SECURITIES
Each Series may invest in convertible securities. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specific price or
formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique investment characteristics such as
(1) higher yields than common stocks, but lower yields than comparable
nonconvertible securities, (2) a lesser degree of fluctuation in value then the
underlying stock since they have fixed income characteristics and (3) the
potential for capital appreciation if the market price of the underlying common
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stock increases. Up to 5% of each Series' assets may be invested in convertible
securities that are rated below investment grade (commonly referred to as "junk"
securities). Such securities present greater credit and market risks than
investment grade securities. (This 5% restriction does not apply to the
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income or Phoenix-Janus
Growth Series.) A convertible security might be subject to redemption at the
option of the issuer at a price established in the convertible security's
governing instrument. If a convertible security held by a Series is called for
redemption, the Series may be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.
REPURCHASE AGREEMENTS
The Phoenix-Goodwin Money Market, Phoenix-Duff & Phelps Real Estate
Securities, Phoenix-Aberdeen International, Phoenix-Seneca Strategic Theme,
Phoenix Research Enhanced Index, Phoenix-Engemann Nifty Fifty, Phoenix-Seneca
Mid-Cap Growth, Phoenix-Schafer Mid-Cap Value, Phoenix-Oakhurst Growth and
Income, Phoenix-Hollister Value Equity, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Morgan Stanley Focus Equity and Phoenix-Aberdeen New Asia Series
may invest in repurchase agreements. However, no more than 10% of a Series' net
assets (15% with respect to Phoenix-Janus Growth, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Morgan Stanley Focus Equity and
Phoenix-Federated U.S. Government Bond Series) will be invested in repurchase
agreements having maturities of more than 7 days. A repurchase agreement is a
transaction where a Series buys a security at one price and the seller
simultaneously agrees to buy that same security back at a higher price.
Repurchase agreements will be entered into with commercial banks, brokers and
dealers considered by the Board of Trustees and the advisor or subadvisor, as
applicable, acting at the Board's direction, to be creditworthy. In addition,
the repurchase agreements are fully collateralized by the underlying instrument
and are marked to market every business day. However, the use of repurchase
agreements involves certain risks such as default by, or insolvency of, the
other party to the transaction.
JUNK BONDS
The Phoenix-Janus Flexible Income, Phoenix-Goodwin Multi-Sector Fixed
Income, Phoenix-Janus Equity Income, Phoenix-Janus Growth, Phoenix-Aberdeen
International, Phoenix-Morgan Stanley Focus Equity and Phoenix-Oakhurst
Strategic Allocation Series may invest up to 100%, 50%, 35%, 35%, 10%, 5% and
5%, respectively, of total net assets in noninvestment grade debt securities.
The market prices of such lower-rated securities generally fluctuate in response
to changes in interest rates and economic conditions more than those of
higher-rated securities. Additionally, there is a greater possibility that an
adverse change in the financial condition of an issuer, particularly a higher
leveraged issuer, may affect its ability to make payments of income and
principal and increase the expenses of the Series seeking recovery from the
issuer. Lower-rated securities may be thinly traded and less liquid than
higher-rated securities and therefore harder to value and more susceptible to
adverse publicity concerning the issuer. A more detailed description of the
risks associated with High Yield-High Risk Securities appears under
"Phoenix-Goodwin Multi-Sector Fixed Income Series - Risk Factors" in the
Prospectus.
REAL ESTATE SECURITIES
The Phoenix-Duff & Phelps Real Estate Securities Series will not invest in
real estate directly, but only in securities issued by real estate companies.
However, the portfolio may be subject to risks similar to those associated with
the direct ownership of real estate because of its policy of concentrating in
the securities of companies in the real estate industry. These include declines
in the value of real estate, risks related to general and local economic
conditions, dependence on management skill, cash flow dependence, possible lack
of availability of long-term mortgage funds, overbuilding, extended vacancies of
properties, decreased occupancy rates and increased competition, increases in
property taxes and operating expenses, changes in neighborhood values and the
appeal of the properties to tenants and changes in interest rates.
Selecting REITs requires an evaluation of the merits of each type of asset a
particular REIT owns, as well as regional and local economics. Due to the
proliferation of REITs in recent years and the relative lack of sophistication
of certain REIT managers, the quality of REIT assets has varied significantly.
In addition to these risks, equity REITs may be affected by changes in the
value of the underlying properties owned by the trusts, while mortgage REITs may
be affected by the quality of any credit extended. Further, equity and mortgage
REITs are dependent upon management skills and generally are not diversified.
Equity and mortgage REITs also are subject to potential defaults by borrowers,
self-liquidation and the possibility of failing to qualify for tax-free status
of income under the Code and failing to maintain exemption from the Investment
Company Act of 1940. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or lessor and may
incur substantial costs associated with protecting its investments. In addition,
investment in REITs could cause the Series to possibly fail to qualify as a
regulated investment company.
EMERGING MARKET SECURITIES
The Phoenix-Aberdeen New Asia, Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income and Phoenix-Janus Growth Series may invest in countries or
regions with relatively low gross national product per capita
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compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth (emerging markets). Emerging markets in Asia
will include countries: (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii) with low- to middle-income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the advisor to be an emerging market as defined above. The Series
also may invest in securities of: (i) companies where the principal securities
trading market is an emerging market country; (ii) companies organized under the
laws of, and with a principal office in, an emerging market country; or (iii)
companies whose principal activities are located in emerging market countries.
The risks of investing in foreign securities may be intensified in the case
of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Series is uninvested and
no return is earned thereon. The inability of the Series to make intended
security purchases due to settlement problems could cause the Series to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Series due to subsequent declines in value of the portfolio securities or, if
the Series has entered into a contract to sell the security, in possible
liability to the purchaser. Securities prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership or prohibitions of repatriation of
assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Series could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Series of any restrictions on investments. Investments in certain foreign
emerging market debt obligations may be restricted or controlled to varying
degrees. These restrictions or controls may at times preclude investment in
certain foreign emerging market debt obligations and increase the expenses of
the Series.
Additional Risk Factors. As a result of its investments in foreign
securities, the Series may receive interest or dividend payments, or the
proceeds of the sale or redemption of such securities, in the foreign currencies
in which such securities are denominated. In that event, the Series may convert
such currencies into dollars at the then current exchange rate. Under certain
circumstances, however, such as where the advisor believes that the applicable
rate is unfavorable at the time the currencies are received or the advisor
anticipates, for any other reason, that the NYSE rate will improve, the Series
may hold such currencies for an indefinite period of time.
In addition, the Series may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts into which it has
entered. This could occur, for example, if an option written by the Fund is
exercised or the Fund is unable to close out a forward contract. The Series may
hold foreign currency in anticipation of purchasing foreign securities. The
Series also may elect to take delivery of the currencies underlying options or
forward contracts if, in the judgment of the advisor, it is in the best interest
of the Series to do so. In such instances as well, the Series may convert the
foreign currencies to dollars at the then current exchange rate, or may hold
such currencies for an indefinite period of time.
While the holding of currencies will permit the Series to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Series
to risk of loss if such rates move in a direction adverse to the Series'
position. Such losses could reduce any profits or increase any losses sustained
by the Series from the sale or redemption of securities, and could reduce the
dollar value of interest or dividend payments received. In addition, the holding
of currencies could adversely affect the Series' profit or loss on currency
options or forward contracts, as well as its hedging strategies.
LEVERAGE
The Phoenix-Seneca Strategic Theme, Phoenix-Hollister Value Equity,
Phoenix-Seneca Mid-Cap Growth, Phoenix-Morgan Stanley Focus Equity and Phoenix
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Research Enhanced Index Series may, from time to time, increase their ownership
of securities holdings above the amounts otherwise possible by borrowing from
banks at fixed amounts of interests and investing the borrowed funds. The Series
will borrow only from banks, and only if immediately after such borrowing the
value of the assets of the Series (including the amount borrowed), less its
liabilities (not including any borrowings) is at least 3 times the amount of
funds borrowed for investment purposes. The Series, other than the
Phoenix-Morgan Stanley Focus Equity Series, may borrow up to 25% of the net
assets of such Series, not including the proceeds of any such borrowings. The
Phoenix-Morgan Stanley Focus Equity Series may borrow up to 33-1/3% of its total
assets (including the amount borrowed) less liabilities. However, the amount of
the borrowings will be dependent upon the availability and cost of credit from
time to time, If, due to market fluctuations or other reasons, the value of such
Series' assets computed as provided above become less than 3 times the amount of
the borrowings for investment purposes, the Series, within 3 business days, is
required to reduce bank debt to the extent necessary to meet the required 300%
asset coverage.
Interest on money borrowed will be an expense of those Series with respect
to which the borrowing has been made. Because such expense otherwise would not
be incurred, the net investment income of such Series is not expected to be as
high as it otherwise would be during periods when borrowings for investment
purposes are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing also must be made subject to an agreement by the
lender that any recourse is limited to the assets of such Series with respect to
which the borrowing has been made.
An investment gains made with the additional monies borrowed in excess of
interest paid will cause the net assets value of such Series shares to rise
faster than otherwise would be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover its cost
(including any interest paid on the monies borrowed) to such Series, the net
asset value of the Series will decrease faster than otherwise would be the case.
Phoenix-Schafer Mid-Cap Value, Phoenix-Oakhurst Growth and Income and
Phoenix-Engemann Nifty Fifty Series may not borrow except for emergency or other
extraordinary purposes, only from a bank, and only in an amount not to exceed 5%
of the Series' total assets (33-1/3% in the case of Phoenix-Oakhurst Growth and
Income Series). These Series must also maintain a 300% asset coverage ratio.
Phoenix-Schafer Mid-Cap Value Series may collateralize any such borrowings with
up to 10% of its total assets; Phoenix-Oakhurst Growth and Income Series may
collateralize any such borrowing with up to 33-1/3% of its total assets.
PRIVATE PLACEMENTS AND RULE 144A SECURITIES
Each Series may purchase securities which have been privately issued and are
subject to legal restrictions on resale or which are issued to qualified
institutional investors under special rules adopted by the SEC. Such securities
may offer higher yields than comparable publicly-traded securities. Such
securities ordinarily can be sold by the Series in secondary market transactions
to certain qualified investors pursuant to rules established by the SEC, in
privately negotiated transactions to a limited number of purchasers or in a
public offering made pursuant to an effective registration statement under the
Securities Act of 1933, ads amended (the "1933 Act"). Public sales of such
securities by a Series may involve significant delays and expense. Private sales
often require negotiation with one or more purchasers and may produce less
favorable prices than the sale of similar unrestricted securities. Public sales
generally involve the time and expense of the preparation and processing of a
registration statement under the 1933 Act (and the possible decline in value of
the securities during such period) and may involve the payment of underwriting
commissions. In some instances, the Series may have to bear certain costs of
registration in order to sell such shares publicly. Except in the case of
securities sold to qualifying institutional investors under special rules
adopted by the SEC for which the Trustees determine the secondary market is
liquid, Rule 144A Securities will be considered illiquid. Trustees may determine
the secondary market is liquid based upon the following factors which will be
reviewed periodically as required pursuant to procedures adopted by the Series:
the number of dealers willing to purchase or sell the security; the frequency of
trades; dealer undertakings to make a market in the security; and the nature of
the security and its market. Investing in Rule 144A Securities could have the
effect of increasing the level of these Series' illiquid securities to the
extent that qualified institutional buyers become, for a time, uninterested in
purchasing these securities. Each Series may invest up to 15% of its net assets
in illiquid securities.
MORTGAGE-BACKED SECURITIES
The Phoenix-Goodwin Multi-Sector Fixed Income, Phoenix-Duff & Phelps Real
Estate Securities, Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income,
Phoenix-Janus Growth and Phoenix-Seneca Mid-Cap Growth Series also may invest in
mortgage-backed securities such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and collateralized
mortgage obligations ("CMOs"). CMOs are hybrid instruments with characteristics
of both mortgage-backed and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
Government National Mortgage Association (GNMA), for Federal National
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Mortgage Association. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes receive principal only
after the first class has been retired. REMICs are similar to CMOs and are fixed
pools of mortgages with multiple classes of interests held by investors.
The Series also may invest in pass-through securities that are derived from
mortgages. A pass-through security is formed when mortgages are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgages is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
The Series may purchase pass-through securities at a premium or at a
discount. The value of pass-through securities in which the Series may invest
will fluctuate with changes in interest rates. The value of such securities
varies inversely with interest rates, except that when interest rates decline,
the value of pass-through securities may not increase as much as other debt
securities because of the prepayment feature. Changes in the value of such
securities will not affect interest income from those obligations but will be
reflected in the Series' net asset value.
A particular risk associated with pass-through securities involves the
volatility of prices in response to changes in interest rates or prepayment
risk. Prepayment rates are important because of their effect on the yield and
price of securities. Prepayments occur when the holder of an individual mortgage
prepays the remaining principal before the mortgages' scheduled maturity date.
As a results of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Although the
pattern of repayments is estimated and reflected in the price paid for
pass-through securities at the time of purchase, the actual prepayment behavior
of mortgages cannot be known at that time. Therefore, it is not possible to
predict accurately the realized yield or average life of a particular issue of
pass-through securities. Prepayments that occur faster than estimated adversely
affect yields for pass-throughs purchased at a premium (that is, a price in
excess of principal amount) and may cause a loss of principal because the
premium may not have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-throughs purchased at a discount. Furthermore, the
proceeds from prepayments usually are reinvested at current market rates, which
may be higher than, but usually are lower than, the rates earned on the original
pass-through securities. Prepayments on a pool of mortgage loans are influenced
by a variety of economic, geographic, social and other factors, including
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties and servicing decisions. Generally,
however, prepayments on fixed rate mortgage loans will increase during a period
of falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities or
decline in value from declining interest rates because of risk of prepayment.
Pass-through securities are forms of derivatives.
LENDING OF PORTFOLIO SECURITIES
Subject to certain investment restrictions, a Series (other than
Phoenix-Engemann Nifty Fifty Series) may, from time to time, lend securities
from its portfolio to brokers, dealers and financial institutions deemed
creditworthy and receive, as collateral, cash or cash equivalents which at all
times while the loan is outstanding will be maintained in amounts equal to at
least 100% (except the Phoenix-Aberdeen New Asia Series which will maintain an
amount equal to at least 102%) of the current market value of the loaned
securities. Any cash collateral will be invested in short-term securities which
will increase the current income of the Series lending its securities. A Series
will have the right to regain record ownership of loaned securities to exercise
beneficial rights such as voting rights and subscription rights. While a
securities loan is outstanding, the Series is to receive an amount equal to any
dividends, interest or other distributions with respect to the loaned
securities. A Series may pay reasonable fees to persons unaffiliated with the
Fund for services in arranging such loans.
Even though securities lending usually does not impose market risks on the
lending Series, a Series would be subject to risk of loss due to an increase in
value if the borrower fails to return the borrowed securities for any reason
(such as the borrower's insolvency). Moreover, if the borrower of the securities
is insolvent, under current bankruptcy law, a Series could be ordered by a court
not to liquidate the collateral for an indeterminate period of time. If the
borrower is the subject of insolvency proceedings and the collateral held may
not be liquidated, the result could be a material adverse impact on the
liquidity of the lending Series.
WHEN-ISSUED SECURITIES
Phoenix Research Enhanced Index, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Morgan Stanley Focus Equity and Phoenix-Seneca Mid-Cap Growth
Series. These Series may purchase securities on a when-issued basis. New issues
of certain securities are offered on a when-issued basis, that is, delivery and
payment for the securities normally takes place 15 to 45 days or more after the
date of the commitment to purchase. The payment obligation and the interest
rate, if any, that will be received on the securities are each fixed at the time
the buyer enters into the commitment. The Series will generally make a
commitment to purchase such securities with the intention of actually acquiring
the securities.
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However, the Series may sell these securities before the settlement date if it
is deemed advisable as a matter of investment strategy. When the Series
purchases securities on a when-issued basis, cash or liquid securities equal in
value to commitments for the when-issued securities will be deposited in a
segregated account with the Series' custodian bank. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
Securities purchased on a when-issued basis are subject to changes in market
value. Therefore, to the extent the Series remains substantially fully invested
at the same time that they have purchased securities on a when-issued basis,
there will be greater fluctuations in the net asset values than if the Series
merely set aside cash to pay for when-issued securities. In addition, there will
be a greater potential for the realization of capital gains. When the time comes
to pay for when-issued securities, the Series will meet its obligations from
then available cash flow, the sales of securities or, although it would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the payment obligation). Lastly,
investing in when-issued securities includes the risk that the securities may
never be issued, in which event the Series may incur expenses associated with
unwinding such transactions.
STRUCTURED NOTES
The Phoenix-Morgan Stanley Focus Equity Series may use Structured Notes.
These are derivative securities for which the amount of principal repayment
and/or interest payments is based upon the movement of one or more "factors."
They include, but are not limited to, currency exchange rates, interest rates
(such as the prime lending rate and LIBOR) and stock indices, such as the S&P
500. In some cases, the impact of the movements of these factors may increase or
decrease through the use of multipliers or deflators.
Structured Notes may be designed to have particular quality and maturity
characteristics and may vary from money market quality to below investment
grade. Depending on the factor used and the use of multipliers or deflators,
however, changes in interest rates and movement of the factor may cause
significant price fluctuations or may cause particular Structured Notes to
become illiquid. The Series will use Structured Notes to tailor its investments
to the specific risks and returns the subadvisor wishes to accept while avoiding
or reducing certain other risks.
INVESTMENT RESTRICTIONS
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The Fund's fundamental policies as they affect any Series cannot be changed
without the approval of a vote of a majority of the outstanding shares of such
Series, which is the lesser of (i) 67% or more of the voting securities of such
Series present at a meeting if the holders of more than 50% of the outstanding
voting securities of such Series are present or represented by proxy or (ii)
more than 50% of the outstanding voting securities of such Series. A proposed
change in fundamental policy or investment objective will be deemed to have been
effectively acted upon by any Series if a majority of the outstanding voting
securities of that Series votes for the approval of the proposal as provided
above, notwithstanding (1) that such matter has not been approved by a majority
of the outstanding securities of any other Series affected by such matter and
(2) that such matter has not been approved by a majority of the outstanding
voting securities of the Fund.
The following investment restrictions are fundamental policies of the Fund
with respect to all Series and may not be changed except as described above;
provided, however, that restrictions (6) through (9) and (13) below, although
applicable to the Phoenix-Morgan Stanley Focus Equity Series, will not be
treated as fundamental restrictions of that Series and may be changed without
shareholder approval. The Fund may not:
(1) Purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other
interest in real estate). A security issued by a real estate or
mortgage investment trust is not treated as an interest in real estate.
The Phoenix-Duff & Phelps Real Estate Securities and the
Phoenix-Federated U.S. Government Bond Series may, however, invest in
mortgage-backed securities.
(2) Make loans other than loans of securities secured by cash or cash
equivalents for the full value of the securities; any interest earned
from securities lending will inure to the benefit of the Series which
holds such securities. However, the purchase of debt securities which
are ordinarily purchased by financial institutions are not considered
the loaning of money.
(3) Invest in commodities or in commodity contracts or in options provided,
however, that it may write covered call option contracts; and provided
further, that the Phoenix-Oakhurst Strategic Allocation,
Phoenix-Oakhurst Balanced, Phoenix-Hollister Value Equity,
Phoenix-Oakhurst Growth and Income, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Morgan
Stanley Focus Equity, Phoenix-Federated U.S. Government Bond and
Phoenix-Seneca Mid-Cap Growth Series may enter into financial futures
contracts to purchase and sell debt obligations and may buy call and
put options on securities and stock market indexes; and provided
further, that the Phoenix-Aberdeen International, Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth,
Phoenix-Morgan Stanley Focus Equity and Phoenix-
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Aberdeen New Asia Series may purchase call and put options on
securities, engage in financial futures contracts and related options
transactions, write secured put options, and enter into foreign
currency and foreign currency options transactions.
(4) Engage in the underwriting of securities of other issuers, except to
the extent any Series may be deemed an underwriter in selling as part
of an offering registered under the Securities Act of 1933
securities which it has acquired. The Phoenix-Aberdeen International
and Phoenix-Aberdeen New Asia Series will, and the Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income and Phoenix-Janus Flexible Income
Series may, buy and sell securities outside the United States that are
not registered with the SEC or marketable in the United States.
(5) Borrow money, except as a temporary measure where such borrowing would
not exceed 25% of the market value of total assets at the time each
such borrowing is made, and except that the Phoenix-Morgan Stanley
Focus Equity Series may borrow from banks in an amount not to exceed
33-1/3% of its total assets (including the amount borrowed) in
accordance with its investment objective and policies. However, the
Fund may borrow money for any general purpose from a bank provided such
borrowing does not exceed 10% of the net asset value of the Fund, not
considering any such borrowings as liabilities. The Phoenix-Oakhurst
Strategic Allocation, Phoenix-Aberdeen International, Phoenix-Janus
Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth,
Phoenix-Morgan Stanley Focus Equity, Phoenix-Federated U.S. Government
Bond and Phoenix-Aberdeen New Asia Series may borrow money to the
extent of financial futures transactions and reverse repurchase
agreements, provided that such borrowings are limited to 33-1/3% of the
value of the total assets of the Series.
(6) Invest in illiquid securities in an amount greater than 15% of the net
asset value of any Series' portfolio at the time any such investment is
made.
(7) Purchase securities on margin, except for short-term credits as may be
necessary for the clearance of purchases or sales of securities, or to
effect a short sale of any security. (The deposit of "maintenance
margin" in connection with financial options futures and swap contracts
is not considered the purchase of a security on margin.)
(8) Invest for the purpose of exercising control over or management of any
company.
(9) Unless received as a dividend or as a result of an offer of exchange
approved by the SEC or of a plan of reorganization, purchase or
otherwise acquire any security issued by an investment company if the
Series would immediately thereafter own (a) more than 3% of the
outstanding voting stock of the investment company, (b) securities of
the investment company having an aggregate value in excess of 5% of the
Series' total assets, (c) securities of investment companies having an
aggregate value in excess of 10% of the Series' total assets or (d)
together with investment companies having the same investment advisor
as the Fund (and companies controlled by such investment companies),
more than 10% of the outstanding voting stock of any registered
closed-end investment company, except that the Phoenix-Federated U.S.
Government Bond Series may invest without limit in the securities of
money market investment companies, including affiliated investment
companies.
(10) (a) Invest more than 5% of its total assets (taken at market value at
the time of each investment) in the securities (other than United
States government or government agency securities or in the case of the
Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia Series,
other than foreign government securities) or, with respect to the
Phoenix-Oakhurst Strategic Allocation and Phoenix-Oakhurst Balanced
Series, call or put options contracts and financial futures contracts
of any one issuer (including repurchase agreements with any one bank);
nor (b) purchase more than either (i) 10% in principal amount of the
outstanding debt securities of an issuer (the foregoing restriction
being inapplicable to the Phoenix-Duff & Phelps Real Estate Securities
Series) or (ii) 10% of the outstanding voting securities of an issuer,
except that such restrictions shall not apply to securities issued or
guaranteed by the United States government or its agencies, bank money
instruments or bank repurchase agreements. The Phoenix-Aberdeen
International Series will, with respect to 75% of its assets, limit its
investment in the securities of any one foreign government, its
agencies or instrumentalities to 5% of the Series' total assets. The
above restrictions will apply only to securities comprising 75% of the
value of the total assets with respect to the Phoenix-Janus Equity
Income and Phoenix-Janus Growth Series. None of the above restrictions
willl apply to the Phoenix-Bankers Trust Dow 30 or Phoenix-Morgan
Stanley Focus Equity Series.
(11) Concentrate the portfolio investments in any one industry (the
foregoing restriction being
18
<PAGE>
inapplicable to the Phoenix-Duff & Phelps Real Estate Securities
Series). No security may be purchased for a Series if such purchase
would cause the value of the aggregate investment in any one industry
to exceed 25% of the Series' total assets. However, the Phoenix-Goodwin
Money Market Series and Phoenix-Oakhurst Strategic Allocation Series
may invest more than 25% of their assets in the banking industry. The
Phoenix-Duff & Phelps Real Estate Securities Series may invest not less
than 75% of its assets in the real estate industry. Government
securities, municipal bonds and bank instruments shall not be
considered an industry.
(12) Issue senior securities.
(13) Enter into repurchase agreements which would cause more than 10% (15%
with respect to the Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income,
Phoenix-Janus Growth and Phoenix-Morgan Stanley Focus Equity Series) of
any Series' net assets (taken at market value) to be subject to
repurchase agreements maturing in more than 7 days.
PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
The portfolio turnover rate of each Series is calculated by dividing the
lesser of purchases or sales of portfolio securities during the fiscal year by
the monthly average of the value of the Series' securities (excluding all
securities, including options, with maturities at the time of acquisition of one
year or less). All long-term securities, including long-term U.S. Government
securities, are included. A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the Series. Turnover rates may vary greatly from year to year as
well as within a particular year and also may be affected by cash requirements
for redemptions of each Series' shares by requirements which enable the Fund to
receive certain favorable tax treatments. The portfolio turnover rates for each
Series (other than the Phoenix-Goodwin Money Market, Phoenix-Bankers Trust Dow
30, Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth, Phoenix-Federated U.S. Government Bond and Phoenix-Morgan Stanley Focus
Equity Series) are set forth under "Financial Highlights" in the Prospectus.
MANAGEMENT OF THE FUND
On November 22, 1999 pursuant to a proxy sent to all shareholders of record
of The Phoenix Edge Series Fund, the Fund shareholders elected an entirely new
Board of Trustees.
These Trustees and executive officers of the Fund and their principal
occupations for the last five years are set forth below. Unless otherwise noted,
the address of each executive officer and Trustee is 56 Prospect Street,
Hartford, Connecticut 06115. The Trustees and executive officers are listed
below.
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Eunice S. Groark (61) Trustee Director, Member Audit Committee and Executive Committee, Chair, Trust
35 Saddleridge Drive Committee, Peoples Bank, CT (since 1995). Visiting Professor in
Bloomfield, CT 06002 Government, Wesleyan University (since 1997). Columnist,
Journal-Inquirer (since 1995). Fellow, Institute of Politics, Kennedy
School, Harvard University (1996). Adjunct Professor, Hartford College
for Women, University of Hartford (1996). Lieutenant Governor of the
State of Connecticut (1991-1995).
John A. Fabian (65) Trustee Retired; previously Chief Investment Officer, Home Life Insurance
497 Hensler Lane Company (1982-1992); Executive Vice President, Investment Department,
Oradell, NJ 07649 Phoenix Home Life Mutual Insurance Company (1992-1994).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Timothy P. Shriver (40) Trustee Chair, Collaborative for the Advancement of Social and Emotional
Special Olympics Inc. Learning. Co-Chair, Advisory Panel on Youth Service for General Colin
1325 G Street NW, Suite 500 Powell's "America's Promise"--The President's Summit on Youth. Director
Washington, DC 20005 Chair, The Shriver Center National Advisory Board, The University of
Maryland Baltimore County (since 1996). Director, The John F. Kennedy
Library Foundation (since 1993). Director, Amistad America, Inc. (since
1998). Director, Education Compact for Learning & Citizenship (since
1998). President and CEO, Special Olympics International (since 1996).
Co-Producer, Amistad film (1997). President, 1995 Special Olympic World
Games (1992-1995).
John R. Mallin (49) Trustee Director, Hartford Ballet. Past President/Director, Connecticut Down
Cummings & Lockwood Syndrome Congress. Past President/Chairman, Corporate Advisory Committee
185 Asylum Street of the Connecticut Rivers Council, Boy Scouts of America, Past Chairman,
Hartford, CT 06103 Scouting Unlimited Committee, Past Officer, Long Rivers Council.
Director/Treasurer, Connecticut Chapter of the Harvard Law School
Association. Director, Business for Downtown Hartford. Partner, Cummings
& Lockwood (since 1996). Partner, Corcoran, Mallin & Asresco, P.C.
(1987-1996).
Frank M. Ellmer (59) Trustee Retired; previously Audit Partner and Past Regional Director of Health
427 Woodhaven Road Care, Ernst & Young, LLP (partner since 1978).
Glastonbury, CT 06033
Simon Y. Tan (47) Trustee and Senior Vice President, Individual Market Development, Phoenix Home Life
President Mutual Insurance Company (since 1994).
Michael E. Haylon (41) Executive Director and Executive Vice President--Investments, Phoenix Duff & Phelps
Vice President Corporation (1995-present). Executive Vice President, Phoenix Funds
(1993-present) and Phoenix-Aberdeen Series Fund (1996-present).
Executive Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds. Director (1994-present),
President (1995-present, Executive Vice President (1994-1995), Vice
President (1991-1994), Phoenix Investment Counsel, Inc. Director
(1994-present), President (1996-present), Executive Vice President
(1994-1996), Vice President (1993-1994), National Securities & Research
Corporation. Director, Phoenix Equity Planning Corporation (1995-present).
Senior Vice President, Securities Investment, Phoenix Home Life Mutual
Insurance Company (1993-1995).
Michael Gilotti (52) Executive Executive Vice President, PHL Variable Insurance Company (6/99 -
Vice President present), Vice President and Head of Bank and Broker/Dealer Operations,
Aetna (1994 - 1998), Principal and Founding Partner, Eden Financial Group
(1982 - 1998).
</TABLE>
- ---------------
* Trustees identified with an asterisk are considered to be "interested
persons" of the Fund within the meaning of the definition set forth in
Section 2(a)(19) of the Investment Company Act of 1940.
20
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Roger Engemann (57) Senior Vice President President, Roger Engemann & Associates (1992-present). President and
600 North Rosemead Boulevard Director, Pasadena Capital Corporation. Senior Vice President, The
Pasadena, CA 91107 Phoenix Edge Series Fund and Phoenix Series Fund (1998-present).
Managing Director, Equities, Phoenix Investment Counsel, Inc.
(1998-present).
David K. Schafer (60) Senior Vice President and Director, Schafer Capital Management, Inc.
101 Carnegie Center, Suite 107 President (1983-present). Senior Vice President and Portfolio Manager, The
Princeton, NJ 08540 Phoenix Edge Series Fund (1998-present). President and Chairman,
Strong Schafer Value Fund (1985-present). Chairman, Schafer Cullen
Capital Management, Inc. (1983-present). President, Chubb Equity
Managers, Inc. (1992-1996).
Gail P. Seneca (43) Senior Vice President President, Chief Executive and Chief Investment Officer, Seneca
909 Montgomery Street Capital Management, LLC (1996-present). Chief Executive and
San Francisco, CA 94133 Investment Officer, and a managing general partner, GMG/Seneca
Capital Management, LLC (1989-present). President and a Trustee,
Seneca Funds (1996-present). Senior Vice President, The Phoenix Edge
Series Fund (1998-present).
James D. Wehr (41) Senior Vice President Managing Director, Fixed Income (1996-present), Vice President
(1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Senior Vice President, Phoenix
Multi-Portfolio Fund, Phoenix Series Fund, The Phoenix Edge Series
Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix Duff &
Phelps Institutional Mutual Funds, Phoenix-Goodwin Multi-Sector
Fixed Income Fund, Inc., Phoenix Multi-Sector Short Term Bond Fund,
Phoenix Income and Growth Fund and Phoenix Strategic Allocation Fund
(1997-present). Senior Vice President and Chief Investment Officer,
Duff & Phelps Utilities Tax-Free Income Inc. (1997-present). Vice
President, Phoenix Multi-Portfolio Fund (1988-1997), Phoenix Series
Fund (1990-1997), The Phoenix Edge Series Fund (1991-1997), Phoenix
California Tax Exempt Bonds, Inc. (1993-1997) and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-1997). Managing Director,
Public Fixed Income, Phoenix Home Life Insurance Company
(1991-1995).
Hugh Young (40) Senior Senior Vice President, Phoenix-Aberdeen Series Fund and The Phoenix
Aberdeen Asset Managers LTD Vice President Edge Series Fund (1996-present). Director, Phoenix-Aberdeen
88A Circular Road International Advisors, LLC. Far East Investment Director, Aberdeen
Singapore 049439 Asset Management Asia Limited (1988-present). Managing Director,
Aberdeen Asset Management Asia Limited (1992-present). Director,
Abtrust Asian Smaller Companies Investment Trust plc (1995-present),
Abtrust New Dawn Investment Trust plc (1989-present), Abtrust
Emerging Asia Investment Trust Limited (1990-present), JF Philippine
Fund Inc. and Apollo Tiger.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
David L. Albrycht (37) Vice President Managing Director, Fixed Income (1996-present) and Vice President
(1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Securities Research Corporation. Vice
President, Phoenix Multi-Portfolio Fund (1993-present), Phoenix
Multi-Sector Short Term Bond Fund (1993-present), Phoenix
Multi-Sector Fixed Income Fund, Inc. (1994-present). The Phoenix
Edge Series Fund (1997-present) and Phoenix Series Fund
(1997-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-1996).
Christian C. Bertelsen (56) Vice President Managing Director, Value Equities, Phoenix Investment Counsel, Inc.
(1997-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Investment Trust 97 (1997-present). Senior
Vice President and Chief Investment Officer, Zurich Kemper
(1996-1997). Vice President and Portfolio Manager, Zurich Kemper
Small Cap Fund and Zurich Kemper Contrarian Fund (1996-1997). Senior
Vice President, Eagle Asset Management (1993-1996). Vice President
and Portfolio Manager, Heritage Value Fund and Golden Select
Variable Annuity Value Trust (1995-1996).
Steven L. Colton (40) Vice President Managing Director, Value Equities, Phoenix Investment Counsel, Inc.
(1997-present). Managing Director, Value Equities, National
Securities & Research Corporation (1998-present). Vice President,
The Phoenix Edge Series Fund (1997-present), Phoenix Series Fund
(1997-present), Phoenix Equity Series Fund (1997-present), and
Phoenix Income and Growth Fund (1998-present). Vice President/Senior
Portfolio Manager, American Century Investment Management
(1987-1997). Portfolio Manager, American Century/Benham Income and
Growth Fund (1990-1997), American Century/Benham Equity Growth Fund
(1991-1996) and American Century/Benham Utilities Income Fund
(1993-1997).
Timothy Devlin (35) Vice President Vice President and Portfolio Manager, J.P. Morgan Investment Company
J.P. Morgan Investment Management Inc. and Morgan Guaranty Trust Company of NY (1996-present). Vice
522 Fifth Avenue President, The Phoenix Edge Series Fund (1997-present). First Vice
New York, NY 10036 President and Portfolio Manager, Mitchell Hutchins Asset Management,
Inc. (1987-1996).
Ronald K. Jacks (31) Vice President Portfolio Manager, Seneca Capital Management, LLC (1996-present).
909 Montgomery Street Portfolio Manager, GMG/Seneca Capital Management, LLC
San Francisco, CA 94133 (1990-present). Senior Vice President, The Phoenix Edge Series Fund
and Phoenix Strategic Equity Series Fund (1998-present). Managing
Director, Equities, National Securities & Research Corporation
(1998-present). Trustee, Seneca Funds (1996-1997).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Christopher J. Kelleher (46) Vice President Managing Director, Fixed Income (1996-present), Vice President
(1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President, (1993-1996) National
Securities & Research Corporation. Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company (1991-1995). Portfolio
Manager, U.S. Government Securities (1989-1997), Vice President
(1989-present), Phoenix Series Fund. Vice President, The Phoenix
Edge Series Fund (1998-present), Phoenix Income and Growth Fund
(1998-present). Portfolio manager, U.S. Government Securities
Portfolio (1996-present). Vice President, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present).
Richard D. Little (50) Vice President Managing Director, Equities, Phoenix Investment Counsel, Inc.
(1998-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Strategic Equity Series Fund (1998-present).
and Phoenix Multi-Portfolio Fund (1998-present). Director of
Equities, Seneca Capital management LLC (1996-present). General
Partner and Director of Equities, Seneca Capital Management LP
(1989-present).
James E. Mair (57) Vice President Managing Director, Phoenix Investment Counsel, Inc. (1998-present).
Roger Engemann & Associates, Inc. Vice President, Co-Portfolio Manager, Nifty Fifty, The Phoenix Edge
600 Rosemead Boulevard Series Fund (1998-present). Vice President, Co-Portfolio Manager,
Pasadena, CA 91107-2138 Aggressive Growth, Phoenix Series Fund (1998-present). Vice
President, Co-Portfolio Manager, Small Cap Phoenix Strategic Equity
Series Fund (1998-present). Executive Vice President (1994-present)
Senior Vice President (1983-1994), Roger Engemann & Associates, Inc.
Executive Vice President (1994-present), Security Analyst
(1983-1994), Roger Engemann Management Co., Inc. Executive Vice
President (1994-present), Senior Vice President (1990-1994),
Director (1990-present), Pasadena Capital Corporation. Director,
Pasadena National Trust company (1989-present).
Chester Sokolosky (39) Vice President Second Vice President and Controller, Individual Insurance, Phoenix
Home Life Mutual Insurance Company (1994 - present).
Julie L. Sapia (42) Vice President Director, Money Market Trading (1998-present), Head Money Market
Trader (1997-1998), Money Market Trader (1995-1997), Phoenix
Investment Counsel, Inc. Vice President, The Phoenix Edge Series
Fund, Phoenix Series Fund, Phoenix Duff & Phelps Institutional
Mutual Funds and Phoenix-Aberdeen Series Fund (1997-present). Money
Market Trader, Phoenix Home Life Mutual Insurance Company
(1991-1995).
Michael Schatt (52) Vice President Managing Director, Phoenix Duff & Phelps Corporation (1994-present).
55 East Monroe Street Senior Vice President, Duff & Phelps Investment Management Co.
Suite 3600 (1997-present). Vice President, Phoenix Realty Securities, Inc.
Chicago, IL 60603 (1997-present). Vice President, Phoenix Duff & Phelps Institutional
Mutual Funds, Phoenix Multi-Portfolio Fund and The Phoenix Edge
Series Fund (1997-present). Director, Real Estate Advisory Practice,
Coopers & Lybrand, LLC (1990-1994).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
John S. Tilson (54) Vice President Executive Vice President, Portfolio Manager and Securities Analyst,
600 North Rosemead Boulevard Roger Engemann & Associates (1983-present). An officer and a
Pasadena, CA 91107 Director of Pasadena Capital Corporation. Senior Vice President, The
Phoenix Edge Series Fund (1998-present).
Nancy G. Curtiss (46) Treasurer Treasurer (1996-present), Vice President, Fund Accounting
(1994-1996), Phoenix Equity Planning Corporation. Treasurer, Phoenix
Funds (1994-present), Phoenix-Aberdeen Series Fund (1996-present)
and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Second Vice President and Treasurer, Fund Accounting, Phoenix Home
Life Mutual Insurance Company (1994-1995). Various positions with
Phoenix Home Life Mutual Insurance Company (1987-1994).
Jeanie Gagnon (44) Secretary Second Vice President, Individual Market Development, Phoenix Home
One American Row Life Mutual Insurance Company (1997 - present), Assistant Vice
Hartford, CT 06115 President (1994 - 1997).
- ---------------
</TABLE>
No person listed in the foregoing table has any immediate family
relationship with any other person listed in the table.
At December 31, 1998, the former Trustees and officers as a group owned none
of the then outstanding shares of the Fund.
For services rendered to the Fund during the fiscal year ended December 31,
1998, the former Trustees received an aggregate of $210,013 from the Fund as
Trustees' fees. For service on the Boards of the Phoenix Funds, each former
Trustee who was not a full-time employee of the advisors or any of their
affiliates received a retainer at the annual rate of $40,000 and $2,500 per
joint meeting of the Boards. Each Trustee who served on the Audit Committee
received a retainer at the annual rate of $2,000 and $2,000 per joint Audit
Committee meeting attended. The members of the Audit Committee were Messrs.
Conway, Roth, Segerson and Weicker. Each Trustee who served on the Executive
Committee and who was not an interested person of the Fund received a retainer
at the annual rate of $1,000 and $1,000 per joint Executive Committee meeting
attended. The members of the Executive Committee were Messrs. Conway,
Dalzell-Payne, McLoughlin, Morris, Oates and Roth. The function of the Executive
Committee was to serve as a contract review, compliance review and performance
review delegate of the full Board of Trustees. The foregoing fees did not
include the reimbursement of expenses incurred in connection with meeting
attendance.
For the Fund's fiscal year ended December 31, 1998, the former Trustees
received the following compensation:
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM FUND AND
AGGREGATE BENEFITS ESTIMATED ANNUAL FUND COMPLEX
COMPENSATION ACCRUED AS PART OF BENEFITS UPON (13 FUNDS)
NAME FROM FUND FUND EXPENSES RETIREMENT PAID TO TRUSTEES
---- --------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert Chesek $18,143 $60,000
E. Virgil Conway $24,122 $79,500
Harry Dalzell-Payne $21,652 $71,250
Francis E. Jeffries $18,192 None for None for $60,000
Leroy Keith, Jr. $19,015 any Trustee any Trustee $62,500
Philip R. McLoughlin $0 $0
Everett L. Morris $20,828 $69,500
James M. Oates $20,828 $68,750
Philip R. Reynolds $140 $500
Herbert Roth, Jr. $24,946 $81,250
Richard E. Segerson $21,486 $70,750
Lowell P. Weicker, Jr. $21,486 $70,000
</TABLE>
24
<PAGE>
* This compensation (and the earnings thereon) is deferred pursuant to the
Directors' Deferred Compensation Plan. At December 31, 1998, the total amount
of deferred compensation (including interest and other accumulation earned on
the original amounts deferred) accrued for Messrs. Jeffries, Morris and Roth
was $60,161.00, $126,891.00 and $137,672.00, respectively. At present, by
agreement among the Fund, the Distributor and the electing director, director
fees that are deferred are paid by the Fund to the Distributor. The liability
for the deferred compensation obligation appears only as a liability of the
Distributor.
The current Trustees are paid an annual retainer of $12,000 plus a fee of
$2,000 for each meeting attended. In addition, members of the Audit and
Nominating Committees are paid a fee of $2,000 for each meeting attended. Also
Trustees are reimbursed for expenses incurred in connection with meeting
attendance.
Trustee costs are allocated equally to each of the Series of the Funds
within the Fund complex. Officers and employees of the advisor who are
"interested persons" are compensated by the advisor and receive no compensation
from the Fund.
25
<PAGE>
CONTROL PERSONS
The shares of each of the Series are owned by one or more of the separate
accounts of the Phoenix family of insurance companies offering variable
insurance products or by the general account of Phoenix Home Life Mutual
Insurance Company ("Phoenix"). The table below shows the percentage ownership of
each Series held by each separate or general account.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PHOENIX HOME LIFE
PHOENIX HOME PHOENIX HOME
PHOENIX LIFE PHL VARIABLE LIFE
HOME VARIABLE ACCUMULATION VARIABLE SEPARATE SEPARATE SEPARATE
LIFE UNIVERSAL ACCOUNT ACCUMULATION ACCOUNT B ACCOUNT C ACCOUNT D
GENERAL LIFE ACCOUNT ACCOUNT
SERIES ACCOUNT
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index 24.6 32.0 43.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Aberdeen International 26.0 11.8 62.2
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Aberdeen New Asia 20.1 16.8 26.8 36.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Bankers Trust Dow 30
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Duff & Phelps Real Estate 8.7 12.6 33.1 45.6
Securities
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Engemann Capital Growth 20.7 14.3 64.5 0.2 0.2 0.1
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Engemann Nifty Fifty 11.2 16.7 40.4 31.7
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Federated U.S. Government
Bond Series
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Goodwin Money Market 18.5 30.2 51.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Goodwin Multi-Sector 11.1 32.7 56.2
Fixed Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Hollister Value Equity 20.1 43.5 36.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Equity Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Flexible Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Growth
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Morgan Stanley Focus Equity
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Balanced 10.6 16.8 72.6
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Growth & Income 4.2 10.8 41.7 43.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Strategic Allocation 13.4 13.6 73.0
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Schaefer Mid-Cap Value 19.6 17.0 32.0 31.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Seneca Mid-Cap Growth 25.9 16.1 30.0 28.0
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Seneca Strategic Theme 12.3 36.8 50.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PHL Variable Insurance Company is an indirect, wholly-owned subsidiary of
Phoenix which is, in turn, the controlling entity of each Series.
No shares of any Series is held by any officer or director of the Fund or
any advisor or subadvisor.
THE INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
The Fund has entered into Investment Advisory Agreements ("Agreements") with
Phoenix Investment Counsel, Inc. ("PIC"), DPIM, Phoenix Variable Advisors, Inc.
("PVA") and Phoenix-Aberdeen International Advisors, LLC ("PAIA").
Phoenix is in the business of writing ordinary and group life and health
insurance and annuities. Phoenix Equity Planning Corporation ("PEPCO") performs
bookkeeping and pricing and administrative services for the Fund. It also
provides bookkeeping and pricing services to other investment companies advised
by PIC and its affiliates. PEPCO is registered as a broker-dealer in 50 states.
The executive offices of Phoenix, PVA and PAIA are located at One American Row,
Hartford, Connecticut 06102-5056 and the principal offices of PEPCO are located
at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
INVESTMENT ADVISORS
The Fund's investment advisor to all Series except the Phoenix-Duff & Phelps
Real Estate Securities and Phoenix-Aberdeen New Asia Series is PIC, which is
located at 56 Prospect Street, Hartford, Connecticut 06115 and Phoenix
26
<PAGE>
Variable Advisors ("PVA"), which is located at One American Row, Hartford, CT
06102-5056. All of the outstanding stock of PIC is owned by PEPCO, a
subsidiary of Phoenix Investment Partners, Ltd. ("PXP"). Phoenix owns a
controlling interest in PXP. PEPCO also performs bookkeeping, pricing and
administrative services for the Fund.
In addition to the Fund, PIC serves as investment advisor to The Phoenix
Edge Series Fund, Phoenix-Oakhurst Strategic Allocation Fund, Inc. Phoenix
Strategic Equity Series Fund (all series other than Equity Opportunities
Series), Phoenix Duff & Phelps Institutional Mutual Funds (all portfolios other
than the Phoenix-Duff & Phelps Real Estate Securities Equity Securities
Portfolio, Core Equity Portfolio and the Enhanced Reserves Portfolio), Phoenix
Growth and Income Fund of Phoenix Equity Series Fund, Phoenix Investment Trust
97 and Phoenix Multi-Portfolio Fund (all portfolios other than the Real Estate
Securities Portfolio) and as subadvisor to Sun America Series Trust. PIC also
serves as subadvisor to the Phoenix-Aberdeen New Asia Series. PIC was originally
organized in 1932 as John P. Chase, Inc. As of December 31, 1998, PIC has
approximately $20.5 billion in assets under management.
Bankers Trust Company ("Bankers Trust") serves as subadvisor to the
Phoenix-Bankers Trust Dow 30 Series. Bankers Trust, a New York banking
corporation with principal offices at 150 Liberty Street, (One Bankers Trust
Plaza), New York, New York 10006, is a wholly owned subsidiary of Deutsche Bank
AG ("Deutsche Bank"), and has more than 50 years of experience managing
retirement assets for the nation's largest corporations and institutions.
Deutsche Bank is split into 5 business divisions, including Deutsche Asset
Management which encompasses the investment management capabilities of Bankers
Trust. At June 30, 1999, Deutsche Asset Management has $680 billion in assets
under management globally and in the U.S. Deutsche Asset Management is
responsible for $300 billion in client assets.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated ("JPM & Co."), serves as subadvisor
to the Phoenix Research Enhanced Index Series. J.P. Morgan's principal place of
business is located at 522 Fifth Avenue, New York, New York 10036. J.P. Morgan
presently serves as an investment manager for corporate, public and union
employee benefit funds, foundations, endowments, insurance companies, government
agencies and the accounts of other institutional investors. J.P. Morgan was
founded in 1984. JPM & Co., through J.P. Morgan and its other investment
management subsidiaries, had approximately $316 billion in assets under
management as of December 31, 1998.
Janus Capital Corporation ("Janus") is the investment subadvisor to the
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income and Phoenix-Janus
Growth Series and is located at 100 Fillmore Street, Denver, Colorado 80206.
Janus began serving as an investment advisor to an investment company in 1970
and currently serves as investment advisor to all of the Janus retail funds,
acts as subadvisor for a number of private label mutual funds and provides
separate account advisory services for institutional accounts. As of December
31, 1998, Janus had $108 billion under management.
Roger Engemann & Associates ("Engemann") serves as subadvisor to the
Phoenix-Engemann Nifty Fifty Series. Engemann is a wholly owned subsidiary of
Pasadena Capital Corporation, which in turn is a wholly owned subsidiary of
PD&P. Engemann has been engaged in the investment management business since
1969, and provides investment counseling services to retirement plans, colleges,
corporations, trusts and individuals. Engemann also serves as investment advisor
to the Phoenix-Engemann Funds. As of December 31, 1998, Engemann had
approximately $7.8 billion in assets under management.
Morgan Stanley Asset Management ("MSAM"), is the investment subadvisor to
the Phoenix-Morgan Stanley Focus Equity Series and has its principal offices at
1221 Avenue of the Americas, New York, New York 10020. On December 1, 1998,
Morgan Stanley Asset Management Inc. changed its name to Morgan Stanley Dean
Witter Investment Management Inc., but continues to do business in certain
instances using the name Morgan Stanley Asset Management. MSAM conducts a
worldwide portfolio management business and provides a broad range of portfolio
management services to customers in the United States and abroad. Morgan Stanley
Dean Witter & Co. ("MSDW") is the direct parent of MSAM. MSDW is a global
financial services firm that maintains leading market positions in each of its 3
primary businesses -securities, asset management and credit services. At
September 30, 1999, MSAM, together with its affiliated institutional asset
management companies, managed assets of approximately $173.5 billion, including
assets under fiduciary advice.
Seneca Capital Management, LLC serves as subadvisor to the Phoenix-Seneca
Mid-Cap Growth Series. PD&P owns a majority interest in Seneca; the balance is
owned by certain of its employees, including Gail Seneca, one of the portfolio
management team leaders, and the former limited partners of GMG/Seneca Capital
Management, LLC. Seneca (including its predecessor, GMG/Seneca Capital
Management LP) has been an investment advisor since 1989, managing equity and
fixed-income securities portfolios primarily for institutions and individuals.
As of December 31, 1998, Seneca had approximately $5.9 billion in assets under
management.
Schafer Capital Management, Inc. ("Schafer"), serves as subadvisor to the
Phoenix-Schafer Mid-Cap Value Series. Schafer's principal place of business is
located at 101 Carnegie Center, Suite 107, Princeton, New Jersey. Schafer
27
<PAGE>
has been engaged in the investment management business since 1981, specializing
in long-term investing in the equity markets. As of December 31, 1998, Schafer
had approximately $1.7 billion in assets under management.
The offices of Duff & Phelps Investment Management Co. ("DPIM") are located
at 55 East Monroe Street, Suite 3600, Chicago, Illinois 60603. DPIM also serves
as investment advisor to the Core Equity Fund of Phoenix Equity Series Fund, the
Enhanced Reserves, Core Equity and Real Estate Equity Securities Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds, the Real Estate Securities
Portfolio of Phoenix Multi-Portfolio Fund and three closed-end funds: Duff &
Phelps Utilities Income Inc., Duff & Phelps Utilities Tax-Free Income Inc. and
Duff & Phelps Utility and Corporate Bond Trust Inc. The investment advisor at
inception of the Phoenix-Duff & Phelps Real Estate Securities Series was Phoenix
Realty Securities, Inc. ("PRS" or "Advisor") PRS is a wholly-owned indirect
subsidiary of Phoenix Home Life. On March 2, 1998, DPIM purchased the management
rights for the Series from PRS and PRS's contract was assigned to DPIM. As of
December 31, 1998, DPIM had approximately $15.2 billion in assets under
management.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc., a subsidiary of Phoenix, and Aberdeen Fund
Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset Management plc.
Aberdeen Fund Managers, Inc. has its principal offices located at One Financial
Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394. PAIA
serves as investment advisor to the Phoenix-Aberdeen New Asia Series and as a
subadvisor to the Phoenix-Aberdeen International Series. PAIA also serves as
investment advisor to the Phoenix-Aberdeen Series. While many of the officers
and directors of the PAIA have extensive experience as investment professionals,
due to its recent formation, PAIA has no prior operating history. Aberdeen Fund
Managers, Inc. also serves as subadvisor for the Phoenix-Aberdeen New Asia
Series and Phoenix-Aberdeen Series Fund.
Aberdeen Asset Management was founded in 1983 and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other institutional and private
portfolios. As of December 31, 1998, Aberdeen Asset Management, and its advisory
subsidiaries, had approximately $23.9 billion in assets under management.
Simon Tan, President and Trustee of the Fund, is a director and officer of
PVA. Michael Haylon, an officer of the Trust, is a director and officer of PIC
and also an officer of DPIM. David L. Albrycht, Christian Bertelsen, Steven L.
Colton, J. Roger Engemann, James E. Mair, Julie Sapia, John S. Tilson, James D.
Wehr, David K. Schafer and Gail P. Seneca, officers of the Trust, are officers
of PIC. Michael Schatt, an officer of the Trust, is also an officer of DPIM.
Hugh Young, an officer of the Trust, is also an officer and director of PAIA.
The Agreements provide that each Advisor shall furnish continuously, at its
own expense, an investment program for each of the Series, subject at all times
to the supervision of the Trustees. They also provide that all costs and
expenses not specifically enumerated as payable by the Advisors shall be paid by
the Fund or by Phoenix, PHL Variable and PLAC. The Advisors or Phoenix, PHL
Variable and PLAC have agreed to reimburse the Fund for certain operating
expenses for all Series. Each Series (except the Phoenix-Aberdeen International,
Phoenix-Duff & Phelps Real Estate Securities, Phoenix-Goodwin Strategic Theme,
Phoenix-Aberdeen New Asia, Phoenix Research Enhanced Index and Phoenix-Seneca
Mid-Cap Growth Series) pays a portion or all of its total operating expenses
other than the management fee, up to .15% of its total average net assets. The
Phoenix-Aberdeen International, Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Goodwin Strategic Theme, Phoenix-Aberdeen New Asia, Phoenix Research
Enhanced Index and Phoenix-Seneca Mid-Cap Growth Series pay total operating
expenses other than the management fee up to .40%, .25%, .25%, .25%, .10%, and
.25%, respectively, of its total average net assets. Expenses above these limits
are paid by the Advisors, Phoenix, PHL Variable or PLAC.
The Agreements also provide that the Advisors will reimburse the Fund for
the amount, if any, by which the total operating expenses (including the
Advisor's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level of
expenses which the Fund is permitted to bear under the most restrictive expense
limitation.
To the extent that any expenses are paid by the Fund, they will be paid by
the Series incurring them or, in the case of general expenses, may be charged
among the Series in relation to the benefits received by the shareholders, as
determined by the financial agent under the supervision of the Board of
Trustees. Such expenses shall include, but shall not be limited to, all expenses
(other than those specifically referred to as being borne by the Advisors,
Phoenix, PHL Variable or PLAC) incurred in the operation of the Fund and any
offering of its shares, including, among others, interest, taxes, brokerage fees
and commissions, fees of Trustees, expenses of Trustees' and shareholders'
meetings including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of repurchase and
redemption of shares, certain expenses of issue and sale of shares, association
membership dues, charges of custodians, transfer agents, dividend disbursing
agents and financial agents, bookkeeping, auditing and legal expenses. The Fund,
Phoenix, PHL Variable or PLAC also will pay the fees and
28
<PAGE>
bear the expense of registering and maintaining the registration of the Fund and
its shares with the SEC and the expense of preparing and mailing prospectuses
and reports to shareholders.
The Investment Advisory Agreements provide that the Advisors shall not be
liable to the Fund or to any shareholder of the Fund for any error of judgment
or mistake of law or for any loss suffered by the Fund or by any shareholder of
the Fund in connection with the matters to which the Investment Advisory
Agreements relate, except a loss resulting from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of the Advisors in the
performance of its duties thereunder.
The Investment Advisory Agreements also provide that, as full compensation
for the services and facilities furnished to the Fund, the advisors shall be
compensated as follows:
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR RATE FOR RATE FOR
FIRST NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ ------------
Phoenix-Goodwin
Money Market......... .40% .35% .30%
Phoenix-Goodwin
Multi-Sector Fixed
Income............... .50% .45% .40%
Phoenix-Oakhurst
Balanced............. .55% .50% .45%
Phoenix-Oakhurst
Strategic Allocation. .60% .55% .50%
Phoenix-Engemann
Capital Growth....... .70% .65% .60%
Phoenix-Aberdeen
International........ .75% .70% .65%
Phoenix-Seneca
Strategic Theme ..... .75% .70% .65%
Phoenix-Engemann
Nifty Fifty.......... .90% .85% .80%
Phoenix-Oakhurst
Growth and Income ... .70% .65% .60%
Phoenix-Hollister
Value Equity......... .70% .65% .60%
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
SERIES
- ------
Phoenix-Seneca Mid-Cap
Growth.............. .80%
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Phoenix-Aberdeen
New Asia............. 1.00%
PHOENIX VARIABLE ADVISORS, INC.
--------------------------------
SERIES
- ------
Phoenix Research
Enhanced Index...... .45%
Phoenix-Bankers Trust
Dow................. .35%
Phoenix-Federated U.S.
Government Bond
Series.............. .60%
Phoenix- Janus Equity
Income Series....... .85%
Phoenix-Janus Flexible
Income Series....... .80%
Phoenix-Janus Growth
Series.............. .85%
Phoenix-Morgan Stanley
Focus Equity Series. .85%
Phoenix-Schafer
Mid-Cap Value ...... 1.05%
DUFF & PHELPS INVESTMENT MANAGEMENT CO.
---------------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Phoenix-Duff & Phelps
Real Estate Securities .75% .70% .65%
The amounts payable to the advisors shall be based upon the average of the
values of the net assets of the Fund as of the close of business each day. There
can be no assurance that the Fund will reach a net asset level high enough to
realize a reduction in the rate of the advisory fee.
The Investment Advisory Agreements continue in force from year to year for
all Series, provided that, with respect to each Series, the applicable agreement
must be approved at least annually by the Trustees or by vote of a majority of
the outstanding voting securities of that Series. In addition, and in either
event, the terms of the agreements and any renewal thereof must be approved by
the vote of a majority of Trustees who are not parties to the agreement or
interested persons (as that term is defined in the Investment Company Act of
1940) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The agreements will terminate automatically if assigned
and may be terminated at any time, without payment of any penalty, either by the
Fund or by the advisors, on sixty (60) days written notice.
Pursuant to a subadvisory agreement with the Fund, PIC delegates certain
investment decisions and research functions with respect to the Phoenix-Engemann
Capital Growth and Phoenix-Engemann Nifty Fifty Series to Engemann, with respect
to Phoenix-Seneca Mid-Cap Growth and Phoenix-Seneca Strategic Theme Series to
Seneca, and with respect to Phoenix-Schafer Mid-Cap Value Series to Schafer for
which they are paid a
29
<PAGE>
fee by PIC. In accordance with the subadvisory agreement between the Fund and
J.P. Morgan, J.P. Morgan is paid a monthly fee at the annual rate of .25% of the
average aggregate daily net asset values of the Phoenix Research Enhanced Index
Series up to $100 million and .20% of such value in excess of $100 million.
Pursuant to the subadvisory agreement between 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 Phoenix-Engemann Nifty Fifty Series up to $250,000,000, .45%
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 between 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 Phoenix-Seneca Mid-Cap Growth
Series. In accordance with the subadvisory agreement between the 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 Phoenix-Schafer Mid-Cap Value Series up
to $175 million and .80% of such value in excess of $175 million.
Pursuant to a subadvisory agreement with each relevant investment
subadvisor, PVA delegates certain investment decisions and research functions
with respect to the Phoenix Research Enhanced Index Series to J.P. Morgan, with
respect to the Phoenix-Bankers Trust Dow 30 Series to Bankers Trust, with
respect to Phoenix-Federated U.S. Government Bond Series to Federated
Investment, with respect to the Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income and Phoenix-Janus Growth Series to Janus Capital, and with
respect to Phoenix-Morgan Stanley Focus Equity Series to MSAM for which each is
paid a fee by PVA. Pursuant to the subadvisory agreement between the Fund and
Bankers Trust, Bankers Trust is paid a monthly fee at the annual rate of 0.10%
of the average aggregate daily net assets of the Phoenix-Bankers Trust Dow 30
Series, subject to a $100,000 annual minimum. In accordance with the subadvisory
agreement between the Fund and Federated Investment, Federated is paid a monthly
fee at the annual rate of 0.30% of the average aggregate daily assets of the
Phoenix-Federated U.S. Government Bond Series up to $25 million, 0.25% on the
next $25 million and 0.20% on the next $50 million. The fee is negotiable on
amounts over $50 billion. Pursuant to the subadvisory agreement between the Fund
and Janus Capital, Janus Capital is paid a monthly fee at the annual rate of
0.55% of the average aggregate daily assets of each of (calculated separately,
not in the aggregate) the Phoenix-Janus Equity Income Series, the Phoenix-Janus
Flexible Income Series and the Phoenix-Janus Growth Series up to $100 million,
0.50% of such values between $100 million and $500 million, and 0.45% of such
values in excess of $500 million. In accordance with the subadvisory agreement
between PVA and MSAM, MSAM is paid a monthly fee at the annual rate of 0.55% of
the average aggregate daily assets of the Phoenix-Morgan Stanley Focus Equity
Series up to $150 million, 0.45% of such value between $150 million and $300
million, and 0.40% of such value in excess of $300 million.
The subadvisory agreements relating to the Phoenix Research Enhanced Index,
Phoenix-Engemann Nifty Fifty, Phoenix-Seneca Mid-Cap Growth, Phoenix-Seneca
Strategic Theme, Phoenix-Schafer Mid-Cap Value, Phoenix-Bankers Trust Dow 30,
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth and Phoenix-Morgan Stanley
Focus Equity Series provide, among other things, that J.P. Morgan, Engemann,
Seneca, Schafer, Bankers Trust, Federated Investment, Janus Capital and MSAM
shall effectuate the purchase and sales of securities for the applicable Series
and provide related advisory services.
For providing research and other domestic advisory services to the
Phoenix-Aberdeen New Asia Series, PAIA pays to PIC a monthly subadvisory fee at
an annual rate equivalent to .30% of the average aggregate daily net asset value
of the Series. For implementing certain portfolio transactions and providing
research and other services to the Series, PAIA also pays a monthly subadvisory
fee to Aberdeen Fund Managers, Inc. equivalent to .40% of the average aggregate
daily net asset value of the Series. For implementing certain portfolio
transactions, providing research and other services with regard to i.e.
investments in particular geographic areas, Aberdeen Fund Managers, Inc. shall
engage the services of its affiliates, Aberdeen Fund Managers Ltd. and Aberdeen
Asset Management Asia Limited for which such entities shall be paid a fee by
Aberdeen Fund Managers, Inc.
CUSTODIAN
- --------------------------------------------------------------------------------
The securities and cash of the Phoenix-Goodwin Multi-Sector Fixed Income and
Phoenix-Goodwin Money Market are held by The Chase Manhattan Bank, N.A. under
the terms of a custodian agreement. The address for The Chase Manhattan Bank,
N.A., is 1 Chase Manhattan Plaza, Floor 13B, New York, NY 10081. The securities
and cash of the Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia
Series are held by Brown Brothers Harriman & Co. under the terms of a custodian
agreement. The address for Brown Brothers Harriman & Co. is 40 Water Street,
Boston, Massachusetts 02109, Attention: Manager, Securities Department. The
securities and cash of the Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Oakhurst Balanced, Phoenix-Oakhurst Growth and Income, Phoenix-Oakhurst
Strategic Allocation, Phoenix-Hollister Value Equity, Phoenix-Engemann Capital
Growth, Phoenix-Engemann Nifty Fifty, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Seneca Strategic Theme, Phoenix-Schafer Mid-Cap Value, Phoenix-Janus
Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth,
Phoenix-Morgan Stanley Focus Equity and Phoenix Research Enhanced Index Series
are held by State
30
<PAGE>
Street Bank and Trust Company, located at 1 Heritage Drive, P2N, North Quincy,
Massachusetts 02171. The Fund permits the Custodian to deposit some or all of
its securities in central depository systems as allowed by Federal law. The use
of foreign custodians and foreign central depositories has been authorized by
the Board of Trustees of the Fund if certain conditions are met.
FOREIGN CUSTODIAN
- --------------------------------------------------------------------------------
The Fund may use a foreign custodian in connection with its purchases of
foreign securities and may maintain cash and cash equivalents in the care of a
foreign custodian. The amount of cash or cash equivalents maintained in the care
of eligible foreign custodians will be limited to an amount reasonably necessary
to effect the Fund's foreign securities transactions. The use of a foreign
custodian involves considerations which are not ordinarily associated with
domestic custodians. These considerations include the possibility of
expropriations, restricted access to books and records of the foreign custodian,
inability to recover assets that are lost while under the control of the foreign
custodian, and the impact of political, social or diplomatic developments.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Fund's financial statements are audited by PricewaterhouseCoopers LLP,
160 Federal Street, Boston, Massachusetts 02110, independent accountants for the
Fund. The independent accountants also provide other accounting and tax-related
services as requested by the Fund from time to time.
FINANCIAL AGENT
Under a Financial Agent Agreement, PEPCO acts as financial agent of the Fund
and, as such, is responsible for certain administrative functions and the
bookkeeping and pricing functions for the Fund. For its services as financial
agent, PEPCO receives a fee based on the average of the aggregate daily net
asset values of the Fund at the annual rate per each $1,000,000 of $600. PFPC,
Inc. has been retained by PEPCO to perform certain administrative and pricing
services for the Fund for which PEPCO pays PFPC a fee. While PEPCO has delegated
certain responsibilities to PFPC, PEPCO retains full responsibility for the
performance of all duties of financial agent.
BROKERAGE ALLOCATION
- --------------------------------------------------------------------------------
In effecting portfolio transactions for the Fund, the advisors and
subadvisors, adhere to the Fund's policy of seeking best execution and price,
determined as described below, except to the extent it is permitted to pay
higher brokerage commissions for "brokerage and research services" as defined
herein. The advisors or subadvisors may cause a Series to pay a broker an amount
of commission for effecting a securities transaction in excess of the amount of
commission which another broker or dealer would have charged for effecting the
transaction, if the advisors or subadvisors determine in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker. As provided in Section 28(e) of the
Securities Exchange Act of 1934, "brokerage and research services" include
giving advice as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities; furnishing
analyses and reports concerning issuers, industries, economic factors and
trends, portfolio strategy and the performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Brokerage and research services provided by brokers
to the Series or to the advisors or subadvisors are considered to be in addition
to and not in lieu of services required to be performed by the advisors or
subadvisors under their advisory contracts and research services may benefit
both the Series and other clients of the advisors or subadvisors. Conversely,
research services provided by brokers to other clients of the advisors or
subadvisors may benefit the Series.
If the securities in which a particular Series of the Fund invests are
traded primarily in the over-the-counter market, where possible the Series will
deal directly with the dealers who make a market in the securities involved
unless better prices and execution are available elsewhere. Such dealers usually
act as principals for their own account. On occasion, securities may be
purchased directly from the issuer. Bonds and money market instruments are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Series (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is effected,
the ability to effect the transaction at all where a large block is involved,
the availability of the broker to stand ready to execute possibly difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by the advisors or
subadvisors in determining the overall reasonableness of brokerage commissions
paid by the Fund.
For the fiscal years ended December 31, 1996, 1997, and 1998 brokerage
commissions paid by the Series on portfolio transactions totaled $6,749,696,
$10,220,704 and $4,487,103, respectively. None of such commissions was paid to a
broker who was an affiliated person of the Series or an affiliated person of
such a person or, to the knowledge of the Series, to a broker an affiliated
person of which was an affiliated person of the Fund or the advisor or
subadvisor. Total brokerage commissions paid during the
31
<PAGE>
fiscal year ended December 31, 1998 included brokerage commissions of $3,822,400
on portfolio transactions aggregating $3,913,541,000 executed by brokers who
provided research and other statistical and factual information.
It may frequently happen that the same security is held in the portfolio of
more than one Series. Simultaneous transactions are inevitable when several
Series are managed by the same investment adviser of subadvisor, particularly
when the same security is suited for the investment objectives of more than one
Series. When 2 or more Series advised by the advisors or subadvisors are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated among the Series in a manner equitable to each
Series. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Series is concerned.
In other cases, however, it is believed that the ability of the Series to
participate in volume transactions will produce better executions for the
Series. It is the opinion of the Board of Trustees of the Fund that the
desirability of utilizing the advisors and subadvisors as investment advisors of
securities owned by the Series outweighs the disadvantages that may be said to
exist from simultaneous transactions.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the advisor or subadvisor, as applicable, shall aggregate
transactions unless it believes in its sole discretion that such aggregation is
inconsistent with its duty to seek best execution (which shall include the duty
to seek best price) for the Series. No advisory account of the advisor or
subadvisor, as applicable, is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the advisor or subadvisor, as
applicable, in that security on a given business day, with all transaction costs
shared pro rata based on the Series' participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
advisor's or subadvisor's, as applicable, accounts in accordance with the
allocation order, and if the order is partially filled, it shall be allocated
pro rata based on the allocation order. Notwithstanding the foregoing, the order
may be allocated on a basis different from that specified in the allocation
order if all accounts of the advisor or subadvisor, as applicable, whose orders
are allocated receive fair and equitable treatment.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of each Series is determined as of the close
of regular trading of the NYSE on days when the NYSE is open for trading. The
NYSE will be closed on the following observed national holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Since the Fund
does not price securities on weekends or United States national holidays, the
net asset value of a Series' foreign assets may be significantly affected on
days when the investor has no access to the Fund. The net asset value per share
of a Series is determined by adding the values of all securities and other
assets of the Series, subtracting liabilities and dividing by the total number
of outstanding shares of the Series. Assets and liabilities are determined in
accordance with generally accepted accounting principles and applicable rules
and regulations of the SEC.
A security that is listed or traded on more than one exchange is valued at
the quotation on the NYSE determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Series which invests
in foreign securities contemporaneously with the determination of the prices of
the majority of the portfolio securities of such Series. All assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time a Series has investments where market quotations are
not readily available, such investments are valued at the fair value thereof as
determined in good faith by the Trustees although the actual calculations may be
made by persons acting pursuant to the direction of the Trustees.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
Shares of the Fund are not available to the public directly. Although shares
of the Fund are owned by the Accounts, contractowners and policyowners do have
voting rights with respect to those shares, as described in the prospectus under
"Shares of Beneficial Interest." You may invest in the Fund by buying a Variable
Accumulation Annuity Contract or a Variable Universal Life Insurance Policy from
Phoenix, PHL Variable or PLAC and directing the allocation of the net purchase
payment(s) to the Subaccounts corresponding to the Series of the Fund. Phoenix,
PHL Variable and PLAC will, in turn, invest payments in shares of the Fund as
the investor directs at net asset value next determined with no sales load.
32
<PAGE>
SALES CHARGE AND SURRENDER CHARGES
The Fund does not assess any sales charge, either when it sells or when it
redeems securities. The sales charges which may be assessed under the contracts
or policies are described in the accompanying prospectus, as are other charges.
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund will redeem any shares presented by the shareholder accounts for
redemption. The account's policies on when and whether to buy or redeem Fund
shares are described in the accompanying prospectus.
At the discretion of the Trustees, the Fund may, to the extent consistent
with state and federal law, make payment for shares of a particular Series
repurchased or redeemed in whole or in part in securities or other assets of
such Series taken at current values. Should payment be made in securities, the
shareholder accounts may incur brokerage costs in converting such securities to
cash.
The right of redemption may be suspended or the payment date postponed for
more than seven days only for any period during which trading on the NYSE is
closed for other than customary weekend and holiday closings, or when trading on
the NYSE is restricted, as determined by the SEC, for any period when an
emergency (as defined by rules of the Commission) exists, or during any period
when the Commission has, by order, permitted such suspension. In case of a
suspension of the right of redemption, the shareholders may withdraw requests
for redemption of shares prior to the next determination of net asset value
after the suspension has been terminated or they will receive payment of the net
asset value so determined.
The shareholder accounts may receive more or less than was paid for the
shares, depending on the net asset value of the shares at the time they are
repurchased or redeemed.
TAXES
- --------------------------------------------------------------------------------
As stated in the prospectus, it will be the policy of the Fund and of each
Series to comply with those provisions of the Internal Revenue Code of 1986, as
amended, ("Code") which relieve investment companies that distribute
substantially all of their net income from federal income tax on the amounts
distributed. The Fund also intends to comply with pertinent Code provisions in
order to avoid imposition of any federal excise tax. Dividends derived from
interest and distributions of any realized capital gains are taxable, under
Subchapter M, to the Fund's shareholders, which in this case are the accounts.
Federal income taxation of separate accounts, life insurance companies, and
unit investment trusts are discussed in the accompanying prospectus for the
Account.
DISCLAIMER
- --------------------------------------------------------------------------------
"Dow Jones," "Dow Jones Industrial Average(SM)" and "DJIA(SM)" are service
marks of Dow Jones & Company, Inc. and have been licensed for use for certain
purposes by the Fund. The Phoenix-Bankers Trust Dow 30 Series, while based on
the Dow Jones Industrial Average(SM), is not sponsored, endorsed, sold or
promoted by Dow Jones, and Dow Jones makes no representation regarding the
advisability of investing in such product(s).
This Series is not sponsored, endorsed, sold or promoted by Dow Jones. Dow
Jones makes no representation or warranty, express or implied, to actual or
potential investors in the Series or to any member of the public regarding the
advisability of investing in securities generally or in this Series
particularly. Dow Jones' only relationship to the Fund is the licensing of
certain trademarks, trade names and service marks of Dow Jones and of the Dow
Jones Industrial Average(SM), which is determined, composed and calculated by
Dow Jones without regard to the Fund or the Series. Dow Jones has no obligation
to take the needs of Fund or the investors in the Series into consideration in
determining, composing or calculating the Dow Jones Industrial Average(SM). Dow
Jones is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Series to be issued or in the
determination or calculation of the equation by which shares of the Series may
be redeemed. Dow Jones has no obligation or liability in connection with the
administration, marketing or trading of the Series.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW
JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND,
INVESTORS IN THE SERIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW
JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY
LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES,
EVEN IF NOTIFIED OF
33
<PAGE>
THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND THE FUND.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements and the notes thereto relating to the Fund and the
report of PricewaterhouseCoopers LLP with respect thereto for the fiscal year
ended December 31, 1998 are contained in the Fund's annual report. The annual
report is available by calling Variable Products Operations at 800/541-0171 or
writing to Phoenix Variable Products Mail Operations, P.O. Box 8027, Boston, MA
02266-8027. Phoenix, PHL Variable and PLAC have agreed to send a copy of both
the annual report and the semiannual report to shareholders containing the
Fund's financial statements to every contractowner or policyowner having an
interest in the accounts. The annual report for the fiscal period ended December
31, 1998, and semiannual report for the period ended June 30, 1999 are included
in this SAI.
34
<PAGE>
SEMIANNUAL REPORT
JUNE 30, 1999
THE PHOENIX EDGE SERIES FUND
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Phoenix Research Enhanced Index Series.................................... 2
Phoenix-Aberdeen International Series..................................... 9
Phoenix-Engemann Nifty Fifty Series....................................... 15
Phoenix-Goodwin Balanced Series........................................... 18
Phoenix-Goodwin Growth Series............................................. 24
Phoenix-Goodwin Money Market Series....................................... 28
Phoenix-Goodwin Multi-Sector Fixed Income Series.......................... 32
Phoenix-Goodwin Strategic Allocation Series............................... 37
Phoenix-Goodwin Strategic Theme Series.................................... 43
Phoenix-Hollister Value Equity Series..................................... 46
Phoenix-Oakhurst Growth and Income Series................................. 50
Phoenix-Seneca Mid-Cap Growth Series...................................... 56
Phoenix-Schafer Mid-Cap Value Series...................................... 59
Phoenix-Aberdeen New Asia Series.......................................... 62
Phoenix-Duff & Phelps Real Estate Securities Series....................... 66
Notes to Financial Statements............................................. 69
</TABLE>
Not FDIC Insured No Bank Guarantee May Lose Value
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(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 Notes 5.875%, 11/15/99 (c)... AAA $210 $ 210,612
---------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $210,862).................................... 210,612
---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
COMMON STOCKS--94.6%
AEROSPACE/DEFENSE--0.9%
Boeing Co. (The)..................................... 17,200 760,025
Lockheed Martin Corp................................. 7,200 268,200
Precision Castparts Corp............................. 100 4,250
---------------
1,032,475
---------------
AIR FREIGHT--0.0%
CNF Transportation, Inc.............................. 600 23,025
---------------
AIRLINES--0.3%
AMR Corp. (b)........................................ 2,100 143,325
Continental Airlines, Inc. (b)....................... 700 26,337
Delta Air Lines, Inc................................. 800 46,100
Southwest Airlines Co................................ 3,900 121,387
---------------
337,149
---------------
ALUMINUM--0.4%
Alcoa, Inc........................................... 6,600 408,375
---------------
AUTO PARTS & EQUIPMENT--0.9%
Cooper Tire & Rubber Co.............................. 900 21,262
Dana Corp............................................ 4,200 193,462
Delphi Automotive Systems Corp....................... 12,300 228,319
Genuine Parts Co..................................... 3,700 129,500
Goodyear Tire & Rubber Co. (The)..................... 3,500 205,844
ITT Industries, Inc.................................. 2,300 87,687
Lear Corp. (b)....................................... 1,700 84,575
---------------
950,649
---------------
AUTOMOBILES--1.0%
Ford Motor Co........................................ 8,400 474,075
General Motors Corp.................................. 9,200 607,200
---------------
1,081,275
---------------
BANKS (MAJOR REGIONAL)--4.0%
Bank One Corp........................................ 14,000 833,875
BankBoston Corp...................................... 7,200 368,100
First Union Corp..................................... 12,000 564,000
Fleet Financial Group, Inc........................... 2,700 119,812
Huntington Bancshares, Inc........................... 1,900 66,500
KeyCorp.............................................. 5,500 176,687
Mellon Bank Corp..................................... 5,300 192,787
Nationalcity Corp.................................... 3,100 203,050
PNC Bank Corp........................................ 3,700 213,212
Regions Financial Corp............................... 2,700 103,781
Summit Bancorp....................................... 2,100 87,806
SunTrust Banks, Inc.................................. 4,000 277,750
U.S. Bancorp......................................... 9,200 312,800
Union Planters Corp.................................. 1,800 80,437
Wells Fargo Co....................................... 20,600 880,650
---------------
4,481,247
---------------
BANKS (MONEY CENTER)--1.5%
Bank of America Corp................................. 21,800 1,598,212
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
BANKS (MONEY CENTER)--CONTINUED
Chase Manhattan Corp. (The).......................... 1,100 $ 95,287
---------------
1,693,499
---------------
BANKS (REGIONAL)--0.6%
Associated Banc-Corp................................. 800 33,200
BancWest Corp........................................ 600 22,275
Colonial BancGroup, Inc. (The)....................... 600 8,362
Commerce Bancshares, Inc............................. 800 32,200
Commercial Federal Corp.............................. 400 9,275
Compass Bancshares, Inc.............................. 1,400 38,150
First American Corp.................................. 2,800 116,375
FirstMerit Corp...................................... 1,100 30,869
Hibernia Corp. Class A............................... 1,900 29,806
M & T Bank Corp...................................... 100 55,000
Mercantile Bankshares Corp........................... 800 28,300
National Commerce Bancorporation..................... 1,500 32,812
North Fork Bancorporation, Inc....................... 1,700 36,231
Pacific Century Financial Corp....................... 700 15,094
Peoples Heritage Financial Group, Inc................ 1,400 26,337
Provident Financial Group, Inc....................... 300 13,125
SouthTrust Corp...................................... 2,000 76,750
TCF Financial Corp................................... 1,100 30,662
Wilmington Trust Corp................................ 400 22,950
---------------
657,773
---------------
BEVERAGES (NON-ALCOHOLIC)--2.2%
Coca-Cola Co. (The).................................. 25,400 1,587,500
Pepsi Bottling Group, Inc. (The)..................... 2,000 46,125
PepsiCo, Inc......................................... 20,100 777,619
---------------
2,411,244
---------------
BIOTECHNOLOGY--0.5%
Amgen, Inc. (b)...................................... 7,600 462,650
Chiron Corp. (b)..................................... 2,500 51,875
Genzyme Corp. (b).................................... 1,500 72,750
Genzyme Surgical Products (b)........................ 269 1,183
---------------
588,458
---------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.7%
AT&T Corp.- Liberty Media Group Class A (b).......... 12,600 463,050
Comcast Corp. Special Class A........................ 13,800 530,437
MediaOne Group, Inc. (b)............................. 11,900 885,062
---------------
1,878,549
---------------
BUILDING MATERIALS--0.1%
Owens Corning........................................ 1,200 41,250
USG Corp............................................. 700 39,200
---------------
80,450
---------------
CHEMICALS--1.4%
Air Products & Chemicals, Inc........................ 2,900 116,725
Dow Chemical Co. (The)............................... 5,700 723,187
Du Pont (E.I.) de Nemours & Co....................... 2,800 191,275
IMC Global, Inc...................................... 2,800 49,350
Lyondell Chemical Co................................. 2,900 59,812
Praxair, Inc......................................... 100 4,894
Rohm & Haas Co....................................... 4,800 205,800
Solutia, Inc......................................... 2,700 57,544
Union Carbide Corp................................... 3,300 160,875
---------------
1,569,462
---------------
CHEMICALS (DIVERSIFIED)--0.6%
Monsanto Co.......................................... 9,400 370,712
</TABLE>
See Notes to Financial Statements
2
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
CHEMICALS (DIVERSIFIED)--CONTINUED
PPG Industries, Inc.................................. 4,400 $ 259,875
---------------
630,587
---------------
CHEMICALS (SPECIALTY)--0.1%
Nalco Chemical Co.................................... 1,700 88,187
USEC, Inc............................................ 1,100 16,362
---------------
104,549
---------------
COMMUNICATIONS EQUIPMENT--2.8%
Harris Corp.......................................... 1,700 66,619
Lucent Technologies, Inc............................. 33,900 2,286,131
Motorola, Inc........................................ 7,700 729,575
---------------
3,082,325
---------------
COMPUTERS (HARDWARE)--4.7%
Apple Computer, Inc. (b)............................. 2,200 101,887
Dell Computer Corp. (b).............................. 29,100 1,076,700
Gateway, Inc. (b).................................... 3,200 188,800
Hewlett-Packard Co................................... 3,600 361,800
International Business Machines Corp. (c)............ 21,800 2,817,650
Sun Microsystems, Inc. (b)........................... 9,900 681,862
---------------
5,228,699
---------------
COMPUTERS (NETWORKING)--2.3%
3Com Corp. (b)....................................... 4,700 125,431
Cisco Systems, Inc. (b).............................. 38,000 2,451,000
---------------
2,576,431
---------------
COMPUTERS (PERIPHERALS)--0.7%
EMC Corp. (b)........................................ 12,600 693,000
Quantum Corp. (b).................................... 2,200 53,075
Seagate Technology, Inc. (b)......................... 3,100 79,437
---------------
825,512
---------------
COMPUTERS (SOFTWARE & SERVICES)--5.8%
America Online, Inc. (b)............................. 12,700 1,403,350
BMC Software, Inc. (b)............................... 500 27,000
Electronic Arts, Inc. (b)............................ 800 43,400
Exodus Communications, Inc. (b)...................... 400 47,975
Microsoft Corp. (b)(c)............................... 50,000 4,509,375
Oracle Corp. (b)..................................... 9,900 367,537
Symantec Corp. (b)................................... 400 10,200
---------------
6,408,837
---------------
CONSUMER FINANCE--0.3%
Household International, Inc......................... 5,900 279,512
---------------
CONTAINERS & PACKAGING (PAPER)--0.0%
Temple-Inland, Inc................................... 800 54,600
---------------
ELECTRIC COMPANIES--2.3%
Allegheny Energy, Inc................................ 2,000 64,125
Ameren Corp.......................................... 2,400 92,100
CMS Energy Corp...................................... 1,900 79,562
Central & South West Corp............................ 9,200 215,050
Cinergy Corp......................................... 2,600 83,200
Constellation Energy Group, Inc...................... 2,600 77,025
Dominion Resources, Inc.............................. 3,300 142,931
Duke Energy Corp..................................... 2,400 130,500
Edison International................................. 6,000 160,500
Entergy Corp......................................... 4,200 131,250
FPL Group, Inc....................................... 3,100 169,337
Nisource............................................. 2,000 51,625
Northeast Utilities (b).............................. 2,200 38,912
Northern States Power Co............................. 2,500 60,469
PG&E Corp............................................ 6,600 214,500
PP&L Resources, Inc.................................. 2,700 83,025
Pinnacle West Capital Corp........................... 1,400 56,350
Public Service Enterprise Group, Inc................. 400 16,350
Reliant Energy, Inc.................................. 5,100 140,887
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
ELECTRIC COMPANIES--CONTINUED
Southern Co. (The)................................... 11,100 $ 294,150
TECO Energy, Inc..................................... 2,100 47,775
Texas Utilities Co................................... 4,800 198,000
Wisconsin Energy Corp................................ 1,900 47,619
---------------
2,595,242
---------------
ELECTRICAL EQUIPMENT--3.3%
Emerson Electric Co.................................. 8,400 528,150
General Electric Co.................................. 25,800 2,915,400
Hubbell, Inc......................................... 1,000 45,375
Rockwell International Corp.......................... 2,000 121,500
Sensormatic Electronics Corp. (b).................... 800 11,150
Symbol Technologies, Inc............................. 1,650 60,844
---------------
3,682,419
---------------
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.1%
Grainger (W.W.), Inc................................. 1,800 96,862
---------------
ELECTRONICS (DEFENSE)--0.4%
Raytheon Co., Class A................................ 5,700 392,587
---------------
ELECTRONICS (INSTRUMENTATION)--0.1%
PE Corp.-PE Biosystems Group......................... 800 91,800
---------------
ELECTRONICS (SEMICONDUCTORS)--2.9%
Intel Corp. (c)...................................... 39,300 2,338,350
National Semiconductor Corp. (b)..................... 2,200 55,688
Texas Instruments, Inc............................... 5,000 725,000
Xilinx, Inc. (b)..................................... 1,600 91,600
---------------
3,210,638
---------------
ENTERTAINMENT--0.4%
Time Warner, Inc..................................... 3,600 264,600
Walt Disney Co. (The)................................ 7,300 224,931
---------------
489,531
---------------
EQUIPMENT (SEMICONDUCTOR)--0.3%
Applied Materials, Inc. (b).......................... 4,700 347,213
---------------
FINANCIAL (DIVERSIFIED)--4.2%
AMRESCO, Inc. (b).................................... 200 1,288
Ambac Financial Group, Inc........................... 1,500 85,688
American Express Co.................................. 5,400 702,675
Associates First Capital Corp........................ 8,900 394,381
CIT Group, Inc. (The)................................ 1,100 31,763
Citigroup, Inc....................................... 42,800 2,033,000
FINOVA Group, Inc. (The)............................. 800 42,100
Fannie Mae........................................... 12,000 820,500
Financial Security Assurance Holdings Ltd............ 300 15,600
Freddie Mac.......................................... 1,900 110,200
Morgan Stanley Dean Witter & Co...................... 4,400 451,000
---------------
4,688,195
---------------
FOODS--1.0%
Bestfoods............................................ 3,800 188,100
General Mills, Inc................................... 1,300 104,488
Heinz (H.J.) Co...................................... 4,900 245,613
Hershey Foods Corp................................... 2,000 118,750
Nabisco Holdings Corp................................ 600 25,950
Ralston-Ralston Purina Group......................... 4,400 133,925
Sara Lee Corp........................................ 10,800 245,025
---------------
1,061,851
---------------
FOOTWEAR--0.0%
Reebok International Ltd. (b)........................ 700 13,038
---------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--0.1%
International Game Technology........................ 1,600 29,600
MGM Grand, Inc. (b).................................. 300 14,700
Mandalay Resort Group................................ 1,800 38,025
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--CONTINUED
Mirage Resorts, Inc. (b)............................. 4,000 $ 67,000
---------------
149,325
---------------
HEALTH CARE (DIVERSIFIED)--4.6%
Abbott Laboratories.................................. 13,500 614,250
American Home Products Corp.......................... 19,500 1,121,250
Bristol-Myers Squibb Co. (c)......................... 27,000 1,901,813
Johnson & Johnson.................................... 6,700 656,600
Warner-Lambert Co.................................... 12,500 867,188
---------------
5,161,101
---------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--3.5%
Forest Laboratories, Inc. Class A (b)................ 1,500 69,375
Lilly (Eli) & Co..................................... 16,000 1,146,000
Merck & Co., Inc..................................... 17,200 1,272,800
Pfizer, Inc.......................................... 7,500 823,125
Pharmacia & Upjohn, Inc.............................. 500 28,406
Schering-Plough Corp................................. 10,900 577,700
---------------
3,917,406
---------------
HEALTH CARE (GENERIC AND OTHER)--0.1%
MedImmune, Inc. (b).................................. 800 54,200
Watson Pharmaceuticals, Inc. (b)..................... 1,300 45,581
---------------
99,781
---------------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.4%
Columbia/HCA Healthcare Corp. (c).................... 10,100 230,406
Health Management Associates, Inc. Class A (b)....... 4,900 55,125
Tenet Healthcare Corp. (b)........................... 6,300 116,944
---------------
402,475
---------------
HEALTH CARE (LONG TERM CARE)--0.0%
HCA Manor Care, Inc. (b)............................. 1,800 43,538
---------------
HEALTH CARE (MANAGED CARE)--0.5%
Aetna, Inc........................................... 2,300 205,706
Humana, Inc. (b)..................................... 3,300 42,694
PacifiCare Health Systems, Inc. (b).................. 500 35,969
United HealthCare Corp............................... 2,800 175,350
Wellpoint Health Networks, Inc. (b).................. 1,100 93,363
---------------
553,082
---------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.4%
Boston Scientific Corp. (b).......................... 3,900 171,356
Medtronic, Inc....................................... 3,200 249,200
---------------
420,556
---------------
HEALTH CARE (SPECIALIZED SERVICES)--0.2%
ALZA Corp. (b)....................................... 1,400 71,225
HEALTHSOUTH Corp. (b)................................ 8,400 125,475
---------------
196,700
---------------
HOUSEHOLD FURNISHINGS & APPLIANCES--0.1%
Furniture Brands International, Inc. (b)............. 600 16,725
Leggett & Platt, Inc................................. 4,700 130,719
---------------
147,444
---------------
HOUSEHOLD PRODUCTS (NON-DURABLE)--2.0%
Clorox Co. (The)..................................... 1,600 170,900
Fort James Corp...................................... 3,000 113,625
Kimberly-Clark Corp.................................. 7,000 399,000
Procter & Gamble Co. (The)........................... 17,800 1,588,650
---------------
2,272,175
---------------
INSURANCE (LIFE/HEALTH)--0.3%
Provident Companies, Inc............................. 2,000 80,000
Torchmark Corp....................................... 2,600 88,725
UNUM Corp............................................ 3,000 164,250
---------------
332,975
---------------
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
INSURANCE (MULTI-LINE)--1.1%
American International Group, Inc.................... 7,700 $ 901,381
CIGNA Corp........................................... 3,400 302,600
---------------
1,203,981
---------------
INSURANCE (PROPERTY-CASUALTY)--1.2%
20th Century Industries.............................. 600 11,325
Allstate Corp. (The)................................. 19,000 681,625
Chubb Corp. (The).................................... 3,000 208,500
Fremont General Corp................................. 800 15,100
MBIA, Inc............................................ 2,100 135,975
Mercury General Corp................................. 1,000 34,000
Ohio Casualty Corp................................... 200 7,225
SAFECO Corp.......................................... 1,000 44,125
St. Paul Companies, Inc. (The)....................... 4,400 139,975
Travelers Property Casualty Corp. Class A............ 1,300 50,863
---------------
1,328,713
---------------
INSURANCE BROKERS--0.5%
Aon Corp............................................. 5,300 218,625
Marsh & McLennan Companies, Inc...................... 5,000 377,500
---------------
596,125
---------------
INVESTMENT BANKING/BROKERAGE--0.9%
Bear Stearns Companies, Inc. (The)................... 1,400 65,450
Goldman Sachs Group, Inc. (The)...................... 6,400 462,400
Lehman Brothers Holdings, Inc........................ 1,100 68,475
Merrill Lynch & Co., Inc............................. 4,500 359,719
Paine Webber Group, Inc.............................. 1,700 79,475
Waddell & Reed Financial, Inc. Class A............... 100 2,744
---------------
1,038,263
---------------
INVESTMENT MANAGEMENT--0.2%
Equitable Companies, Inc. (The)...................... 1,600 107,200
Franklin Resources, Inc.............................. 1,800 73,125
---------------
180,325
---------------
IRON & STEEL--0.2%
Allegheny Teledyne, Inc.............................. 5,800 131,225
Nucor Corp........................................... 500 23,719
USX-U. S. Steel Group................................ 1,800 48,600
---------------
203,544
---------------
LEISURE TIME (PRODUCTS)--0.2%
Mattel, Inc.......................................... 8,300 219,431
---------------
LODGING-HOTELS--0.1%
Extended Stay America, Inc. (b)...................... 500 6,000
Hilton Hotels Corp................................... 6,500 92,219
---------------
98,219
---------------
MACHINERY (DIVERSIFIED)--0.4%
Cooper Industries, Inc............................... 1,800 93,600
Deere & Co........................................... 4,400 174,350
Dover Corp........................................... 3,500 122,500
---------------
390,450
---------------
MANUFACTURING (DIVERSIFIED)--1.9%
AlliedSignal, Inc.................................... 9,500 598,500
Coltec Industries, Inc. (b).......................... 1,200 26,025
Eaton Corp........................................... 1,500 138,000
National Service Industries, Inc..................... 500 18,000
Tenneco, Inc......................................... 3,700 88,338
Tyco International Ltd............................... 13,700 1,298,075
---------------
2,166,938
---------------
MANUFACTURING (SPECIALIZED)--0.1%
Parker-Hannifin Corp................................. 2,100 96,075
---------------
METALS MINING--0.4%
Freeport-McMoRan Copper & Gold, Inc. Class A (b)..... 4,000 67,000
Freeport-McMoRan Copper & Gold, Inc. Class B (b)..... 4,300 77,131
</TABLE>
See Notes to Financial Statements
4
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
METALS MINING--CONTINUED
Level 3 Communications, Inc. (b)..................... 5,100 $ 306,319
---------------
450,450
---------------
NATURAL GAS--0.2%
Columbia Energy Group................................ 1,400 87,763
Consolidated Natural Gas Co.......................... 1,500 91,125
K N Energy, Inc...................................... 600 8,025
---------------
186,913
---------------
OIL & GAS (DRILLING & EQUIPMENT)--0.1%
Cooper Cameron Corp. (b)............................. 600 22,238
Diamond Offshore Drilling, Inc....................... 1,000 28,375
ENSCO International, Inc............................. 1,600 31,900
Global Marine, Inc. (b).............................. 1,700 26,244
Input/Output, Inc. (b)............................... 200 1,513
R&B Falcon Corp. (b)................................. 3,700 34,688
Smith International, Inc. (b)........................ 500 21,719
---------------
166,677
---------------
OIL & GAS (REFINING & MARKETING)--0.1%
El Paso Energy Corp.................................. 2,000 70,375
Tosco Corp........................................... 2,100 54,469
Ultramar Diamond Shamrock Corp....................... 900 19,631
Valero Energy Corp................................... 500 10,719
---------------
155,194
---------------
OIL (DOMESTIC INTEGRATED)--0.5%
Amerada Hess Corp.................................... 1,000 59,500
Atlantic Richfield Co................................ 2,000 167,125
Phillips Petroleum Co................................ 3,100 155,969
Unocal Corp.......................................... 3,100 122,838
---------------
505,432
---------------
OIL (INTERNATIONAL INTEGRATED)--3.8%
Chevron Corp......................................... 7,500 713,906
Conoco, Inc. Class A................................. 2,300 64,113
Exxon Corp........................................... 22,800 1,758,450
Mobil Corp........................................... 12,700 1,257,300
Texaco, Inc.......................................... 6,300 393,750
---------------
4,187,519
---------------
PAPER & FOREST PRODUCTS--0.5%
Boise Cascade Corp................................... 100 4,300
Bowater, Inc......................................... 700 33,075
Georgia-Pacific Group................................ 1,200 56,850
International Paper Co............................... 5,700 287,852
Louisiana-Pacific Corp............................... 1,500 35,625
Mead Corp. (The)..................................... 1,100 45,925
Smurfit-Stone Container Corp. (b).................... 3,900 80,194
---------------
543,821
---------------
PERSONAL CARE--0.4%
Gillette Co. (The)................................... 10,900 446,900
---------------
PHOTOGRAPHY/IMAGING--1.1%
Eastman Kodak Co..................................... 7,100 481,025
Xerox Corp........................................... 12,500 738,281
---------------
1,219,306
---------------
PUBLISHING (NEWSPAPERS)--0.8%
Gannett Co., Inc..................................... 5,400 385,425
Knight-Ridder, Inc................................... 1,900 104,381
New York Times Co. Class A........................... 4,100 150,931
Times Mirror Co. (The) Class A....................... 2,000 118,500
Washington Post Co. (The) Class B.................... 200 107,550
---------------
866,787
---------------
RAILROADS--0.6%
Burlington Northern Santa Fe Corp.................... 5,900 182,900
CSX Corp............................................. 2,900 131,406
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
RAILROADS--CONTINUED
Norfolk Southern Corp................................ 4,600 $ 138,575
Union Pacific Corp................................... 3,100 180,769
Wisconsin Central Transportation Corp. (b)........... 200 3,775
---------------
637,425
---------------
REITS--0.2%
Starwood Hotel & Resorts Worldwide, Inc.............. 6,100 186,431
---------------
RESTAURANTS--0.4%
McDonald's Corp...................................... 10,600 437,913
---------------
RETAIL (BUILDING SUPPLIES)--0.6%
Home Depot, Inc. (The)............................... 9,100 586,381
Sherwin-Williams Co.................................. 3,800 105,450
---------------
691,831
---------------
RETAIL (COMPUTERS & ELECTRONICS)--0.0%
CompUSA, Inc. (b).................................... 1,000 7,438
---------------
RETAIL (DEPARTMENT STORES)--0.7%
Dillard's, Inc., Class A............................. 1,800 63,225
Federated Department Stores, Inc. (b)................ 3,600 190,575
May Department Stores Co............................. 5,800 237,075
Nordstrom, Inc....................................... 2,300 77,050
Penney (J.C.) Co., Inc............................... 4,400 213,675
---------------
781,600
---------------
RETAIL (FOOD CHAINS)--0.8%
Albertson's, Inc..................................... 2,835 146,180
Hannaford Brothers Co................................ 700 37,450
Kroger Co. (The) (b)................................. 11,000 307,313
Safeway, Inc. (b).................................... 8,400 415,800
---------------
906,743
---------------
RETAIL (GENERAL MERCHANDISE)--3.0%
Costco Companies, Inc. (b)........................... 1,900 152,119
Dayton Hudson Corp................................... 7,800 507,000
Kmart Corp. (b)...................................... 8,600 141,363
Sears, Roebuck & Co.................................. 6,700 298,569
Wal-Mart Stores, Inc................................. 45,900 2,214,675
---------------
3,313,726
---------------
RETAIL (HOME SHOPPING)--0.0%
Corporate Express, Inc. (b).......................... 900 6,300
---------------
RETAIL (SPECIALTY)--0.2%
Autozone, Inc........................................ 2,600 78,325
General Nutrition Companies, Inc. (b)................ 900 20,981
Tiffany & Co......................................... 600 57,900
Toys 'R' Us, Inc. (b)................................ 4,200 86,888
---------------
244,094
---------------
RETAIL (SPECIALTY-APPAREL)--0.9%
Abercrombie & Fitch Co. Class A (b).................. 1,800 86,400
Gap, Inc. (The)...................................... 13,300 669,988
TJX Companies, Inc. (The)............................ 5,700 189,881
---------------
946,269
---------------
SAVINGS & LOAN COMPANIES--0.5%
Astoria Financial Corp............................... 700 30,756
Charter One Financial, Inc........................... 2,000 55,625
Dime Bancorp, Inc.................................... 1,500 30,188
Golden State Bancorp, Inc. (b)....................... 1,000 22,000
Golden West Financial Corp........................... 700 68,600
GreenPoint Financial Corp............................ 1,300 42,656
Ocwen Financial Corp. (b)............................ 300 2,663
Sovereign Bancorp, Inc............................... 2,600 31,525
Washington Federal, Inc.............................. 200 4,488
Washington Mutual, Inc............................... 7,400 261,775
---------------
550,276
---------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)--0.6%
Cendant Corp. (b).................................... 24,300 $ 498,150
Service Corp. International.......................... 9,500 182,875
---------------
681,025
---------------
SERVICES (COMPUTER SYSTEMS)--0.1%
Electronic Data Systems Corp......................... 2,500 141,406
---------------
SERVICES (DATA PROCESSING)--0.6%
Automatic Data Processing, Inc....................... 7,400 325,600
Equifax, Inc......................................... 3,400 121,338
First Data Corp...................................... 5,600 274,050
---------------
720,988
---------------
SPECIALTY PRINTING--0.1%
Donnelley (R.R.) & Sons Co........................... 2,600 96,363
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.1%
AT&T Corp............................................ 25,400 1,417,638
MCI WorldCom, Inc. (b)............................... 23,600 2,035,500
---------------
3,453,138
---------------
TELEPHONE--5.5%
Ameritech Corp....................................... 7,600 558,600
Bell Atlantic Corp................................... 23,100 1,510,163
BellSouth Corp....................................... 11,200 525,000
Frontier Corp........................................ 2,000 118,000
GTE Corp............................................. 15,000 1,136,250
SBC Communications, Inc. (c)......................... 30,500 1,769,000
U S WEST, Inc........................................ 7,500 440,625
---------------
6,057,638
---------------
TEXTILES (APPAREL)--0.1%
Fruit of the Loom, Inc. Class A (b).................. 800 7,800
Jones Apparel Group, Inc. (b)........................ 2,350 80,638
---------------
88,438
---------------
TEXTILES (SPECIALTY)--0.0%
Unifi, Inc. (b)...................................... 700 14,875
---------------
TOBACCO--1.2%
Philip Morris Companies, Inc. (c).................... 32,900 1,322,169
---------------
TRUCKERS --0.0%
Ryder System, Inc.................................... 600 15,600
---------------
TRUCKS & PARTS--0.1%
PACCAR, Inc.......................................... 1,500 80,069
---------------
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
WASTE MANAGEMENT--0.6%
Browning-Ferris Industries, Inc...................... 400 $ 17,200
Waste Management, Inc................................ 12,400 666,500
---------------
683,700
---------------
TOTAL COMMON STOCKS
(Identified cost $87,992,027)................................. 105,067,134
---------------
FOREIGN COMMON STOCKS--2.7%
ALUMINUM--0.1%
Alcan Aluminum Ltd. (Canada)......................... 2,600 83,037
---------------
BEVERAGES (ALCOHOLIC)--0.5%
Seagram Company Ltd. (The) (Canada).................. 9,900 498,712
---------------
COMMUNICATIONS EQUIPMENT--0.2%
Nortel Networks Corp. (Canada)....................... 3,000 260,438
---------------
FOODS--0.5%
Unilever NV (Netherlands)............................ 8,700 606,825
---------------
OIL (INTERNATIONAL INTEGRATED)--1.4%
Royal Dutch Petroleum Co. NY Registered Shares
(Netherlands) (c).................................. 26,300 1,584,575
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $2,660,144).................................. 3,033,587
---------------
TOTAL LONG-TERM INVESTMENTS--97.5%
(Identified cost $90,863,033)................................. 108,311,333
---------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.8%
COMMERCIAL PAPER--2.8%
CXC, Inc. 5.75%, 7/1/99.................... A-1+ $3,090 3,090,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $3,090,000).................................. 3,090,000
---------------
TOTAL INVESTMENTS --100.3%
(Identified cost $93,953,033)................................. 111,401,333(a)
Cash and receivables, less liabilities--(0.3%)................ (358,019)
---------------
NET ASSETS--100.0%.............................................. $ 111,043,314
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $20,225,620 and gross
depreciation of $2,835,462 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$94,011,175.
(b) Non-income producing.
(c) All or a portion segregated as collateral.
See Notes to Financial Statements
6
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$93,953,033).............................................. $ 111,401,333
Cash........................................................ 2,074
Receivables
Investment securities sold................................ 902,509
Dividends and interest.................................... 101,338
Fund shares sold.......................................... 85,362
Variation margin for future contracts..................... 51,475
Prepaid expenses............................................ 1,373
--------------
Total assets............................................ 112,545,464
--------------
LIABILITIES
Payables
Investment securities purchased........................... 1,326,525
Fund shares repurchased................................... 125,170
Investment advisory fee................................... 14,809
Financial agent fee....................................... 9,603
Trustees' fee............................................. 7,369
Accrued expenses............................................ 18,674
--------------
Total liabilities....................................... 1,502,150
--------------
NET ASSETS.................................................. $ 111,043,314
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 89,401,764
Undistributed net investment income....................... 167,977
Accumulated net realized gain............................. 3,912,023
Net unrealized appreciation............................... 17,561,550
--------------
NET ASSETS.................................................. $ 111,043,314
--------------
--------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 7,538,746
--------------
--------------
Net asset value and offering price per share................ $ 14.73
-------
-------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 644,541
Interest.................................................. 71,296
Foreign taxes withheld.................................... (21,140)
-------------
Total investment income................................. 694,697
-------------
EXPENSES
Investment advisory fee................................... 201,571
Financial agent fee....................................... 54,493
Custodian................................................. 26,348
Professional.............................................. 12,846
Printing.................................................. 11,307
Trustees.................................................. 9,917
Miscellaneous............................................. 5,550
-------------
Total expenses.......................................... 322,032
Less expenses borne by investment adviser............... (75,665)
-------------
Net expenses............................................ 246,367
-------------
NET INVESTMENT INCOME....................................... 448,330
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 3,742,582
Net realized gain on futures contracts.................... 297,629
Net change in unrealized appreciation (depreciation) on
investments............................................. 6,949,285
-------------
NET GAIN ON INVESTMENTS..................................... 10,989,496
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 11,437,826
-------------
-------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 448,330 $ 523,699
Net realized gain (loss).................................. 4,040,211 3,008,093
Net change in unrealized appreciation (depreciation)...... 6,949,285 9,780,453
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 11,437,826 13,312,245
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (280,353) (532,936)
Net realized gains........................................ (299,858) (2,994,712)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (580,211) (3,527,648)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (3,231,070 and 5,285,851
shares, respectively)................................... 44,617,864 63,644,481
Net asset value of shares issued from reinvestment of
distributions (40,443 and 271,800 shares,
respectively)........................................... 580,211 3,527,648
Cost of shares repurchased (1,046,652 and 3,186,084
shares, respectively)................................... (14,534,301) (38,286,173)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 30,663,774 28,885,956
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 41,521,389 38,670,553
NET ASSETS
Beginning of period....................................... 69,521,925 30,851,372
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $167,977 AND $0, RESPECTIVELY)......... $ 111,043,314 $ 69,521,925
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED YEAR INCEPTION
6/30/99 ENDED 7/15/97 TO
(UNAUDITED) 12/31/98 12/31/97
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 13.08 $ 10.49 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............... 0.06(2) 0.12(2) 0.05(2)
Net realized and unrealized gain (loss).... 1.67 3.19 0.54
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS......... 1.73 3.31 0.59
----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.04) (0.12) (0.05)
Dividends from net realized gains.......... (0.04) (0.60) (0.05)
----------- ----------- -----------
TOTAL DISTRIBUTIONS...................... (0.08) (0.72) (0.10)
----------- ----------- -----------
CHANGE IN NET ASSET VALUE.................... 1.65 2.59 0.49
----------- ----------- -----------
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD............... $14.73 $13.08 $10.49
----------- ----------- -----------
----------- ----------- -----------
Total return................................. 13.25%(3) 31.68% 5.83%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $111,043 $69,522 $30,851
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.55%(1) 0.55% 0.55%(1)
Net investment income...................... 1.00%(1) 1.08% 1.46%(1)
Portfolio turnover rate...................... 22%(3) 45% 9%(3)
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.01,
$0.03 and $0.02 per share, respectively.
(3) Not annualized.
See Notes to Financial Statements
8
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--95.3%
ARGENTINA--0.2%
Perez Companc SA Sponsored ADR (Oil & Gas
(Exploration & Production))................... 32,000 $ 371,248
Telecom Argentina SA Sponsored ADR
(Telecommunications (Long Distance)).......... 9,600 256,800
-------------
628,048
-------------
AUSTRALIA--1.3%
Australian Gas Light Co., Ltd. (Natural Gas).... 250,000 1,520,768
QBE Insurance Group Ltd. (Insurance (Property-
Casualty)).................................... 450,000 1,712,725
-------------
3,233,493
-------------
BRAZIL--1.1%
Tele Centro Sul Participacoes SA ADR
(Telephone)................................... 9,500 527,250
Tele Norte Leste Participacoes SA ADR
(Telephone)................................... 49,000 909,562
Tele Sudeste Celular Participacoes SA ADR
(Telecommunications (Cellular/Wireless))...... 25,000 725,000
Telesp Participacoes SA ADR (Telephone)......... 31,000 709,125
-------------
2,870,937
-------------
CANADA--2.4%
Nortel Networks Corp. (Communications
Equipment).................................... 28,500 2,474,156
Seagram Co. Ltd. (The) (Beverages
(Alcoholic)).................................. 38,000 1,914,250
Toronto-Dominion Bank (The) (Banks (Money
Center))...................................... 39,000 1,774,500
-------------
6,162,906
-------------
DENMARK--1.1%
Danisco A/S (Foods)............................. 28,900 1,306,005
Tele Danmark A/S (Telephone).................... 28,600 1,407,774
-------------
2,713,779
-------------
FINLAND--2.2%
Nokia Oyj Class A (Communications Equipment).... 41,400 3,629,032
Stora Enso Oyj (Paper & Forest Products)........ 100,465 1,077,506
UPM-Kymmene Oyj (Paper & Forest Products)....... 29,210 837,429
-------------
5,543,967
-------------
FRANCE--11.5%
Air Liquide (Chemicals (Specialty))............. 7,120 1,119,751
Alstom (Engineering & Construction)............. 77,200 2,428,224
Axa (Insurance (Multi-Line)).................... 13,769 1,679,804
Canal Plus (Broadcasting (Television, Radio &
Cable))....................................... 2,100 589,277
Carrefour SA (Retail (Food Chains))............. 12,180 1,789,920
Castorama Dubois (Retail (Building Supplies))... 7,225 1,713,710
Coflexip SA (Metal Fabricators)................. 16,950 1,455,209
Compagnie de Saint Gobain (Manufacturing
(Diversified))................................ 3,500 557,658
Dexia France (Banks (Major Regional))........... 7,600 1,017,325
Elf Aquitaine SA (Oil (International
Integrated)).................................. 13,150 1,929,755
Groupe Danone (Foods)........................... 4,450 1,147,286
Lafarge SA (Construction (Cement &
Aggregates)).................................. 20,500 1,949,200
Pechiney SA Class A (Containers & Packaging
(Paper))...................................... 41,200 1,770,910
Renault SA (Automobiles)........................ 41,700 1,814,764
Rhodia SA (Chemicals (Specialty))............... 66,200 1,256,167
Schneider SA (Electrical Equipment)............. 9,500 533,449
Societe Generale Class A (Banks (Major
Regional)).................................... 7,650 1,348,264
Total Fina SA Class B (Oil & Gas (Refining &
Marketing))................................... 13,800 1,780,361
Valeo SA (Auto Parts & Equipment)............... 20,150 1,662,404
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
FRANCE--CONTINUED
Vivendi (Manufacturing (Diversified))........... 19,500 $ 1,579,619
-------------
29,123,057
-------------
GERMANY--8.5%
Allianz AG Vinkulierte Registered Shares
(Insurance (Multi-Line))...................... 6,400 1,775,431
BASF AG (Chemicals (Diversified))............... 31,100 1,374,304
Bayer AG (Chemicals (Diversified)).............. 27,600 1,149,905
Bayerische Motoren Werke AG (Automobiles)....... 2,430 1,671,490
Bayerische Vereinsbank AG (Banks (Major
Regional)).................................... 32,600 2,118,018
Bewag AG (Electric Companies)................... 45,820 706,428
DaimlerChrysler AG (Automobiles)................ 27,755 2,404,319
Deutsche Bank AG (Banks (Major Regional))....... 22,800 1,390,789
Deutsche Lufthansa AG (Airlines)................ 107,950 1,957,100
Mannesmann AG (Manufacturing (Diversified))..... 14,000 2,089,143
Metro AG (Retail (Specialty))................... 25,200 1,564,475
Muenchener Rueckversicherungs New Shares
(Insurance (Multi-Line))(b)................... 6,020 1,098,857
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance (Multi-Line))...................... 6,020 1,114,378
RWE AG (Manufacturing (Diversified))............ 22,900 1,060,124
-------------
21,474,761
-------------
GREECE--0.4%
Alpha Credit Bank (Banks (Major Regional))...... 7,346 473,544
Hellenic Telecommunications Organization SA
(Telephone)................................... 26,500 568,019
-------------
1,041,563
-------------
HONG KONG--1.6%
Hongkong Electric Holdings Ltd. (Electric
Companies).................................... 650,000 2,094,447
Swire Pacific Ltd. Class B (Manufacturing
(Diversified))................................ 2,750,000 2,055,781
-------------
4,150,228
-------------
HUNGARY--0.2%
Magyar Tavkozlesi Rt Sponsored ADR
(Telecommunications (Long Distance)).......... 21,900 602,250
-------------
INDIA--0.6%
Mahanagar Telephone Nigam Ltd. GDR
(Telecommunications (Long Distance)).......... 140,000 1,421,000
-------------
INDONESIA--0.3%
PT Indosat (Telecommunications (Long
Distance)).................................... 229,000 439,055
PT Indosat ADR (Telecommunications (Long
Distance)).................................... 20,000 390,000
-------------
829,055
-------------
ISRAEL--0.5%
Bank Hapoalim Ltd. (Banks (Major Regional))..... 221,500 568,262
Koor Industries Ltd. (Manufacturing
(Diversified))................................ 6,036 695,959
-------------
1,264,221
-------------
ITALY--2.6%
Assicurazioni Generali (Insurance
(Life/Health))................................ 30,500 1,056,843
Banca Intesa SPA (Banks (Major Regional))....... 691,600 1,547,698
San Paolo-IMI SPA (Banks (Major Regional))...... 109,159 1,485,953
Telecom Italia Mobile SPA (Telecommunications
(Cellular/Wireless)).......................... 182,500 1,089,715
Telecom Italia SPA (Telephone).................. 138,460 1,439,317
-------------
6,619,526
-------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
JAPAN--13.2%
77 Bank Ltd. (The) (Banks (Major Regional))..... 135,000 $ 1,182,291
Canon, Inc. (Office Equipment & Supplies)....... 63,000 1,811,360
Dai Nippon Printing Co., Ltd. (Specialty
Printing)..................................... 126,000 2,014,357
Fuji Photo Film Co. (Photography/Imaging)....... 30,000 1,135,198
Hitachi Credit Corp. (Consumer Finance)......... 85,000 1,681,935
Ito-Yokado Co., Ltd. (Retail (Food Chains))..... 30,000 2,007,664
Kao Corp. (Household Products (Non-Durable)).... 60,000 1,685,447
Kawasumi Laboratories, Inc. (Health Care
(Medical Products & Supplies))................ 125,000 1,869,276
Kirin Beverage Corp. (Beverages (Alcoholic)).... 83,000 1,488,068
Mabuchi Motor Co., Ltd. (Electrical
Equipment).................................... 20,000 1,858,949
Nippon COMSYS Corp. (Engineering &
Construction)................................. 100,000 1,623,482
Nippon Telegraph & Telephone Corp.
(Telephone)................................... 1,400 1,630,918
Rinnai Corp. (Household Furnishings &
Appliances)................................... 75,000 1,722,626
Rohm Co., Ltd (Electronics (Semiconductors)).... 13,000 2,035,342
Sanwa Bank Ltd. (The) (Banks (Major
Regional)).................................... 180,000 1,771,206
Secom Co., Ltd. (Services (Commercial &
Consumer)).................................... 20,000 2,082,022
Shin-Etsu Chemical Co., Ltd. (Chemicals
(Specialty)).................................. 52,000 1,739,976
Suzuki Motor Corp. (Automobiles)................ 140,000 2,226,607
Takeda Chemical Industries (Health Care (Drugs-
Major Pharmaceuticals))....................... 40,000 1,853,991
-------------
33,420,715
-------------
MALAYSIA--0.2%
Carlsberg Brewery Malaysia Berhad (Beverages
(Alcoholic))(c)............................... 150,000 383,886
Malaysian Oxygen Berhad (Chemicals
(Specialty))(c)............................... 104,000 221,801
-------------
605,687
-------------
MEXICO--1.4%
Cemex SA de CV Class B Sponsored ADR
(Construction (Cement & Aggregates)).......... 75,000 741,450
Coca-Cola Femsa SA Sponsored ADR (Beverages
(Non-Alcoholic))(b)........................... 61,000 1,181,875
Grupo Televisa SA Sponsored GDR (Broadcasting
(Television, Radio & Cable))(b)............... 20,000 896,250
Telefonos de Mexico SA Sponsored ADR Class L
(Telecommunications (Long Distance)).......... 8,000 646,500
-------------
3,466,075
-------------
NETHERLANDS--6.6%
ASM Lithography Holding NV (Equipment
(Semiconductor))(b)........................... 23,500 1,359,572
Benckiser NV B (Household Products (Non-
Durable))..................................... 40,900 2,182,756
Elsevier NV (Publishing)........................ 79,600 923,501
Equant NV (Services (Data Processing))(b)....... 17,550 1,618,029
Fortis (NL) NV (Financial (Diversified))........ 47,100 1,454,753
Getronics NV (Services (Data Processing))....... 28,500 1,096,289
IHC Caland NV (Oil & Gas (Drilling &
Equipment))................................... 20,530 804,533
ING Groep NV (Financial (Diversified)).......... 29,400 1,591,762
KPN NV (Telephone).............................. 21,700 1,018,222
Koninklijke (Royal) Philips Electronics NV
(Electronics (Components Distributors))....... 8,400 828,583
Royal Dutch Petroleum Co. (Oil (Domestic
Integrated)).................................. 48,600 2,846,795
VNU NV (Publishing)............................. 28,200 1,126,918
-------------
16,851,713
-------------
NEW ZEALAND--0.2%
Telecom Corporation of New Zealand Ltd.
(Telephone)................................... 100,000 429,235
-------------
PHILIPPINES--0.7%
Ayala Land, Inc. (Financial (Diversified))...... 2,500,000 788,460
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
PHILIPPINES--CONTINUED
Philippine Long Distance Telephone Co. Sponsored
ADR (Telecommunications (Long Distance))...... 30,000 $ 903,750
-------------
1,692,210
-------------
POLAND--0.3%
Elektrim Spolka Akcyjna SA (Distributors (Food &
Health))...................................... 54,000 763,886
-------------
SINGAPORE--1.4%
United Overseas Bank Ltd. (Banks (Major
Regional)).................................... 490,000 3,425,024
-------------
SOUTH AFRICA--0.8%
Anglo American PLC (Metals Mining)(b)........... 10,260 479,477
BOE Ltd. (Financial (Diversified)).............. 302,150 300,432
Liberty International PLC (Financial
(Diversified))................................ 21,162 147,996
Liberty Life Association of Africa (Insurance
(Life/ Health))............................... 45,052 577,119
Metro Cash and Carry Ltd. (Retail
(Specialty)).................................. 683,000 565,930
-------------
2,070,954
-------------
SOUTH KOREA--1.5%
Kookmin Bank (Banks (Major Regional))........... 115,000 2,334,847
Pohang Iron & Steel Co. Ltd. (Iron & Steel)..... 12,500 1,501,721
-------------
3,836,568
-------------
SPAIN--3.6%
Argentaria, Caja Postal y Banco Hipotecario de
Espana SA (Banks (Major Regional))............ 53,300 1,214,212
Banco Popular Espanol SA (Banks (Major
Regional)).................................... 31,400 2,258,632
Banco Santander Central Hispano SA (Banks (Major
Regional)).................................... 156,374 1,628,761
Iberdrola SA (Electric Companies)............... 68,400 1,041,857
Repsol SA (Oil & Gas (Refining & Marketing)).... 59,700 1,219,021
Telefonica SA (Telephone)(b).................... 34,731 1,673,011
-------------
9,035,494
-------------
SWEDEN--5.1%
AstraZeneca Group PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 65,758 2,560,170
Electrolux AB (Household Furnishings &
Appliances)................................... 84,700 1,773,355
Mandamus AB (Real Estate Development)........... 2,020 10,692
SSAB Svenskt Stal AB Series A (Iron & Steel).... 47,800 598,783
Sandvik AB Class B (Machinery (Diversified)).... 26,300 581,575
Skandia Forsakrings AB (Insurance
(Life/Health))................................ 148,600 2,779,125
Skandinaviska Enskilda Banken Class A (Banks
(Major Regional))............................. 165,900 1,931,852
Telefonaktiebolaget LM Ericsson Class B
(Communications Equipment).................... 80,900 2,593,028
-------------
12,828,580
-------------
SWITZERLAND--5.3%
Credit Suisse Group (Banks (Major Regional)).... 7,900 1,366,984
Nestle SA (Foods)............................... 1,387 2,499,043
Novartis AG Registered Shares (Health Care
(Drugs-Major Pharmaceuticals))................ 1,943 2,837,153
Roche Holding AG (Health Care (Drugs-Major
Pharmaceuticals))............................. 284 2,919,303
UBS AG (Banks (Major Regional))................. 8,900 2,656,392
Zurich Allied AG (Financial (Diversified))...... 2,170 1,233,946
-------------
13,512,821
-------------
TAIWAN--0.2%
Standard Foods Taiwan Ltd. GDR (Foods)(b)....... 59,210 464,798
-------------
TURKEY--0.3%
Yapi ve Kredi Bankasi AS (Banks (Major
Regional)).................................... 26,300,000 380,160
Yapi ve Kredi Bankasi AS (Banks (Major
Regional))(d)................................. 25,280,000 335,464
-------------
715,624
-------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
UNITED KINGDOM--20.0%
3i Group PLC (Investment Banking/Brokerage)..... 105,821 $ 1,203,497
BG PLC (Natural Gas)............................ 127,958 781,585
BOC Group PLC (Chemicals (Specialty))........... 33,593 656,610
Bank of Scotland (Banks (Major Regional))....... 114,244 1,512,689
Barclays PLC (Banks (Major Regional))........... 51,744 1,505,666
Bass PLC (Beverages (Alcoholic))................ 42,709 619,698
Berkeley Group PLC (The) (Homebuilding)......... 63,480 761,480
British Aerospace PLC (Aerospace/Defense)....... 132,783 861,813
British American Tobacco PLC (Tobacco).......... 56,619 532,365
British Petroleum Co. PLC (Oil (Domestic
Integrated)).................................. 205,057 3,675,123
British Telecommunications PLC (Telephone)...... 178,746 2,995,066
Cable & Wireless PLC (Telephone)................ 81,729 1,041,581
Compass Group PLC (Services (Commercial &
Consumer)).................................... 86,263 855,287
Debenhams PLC (Retail (Department Stores))...... 68,945 462,966
FirstGroup PLC (Services (Commercial &
Consumer)).................................... 128,000 699,117
GKN PLC (Auto Parts & Equipment)................ 50,783 866,929
Glaxo Wellcome PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 100,311 2,787,646
Granada Group PLC (Broadcasting (Television,
Radio & Cable))............................... 35,066 650,578
HSBC Holdings PLC (Financial (Diversified))..... 51,855 1,836,667
Hilton Group PLC (Gaming, Lottery & Pari-mutuel
Companies).................................... 150,646 597,217
Kingfisher PLC (Retail (Specialty))............. 99,811 1,148,519
Legal & General Group PLC (Insurance
(Multi-Line))................................. 443,463 1,128,929
Lloyds TSB Group PLC (Financial
(Diversified))................................ 166,275 2,254,043
Logica PLC (Services (Data Processing))......... 74,000 775,694
National Westminster Bank PLC (Banks (Major
Regional)).................................... 75,338 1,597,251
Norwich Union PLC (Insurance (Life/Health))..... 120,834 819,496
PowerGen PLC (Electric Companies)............... 72,627 783,053
RMC Group PLC (Construction (Cement &
Aggregates)).................................. 62,703 1,007,162
Reuters Holdings Group PLC (Publishing)......... 90,437 1,189,623
Rio Tinto PLC (Metals Mining)................... 53,506 896,968
Royal & Sun Alliance Insurance Group PLC
(Insurance (Multi-Line))...................... 125,000 1,121,138
Schroders PLC (Investment Banking/Brokerage).... 33,721 688,878
Serco Group PLC (Services (Commercial &
Consumer)).................................... 22,718 512,086
Shell Transport & Trading Co. PLC (Oil (Domestic
Integrated)).................................. 211,475 1,585,896
Siebe PLC (Machinery (Diversified))............. 176,907 837,269
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
UNITED KINGDOM--CONTINUED
SmithKline Beecham PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 131,389 $ 1,707,601
Tesco PLC (Retail (Food Chains))................ 408,638 1,051,547
Thames Water PLC (Water Utilities).............. 38,937 617,444
Unilever PLC (Foods)............................ 80,976 720,538
Vodafone AirTouch PLC (Telecommunications
(Cellular/Wireless)).......................... 136,088 2,681,431
Woolwich PLC (Consumer Finance)................. 85,978 503,142
Zeneca Group PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 54,366 2,102,998
-------------
50,634,286
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $216,950,034)............................... 241,432,461
-------------
WARRANTS--0.0%
GERMANY--0.0%
Muenchener Rueckversicherungs-Gesellschaft AG
Warrants (Insurance (Multi-Line))(b).......... 220 6,579
-------------
TOTAL WARRANTS
(Identified cost $0)......................................... 6,579
-------------
TOTAL LONG-TERM INVESTMENTS--95.3%
(Identified cost $216,950,034)............................... 241,439,040
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.6%
COMMERCIAL PAPER--4.6%
Corporate Asset Funding Co., Inc. 5.55%,
7/1/99........................................ A-1+ $ 3,155 3,155,000
Exxon Imperial Funding U.S., Inc. 5.20%,
7/1/99........................................ A-1+ 1,380 1,380,000
Pitney Bowes Credit Corp. 5%, 7/1/99............ A-1+ 1,675 1,675,000
Ford Motor Credit Co. 5.41%, 7/2/99............. A-1+ 5,505 5,504,173
---------------
11,714,173
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $11,714,173)................................................ 11,714,173
---------------
TOTAL INVESTMENTS--99.9%
(Identified cost $228,664,207)............................................... 253,153,213(a)
Cash and receivables, less liabilities--0.1%................................. 286,154
---------------
NET ASSETS--100.0%............................................................. $ 253,439,367
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $33,200,522 and gross
depreciation of $10,796,262 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$230,748,953.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the Trustees.
(d) Non-tradable bonus shares.
See Notes to Financial Statements
11
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense.................................. 0.4%
Airlines........................................... 0.8
Auto Parts & Equipment............................. 1.0
Automobiles........................................ 3.4
Banks (Major Regional)............................. 14.5
Banks (Money Center)............................... 0.7
Beverages (Alcoholic).............................. 1.8
Beverages (Non-Alcoholic).......................... 0.5
Broadcasting (Television, Radio & Cable)........... 0.9
Chemicals (Diversified)............................ 1.0
Chemicals (Specialty).............................. 2.1
Communications Equipment........................... 3.6
Construction (Cement & Aggregates)................. 1.5
Consumer Finance................................... 0.9
Containers & Packaging (Paper)..................... 0.7
Distributors (Food & Health)....................... 0.3
Electric Companies................................. 1.9
Electrical Equipment............................... 1.0
Electronics (Components Distributors).............. 0.3
Electronics (Semiconductors)....................... 0.8
Engineering & Construction......................... 1.7
Equipment (Semiconductor).......................... 0.6
Financial (Diversified)............................ 4.0
Foods.............................................. 2.5
Gaming, Lottery & Pari-Mutuel Companies............ 0.2
Health Care (Drugs-Major Pharmaceuticals).......... 7.0
Health Care (Medical Products & Supplies).......... 0.8
Homebuilding....................................... 0.3
Household Furnishings & Appliances................. 1.4
Household Products (Non-Durable)................... 1.6
Insurance (Life/Health)............................ 2.2
Insurance (Multi-Line)............................. 3.3
Insurance (Property-Casualty)...................... 0.7
Investment Banking/Brokerage....................... 0.8
Iron & Steel....................................... 0.9
Machinery (Diversified)............................ 0.6
Manufacturing (Diversified)........................ 3.3
Metal Fabricators.................................. 0.6
Metals Mining...................................... 0.6
Natural Gas........................................ 1.0
Office Equipment & Supplies........................ 0.8
Oil & Gas (Drilling & Equipment)................... 0.3
Oil & Gas (Exploration & Production)............... 0.2
Oil & Gas (Refining & Marketing)................... 1.2
Oil (Domestic Integrated).......................... 3.4
Oil (International Integrated)..................... 0.8
Paper & Forest Products............................ 0.8
Photography/Imaging................................ 0.5
Publishing......................................... 1.3
Real Estate Development............................ 0.1
Retail (Building Supplies)......................... 0.7
Retail (Department Stores)......................... 0.2
Retail (Food Chains)............................... 2.0
Retail (Specialty)................................. 1.4
Services (Commercial & Consumer)................... 1.7
Services (Data Processing)......................... 1.4
Specialty Printing................................. 0.8
Telecommunications (Cellular/Wireless)............. 1.9
Telecommunications (Long Distance)................. 1.9
Telephone.......................................... 5.9
Tobacco............................................ 0.2
Water Utilities.................................... 0.3
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$228,664,207)............................................. $ 253,153,213
Cash........................................................ 16,799
Receivables
Investment securities sold................................ 2,048,169
Dividends and interest.................................... 355,942
Fund shares sold.......................................... 210,170
Tax reclaim............................................... 206,169
Prepaid expenses............................................ 5,026
-------------
Total assets............................................ 255,995,488
-------------
LIABILITIES
Foreign currency at value (Identified cost $241,801)........ 241,819
Payables
Investment securities purchased........................... 1,663,549
Fund shares repurchased................................... 332,752
Investment advisory fee................................... 155,507
Financial agent fee....................................... 18,762
Trustees' fee............................................. 5,880
Accrued expenses............................................ 137,852
-------------
Total liabilities....................................... 2,556,121
-------------
NET ASSETS.................................................. $ 253,439,367
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 210,320,119
Undistributed net investment loss......................... (295,370)
Accumulated net realized gain............................. 18,936,699
Net unrealized appreciation............................... 24,477,919
-------------
NET ASSETS.................................................. $ 253,439,367
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 16,353,333
-------------
-------------
Net asset value and offering price per share................ $ 15.50
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 2,841,796
Interest.................................................. 354,894
Foreign taxes withheld.................................... (212,208)
-------------
Total investment income................................. 2,984,482
-------------
EXPENSES
Investment advisory fee................................... 916,902
Custodian................................................. 132,098
Financial agent fee....................................... 111,011
Printing.................................................. 38,920
Professional.............................................. 7,099
Trustees.................................................. 6,333
Miscellaneous............................................. 13,000
-------------
Total expenses.......................................... 1,225,363
-------------
NET INVESTMENT INCOME....................................... 1,759,119
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 18,986,331
Net realized gain on foreign currency transactions........ 56,260
Net change in unrealized appreciation (depreciation) on
investments............................................. (6,641,618)
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... 4,154
-------------
NET GAIN ON INVESTMENTS..................................... 12,405,127
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 14,164,246
-------------
-------------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 1,759,119 $ 1,631,804
Net realized gain (loss).................................. 19,042,591 51,043,087
Net change in unrealized appreciation (depreciation)...... (6,637,464) 150,814
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 14,164,246 52,825,705
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (3,263,175) --
Net realized gains........................................ (10,330,809) (41,161,214)
----------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (13,593,984) (41,161,214)
----------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,113,693 and 3,647,895
shares, respectively)................................... 33,469,388 63,751,174
Net asset value of shares issued from reinvestment of
distributions (873,524 and 2,641,331 shares,
respectively)........................................... 13,593,984 41,161,214
Cost of shares repurchased (2,285,739 and 3,994,250
shares, respectively)................................... (36,109,216) (68,770,405)
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 10,954,156 36,141,983
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 11,524,418 47,806,474
NET ASSETS
Beginning of period....................................... 241,914,949 194,108,475
----------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF ($295,370) AND $1,208,686,
RESPECTIVELY)........................................... $253,439,367 $ 241,914,949
----------------- -----------------
----------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/99 -----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 15.46 $ 14.53 $ 14.52 $ 12.70 $ 11.85 $ 12.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.12 0.12(1) 0.12(1) 0.11(1) 0.12(1) 0.08(1)
Net realized and unrealized gain
(loss).......................... 0.80 3.94 1.61 2.25 1.02 (0.07)
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 0.92 4.06 1.73 2.36 1.14 0.01
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.21) -- (0.22) (0.19) (0.04) (0.03)
Dividends from net realized
gains........................... (0.67) (3.13) (1.50) (0.33) (0.25) (0.34)
In excess of net investment
income.......................... -- -- -- (0.02) -- --
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.88) (3.13) (1.72) (0.54) (0.29) (0.37)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 0.04 0.93 0.01 1.82 0.85 (0.36)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 15.50 $ 15.46 $ 14.53 $ 14.52 $ 12.70 $ 11.85
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 5.93%(3) 27.92% 12.04% 18.65% 9.59% 0.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $253,439 $241,915 $194,108 $172,668 $134,455 $134,627
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 1.00%(2) 0.98% 1.01% 1.04% 1.07% 1.10%
Net investment income............. 1.44%(2) 0.72% 0.72% 0.80% 0.95% 0.64%
Portfolio turnover rate............. 47%(3) 93% 184% 142% 249% 172%
</TABLE>
(1) Computed using average shares outstanding.
(2) Annualized.
(3) Not annualized.
See Notes to Financial Statements
14
<PAGE>
PHOENIX-ENGEMANN NIFTY FIFTY SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
COMMON STOCKS--93.9%
BANKS (MAJOR REGIONAL)--30.3%
State Street Corp.................................... 1,900 $ 162,212
Wells Fargo Co....................................... 20,460 874,665
---------------
1,036,877
---------------
BEVERAGES (NON-ALCOHOLIC)--1.0%
Coca-Cola Co. (The).................................. 5,300 331,250
---------------
COMMUNICATIONS EQUIPMENT--7.8%
Lucent Technologies, Inc............................. 21,230 1,431,698
Tellabs, Inc. (b).................................... 18,180 1,228,286
---------------
2,659,984
---------------
COMPUTERS (HARDWARE)--2.2%
International Business Machines Corp................. 2,580 333,465
Sun Microsystems, Inc. (b)........................... 6,100 420,137
---------------
753,602
---------------
COMPUTERS (NETWORKING)--4.2%
Cisco Systems, Inc. (b).............................. 22,450 1,448,025
---------------
COMPUTERS (PERIPHERALS)--4.1%
EMC Corp. (b)........................................ 25,770 1,417,350
---------------
COMPUTERS (SOFTWARE & SERVICES)--9.7%
America Online, Inc. (b)............................. 9,550 1,055,275
BMC Software, Inc. (b)............................... 9,080 490,320
Compuware Corp. (b).................................. 8,620 274,224
Microsoft Corp. (b).................................. 16,600 1,497,112
---------------
3,316,931
---------------
CONSUMER FINANCE--4.0%
Countrywide Credit Industries, Inc................... 8,000 342,000
MBNA Corp............................................ 34,100 1,044,312
---------------
1,386,312
---------------
ELECTRICAL EQUIPMENT--2.9%
General Electric Co.................................. 8,730 986,490
---------------
ELECTRONICS (SEMICONDUCTORS)--8.3%
Intel Corp........................................... 16,950 1,008,525
Texas Instruments, Inc............................... 12,730 1,845,850
---------------
2,854,375
---------------
ENTERTAINMENT--1.8%
Time Warner, Inc..................................... 4,940 363,090
Walt Disney Co. (The)................................ 8,460 260,674
---------------
623,764
---------------
FINANCIAL (DIVERSIFIED)--7.1%
American Express Co.................................. 3,040 395,580
Citigroup, Inc....................................... 17,110 812,725
Freddie Mac.......................................... 12,780 741,240
Morgan Stanley Dean Witter & Co...................... 4,550 466,375
---------------
2,415,920
---------------
HEALTH CARE (DIVERSIFIED)--1.0%
Warner-Lambert Co.................................... 4,900 339,938
---------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--6.9%
Merck & Co., Inc..................................... 12,640 935,360
Pfizer, Inc.......................................... 9,250 1,015,188
Schering-Plough Corp................................. 7,590 402,270
---------------
2,352,818
---------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.7%
Guidant Corp. (b).................................... 4,950 254,616
Medtronic, Inc....................................... 8,420 655,708
---------------
910,324
---------------
INSURANCE (MULTI-LINE)--1.8%
American International Group, Inc.................... 5,405 632,723
---------------
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
INVESTMENT BANKING/BROKERAGE--2.6%
Goldman Sachs Group, Inc. (The)...................... 2,400 $ 173,400
Merrill Lynch & Co., Inc............................. 8,800 703,450
---------------
876,850
---------------
INVESTMENT MANAGEMENT--0.3%
Price (T. Rowe) Associates, Inc...................... 3,040 116,660
---------------
LODGING-HOTELS--2.0%
Carnival Corp........................................ 14,390 697,915
---------------
MANUFACTURING (DIVERSIFIED)--0.6%
United Technologies Corp............................. 3,040 217,930
---------------
PERSONAL CARE--1.8%
Avon Products, Inc................................... 6,460 358,530
Gillette Co. (The)................................... 6,400 262,400
---------------
620,930
---------------
RETAIL (BUILDING SUPPLIES)--4.2%
Home Depot, Inc. (The)............................... 15,530 1,000,714
Lowe's Companies, Inc................................ 7,590 430,258
---------------
1,430,972
---------------
RETAIL (DEPARTMENT STORES)--0.7%
Kohl's Corp. (b)..................................... 3,010 232,334
---------------
RETAIL (DRUG STORES)--1.2%
Walgreen Co.......................................... 14,400 423,000
---------------
RETAIL (GENERAL MERCHANDISE)--3.2%
Dayton Hudson Corp................................... 5,700 370,500
Wal-Mart Stores, Inc................................. 14,730 710,723
---------------
1,081,223
---------------
RETAIL (SPECIALTY)--0.8%
Staples, Inc. (b).................................... 9,405 290,967
---------------
SERVICES (ADVERTISING/MARKETING)--1.1%
Interpublic Group of Companies, Inc. (The)........... 4,540 393,278
---------------
SERVICES (COMMERCIAL & CONSUMER)--1.5%
Cendant Corp. (b).................................... 24,620 504,710
---------------
SERVICES (COMPUTER SYSTEMS)--1.1%
Electronic Data Systems Corp......................... 6,470 365,959
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--4.3%
MCI WorldCom, Inc. (b)............................... 16,980 1,464,525
---------------
TOTAL COMMON STOCKS
(Identified cost $26,746,379)................................. 32,183,936
---------------
TOTAL LONG-TERM INVESTMENTS--93.9%
(Identified cost $26,746,379)................................. 32,183,936
---------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--6.1%
COMMERCIAL PAPER--6.1%
CXC, Inc 5.80%, 7/1/99..................... A-1+ $ 1,000 1,000,000
Corporate Asset Funding Co., Inc. 5.55%,
7/1/99................................... A-1+ 1,085 1,085,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,085,000).................................. 2,085,000
---------------
TOTAL INVESTMENTS--100.0%
(Identified cost $28,831,379)................................. 34,268,936(a)
Cash and receivables, less liabilities--(0.0%)................ (1,944)
---------------
NET ASSETS--100.0%.............................................. $ 34,266,992
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,617,822 and gross
depreciation of $356,257 for federal income tax purposes. At June 30, 1999,
the aggregate cost of securities for federal income tax purposes was
$29,007,371.
(b) Non-income producing.
See Notes to Financial Statements
15
<PAGE>
PHOENIX-ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$28,831,379).............................................. $ 34,268,936
Cash........................................................ 3,528
Receivables
Fund shares sold.......................................... 284,870
Investment securities sold................................ 216,097
Dividends and interest.................................... 7,499
Prepaid expenses............................................ 238
------------
Total assets............................................ 34,781,168
------------
LIABILITIES
Payables
Investment securities purchased........................... 456,825
Fund shares repurchased................................... 10,589
Investment advisory fee................................... 17,409
Trustees' fee............................................. 7,353
Financial agent fee....................................... 4,740
Accrued expenses............................................ 17,260
------------
Total liabilities....................................... 514,176
------------
NET ASSETS.................................................. $ 34,266,992
------------
------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 29,577,050
Undistributed net investment loss......................... (22,462)
Accumulated net realized loss............................. (725,153)
Net unrealized appreciation............................... 5,437,557
------------
NET ASSETS.................................................. $ 34,266,992
------------
------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 2,413,452
------------
------------
Net asset value and offering price per share................ $ 14.20
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 56,111
Interest.................................................. 42,937
------------
Total investment income................................. 99,048
------------
EXPENSES
Investment advisory fee................................... 104,148
Financial agent fee....................................... 27,490
Custodian................................................. 14,301
Professional.............................................. 13,852
Trustees.................................................. 9,917
Printing.................................................. 6,136
Miscellaneous............................................. 2,207
------------
Total expenses.......................................... 178,051
Less expense borne by investment adviser................ (56,541)
------------
Net expenses............................................ 121,510
------------
NET INVESTMENT LOSS......................................... (22,462)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (481,024)
Net change in unrealized appreciation (depreciation) on
investments............................................. 3,139,676
------------
NET GAIN ON INVESTMENTS..................................... 2,658,652
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,636,190
------------
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
PHOENIX-ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FROM INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ (22,462) $ 3,598
Net realized gain (loss).................................. (481,024) (244,129)
Net change in unrealized appreciation (depreciation)...... 3,139,676 2,297,881
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 2,636,190 2,057,350
---------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- (3,598)
In excess of net investment income........................ -- (1,543)
---------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ -- (5,141)
---------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,140,367 and 1,342,696
shares, respectively)................................... 28,902,406 14,285,565
Net asset value of shares issued from reinvestment of
distributions (0 and 406 shares, respectively).......... -- 5,141
Cost of shares repurchased (769,107 and 300,910 shares,
respectively)........................................... (10,425,086) (3,189,433)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 18,477,320 11,101,273
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 21,113,510 13,153,482
NET ASSETS
Beginning of period....................................... 13,153,482 --
---------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF ($22,462) AND $0, RESPECTIVELY)........ $34,266,992 $13,153,482
---------------- -----------------
---------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
---------------- -----------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 12.62 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. (0.01)(3) 0.01(3)(4)
Net realized and unrealized gain (loss)................... 1.59 2.62
------- -------
TOTAL FROM INVESTMENT OPERATIONS........................ 1.58 2.63
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... 0.00 (0.01)
------- -------
TOTAL DISTRIBUTIONS..................................... 0.00 (0.01)
------- -------
CHANGE IN NET ASSET VALUE................................... 1.58 2.62
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $14.20 $12.62
------- -------
------- -------
Total return................................................ 12.50%(2) 26.26%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $34,267 $13,153
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1) 1.05%(1)
Net investment income..................................... (0.19)%(1) 0.07%(1)
Portfolio turnover rate..................................... 38%(2) 90%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.13 per share, respectively.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
17
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- --------- ----------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--11.2%
U.S. TREASURY BONDS--0.9%
U.S. Treasury Bonds 5.25%, 11/15/28... AAA $ 1,220 $1,079,755
U.S. Treasury Bonds 5.25%, 2/15/29.... AAA 1,810 1,624,040
----------
2,703,795
----------
U.S. TREASURY NOTES--10.3%
U.S. Treasury Notes 5.375%, 1/31/00... AAA 4,075 4,082,788
U.S. Treasury Notes 5.50%, 3/31/00.... AAA 750 752,002
U.S. Treasury Notes 6.875%, 3/31/00... AAA 3,100 3,138,217
U.S. Treasury Notes 6%, 8/15/00....... AAA 1,700 1,711,409
U.S. Treasury Notes 4.50%, 9/30/00.... AAA 355 351,207
U.S. Treasury Notes 4.625%,
11/30/00............................ AAA 500 494,632
U.S. Treasury Notes 5.25%, 8/15/03.... AAA 3,105 3,043,197
U.S. Treasury Notes 4.25%, 11/15/03... AAA 8,650 8,142,302
U.S. Treasury Notes 4.75%, 2/15/04.... AAA 4,050 3,882,938
U.S. Treasury Notes 5.625%, 5/15/08... AAA 4,584 4,488,458
----------
30,087,150
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $34,047,177)................................ 32,790,945
----------
AGENCY MORTGAGE-BACKED SECURITIES--2.7%
GNMA 6.50%, 11/15/23.................. AAA 1,384 1,342,034
GNMA 6.50%, 12/15/23.................. AAA 487 472,136
GNMA 6.50%, 2/15/24................... AAA 2,266 2,196,229
GNMA 6.50%, 6/15/28................... AAA 3,875 3,729,765
----------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $7,908,385)................................. 7,740,164
----------
MUNICIPAL BONDS--5.7%
CALIFORNIA--1.2%
Fresno County Pension Obligation
Taxable 6.21%, 8/15/06.............. AAA 1,000 975,000
Kern County Pension Obligation Revenue
Taxable 7.26%, 8/15/14.............. AAA 420 425,775
Long Beach Pension Obligation Taxable
6.87%, 9/1/06....................... AAA 230 232,587
Orange County Pension Obligation
Revenue Taxable Series A 7.62%,
9/1/08.............................. AAA 650 684,937
San Bernardino County Pension
Obligation Revenue Taxable 6.87%,
8/1/08.............................. AAA 110 110,412
San Bernardino County Pension
Obligation Revenue Taxable 6.94%,
8/1/09.............................. AAA 300 301,875
Sonoma County Pension Obligation
Revenue Taxable 6.625%, 6/1/13...... AAA 495 476,437
Ventura County Pension Obligation
Taxable 6.54%, 11/1/05.............. AAA 260 260,325
----------
3,467,348
----------
FLORIDA--0.7%
Miami Beach Special Obligation Revenue
Taxable 8.60%, 9/1/21............... AAA 875 951,563
Tampa Solid Waste System Revenue
Taxable Series A 6.33%, 10/1/06..... Aaa(d) 700 686,875
University of Miami Exchangeable
Revenue Taxable Series A 7.65%,
4/1/20 (e).......................... AAA 270 274,388
----------
1,912,826
----------
ILLINOIS--0.5%
Illinois Educational Facilities
Authority-Loyola University Revenue
Taxable Series A 7.84%, 7/1/24
(f)................................. AAA 1,500 1,546,875
----------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- --------- ----------
<S> <C> <C> <C>
MASSACHUSETTS--0.2%
Massachusetts Port Authority Revenue
Taxable Series C 6.05%, 7/1/02...... AA- $ 450 $ 447,750
----------
NEW YORK--0.9%
Long Island Power Authority Electrical
Systems Revenue Series A 5.50%,
12/1/10............................. AAA 490 507,763
New York State Dormitory Authority
Revenue Taxable 6.90%, 4/1/03....... BBB+ 650 656,500
New York State Taxable Series C 6.35%,
3/1/07.............................. AAA 1,500 1,464,375
----------
2,628,638
----------
PENNSYLVANIA--0.7%
Philadelphia Authority For Industrial
Development Pension Funding
Retirement Systems Revenue Taxable
Series A 5.79%, 4/15/09............. AAA 1,100 1,017,500
Pittsburgh Pension Obligation Taxable
Series C 6.50%, 3/1/17.............. AAA 1,250 1,168,750
----------
2,186,250
----------
TEXAS--1.2%
Dallas Civic Center Revenue 5.25%,
8/15/08............................. AAA 520 532,350
Dallas-Fort Worth International
Airport Revenue Taxable 6.40%,
11/1/07............................. AAA 1,000 977,500
Houston Water & Sewer System Revenue
Refunding, Jr. Lien, Series D 5%,
12/1/25............................. AAA 685 633,625
Texas State General Obligation Series
B 5.25%, 10/1/08.................... AA 275 283,594
Texas State Taxable Veterans Limited
Series B 6.10%, 12/1/03............. AA 1,000 990,000
----------
3,417,069
----------
VIRGINIA--0.3%
Newport News General Obligation
Taxable Series B 7.05%, 1/15/25..... AA 1,000 948,750
----------
TOTAL MUNICIPAL BONDS
(Identified cost $16,993,901)................................ 16,555,506
----------
ASSET-BACKED SECURITIES--2.5%
AESOP Funding II LLC 97-1, A2 144A
6.40%, 10/20/03 (c)................. AAA 1,200 1,199,831
Advanta Equipment Receivables 98-1, A4
5.98%, 12/15/06..................... AAA 490 485,712
Capita Equipment Receivables Trust
97-1, B 6.45%, 8/15/02.............. A+ 770 769,315
Case Equipment Loan Trust 98-A, A4
5.83%, 2/15/05...................... AAA 1,750 1,739,097
Ford Credit Auto Owner Trust 99-B, A4
5.80%, 6/15/02...................... AAA 500 496,836
Green Tree Financial Corp. 96-2, M1
7.60%, 4/15/27...................... AA- 675 683,907
Premier Auto Trust 98-3, B 6.14%,
9/8/04.............................. A+ 500 499,328
Triangle Funding Ltd. 98-2A, 3 144A
6.85%, 10/15/04 (c)................. BBB 1,500 1,496,250
----------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $7,384,083)................................. 7,370,276
----------
CORPORATE BONDS--4.8%
BANKS (MAJOR REGIONAL)--0.3%
U.S. Bank of Minnesota N.A. 6.30%,
7/15/08............................. A 500 478,125
</TABLE>
See Notes to Financial Statements
18
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- --------- ----------
<S> <C> <C> <C>
BANKS (MAJOR REGIONAL)--CONTINUED
Wachovia Corp. 5.625%, 12/15/08....... A+ $ 500 $ 456,250
----------
934,375
----------
BROADCASTING (TELEVISION, RADIO & CABLE)--0.3%
CSC Holdings, Inc. 7.625%, 7/15/18.... BB+ 1,000 950,000
----------
COMPUTERS (SOFTWARE & SERVICES)--0.2%
Computer Associates International,
Inc. Series B 6.375%, 4/15/05....... A- 535 508,250
----------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--0.2%
Station Casinos, Inc. 10.125%,
3/15/06............................. B+ 500 518,750
----------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.3%
Tenet Healthcare Corp. 8%, 1/15/05.... BB+ 1,000 980,000
----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.2%
Boston Scientific Corp. 6.625%,
3/15/05............................. BBB 550 525,250
----------
INSURANCE (MULTI-LINE)--0.3%
Willis Corroon Corp. 144A 9%, 2/1/09
(c)................................. B+ 815 790,550
----------
MANUFACTURING (DIVERSIFIED)--0.5%
American Standard, Inc. 7.375%,
4/15/05............................. BB- 1,000 960,000
Tyco International Group SA 6.375%,
6/15/05............................. A- 600 579,000
----------
1,539,000
----------
PAPER & FOREST PRODUCTS--0.2%
Buckeye Technologies, Inc. 8.50%,
12/15/05............................ BB- 700 707,000
----------
PERSONAL CARE--0.2%
Revlon Consumer Products Corp. 9%,
11/1/06 ............................ B 500 500,000
----------
PUBLISHING--0.1%
Charter Communications Holdings LLC
144A 8.625%, 4/1/09 (c)............. B+ 450 433,125
----------
PUBLISHING (NEWSPAPERS)--0.2%
Hollinger International Publishing,
Inc. 9.25%, 3/15/07................. BB- 625 639,062
----------
RETAIL (FOOD CHAINS)--0.4%
Meyer (Fred), Inc. 7.45%, 3/1/08...... BBB- 1,000 1,017,500
----------
SERVICES (COMMERCIAL & CONSUMER)--0.2%
United Rentals, Inc. Series B 9.50%,
6/1/08.............................. BB- 250 253,750
United Rentals, Inc. 8.80%, 8/15/08... BB- 250 245,937
----------
499,687
----------
TELECOMMUNICATIONS (LONG DISTANCE)--0.5%
Nextlink Communications, Inc. 10.75%,
11/15/08............................ B 370 380,175
Qwest Communications International,
Inc. Series B 7.50%, 11/1/08........ BB+ 1,100 1,094,500
----------
1,474,675
----------
TELEPHONE--0.2%
Century Telephone Enterprises, Inc.
Series F 6.30%, 1/15/08............. BBB+ 500 474,375
----------
TEXTILES (HOME FURNISHINGS)--0.3%
Westpoint Stevens, Inc. 7.875%,
6/15/05............................. BB 1,000 980,000
----------
TRUCKERS --0.1%
Teekay Shipping Corp. 8.32%, 2/1/08... BB+ 230 218,213
----------
TRUCKS & PARTS--0.1%
Cummins Engine Co., Inc. 6.45%,
3/1/05.............................. BBB+ 200 190,500
----------
TOTAL CORPORATE BONDS
(Identified cost $14,108,902)................................ 13,880,312
----------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- --------- ----------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES--7.2%
CS First Boston Mortgage Securities
Corp. 97-C2, A3 6.55%, 11/17/07..... AAA $ 2,500 $2,435,547
CS First Boston Mortgage Securities
Corp. 97-C2, B 6.72%, 11/17/07...... Aa(d) 2,000 1,950,937
CS First Boston Mortgage Securities
Corp. 98-C1, A1B 6.48%, 5/17/08..... AAA 500 483,750
CS First Boston Mortgage Securities
Corp. 95-AEW1, B 7.182%, 11/25/27... AA- 74 74,259
DLJ Commercial Mortgage Corp. 99-CG1,
A1B 6.46%, 1/10/09.................. Aaa(d) 2,000 1,932,500
DLJ Commercial Mortgage Corp. 98-CF2,
A1B 6.24%, 11/12/31................. Aaa(d) 2,500 2,394,141
DLJ Mortgage Acceptance Corp. 96-CF1,
A1B 144A 7.58%, 2/12/06 (c)......... AAA 1,400 1,433,250
First Union - Lehman Brothers
Commercial Mortgage 97-C1, B 7.43%,
4/18/07............................. Aa(d) 930 949,519
First Union Commercial Mortgage Trust
99-C1, A2 6.07%, 10/15/08........... AAA 2,000 1,881,875
G.E. Capital Mortgage Services, Inc.
96-8, 1M 7.25%, 5/25/26............. AA 242 239,174
GMAC Commercial Mortgage Securities,
Inc. 99-C1, A1 5.83%, 5/15/33....... AAA 449 433,747
LB Commercial Conduit Mortgage Trust
98-C4, A1B 6.21%, 10/15/08.......... AAA 2,500 2,378,239
Lehman Large Loan 97-LLI, B 6.95%,
3/12/07............................. AA 825 822,317
Nationslink Funding Corp. 96-1, B
7.69%, 12/20/05..................... AA 450 460,266
Residential Asset Securitization Trust
96-A8, A1 8%, 12/25/26.............. AAA 1 1,316
Residential Funding Mortgage
Securities I 96-S8, A4 6.75%,
3/25/11............................. AAA 601 591,987
Residential Funding Mortgage
Securities I 96-S1, A11 7.10%,
1/25/26............................. AAA 1,000 995,000
Residential Funding Mortgage
Securities I 96-S4, M1 7.25%,
2/25/26............................. AA 961 957,779
Structured Asset Securities Corp.
93-C1, B 6.60%, 10/25/24............ A+ 525 522,438
----------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $21,269,426)................................ 20,938,041
----------
FOREIGN GOVERNMENT SECURITIES--2.3%
COLOMBIA--0.4%
Republic of Colombia 144A 7.70%,
7/14/03 (c)......................... NR 610 524,600
Republic of Colombia 10.875%,
3/9/04.............................. BBB- 825 792,000
----------
1,316,600
----------
CROATIA--0.4%
Croatia Series B 5.813%, 7/31/06
(e)................................. BBB- 664 555,960
Croatia Series A 5.813%, 7/31/10
(e)................................. BBB- 775 620,000
----------
1,175,960
----------
KOREA--0.4%
Republic of Korea 8.875%, 4/15/08..... BBB- 1,000 1,061,250
----------
POLAND--0.7%
Poland Bearer PDI 5%, 10/27/14 (e).... BBB 2,350 2,091,500
----------
URUGUAY--0.4%
Republic of Uruguay 7.25%, 5/4/09..... BBB- 1,100 1,050,500
----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $6,957,718)................................. 6,695,810
----------
FOREIGN CORPORATE BONDS--0.9%
ARGENTINA--0.2%
Compania de Radiocomunicaciones
Moviles SA 144A 9.25%, 5/8/08 (c)... BBB- 300 265,500
</TABLE>
See Notes to Financial Statements
19
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- --------- ----------
<S> <C> <C> <C>
ARGENTINA--CONTINUED
Telecom Argentina - France Telecom SA
EMTN 144A 9.75%, 7/12/01 (c)........ BBB- $ 400 $ 401,000
----------
666,500
----------
CHILE--0.1%
Compania Sud Americana de Vapores SA
RegS 7.375%, 12/8/03................ BBB 120 112,950
Petropower I Funding Trust 144A 7.36%,
2/15/14 (c)......................... BBB 343 291,613
----------
404,563
----------
JAPAN--0.6%
IBJ Preferred Capital Co. LLC 144A
8.79%, 12/29/49 (c)(e).............. Ba(d) 910 763,449
SB Treasury Co. LLC Series A 144A
9.40%, 12/29/49 (c)(e).............. BB+ 910 879,709
----------
1,643,158
----------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $2,976,102)................................. 2,714,221
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
COMMON STOCKS--57.4%
BANKS (MAJOR REGIONAL)--2.2%
Mellon Bank Corp................................. 37,000 1,345,875
Wells Fargo Co................................... 120,100 5,134,275
-----------
6,480,150
-----------
BANKS (MONEY CENTER)--1.7%
Bank of America Corp............................. 66,982 4,910,618
-----------
BEVERAGES (NON-ALCOHOLIC)--1.4%
PepsiCo, Inc..................................... 106,600 4,124,087
-----------
BIOTECHNOLOGY--0.6%
Genzyme Corp. (b)................................ 38,300 1,857,550
Genzyme Surgical Products (b).................... 6,856 30,210
-----------
1,887,760
-----------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.6%
AT&T Corp.- Liberty Media Group Class A (b)...... 168,200 6,181,350
CBS Corp. (b).................................... 36,800 1,598,500
Chancellor Media Corp. (b)....................... 30,800 1,697,850
Clear Channel Communications, Inc. (b)........... 16,000 1,103,000
-----------
10,580,700
-----------
COMMUNICATIONS EQUIPMENT--2.4%
General Motors Corp. Class H (b)................. 17,000 956,250
Motorola, Inc.................................... 35,000 3,316,250
Tellabs, Inc. (b)................................ 38,400 2,594,400
-----------
6,866,900
-----------
COMPUTERS (HARDWARE)--4.7%
Dell Computer Corp. (b).......................... 64,900 2,401,300
International Business Machines Corp............. 67,000 8,659,750
Sun Microsystems, Inc. (b)....................... 39,200 2,699,900
-----------
13,760,950
-----------
COMPUTERS (NETWORKING)--2.1%
Cisco Systems, Inc. (b).......................... 94,250 6,079,125
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.2%
America Online, Inc. (b)......................... 21,000 2,320,500
Microsoft Corp. (b).............................. 93,600 8,441,550
Novell, Inc. (b)................................. 17,500 463,750
Yahoo!, Inc. (b)................................. 5,200 895,700
-----------
12,121,500
-----------
CONSUMER FINANCE--1.1%
Capital One Financial Corp....................... 55,500 3,090,656
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)--0.8%
Cardinal Health, Inc............................. 36,850 $ 2,363,006
-----------
ELECTRICAL EQUIPMENT--1.7%
General Electric Co.............................. 44,300 5,005,900
-----------
ELECTRONICS (SEMICONDUCTORS)--1.9%
Intel Corp....................................... 91,000 5,414,500
-----------
FINANCIAL (DIVERSIFIED)--3.8%
Citigroup, Inc................................... 97,950 4,652,625
Freddie Mac...................................... 34,100 1,977,800
Morgan Stanley Dean Witter & Co.................. 44,000 4,510,000
-----------
11,140,425
-----------
HEALTH CARE (DIVERSIFIED)--1.9%
American Home Products Corp...................... 27,100 1,558,250
Bristol-Myers Squibb Co.......................... 56,900 4,007,894
-----------
5,566,144
-----------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--2.2%
Pfizer, Inc...................................... 30,700 3,369,325
Schering-Plough Corp............................. 60,100 3,185,300
-----------
6,554,625
-----------
HEALTH CARE (GENERIC AND OTHER)--0.3%
Mylan Laboratories, Inc.......................... 32,600 863,900
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.3%
Bard (C.R.), Inc................................. 25,000 1,195,312
Baxter International, Inc........................ 35,900 2,176,437
Becton, Dickinson and Co......................... 17,500 525,000
-----------
3,896,749
-----------
HOUSEHOLD PRODUCTS (NON-DURABLE)--1.2%
Procter & Gamble Co. (The)....................... 38,500 3,436,125
-----------
INSURANCE (LIFE/HEALTH)--0.3%
ReliaStar Financial Corp......................... 20,600 901,250
-----------
INSURANCE (MULTI-LINE)--1.2%
American International Group, Inc................ 29,800 3,488,463
-----------
LODGING-HOTELS--0.6%
Carnival Corp.................................... 38,500 1,867,250
-----------
MANUFACTURING (DIVERSIFIED)--1.9%
Tyco International Ltd........................... 59,300 5,618,675
-----------
OIL & GAS (DRILLING & EQUIPMENT)--0.9%
Halliburton Co................................... 21,900 990,975
Schlumberger Ltd................................. 14,200 904,363
Transocean Offshore, Inc......................... 30,000 787,500
-----------
2,682,838
-----------
OIL (INTERNATIONAL INTEGRATED)--0.7%
Conoco, Inc. Class A............................. 68,300 1,903,863
-----------
PERSONAL CARE--0.7%
Gillette Co. (The)............................... 48,500 1,988,500
-----------
RETAIL (BUILDING SUPPLIES)--1.2%
Home Depot, Inc. (The)........................... 52,200 3,363,638
-----------
RETAIL (COMPUTERS & ELECTRONICS)--0.5%
Tandy Corp....................................... 31,000 1,515,125
-----------
RETAIL (DEPARTMENT STORES)--0.2%
Nordstrom, Inc................................... 20,400 683,400
-----------
RETAIL (FOOD CHAINS)--1.3%
Kroger Co. (The) (b)............................. 98,540 2,752,961
Safeway, Inc. (b)................................ 22,400 1,108,800
-----------
3,861,761
-----------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
RETAIL (GENERAL MERCHANDISE)--1.5%
Wal-Mart Stores, Inc............................. 89,600 $ 4,323,200
-----------
RETAIL (SPECIALTY)--0.8%
Staples, Inc. (b)................................ 74,475 2,304,070
-----------
SERVICES (COMMERCIAL & CONSUMER)--0.3%
ServiceMaster Co. (The).......................... 39,200 735,000
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--3.8%
AT&T Corp........................................ 136,747 7,632,193
MCI WorldCom, Inc. (b)........................... 41,175 3,551,344
-----------
11,183,537
-----------
TELEPHONE--0.9%
SBC Communications, Inc.......................... 44,400 2,575,200
-----------
WASTE MANAGEMENT--1.5%
Waste Management, Inc............................ 80,100 4,305,375
-----------
TOTAL COMMON STOCKS
(Identified cost $121,483,443)............................... 167,444,965
-----------
FOREIGN COMMON STOCKS--3.1%
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.6%
Elan Corp. PLC Sponsored ADR (Ireland) (b)....... 64,400 1,787,100
-----------
OIL (INTERNATIONAL INTEGRATED)--1.6%
BP Amoco PLC Sponsored ADR
(United Kingdom)............................... 42,686 4,631,431
-----------
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.9%
Vodafone AirTouch PLC Sponsored ADR (United
Kingdom)....................................... 13,700 $ 2,698,900
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $6,712,078)................................. 9,117,431
-----------
TOTAL LONG-TERM INVESTMENTS--97.8%
(Identified cost $239,841,215)............................... 285,247,671
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
--------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.9%
COMMERCIAL PAPER--1.9%
Koch Industries, Inc. 5.80%, 7/1/99 A-1+ $ 5,390 5,390,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $5,390,000)................................. 5,390,000
------------
TOTAL INVESTMENTS--99.7%
(Identified cost $245,231,215)............................... 290,637,671(a)
Cash and receivables, less liabilities--0.3%................. 935,258
------------
NET ASSETS--100.0%............................................. $291,572,929
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $51,050,705 and gross
depreciation of $5,740,701 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$245,327,667.
(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, 1999,
these securities amounted to a value of $8,478,877 or 2.9% 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.
(f) All or a portion segregated as collateral.
See Notes to Financial Statements
21
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$245,231,215)............................................. $ 290,637,671
Cash........................................................ 248,074
Receivables
Interest and dividends.................................... 1,520,475
Fund shares sold.......................................... 122,776
Prepaid expenses............................................ 5,654
-------------
Total assets............................................ 292,534,650
-------------
LIABILITIES
Payables
Investment securities purchased........................... 399,500
Fund shares repurchased................................... 321,446
Investment advisory fee................................... 126,550
Financial agent fee....................................... 20,080
Trustees' fee............................................. 5,880
Accrued expenses............................................ 88,265
-------------
Total liabilities....................................... 961,721
-------------
NET ASSETS.................................................. $ 291,572,929
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of benefical interest........... $ 234,835,132
Undistributed net investment income....................... 314,306
Accumulated net realized gain............................. 11,017,035
Net unrealized appreciation............................... 45,406,456
-------------
NET ASSETS.................................................. $ 291,572,929
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,746,156
-------------
-------------
Net asset value and offering price per share................ $ 14.05
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 3,705,669
Dividends................................................. 648,105
Foreign taxes withheld.................................... (5,407)
-------------
Total investment income................................. 4,348,367
-------------
EXPENSES
Investment advisory fee................................... 769,229
Financial agent fee....................................... 119,140
Custodian................................................. 32,364
Professional.............................................. 13,942
Trustees.................................................. 8,428
Miscellaneous............................................. 55,985
-------------
Total expenses.......................................... 999,088
-------------
NET INVESTMENT INCOME....................................... 3,349,279
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 11,204,638
Net change in unrealized appreciation (depreciation) on
investments............................................. (2,761,271)
-------------
NET GAIN ON INVESTMENTS..................................... 8,443,367
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 11,792,646
-------------
-------------
</TABLE>
See Notes to Financial Statements
22
<PAGE>
PHOENIX-GOODWIN BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 3,349,279 $ 6,484,210
Net realized gain (loss).................................. 11,204,638 1,823,127
Net change in unrealized appreciation (depreciation)...... (2,761,271) 36,386,238
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 11,792,646 44,693,575
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (3,279,104) (6,299,939)
Net realized gains........................................ (1,969,512) (9,082,295)
----------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (5,248,616) (15,382,234)
----------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,441,277 and 4,750,917
shares, respectively)................................... 33,930,350 60,237,782
Net asset value of shares issued from reinvestment of
distributions
(376,998 and 1,187,415 shares, respectively)............ 5,248,616 15,382,234
Cost of shares repurchased (2,458,908 and 4,412,737
shares, respectively)................................... (34,205,710) (56,055,533)
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 4,973,256 19,564,483
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 11,517,286 48,875,824
NEW ASSETS
Beginning of period....................................... 280,055,643 231,179,819
----------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$314,306 AND $244,131, RESPECTIVELY).................... $291,572,929 $280,055,643
----------------- -----------------
----------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
6/30/99 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 13.74 $ 12.26 $ 12.06 $ 12.30 $ 10.53 $ 11.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).......... 0.16 0.33 0.38 0.36 0.40(2) 0.38(1)(2)
Net realized and unrealized gain
(loss).............................. 0.41 1.94 1.73 0.89 2.02 (0.70)
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... 0.57 2.27 2.11 1.25 2.42 (0.32)
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.16) (0.32) (0.40) (0.35) (0.40) (0.36)
Dividends from net realized gains..... (0.10) (0.47) (1.51) (1.14) (0.25) (0.10)
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.26) (0.79) (1.91) (1.49) (0.65) (0.46)
--------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... 0.31 1.48 0.20 (0.24) 1.77 (0.78)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 14.05 $ 13.74 $ 12.26 $ 12.06 $ 12.30 $ 10.53
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return............................ 4.20%(5) 19.01% 17.93% 10.56% 23.28% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $291,573 $280,056 $231,180 $204,285 $193,302 $161,105
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 0.71%(4) 0.68% 0.71% 0.68% 0.65%(3) 0.69%
Net investment income................. 2.37%(4) 2.58% 2.92% 2.93% 3.44% 3.44%
Portfolio turnover rate................. 36%(5) 110% 181% 229% 223% 171%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.001
per share.
(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
23
<PAGE>
PHOENIX-GOODWIN GROWTH SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------------
<S> <C> <C> <C>
COMMON STOCKS--92.9%
AIRLINES--0.5%
Southwest Airlines Co................................ 289,000 $ 8,995,125
-----------------
BANKS (MAJOR REGIONAL)--3.7%
Mellon Bank Corp..................................... 407,600 14,826,450
Wells Fargo Co....................................... 1,334,500 57,049,875
-----------------
71,876,325
-----------------
BEVERAGES (NON-ALCOHOLIC)--0.4%
Coca-Cola Co. (The).................................. 147,050 8,377,983
-----------------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.4%
AT&T Corp. - Liberty Media Group Class A (b)......... 993,400 36,507,450
CBS Corp. (b)........................................ 408,500 17,744,219
Clear Channel Communications, Inc. (b)............... 186,800 12,877,525
-----------------
67,129,194
-----------------
CHEMICALS--1.0%
Du Pont (E.I.) de Nemours & Co....................... 293,000 20,015,562
-----------------
CHEMICALS (DIVERSIFIED)--0.4%
Monsanto Co.......................................... 209,450 8,260,184
-----------------
COMMUNICATIONS EQUIPMENT--4.8%
Lucent Technologies, Inc............................. 950,100 64,072,369
Tellabs, Inc. (b).................................... 451,400 30,497,712
-----------------
94,570,081
-----------------
COMPUTERS (HARDWARE)--4.4%
Dell Computer Corp. (b).............................. 531,300 19,658,100
International Business Machines Corp................. 351,400 45,418,450
Sun Microsystems, Inc. (b)........................... 312,750 21,540,656
-----------------
86,617,206
-----------------
COMPUTERS (NETWORKING)--2.8%
Cisco Systems, Inc. (b).............................. 852,150 54,963,675
-----------------
COMPUTERS (PERIPHERALS)--1.9%
EMC Corp. (b)........................................ 685,650 37,710,750
-----------------
COMPUTERS (SOFTWARE & SERVICES)--7.7%
America Online, Inc. (b)............................. 281,600 31,116,800
BMC Software, Inc. (b)............................... 188,850 10,197,900
Compuware Corp. (b).................................. 244,900 7,790,881
Microsoft Corp. (b).................................. 1,035,400 93,380,137
Yahoo!, Inc. (b)..................................... 57,550 9,912,987
-----------------
152,398,705
-----------------
CONSUMER FINANCE--2.4%
Capital One Financial Corp........................... 646,800 36,018,675
MBNA Corp............................................ 353,000 10,810,625
-----------------
46,829,300
-----------------
DISTRIBUTORS (FOOD & HEALTH)--0.8%
Cardinal Health, Inc................................. 241,350 15,476,569
-----------------
ELECTRICAL EQUIPMENT--2.9%
General Electric Co.................................. 508,750 57,488,750
-----------------
ELECTRONICS (SEMICONDUCTORS)--5.8%
Intel Corp........................................... 1,028,400 61,189,800
Texas Instruments, Inc............................... 371,450 53,860,250
-----------------
115,050,050
-----------------
ENTERTAINMENT--1.4%
Time Warner, Inc..................................... 215,000 15,802,500
Walt Disney Co. (The)................................ 376,000 11,585,500
-----------------
27,388,000
-----------------
EQUIPMENT (SEMICONDUCTOR)--0.1%
Applied Materials, Inc. (b).......................... 16,000 1,182,000
-----------------
<CAPTION>
SHARES VALUE
---------- -----------------
<S> <C> <C> <C>
FINANCIAL (DIVERSIFIED)--6.5%
American Express Co.................................. 73,500 $ 9,564,187
Citigroup, Inc....................................... 1,067,975 50,728,813
Freddie Mac.......................................... 323,950 18,789,100
Morgan Stanley Dean Witter & Co...................... 484,650 49,676,625
-----------------
128,758,725
-----------------
HEALTH CARE (DIVERSIFIED)--1.9%
Bristol-Myers Squibb Co.............................. 246,200 17,341,713
Warner-Lambert Co.................................... 296,000 20,535,000
-----------------
37,876,713
-----------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--5.4%
Lilly (Eli) & Co..................................... 181,000 12,964,125
Merck & Co., Inc..................................... 277,250 20,516,500
Pfizer, Inc.......................................... 562,700 61,756,325
Schering-Plough Corp................................. 205,250 10,878,250
-----------------
106,115,200
-----------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.1%
Medtronic, Inc....................................... 542,600 42,254,975
-----------------
HOUSEHOLD PRODUCTS (NON-DURABLE)--1.5%
Colgate-Palmolive Co................................. 90,000 8,887,500
Procter & Gamble Co. (The)........................... 231,900 20,697,075
-----------------
29,584,575
-----------------
INSURANCE (MULTI-LINE)--2.0%
American International Group, Inc.................... 335,650 39,292,028
-----------------
INSURANCE (PROPERTY-CASUALTY)--0.5%
Progressive Corp. (The).............................. 68,000 9,860,000
-----------------
INVESTMENT BANKING/BROKERAGE--1.1%
Merrill Lynch & Co., Inc............................. 262,550 20,987,591
-----------------
LODGING-HOTELS--1.1%
Carnival Corp........................................ 445,900 21,626,150
-----------------
MANUFACTURING (DIVERSIFIED)--3.9%
AlliedSignal, Inc.................................... 80,600 5,077,800
Illinios Tool Works, Inc............................. 74,000 6,068,000
Minnesota Mining & Manufacturing Co.................. 64,000 5,564,000
Tyco International Ltd............................... 419,600 39,757,100
United Technologies Corp............................. 294,000 21,076,125
-----------------
77,543,025
-----------------
PERSONAL CARE--0.9%
Avon Products, Inc................................... 190,000 10,545,000
Gillette Co. (The)................................... 183,150 7,509,150
-----------------
18,054,150
-----------------
RAILROADS--0.3%
Kansas City Southern Industries, Inc................. 100,000 6,381,250
-----------------
RESTAURANTS--0.5%
McDonald's Corp...................................... 247,000 10,204,188
-----------------
RETAIL (BUILDING SUPPLIES)--2.9%
Home Depot, Inc. (The)............................... 598,700 38,578,731
Lowe's Companies, Inc................................ 338,450 19,185,884
-----------------
57,764,615
-----------------
RETAIL (DEPARTMENT STORES)--0.6%
Kohl's Corp. (b)..................................... 142,250 10,979,922
-----------------
RETAIL (DRUG STORES)--1.2%
Walgreen Co.......................................... 798,000 23,441,250
-----------------
RETAIL (GENERAL MERCHANDISE)--4.2%
Costco Companies, Inc. (b)........................... 127,500 10,207,969
Dayton Hudson Corp................................... 288,100 18,726,500
Wal-Mart Stores, Inc................................. 1,110,200 53,567,150
-----------------
82,501,619
-----------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
PHOENIX-GOODWIN GROWTH SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------------
RETAIL (SPECIALTY)--1.4%
<S> <C> <C> <C>
Staples, Inc. (b).................................... 856,825 $ 26,508,023
-----------------
RETAIL (SPECIALTY-APPAREL)--0.6%
Gap, Inc. (The)...................................... 225,000 11,334,375
-----------------
SERVICES (ADVERTISING/MARKETING)--1.2%
Interpublic Group of Companies, Inc. (The)........... 269,700 23,362,763
-----------------
SERVICES (COMMERCIAL & CONSUMER)--1.0%
Cendant Corp. (b).................................... 990,000 20,295,000
-----------------
SERVICES (COMPUTER SYSTEMS)--0.5%
Electronic Data Systems Corp......................... 166,000 9,389,375
-----------------
SERVICES (DATA PROCESSING)--0.3%
Automatic Data Processing, Inc....................... 138,000 6,072,000
-----------------
TELECOMMUNICATIONS (LONG DISTANCE)--6.9%
AT&T Corp............................................ 650,653 36,314,570
MCI WorldCom, Inc. (b)............................... 1,162,794 100,290,983
-----------------
136,605,553
-----------------
TOTAL COMMON STOCKS
(Identified cost $1,383,187,711)................................. 1,831,122,524
-----------------
TOTAL LONG-TERM INVESTMENTS--92.9%
(Identified cost $1,383,187,711)................................. 1,831,122,524
-----------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- ----------
<S> <C> <C> <C>
MEDIUM-TERM NOTES--0.1%
Associates Corp. NA 9.125%, 4/1/00......... A-1+ $ 1,000 1,026,674
-----------------
TOTAL MEDIUM-TERM NOTES
(Identified cost $1,030,934)..................................... 1,026,674
-----------------
SHORT-TERM OBLIGATIONS--7.7%
COMMERCIAL PAPER--7.5%
Exxon Imperial Funding U.S., Inc. 5.70%,
7/1/99................................... A-1+ 25,000 25,000,000
Koch Industries, Inc. 5.80%, 7/1/99........ A-1+ 4,370 4,370,000
Lexington Parker Capital Co. LLC 5.50%,
7/1/99................................... A-1 375 375,000
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ---------- -----------------
<S> <C> <C> <C>
COMMERCIAL PAPER--CONTINUED
Exxon Imperial Funding U.S., Inc. 5.40%,
7/2/99................................... A-1+ $ 3,115 $ 3,114,533
General Electric Capital Corp. 5.20%,
7/8/99................................... A-1+ 5,555 5,549,383
Donnelley (R.R.) & Sons & Co. 5.13%,
7/9/99................................... A-1 11,390 11,377,015
Greenwich Funding Corp. 4.90%, 7/9/99...... A-1+ 2,600 2,597,169
Kimberly-Clark Corp. 5.02%, 7/12/99........ A-1+ 9,655 9,640,190
General Electric Capital Corp. 5%,
7/14/99.................................. A-1+ 5,135 5,125,729
General Electric Capital Corp. 5.03%,
7/15/99.................................. A-1+ 14,010 13,982,595
Ford Motor Credit Co. 4.89%, 7/19/99....... A-1 5,000 4,987,775
Kimberly-Clark Corp. 4.99%, 7/19/99........ A-1+ 10,185 10,159,588
General Electric Capital Corp. 4.90%,
7/22/99.................................. A-1+ 5,200 5,185,137
Warner-Lambert Co. 5.17%, 7/22/99.......... A-1+ 4,500 4,486,429
Albertson's, Inc. 5.03%, 7/27/99........... A-1 15,000 14,945,508
Ameritech Capital Funding Corp. 5.08%,
7/27/99.................................. A-1+ 12,000 11,955,973
Private Export Funding Corp. 4.85%,
7/28/99.................................. A-1+ 3,481 3,466,228
Albertson's, Inc. 5.04%, 7/29/99........... A-1 2,000 1,992,160
Private Export Funding Corp. 4.86%,
7/30/99.................................. A-1+ 2,500 2,489,897
Receivables Capital Corp. 5.07%, 8/20/99... A-1+ 2,814 2,795,278
BellSouth Telecommunications, Inc. 5.17%,
8/27/99.................................. A-1+ 2,435 2,415,068
Preferred Receivables Funding Corp. 5.28%,
9/24/99.................................. A-1 2,865 2,828,443
-----------------
148,839,098
-----------------
FEDERAL AGENCY SECURITIES--0.2%
Fannie Mae 4.87%, 8/24/99.................. 3,399 3,373,756
-----------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $152,212,854)................................... 152,212,854
-----------------
TOTAL INVESTMENTS--100.7%
(Identified cost $1,536,431,499)................................. 1,984,362,052(a)
Cash and receivables, less liabilities--(0.7%)................... (14,153,159)
-----------------
NET ASSETS--100.0%................................................. $ 1,970,208,893
-----------------
-----------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $466,361,558 and gross
depreciation of $20,507,268 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$1,538,507,762.
(b) Non-income producing.
See Notes to Financial Statements
25
<PAGE>
PHOENIX-GOODWIN GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$1,536,431,499)........................................... $ 1,984,362,052
Cash........................................................ 1,119
Receivables
Investment securities sold................................ 27,753,742
Fund shares sold.......................................... 715,041
Dividends and interest.................................... 677,252
Prepaid expenses............................................ 36,887
---------------
Total assets............................................ 2,013,546,093
---------------
LIABILITIES
Payables
Investment securities purchased........................... 38,553,342
Fund shares repurchased................................... 3,552,407
Investment advisory fee................................... 958,745
Financial agent fee....................................... 44,159
Trustees' fee............................................. 5,880
Accrued expenses............................................ 222,667
---------------
Total liabilities....................................... 43,337,200
---------------
NET ASSETS.................................................. $ 1,970,208,893
---------------
---------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 1,321,135,961
Undistributed net investment income....................... 1,013,265
Accumulated net realized gain............................. 200,129,114
Net unrealized appreciation............................... 447,930,553
---------------
NET ASSETS.................................................. $ 1,970,208,893
---------------
---------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 77,956,799
---------------
---------------
Net asset value and offering price per share................ $ 25.27
-------
-------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 6,294,361
Interest.................................................. 2,244,356
Foreign taxes withheld.................................... (31,899)
-------------
Total investment income................................. 8,506,818
-------------
EXPENSES
Investment advisory fee................................... 5,856,598
Financial agent fee....................................... 263,584
Custodian................................................. 144,136
Printing.................................................. 112,375
Professional.............................................. 40,063
Trustees.................................................. 8,428
Miscellaneous............................................. 31,310
-------------
Total expenses.......................................... 6,456,494
-------------
NET INVESTMENT INCOME....................................... 2,050,324
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 198,442,938
Net change in unrealized appreciation (depreciation) on
investments............................................. (67,756,227)
-------------
NET GAIN ON INVESTMENTS..................................... 130,686,711
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 132,737,035
-------------
-------------
</TABLE>
See Notes to Financial Statements
26
<PAGE>
PHOENIX-GOODWIN GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)....................................................... $ 2,050,324 $ 2,502,083
Net realized gain (loss)........................................................... 198,442,938 45,867,063
Net change in unrealized appreciation (depreciation)............................... (67,756,227) 390,908,702
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................... 132,737,035 439,277,848
-------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................................................. (2,322,260) (2,092,243)
Net realized gains................................................................. (25,723,528) (67,564,709)
-------------- ---------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.......................... (28,045,788) (69,656,952)
-------------- ---------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (6,462,141 and 14,661,827 shares, respectively)...... 158,226,030 306,260,617
Net asset value of shares issued from reinvestment of distributions (1,125,498 and
3,143,060 shares, respectively).................................................. 28,045,788 69,656,952
Cost of shares repurchased (8,040,561 and 17,964,177 shares, respectively)......... (197,050,473) (374,810,017)
-------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS.......................... (10,778,655) 1,107,552
-------------- ---------------
NET INCREASE IN NET ASSETS......................................................... 93,912,592 370,728,448
NET ASSETS
Beginning of period................................................................ 1,876,296,301 1,505,567,853
-------------- ---------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $1,013,265
AND $1,285,201, RESPECTIVELY).................................................... $1,970,208,893 $1,876,296,301
-------------- ---------------
-------------- ---------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 23.93 $ 19.16 $ 18.89 $ 18.13 $ 15.69 $ 16.59
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.03 0.03 0.13 0.19 0.20 0.23(1)(3)
Net realized and unrealized gain
(loss).......................... 1.67 5.65 3.70 2.10 4.60 0.02
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 1.70 5.68 3.83 2.29 4.80 0.25
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.03) (0.03) (0.13) (0.18) (0.17) (0.23)
Dividends from net realized
gains........................... (0.33) (0.88) (3.43) (1.35) (2.19) (0.92)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.36) (0.91) (3.56) (1.53) (2.36) (1.15)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 1.34 4.77 0.27 0.76 2.44 (0.90)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 25.27 $ 23.93 $ 19.16 $ 18.89 $ 18.13 $ 15.69
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return........................ 7.21%(5) 30.01% 21.07% 12.58% 30.85% 1.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $1,970,209 $1,876,296 $1,505,568 $1,235,395 $985,389 $616,221
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.68%(4) 0.69% 0.74% 0.72% 0.75%(2) 0.80%
Net investment income............. 0.22%(4) 0.15% 0.64% 1.03% 1.12% 1.38%
Portfolio turnover rate............. 71%(5) 102% 284% 167% 173% 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
27
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
VALUE INTEREST RESET
(000) DESCRIPTION RATE DATE VALUE
- - ------- --------------------------------------------- -------- -------- ------------
<C> <S> <C> <C> <C>
FEDERAL AGENCY SECURITIES--VARIABLE(B)--13.2%
$ 2,500 FFCB (final maturity 6/1/00)................. 4.98% 7/1/99 $ 2,500,000
4,500 FFCB (final maturity 7/24/00)................ 5.04 7/1/99 4,500,000
1,770 FHLB (final maturity 7/15/99)................ 5.54 7/15/99 1,770,385
3,500 FNMA (final maturity 9/17/99)................ 4.98 9/17/99 3,499,551
214 SBA (final maturity 1/25/21)................. 5.25 7/1/99 214,231
238 SBA (final maturity 5/25/21)................. 5.25 7/7/99 238,066
1,753 SBA (final maturity 10/25/22)................ 5.25 7/1/99 1,752,067
2,184 SBA (final maturity 2/25/23)................. 5.25 7/1/99 2,183,976
1,864 SBA (final maturity 2/25/23)................. 5.25 7/1/99 1,864,320
2,922 SBA (final maturity 9/25/23)................. 5.13 7/1/99 2,919,287
2,481 SBA (final maturity 3/25/24)................. 5.13 7/1/99 2,479,381
642 SLMA (final maturity 8/19/99)................ 5.32 7/7/99 642,000
2,500 SLMA (final maturity 11/18/99)............... 5.17 7/7/99 2,500,000
------------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE.................................... 27,063,264
------------
</TABLE>
<TABLE>
<CAPTION>
PAR STANDARD
VALUE & POOR'S MATURITY
(000) DESCRIPTION RATING DATE
- - ------- ------------------------------------- ----------- --------
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER--71.7%
8,635 Cargill, Inc......................... A-1+ 5.90 7/1/99 8,635,000
5,440 Pitney Bowes, Inc.................... A-1+ 5.87 7/1/99 5,440,000
2,125 Exxon Imperial Funding U.S., Inc..... A-1+ 5.40 7/2/99 2,124,680
3,811 Lexington Parker Capital Co. LLC..... A-1 5.60 7/2/99 3,810,407
2,500 SBC Communications, Inc.............. A-1+ 5.30 7/7/99 2,497,792
2,500 Greenwich Funding Corp............... A-1+ 4.90 7/8/99 2,497,618
3,472 Greenwich Funding Corp............... A-1+ 5.15 7/8/99 3,468,523
2,500 Receivables Capital Corp............. A-1+ 4.87 7/8/99 2,497,633
1,595 Donnelley (R.R.) & Sons Co........... A-1 5.13 7/9/99 1,593,182
2,130 Enterprise Funding Corp.............. A-1 4.95 7/9/99 2,127,657
3,500 Ford Motor Credit Co................. A-1+ 4.84 7/9/99 3,496,236
4,953 Albertson's, Inc..................... A-1 5.01 7/12/99 4,945,418
3,500 Kimberly-Clark Corp.................. A-1+ 5.02 7/12/99 3,494,631
3,400 Private Export Funding Corp.......... A-1+ 4.80 7/12/99 3,395,013
3,000 BellSouth Telecommunications, Inc.... A-1+ 4.90 7/13/99 2,995,100
2,500 Donnelly (R.R.) & Sons Co............ A-1 5.28 7/13/99 2,495,600
2,500 General Electric Capital Corp........ A-1+ 5.00 7/14/99 2,495,486
2,200 Albertson's, Inc..................... A-1 5.30 7/15/99 2,195,466
2,500 Greenwich Funding Corp............... A-1+ 5.05 7/15/99 2,495,090
1,538 Kimberly-Clark Corp.................. A-1+ 5.05 7/15/99 1,534,980
3,500 Coca-Cola Co......................... A-1+ 5.05 7/16/99 3,492,635
2,348 AlliedSignal, Inc.................... A-1 4.85 7/19/99 2,342,307
3,500 Kimberly-Clark Corp.................. A-1+ 4.99 7/19/99 3,491,267
690 Shell Oil Co......................... A-1+ 5.05 7/19/99 688,258
4,470 Ford Motor Credit Co................. A-1+ 4.89 7/20/99 4,458,464
2,100 Coca-Cola Co......................... A-1+ 5.10 7/21/99 2,094,050
3,000 Lexington Parker Capital Co. LLC..... A-1 5.05 7/21/99 2,991,583
2,500 Warner-Lambert Co.................... A-1+ 5.17 7/22/99 2,492,460
2,810 BellSouth Telecommunications, Inc.... A-1+ 5.17 7/23/99 2,801,122
3,500 Ameritech Corp....................... A-1+ 5.08 7/27/99 3,487,159
530 Schering-Plough Corp................. A-1+ 5.23 7/27/99 527,998
3,000 Bavaria Universal Funding Corp....... A-1+ 5.22 7/28/99 2,988,255
Private Export Funding Corp. 4.85%,
3,500 7/28/99.............................. A-1+ 4.85 7/28/99 3,487,269
3,000 Albertson's, Inc..................... A-1 5.04 7/29/99 2,988,240
2,445 Heinz (H.J.) Co...................... A-1 4.90 7/30/99 2,435,349
Private Export Funding Corp. 4.86%,
2,500 7/30/99.............................. A-1+ 4.86 7/30/99 2,490,213
3,982 Receivables Capital Corp............. A-1+ 5.06 8/13/99 3,957,933
1,835 Lexington Parker Capital Co. LLC..... A-1 4.90 8/20/99 1,822,512
2,500 Receivables Capital Corp............. A-1+ 5.07 8/20/99 2,482,396
1,000 Enterprise Funding Corp.............. A-1+ 4.84 8/26/99 992,471
3,500 Enterprise Funding Corp.............. A-1+ 5.25 8/26/99 3,471,417
3,500 BellSouth Telecommunications, Inc.... A-1+ 5.17 8/27/99 3,471,350
3,500 Exxon Imperial Funding U.S., Inc..... A-1+ 5.15 8/30/99 3,469,958
1,624 Lexington Parker Capital Co. LLC..... A-1 4.87 9/3/99 1,609,940
</TABLE>
See Notes to Financial Statements
28
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
<TABLE>
<CAPTION>
PAR STANDARD
VALUE & POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- - ------- ------------------------------------- ----------- ------ -------- ------------
COMMERCIAL PAPER--CONTINUED
<C> <S> <C> <C> <C> <C>
$ 500 Beta Finance, Inc.................... A-1+ 4.83% 9/8/99 $ 495,371
2,500 American Home Products Corp.......... A-1 5.10 9/13/99 2,473,792
Preferred Receivables Funding
2,500 Corp................................. A-1 4.85 9/13/99 2,475,076
Preferred Receivables Funding
2,500 Corp................................. A-1 4.87 9/13/99 2,474,974
1,261 Enterprise Funding Corp.............. A-1 4.87 9/17/99 1,247,694
Preferred Receivables Funding
3,500 Corp................................. A-1 5.28 9/24/99 3,456,367
3,000 General Electric Capital Corp........ A-1+ 4.94 2/4/00 2,910,257
2,500 Campbell Soup Co..................... A-1+ 4.85 4/13/00 2,403,337
------------
TOTAL COMMERCIAL PAPER.......................................................... 146,706,986
------------
MEDIUM-TERM NOTES(C)--5.7%
Associates Corporation of North
1,000 America.............................. AA- 6.68 9/17/99 1,003,242
Associates Corporation of North
600 America.............................. AA- 6.75 10/15/99 603,087
2,500 Beta Finance, Inc.................... AAA 5.35 3/9/00 2,500,000
Associates Corporation of North
2,500 America.............................. AA- 4.81 3/20/00 2,498,829
Associates Corporation of North
2,500 America.............................. AA- 9.13 4/1/00 2,570,870
2,500 Dupont (E.I.) de Nemours & Co........ AA- 5.08 4/3/00 2,498,695
------------
TOTAL MEDIUM-TERM NOTES......................................................... 11,674,723
------------
CERTIFICATES OF DEPOSIT(C)--9.8%
2,500 Canadian Imperial Holdings, Inc...... AA- 6.48 1/24/00 2,520,042
2,500 Deutsche Bank Financial, Inc......... AA 4.97 2/2/00 2,498,074
2,500 Canadian Imperial Holdings, Inc...... AA- 5.01 2/7/00 2,499,708
2,500 Deutsche Bank Financial, Inc......... AA 5.10 2/17/00 2,499,543
2,500 Canadian Imperial Holdings, Inc...... AA- 5.12 2/23/00 2,499,374
450 Canadian Imperial Holdings, Inc...... AA- 5.27 3/3/00 448,902
3,000 Deutsche Bank Financial, Inc......... AA 5.19 3/13/00 2,999,083
3,500 ABN AMRO Bank (b).................... AA 4.88 4/20/00 3,498,337
550 Deutsche Bank Financial, Inc......... AA 5.25 5/18/00 547,755
------------
TOTAL CERTIFICATES OF DEPOSIT................................................... 20,010,818
------------
TOTAL INVESTMENTS--100.4%
(Identified cost $205,455,791)................................................ 205,455,791(a)
Cash and receivables, less liabilities--(0.4%)................................ (830,974)
------------
NET ASSETS--100.0%.............................................................. $204,624,817
------------
------------
</TABLE>
(a) Federal Income Tax Information: At June 30, 1999, 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.
(c) The interest rate shown is the coupon rate.
See Notes to Financial Statements
29
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$205,455,791)............................................. $ 205,455,791
Cash........................................................ 5,111
Receivables
Fund shares sold.......................................... 744,015
Interest.................................................. 716,661
Prepaid expenses............................................ 3,880
-------------
Total assets............................................ 206,925,458
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 2,158,479
Investment advisory fee................................... 88,534
Financial agent fee....................................... 16,135
Trustees' fee............................................. 7,369
Accrued expenses............................................ 30,124
-------------
Total liabilities....................................... 2,300,641
-------------
NET ASSETS.................................................. $ 204,624,817
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 204,624,817
-------------
NET ASSETS.................................................. $ 204,624,817
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,462,504
-------------
-------------
Net asset value and offering price per share................ $ 10.00
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 4,980,228
-------------
Total investment income................................. 4,980,228
-------------
EXPENSES
Investment advisory fee................................... 394,119
Financial agent fee....................................... 98,235
Custodian................................................. 16,080
Printing.................................................. 16,163
Professional.............................................. 15,961
Trustees.................................................. 9,917
Miscellaneous............................................. 4,224
-------------
Total expenses.......................................... 554,699
Less expense borne by investment adviser................ (13,786)
-------------
Net expenses............................................ 540,913
-------------
NET INVESTMENT INCOME....................................... 4,439,315
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 4,439,315
-------------
-------------
</TABLE>
See Notes to Financial Statements
30
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
----------------- ------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)............................................. $ 4,439,315 $ 7,055,194
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... 4,439,315 7,055,194
----------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................................... (4,439,315) (7,055,197)
----------------- ------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................ (4,439,315) (7,055,197)
----------------- ------------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (25,229,342 and 47,209,211 shares,
respectively).......................................................... 252,293,420 472,092,185
Net asset value of shares issued from reinvestment of distributions
(443,931 and 705,519 shares, respectively)............................. 4,439,315 7,055,197
Cost of shares repurchased (24,891,913 and 40,894,255 shares,
respectively).......................................................... (248,919,139) (408,942,852)
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS............ 7,813,596 70,204,530
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS.................................... 7,813,596 70,204,527
NET ASSETS
Beginning of period...................................................... 196,811,221 126,606,694
----------------- ------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $0
AND $3, RESPECTIVELY).................................................. $ 204,624,817 $ 196,811,221
----------------- ------------------
----------------- ------------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
-------------- --------- --------- --------- --------- ---------
<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 (loss)..... 0.22(1) 0.50 0.50 0.50 0.56 0.38(1)
------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS................... 0.22 0.50 0.50 0.50 0.56 0.38
------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.22) (0.50) (0.50) (0.50) (0.56) (0.38)
------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............ (0.22) (0.50) (0.50) (0.50) (0.56) (0.38)
------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD..... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Total return....................... 2.26%(4) 5.09% 4.99% 4.98% 5.55% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)...................... $204,625 $196,811 $126,607 $131,361 $102,943 $94,586
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses............... 0.55%(3) 0.55% 0.55% 0.55% 0.53%(2) 0.55%
Net investment income............ 4.50%(3) 4.99% 5.07% 4.89% 5.57% 3.85%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.001
and $0.003 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) Annualized.
(4) Not annualized.
See Notes to Financial Statements
31
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
------- ------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--5.0%
U.S. TREASURY BONDS--2.6%
U.S. Treasury Bonds 5.25%, 2/15/29......... Aaa $ 5,250 $ 4,710,613
---------------
U.S. TREASURY NOTES--2.4%
U.S. Treasury Notes 5.50%, 5/15/09......... Aaa 4,350 4,256,274
---------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $8,963,755)................................. 8,966,887
---------------
AGENCY MORTGAGE-BACKED SECURITIES--0.7%
GNMA 8%, 9/15/06........................... Aaa 5 5,226
GNMA 8%, 10/15/06.......................... Aaa 112 116,399
GNMA 6.50%, '23-'26........................ Aaa 1,180 1,142,308
---------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $1,283,877)................................. 1,263,933
---------------
MUNICIPAL BONDS--12.3%
CALIFORNIA--2.4%
Alameda Corridor Transportation Authority
Revenue Taxable Series C 6.60%,
10/1/29.................................. Aaa 1,750 1,585,937
Orange County Pension Obligation Revenue
Taxable Series A 7.67%, 9/1/09........... Aaa 2,620 2,777,200
---------------
4,363,137
---------------
CONNECTICUT--1.7%
Mashantucket Western Pequot Tribe Revenue
Taxable Series A 144A 6.91%, 9/1/12 (b).. Aaa 1,100 1,075,250
Mashantucket Western Pequot Tribe Revenue
Taxable Series A 144A 6.57%, 9/1/13 (b).. Aaa 2,140 2,024,975
---------------
3,100,225
---------------
FLORIDA--2.4%
Palm Beach County Solid Waste Industrial
Development Project B Revenue Taxable
10.50%, 1/1/11 (e)(f).................... NR 1,500 750,000
Tampa Solid Waste System Revenue Taxable
Series A 6.46%, 10/1/09.................. Aaa 2,250 2,185,312
University of Miami Exchangeable Revenue
Taxable Series A 7.65%, 4/1/20........... Aaa 1,310 1,331,288
---------------
4,266,600
---------------
ILLINOIS--2.4%
Illinois Educational Facilities
Authority-Loyola University Revenue
Taxable Series A 7.84%, 7/1/24........... Aaa 1,600 1,650,000
Illinois Educational Facilities
Authority-Loyola University Revenue
Taxable Series C 7.12%, 7/1/11........... Aaa 1,330 1,351,613
Illinois Educational Facilities
Authority-Loyola University Revenue
Series A 5.70%, 7/1/24................... Aaa 1,200 1,228,500
---------------
4,230,113
---------------
MASSACHUSETTS--0.8%
Massachusetts Port Authority Revenue
Taxable Series C 6.35%, 7/1/06........... Aa 1,500 1,470,000
---------------
PENNSYLVANIA--1.8%
Philadelphia Authority For Industrial
Development Pension Funding Retirement
Systems Revenue Taxable 6.35%, 4/15/28
......................................... Aaa 1,500 1,316,250
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
------- ------- ---------------
<S> <C> <C> <C>
PENNSYLVANIA--CONTINUED
Pittsburgh Pension General Obligation
Taxable Series B 6.35%, 3/1/13........... Aaa $ 2,000 $ 1,902,500
---------------
3,218,750
---------------
TEXAS--0.8%
Texas State University System Revenue
6.16%, 3/15/06........................... Aaa 1,495 1,453,888
---------------
TOTAL MUNICIPAL BONDS
(Identified cost $23,233,843)................................ 22,102,713
---------------
ASSET-BACKED SECURITIES--8.0%
ContiMortgage Home Equity Loan Trust 98-1,
B 7.86%, 4/15/29......................... Baa 4,000 3,784,375
Continental Airlines, Inc. Series 97-2D
7.522%, 6/30/01.......................... Ba 1,398 1,394,357
Green Tree Financial Corp. 94-1, B2 7.85%,
4/15/19.................................. Baa 3,000 2,848,590
Green Tree Financial Corp. 97-4, M1 7.22%,
2/15/29.................................. Aa 2,500 2,472,657
IMC Home Equity Loan Trust 98-1, B 7.87%
6/20/29.................................. Baa 2,000 1,862,188
Team Fleet Financing Corp. 96-1, B 144A
7.10%, 12/15/02 (b)...................... BBB(c) 1,975 1,945,066
---------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $15,028,863)................................ 14,307,233
---------------
CORPORATE BONDS--17.0%
AIRLINES--1.0%
US Airways, Inc. Series 98-1 Class A 6.85%,
1/30/18.................................. A 1,860 1,746,075
---------------
AUTOMOBILES--1.4%
Titan Tire Corp. 7%, 2/11/00............... NR 2,500 2,481,250
---------------
BANKS (MAJOR REGIONAL)--1.3%
BNP U.S. Funding LLC Series A 144A, 7.738%,
12/31/49 (b)(d).......................... A 2,500 2,347,057
---------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.2%
Poland Communications, Inc. Series B
9.875%, 11/1/03.......................... B 2,200 2,211,000
---------------
COMMUNICATIONS EQUIPMENT--0.6%
Metromedia Fiber Network, Inc. 10%,
11/15/08................................. B 1,140 1,174,200
---------------
COMPUTERS (SOFTWARE & SERVICES)--1.0%
ICG Holdings, Inc. 0%, 9/15/05 (d)......... NR 1,150 1,035,000
PSINet, Inc. 11.50%, 11/1/08............... B 740 777,000
---------------
1,812,000
---------------
ENTERTAINMENT--1.1%
SFX Entertainment, Inc. 9.125%, 12/1/08.... B 2,000 1,960,000
---------------
HOMEBUILDING--1.0%
Lennar Corp. 7.625%, 3/1/09................ Ba 2,000 1,887,500
---------------
INSURANCE (MULTI-LINE)--0.8%
Willis Corroon Corp. 144A 9%, 2/1/09 (b)... Ba 1,500 1,455,000
---------------
LEISURE TIME (PRODUCTS)--1.0%
Bally Total Fitness Holding Corp. Series D
9.875%, 10/15/07......................... B 1,900 1,843,000
---------------
OIL & GAS (EXPLORATION & PRODUCTION)--1.0%
Benton Oil & Gas Co. 11.625%, 5/1/03....... B 1,000 720,000
Benton Oil & Gas Co. 9.375%, 11/1/07....... B 1,500 1,108,125
---------------
1,828,125
---------------
</TABLE>
See Notes to Financial Statements
32
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
------- ------- ---------------
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS--0.9%
S.D. Warren Co. PIK 14%, 12/15/06.......... NR $ 1,390 $ 1,585,169
---------------
SERVICES (COMMERCIAL & CONSUMER)--0.6%
ARA Services, Inc. 10.625%, 8/1/00......... Baa 54 56,565
Fisher Scientific International, Inc. 9%,
2/1/08................................... B 1,000 950,000
---------------
1,006,565
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.2%
EchoStar DBS Corp. 144A 9.375%, 2/1/09
(b)...................................... B 2,000 2,045,000
Interamericas Communications Corp. 14%,
10/27/07................................. NR 1,830 1,253,550
RCN Corp. Series B 0%, 2/15/08 (d)......... B 1,000 635,000
---------------
3,933,550
---------------
TELEPHONE--0.4%
Pathnet, Inc. 12.25%, 4/15/08.............. NR 1,175 681,500
---------------
TEXTILES (APPAREL)--1.4%
Collins & Aikman Corp. 11.50%, 4/15/06..... B 2,390 2,437,800
---------------
TRUCKERS--0.1%
Hvide Marine, Inc. 8.375%, 2/15/08......... Caa 300 138,000
---------------
TOTAL CORPORATE BONDS
(Identified cost $32,513,127)................................ 30,527,791
---------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--20.8%
CS First Boston Mortgage Securities Corp.
144A 7.077%, 2/20/07 (b)................. A(c) 2,000 1,925,625
CS First Boston Mortgage Securities Corp.
97-1R, 1M4 144A 7.251%, 2/28/22 (b)...... Baa 2,579 2,492,258
Commercial Mortgage Asset Trust 99-C1 D
7.35%, 10/17/13.......................... Baa 1,750 1,565,891
DLJ Mortgage Acceptance Corp. 97-CF2, B2
144A 7.14%, 11/15/08 (b)................. Baa 2,200 2,002,000
First Chicago/Lennar Trust 97-CHL1, D 144A
8.055%, 5/29/08 (b)...................... BB(c) 2,000 1,651,875
First Union - Lehman Brothers - Bank of
America 98-C2, A2 6.56%, 11/18/08........ Aaa 3,000 2,924,139
G.E. Capital Mortgage Services, Inc. 96-8,
2A5 7.50%, 5/25/26....................... AAA(c) 1,184 1,186,593
General Growth Properties Series 1, A2 144A
6.602%, 11/15/07 (b)..................... Aaa 2,000 1,960,760
IMPAC CMB Trust 98-2, M3 7.25%, 4/25/28.... A(c) 723 723,260
LB Commercial Conduit Mortgage Trust 98-C4,
A1B 6.21%, 10/15/08...................... Aaa 2,250 2,140,416
Merrill Lynch Mortgage Investors, Inc.
96-C2, C 6.96%, 11/21/28................. A(c) 3,607 3,566,421
Morgan Stanley Capital I 98-WF2, C 6.77%,
6/15/08.................................. A(c) 1,700 1,657,500
Nationslink Funding Corp. 99-1, A2 6.316%,
11/20/08................................. Aaa 2,100 2,011,742
Norwest Asset Securities Corp. 99-5, B3
6.25%, 3/25/14........................... BBB(c) 1,554 1,405,615
Norwest Asset Securities Corp. 99-10, B1
6.25%, 4/25/14........................... AA(c) 1,708 1,625,656
Norwest Asset Securities Corp. 99-10, B3
6.25%, 4/25/14........................... BBB(c) 891 806,957
Residential Asset Securitization Trust
96-A4, A13 7.50%, 9/25/26................ AAA(c) 1,000 1,010,000
Residential Asset Securitization Trust
96-A8, A1 8%, 12/25/26................... AAA(c) 4 3,760
Residential Funding Mortgage Securities I
94-S7, M3 6.50%, 3/25/24................. BBB(c) 3,980 3,658,858
Ryland Mortgage Securities Corp. III 92-A,
1A 8.256%, 3/29/30....................... A-(c) 598 596,647
Securitized Asset Sales Inc. 95-6, B3 144A
7%, 12/25/10 (b)......................... NR 1,227 1,148,754
<CAPTION>
PAR
MOODY'S 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 $ 1,517 $ 1,366,711
---------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $38,578,807)................................ 37,431,438
---------------
FOREIGN GOVERNMENT SECURITIES--17.6%
ARGENTINA--1.5%
Republic of Argentina RegS 11.75%, 2/12/07
(g)...................................... Ba 3,250 2,612,527
---------------
BULGARIA--1.5%
Republic of Bulgaria FLIRB Series A Bearer
Euro 2.50%, 7/28/12 (d).................. B 4,430 2,705,069
---------------
COLOMBIA--1.3%
Republic of Colombia 10.875%, 3/9/04....... Baa 2,500 2,400,000
---------------
COSTA RICA--1.1%
Republic of Costa Rica 144A 9.335%, 5/15/09
(b)...................................... Ba 2,000 1,955,000
---------------
CROATIA--1.7%
Croatia Series B 5.8125%, 7/31/06 (d)...... Baa 1,770 1,482,559
Croatia Series A 5.8125%, 7/31/10 (d)...... Baa 2,000 1,600,000
---------------
3,082,559
---------------
MEXICO--5.1%
United Mexican States Global Bond 11.375%,
9/15/16.................................. Ba 2,750 2,954,531
United Mexican States Global Bond 11.50%,
5/15/26.................................. Ba 5,600 6,258,000
---------------
9,212,531
---------------
PANAMA--1.9%
Republic of Panama 8.875%, 9/30/27......... Ba 45 37,553
Republic of Panama 9.375%, 4/1/29.......... Ba 3,500 3,342,500
---------------
3,380,053
---------------
PHILIPPINES--1.3%
Republic of Philippines 9.875% 1/15/19..... Ba 2,375 2,336,406
---------------
POLAND--2.2%
Poland Bearer PDI 5%, 10/27/14 (d)......... Baa 4,400 3,916,000
---------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $32,751,674)................................ 31,600,145
---------------
FOREIGN CORPORATE BONDS--12.5%
ARGENTINA--1.6%
Compania de Radiocomunicaciones Moviles SA
144A 9.25%, 5/8/08 (b)................... Ba 3,200 2,832,000
---------------
BERMUDA--0.3%
AES China Generating Co. 10.125%,
12/15/06................................. Ba 985 625,475
---------------
BRAZIL--1.0%
Globo Communicacoes e Participacoes SA 144A
10.625%, 12/5/08 (b)..................... B 2,500 1,762,500
---------------
CHILE--1.8%
Compania Sud Americana de Vapores SA RegS
7.375%, 12/8/03.......................... BBB(c) 2,000 1,882,500
Empresa Nacional de Electricidad SA 7.75%,
7/15/08.................................. Baa 1,500 1,395,000
---------------
3,277,500
---------------
GREECE--1.0%
Fage Dairy Industries SA 9%, 2/1/07........ B 2,000 1,760,000
---------------
INDONESIA--0.2%
APP Finance II Mauritius Ltd. 12%, 12/29/49
(d)...................................... Caa 590 389,400
---------------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
------- ------- ---------------
<S> <C> <C> <C>
JAPAN--1.1%
SB Treasury Co. LLC Series A 144A 9.40%,
12/29/49 (b)(d).......................... Baa $ 2,000 $ 1,933,426
---------------
MEXICO--0.8%
Gruma SA de CV 7.625%, 10/15/07............ Ba 1,650 1,476,750
---------------
NETHERLANDS--2.2%
PTC International Finance BV 0%, 7/1/07
(d)...................................... B 5,500 4,015,000
---------------
POLAND--1.9%
PDVSA Finance Ltd. 7.50%, 11/15/28......... A 3,250 2,400,938
TPSA Finance BV 144A 7.75%, 12/10/08 (b)... Baa 1,125 1,096,875
---------------
3,497,813
---------------
UNITED KINGDOM--0.6%
Orange PLC 8.75% 6/1/06 144A (b)........... Ba 1,000 1,000,000
---------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $24,121,804)................................ 22,569,864
---------------
FOREIGN CONVERTIBLE BONDS--1.3%
CANADA--0.2%
PLD Telekom Cv. 144A 9%, 6/1/06 (b)........ NR 600 333,750
---------------
RUSSIA--1.1%
Lukinter Finance Cv. RegS 3.50%, 5/6/02 ... CCC-(c) 2,700 2,011,500
---------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $4,060,275)................................. 2,345,250
---------------
<CAPTION>
SHARES VALUE
------- ---------------
<S> <C> <C> <C>
WARRANTS--0.1%
COMMUNICATIONS EQUIPMENT--0.0%
Loral Space & Communications, Inc. Warrants (e)..... 1,000 $ 6,000
---------------
FOREIGN GOVERNMENT--0.0%
Republic of Argentina Warrants (Argentina) (e)...... 1,440 1,656
Republic of Argentina Warrants (Argentina) (e)...... 3,050 2,669
TELECOMMUNICATIONS (LONG DISTANCE)--0.0%
FirstCom Corp. 144A Warrants (b)(e)................. 64,050 240,187
---------------
TELEPHONE--0.0%
Pathnet, Inc. 144A Warrants (b)(e).................. 1,000 10,000
---------------
TOTAL WARRANTS
(Identified cost $0)......................................... 260,512
---------------
TOTAL LONG-TERM INVESTMENTS--95.3%
(Identified cost $180,536,025)............................... 171,375,766
---------------
<CAPTION>
STANDARD
& PAR
POOR'S VALUE
RATING (000)
------- -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.6%
COMMERCIAL PAPER--1.6%
CXC, Inc. 5.75%, 7/1/99.................... A-1+ $ 2,845 2,845,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,845,000)................................. 2,845,000
---------------
TOTAL INVESTMENTS--96.9%
(Identified cost $183,381,025)............................... 174,220,766(a)
Cash and receivables, less liabilities--3.1%................. 5,659,980
---------------
NET ASSETS--100.0%............................................. $ 179,880,746
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $1,384,269 and gross
depreciation of $12,196,703 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$185,033,200.
(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, 1999,
these securities amounted to a value of $33,237,358 or 18.5% 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.
(f) Security in default.
(g) Par value represents Argentine Pesos.
See Notes to Financial Statements
34
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$183,381,025)............................................. $ 174,220,766
Cash........................................................ 684,868
Receivables
Investment securities sold................................ 4,496,444
Interest and dividends.................................... 3,311,149
Fund shares sold.......................................... 76,789
Prepaid expenses............................................ 4,156
-------------
Total assets............................................ 182,794,172
-------------
LIABILITIES
Payables
Investment securities purchased........................... 2,682,097
Fund shares repurchased................................... 124,034
Financial agent fee....................................... 15,675
Investment advisory fee................................... 12,826
Trustees' fee............................................. 7,369
Accrued expenses............................................ 71,425
-------------
Total liabilities....................................... 2,913,426
-------------
NET ASSETS.................................................. $ 179,880,746
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 200,641,432
Undistributed net investment income....................... 1,163,700
Accumulated net realized loss............................. (12,764,127)
Net unrealized depreciation............................... (9,160,259)
-------------
NET ASSETS.................................................. $ 179,880,746
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 19,934,097
-------------
-------------
Net asset value and offering price per share................ $ 9.02
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 7,852,009
Dividends................................................. 92,628
------------
Total investment income................................. 7,944,637
------------
EXPENSES
Investment advisory fee................................... 458,494
Financial agent fee....................................... 93,695
Custodian................................................. 28,156
Printing.................................................. 26,127
Professional.............................................. 16,423
Trustees.................................................. 9,917
Miscellaneous............................................. 10,885
------------
Total expenses.......................................... 643,697
Less expenses borne by investment adviser............... (47,823)
------------
Net expenses............................................ 595,874
------------
NET INVESTMENT INCOME....................................... 7,348,763
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (4,705,780)
Net change in unrealized appreciation (depreciation) on
investments............................................. 1,457,665
------------
NET LOSS ON INVESTMENTS..................................... (3,248,115)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 4,100,648
------------
------------
</TABLE>
See Notes to Financial Statements
35
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 7,348,763 $ 15,128,640
Net realized gain (loss).................................. (4,705,780) (8,037,422)
Net change in unrealized appreciation (depreciation)...... 1,457,665 (15,423,527)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 4,100,648 (8,332,309)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (7,081,256) (14,753,888)
Net realized gains........................................ - (1,233,525)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (7,081,256) (15,987,413)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (3,155,046 and 8,615,846
shares, respectively)................................... 29,085,761 85,699,046
Net asset value of shares issued from reinvestment of
distributions (781,113 and 1,648,116 shares,
respectively)........................................... 7,081,256 15,987,413
Cost of shares repurchased (4,403,346 and 8,318,291
shares, respectively)................................... (40,669,073) (81,629,911)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (4,502,056) 20,056,548
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (7,482,664) (4,263,174)
NET ASSETS
Beginning of period....................................... 187,363,410 191,626,584
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $1,163,700 AND $896,193,
RESPECTIVELY)........................................... $ 179,880,746 $ 187,363,410
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 9.18 $ 10.38 $ 10.34 $ 10.22 $ 8.98 $ 10.27
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.37(1) 0.77 0.75(1) 0.79(1) 0.83(1)(2) 0.72(1)(2)
Net realized and unrealized gain
(loss).......................... (0.17) (1.17) 0.34 0.43 1.22 (1.28)
----------- ----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 0.20 (0.40) 1.09 1.22 2.05 (0.56)
----------- ----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.36) (0.74) (0.77) (0.78) (0.81) (0.73)
Dividends from net realized
gains........................... -- (0.06) (0.28) (0.32) -- --
----------- ----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.36) (0.80) (1.05) (1.10) (0.81) (0.73)
----------- ----------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... (0.16) (1.20) 0.04 0.12 1.24 (1.29)
----------- ----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 9.02 $ 9.18 $ 10.38 $ 10.34 $ 10.22 $ 8.98
----------- ----------- --------- --------- --------- ---------
----------- ----------- --------- --------- --------- ---------
Total return........................ 2.19%(5) (4.02)% 10.93% 12.42% 23.54% (5.47)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $179,881 $187,363 $191,627 $145,044 $109,046 $74,686
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.65%(4) 0.64% 0.65% 0.65% 0.65%(3) 0.66%
Net investment income............. 8.10%(4) 7.61% 7.25% 7.80% 8.55% 7.62%
Portfolio turnover rate............. 63%(5) 160% 151% 191% 147% 181%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001, $0.001, $0.002, $0.007, and $0.006 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
36
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--21.2%
U.S. TREASURY BONDS--1.9%
U.S. Treasury Bonds 6.125%, 11/15/27............ AAA $ 2,300 $ 2,281,519
U.S. Treasury Bonds 5.25%, 11/15/28............. AAA 2,835 2,509,103
U.S. Treasury Bonds 5.25%, 2/15/29.............. AAA 4,980 4,468,353
------------
9,258,975
------------
U.S. TREASURY NOTES--19.3%
U.S. Treasury Notes 5.625%, 10/31/99............ AAA 800 801,454
U.S. Treasury Notes 5.50%, 2/29/00 (f).......... AAA 13,500 13,533,874
U.S. Treasury Notes 4.50%, 9/30/00.............. AAA 2,025 2,003,364
U.S. Treasury Notes 5.75%, 11/15/00............. AAA 4,950 4,970,964
U.S. Treasury Notes 5%, 2/28/01................. AAA 15,000 14,890,421
U.S. Treasury Notes 6.25%, 6/30/02.............. AAA 1,250 1,268,353
U.S. Treasury Notes 5.75%, 11/30/02............. AAA 1,630 1,629,408
U.S. Treasury Notes 5.50%, 1/31/03.............. AAA 11,960 11,856,162
U.S. Treasury Notes 5.50%, 2/28/03.............. AAA 7,000 6,937,741
U.S. Treasury Notes 5.75%, 4/30/03.............. AAA 2,500 2,496,379
U.S. Treasury Notes 5.25%, 8/15/03.............. AAA 3,053 2,992,232
U.S. Treasury Notes 4.25%, 11/15/03............. AAA 4,000 3,765,226
U.S. Treasury Notes 4.75%, 2/15/04.............. AAA 15,250 14,620,937
U.S. Treasury Notes 5.625%, 5/15/08............. AAA 3,359 3,288,990
U.S. Treasury Notes 4.75%, 11/15/08............. AAA 7,775 7,132,887
U.S. Treasury Notes 5.50%, 5/15/09.............. AAA 925 905,070
------------
93,093,462
------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $104,488,063)......................................... 102,352,437
------------
MUNICIPAL BONDS--4.0%
CALIFORNIA--1.2%
Kern County Pension Obligation Revenue Taxable
7.26%, 8/15/14................................ AAA 1,500 1,520,625
Long Beach Pension Obligation Taxable 6.87%,
9/1/06........................................ AAA 840 849,450
San Bernardino County Pension Obligation Revenue
Taxable 6.87%, 8/1/08......................... AAA 410 411,537
San Bernardino County Pension Obligation Revenue
Taxable 6.94%, 8/1/09......................... AAA 1,110 1,116,937
Sonoma County Pension Obligation Revenue Taxable
6.625%, 6/1/13................................ AAA 925 890,312
Ventura County Pension Obligation Taxable 6.54%,
11/1/05....................................... AAA 975 976,219
------------
5,765,080
------------
FLORIDA--1.3%
Miami Beach Special Obligation Revenue Taxable
8.60%, 9/1/21................................. AAA 3,210 3,490,875
Tampa Solid Waste System Revenue Taxable Series
A 6.33%, 10/1/06.............................. Aaa(c) 2,160 2,119,500
University of Miami Exchangeable Revenue Taxable
Series A 7.65%, 4/1/20 (e).................... AAA 540 548,775
------------
6,159,150
------------
MASSACHUSETTS--0.2%
Massachusetts Port Authority Revenue Taxable
Series C 6.05%, 7/1/02........................ AA- 835 830,825
------------
NEW YORK--0.4%
Long Island Power Authority Electrical Systems
Revenue Series A 5.50%, 12/1/10............... AAA 450 466,313
New York State Dormitory Authority Revenue
Taxable 6.90%, 4/1/03......................... BBB+ 725 732,250
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
NEW YORK--CONTINUED
New York State Environmental Facilities Corp.
Revenue Taxable 6.70%, 3/15/08................ AAA $ 670 $ 664,975
------------
1,863,538
------------
PENNSYLVANIA--0.2%
Philadelphia Authority For Industrial
Development Pension Funding Retirement Systems
Revenue Taxable Series A 5.79%, 4/15/09....... AAA 1,300 1,202,500
------------
TEXAS--0.7%
Dallas Civic Center Revenue 5.25%,
8/15/08....................................... AAA 475 486,281
Houston Water & Sewer System Revenue Refunding,
Jr. Lien, Series D 5%, 12/1/25................ AAA 630 582,750
Texas State General Obligation Series B 5.25%,
10/1/08....................................... AA 255 262,969
Texas Water Reservoir Finance Authority Revenue
6.62%, 8/15/10................................ AAA 2,265 2,214,038
------------
3,546,038
------------
TOTAL MUNICIPAL BONDS
(Identified cost $19,735,984).......................................... 19,367,131
------------
ASSET-BACKED SECURITIES--1.4%
AESOP Funding II LLC 97-1, A2 144A 6.40%,
10/20/03 (d).................................. AAA 2,000 1,999,718
Capita Equipment Receivables Trust 97-1, B
6.45%, 8/15/02................................ A+ 720 719,359
Ford Credit Auto Owner Trust 99-B, A4 5.80%,
6/15/02....................................... AAA 500 496,836
Green Tree Financial Corp. 96-2, M1 7.60%,
4/15/27....................................... AA- 1,075 1,089,185
Premier Auto Trust 98-3, B 6.14%, 9/8/04........ A+ 500 499,328
Triangle Funding Ltd. 98-2A, 3 144A 6.85%,
10/15/04 (d)(e)............................... BBB 2,000 1,995,000
------------
6,799,426
------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $6,801,722)........................................... 6,799,426
------------
CORPORATE BONDS--1.7%
BUILDING MATERIALS--0.2%
Nortek, Inc. Series B 9.125%, 9/1/07............ B+ 700 698,250
------------
COMPUTERS (SOFTWARE & SERVICES)--0.1%
Computer Associates International, Inc. Series B
6.375%, 4/15/05............................... A- 635 603,250
------------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.3%
Tenet Healthcare Corp. 8%, 1/15/05.............. BB+ 1,200 1,176,000
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.1%
Boston Scientific Corp. 6.625%, 3/15/05......... BBB 710 678,050
------------
INSURANCE (MULTI-LINE)--0.1%
Willis Corroon Corp. 144A 9%, 2/1/09 (d)........ B+ 530 514,100
------------
MANUFACTURING (DIVERSIFIED)--0.1%
Tyco International Group SA 6.375%, 6/15/05..... A- 500 482,500
------------
METALS MINING--0.1%
Level 3 Communications, Inc. 9.125%, 5/1/08..... B 400 395,000
------------
PAPER & FOREST PRODUCTS--0.1%
Buckeye Technologies, Inc. 9.25%, 9/15/08....... BB- 350 368,812
------------
</TABLE>
See Notes to Financial Statements
37
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
PUBLISHING--0.1%
Charter Communications Holdings LLC 144A 8.625%,
4/1/09 (d).................................... B+ $ 675 $ 649,688
------------
RETAIL (FOOD CHAINS)--0.1%
Meyer (Fred), Inc. 7.45%, 3/1/08................ BBB- 650 661,375
------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.2%
Nextlink Communications, Inc. 10.75%,
11/15/08...................................... B 900 924,750
------------
TEXTILES (APPAREL)--0.2%
Collins & Aikman Corp. 11.50%, 4/15/06.......... B 695 708,900
------------
TRUCKS & PARTS--0.0%
Cummins Engine Co., Inc. 6.45%, 3/1/05.......... BBB+ 160 152,400
------------
TOTAL CORPORATE BONDS
(Identified cost $8,271,453)........................................... 8,013,075
------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--5.5%
CS First Boston Mortgage Securities Corp. 97-C2,
A3 6.55%, 11/17/07............................ AAA 4,200 4,091,719
CS First Boston Mortgage Securities Corp.
95-AEW1, B 7.182%, 11/25/27................... AA- 237 235,883
DLJ Commercial Mortgage Corp. 99-CG1, A1B 6.46%,
1/10/09....................................... Aaa(c) 3,000 2,898,750
DLJ Commercial Mortgage Corp. 98-CF2, A1B 6.24%,
11/12/31...................................... Aaa(c) 4,150 3,974,273
First Union Commercial Mortgage Trust 99-C1, A2
6.07%, 10/15/08............................... AAA 3,000 2,822,812
First Union-Lehman Brothers-Bank of America
98-C2, A2 6.56%, 11/18/08..................... AAA 1,840 1,793,472
First Union-Lehman Brothers Commercial Mortgage
97-C1, B 7.43%, 4/18/07....................... Aa(c) 850 867,840
G.E. Capital Mortgage Services, Inc. 96-8, 1M
7.25%, 5/25/26................................ AA 242 239,174
LB Commercial Conduit Mortgage Trust 98-C4, A1B
6.21%, 10/15/08............................... AAA 4,000 3,805,183
Lehman Large Loan 97-LLI, B 6.95%, 3/12/07...... AA 645 642,902
Nationslink Funding Corp. 96-1, B 7.69%,
12/20/05...................................... AA 450 460,266
Residential Asset Securitization Trust 96-A8, A1
8%, 12/25/26.................................. AAA 2 1,880
Residential Funding Mortgage Securities I 96-S1,
A11 7.10%, 1/25/26............................ AAA 1,500 1,492,500
Residential Funding Mortgage Securities I 96-S4,
M1 7.25%, 2/25/26............................. AA 961 957,779
Securitized Asset Sales, Inc. 93-J, 2B 6.808%,
11/28/23...................................... AA 904 883,380
Structured Asset Securities Corp. 93-C1, B
6.60%, 10/25/24............................... A+ 1,150 1,144,389
------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $26,651,302).......................................... 26,312,202
------------
FOREIGN GOVERNMENT SECURITIES--3.0%
BULGARIA--0.3%
Republic of Bulgaria FLIRB Series A Bearer
2.50%, 7/28/12(e)............................. B(c) 810 494,606
Republic of Bulgaria IAB Series PDI 5.875%,
7/28/11(e).................................... B(c) 1,600 1,105,000
------------
1,599,606
------------
COLOMBIA--0.2%
Republic of Colombia 10.875%, 3/9/04............ BBB- 1,000 960,000
------------
COSTA RICA--0.4%
Republic of Costa Rica 144A 9.335%, 5/15/09
(d)........................................... BB 1,755 1,715,512
------------
CROATIA--0.3%
Croatia Series B 5.813%, 7/31/06 (e)............ BBB- 885 741,280
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
CROATIA--CONTINUED
Croatia Series A 5.813%, 7/31/10 (e)............ BBB- $ 1,000 $ 800,000
------------
1,541,280
------------
KOREA--0.2%
Republic of Korea 8.875%, 4/15/08............... BBB- 1,095 1,162,069
------------
MEXICO--0.3%
United Mexican States Global Bond 11.50%,
5/15/26....................................... BB 1,500 1,676,250
------------
PANAMA--0.5%
Republic of Panama 8.875%, 9/30/27.............. BB+ 1,465 1,222,542
Republic of Panama 9.375%, 4/1/29............... BB+ 1,000 955,000
------------
2,177,542
------------
PHILIPPINES--0.1%
Republic of Philippines 9.875%, 1/15/19......... BB+ 250 245,938
------------
POLAND--0.7%
Poland Bearer PDI 5%, 10/27/14 (e).............. BBB 4,000 3,560,000
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $14,886,504).......................................... 14,638,197
------------
FOREIGN CORPORATE BONDS--0.7%
ARGENTINA--0.2%
Compania de Radiocomunicaciones Moviles SA 144A
9.25%, 5/8/08 (d)............................. BBB- 450 398,250
Telecom Argentina-France Telecom SA EMTN WI 144A
9.75%, 7/12/01 (d)............................ BBB- 650 651,625
------------
1,049,875
------------
CHILE--0.1%
Compania Sud Americana de Vapores SA RegS
7.375%, 12/8/03............................... BBB 140 131,775
Petropower I Funding Trust 144A 7.36%, 2/15/14
(d)........................................... BBB 489 416,590
------------
548,365
------------
JAPAN--0.3%
IBJ Preferred Capital Co. LLC 144A 8.79%,
12/29/49 (d)(e)............................... Ba(c) 830 696,332
SB Treasury Co. LLC Series A 144A 9.40%,
12/29/49 (d)(e)............................... BB+ 830 802,372
------------
1,498,704
------------
POLAND--0.1%
TPSA Finance BV 144A 7.75%, 12/10/08 (d)........ BBB 355 346,125
------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $3,733,864)........................................... 3,443,069
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------
<S> <C> <C> <C>
COMMON STOCKS--57.1%
BANKS (MAJOR REGIONAL)--2.3%
Mellon Bank Corp..................................................................... 63,400 2,306,175
Wells Fargo Co....................................................................... 206,000 8,806,500
---------------
11,112,675
---------------
BANKS (MONEY CENTER)--1.7%
Bank of America Corp................................................................. 115,074 8,436,363
---------------
BEVERAGES (NON-ALCOHOLIC)--1.3%
PepsiCo, Inc......................................................................... 156,000 6,035,250
---------------
BIOTECHNOLOGY--0.5%
Genzyme Corp. (b).................................................................... 47,100 2,284,350
Genzyme Surgical Products (b)........................................................ 8,431 37,151
---------------
2,321,501
---------------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.8%
AT&T Corp.--Liberty Media Group Class A (b).......................................... 289,000 10,620,750
</TABLE>
See Notes to Financial Statements
38
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)--CONTINUED
CBS Corp. (b)........................................................................ 63,300 $ 2,749,594
Chancellor Media Corp. (b)........................................................... 53,000 2,921,625
Clear Channel Communications, Inc. (b)............................................... 27,600 1,902,675
---------------
18,194,644
---------------
COMMUNICATIONS EQUIPMENT--1.6%
General Motors Corp. Class H (b)..................................................... 28,900 1,625,625
Motorola, Inc........................................................................ 18,000 1,705,500
Tellabs, Inc. (b).................................................................... 66,800 4,513,175
---------------
7,844,300
---------------
COMPUTERS (HARDWARE)--4.8%
Dell Computer Corp. (b).............................................................. 110,800 4,099,600
International Business Machines Corp................................................. 115,600 14,941,300
Sun Microsystems, Inc. (b)........................................................... 57,800 3,980,975
---------------
23,021,875
---------------
COMPUTERS (NETWORKING)--2.1%
Cisco Systems, Inc. (b).............................................................. 160,750 10,368,375
---------------
COMPUTERS (SOFTWARE & SERVICES)--4.1%
America Online, Inc. (b)............................................................. 35,800 3,955,900
Microsoft Corp. (b).................................................................. 160,600 14,484,112
Yahoo!, Inc. (b)..................................................................... 8,900 1,533,025
---------------
19,973,037
---------------
CONSUMER FINANCE--1.1%
Capital One Financial Corp........................................................... 96,300 5,362,706
---------------
DISTRIBUTORS (FOOD & HEALTH)--0.8%
Cardinal Health, Inc................................................................. 57,800 3,706,425
---------------
ELECTRICAL EQUIPMENT--1.8%
General Electric Co.................................................................. 76,400 8,633,200
---------------
ELECTRONICS (SEMICONDUCTORS)--1.8%
Intel Corp........................................................................... 147,400 8,770,300
---------------
FINANCIAL (DIVERSIFIED)--4.0%
Citigroup, Inc....................................................................... 171,375 8,140,312
Freddie Mac.......................................................................... 59,800 3,468,400
Morgan Stanley Dean Witter & Co...................................................... 75,900 7,779,750
---------------
19,388,462
---------------
HEALTH CARE (DIVERSIFIED)--2.0%
American Home Products Corp.......................................................... 46,400 2,668,000
Bristol-Myers Squibb Co.............................................................. 98,000 6,902,875
---------------
9,570,875
---------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--2.3%
Pfizer, Inc.......................................................................... 53,100 5,827,725
Schering-Plough Corp................................................................. 102,400 5,427,200
---------------
11,254,925
---------------
HEALTH CARE (GENERIC AND OTHER)--0.3%
Mylan Laboratories, Inc.............................................................. 55,700 1,476,050
---------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.1%
Bard (C.R.), Inc..................................................................... 31,000 1,482,187
Baxter International, Inc............................................................ 61,800 3,746,625
---------------
5,228,812
---------------
HOUSEHOLD PRODUCTS (NON-DURABLE)--1.2%
Procter & Gamble Co. (The)........................................................... 66,000 5,890,500
---------------
INSURANCE (LIFE/HEALTH)--0.3%
ReliaStar Financial Corp............................................................. 35,400 1,548,750
---------------
INSURANCE (MULTI-LINE)--1.3%
American International Group, Inc.................................................... 51,650 6,046,278
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
LODGING--HOTELS--0.7%
Carnival Corp........................................................................ 66,200 $ 3,210,700
---------------
MANUFACTURING (DIVERSIFIED)--2.0%
Tyco International Ltd............................................................... 99,400 9,418,150
---------------
OIL & GAS (DRILLING & EQUIPMENT)--0.8%
Halliburton Co....................................................................... 37,200 1,683,300
Schlumberger Ltd..................................................................... 24,500 1,560,344
Transocean Offshore, Inc............................................................. 30,000 787,500
---------------
4,031,144
---------------
OIL (INTERNATIONAL INTEGRATED)--0.7%
Conoco, Inc. Class A................................................................. 116,000 3,233,500
---------------
PERSONAL CARE--0.7%
Gillette Co. (The)................................................................... 82,600 3,386,600
---------------
RETAIL (BUILDING SUPPLIES)--1.2%
Home Depot, Inc. (The)............................................................... 90,100 5,805,819
---------------
RETAIL (COMPUTERS & ELECTRONICS)--0.6%
Tandy Corp........................................................................... 55,400 2,707,675
---------------
RETAIL (FOOD CHAINS)--1.3%
Kroger Co. (The) (b)................................................................. 151,700 4,238,119
Safeway, Inc. (b).................................................................... 38,500 1,905,750
---------------
6,143,869
---------------
RETAIL (GENERAL MERCHANDISE)--1.5%
Wal-Mart Stores, Inc................................................................. 152,300 7,348,475
---------------
RETAIL (SPECIALTY)--0.6%
Staples, Inc. (b).................................................................... 98,400 3,044,250
---------------
SERVICES (COMMERCIAL & CONSUMER)--0.3%
ServiceMaster Co. (The).............................................................. 70,700 1,325,625
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--4.0%
AT&T Corp............................................................................ 233,160 13,013,242
MCI WorldCom, Inc. (b)............................................................... 70,538 6,083,903
---------------
19,097,145
---------------
TELEPHONE--1.0%
SBC Communications, Inc.............................................................. 82,400 4,779,200
---------------
WASTE MANAGEMENT--1.5%
Waste Management, Inc................................................................ 138,200 7,428,250
---------------
TOTAL COMMON STOCKS
(Identified cost $205,755,072)...................................................................... 275,145,705
---------------
FOREIGN COMMON STOCKS--3.3%
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--0.6%
Elan Corp. PLC Sponsored ADR (Ireland) (b)........................................... 107,400 2,980,350
---------------
OIL (INTERNATIONAL INTEGRATED)--1.7%
BP Amoco PLC Sponsored ADR (United Kingdom).......................................... 73,566 7,981,911
---------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.0%
Vodafone AirTouch PLC Sponsored ADR (United Kingdom).................................
23,650 4,659,050
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $12,089,986)....................................................................... 15,621,311
---------------
WARRANTS--0.0%
FOREIGN GOVERNMENT--0.0%
Republic of Argentina Warrants (Argentina) (b)....................................... 1,118 1,286
---------------
TOTAL WARRANTS
(Identified cost $0)................................................................................ 1,286
---------------
TOTAL LONG-TERM INVESTMENTS--97.9%
(Identified cost $402,413,950)...................................................................... 471,693,839
---------------
</TABLE>
See Notes to Financial Statements
39
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- --------------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.6%
COMMERCIAL PAPER--1.6%
Cargill, Inc. 5.90%, 7/1/99..................... A-1+ $ 6,505 $ 6,505,000
Kimberly-Clark Corp. 4.99%, 7/19/99............. A-1+ 1,315 1,311,719
---------------
7,816,719
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $7,816,719)................................................... 7,816,719
---------------
TOTAL INVESTMENTS--99.5%
(Identified cost $410,230,669)................................................. 479,510,558(a)
Cash and receivables, less liabilities--0.5%................................... 2,363,880
---------------
NET ASSETS--100.0%............................................................... $ 481,874,438
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $76,443,280 and gross
depreciation of $7,750,633 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$410,817,911.
(b) Non-income producing.
(c) As rated by Moodys, 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, 1999,
these securities amounted to a value of $10,185,312 or 2.11% 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
40
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$410,230,669)............................................. $ 479,510,558
Cash........................................................ 430,494
Receivables
Interest and dividends.................................... 2,767,273
Investment securities sold................................ 1,890,912
Fund shares sold.......................................... 42,376
Prepaid expenses............................................ 9,704
-------------
Total assets............................................ 484,651,317
-------------
LIABILITIES
Payables
Investment securities purchased........................... 2,186,441
Fund shares repurchased................................... 230,601
Investment advisory fee................................... 222,281
Financial agent fee....................................... 24,826
Trustees' fee............................................. 5,880
Accrued expenses............................................ 106,850
-------------
Total liabilities....................................... 2,776,879
-------------
NET ASSETS.................................................. $ 481,874,438
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 389,068,897
Undistributed net investment income....................... 1,160,673
Accumulated net realized gain............................. 22,364,979
Net unrealized appreciation............................... 69,279,889
-------------
NET ASSETS.................................................. $ 481,874,438
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 30,118,728
-------------
-------------
Net asset value and offering price per share................ $ 16.00
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 5,443,307
Dividends................................................. 1,119,577
Foreign taxes withheld.................................... (9,808)
-------------
Total investment income................................. 6,553,076
-------------
EXPENSES
Investment advisory fee................................... 1,371,503
Financial agent fee....................................... 156,096
Printing.................................................. 58,867
Custodian................................................. 53,574
Professional.............................................. 17,274
Trustees.................................................. 8,428
Miscellaneous............................................. 12,139
-------------
Total expenses.......................................... 1,677,881
-------------
NET INVESTMENT INCOME....................................... 4,875,195
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 23,413,242
Net change in unrealized appreciation (depreciation) on
investments............................................. (8,701,907)
-------------
NET GAIN ON INVESTMENTS..................................... 14,711,335
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 19,586,530
-------------
-------------
</TABLE>
See Notes to Financial Statements
41
<PAGE>
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 4,875,195 $ 8,822,688
Net realized gain (loss).................................. 23,413,242 19,330,598
Net change in unrealized appreciation (depreciation)...... (8,701,907) 57,110,856
------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 19,586,530 85,264,142
------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (4,201,563) (8,371,532)
Net realized gains........................................ (4,550,416) (31,140,159)
------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (8,751,979) (39,511,691)
------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,699,050 and 3,651,580
shares, respectively)................................... 26,888,490 52,916,356
Net asset value of shares issued from reinvestment of
distributions(552,311 and 2,607,238 shares,
respectively)........................................... 8,751,979 39,511,691
Cost of shares repurchased (2,869,738 and 5,904,172
shares, respectively)................................... (45,497,259) (86,285,937)
------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (9,856,790) 6,142,110
------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 977,761 51,894,561
NET ASSETS
Beginning of period....................................... 480,896,677 429,002,116
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $1,160,673 AND $487,041,
RESPECTIVELY)........................................... $481,874,438 $480,896,677
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 15.65 $ 14.12 $ 13.65 $ 13.63 $ 12.68 $ 13.71
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)..... 0.16 0.29 0.32 0.32 0.45 0.36(1)(3)
Net realized and unrealized gain
(loss)......................... 0.48 2.57 2.46 0.91 1.84 (0.56)
----------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS................... 0.64 2.86 2.78 1.23 2.29 (0.20)
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.14) (0.28) (0.33) (0.31) (0.45) (0.37)
Dividends from net realized
gains.......................... (0.15) (1.05) (1.98) (0.90) (0.89) (0.46)
----------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............ (0.29) (1.33) (2.31) (1.21) (1.34) (0.83)
----------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE.......... 0.35 1.53 0.47 0.02 0.95 (1.03)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD..... $ 16.00 $ 15.65 $ 14.12 $ 13.65 $ 13.63 $ 12.68
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total return....................... 4.16%(5) 20.79% 20.73% 9.05% 18.22% (1.45)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)...................... $481,874 $480,897 $429,002 $374,244 $353,838 $289,083
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses............... 0.70%(4) 0.68% 0.71% 0.70% 0.67%(2) 0.74%
Net investment income............ 2.05%(4) 1.97% 2.09% 2.26% 3.28% 2.71%
Portfolio turnover rate............ 51%(5) 139% 368% 287% 170% 220%
</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
42
<PAGE>
PHOENIX-GOODWIN STRATEGIC THEME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
COMMON STOCKS--87.7%
ALUMINUM--3.5%
Alcoa, Inc................................................................. 67,450 $ 4,173,469
-----------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.5%
Chancellor Media Corp. (b)................................................. 32,500 1,791,562
-----------
CHEMICALS--3.3%
Dow Chemical Co. (The)..................................................... 31,000 3,933,125
-----------
COMMUNICATIONS EQUIPMENT--14.2%
EchoStar Communications Corp. (b).......................................... 15,200 2,332,250
General Motors Corp. Class H (b)........................................... 31,000 1,743,750
Lucent Technologies, Inc................................................... 35,000 2,360,312
Motorola, Inc.............................................................. 50,000 4,737,500
QUALCOMM, Inc. (b)......................................................... 38,250 5,488,875
-----------
16,662,687
-----------
COMPUTERS (HARDWARE)--6.6%
International Business Machines Corp....................................... 37,600 4,859,800
Sun Microsystems, Inc. (b)................................................. 43,000 2,961,625
-----------
7,821,425
-----------
COMPUTERS (NETWORKING)--3.3%
Cisco Systems, Inc. (b).................................................... 59,800 3,857,100
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.0%
Microsoft Corp. (b)........................................................ 52,400 4,725,825
-----------
ELECTRICAL EQUIPMENT--2.1%
General Electric Co........................................................ 22,300 2,519,900
-----------
ELECTRONICS (SEMICONDUCTORS)--4.7%
Texas Instruments, Inc..................................................... 38,120 5,527,400
-----------
EQUIPMENT (SEMICONDUCTOR)--2.1%
Novellus Systems, Inc. (b)................................................. 17,700 1,208,025
Teradyne, Inc. (b)......................................................... 18,100 1,298,675
-----------
2,506,700
-----------
FINANCIAL (DIVERSIFIED)--4.1%
Citigroup, Inc............................................................. 44,700 2,123,250
Morgan Stanley Dean Witter & Co............................................ 26,100 2,675,250
-----------
4,798,500
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--3.1%
VISX, Inc. (b)............................................................. 45,500 3,603,031
-----------
MANUFACTURING (DIVERSIFIED)--4.0%
Tyco International Ltd..................................................... 50,000 4,737,500
-----------
NATURAL GAS--1.3%
Williams Companies, Inc. (The)............................................. 35,000 1,489,688
-----------
OIL & GAS (DRILLING & EQUIPMENT)--5.9%
Baker Hughes, Inc.......................................................... 75,000 2,512,500
Halliburton Co............................................................. 96,700 4,375,675
-----------
6,888,175
-----------
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
OIL (INTERNATIONAL INTEGRATED)--1.9%
Texaco, Inc................................................................ 35,000 $ 2,187,500
-----------
PAPER & FOREST PRODUCTS--6.1%
Georgia-Pacific Group...................................................... 87,000 4,121,625
Weyerhaeuser Co............................................................ 45,000 3,093,750
-----------
7,215,375
-----------
RETAIL (COMPUTERS & ELECTRONICS)--9.5%
Best Buy Co., Inc. (b)..................................................... 69,830 4,713,525
Circuit City Stores-Circuit City Group..................................... 40,000 3,720,000
Tandy Corp................................................................. 55,000 2,688,125
-----------
11,121,650
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--6.5%
MCI WorldCom, Inc. (b)..................................................... 50,300 4,338,376
Qwest Communications International, Inc. (b)............................... 100,000 3,306,250
-----------
7,644,626
-----------
TOTAL COMMON STOCKS
(Identified cost $89,432,498)....................................................... 103,205,237
-----------
FOREIGN COMMON STOCKS--3.9%
COMMUNICATIONS EQUIPMENT--2.6%
Nokia Oyj Sponsored ADR Class A (Finland).................................. 34,000 3,113,125
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.3%
Vodafone AirTouch PLC Sponsored ADR (United Kingdom).......................
7,700 1,516,900
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $3,472,020)........................................................ 4,630,025
-----------
TOTAL LONG-TERM INVESTMENTS--91.6%
(Identified cost $92,904,518)....................................................... 107,835,262
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--9.6%
COMMERCIAL PAPER--9.6%
Koch Industries, Inc. 5.80%, 7/1/99............. A-1+ $ 3,790 3,790,000
Lexington Parker Capital Co. LLC 5.50%,
7/1/99........................................ A-1 3,205 3,205,000
SBC Communications, Inc. 5.30%, 7/7/99.......... A-1+ 1,800 1,798,410
Greenwich Funding Corp. 4.92%, 7/8/99........... A-1+ 1,175 1,173,876
Kimberly-Clark Corp. 5.02%, 7/12/99............. A-1+ 1,360 1,357,914
------------
11,325,200
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $11,325,200).............................................. 11,325,200
------------
TOTAL INVESTMENTS--101.2%
(Identified cost $104,229,718)............................................. 119,160,463(a)
Cash and receivables, less liabilities--(1.2%)............................. (1,434,234)
------------
NET ASSETS--100.0%........................................................... $117,726,229
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $16,743,984 and gross
depreciation of $1,814,096 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purpose was
$104,230,575.
(b) Non-income producing.
See Notes to Financial Statements
43
<PAGE>
PHOENIX-GOODWIN STRATEGIC THEME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$104,229,718)............................................. $ 119,160,463
Cash........................................................ 137,890
Receivables
Fund shares sold.......................................... 271,731
Interest and dividends.................................... 42,946
Prepaid expenses............................................ 1,469
-------------
Total assets............................................ 119,614,499
-------------
LIABILITIES
Payables
Investment securities purchased........................... 1,772,191
Fund shares repurchased................................... 25,505
Investment advisory fee................................... 54,756
Financial agent fee....................................... 10,432
Trustees' fee............................................. 7,369
Accrued expenses............................................ 18,017
-------------
Total liabilities....................................... 1,888,270
-------------
NET ASSETS.................................................. $ 117,726,229
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 87,442,011
Undistributed net investment loss......................... (81,696)
Accumulated net realized gain............................. 15,435,169
Net unrealized appreciation............................... 14,930,745
-------------
NET ASSETS.................................................. $ 117,726,229
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 6,713,336
-------------
-------------
Net asset value and offering price per share................ $ 17.54
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 181,806
Dividends................................................. 197,746
-------------
Total investment income................................. 379,552
-------------
EXPENSES
Investment advisory fee................................... 361,594
Financial agent fee....................................... 45,838
Printing.................................................. 17,289
Professional.............................................. 14,220
Custodian................................................. 9,982
Trustees.................................................. 9,917
Miscellaneous............................................. 2,408
-------------
Total expenses.......................................... 461,248
-------------
NET INVESTMENT LOSS......................................... (81,696)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 15,659,669
Net change in unrealized appreciation (depreciation) on
investments............................................. (125,361)
-------------
NET GAIN ON INVESTMENTS..................................... 15,534,308
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 15,452,612
-------------
-------------
</TABLE>
See Notes to Financial Statements
44
<PAGE>
PHOENIX-GOODWIN STRATEGIC THEME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ (81,696) $ (5,345)
Net realized gain (loss).................................. 15,659,669 10,385,680
Net change in unrealized appreciation (depreciation)...... (125,361) 12,160,802
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 15,452,612 22,541,137
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- --
Net realized gains........................................ (4,592,789) (4,406,657)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (4,592,789) (4,406,657)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,635,557 and 1,899,576
shares, respectively)................................... 45,417,914 24,310,681
Net asset value of shares issued from reinvestment of
distributions (265,423 and 289,988 shares,
respectively)........................................... 4,592,789 4,406,657
Cost of shares repurchased (1,064,178 and 1,521,202
shares, respectively)................................... (18,242,013) (19,373,613)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 31,768,690 9,343,725
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 42,628,513 27,478,205
NET ASSETS
Beginning of period....................................... 75,097,716 47,619,511
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF ($81,696) AND $0, RESPECTIVELY)........ $ 117,726,229 $ 75,097,716
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
SIX MONTHS INCEPTION
ENDED YEAR ENDED DECEMBER 31, 1/29/96
6/30/99 ----------------------- TO
(UNAUDITED) 1998 1997 12/31/96
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 15.40 $ 11.32 $ 10.98 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............... (0.01) 0.01 0.05(3) 0.04(3)
Net realized and unrealized gain (loss).... 2.87 5.03 1.82 0.99
----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS......... 2.86 5.04 1.87 1.03
----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income....... -- (0.01) (0.05) (0.04)
Dividends from net realized gains.......... (0.72) (0.95) (1.16) --
In excess of net realized gains............ -- -- (0.31) --
Tax return of capital...................... -- -- (0.01) (0.01)
----------- --------- --------- ---------
TOTAL DISTRIBUTIONS...................... (0.72) (0.96) (1.53) (0.05)
----------- --------- --------- ---------
CHANGE IN NET ASSET VALUE.................... 2.14 4.08 0.34 0.98
----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD............... $ 17.54 $ 15.40 $ 11.32 $ 10.98
----------- --------- --------- ---------
----------- --------- --------- ---------
Total return................................. 18.58%(2) 44.69% 17.16% 10.33%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $117,726 $75,098 $47,620 $25,972
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.96%(1) 0.99% 1.00% 1.00%(1)
Net investment income...................... (0.17)%(1) (0.01)% 0.42% 0.64%(1)
Portfolio turnover rate...................... 109%(2) 364% 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
45
<PAGE>
PHOENIX-HOLLISTER VALUE EQUITY SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C> <C>
COMMON STOCKS--82.0%
AEROSPACE/DEFENSE--1.4%
Goodrich (B.F.) Co. (The).................................................. 3,000 $ 127,500
---------
AIRLINES--0.7%
US Airways Group, Inc. (b)................................................. 1,500 65,344
---------
AUTO PARTS & EQUIPMENT--0.6%
Delphi Automotive Systems Corp............................................. 3,000 55,687
---------
BANKS (MAJOR REGIONAL)--2.3%
Bank One Corp.............................................................. 3,600 214,425
---------
BANKS (MONEY CENTER)--7.4%
Bank of America Corp....................................................... 4,000 293,250
Chase Manhattan Corp. (The)................................................ 3,600 311,850
Morgan (J.P.) & Co., Inc................................................... 600 84,300
---------
689,400
---------
BEVERAGES (ALCOHOLIC)--1.5%
Anheuser-Busch Companies, Inc.............................................. 2,000 141,875
---------
BIOTECHNOLOGY--0.9%
Cell Genesys, Inc. (b)..................................................... 18,000 81,000
---------
CHEMICALS--1.6%
Praxair, Inc............................................................... 3,000 146,812
---------
CHEMICALS (DIVERSIFIED)--1.7%
Monsanto Co................................................................ 4,000 157,750
---------
COMMUNICATIONS EQUIPMENT--3.5%
C-Cube Microsystems, Inc. (b).............................................. 2,000 63,375
Ciena Corp. (b)............................................................ 7,000 211,312
Terayon Communication Systems, Inc. (b).................................... 1,000 55,875
---------
330,562
---------
COMPUTERS (HARDWARE)--1.5%
Compaq Computer Corp....................................................... 3,000 71,062
Data General Corp. (b)..................................................... 5,000 72,812
---------
143,874
---------
COMPUTERS (NETWORKING)--1.0%
3Com Corp. (b)............................................................. 3,500 93,406
---------
COMPUTERS (PERIPHERALS)--0.5%
Maxtor Corp. (b)........................................................... 9,000 45,281
---------
COMPUTERS (SOFTWARE & SERVICES)--2.6%
At Home Corp. Series A (b)................................................. 2,000 107,875
Autodesk, Inc.............................................................. 1,500 44,344
Aware, Inc. (b)............................................................ 2,000 92,250
---------
244,469
---------
ELECTRICAL EQUIPMENT--3.7%
Honeywell, Inc............................................................. 3,000 347,625
---------
ELECTRONICS (SEMICONDUCTORS)--1.1%
Dallas Semiconductor Corp.................................................. 2,000 101,000
---------
ENTERTAINMENT--2.7%
Royal Caribbean Cruises Ltd................................................ 3,300 144,375
Walt Disney Co. (The)...................................................... 3,500 107,844
---------
252,219
---------
FINANCIAL (DIVERSIFIED)--7.0%
Citigroup, Inc............................................................. 6,000 285,000
Fannie Mae................................................................. 1,350 92,306
SLM Holding Corp........................................................... 6,000 274,875
---------
652,181
---------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--0.8%
Lilly (Eli) & Co........................................................... 1,000 71,625
---------
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C> <C>
HEALTH CARE (GENERIC AND OTHER)--2.1%
Mylan Laboratories, Inc.................................................... 7,500 $ 198,750
---------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.4%
Tenet Healthcare Corp. (b)................................................. 7,000 129,937
---------
HEALTH CARE (MANAGED CARE)--1.0%
Aetna, Inc................................................................. 1,000 89,438
---------
INSURANCE (MULTI-LINE)--6.0%
American International Group, Inc.......................................... 2,500 292,656
CIGNA Corp................................................................. 1,800 160,200
Hartford Financial Services Group, Inc. (The).............................. 1,800 104,963
---------
557,819
---------
INSURANCE (PROPERTY-CASUALTY)--1.5%
Chubb Corp. (The).......................................................... 2,000 139,000
---------
INVESTMENT BANKING/BROKERAGE--0.9%
Merrill Lynch & Co., Inc................................................... 1,000 79,938
---------
LEISURE TIME (PRODUCTS)--1.4%
Mattel, Inc................................................................ 5,000 132,188
---------
MACHINERY (DIVERSIFIED)--1.6%
Caterpillar, Inc........................................................... 2,500 150,000
---------
MANUFACTURING (DIVERSIFIED)--5.3%
Corning, Inc............................................................... 3,000 210,375
Eaton Corp................................................................. 1,800 165,600
Illinios Tool Works, Inc................................................... 1,400 114,800
---------
490,775
---------
MANUFACTURING (SPECIALIZED)--1.8%
Diebold, Inc............................................................... 6,000 172,500
---------
OFFICE EQUIPMENT & SUPPLIES--1.2%
Pitney Bowes, Inc.......................................................... 1,800 115,650
---------
PHOTOGRAPHY/IMAGING--1.2%
Eastman Kodak Co........................................................... 1,700 115,175
---------
RAILROADS--1.2%
Union Pacific Corp......................................................... 2,000 116,625
---------
REITS--1.0%
LaSalle Hotel Properties................................................... 6,000 91,875
---------
RESTAURANTS--0.9%
McDonald's Corp............................................................ 2,000 82,625
---------
RETAIL (HOME SHOPPING)--0.7%
Black Box Corp. (b)........................................................ 1,300 65,163
---------
RETAIL (SPECIALTY)--1.1%
Claire's Stores, Inc....................................................... 4,000 102,500
---------
RETAIL (SPECIALTY-APPAREL)--1.2%
Talbots, Inc. (The)........................................................ 3,000 114,375
---------
SAVINGS & LOAN COMPANIES--0.6%
Washington Mutual, Inc..................................................... 1,600 56,600
---------
SERVICES (DATA PROCESSING)--1.0%
First Data Corp............................................................ 2,000 97,875
---------
TELECOMMUNICATIONS (LONG DISTANCE)--3.4%
AT&T Corp.................................................................. 4,200 234,413
MCI WorldCom, Inc. (b)..................................................... 1,000 86,250
---------
320,663
---------
TELEPHONE--1.8%
BellSouth Corp............................................................. 1,900 89,063
GTE Corp................................................................... 1,000 75,750
---------
164,813
---------
</TABLE>
See Notes to Financial Statements
46
<PAGE>
PHOENIX-HOLLISTER VALUE EQUITY SERIES
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C> <C>
WASTE MANAGEMENT--1.2%
Waste Management, Inc...................................................... 2,000 $ 107,500
---------
TOTAL COMMON STOCKS
(Identified cost $7,205,262).......................................................... 7,653,819
---------
FOREIGN COMMON STOCKS--8.5%
AUTOMOBILES--0.5%
DaimlerChrysler AG (Germany)............................................... 499 44,349
---------
COMMUNICATIONS EQUIPMENT--5.8%
Alcatel SA ADR (France).................................................... 5,000 141,875
Newbridge Networks Corp. (Canada) (b)...................................... 7,000 201,250
Telefonaktiebolaget LM Ericsson Sponsored ADR (Sweden).....................
6,000 197,625
---------
540,750
---------
COMPUTERS (SOFTWARE & SERVICES)--1.1%
SAP AG Sponsored ADR (Germany) (b)......................................... 3,000 103,875
---------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.7%
Telesp Celular Participacoes SA ADR (Brazil)............................... 2,400 64,200
---------
TELEPHONE--0.4%
Embratel Participacoes SA ADR (Brazil)..................................... 3,000 41,625
---------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $740,679)............................................................ 794,799
---------
UNIT INVESTMENT TRUSTS--6.4%
Diamonds Trust Series I.................................................... 3,000 328,125
S&P 500 Depository Receipts................................................ 2,000 273,906
---------
602,031
---------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $534,834)............................................................ 602,031
---------
TOTAL LONG-TERM INVESTMENTS--96.9%
(Identified cost $8,480,775).......................................................... 9,050,649
---------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- --------- ----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.4%
COMMERCIAL PAPER--3.4%
Corporate Asset Funding Co., Inc.
5.55%, 7/1/99....................... A-1+ $ 315 $ 315,000
----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $315,000)............................................................ 315,000
----------
TOTAL INVESTMENTS--100.3%
(Identified cost $8,795,775).......................................................... 9,365,649(a)
Cash and receivables, less liabilities--(0.3%)........................................ (26,034)
----------
NET ASSETS--100.0%...................................................................... $9,339,615
----------
----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $949,075 and gross
depreciation of $399,601 for federal income tax purposes. At June 30, 1999,
the aggregate cost of securities for federal income tax purposes was
$8,816,175.
(b) Non-income producing.
See Notes to Financial Statements
47
<PAGE>
PHOENIX-HOLLISTER VALUE EQUITY SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$8,795,775)............................................... $ 9,365,649
Cash........................................................ 3,670
Receivables
Dividends and interest.................................... 13,021
Funds shares sold......................................... 227
Prepaid expenses............................................ 181
-------------
Total assets............................................ 9,382,748
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 373
Investment advisory fee................................... 16,414
Trustees' fee............................................. 7,309
Financial agent fee....................................... 1,808
Accrued expenses............................................ 17,229
-------------
Total liabilities....................................... 43,133
-------------
NET ASSETS.................................................. $ 9,339,615
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 7,932,417
Undistributed net investment income....................... 15,321
Accumulated net realized gain............................. 822,003
Net unrealized appreciation............................... 569,874
-------------
NET ASSETS.................................................. $ 9,339,615
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 802,104
-------------
-------------
Net asset value and offering price per share................ $ 11.64
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 57,177
Interest.................................................. 3,314
Foreign taxes withheld.................................... (420)
---------
Total investment income................................. 60,071
---------
EXPENSES
Investment advisory fee................................... 29,952
Financial agent fee....................................... 21,312
Professional.............................................. 13,836
Trustees.................................................. 9,917
Custodian................................................. 7,359
Printing.................................................. 6,015
Miscellaneous............................................. 2,500
---------
Total expenses.......................................... 90,891
Less expense borne by investment adviser................ (54,518)
---------
Net expenses............................................ 36,373
---------
NET INVESTMENT INCOME....................................... 23,698
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 932,641
Net change in unrealized appreciation (depreciation) on
investments............................................. (426,715)
---------
NET GAIN ON INVESTMENTS..................................... 505,926
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 529,624
---------
---------
</TABLE>
See Notes to Financial Statements
48
<PAGE>
PHOENIX-HOLLISTER VALUE EQUITY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FROM INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 23,698 $ 37,497
Net realized gain (loss).................................. 932,641 (110,638)
Net change in unrealized appreciation (depreciation)...... (426,715) 996,589
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 529,624 923,448
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (7,989) (37,497)
In excess of net investment income........................ -- (388)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (7,989) (37,885)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (343,460 and 990,498 shares,
respectively)........................................... 3,905,237 9,960,882
Net asset value of shares issued from reinvestment of
distributions (692 and 3,586 shares, respectively)...... 7,989 37,885
Cost of shares repurchased (406,270 and 129,862 shares,
respectively)........................................... (4,628,233) (1,351,343)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (715,007) 8,647,424
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (193,372) 9,532,987
NET ASSETS
Beginning of period....................................... 9,532,987 --
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $15,321 AND DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME OF ($388), RESPECTIVELY).......... $ 9,339,615 $ 9,532,987
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FROM INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 11.03 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. 0.03(3) 0.05(3)
Net realized and unrealized gain (loss)................... 0.59 1.03
------- -------
TOTAL FROM INVESTMENT OPERATIONS........................ 0.62 1.08
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.01) (0.05)
------- -------
TOTAL DISTRIBUTIONS..................................... (0.01) (0.05)
------- -------
CHANGE IN NET ASSET VALUE................................... 0.61 1.03
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 11.64 $ 11.03
------- -------
------- -------
Total return................................................ 5.65%(2) 10.79%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $9,340 $9,533
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 0.85%(1) 0.85%(1)
Net investment income..................................... 0.55%(1) 0.85%(1)
Portfolio turnover rate..................................... 81%(2) 77%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.13 per share, respectively.
See Notes to Financial Statements
49
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
COMMON STOCKS--93.4%
AEROSPACE/DEFENSE--1.2%
Boeing Co. (The).................................................... 4,900 $ 216,519
Cordant Technologies, Inc........................................... 2,200 99,412
General Dynamics Corp............................................... 5,000 342,500
Goodrich (B.F.) Co. (The)........................................... 5,200 221,000
Northrop Grumman Corp............................................... 400 26,525
------------
905,956
------------
AIRLINES--0.2%
Alaska Air Group, Inc. (b).......................................... 400 16,700
COMAIR Holdings, Inc................................................ 3,000 62,437
Delta Air Lines, Inc................................................ 1,000 57,625
SkyWest, Inc........................................................ 1,400 34,912
------------
171,674
------------
ALUMINUM--0.2%
Alcoa, Inc.......................................................... 2,700 167,062
------------
AUTO PARTS & EQUIPMENT--0.2%
Arvin Industries, Inc............................................... 1,700 64,387
ITT Industries, Inc................................................. 800 30,500
Meritor Automotive, Inc............................................. 2,000 51,000
------------
145,887
------------
AUTOMOBILES--3.2%
Ford Motor Co....................................................... 25,600 1,444,800
General Motors Corp................................................. 14,900 983,400
------------
2,428,200
------------
BANKS (MAJOR REGIONAL)--3.1%
Bank of New York Co., Inc. (The).................................... 3,300 121,069
Bank One Corp....................................................... 19,200 1,143,600
First Union Corp.................................................... 12,300 578,100
Fleet Financial Group, Inc.......................................... 9,300 412,687
Mellon Bank Corp.................................................... 2,800 101,850
------------
2,357,306
------------
BANKS (MONEY CENTER)--4.1%
Bank of America Corp................................................ 10,800 791,775
Chase Manhattan Corp. (The)......................................... 20,100 1,741,162
Morgan (J.P.) & Co., Inc............................................ 4,300 604,150
------------
3,137,087
------------
BANKS (REGIONAL)--1.1%
City National Corp.................................................. 5,300 198,419
Cullen/Frost Bankers, Inc........................................... 5,200 143,325
UnionBanCal Corp.................................................... 14,400 520,200
------------
861,944
------------
BEVERAGES (ALCOHOLIC)--0.7%
Anheuser-Busch Companies, Inc....................................... 6,000 425,625
Coors (Adolph) Co. Class B.......................................... 2,000 99,000
------------
524,625
------------
BIOTECHNOLOGY--0.7%
Amgen, Inc. (b)..................................................... 6,600 401,775
Biogen, Inc. (b).................................................... 400 25,725
Chiron Corp. (b).................................................... 2,900 60,175
Genzyme Corp. (b)................................................... 300 14,550
Genzyme Surgical Products (b)....................................... 54 237
IDEXX Laboratories, Inc. (b)........................................ 2,200 51,287
------------
553,749
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--0.6%
CBS Corp. (b)....................................................... 8,800 382,250
Chris-Craft Industries, Inc. (b).................................... 1,545 $ 72,808
------------
455,058
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
BUILDING MATERIALS--0.4%
Masco Corp.......................................................... 6,100 176,137
Owens Corning....................................................... 3,700 127,187
------------
303,324
------------
CHEMICALS--0.2%
Solutia, Inc........................................................ 8,500 181,156
------------
CHEMICALS (SPECIALTY)--0.4%
Crompton & Knowles Corp............................................. 5,100 99,769
Geon Co............................................................. 2,200 70,950
W.R. Grace & Co. (b)................................................ 7,200 132,300
------------
303,019
------------
COMMUNICATIONS EQUIPMENT--2.7%
Comverse Technology, Inc. (b)....................................... 3,000 226,500
General Instrument Corp. (b)........................................ 5,300 225,250
Lucent Technologies, Inc............................................ 16,400 1,105,975
Motorola, Inc....................................................... 3,900 369,525
Tellabs, Inc. (b)................................................... 1,200 81,075
------------
2,008,325
------------
COMPUTERS (HARDWARE)--5.4%
Adaptec, Inc. (b)................................................... 2,600 91,812
Apple Computer, Inc. (b)............................................ 9,100 421,444
Compaq Computer Corp................................................ 7,200 170,550
Dell Computer Corp. (b)............................................. 11,400 421,800
Electronics for Imaging, Inc. (b)................................... 1,000 51,375
Gateway, Inc. (b)................................................... 1,800 106,200
Hewlett-Packard Co.................................................. 10,400 1,045,200
International Business Machines Corp................................ 11,700 1,512,225
NCR Corp. (b)....................................................... 3,100 151,319
Sun Microsystems, Inc. (b).......................................... 1,800 123,975
------------
4,095,900
------------
COMPUTERS (NETWORKING)--1.3%
3Com Corp. (b)...................................................... 1,000 26,687
Cisco Systems, Inc. (b)............................................. 14,800 954,600
------------
981,287
------------
COMPUTERS (PERIPHERALS)--0.4%
EMC Corp. (b)....................................................... 3,600 198,000
Seagate Technology, Inc. (b)........................................ 3,900 99,937
Xircom, Inc. (b).................................................... 100 3,006
------------
300,943
------------
COMPUTERS (SOFTWARE & SERVICES)--6.3%
Adobe Systems, Inc.................................................. 100 8,216
America Online, Inc. (b)............................................ 4,900 541,450
BMC Software, Inc. (b).............................................. 3,000 162,000
Citrix Systems, Inc. (b)............................................ 400 22,600
Computer Associates International, Inc.............................. 1,600 88,000
Computer Sciences Corp. (b)......................................... 200 13,837
Compuware Corp. (b)................................................. 4,900 155,881
Legato Systems, Inc. (b)............................................ 1,600 92,400
Microsoft Corp. (b)................................................. 32,600 2,940,112
New Era of Networks, Inc. (b)....................................... 700 30,756
Novell, Inc. (b).................................................... 2,500 66,250
Oracle Corp. (b).................................................... 5,900 219,037
Rational Software Corp. (b)......................................... 100 3,294
Siebel Systems, Inc. (b)............................................ 1,100 73,012
Sterling Software, Inc. (b)......................................... 1,500 40,031
Synopsys, Inc. (b).................................................. 800 44,150
</TABLE>
See Notes to Financial Statements
50
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)--CONTINUED
Unisys Corp. (b).................................................... 7,100 $ 276,456
------------
4,777,482
------------
CONSTRUCTION (CEMENT & AGGREGATES)--0.5%
Centex Construction Products, Inc................................... 1,400 47,775
Lafarge Corp........................................................ 4,900 173,644
Southdown, Inc...................................................... 2,000 128,500
------------
349,919
------------
CONSUMER FINANCE--0.3%
Countrywide Credit Industries, Inc.................................. 4,800 205,200
------------
DISTRIBUTORS (FOOD & HEALTH)--0.6%
AmeriSource Health Corp. Class A (b)................................ 6,200 158,100
Andrx Corp. (b)..................................................... 1,400 107,975
Bindley Western Industries, Inc..................................... 4,133 95,325
Cardinal Health, Inc................................................ 500 32,062
SUPERVALU, Inc...................................................... 3,500 89,906
------------
483,368
------------
ELECTRIC COMPANIES--4.4%
Central & South West Corp........................................... 5,400 126,225
Conectivity Technologies, Inc....................................... 300 7,331
DTE Energy Co....................................................... 3,100 124,000
Dominion Resources, Inc............................................. 2,100 90,956
Duke Energy Corp.................................................... 1,500 81,562
Edison International................................................ 500 13,375
Energy East Corp.................................................... 16,200 421,200
GPU, Inc............................................................ 4,800 202,500
Minnesota Power, Inc................................................ 7,200 143,100
Northern States Power Co............................................ 9,400 227,362
PG&E Corp........................................................... 6,800 221,000
Puget Sound Energy, Inc............................................. 6,200 148,800
Texas Utilities Co.................................................. 24,300 1,002,375
Unicom Corp......................................................... 3,400 131,112
UtiliCorp United, Inc............................................... 17,200 418,175
------------
3,359,073
------------
ELECTRICAL EQUIPMENT--2.6%
General Electric Co................................................. 16,400 1,853,200
Rockwell International Corp......................................... 2,100 127,575
------------
1,980,775
------------
ELECTRONICS (SEMICONDUCTORS)--2.8%
Intel Corp.......................................................... 26,800 1,594,600
Micron Technology, Inc. (b)......................................... 500 20,156
Texas Instruments, Inc.............................................. 3,100 449,500
Vitesse Semiconductor Corp. (b)..................................... 300 20,231
------------
2,084,487
------------
ENGINEERING & CONSTRUCTION--0.0%
McDermott International, Inc........................................ 300 8,475
------------
ENTERTAINMENT--0.9%
Time Warner, Inc.................................................... 3,000 220,500
Viacom, Inc. Class B (b)............................................ 10,600 466,400
------------
686,900
------------
EQUIPMENT (SEMICONDUCTOR)--0.4%
Applied Materials, Inc. (b)......................................... 3,000 221,625
Teradyne, Inc. (b).................................................. 900 64,575
------------
286,200
------------
FINANCIAL (DIVERSIFIED)--5.7%
Ambac Financial Group, Inc.......................................... 4,000 228,500
American Express Co................................................. 1,000 130,125
Citigroup, Inc...................................................... 36,300 1,724,250
Fannie Mae.......................................................... 11,600 793,150
Freddie Mac......................................................... 11,400 661,200
Morgan Stanley Dean Witter & Co..................................... 7,800 799,500
------------
4,336,725
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
FOODS--1.2%
Earthgrains Co. (The)............................................... 6,700 $ 172,944
General Mills, Inc.................................................. 500 40,187
Hormel Foods Corp................................................... 6,300 253,575
Keebler Foods Co. (b)............................................... 400 12,150
Quaker Oats Co. (The)............................................... 5,800 384,975
Tyson Foods, Inc. Class A........................................... 1,800 40,500
------------
904,331
------------
GOLD & PRECIOUS METALS MINING--0.1%
Placer Dome, Inc.................................................... 3,100 36,619
------------
HARDWARE & TOOLS--0.2%
Black & Decker Corp. (The).......................................... 2,200 138,875
------------
HEALTH CARE (DIVERSIFIED)--4.0%
Abbott Laboratories................................................. 3,200 145,600
Allergan, Inc....................................................... 1,700 188,700
American Home Products Corp......................................... 2,500 143,750
Bristol-Myers Squibb Co............................................. 16,500 1,162,219
Johnson & Johnson................................................... 6,400 627,200
Mallinckrodt, Inc................................................... 3,100 112,762
Warner-Lambert Co................................................... 8,800 610,500
------------
2,990,731
------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--3.3%
Lilly (Eli) & Co.................................................... 5,400 386,775
Medicis Pharmaceutical Corp. Class A (b)............................ 2,900 73,587
Merck & Co., Inc.................................................... 6,900 510,600
Pfizer, Inc......................................................... 3,900 428,025
Pharmacia & Upjohn, Inc............................................. 9,600 545,400
Schering-Plough Corp................................................ 10,000 530,000
------------
2,474,387
------------
HEALTH CARE (GENERIC AND OTHER)--0.2%
MedImmune, Inc. (b)................................................. 1,300 88,075
Mylan Laboratories, Inc............................................. 1,500 39,750
------------
127,825
------------
HEALTH CARE (MANAGED CARE)--0.8%
Aetna, Inc.......................................................... 700 62,606
Oxford Health Plans, Inc. (b)....................................... 5,200 80,925
PacifiCare Health Systems, Inc. (b)................................. 3,100 223,006
Trigon Healthcare, Inc. (b)......................................... 3,800 138,225
Wellpoint Health Networks, Inc. (b)................................. 1,600 135,800
------------
640,562
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.2%
Baxter International, Inc........................................... 1,600 97,000
Ocular Sciences, Inc. (b)........................................... 400 6,950
Patterson Dental Co. (b)............................................ 2,300 79,925
------------
183,875
------------
HOMEBUILDING--0.3%
Centex Corp......................................................... 3,300 123,956
Horton (D.R.), Inc.................................................. 600 9,975
Kaufman and Broad Home Corp......................................... 400 9,950
Lennar Corp......................................................... 1,400 33,600
Pulte Corp.......................................................... 2,600 59,963
------------
237,444
------------
HOUSEHOLD FURNISHINGS & APPLIANCES--0.2%
Maytag Corp......................................................... 1,400 97,563
Whirlpool Corp...................................................... 1,100 81,400
------------
178,963
------------
HOUSEHOLD PRODUCTS (NON-DURABLE)--1.4%
Church & Dwight Co., Inc............................................ 5,200 226,200
Kimberly-Clark Corp................................................. 9,500 541,500
Procter & Gamble Co. (The).......................................... 3,300 294,525
------------
1,062,225
------------
</TABLE>
See Notes to Financial Statements
51
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
HOUSEWARES--0.3%
Tupperware Corp..................................................... 10,200 $ 260,100
------------
INSURANCE (LIFE/HEALTH)--1.0%
Lincoln National Corp............................................... 14,200 742,838
------------
INSURANCE (MULTI-LINE)--0.3%
Hartford Financial Services Group, Inc. (The)....................... 2,600 151,613
Loews Corp.......................................................... 1,100 87,038
------------
238,651
------------
INSURANCE (PROPERTY-CASUALTY)--0.5%
Allstate Corp. (The)................................................ 9,700 347,988
------------
INSURANCE BROKERS--1.3%
Gallagher (Arthur J.) & Co.......................................... 5,400 267,300
Marsh & McLennan Companies, Inc..................................... 9,700 732,350
------------
999,650
------------
INVESTMENT BANKING/BROKERAGE--1.1%
Bear Stearns Companies, Inc. (The).................................. 900 42,075
Edwards (A.G.), Inc................................................. 800 25,800
Lehman Brothers Holdings, Inc....................................... 1,400 87,150
Merrill Lynch & Co., Inc............................................ 5,600 447,650
Schwab (Charles) Corp............................................... 2,100 230,738
------------
833,413
------------
INVESTMENT MANAGEMENT--0.2%
Equitable Companies, Inc. (The)..................................... 2,400 160,800
------------
LEISURE TIME (PRODUCTS)--0.1%
Hasbro, Inc......................................................... 2,400 67,050
------------
MACHINERY (DIVERSIFIED)--1.0%
Ingersoll-Rand Co................................................... 3,800 245,575
Manitowoc Co., Inc. (The)........................................... 1,500 62,438
Mettler-Toledo International, Inc. (b).............................. 5,700 141,431
Tecumseh Products Co. Class A....................................... 3,700 224,081
Terex Corp. (b)..................................................... 2,800 85,225
------------
758,750
------------
MANUFACTURING (DIVERSIFIED)--2.2%
AlliedSignal, Inc................................................... 3,600 226,800
Crane Co............................................................ 2,800 88,025
National Service Industries, Inc.................................... 2,900 104,400
Pentair, Inc........................................................ 1,700 77,775
Premark International, Inc.......................................... 7,700 288,750
Tyco International Ltd.............................................. 5,800 549,550
United Technologies Corp............................................ 5,000 358,438
------------
1,693,738
------------
MANUFACTURING (SPECIALIZED)--0.2%
Briggs & Stratton Corp.............................................. 1,400 80,850
York International Corp............................................. 2,400 102,750
------------
183,600
------------
NATURAL GAS--1.1%
MDU Resources Group, Inc............................................ 3,800 86,688
Sempra Energy....................................................... 18,100 409,513
Southwest Gas Corp.................................................. 10,900 312,013
------------
808,214
------------
OIL & GAS (EXPLORATION & PRODUCTION)--0.4%
Apache Corp......................................................... 7,600 296,400
------------
OIL (DOMESTIC INTEGRATED)--0.9%
Atlantic Richfield Co............................................... 5,100 426,169
Unocal Corp......................................................... 6,800 269,450
------------
695,619
------------
OIL (INTERNATIONAL INTEGRATED)--1.6%
Chevron Corp........................................................ 4,000 380,750
Exxon Corp.......................................................... 7,900 609,288
Texaco, Inc......................................................... 3,000 187,500
------------
1,177,538
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS--0.6%
Georgia-Pacific Group............................................... 3,400 $ 161,075
Louisiana-Pacific Corp.............................................. 11,600 275,500
------------
436,575
------------
PHOTOGRAPHY/IMAGING--0.4%
Eastman Kodak Co.................................................... 5,000 338,750
------------
PUBLISHING (NEWSPAPERS)--0.3%
Knight-Ridder, Inc.................................................. 2,900 159,319
Times Mirror Co. (The) Class A...................................... 1,300 77,025
------------
236,344
------------
RAILROADS--0.5%
Union Pacific Corp.................................................. 6,500 379,031
------------
RESTAURANTS--0.1%
Bob Evans Farms, Inc................................................ 3,400 67,575
------------
RETAIL (BUILDING SUPPLIES)--1.0%
Home Depot, Inc. (The).............................................. 9,400 605,713
Lowe's Companies, Inc............................................... 2,100 119,044
------------
724,757
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.3%
Best Buy Co., Inc. (b).............................................. 2,800 189,000
------------
RETAIL (DISCOUNTERS)--0.1%
Family Dollar Stores, Inc........................................... 400 9,600
Ross Stores, Inc.................................................... 1,100 55,413
------------
65,013
------------
RETAIL (FOOD CHAINS)--0.1%
Safeway, Inc. (b)................................................... 1,000 49,500
------------
RETAIL (GENERAL MERCHANDISE)--2.6%
Kmart Corp. (b)..................................................... 3,800 62,463
Sears, Roebuck & Co................................................. 7,400 329,763
Wal-Mart Stores, Inc................................................ 31,900 1,539,175
------------
1,931,401
------------
RETAIL (SPECIALTY)--0.3%
Claire's Stores, Inc................................................ 2,900 74,313
Toys "R" Us, Inc. (b)............................................... 1,800 37,238
Zale Corp. (b)...................................................... 2,000 80,000
------------
191,551
------------
RETAIL (SPECIALTY-APPAREL)--0.7%
AnnTaylor Stores Corp. (b).......................................... 1,600 72,000
Gap, Inc. (The)..................................................... 4,200 211,575
TJX Companies, Inc. (The)........................................... 7,100 236,519
------------
520,094
------------
SAVINGS & LOAN COMPANIES--0.0%
GreenPoint Financial Corp........................................... 800 26,250
------------
SERVICES (ADVERTISING/MARKETING)--0.3%
ACNielsen Corp. (b)................................................. 600 18,150
Omnicom Group, Inc.................................................. 1,300 104,000
Snyder Communications, Inc. (b)..................................... 3,600 117,900
------------
240,050
------------
SERVICES (COMMERCIAL & CONSUMER)--1.1%
H&R Block, Inc...................................................... 5,400 270,000
Hertz Corp. (The) Class A........................................... 1,500 93,000
Metzler Group, Inc. (The) (b)....................................... 3,300 91,163
Ogden Corp.......................................................... 10,100 272,069
Viad Corp........................................................... 3,500 108,281
------------
834,513
------------
SERVICES (COMPUTER SYSTEMS)--0.1%
SunGard Data Systems, Inc. (b)...................................... 2,600 89,700
------------
SERVICES (DATA PROCESSING)--0.3%
Concord EFS, Inc. (b)............................................... 3,000 126,938
NOVA Corp. (b)...................................................... 1,700 42,500
</TABLE>
See Notes to Financial Statements
52
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
SERVICES (DATA PROCESSING)--CONTINUED
Paychex, Inc........................................................ 1,800 $ 57,375
------------
226,813
------------
SPECIALTY PRINTING--0.7%
Deluxe Corp......................................................... 13,400 521,763
------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.8%
AT&T Corp........................................................... 24,300 1,356,244
MCI WorldCom, Inc. (b).............................................. 8,600 741,750
------------
2,097,994
------------
TELEPHONE--5.0%
Ameritech Corp...................................................... 6,300 463,050
Bell Atlantic Corp.................................................. 10,700 699,513
BellSouth Corp...................................................... 20,800 975,000
GTE Corp............................................................ 6,100 462,075
SBC Communications, Inc............................................. 21,000 1,218,000
------------
3,817,638
------------
TEXTILES (APPAREL)--0.4%
Jones Apparel Group, Inc. (b)....................................... 3,900 133,819
Tommy Hilfiger Corp. (b)............................................ 2,700 198,450
------------
332,269
------------
TOBACCO--0.9%
Philip Morris Companies, Inc........................................ 17,700 711,319
------------
TRUCKS & PARTS--0.1%
PACCAR, Inc......................................................... 800 42,700
------------
TOTAL COMMON STOCKS
(Identified cost $61,063,212)................................................ 70,751,892
------------
FOREIGN COMMON STOCKS--2.5%
COMMUNICATIONS EQUIPMENT--0.3%
Nortel Networks Corp. (Canada)...................................... 2,900 251,756
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
FOODS--0.7%
Unilever NV NY Registered Shares (Netherlands)...................... 7,200 $ 502,200
------------
OIL (INTERNATIONAL INTEGRATED)--1.5%
BP Amoco PLC Sponsored ADR (United Kingdom)......................... 2,900 314,650
Royal Dutch Petroleum Co. NY Registered Shares (Netherlands)........
14,000 843,500
------------
1,158,150
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,784,418)................................................. 1,912,106
------------
UNIT INVESTMENT TRUSTS--3.1%
S&P 500 Depository Receipts......................................... 17,000 2,328,203
------------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $2,115,065)................................................. 2,328,203
------------
TOTAL LONG-TERM INVESTMENTS--99.0%
(Identified cost $64,962,695)................................................ 74,992,201
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.8%
COMMERCIAL PAPER--1.8%
Corporate Asset Funding Co., Inc. 5.55%,
7/1/99........................................ A-1+ $ 1,325 1,325,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,325,000)................................................. 1,325,000
---------------
TOTAL INVESTMENTS--100.8%
(Identified cost $66,287,695)................................................ 76,317,201(a)
Cash and receivables, less liabilities--(0.8%)............................... (593,636)
---------------
NET ASSETS--100.0%............................................................. $ 75,723,565
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $11,298,159 and gross
depreciation of $1,347,113 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purpose was
$66,366,155.
(b) Non-income producing.
See Notes to Financial Statements
53
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$66,287,695).................................... $ 76,317,201
Cash.............................................. 3,522
Receivables
Investment securities sold...................... 197,271
Fund shares sold................................ 162,072
Dividends and interest.......................... 101,703
Prepaid expenses.................................. 781
-------------
Total assets.................................. 76,782,550
-------------
LIABILITIES
Payables
Investment securities purchased................. 973,036
Fund shares repurchased......................... 14,295
Investment advisory fee......................... 20,263
Financial agent fee............................. 7,790
Trustees' fee................................... 7,353
Accrued expenses.................................. 36,248
-------------
Total liabilities............................. 1,058,985
-------------
NET ASSETS........................................ $ 75,723,565
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 64,983,524
Undistributed net investment income............. 184,139
Accumulated net realized gain................... 526,396
Net unrealized appreciation..................... 10,029,506
-------------
NET ASSETS........................................ $ 75,723,565
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 5,720,789
-------------
-------------
Net asset value and offering price per share...... $ 13.24
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 463,295
Interest.................................................. 26,185
-------------
Total investment income................................. 489,480
-------------
EXPENSES
Investment advisory fee................................... 201,153
Financial agent fee....................................... 41,297
Custodian................................................. 24,303
Professional.............................................. 14,035
Trustees.................................................. 9,917
Printing.................................................. 6,706
Miscellaneous............................................. 4,441
-------------
Total expenses.......................................... 301,852
Less expenses borne by investment adviser............... (57,585)
-------------
Net expenses............................................ 244,267
-------------
NET INVESTMENT INCOME....................................... 245,213
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 929,528
Net realized gains on written options..................... 26,978
Net change in unrealized appreciation (depreciation) on
investments............................................. 4,983,814
-------------
NET GAIN ON INVESTMENTS..................................... 5,940,320
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 6,185,533
-------------
-------------
</TABLE>
See Notes to Financial Statements
54
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 245,213 $ 159,891
Net realized gain (loss).................................. 956,506 (430,367)
Net change in unrealized appreciation (depreciation)...... 4,983,814 5,045,692
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 6,185,533 4,775,216
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (56,685) (159,891)
In excess of net investment income........................ -- (4,132)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (56,685) (164,023)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (3,226,355 and 4,102,319
shares, respectively)................................... 40,144,602 43,754,814
Net asset value of shares issued from reinvestment of
distributions (4,358 and 14,099 shares, respectively)... 56,685 164,023
Cost of shares repurchased (1,000,218 and 626,124 shares,
respectively)........................................... (12,466,719) (6,669,881)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 27,734,568 37,248,956
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 33,863,416 41,860,149
NET ASSETS
Beginning of period....................................... 41,860,149 --
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $184,139 AND DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME OF ($4,389), RESPECTIVELY)............ $ 75,723,565 $ 41,860,149
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 11.99 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. 0.04(3) 0.05(3)
Net realized and unrealized gain (loss)................... 1.22 1.99
------- -------
TOTAL FROM INVESTMENT OPERATIONS........................ 1.26 2.04
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.01) (0.05)
------- -------
TOTAL DISTRIBUTIONS..................................... (0.01) (0.05)
------- -------
CHANGE IN NET ASSET VALUE................................... 1.25 1.99
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $13.24 $11.99
------- -------
------- -------
Total return................................................ 10.45%(2) 20.45%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $75,724 $41,860
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 0.85%(1) 0.85%(1)
Net investment income..................................... 0.85%(1) 1.02%(1)
Portfolio turnover rate..................................... 33%(2) 81%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.01
and $0.05 per share, respectively.
See Notes to Financial Statements
55
<PAGE>
PHOENIX-SENECA MID-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
COMMON STOCKS--91.4%
AUTO PARTS & EQUIPMENT--2.9%
Lear Corp. (b)............................................................. 6,280 $ 312,430
----------
BANKS (MAJOR REGIONAL)--2.6%
Comerica, Inc.............................................................. 4,745 282,031
----------
BANKS (REGIONAL)--3.3%
UnionBanCal Corp........................................................... 9,840 355,470
----------
BIOTECHNOLOGY--2.1%
Biogen, Inc. (b)........................................................... 3,520 226,380
----------
BROADCASTING (TELEVISION, RADIO & CABLE)--2.4%
Chancellor Media Corp. (b)................................................. 4,770 262,946
----------
CHEMICALS (SPECIALTY)--2.7%
Hercules, Inc.............................................................. 7,530 296,023
----------
COMMUNICATIONS EQUIPMENT--18.0%
ADC Telecommunications, Inc. (b)........................................... 6,820 310,736
American Tower Corp. Class A (b)........................................... 12,760 306,240
Comverse Technology, Inc. (b).............................................. 4,275 322,762
Copper Mountain Networks, Inc. (b)......................................... 2,500 193,125
Crown Castle International Corp. (b)....................................... 10,620 221,029
EchoStar Communications Corp. (b).......................................... 1,290 197,934
QUALCOMM, Inc. (b)......................................................... 2,750 394,625
----------
1,946,451
----------
COMPUTERS (SOFTWARE & SERVICES)--1.1%
International Integration, Inc. (b)........................................ 5,170 116,325
----------
DISTRIBUTORS (FOOD & HEALTH)--2.1%
WESCO International, Inc. (b).............................................. 11,040 226,320
----------
ELECTRICAL EQUIPMENT--4.0%
SPX Corp. (b).............................................................. 3,570 298,095
Universal Electronics, Inc. (b)............................................ 4,950 138,909
----------
437,004
----------
ELECTRONICS (SEMICONDUCTORS)--7.6%
RF Micro Devices, Inc. (b)................................................. 6,400 477,600
Xilinx, Inc. (b)........................................................... 6,110 349,798
----------
827,398
----------
EQUIPMENT (SEMICONDUCTOR)--3.4%
KLA-Tencor Corp. (b)....................................................... 5,710 370,436
----------
HEALTH CARE (MANAGED CARE)--3.0%
Wellpoint Health Networks, Inc. (b)........................................ 3,760 319,130
----------
INVESTMENT BANKING/BROKERAGE--2.9%
Donaldson, Lufkin & Jenrette, Inc.......................................... 5,250 316,313
----------
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)--6.6%
Nabors Industries, Inc. (b)................................................ 13,850 $ 338,459
Weatherford International, Inc. (b)........................................ 10,210 373,941
----------
712,400
----------
PAPER & FOREST PRODUCTS--5.9%
Mead Corp. (The)........................................................... 9,170 382,848
Smurfit-Stone Container Corp. (b).......................................... 12,350 253,947
----------
636,795
----------
RETAIL (COMPUTERS & ELECTRONICS)--7.0%
Best Buy Co., Inc. (b)..................................................... 5,500 371,250
Tandy Corp................................................................. 7,940 388,068
----------
759,318
----------
RETAIL (SPECIALTY-APPAREL)--6.8%
Abercrombie & Fitch Co. Class A (b)........................................ 8,580 411,840
TJX Companies, Inc. (The).................................................. 9,870 328,794
----------
740,634
----------
SERVICES (ADVERTISING/MARKETING)--4.0%
Outdoor Systems, Inc. (b).................................................. 11,755 429,058
----------
SERVICES (DATA PROCESSING)--3.0%
Concord EFS, Inc. (b)...................................................... 7,600 321,575
----------
TOTAL COMMON STOCKS
(Identified cost $8,108,227).......................................................... 9,894,437
----------
TOTAL LONG-TERM INVESTMENTS--91.4%
(Identified cost $8,108,227).......................................................... 9,894,437
----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--8.7%
COMMERCIAL PAPER--8.7%
CXC, Inc 5.80%, 7/1/99.......................... A-1+ $ 300 300,000
Corporate Asset Funding Co., Inc. 5.55%,
7/1/99........................................ A-1+ 345 345,000
Exxon Imperial Funding U.S., Inc. 5.80%,
7/1/99........................................ A-1+ 300 300,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $945,000)................................................. 945,000
------------
TOTAL INVESTMENTS--100.1%
(Identified cost $9,053,227)............................................... 10,839,437(a)
Cash and receivables, less liabilities--(0.1%)............................. (9,920)
------------
NET ASSETS--100.0%........................................................... $ 10,829,517
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,879,213 and gross
depreciation of $95,718 for federal income tax purposes. At June 30, 1999,
the aggregate cost of securities for federal income tax purpose was
$9,055,942.
(b) Non-income producing.
See Notes to Financial Statements
56
<PAGE>
PHOENIX-SENECA MID-CAP GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$9,053,227)..................................... $ 10,839,437
Receivables
Investment securities sold...................... 212,723
Interest and dividends.......................... 3,823
Fund shares sold................................ 1,572
Prepaid expenses.................................. 147
-------------
Total assets.................................. 11,057,702
-------------
LIABILITIES
Payables
Custodian....................................... 266
Investment securities purchased................. 167,285
Fund shares repurchased......................... 22,919
Trustees' fee................................... 7,353
Financial agent fee............................. 3,132
Investment advisory fee......................... 1,766
Accrued expenses.................................. 25,464
-------------
Total liabilities............................. 228,185
-------------
NET ASSETS........................................ $ 10,829,517
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 8,989,159
Undistributed net investment loss............... (14,403)
Accumulated net realized gain................... 68,551
Net unrealized appreciation..................... 1,786,210
-------------
NET ASSETS........................................ $ 10,829,517
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 850,942
-------------
-------------
Net asset value and offering price per share...... $ 12.73
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 16,331
Dividends................................................. 15,171
-------------
Total investment income................................. 31,502
-------------
EXPENSES
Investment advisory fee................................... 34,442
Financial agent fee....................................... 21,212
Professional.............................................. 13,821
Trustees.................................................. 9,917
Printing.................................................. 6,080
Custodian................................................. 5,911
Miscellaneous............................................. 2,134
-------------
Total expenses.......................................... 93,517
Less expense borne by investment adviser................ (48,309)
-------------
Net expenses............................................ 45,208
-------------
NET INVESTMENT INCOME....................................... (13,706)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 241,148
Net change in unrealized appreciation (depreciation) on
investments............................................. 371,470
-------------
NET GAIN ON INVESTMENTS..................................... 612,618
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 598,912
-------------
-------------
</TABLE>
See Notes to Financial Statements
57
<PAGE>
PHOENIX-SENECA MID-CAP GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ (13,706) $ 5,783
Net realized gain (loss).................................. 241,148 (172,597)
Net change in unrealized appreciation (depreciation)...... 371,470 1,414,740
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 598,912 1,247,926
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- (5,783)
In excess of net investment income........................ -- (697)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ -- (6,480)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (329,638 and 958,184
shares)................................................. 3,830,683 9,826,161
Net asset value of shares issued from reinvestment of
distributions (0 and 557 shares)........................ -- 6,480
Cost of shares repurchased (127,904 and 309,533
shares)................................................. (1,497,222) (3,176,943)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 2,333,461 6,655,698
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 2,932,373 7,897,144
NET ASSETS
Beginning of period....................................... 7,897,144 --
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF ($14,403) AND DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME OF ($697))..................... $ 10,829,517 $ 7,897,144
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 12.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. (0.02)(3)(4) 0.01(3)(4)
Net realized and unrealized gain (loss)................... 0.59 2.16
------- -------
TOTAL FROM INVESTMENT OPERATIONS........................ 0.57 2.17
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income...................... -- (0.01)
------- -------
TOTAL DISTRIBUTIONS..................................... -- (0.01)
------- -------
CHANGE IN NET ASSET VALUE................................... 0.57 2.16
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $12.73 $ 12.16
------- -------
------- -------
Total return................................................ 4.62%(2) 12.75%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $10,830 $7,897
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1) 1.05%(1)
Net investment income..................................... (0.32)%(1) 0.15%(1)
Portfolio turnover rate..................................... 110%(2) 127%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.15 per share, respectively.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
58
<PAGE>
PHOENIX-SCHAFER MID-CAP VALUE SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
COMMON STOCKS--80.5%
AIR FREIGHT--3.6%
FDX Corp. (b).............................................................. 6,400 $ 347,200
----------
AUTO PARTS & EQUIPMENT--2.5%
Borg-Warner Automotive, Inc................................................ 4,400 242,000
----------
BANKS (MAJOR REGIONAL)--4.6%
Mellon Bank Corp........................................................... 5,600 203,700
Summit Bancorp............................................................. 5,600 234,150
----------
437,850
----------
BANKS (MONEY CENTER)--5.1%
Bank of America Corp....................................................... 2,800 205,275
Chase Manhattan Corp. (The)................................................ 3,300 285,862
----------
491,137
----------
BUILDING MATERIALS--4.3%
Armstrong World Industries, Inc............................................ 3,100 179,219
Owens Corning.............................................................. 6,800 233,750
----------
412,969
----------
COMPUTERS (PERIPHERALS)--2.9%
Storage Technology Corp. (b)............................................... 12,300 279,825
----------
COMPUTERS (SOFTWARE & SERVICES)--2.8%
Cadence Design System, Inc. (b)............................................ 20,900 266,475
----------
CONSTRUCTION (CEMENT & AGGREGATES)--5.3%
Lafarge Corp............................................................... 6,800 240,975
Southdown, Inc............................................................. 4,100 263,425
----------
504,400
----------
ELECTRIC COMPANIES--1.4%
Western Resources, Inc..................................................... 5,000 133,125
----------
ELECTRICAL EQUIPMENT--2.7%
Harman International Industries, Inc....................................... 5,900 259,600
----------
ELECTRONICS (COMPONENT DISTRIBUTORS)--5.1%
Arrow Electronics, Inc. (b)................................................ 12,900 245,100
Avnet, Inc................................................................. 5,300 246,450
----------
491,550
----------
FOODS--1.8%
IBP, Inc................................................................... 7,100 168,625
----------
HEALTH CARE (GENERIC AND OTHER)--5.0%
ICN Pharmaceuticals, Inc................................................... 7,600 244,625
Mylan Laboratories, Inc.................................................... 8,900 235,850
----------
480,475
----------
HEALTH CARE (SPECIALIZED SERVICES)--1.8%
Omnicare, Inc.............................................................. 13,300 167,912
----------
HOUSEHOLD FURNISHINGS & APPLIANCES--2.7%
Maytag Corp................................................................ 3,700 257,844
----------
INSURANCE (PROPERTY-CASUALTY)--6.2%
Berkley (W.R.) Corp........................................................ 7,800 195,000
Chubb Corp. (The).......................................................... 3,600 250,200
Old Republic International Corp............................................ 8,500 147,156
----------
592,356
----------
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
INVESTMENT BANKING/BROKERAGE--5.8%
Merrill Lynch & Co., Inc................................................... 3,800 $ 303,763
Paine Webber Group, Inc.................................................... 5,400 252,450
----------
556,213
----------
IRON & STEEL--5.4%
Cleveland-Cliffs, Inc...................................................... 5,800 187,775
UCAR International, Inc. (b)............................................... 13,000 328,250
----------
516,025
----------
MANUFACTURING (SPECIALIZED)--2.7%
Diebold, Inc............................................................... 9,000 258,750
----------
OIL & GAS (REFINING & MARKETING)--1.5%
Sunoco, Inc................................................................ 4,800 144,900
----------
RAILROADS--2.4%
Burlington Northern Santa Fe Corp.......................................... 7,400 229,400
----------
RETAIL (SPECIALTY)--2.4%
Jo-Ann Stores, Inc. Class A (b)............................................ 15,200 228,000
----------
TELEPHONE--2.5%
GTE Corp................................................................... 3,200 242,400
----------
TOTAL COMMON STOCKS
(Identified cost $7,719,848).......................................................... 7,709,031
----------
FOREIGN COMMON STOCKS--19.6%
AIRLINES--2.3%
KLM Royal Dutch Airlines NV NY Registered Shares (Netherlands).............
7,800 222,787
----------
BANKS (MONEY CENTER)--1.5%
National Bank of Canada (Canada)........................................... 11,400 148,314
----------
COMMUNICATIONS EQUIPMENT--2.4%
ECI Telecom Ltd. (Israel).................................................. 6,800 225,675
----------
ELECTRICAL EQUIPMENT--2.8%
Koninklijke (Royal) Philips Electronics NV NY Registered Shares
(Netherlands)............................................................ 2,668 269,134
----------
INSURANCE (PROPERTY-CASUALTY)--1.9%
PartnerRe Ltd. (Bermuda)................................................... 4,800 179,400
----------
MACHINERY (DIVERSIFIED)--4.1%
New Holland NV (Netherlands)............................................... 22,700 388,738
----------
OIL & GAS (DRILLING & EQUIPMENT)--2.1%
Petroleum Geo-Services Sponsored ADR (Norway) (b).......................... 13,500 200,813
----------
RAILROADS--2.5%
Canadian National Railway Co. (Canada)..................................... 3,600 241,200
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,940,715).......................................................... 1,876,061
----------
TOTAL INVESTMENTS--100.1%
(Identified cost $9,660,563).......................................................... 9,585,092(a)
Cash and receivables, less liabilities--(0.1%)........................................ (6,255)
----------
NET ASSETS--100.0%...................................................................... $9,578,837
----------
----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $1,181,811 and gross
depreciation of $1,257,282 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$9,660,563.
(b) Non-income producing.
See Notes to Financial Statements
59
<PAGE>
PHOENIX-SCHAFER MID-CAP VALUE SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$9,660,563)............................................... $ 9,585,092
Cash........................................................ 36,180
Receivables
Dividends and interest.................................... 10,898
Fund shares sold.......................................... 10,349
Prepaid expenses............................................ 160
-----------
Total assets............................................ 9,642,679
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 1,384
Investment advisory fee................................... 24,842
Trustees' fee............................................. 7,353
Financial agent fee....................................... 3,616
Accrued expenses............................................ 26,647
-----------
Total liabilities......................................... 63,842
-----------
NET ASSETS.................................................. $ 9,578,837
-----------
-----------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $10,299,243
Undistributed net investment income....................... 31,590
Accumulated net realized loss............................. (676,525)
Net unrealized depreciation............................... (75,471)
-----------
NET ASSETS.................................................. $ 9,578,837
-----------
-----------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 1,107,470
-----------
-----------
Net asset value and offering price per share................ $ 8.65
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 90,279
Interest.................................................. 6,541
Foreign taxes withheld.................................... (3,745)
----------
Total investment income................................. 93,075
----------
EXPENSES
Investment advisory fee................................... 44,022
Financial agent fee....................................... 21,512
Professional.............................................. 14,840
Trustees.................................................. 9,917
Printing.................................................. 6,187
Custodian................................................. 5,206
Miscellaneous............................................. 2,124
----------
Total expenses.......................................... 103,808
Less expenses borne by investment adviser............... (53,495)
----------
Net expenses............................................ 50,313
----------
NET INVESTMENT INCOME....................................... 42,762
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (334,961)
Net change in unrealized appreciation (depreciation) on
investments............................................. 196,986
----------
NET LOSS ON INVESTMENTS..................................... (137,975)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (95,213)
----------
----------
</TABLE>
See Notes to Financial Statements
60
<PAGE>
PHOENIX-SCHAFER MID-CAP VALUE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 42,762 $ 23,057
Net realized gain (loss).................................. (334,961) (341,564)
Net change in unrealized appreciation (depreciation)...... 196,986 (272,457)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. (95,213) (590,964)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (11,054) (23,057)
In excess of net investment income........................ -- (118)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (11,054) (23,175)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (466,824 and 1,051,036
shares, respectively)................................... 3,885,543 9,921,823
Net asset value of shares issued from reinvestment of
distributions (1,283 and 2,696 shares, respectively).... 11,054 23,175
Cost of shares repurchased (254,204 and 160,165 shares,
respectively)........................................... (2,107,085) (1,435,267)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 1,789,512 8,509,731
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 1,683,245 7,895,592
NET ASSETS
Beginning of period....................................... 7,895,592 --
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $31,590 AND DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME OF ($118), RESPECTIVELY).......... $ 9,578,837 $ 7,895,592
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS FROM INCEPTION
ENDED 6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 8.84 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................... 0.04(3)(4) 0.03(3)(4)
Net realized and unrealized gain (loss)......... (0.22) (1.16)
------ -------
TOTAL FROM INVESTMENT OPERATIONS.............. (0.18) (1.13)
------ -------
LESS DISTRIBUTIONS
Dividends from net investment income............ (0.01) (0.03)
------ -------
TOTAL DISTRIBUTIONS........................... (0.01) (0.03)
------ -------
CHANGE IN NET ASSET VALUE......................... (0.19) (1.16)
------ -------
NET ASSET VALUE, END OF PERIOD.................... $ 8.65 $8.84
------ -------
------ -------
Total return...................................... (2.01)%(2) (11.37)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)............. $9,579 $7,896
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.............................. 1.20%(1) 1.20%(1)
Net investment income........................... 1.02%(1) 0.52%(1)
Portfolio turnover rate........................... 17%(2) 21%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.05
and $0.11 per share, respectively.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
61
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--91.5%
AUSTRALIA--13.9%
Australian Gas Light Co., Ltd. (Natural Gas)..... 38,000 $ 231,157
BRL Hardy Ltd. (Beverages (Alcoholic))........... 105,000 445,229
Commonwealth Bank of Australia (Banks (Major
Regional))..................................... 12,000 191,031
Leighton Holdings Ltd. (Engineering &
Construction).................................. 50,000 195,267
Pacifica Group Ltd. (Auto Parts & Equipment)..... 65,000 266,755
QBE Insurance Group Ltd. (Insurance (Property-
Casualty))..................................... 115,000 437,696
Telstra Corp. Ltd. (Telephone)................... 40,000 229,211
----------
1,996,346
----------
HONG KONG--20.4%
Axa China Region Ltd. (Insurance
(Life/Health))................................. 450,000 359,600
CDL Hotels International Ltd. (Lodging-Hotels)... 850,000 356,056
Giordano International Ltd. (Retail
(Specialty-Apparel))........................... 1,000,000 708,890
Hongkong Electric Holdings Ltd. (Electric
Companies)..................................... 100,000 322,223
Johnson Electric Holdings Ltd. (Manufacturing
(Diversified))................................. 80,000 329,956
Li & Fung Ltd. (Distributors (Food & Health)).... 110,000 263,707
Smartone Telecommunications (Telephone).......... 75,000 266,800
Swire Pacific Ltd. Class B (Manufacturing
(Diversified))................................. 450,000 336,400
----------
2,943,632
----------
INDIA--6.6%
BSES Ltd. GDR (Electric Companies)............... 20,000 202,500
Industrial Credit & Investment Corporation of
India Ltd. Sponsored GDR (Financial
(Diversified))................................. 30,000 311,250
Mahanagar Telephone Nigam Ltd. Sponsored GDR
(Telecommunications (Long Distance))........... 25,000 253,750
Ranbaxy Laboratories Ltd. GDR (Health Care
(Drugs-Major Pharmaceuticals))................. 11,000 184,250
----------
951,750
----------
INDONESIA--3.0%
PT Indosat (Telecommunications (Long
Distance))..................................... 100,000 191,727
PT Indosat ADR (Telecommunications (Long
Distance))..................................... 12,500 243,750
----------
435,477
----------
MALAYSIA--4.7%
Carlsberg Brewery Malaysia Berhad (Beverages
(Alcoholic))(c)................................ 70,000 179,147
Malaysian Oxygen Berhad (Chemicals
(Specialty))(c)................................ 100,000 213,270
Sime UEP Properties Berhad (Financial
(Diversified))(c).............................. 250,000 289,100
----------
681,517
----------
NEW ZEALAND--1.8%
Telecom Corporation of New Zealand Ltd.
(Telephone).................................... 60,000 257,541
----------
PHILIPPINES--7.7%
Ayala Land, Inc. (Financial (Diversified))....... 900,000 283,846
Bank of The Philippine Islands (Banks (Major
Regional))..................................... 100,000 357,435
La Tondena Distillers, Inc. (Beverages
(Alcoholic))................................... 175,000 206,971
Philippine Long Distance Telephone Co. Sponsored
ADR (Telecommunications (Long Distance))....... 8,500 256,062
----------
1,104,314
----------
SINGAPORE--9.1%
Chemical Industries (Far East) Ltd. (Financial
(Diversified))................................. 15,000 18,943
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C> <C>
SINGAPORE--CONTINUED
Clipsal Industries (Holdings) Ltd. (Electrical
Equipment) .................................... 175,000 $ 271,250
Robinson & Co. Ltd. (Retail (Department
Stores))....................................... 105,000 317,627
Singapore Press Holdings Ltd. (Publishing
(Newspapers)).................................. 17,000 289,579
United Overseas Bank Ltd. (Banks (Major
Regional))..................................... 60,000 419,391
----------
1,316,790
----------
SOUTH KOREA--11.7%
Kookmin Bank (Banks (Major Regional))............ 20,000 406,060
Korea Telecom Corp. (Telephone).................. 5,000 331,760
Korea Telecom Corp. Sponsored ADR (Telephone).... 4,000 149,500
Pohang Iron & Steel Co. Ltd. (Iron & Steel)...... 5,000 600,689
Seoul City Gas Co. Ltd. (Natural Gas)............ 6,000 191,799
----------
1,679,808
----------
SRI LANKA--1.8%
John Keells Holdings Ltd. (Beverages
(Alcoholic))................................... 60,000 130,822
National Development Bank Ltd. (Banks (Major
Regional))..................................... 99,600 121,111
----------
251,933
----------
TAIWAN--2.2%
Standard Foods Taiwan Ltd. GDR (Foods)(b)........ 40,864 320,782
----------
THAILAND--4.8%
Bec World Public Company Ltd. (Entertainment).... 30,000 185,497
Phatra Insurance Public Company Ltd. Foreign
(Insurance (Property-Casualty))................ 71,600 231,069
Ruam Pattana Fund II Local (Financial
(Diversified))(b).............................. 250,000 46,781
Ruam Pattana Fund II Foreign (Financial
(Diversified))(b).............................. 1,250,000 233,905
----------
697,252
----------
UNITED KINGDOM--3.8%
HSBC Holdings PLC (Financial (Diversified))...... 10,000 354,193
Rowe Evans Investments Group PLC (Agricultural
Products)...................................... 200,000 189,155
----------
543,348
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $12,455,908)................................ 13,180,490
----------
TOTAL LONG-TERM INVESTMENTS--91.5%
(Identified cost $12,455,908)................................ 13,180,490
----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
--------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.8%
COMMERCIAL PAPER--2.8%
Corporate Asset Funding
Co., Inc. 5.55%, 7/1/99............. A-1+ $ 400 400,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $400,000)................................... 400,000
-----------
TOTAL INVESTMENTS--94.3%
(Identified cost $12,855,908)................................ 13,580,490(a)
CASH AND RECEIVABLES, LESS LIABILITIES--5.7%................. 823,049
-----------
NET ASSETS--100.0%............................................. $14,403,539
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,754,732 and gross
depreciation of $2,064,603 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purposes was
$12,890,361.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the Trustees.
See Notes to Financial Statements
62
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Agricultural Products.............................. 1.4%
Auto Parts & Equipment............................. 2.0
Banks (Major Regional)............................. 11.3
Beverages (Alcoholic).............................. 7.3
Chemicals (Specialty).............................. 1.6
Distributors (Food & Health)....................... 2.0
Electric Companies................................. 4.0
Electrical Equipment............................... 2.1
Engineering & Construction......................... 1.5
Entertainment...................................... 1.4
Financial (Diversified)............................ 11.6
Foods.............................................. 2.4
Health Care (Drugs-Major Pharmaceuticals).......... 1.4
Insurance (Life/Health)............................ 2.7
Insurance (Property-Casualty)...................... 5.1
Iron & Steel....................................... 4.6
Lodging-Hotels..................................... 2.7
Manufacturing (Diversified)........................ 5.1
Natural Gas........................................ 3.2
Publishing (Newspapers)............................ 2.2
Retail (Department Stores)......................... 2.4
Retail (Specialty-Apparel)......................... 5.4
Telecommunications (Long Distance)................. 7.2
Telephone.......................................... 9.4
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
63
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$12,855,908).............................................. $ 13,580,490
Cash........................................................ 1,136
Foreign currency at value (Identified cost $48,220)......... 52,101
Receivables
Fund shares sold.......................................... 590,295
Investment securities sold................................ 221,081
Dividends and interest.................................... 56,024
Prepaid expenses............................................ 208
-------------
Total assets............................................ 14,501,335
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 19,494
Investment advisory fee................................... 17,151
Trustees' fee............................................. 9,321
Financial agent fee....................................... 3,848
Accrued expenses............................................ 47,982
-------------
Total liabilities....................................... 97,796
-------------
NET ASSETS.................................................. $ 14,403,539
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 16,667,631
Undistributed net investment income....................... 85,024
Accumulated net realized loss............................. (3,078,111)
Net unrealized appreciation............................... 728,995
-------------
NET ASSETS.................................................. $ 14,403,539
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 1,781,515
-------------
-------------
Net asset value and offering price per share................ $ 8.08
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 178,738
Interest.................................................. 8,145
Foreign taxes withheld.................................... (9,767)
-------------
Total investment income................................. 177,116
-------------
EXPENSES
Investment advisory fee................................... 54,352
Financial agent fee....................................... 22,599
Custodian................................................. 28,937
Professional.............................................. 11,368
Printing.................................................. 10,398
Trustees.................................................. 9,774
Miscellaneous............................................. 2,823
-------------
Total expenses.......................................... 140,251
Less expenses borne by investment adviser............... (72,311)
-------------
Net expenses............................................ 67,940
-------------
NET INVESTMENT INCOME....................................... 109,176
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 331,083
Net realized gain on foreign currency transactions........ 2,260
Net change in unrealized appreciation (depreciation) on
investments............................................. 2,811,608
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... 4,709
-------------
NET GAIN ON INVESTMENTS..................................... 3,149,660
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,258,836
-------------
-------------
</TABLE>
See Notes to Financial Statements
64
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
------------------ -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 109,176 $ 195,924
Net realized gain (loss).................................. 333,343 (2,798,842)
Net change in unrealized appreciation (depreciation)...... 2,816,317 2,317,131
------------------ -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 3,258,836 (285,787)
------------------ -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (118,700) (36,125)
In excess of net investment income........................ -- (4,147)
------------------ -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (118,700) (40,272)
------------------ -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (663,650 and 2,726,957
shares, respectively)................................... 4,859,485 16,221,934
Net asset value of shares issued from reinvestment of
distributions (14,729 and 6,603 shares, respectively)... 118,700 40,272
Cost of shares repurchased (448,960 and 2,736,922 shares,
respectively)........................................... (3,225,222) (16,442,409)
------------------ -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ 1,752,963 (180,203)
------------------ -----------------
NET INCREASE (DECREASE) IN NET ASSETS..................... 4,893,099 (506,262)
NET ASSETS
Beginning of period....................................... 9,510,440 10,016,702
------------------ -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $85,024 AND $94,548, RESPECTIVELY)..... $ 14,403,539 $ 9,510,440
------------------ -----------------
------------------ -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, FROM INCEPTION
6/30/99 -------------------------- 9/17/96 TO
(UNAUDITED) 1998 1997 12/31/96
----------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $6.13 $6.44 $9.96 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............... 0.07(1) 0.13(1)(4) 0.15(1) 0.05(1)
Net realized and unrealized gain (loss).... 1.95 (0.41) (3.36) (0.04)
----------- ----- ----- -------
TOTAL FROM INVESTMENT OPERATIONS......... 2.02 (0.28) (3.21) 0.01
----------- ----- ----- -------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.07) (0.03) (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...................... (0.07) (0.03) (0.31) (0.05)
----------- ----- ----- -------
CHANGE IN NET ASSET VALUE.................... 1.95 (0.31) (3.52) (0.04)
----------- ----- ----- -------
NET ASSET VALUE, END OF PERIOD............... $8.08 $6.13 $6.44 $ 9.96
----------- ----- ----- -------
----------- ----- ----- -------
Total return................................. 33.09%(3) (4.44)% (32.39)% 0.16%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $14,404 $9,510 $10,017 $11,585
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 1.25%(2) 1.25% 1.25% 1.25%(2)
Net investment income...................... 2.01%(2) 2.09% 1.63% 2.40%(2)
Portfolio turnover rate...................... 14%(3) 46% 27% 2%(3)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.05,
$0.08, $0.07 and $0.03 per share, respectively.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
65
<PAGE>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
COMMON STOCKS--96.3%
REAL ESTATE INVESTMENT TRUSTS--94.1%
DIVERSIFIED--11.9%
Colonial Properties Trust.................................................. 16,700 $ 471,775
Crescent Real Estate Equities Co........................................... 59,900 1,422,625
Vornado Realty Trust....................................................... 52,200 1,843,312
-----------
3,737,712
-----------
HEALTH CARE--2.9%
Nationwide Health Properties, Inc.......................................... 47,900 913,094
-----------
INDUSTRIAL/OFFICE--37.8%
INDUSTRIAL--10.0%
CenterPoint Properties Trust............................................... 37,600 1,377,100
First Industrial Realty Trust, Inc......................................... 30,000 823,125
Weeks Corp................................................................. 30,500 930,250
-----------
3,130,475
-----------
MIXED--6.9%
Duke Realty Investments, Inc............................................... 31,600 712,975
Reckson Associates Realty Corp............................................. 62,200 1,461,700
-----------
2,174,675
-----------
OFFICE--20.9%
Alexandria Real Estate Equities, Inc....................................... 10,000 312,500
Boston Properties, Inc..................................................... 68,500 2,457,437
Mack-Cali Realty Corp...................................................... 47,200 1,460,250
Spieker Properties, Inc.................................................... 60,200 2,340,275
-----------
6,570,462
-----------
TOTAL INDUSTRIAL/OFFICE................................................................. 11,875,612
-----------
RESIDENTIAL--21.5%
APARTMENTS--16.9%
Apartment Investment & Management Co....................................... 18,500 790,875
Avalonbay Communities, Inc................................................. 33,900 1,254,300
Equity Residential Properties Trust........................................ 48,100 2,167,506
Essex Property Trust, Inc.................................................. 30,700 1,086,012
-----------
5,298,693
-----------
MANUFACTURED HOMES--4.6%
Manufactured Home Communities, Inc......................................... 33,800 878,800
Sun Communities, Inc....................................................... 16,300 578,650
-----------
1,457,450
-----------
TOTAL RESIDENTIAL....................................................................... 6,756,143
-----------
RETAIL--17.4%
OUTLET CENTERS--2.1%
Chelsea GCA Realty, Inc.................................................... 17,600 653,400
-----------
REGIONAL MALLS--8.6%
General Growth Properties, Inc............................................. 20,000 710,000
Macerich Co. (The)......................................................... 49,300 1,294,125
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
REGIONAL MALLS--CONTINUED
Urban Shopping Centers, Inc................................................ 21,700 $ 683,550
-----------
2,687,675
-----------
STRIP CENTERS--6.7%
Developers Diversified Realty Corp......................................... 40,000 665,000
JDN Realty Corp............................................................ 20,000 447,500
Kimco Realty Corp.......................................................... 25,000 978,125
-----------
2,090,625
-----------
TOTAL RETAIL............................................................................ 5,431,700
-----------
SELF STORAGE--2.6%
Storage USA, Inc........................................................... 25,900 825,563
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $29,141,679)......................................................... 29,539,824
-----------
REAL ESTATE OPERATING COMPANIES--2.2%
DIVERSIFIED--0.1%
Vornado Operating, Inc. (b)................................................ 3,110 24,880
-----------
HEALTH CARE--0.0%
OMEGA Worldwide, Inc. (b).................................................. 4,641 18,854
-----------
INDUSTRIAL/OFFICE--2.1%
LODGING-HOTELS--0.9%
Interstate Hotels Corp. (b)................................................ 1,996 8,235
Wyndham International, Inc. Class A (b).................................... 59,891 269,510
-----------
277,745
-----------
MIXED--1.2%
Reckson Services Industries, Inc. (b)...................................... 24,956 377,460
-----------
TOTAL INDUSTRIAL/OFFICE................................................................. 655,205
-----------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $1,340,733).......................................................... 698,939
-----------
TOTAL COMMON STOCKS
(Identified cost $30,482,412)......................................................... 30,238,763
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.8%
COMMERCIAL PAPER--4.8%
CXC, Inc. 5.75%, 7/1/99......................... A-1+ $ 1,500 1,500,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,500,000)............................................... 1,500,000
------------
TOTAL INVESTMENTS--101.1%
(Identified cost $31,982,412).............................................. 31,738,763(a)
Cash and receivables, less liabilities--(1.1%)............................. (349,706)
------------
NET ASSETS--100.0%........................................................... $ 31,389,057
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $2,357,903 and gross
depreciation of $2,601,552 for federal income tax purposes. At June 30,
1999, the aggregate cost of securities for federal income tax purpose was
$31,982,412.
(b) Non-income producing.
See Notes to Financial Statements
66
<PAGE>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$31,982,412).............................................. $ 31,738,763
Cash........................................................ 1,908
Receivables
Investment securities sold................................ 838,472
Dividends and interest.................................... 229,382
Fund shares sold.......................................... 87,366
Receivable from adviser................................... 66,422
Prepaid expenses............................................ 791
------------
Total assets............................................ 32,963,104
------------
LIABILITIES
Payables
Investment securities purchased........................... 1,504,779
Fund shares repurchased................................... 14,676
Custodian fee............................................. 20,307
Trustees' fee............................................. 7,369
Financial agent fee....................................... 4,874
Accrued expenses............................................ 22,042
------------
Total liabilities....................................... 1,574,047
------------
NET ASSETS.................................................. $ 31,389,057
------------
------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 33,721,276
Undistributed net investment income....................... 313,222
Accumulated net realized loss............................. (2,401,792)
Net unrealized depreciation............................... (243,649)
------------
NET ASSETS.................................................. $ 31,389,057
------------
------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 2,383,097
------------
------------
Net asset value and offering price per share................ $ 13.17
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 998,574
Interest.................................................. 28,806
------------
Total investment income................................. 1,027,380
------------
EXPENSES
Investment advisory fee................................... 120,631
Financial agent fee....................................... 31,457
Custodian................................................. 24,303
Professional.............................................. 14,035
Trustees.................................................. 9,917
Printing.................................................. 6,706
Miscellaneous............................................. 4,448
------------
Total expenses.......................................... 211,497
Less expenses borne by investment adviser............... (51,561)
------------
Net expenses............................................ 159,936
------------
NET INVESTMENT INCOME....................................... 867,444
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (2,288,292)
Net change in unrealized appreciation (depreciation) on
investments............................................. 3,408,596
------------
NET GAIN ON INVESTMENTS..................................... 1,120,304
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,987,748
------------
------------
</TABLE>
See Notes to Financial Statements
67
<PAGE>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 867,444 $ 1,898,008
Net realized gain (loss).................................. (2,288,292) (109,430)
Net change in unrealized appreciation (depreciation)...... 3,408,596 (13,109,206)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. 1,987,748 (11,320,628)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (554,222) (1,978,391)
Net realized gains........................................ -- (49,416)
Tax return of capital..................................... -- (45,581)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (554,222) (2,073,388)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (355,937 and 1,369,232
shares, respectively)................................... 5,098,785 20,540,759
Net asset value of shares issued from reinvestment of
distributions (45,762 and 154,542 shares,
respectively)........................................... 554,222 2,073,388
Cost of shares repurchased (984,098 and 1,894,769 shares,
respectively)........................................... (12,105,268) (27,471,348)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (6,452,261) (4,857,201)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (5,018,735) (18,251,217)
NET ASSETS
Beginning of period....................................... 36,407,792 54,659,009
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $313,222 AND $0, RESPECTIVELY)......... $ 31,389,057 $ 36,407,792
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED FROM
ENDED DECEMBER 31, INCEPTION
6/30/99 --------------------------------------- 5/1/95 TO
(UNAUDITED) 1998 1997 1996 12/31/95
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.28 $ 16.38 $ 14.32 $ 11.33 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).......... 0.35(3) 0.78(3) 0.50(3) 0.50(3) 0.33(3)
Net realized and unrealized gain
(loss).............................. 0.76 (4.20) 2.62 3.14 1.42
----------- ----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... 1.11 (3.42) 3.12 3.64 1.75
----------- ----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.22) (0.65) (0.48) (0.50) (0.33)
Dividends from net realized gains..... -- (0.02) (0.58) (0.15) (0.06)
Tax return of capital................. -- (0.01) -- -- (0.03)
----------- ----------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.22) (0.68) (1.06) (0.65) (0.42)
----------- ----------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... 0.89 (4.10) 2.06 2.99 1.33
----------- ----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 13.17 $ 12.28 $ 16.38 $ 14.32 $ 11.33
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Total return............................ 9.20%(2) (21.19)% 22.05% 33.09% 17.79%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $31,389 $36,408 $54,659 $22,710 $8,473
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 1.00%(1) 1.00% 1.00% 1.00% 1.00%(1)
Net investment income................. 5.39%(1) 5.07% 3.59% 4.36% 4.80%(1)
Portfolio turnover rate................. 14%(2) 18% 41% 21% 10%(2)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of $0.02,
$0.002, $0.01, $0.05 and $0.07 per share, respectively.
See Notes to Financial Statements
68
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(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 Phoenix Research Enhanced Index, Phoenix-Aberdeen International,
Phoenix-Aberdeen New Asia, Phoenix-Duff & Phelps Real Estate,
Phoenix-Engemann Nifty Fifty, Phoenix-Goodwin Balanced, Phoenix-Goodwin
Growth, Phoenix-Goodwin Money Market, Phoenix-Goodwin Multi-Sector Fixed
Income, Phoenix-Goodwin Strategic Allocation, Phoenix-Goodwin Strategic
Theme, Phoenix-Hollister Value Equity, Phoenix-Oakhurst Growth and Income,
Phoenix-Schafer Mid-Cap Value and Phoenix-Seneca Mid-Cap Growth 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 subaccounts 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 Phoenix Research 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 Phoenix-Aberdeen 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 Phoenix-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
Phoenix-Duff & Phelps 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 Phoenix-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 Phoenix-Goodwin Balanced Series seeks to provide reasonable
income, long-term growth and conservation of capital. The Phoenix-Goodwin
Growth Series seeks to achieve intermediate and long-term growth of capital,
with income as a secondary consideration. The Phoenix-Goodwin Money Market
Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Goodwin 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
Phoenix-Goodwin 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 Phoenix-Goodwin
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 Phoenix-Hollister 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
Phoenix-Oakhurst Growth and Income Series seeks as its investment objective,
dividend growth, current income and capital appreciation by investing in
common stocks. The Phoenix-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. The Phoenix-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.
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 Phoenix-Goodwin 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.
69
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(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 Phoenix-Goodwin
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 Phoenix-Goodwin Multi-Sector Fixed Income, Phoenix-Goodwin Money Market,
Phoenix-Goodwin Growth, Phoenix-Goodwin Strategic Allocation, Phoenix-Goodwin
Balanced, Phoenix-Aberdeen International, Phoenix-Goodwin Strategic Theme,
Phoenix Research Enhanced Index, Phoenix Seneca Mid-Cap Growth,
Phoenix-Oakhurst Growth and Income, Phoenix Hollister Value Equity and
Phoenix-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
70
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
that the change in value of options contracts may not correspond to the
change in value of the hedged instruments. In addition, losses may arise from
changes in the value of the underlying instruments, or if a liquid secondary
market does not exist for the contracts.
Each Series may purchase options which are included in the Series' Schedule
of Investments and subsequently marked-to-market to reflect the current value
of the option. When a purchased option is exercised, the cost of the security
is adjusted by the amount of premium paid. The risk associated with purchased
options is limited to the premium paid.
I. EXPENSES
Expenses incurred by the Fund with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation
method can be more fairly made.
J. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Series may engage in when-issued or delayed delivery transactions. The
Series record when-issued securities on the trade date and maintain
collateral for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis begin earning interest on the
settlement date.
K. REPURCHASE AGREEMENTS
A repurchase agreement is a transaction where a Series acquires a security
for cash and obtains a simultaneous commitment from the seller to repurchase
the security at an agreed upon price and date. The Series, through its
custodian, takes possession of 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>
Phoenix Research Enhanced Index................... 0.45% 0.45% 0.45%
Phoenix-Aberdeen International.................... 0.75 0.70 0.65
Phoenix-Engemann Nifty Fifty...................... 0.90 0.85 0.80
Phoenix-Goodwin Balanced.......................... 0.55 0.50 0.45
Phoenix-Goodwin Growth............................ 0.70 0.65 0.60
Phoenix-Goodwin Money Market...................... 0.40 0.35 0.30
Phoenix-Goodwin Multi-Sector Fixed Income......... 0.50 0.45 0.40
Phoenix-Goodwin Strategic Allocation.............. 0.60 0.55 0.50
Phoenix-Goodwin Strategic Theme................... 0.75 0.70 0.65
Phoenix-Hollister Value Equity.................... 0.70 0.65 0.60
Phoenix-Oakhurst Growth and Income................ 0.70 0.65 0.60
Phoenix-Seneca Mid-Cap Growth..................... 0.80 0.80 0.80
Phoenix-Schafer Mid-Cap Value..................... 1.05 1.05 1.05
Phoenix-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>
Phoenix-Duff & Phelps Real Estate................. 0.75 0.70 0.65
</TABLE>
Phoenix Investment Council ("PIC") is adviser to each Series except the
Phoenix-Duff & Phelps Real Estate Series and Phoenix-Aberdeen New Asia
Series. Pursuant to a subadvisory agreement with the Fund, 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>
Phoenix Research Enhanced Index Series................... J.P. Morgan Investment Management, Inc. ("J.P. Morgan")
Phoenix-Engemann Nifty Fifty Series...................... Roger Engemann & Associates, Inc. ("Engemann")
Phoenix-Seneca Mid-Cap Growth Series..................... Seneca Capital Management, LLC ("Seneca")
Phoenix-Schafer Mid-Cap Value 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 Phoenix Research 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 0.45% of the average
aggregate daily net asset values of the Phoenix-Engemann Nifty Fifty Series
up to $250,000,000, 0.425% of such values between $250,000,000 and
$500,000,000 and 0.40% of such values in excess of $500,000,000. Pursuant to
the subadvisory agreement with the Fund and Seneca, Seneca is paid a
71
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
monthly fee at the annual rate of 0.40% of the average aggregate daily net
asset values of the Phoenix-Seneca Mid-Cap Growth Series. In accordance with
the subadvisory agreement with the Fund and Schafer, Schafer is paid a
monthly fee at the annual rate of 0.85% of the average aggregate daily net
asset values of the Phoenix-Schafer Mid-Cap Value Series up to $175 million
and 0.80% of such value in excess of $175 million.
Aberdeen Fund Managers, Inc. ("Aberdeen") is subadvisor to the
Phoenix-Aberdeen International Series. For its services, Aberdeen is paid a
fee by the Advisers equal to 0.375% of the average daily net assets of the
Phoenix-Aberdeen International Series up to $250 million, 0.35% of such value
between $250 million to $500 million and 0.325% of such value in excess of
$500 million. Aberdeen is a subsidiary of Aberdeen Asset Management PLC, of
which Phoenix Home Life Mutual Insurance Company ("Phoenix") owns
approximately 11%.
The investment adviser for the Phoenix-Duff & Phelps Real Estate Series is
Duff & Phelps Investment Management Co. ("DPIM"), a subsidiary of Phoenix
Investment Partners, Ltd. ("PXP"). PXP is a majority owned subsidiary of
Phoenix. 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 Phoenix-Aberdeen New Asia Series. PAIA is a joint
venture between PM Holdings, Inc., a direct subsidiary of Phoenix, 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 Phoenix-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 Phoenix-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 Phoenix-Aberdeen International, Phoenix-Duff & Phelps
Real Estate, Phoenix-Goodwin Strategic Theme, Phoenix-Aberdeen New Asia,
Phoenix Research Enhanced Index and Phoenix-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 Phoenix-Aberdeen International, Phoenix-Duff & Phelps Real
Estate, Phoenix-Goodwin Strategic Theme, Phoenix-Aberdeen New Asia, Phoenix
Research Enhanced Index and Phoenix-Seneca Mid-Cap Series pay other operating
expenses up to 0.40%, 0.25%, 0.25%, 0.25%, 0.10% and 0.25% respectively, of
its average net assets. Expenses above these limits are paid by the Advisers
(PIC, DPIM, PAIA), Phoenix and/or Phoenix Variable Insurance Company.
As Financial Agent to the Fund and to each Series, Phoenix Equity Planning
Corporation ("PEPCO"), an indirect majority-owned subsidiary of Phoenix,
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, 1999, Phoenix and affiliates held shares in The Phoenix Edge
Series Fund which had the following aggregate value:
<TABLE>
<S> <C>
Phoenix-Seneca Mid-Cap Growth Series............. $ 2,505,858
Phoenix-Schafer Mid-Cap Value Series............. 1,708,108
Phoenix-Aberdeen New Asia Series................. 2,495,031
</TABLE>
NOTE 4--PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities during the period ended June 30, 1999
(excluding U.S. Government securities, short-term securities, options written
and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Phoenix Research Enhanced Index........ $ 49,287,726 $ 19,537,636
Phoenix-Aberdeen International......... 110,086,234 111,294,002
Phoenix-Engemann Nifty Fifty........... 24,997,409 8,454,974
Phoenix-Goodwin Balanced............... 83,131,215 77,616,289
Phoenix-Goodwin Growth................. 1,308,524,870 1,467,875,459
Phoenix-Goodwin Multi-Sector Fixed
Income............................... 92,317,637 103,000,412
Phoenix-Goodwin Strategic Allocation... 148,712,810 221,165,770
Phoenix-Goodwin Strategic Theme........ 116,592,635 97,652,367
Phoenix-Hollister Value Equity......... 7,012,150 8,032,877
Phoenix-Oakhurst Growth and Income..... 46,628,064 18,712,178
Phoenix-Seneca Mid-Cap Growth.......... 10,304,084 8,963,231
Phoenix-Schafer Mid-Cap Value.......... 3,233,912 1,390,443
Phoenix-Aberdeen New Asia.............. 2,263,410 1,513,168
Phoenix-Duff & Phelps Real Estate...... 4,353,937 10,551,569
</TABLE>
72
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
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, 1999 aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Phoenix-Goodwin Balanced Series...... $30,782,019 $19,874,611
Phoenix-Goodwin Multi-Sector Fixed
Income Series...................... 22,447,195 20,970,539
Phoenix-Goodwin Strategic Allocation
Series............................. 81,315,438 13,762,454
</TABLE>
There were no purchases or sales of long-term U.S. Government Securities in
the Phoenix-Goodwin Money Market, Phoenix-Goodwin Growth, Phoenix-Aberdeen
International, Phoenix-Duff & Phelps Real Estate, Phoenix-Goodwin Strategic
Theme, Phoenix-Aberdeen New Asia, Phoenix Research Enhanced Index,
Phoenix-Engemann Nifty Fifty, Phoenix-Seneca Mid-Cap Growth, Phoenix-Oakhurst
Growth and Income, Phoenix-Hollister Value Equity and Phoenix-Schafer Mid-Cap
Value Series.
Written call option activity for the year ended June 30, 1999 aggregated the
following:
<TABLE>
<CAPTION>
PHOENIX-OAKHURST
GROWTH AND INCOME
SERIES
-------------------
AMOUNT
# OF OF
OPTIONS PREMIUMS
-------- --------
<S> <C> <C>
Options outstanding at December 31,
1998............................... -- $ --
Options written...................... 256 41,634
Options canceled in closing purchase
transactions....................... (67) (8,042)
Options expired...................... (122) (25,924)
Options exercised.................... (67) (7,668)
--- --------
Options outstanding at June 30,
1999............................... -- --
--- --------
--- --------
</TABLE>
At June 30, 1999, the Phoenix Research 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.............. 2 $ 645,400 $ 690,850 $45,450
Standard & Poor's 500 Index.............. 1 330,625 345,425 14,800
Standard & Poor's 500 Index.............. 2 667,250 690,850 23,600
Standard & Poor's 500 Index.............. 1 334,550 345,425 10,875
Standard & Poor's 500 Index.............. 1 334,625 345,425 10,800
Standard & Poor's 500 Index.............. 1 337,700 345,425 7,725
--- ---------- ---------- ------------
8 $2,650,150 $2,763,400 $113,250
--- ---------- ---------- ------------
--- ---------- ---------- ------------
</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
owed 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. When the Fund purchases
assignments from lenders it acquires direct rights against the borrower on
the loan. Direct indebtedness of emerging countries involves a risk that the
government entities responsible for the repayment of the debt may be unable,
or unwilling to pay the principal and interest when due.
73
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
NOTE 8--CAPITAL LOSS CARRYOVERS
The following Series have capital loss carryovers which may be used to offset
future capital gains.
<TABLE>
<S> <C>
Phoenix-Engemann Nifty Fifty Series.... $ 4,085
Phoenix-Goodwin Multi-Sector Fixed
Income Series........................ 566,989
Phoenix-Hollister Value Equity
Series............................... 104,098
Phoenix-Oakhurst Growth and Income
Series............................... 349,419
Phoenix-Seneca Mid-Cap Growth Series... 164,133
Phoenix-Schafer Mid-Cap Value Series... 285,733
Phoenix-Aberdeen New Asia Series....... 2,887,698
Phoenix-Duff & Phelps Real Estate
Series............................... 113,500
</TABLE>
Capital loss carryforwards expire in 2006 for all Series except for
Phoenix-Aberdeen New Asia Series which expires as follows: $143,419 in 2005
and $2,744,279 in 2006.
Under current tax law, capital and foreign currency losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following tax year. For the calendar year ended December 31, 1998 the
Phoenix-Aberdeen New Asia Series, Phoenix-Goodwin Multi-Sector Fixed Income
Series, and Phoenix-Schafer Mid-Cap Growth Series elected to defer losses
occurring between November 1, 1998 and December 31, 1998 in the amount of
$496,277, $5,850,282, and $55,831, respectively. In addition, the
Phoenix-Aberdeen International Series, Phoenix-Aberdeen New Asia Series,
Phoenix-Goodwin Growth Series and Phoenix-Goodwin Strategic Theme Series were
able to utilize losses deferred in the prior year in the amount of $761,290,
$379,802, $1,144 and $1,280,577, respectively.
This report is not authorized for distribution to prospective investors in The
Phoenix Edge Series Fund unless preceded or accompanied by any effective
Prospectus which includes information concerning the sales charges, Fund's
record and other pertinent information.
74
<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
David K. Schafer, Senior Vice President
Gail P. Seneca, 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
Robert S. Driessen, Vice President
Ron K. Jacks, Vice President
Christopher J. Kelleher, Vice President
Richard D. Little, Vice President
James E. Mair, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Julie L. Sapia, Vice President
Michael Schatt, Vice President
John S. Tilson, 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.
(Phoenix-Duff & Phelps Real Estate Securities
Series)
55 East Monroe Street Suite 3600
Chicago, Illinois 60603
Phoenix-Aberdeen International Advisors, LLC
(Phoenix-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.
(Phoenix-Aberdeen New Asia Series and Phoenix-
Aberdeen International Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PRSRT STD
101 Munson Street U.S. Postage
P.O. Box 942 PAID
Greenfield, MA 01302-0942 Springfield, MA
Permit No. 444
[Logo] PRINTED ON RECYCLED PAPER USING A SOYBASED INK.
Phoenix Home Life Mutual Insurance Company
Statutory Home Office: East Greenbush, New York
[Logo] PHOENIX
http://www.phl.com
OL2531S (c)1999 Phoenix Home Life Mutual Insurance Company
700.04 8/99
<PAGE>
ANNUAL REPORT
DECEMBER 31, 1998
THE PHOENIX EDGE SERIES FUND
<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....................................... 19
Phoenix International Series.............................................. 26
Phoenix Balanced Series................................................... 34
Phoenix Real Estate Securities Series..................................... 42
Phoenix Strategic Theme Series............................................ 47
Phoenix Aberdeen New Asia Series.......................................... 52
Phoenix Research Enhanced Index Series.................................... 59
Engemann Nifty Fifty Series............................................... 67
Seneca Mid-Cap Growth Series.............................................. 72
Phoenix Growth and Income Series.......................................... 76
Phoenix Value Equity Series............................................... 83
Schafer Mid-Cap Value Series.............................................. 88
Notes to Financial Statements............................................. 92
</TABLE>
- --------------------------------------------------------------------------------
Not FDIC Insured No Bank Guarantee May Lose Value
- --------------------------------------------------------------------------------
<PAGE>
MONEY MARKET SERIES
INVESTOR PROFILE
Phoenix Money Market Series is appropriate for investors seeking competitive
money market yields with minimal risk to principal. Investors should note that
an investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of an investor's investment at $10.00 per share, it is
possible to lose money by investing in the Fund.
INVESTMENT ADVISER'S REPORT
The Phoenix Money Market Series seven-day current yield was 4.05%(1). The
primary factors that affected performance were the growing global economic
crises and unstable markets. Safety and liquidity concerns caused an inflow of
cash into the Fund. A very evident liquidity crisis prompted the Federal Reserve
to lower rates on September 29, 1998 and then twice more on October 15 and
November 17, resulting in a total decrease of 75 basis points within a very
short time.
The Fund's weighted average maturity at the time of this writing is 42 days.
At the November, 1998 meeting of the Federal Reserve Board, a neutral bias was
adopted due to stable financial markets and above-trend growth. The Fund is
continuously monitored and adjusted to reflect current market conditions.
OUTLOOK
The domestic fundamentals in the economy remain moderately strong, with
historically low inflation. The breadth of the liquidity crisis and its impact
on the financial markets will be a focus going forward, in our opinion. The
market will continue to question the real strength in the domestic economy and
whether we will see further deterioration in the financial markets, which could
prompt the Federal Reserve to lower rates once again.
MONTHLY YIELD COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
IBC MONEY
MONEY MARKET MARKET
DATE SERIES INDEX *
<S> <C> <C>
30-Jan-98 5.09% 5.03%
27-Feb-98 5.01% 4.96%
31-Mar-98 4.91% 4.93%
30-Apr-98 4.86% 4.91%
29-May-98 4.76% 4.91%
30-Jun-98 4.93% 4.92%
31-Jul-98 4.98% 4.92%
31-Aug-98 5.06% 4.91%
30-Sep-98 5.05% 4.90%
30-Oct-98 5.13% 4.72%
30-Nov-98 5.09% 4.60%
31-Dec-98 4.88% 4.53%
7 day yield as of 12/31/98: 4.05%
</TABLE>
The above graph covers the period from January 1, 1998 to December 31, 1998. The
results are not indicative of the rate of return which may be realized from an
investment made in the Money Market Series today.
* Average monthly yield of First Tier Money Market Funds as reported by IBC's
Money Market Insight.
(1) 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.
2
<PAGE>
MONEY MARKET SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE
VALUE INTEREST RESET
(000) DESCRIPTION RATE DATE VALUE
- - ------- --------------------------------------------- -------- -------- ------------
<C> <S> <C> <C> <C>
FEDERAL AGENCY SECURITIES--VARIABLE(B)--14.4%
$ 3,500 FFCB (final maturity 4/1/99)................. 4.81% 1/4/99 $ 3,500,000
4,500 FFCB (final maturity 7/24/00)................ 5.04 1/4/99 4,500,857
2,000 FHLB (final maturity 1/22/99)................ 4.90 1/22/99 1,994,283
2,500 FHLB (final maturity 11/17/99)............... 5.12 2/17/99 2,500,387
2,000 FNMA (final maturity 4/9/99)................. 5.10 1/9/99 1,999,732
3,500 FNMA (final maturity 9/17/99)................ 5.04 3/17/99 3,498,510
217 SBA (final maturity 1/25/21)................. 5.25 1/1/99 217,014
241 SBA (final maturity 5/25/21)................. 5.75 1/1/99 241,021
1,871 SBA (final maturity 10/25/22)................ 5.75 1/1/99 1,872,189
2,206 SBA (final maturity 2/25/23)................. 5.75 1/1/99 2,206,442
1,976 SBA (final maturity 2/25/23)................. 5.75 1/1/99 1,976,085
2,951 SBA (final maturity 9/25/23)................. 5.63 1/1/99 2,949,263
1,000 SLMA (final maturity 2/22/99)................ 4.84 1/5/99 1,000,000
------------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE.................................... 28,455,783
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
FACE & POOR'S
VALUE RATING MATURITY
(000) DESCRIPTION (UNAUDITED) DATE VALUE
- - ------- ------------------------------------- ----------- -------- ------------
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER--80.3%
1,350 Greenwich Funding Corp............... A-1+ 5.50 1/4/99 1,349,381
6,030 Receivables Capital Corp............. A-1+ 5.50 1/4/99 6,027,236
955 Marsh & McLennan Cos., Inc........... A-1+ 6.00 1/6/99 954,204
2,450 SBC Communications, Inc.............. A-1+ 5.95 1/6/99 2,447,975
2,000 Coca-Cola Co......................... A-1+ 5.50 1/7/99 1,998,167
1,450 Sara Lee Corp........................ A-1+ 5.50 1/7/99 1,448,671
1,702 General Electric Capital Corp........ A-1+ 5.45 1/8/99 1,700,196
Preferred Receivables Funding
1,580 Corp................................. A-1 5.25 1/8/99 1,578,387
2,500 Corporate Asset Funding Co., Inc..... A-1+ 5.33 1/11/99 2,496,299
739 Greenwich Funding Corp............... A-1+ 5.55 1/11/99 737,861
2,500 Corporate Asset Funding Co., Inc..... A-1+ 5.15 1/12/99 2,496,066
2,790 Potomac Electric Power Co............ A-1 5.23 1/12/99 2,785,541
4,290 Citigroup, Inc....................... A-1+ 5.20 1/14/99 4,281,944
1,329 Greenwich Funding Corp............... A-1+ 5.25 1/14/99 1,326,480
1,650 Greenwich Funding Corp............... A-1+ 5.36 1/14/99 1,646,806
1,105 Pitney Bowes, Inc.................... A-1+ 4.95 1/14/99 1,103,025
458 Receivables Capital Corp............. A-1+ 5.45 1/14/99 457,099
2,057 Receivables Capital Corp............. A-1+ 5.40 1/19/99 2,051,446
2,500 Potomac Electric Power Co............ A-1 5.30 1/20/99 2,493,007
3,500 Corporate Receivables Corp........... A-1+ 5.22 1/21/99 3,489,850
3,000 Lexington Parker Capital Co. LLC..... A-1 5.26 1/22/99 2,990,795
935 Potomac Electric Power Co............ A-1 5.50 1/26/99 931,429
3,000 AlliedSignal, Inc.................... A-1 5.50 1/27/99 2,988,083
2,500 Lexington Parker Capital Co. LLC..... A-1 5.42 1/27/99 2,490,214
705 Vermont American Corp................ A-1+ 5.45 1/27/99 702,225
2,000 CXC, Inc............................. A-1+ 5.44 1/28/99 1,991,840
1,685 Wisconsin Electric Power Co.......... A-1+ 5.40 1/28/99 1,678,176
Associates Corporation of North
3,000 America.............................. A-1+ 5.04 1/29/99 2,988,240
2,500 Merrill Lynch & Co................... A-1+ 5.10 1/29/99 2,490,083
3,200 Wisconsin Electric Power Co.......... A-1+ 5.50 1/29/99 3,186,311
940 General Electric Capital Corp........ A-1+ 5.43 2/1/99 935,605
2,760 Greenwich Asset Funding Corp......... A-1+ 5.55 2/1/99 2,746,810
Preferred Receivables Funding
2,500 Corp................................. A-1 5.32 2/1/99 2,488,547
Preferred Receivables Funding
1,370 Corp................................. A-1 5.40 2/2/99 1,363,424
Preferred Receivables Funding
465 Corp................................. A-1 5.40 2/2/99 462,768
2,500 Vermont American Corp................ A-1+ 5.27 2/3/99 2,487,923
Preferred Receivables Funding
570 Corp................................. A-1 5.33 2/4/99 567,131
1,295 Coca-Cola Co......................... A-1+ 5.12 2/5/99 1,288,554
3,500 Ford Motor Credit Co................. A-1+ 5.15 2/5/99 3,482,476
1,000 Wisconsin Electric Power Co.......... A-1+ 5.25 2/5/99 994,896
2,000 Marsh & McLennan Cos., Inc........... A-1+ 5.50 2/8/99 1,988,389
2,500 Corporate Receivables Corp........... A-1+ 5.15 2/10/99 2,485,695
1,000 Merrill Lynch & Co................... A-1+ 5.20 2/10/99 994,222
3,700 Heinz (H.J.) Co...................... A-1 5.22 2/12/99 3,677,467
</TABLE>
See Notes to Financial Statements
3
<PAGE>
MONEY MARKET SERIES
<TABLE>
<CAPTION>
STANDARD
FACE & POOR'S
VALUE RATING INTEREST MATURITY
(000) DESCRIPTION (UNAUDITED) RATE DATE VALUE
- - ------- ------------------------------------- ----------- ------ -------- ------------
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER--CONTINUED
$ 2,500 Lexington Parker Capital Co. LLC..... A-1 5.35% 2/12/99 $ 2,484,396
Preferred Receivables Funding
3,000 Corp................................. A-1 5.35 2/16/99 2,979,492
2,500 Beta Finance, Inc.................... A-1+ 5.27 2/18/99 2,482,433
2,500 Goldman Sachs & Co................... A-1+ 5.08 2/24/99 2,480,950
2,000 Goldman Sachs & Co................... A-1+ 5.18 2/24/99 1,984,460
2,500 Marsh & McLennan Cos., Inc........... A-1+ 5.23 2/25/99 2,480,024
3,000 Goldman Sachs & Co................... A-1+ 5.24 2/26/99 2,975,547
1,700 Marsh & McLennan Cos., Inc........... A-1+ 5.30 2/26/99 1,685,984
1,000 Coca-Cola Co......................... A-1+ 5.02 3/1/99 991,773
2,500 General Electric Capital Corp........ A-1+ 5.13 3/4/99 2,500,000
2,000 Deutsche Bank Financial Corp......... A-1+ 5.70 3/5/99 1,999,457
3,000 Dupont (E.I) de Nemours & Co......... A-1+ 5.05 3/9/99 2,971,804
2,500 Colgate-Palmolive Co................. A-1 5.05 3/12/99 2,475,451
1,250 Enterprise Funding Corp.............. A-1 5.22 3/15/99 1,236,769
2,500 Beta Finance, Inc.................... A-1+ 5.73 3/16/99 2,500,123
2,500 Schering Corp........................ A-1+ 5.02 3/16/99 2,474,203
788 Enterprise Funding Corp.............. A-1 5.12 3/19/99 779,371
3,000 Chase Manhattan Bank................. A-1+ 5.22 3/22/99 3,000,235
1,500 Coca-Cola Co......................... A-1+ 5.00 3/22/99 1,483,333
4,070 Greenwich Funding Corp............... A-1+ 5.15 3/25/99 4,021,674
2,500 Marsh & McLennan Cos., Inc........... A-1+ 5.19 3/25/99 2,470,085
2,500 Colgate-Palmolive Co................. A-1 5.00 4/5/99 2,467,361
2,500 Beta Finance, Inc.................... A-1+ 5.00 4/6/99 2,467,014
1,300 Corporate Asset Funding Co., Inc..... A-1+ 5.45 4/15/99 1,279,532
2,500 Asset Securitization Cooperative..... A-1+ 5.08 4/16/99 2,462,958
3,000 Chase Manhattan Bank................. A-1+ 4.86 4/21/99 3,000,000
2,500 Private Export Funding Corp.......... A-1+ 4.68 5/6/99 2,459,375
1,360 Beta Finance, Inc.................... A-1+ 5.01 5/17/99 1,334,260
2,845 Greenwich Asset Funding Corp......... A-1+ 5.10 5/18/99 2,789,783
------------
TOTAL COMMERCIAL PAPER.......................................................... 157,988,791
------------
MEDIUM-TERM NOTES--4.4%
575 General Electric Capital Corp........ A-1+ 8.10 1/26/99 575,855
Associates Corporation of North
2,000 America.............................. A-1+ 6.25 3/15/99 2,002,175
1,500 General Electric Capital Corp........ A-1+ 5.98 3/19/99 1,500,768
2,500 General Electric Capital Corp.(b).... A-1+ 5.14 6/4/99 2,505,525
Associates Corporation of North
1,500 America.............................. A-1+ 5.65 6/15/99 1,498,891
Associates Corporation of North
600 America.............................. A-1+ 6.75 10/15/99 608,296
------------
TOTAL MEDIUM-TERM NOTES......................................................... 8,691,510
------------
TOTAL INVESTMENTS--99.1%
(Identified cost $195,136,084)................................................ 195,136,084(a)
Cash and receivables, less liabilities--0.9%.................................. 1,675,137
------------
NET ASSETS--100.0%.............................................................. $196,811,221
------------
------------
</TABLE>
(a) Federal Income Tax information: At December 31, 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
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$195,136,084)............................................. $ 195,136,084
Cash........................................................ 27,357
Receivables
Fund shares sold.......................................... 2,426,087
Interest.................................................. 549,742
Prepaid expenses............................................ 3,418
-------------
Total assets............................................ 198,142,688
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 1,161,522
Investment advisory fee................................... 74,750
Financial agent fee....................................... 16,912
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 73,223
-------------
Total liabilities....................................... 1,331,467
-------------
NET ASSETS.................................................. $ 196,811,221
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 196,811,221
-------------
NET ASSETS.................................................. $ 196,811,221
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 19,681,144
-------------
-------------
Net asset value and offering price per share................ $ 10.00
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 7,835,760
-------------
Total investment income................................. 7,835,760
-------------
EXPENSES
Investment advisory fee................................... 564,665
Financial agent fee....................................... 123,865
Custodian................................................. 30,083
Printing.................................................. 22,780
Professional.............................................. 20,755
Trustees.................................................. 12,172
Miscellaneous............................................. 6,246
-------------
Total expenses.......................................... 780,566
-------------
NET INVESTMENT INCOME....................................... 7,055,194
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 7,055,194
-------------
-------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)............................................. $ 7,055,194 $ 6,261,529
----------------- ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... 7,055,194 6,261,529
----------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................................... (7,055,197) (6,261,529)
----------------- ------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................ (7,055,197) (6,261,529)
----------------- ------------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (47,209,211 and 35,987,251 shares,
respectively).......................................................... 472,092,185 359,872,496
Net asset value of shares issued from reinvestment of distributions
(705,519 and 626,153 shares, respectively)............................. 7,055,197 6,261,528
Cost of shares repurchased (40,894,255 and 37,088,873 shares,
respectively).......................................................... (408,942,852) (370,888,736)
----------------- ------------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS................ 70,204,530 (4,754,712)
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS.................................... 70,204,527 (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).................................................. $ 196,811,221 $ 126,606,694
----------------- ------------------
----------------- ------------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.50 0.50 0.50 0.56 0.38(1)
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 0.50 0.50 0.50 0.56 0.38
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.50) (0.50) (0.50) (0.56) (0.38)
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.50) (0.50) (0.50) (0.56) (0.38)
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return........................ 5.09% 4.99% 4.98% 5.55% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $196,811 $126,607 $131,361 $102,943 $94,586
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.55% 0.55% 0.55% 0.53%(2) 0.55%
Net investment income............. 4.99% 5.07% 4.89% 5.57% 3.85%
</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.
See Notes to Financial Statements
6
<PAGE>
GROWTH SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term appreciation through
investments in common stocks.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned 30.01%,
outperforming the 28.76% return of the S&P 500 Index.(1) All performance figures
assume reinvestment of distributions and are net of sales charges.
While 1998 turned out to be an excellent year for the U.S. stock market, it
was marked with exceptional volatility. Last year was also marked by a large
disparity in returns between asset classes. Small-capitalization stocks
continued to underperform and profitability at many cyclical companies came
under pressure due to weakness in the international markets and falling
commodity prices. Recognizing these trends, we focused our stock selection on
large-capitalization companies with predictable revenue streams and a domestic
focus. The portfolio's heavy bias towards large-cap names and its overweighting
in the health-care, consumer staples and technology sectors were the primary
drivers for our strong performance last year.
Specific to the fourth quarter, positive contributors to the portfolio's
above-average results included our top-down strategy of overweighting
technology, communication services and consumer staples as well as strong stock
selection in each of these sectors. Despite the obvious temptation to raise cash
during this summer's sell-off, our decision to remain fully invested in stocks
also paid off handsomely as the market has rebounded dramatically from its early
October lows. On the other side of the equation, the most notable factor that
held back performance over this latest reporting period was the portfolio's
underweighted position in the strongly performing consumer cyclical group during
the final quarter. While we were not expecting a recession anytime soon, we were
somewhat surprised by the strength of the U.S consumer over this latest quarter.
OUTLOOK
As we enter 1999, the stock market and U.S. economy continue to be strong.
Despite some weakness in exports and the manufacturing sector, robust consumer
spending has made the U.S. economy the strongest in the industrialized world.
Recent data on employment, personal income, consumer spending, and consumer
confidence are all encouraging. Yet, there is a fundamental disconnect between
the economy and corporate profits. Profits for 1998 were about flat with 1997,
and we expect only slight improvement this year. This tough earnings environment
over the past year benefited steady growth groups such as health-care and
communication services. We don't see this changing for the foreseeable future.
Actually, we see the torrid pace of economic growth slowing somewhat in 1999.
Overall, we remain cautiously optimistic on the market. While we expect
corporate profits to remain under pressure, this current environment of benign
inflation and historically low interest rates should continue to be a positive
catalyst for financial assets. After four straight years of double-digit gains,
it is also likely that we will see more normalized (single-digit) returns for
U.S. equities in 1999. Lastly, we believe that the financial markets will remain
volatile over the near term, as there are still many crosscurrents at work in
the global financial systems.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH SERIES S&P 500 INDEX(1)
<S> <C> <C>
12/31/1988 $10,000.00 $10,000.00
12/31/1989 $13,605.95 $13,143.49
12/31/1990 $14,162.17 $12,723.63
12/31/1991 $20,352.54 $16,609.89
12/31/1992 $22,446.69 $17,887.30
12/31/1993 $26,867.26 $19,676.05
12/31/1994 $27,264.69 $19,936.37
12/31/1995 $35,674.71 $27,413.96
12/31/1996 $40,162.38 $33,787.07
12/31/1997 $48,625.91 $45,063.71
12/31/1998 $63,220 $58,022
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/98
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
- - ---------------------------------------------------------------------
Growth Series 30.01% 18.67% 20.25%
- - ---------------------------------------------------------------------
S&P 500 Index 28.76% 24.15% 19.22%
- - ---------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/88.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
(1) 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.
7
<PAGE>
GROWTH SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
COMMON STOCKS--98.3%
BANKS (MAJOR REGIONAL)--3.7%
Bank One Corp........................................... 324,852 $ 16,587,755
Mellon Bank Corp........................................ 203,800 14,011,250
U.S. Bancorp............................................ 261,800 9,293,900
Wells Fargo & Co........................................ 730,000 29,154,375
----------------
69,047,280
----------------
BANKS (MONEY CENTER)--1.3%
BankAmerica Corp........................................ 411,887 24,764,706
----------------
BEVERAGES (ALCOHOLIC)--1.0%
Anheuser-Busch Companies, Inc........................... 285,800 18,755,625
----------------
BEVERAGES (NON-ALCOHOLIC)--1.5%
PepsiCo, Inc............................................ 706,700 28,930,531
----------------
BROADCASTING (TELEVISION, RADIO & CABLE)--4.9%
CBS Corp................................................ 283,400 9,281,350
Chancellor Media Corp. (b).............................. 228,200 10,925,075
Clear Channel Communications, Inc. (b).................. 175,800 9,581,100
Fox Entertainment Group, Inc. Class A (b)............... 228,800 5,762,900
Liberty Media Group Class A (b)......................... 502,100 23,127,981
Tele-Communications, Inc. Class A (b)................... 594,200 32,866,687
----------------
91,545,093
----------------
COMMUNICATIONS EQUIPMENT--0.8%
Tellabs, Inc. (b)....................................... 212,000 14,535,250
----------------
COMPUTERS (HARDWARE)--3.5%
International Business Machines Corp.................... 354,900 65,567,775
----------------
COMPUTERS (NETWORKING)--1.5%
Cisco Systems, Inc. (b)................................. 312,375 28,992,305
----------------
COMPUTERS (PERIPHERALS)--1.6%
EMC Corp. (b)........................................... 356,000 30,260,000
----------------
COMPUTERS (SOFTWARE & SERVICES)--11.8%
America Online, Inc. (b)................................ 119,500 19,120,000
BMC Software, Inc. (b).................................. 649,600 28,947,800
Compuware Corp. (b)..................................... 584,000 45,625,000
Edwards (J.D.) & Co. (b)................................ 227,600 6,458,150
HBO & Co................................................ 1,072,100 30,755,869
Microsoft Corp. (b)..................................... 450,500 62,478,719
Oracle Corp. (b)........................................ 401,100 17,297,437
Sterling Commerce, Inc. (b)............................. 241,601 10,872,045
----------------
221,555,020
----------------
CONSUMER FINANCE--1.2%
Capital One Financial Corp.............................. 203,600 23,414,000
----------------
DISTRIBUTORS (FOOD & HEALTH)--1.5%
Cardinal Health, Inc.................................... 365,400 27,724,725
----------------
ELECTRICAL EQUIPMENT--2.6%
General Electric Co..................................... 474,300 48,408,244
----------------
ELECTRONICS (SEMICONDUCTORS)--4.8%
Intel Corp.............................................. 656,000 77,777,000
Micron Technology, Inc.................................. 257,100 12,999,619
----------------
90,776,619
----------------
FINANCIAL (DIVERSIFIED)--4.9%
Citigroup, Inc.......................................... 542,150 26,836,425
Freddie Mac............................................. 660,100 42,535,194
Morgan Stanley, Dean Witter & Co. (b)................... 309,500 21,974,500
----------------
91,346,119
----------------
HEALTH CARE (DIVERSIFIED)--5.8%
Bristol-Myers Squibb Co. (b)............................ 383,400 51,303,712
Mylan Laboratories, Inc................................. 367,600 11,579,400
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
HEALTH CARE (DIVERSIFIED)--CONTINUED
Warner-Lambert Co....................................... 609,200 $ 45,804,225
----------------
108,687,337
----------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--6.7%
Pfizer, Inc............................................. 494,800 62,066,475
Schering-Plough Corp.................................... 751,800 41,536,950
Watson Pharmaceuticals, Inc. (b)........................ 357,700 22,490,387
----------------
126,093,812
----------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--3.7%
Baxter International, Inc. (b).......................... 351,600 22,612,275
Becton, Dickinson and Co................................ 175,700 7,500,194
Genzyme Corp............................................ 184,900 9,198,775
Medtronic, Inc.......................................... 403,400 29,952,450
----------------
69,263,694
----------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.1%
Clorox Co. (The)........................................ 59,200 6,915,300
Colgate-Palmolive Co.................................... 90,700 8,423,762
Procter & Gamble Co. (The) (b).......................... 269,800 24,636,112
----------------
39,975,174
----------------
INSURANCE (LIFE/HEALTH)--0.6%
UNUM Corp............................................... 193,600 11,301,400
----------------
INSURANCE (MULTI-LINE)--1.9%
American International Group, Inc....................... 241,850 23,368,756
ReliaStar Financial Corp................................ 246,700 11,379,037
----------------
34,747,793
----------------
LODGING--HOTELS--0.5%
Carnival Corp........................................... 204,500 9,816,000
----------------
MANUFACTURING (DIVERSIFIED)--2.1%
Tyco International Ltd.................................. 532,500 40,170,469
----------------
OIL & GAS (DRILLING & EQUIPMENT)--0.6%
Halliburton Co.......................................... 122,400 3,626,100
Schlumberger Ltd........................................ 79,400 3,662,325
Transocean Offshore, Inc................................ 120,500 3,230,906
----------------
10,519,331
----------------
OIL (DOMESTIC INTEGRATED)--1.8%
USX-Marathon Group...................................... 1,129,800 34,035,225
----------------
OIL (INTERNATIONAL INTEGRATED)--2.1%
Amoco Corp.............................................. 543,200 32,048,800
Conoco, Inc. Class A (b)................................ 320,200 6,684,175
----------------
38,732,975
----------------
RETAIL (BUILDING SUPPLIES)--1.8%
Home Depot, Inc. (The).................................. 558,500 34,173,219
----------------
RETAIL (COMPUTERS & ELECTRONICS)--0.4%
Tandy Corp. (b)......................................... 172,900 7,121,319
----------------
RETAIL (DRUG STORES)--4.0%
CVS Corp................................................ 655,500 36,052,500
Rite Aid Corp........................................... 779,200 38,619,100
----------------
74,671,600
----------------
RETAIL (FOOD CHAINS)--4.3%
Meyer (Fred), Inc. (b).................................. 548,590 33,052,548
Safeway, Inc. (b)....................................... 788,300 48,037,031
----------------
81,089,579
----------------
RETAIL (GENERAL MERCHANDISE)--0.8%
Wal-Mart Stores, Inc.................................... 173,500 14,129,406
----------------
RETAIL (SPECIALTY)--1.7%
Borders Group, Inc...................................... 379,500 9,463,781
</TABLE>
See Notes to Financial Statements
8
<PAGE>
GROWTH SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------------
<S> <C> <C> <C>
RETAIL (SPECIALTY)--CONTINUED
Staples, Inc. (b)....................................... 531,550 $ 23,222,091
----------------
32,685,872
----------------
SERVICES (COMMERCIAL & CONSUMER)--0.5%
ServiceMaster Co. (The)................................. 450,000 9,928,125
----------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--3.4%
AirTouch Communications, Inc. (b)....................... 879,100 63,405,088
----------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.2%
AT&T Corp............................................... 359,400 27,044,850
MCI WorldCom, Inc. (b).................................. 455,794 32,703,220
----------------
59,748,070
----------------
TELEPHONE--2.0%
BellSouth Corp.......................................... 436,600 21,775,425
SBC Communications, Inc................................. 295,500 15,846,188
----------------
37,621,613
----------------
WASTE MANAGEMENT--1.7%
Waste Management, Inc................................... 678,300 31,625,738
----------------
TOTAL COMMON STOCKS
(Identified cost $1,331,834,475)...................................... 1,845,166,131
----------------
FOREIGN COMMON STOCKS--0.8%
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--0.8%
Elan Corp. PLC Sponsored ADR (Ireland) (b).............. 211,000 14,677,687
----------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $12,319,521)......................................... 14,677,687
----------------
TOTAL LONG-TERM INVESTMENTS--99.1%
(Identified cost $1,344,153,996)...................................... 1,859,843,818
----------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.6%
COMMERCIAL PAPER--0.8%
Greenwich Funding Corp. 5.20%,
1/4/99........................................ A-1+ $ 3,000 $ 2,997,964
SBC. Communications Inc. 5.95%,
1/6/99........................................ A-1+ 3,770 3,766,885
Freddie Mac 5%, 1/8/99.......................... A-1+ 2,000 1,998,024
Pitney Bowes Credit Corp. 4.95%,
1/14/99....................................... A-1+ 5,945 5,934,373
Vermont American Corp. 5.45%,
1/27/99....................................... A-1+ 1,115 1,110,611
---------------
15,807,857
---------------
FEDERAL AGENCY SECURITIES--0.7%
FHLB 4.50%, 1/4/99.............................. 13,770 13,764,836
---------------
MEDIUM-TERM NOTES--0.1%
General Electric Capital Corp. 5.14%, 3/4/99
(c)........................................... A-1+ 1,000 999,900
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $30,575,635)................................................ 30,572,593
---------------
TOTAL INVESTMENTS--100.7%
(Identified cost $1,374,729,631)............................................. 1,890,416,411(a)
Cash and receivables, less liabilities--(0.7%)............................... (14,120,110)
---------------
NET ASSETS--100.0%............................................................. $ 1,876,296,301
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $532,916,550 and gross
depreciation of $15,547,346 for federal income tax purposes. At December
31, 1998, the aggregate cost of securities for federal income tax purposes
was $1,373,047,207.
(b) Non-income producing.
(c) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
9
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$1,374,729,631)........................................... $ 1,890,416,411
Receivables
Investment securities sold................................ 12,648,491
Fund shares sold.......................................... 1,205,089
Dividends and interest.................................... 1,002,798
Prepaid expenses............................................ 32,273
---------------
Total assets............................................ 1,905,305,062
---------------
LIABILITIES
Payables
Custodian................................................. 25,163
Investment securities purchased........................... 26,232,303
Fund shares repurchased................................... 1,447,850
Investment advisory fee................................... 928,585
Financial agent fee....................................... 60,789
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 309,011
---------------
Total liabilities....................................... 29,008,761
---------------
NET ASSETS.................................................. $ 1,876,296,301
---------------
---------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 1,331,914,616
Undistributed net investment income....................... 1,285,201
Accumulated net realized gain............................. 27,409,704
Net unrealized appreciation............................... 515,686,780
---------------
NET ASSETS.................................................. $ 1,876,296,301
---------------
---------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 78,409,721
---------------
---------------
Net asset value and offering price per share................ $ 23.93
-------
-------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 11,511,581
Interest.................................................. 2,338,299
Foreign taxes withheld.................................... (83,354)
-------------
Total investment income................................. 13,766,526
-------------
EXPENSES
Investment advisory fee................................... 10,143,250
Financial agent fee....................................... 706,724
Custodian................................................. 174,982
Printing.................................................. 98,816
Professional.............................................. 44,009
Trustees.................................................. 13,431
Miscellaneous............................................. 83,231
-------------
Total expenses.......................................... 11,264,443
-------------
NET INVESTMENT INCOME....................................... 2,502,083
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 45,867,063
Net change in unrealized appreciation (depreciation) on
investments............................................. 390,908,702
-------------
NET GAIN ON INVESTMENTS..................................... 436,775,765
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 439,277,848
-------------
-------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)....................................................... $ 2,502,083 $ 8,821,110
Net realized gain (loss)........................................................... 45,867,063 208,505,196
Net change in unrealized appreciation (depreciation)............................... 390,908,702 44,027,962
-------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................... 439,277,848 261,354,268
-------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................................................. (2,092,243) (8,665,448)
Net realized gains................................................................. (67,564,709) (236,146,906)
-------------- ---------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS.......................... (69,656,952) (244,812,354)
-------------- ---------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (14,661,827 and 12,502,677 shares, respectively)..... 306,260,617 253,355,592
Net asset value of shares issued from reinvestment of distributions (3,143,060 and
12,750,840 shares, respectively)................................................. 69,656,952 244,812,354
Cost of shares repurchased (17,964,177 and 12,075,426 shares, respectively)........ (374,810,017) (244,536,540)
-------------- ---------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS..................................... 1,107,552 253,631,406
-------------- ---------------
NET INCREASE IN NET ASSETS......................................................... 370,728,448 270,173,320
NET ASSETS
Beginning of period................................................................ 1,505,567,853 1,235,394,533
-------------- ---------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $1,285,201 AND
$875,361, RESPECTIVELY).......................................................... $1,876,296,301 $1,505,567,853
-------------- ---------------
-------------- ---------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 19.16 $ 18.89 $ 18.13 $ 15.69 $ 16.59
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.03 0.13 0.19 0.20 0.23(1)(3)
Net realized and unrealized gain
(loss).......................... 5.65 3.70 2.10 4.60 0.02
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 5.68 3.83 2.29 4.80 0.25
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.03) (0.13) (0.18) (0.17) (0.23)
Dividends from net realized
gains........................... (0.88) (3.43) (1.35) (2.19) (0.92)
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.91) (3.56) (1.53) (2.36) (1.15)
----------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 4.77 0.27 0.76 2.44 (0.90)
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 23.93 $ 19.16 $ 18.89 $ 18.13 $ 15.69
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return........................ 30.01% 21.07% 12.58% 30.85% 1.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $1,876,296 $1,505,568 $1,235,395 $985,389 $616,221
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.69% 0.74% 0.72% 0.75%(2) 0.80%
Net investment income............. 0.15% 0.64% 1.03% 1.12% 1.38%
Portfolio turnover rate............. 102% 284% 167% 173% 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.
See Notes to Financial Statements
11
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking high current income. Investors
should note that the Fund may invest in emerging-markets debt and high-yield
securities. Foreign investments pose added risks, such as currency fluctuation,
less public disclosure, and political and economic uncertainty. High-yielding
fixed-income securities generally are subject to greater market fluctuations and
risk of loss of income and principal than are investments in lower-yielding
fixed-income securities.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned (4.02)%
compared with a return of 8.69% for the Lehman Brothers Aggregate Index.(1) In
contrast, the J.P. Morgan Emerging Market Bond Index Plus was down (14.35)% for
the same period.(2) All performance figures assume reinvestment of distributions
and are net of sales charges.
The disappointing performance was due to our exposure to more
credit-sensitive sectors of the bond market. During 1998, the world financial
markets have been experiencing a global "flight to quality" that has been driven
by the financial crises in Asia and Russia. U.S. Treasuries have been the sole
benefactor, while the biggest losers have been higher-yielding sectors, such as
emerging-markets and domestic high-yield, two of our largest portfolio
positions.
The two biggest risks in fixed income investing are interest rate risk and
credit risk. Our investment approach does not try to anticipate the direction of
interest rates. Instead, we seek to add value by identifying undervalued sectors
of the bond market. This contrarian approach is one that requires discipline and
conviction, but has served us well in the past. Of course, past performance is
no guarantee of future results.
We will continue to follow our value-oriented investment approach,
overweighting those sectors where we find the best values. Despite recent
weakness, our long-term outlook remains constructive. We feel the market has
overreacted to global events, resulting in extraordinary values for long-term
investors. We will continue to maintain well-diversified portfolios (investing
across 12 market sectors), with exposure to more credit-sensitive sectors, which
we perceive to be considerably undervalued.
OUTLOOK
It is important at times like this to keep a long-term perspective as
extreme market moves like the one we are currently experiencing generally
reverse themselves over time. We have seen a number of market events like this
over the last decade. Two that most resemble the current situation were the
"junk" bond panic of 1990-91 and the Mexican peso devaluation in 1994-95.
Although both of these events triggered dips in the market, long-term investors
were rewarded for their patience and conviction. Of course, past performance is
no guarantee of future performance, and there can be no assurance that there
will be a similar turnaround in emerging markets.
(1) The Lehman Brothers Aggregate Index is an unmanaged, commonly used measure
of broad bond market total return performance. The Index is not available
for direct investment.
(2) The J.P. Morgan Emerging Market Bond Index Plus is an unmanaged, commonly
used measure of emerging-market debt total return performance. The Index is
not available for direct investment.
12
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MULTI-SECTOR FIXED INCOME LEHMAN BROTHERS AGGREGATE BOND
SERIES INDEX*
<S> <C> <C>
12/31/1988 $10,000.00 $10,000.00
12/31/1989 $10,817.36 $11,453.45
12/31/1990 $11,385.31 $12,479.63
12/31/1991 $13,595.70 $14,476.73
12/31/1992 $14,959.31 $15,548.07
12/31/1993 $17,337.56 $17,064.12
12/31/1994 $16,388.58 $16,566.46
12/31/1995 $20,246.12 $19,627.75
12/31/1996 $22,760.36 $20,340.30
12/31/1997 $25,247.92 $22,303.70
12/31/1998 $24,234.00 $24,241.18
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING
12/31/98
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
- - -----------------------------------------------------------------------
Multi-Sector Fixed Income Series (4.02)% 6.93% 9.26%
- - -----------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index* 8.69% 7.27% 9.26%
- - -----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/88.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. High yield fixed income securities
generally are subject to greater market fluctuations and risk of loss of income
and principal than are investments in lower-yielding fixed income securities.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
* The Lehman Brothers Aggregate Bond Index is an unmanaged but commonly used
measure of bond performance. The Index is not available for direct investment.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--2.0%
U.S. Treasury Notes 4.75%, 11/15/08.................. Aaa $ 1,250 $ 1,258,942
U.S. Treasury Notes 5.25%, 11/15/28.................. Aaa 2,400 2,456,955
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $3,691,391)................................................. 3,715,897
-------------
AGENCY MORTGAGE-BACKED SECURITIES--0.8%
GNMA 8%, 9/15/06..................................... Aaa 8 8,500
GNMA 8%, 10/15/06.................................... Aaa 129 134,825
GNMA 6.50%, '24-'26.................................. Aaa 1,305 1,325,406
-------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $1,427,614)................................................. 1,468,731
-------------
MUNICIPAL BONDS--11.9%
CALIFORNIA--1.6%
Orange County Pension Revenue Series A Taxable 7.67%,
9/1/09............................................. Aaa 2,620 2,990,075
-------------
COLORADO--1.2%
Denver City and County School District 01 Pension
Taxable 6.76%, 12/15/07............................ Aaa 2,000 2,140,000
-------------
FLORIDA--1.1%
Palm Beach County Solid Waste Industrial Development
Project B Revenue Taxable 10.50%, 1/1/11 (e)(f).... NR 1,500 750,000
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
FLORIDA--CONTINUED
University of Miami Exchangeable Revenue Series A
Taxable 7.65%, 4/1/20.............................. Aaa $ 1,290 $ 1,381,912
-------------
2,131,912
-------------
ILLINOIS--1.6%
Illinois Educational Facilities Authority-- Loyola
University Revenue Series A 5.70%, 7/1/24.......... Aaa 1,200 1,293,000
Illinois Educational Facilities Authority-- Loyola
University Revenue Series A Taxable 7.84%,
7/1/24............................................. Aaa 1,600 1,734,000
-------------
3,027,000
-------------
MASSACHUSETTS--3.3%
Massachusetts State Port Authority Revenue Series C
Taxable 6.35%, 7/1/06.............................. Aa 1,500 1,569,375
Massachusetts State Turnpike Authority Series A
Revenue 5%, 1/1/27................................. Aaa 2,125 2,095,781
Massachusetts State Water Resources Authority Revenue
Series D 5%,
8/1/24............................................. Aaa 2,500 2,468,750
-------------
6,133,906
-------------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
PENNSYLVANIA--1.1%
Pittsburgh Series B Pension General Obligation
Taxable 6.35%, 3/1/13.............................. Aaa $ 2,000 $ 2,100,000
-------------
TEXAS--0.8%
Texas State University System Revenue 6.16%,
3/15/06............................................ Aaa 1,495 1,534,244
-------------
VIRGINIA--0.4%
Newport News Series B Taxable 7.05%, 1/15/25......... Aa 750 774,375
-------------
WASHINGTON--0.8%
Snohomish County Washington School District 5.65%,
12/1/09............................................ Aaa 1,400 1,547,000
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $21,832,860)................................................ 22,378,512
-------------
ASSET-BACKED SECURITIES--5.0%
Continental Airlines, Series 97-2D 7.522%, 6/30/01... Ba 2,004 2,001,291
Green Tree Financial Corp. 94-1, B2 7.85%, 4/15/19... Baa(c) 3,000 2,895,000
Green Tree Financial Corp. 97-4, M1 7.22%, 2/15/29... Aa 2,500 2,514,062
Team Fleet Financing Corp. 96-1, B 144A 7.10%,
12/15/02 (b)....................................... BBB(c) 1,975 1,955,250
-------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $9,579,253)................................................. 9,365,603
-------------
CORPORATE BONDS--18.4%
AIRLINES--1.0%
U.S. Airways 6.85%, 01/30/18......................... A 1,860 1,861,581
-------------
AUTO PARTS & EQUIPMENT--1.3%
Titan Tire Corp. 7%, 2/11/00......................... NR 2,500 2,475,000
-------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.0%
Poland Communications, Inc. Series B 9.875%,
11/1/03............................................ B 2,200 1,944,250
-------------
COMPUTERS (SOFTWARE & SERVICES)--0.3%
PSINet, Inc. 144A 11.50%, 11/1/08 (b)................ B 600 624,000
-------------
ENTERTAINMENT--0.8%
SFX Entertainment, Inc. 144A 9.125%, 12/1/08 (b)..... B 1,500 1,496,250
-------------
FINANCIAL (DIVERSIFIED)--1.3%
BNP U.S. Funding LLC Series A 144A, 7.738%, 12/31/49
(b)(d)............................................. A 2,500 2,412,435
-------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES--3.9%
Majestic Star Casino LLC Series B 12.75%, 5/15/03.... B 1,500 1,567,500
Mashantucket Pequot 144A 6.57%, 9/1/13 (b)........... Aaa 2,140 2,153,375
Mashantucket Pequot 144A 6.91%, 9/1/12 (b)........... Aaa 1,100 1,138,500
Station Casinos, Inc. 10.125%, 3/15/06............... B 2,250 2,356,875
-------------
7,216,250
-------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--0.9%
Schein Pharmaceutical, Inc. 8.762%, 12/15/04 (d)..... B 2,055 1,767,300
-------------
MANUFACTURING (SPECIALIZED)--0.6%
Collins & Aikman Products 11.50%, 4/15/06............ B 1,000 1,042,500
-------------
OIL & GAS (EXPLORATION & PRODUCTION)--3.1%
Benton Oil & Gas Co. 9.375%, 11/1/07................. B 1,500 930,000
Benton Oil & Gas Co. 144A 11.625%, 5/1/03 (b)........ B 1,000 660,000
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)--CONTINUED
Forcenergy, Inc. Series B 8.50%, 2/15/07............. B $ 4,325 $ 2,595,000
Lomak Petroleum, Inc. 8.75%, 1/15/07................. B 1,750 1,627,500
-------------
5,812,500
-------------
PERSONAL CARE--0.9%
Bally Total Fitness Holding Corp. Series B 9.875%,
10/15/07........................................... B 1,750 1,715,000
-------------
SERVICES (COMMERCIAL & CONSUMER)--0.6%
ARA Services, Inc. 10.625%, 8/1/00................... Baa 54 56,970
Fisher Scientific International, Inc. 144A 9%, 2/1/08
(b)................................................ B 1,000 1,000,000
-------------
1,056,970
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.6%
RCN Corp. Series B 0%, 2/15/08 (d)................... B 2,000 1,080,000
-------------
TELEPHONE--1.7%
ICG Holdings, Inc. 0%, 9/15/05 (d)................... NR 900 747,000
Interamericas Co. 144A 14%, 10/27/07 (b)............. NR 1,830 960,750
Intermedia Communications, Inc. Series B 0%, 7/15/07
(d)................................................ B 1,100 770,000
Pathnet, Inc. 12.25%, 4/15/08........................ NR 1,000 700,000
-------------
3,177,750
-------------
TRUCKERS & MARINE--0.4%
Hvide Marine, Inc. 8.375%, 2/15/08................... B 1,000 811,250
-------------
TOTAL CORPORATE BONDS
(Identified cost $38,992,188)................................................ 34,493,036
-------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--24.4%
BTC Mortgage Investors Trust 97-S1, D 144A 6.95%,
12/31/09 (b)....................................... BBB(c) 1,750 1,750,000
CS First Boston Corp. 97-SPCE, D 144A 7.332%, 4/20/08
(b)................................................ BBB(c) 1,800 1,763,437
CS First Boston Mortgage Securities 97-1R, 1M4 144A
7.312%, 2/28/22 (b)................................ Baa 2,697 2,496,175
ContiMortgage Home Equity Loan Trust 98-1, B 7.86%,
4/15/29............................................ Baa 4,000 3,937,500
DLJ Mortgage Acceptance Corp. 97-CF2, B1 144A 7.14%,
11/15/08 (b)....................................... Baa 2,200 2,042,562
First Chicago/Lennar Trust 97-CHL1, D 144A 8.11%,
5/29/08 (b)........................................ BB(c) 2,000 1,715,625
First Union Lehman Brothers Bank of America 98-C2, D
6.778%, 3/18/13.................................... Baa 3,000 2,834,063
GE Capital Mortgage Securities, Inc. 98-26, M 6.25%,
2/25/14............................................ AAA(c) 1,217 1,197,153
GE Capital Mortgage Services, Inc. 96-8, 2A5 7.50%,
5/25/26............................................ AAA(c) 972 981,486
General Growth Properties 97-1, D2 144A 6.992%,
11/15/07 (b)....................................... Baa 2,000 1,935,625
IMC Home Equity Loan Trust 98-1, B 7.87% 6/20/29..... Baa 2,000 1,930,938
IMPAC CMB Trust 98-2, M3 7.25%, 4/25/28.............. A(c) 957 959,139
LB Commercial Conduit Mortgage Trust 98-C4, A1B
6.21%, 10/15/08.................................... Aaa 2,250 2,294,297
Merrill Lynch Mortgage Investors, Inc. 96-C2, A3
6.96%, 11/21/28.................................... A(c) 3,607 3,715,210
Morgan Stanley Capital I 98-WF2, C 6.77%, 6/15/08.... A(c) 1,700 1,734,000
Residential Asset Securitization Trust 96-A4, A13
7.50%, 9/25/26..................................... AAA(c) 1,000 1,014,375
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26........................................... AAA(c) 273 273,052
Residential Funding Mortgage Securities I 94-57, M3
6.50%, 3/25/24..................................... BBB(c) 4,012 3,799,398
Ryland Mortgage Securities Corp. III 92-A, 1A 8.258%,
3/29/30............................................ A-(c) 750 748,887
</TABLE>
See Notes to Financial Statements
14
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES--CONTINUED
Securitized Asset Sales, Inc. 95-6, B3 144A 7%,
12/25/10 (b)....................................... NR $ 1,266 $ 1,180,091
Securitized Asset Sales, Inc. 95-A, M 7.53%,
3/25/24............................................ Aa 1,771 1,782,754
Structured Asset Securities Corp. 95-C1, D 7.375%,
9/25/24............................................ BBB(c) 2,000 2,008,750
Structured Asset Securities Corp. 93-C1, B 6.60%,
10/25/24........................................... A+(c) 2,250 2,257,031
Wilshire Funding Corp. 97-WFC1, M3 7.25%, 8/25/27.... Baa 1,541 1,404,422
-------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $46,266,182)................................................ 45,755,970
-------------
FOREIGN GOVERNMENT SECURITIES--18.3%
ARGENTINA--3.4%
Republic of Argentina 11%, 12/4/05................... Ba 3,050 3,042,375
Republic of Argentina BGL5 11.375%, 1/30/17.......... Ba 1,500 1,503,750
Republic of Argentina RegS 11.75%, 2/12/07........... Ba 2,250 1,915,312
-------------
6,461,437
-------------
BRAZIL--1.6%
Republic of Brazil C Bond, PIK interest
capitalization, 8%, 4/15/14 (d).................... B 2,555 1,539,629
Republic of Brazil NMB-L Bearer 6.188%, 4/15/09
(d)................................................ B 2,500 1,382,812
-------------
2,922,441
-------------
BULGARIA--1.8%
Republic of Bulgaria FLIRB Series A Bearer 2.50%,
7/28/12 (d)........................................ B 4,430 2,547,250
Republic of Bulgaria IAB Series PDI Euro 6.688%,
7/28/11 (d)........................................ B 1,250 845,313
-------------
3,392,563
-------------
COLOMBIA--1.8%
Republic of Colombia 7.625%, 2/15/07................. Baa 1,500 1,248,750
Republic of Colombia Global Bond 8.375%, 2/15/27..... Baa 2,750 2,048,750
-------------
3,297,500
-------------
CROATIA--1.6%
Croatia Series A 6.563%, 7/31/10 (d)................. Baa 2,000 1,600,000
Croatia Series B 6.563%, 7/31/06 (d)................. Baa 1,810 1,465,744
-------------
3,065,744
-------------
DOMINICAN REPUBLIC--0.2%
Dominican Republic PDI Bearer 6.625%, 8/30/09 (d).... B(c) 485 339,500
-------------
MEXICO--3.0%
United Mexican States Global Bond 11.50%, 5/15/26.... Ba 5,350 5,700,425
-------------
PANAMA--1.1%
Republic of Panama 8.875%, 9/30/27................... Ba 2,215 2,093,175
-------------
PERU--1.0%
Peru PDI 4%, 3/7/17 (d).............................. BB(c) 2,950 1,865,875
-------------
POLAND--1.9%
Poland PDI Bearer 5%, 10/27/14 (d)................... Baa 3,750 3,513,281
-------------
SOUTH AFRICA--0.9%
Republic of South Africa 8.50%, 6/23/17.............. Baa 2,080 1,600,768
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $34,928,431)................................................
34,252,709
-------------
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
FOREIGN CORPORATE BONDS--15.8%
ARGENTINA--3.3%
Compania de Radiocomunicaciones Moviles SA 144A
9.25%, 5/8/08 (b).................................. Ba $ 3,200 $ 2,960,000
Mastellone Hermanos S.A. 11.75%, 04/01/08............ B 1,000 807,500
Telefonica de Argentina 144A 9.125%, 5/7/08 (b)...... Ba 2,500 2,312,500
-------------
6,080,000
-------------
BRAZIL--1.4%
Globo Communicacoes Co. 144A 10.625%, 12/5/08 (b).... B 3,500 2,292,500
MRS Logistica SA RegS Series B 10.625%, 8/15/05...... B(c) 750 388,125
-------------
2,680,625
-------------
CAYMAN ISLANDS--1.1%
Centaur Funding Corp. 144A, 9.08%, 4/21/20 (b)....... Baa 2,000 2,075,000
-------------
CHILE--1.7%
Compania Sud Americana de Vapores SA 7.375%,
12/8/03............................................ BBB(c) 2,000 1,810,000
Empresa Nacional de Electricidad SA 7.75%, 7/15/08... Baa 1,500 1,416,300
-------------
3,226,300
-------------
CHINA--0.5%
AES China Generating Co. Yankee 10.125%, 12/15/06.... Ba 1,235 852,150
-------------
GREECE--0.9%
Fage Dairy Industries SA 9%, 2/1/07.................. B 2,000 1,710,000
-------------
INDONESIA--0.3%
APP Finance II Mauritius, Ltd. 12%, 12/29/49 (d)..... Caa 1,090 624,025
-------------
JAPAN--1.9%
IBJ Preferred Capital Co. LLC 144A 8.79%, 12/29/49
(b)(d)............................................. Baa 330 284,314
SB Treasury Co. LLC 144A 9.40%, 12/29/49 (b)(d)...... Baa 3,500 3,331,073
-------------
3,615,387
-------------
NETHERLANDS--2.4%
PTC International Finance BV 0%, 7/1/07 (d).......... NR 6,500 4,420,000
-------------
POLAND--0.9%
TPSA Finance 144A 7.75%, 12/10/08 (b)................ Baa 1,625 1,602,656
-------------
VENEZUELA--1.4%
PDVSA Finance Ltd. 144A 7.50%, 11/15/28 (b).......... A 3,250 2,591,875
-------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $31,983,669)................................................
29,478,018
-------------
FOREIGN CONVERTIBLE BONDS--0.7%
CANADA--0.1%
PLD Telekom Cv. 144A 9%, 6/1/06 (b).................. NR 600 222,750
-------------
RUSSIA--0.6%
Lukinter Finance Cv. 3.50%, 5/6/02................... CC(c) 3,200 1,168,000
-------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $4,705,775).................................................
1,390,750
-------------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
PREFERRED STOCKS--0.5%
PAPER & FOREST PRODUCTS--0.5%
SD Warren Co. Series B Pfd. PIK 14%.......................
30,000 $ 987,010
------------
TOTAL PREFERRED STOCKS
(Identified cost $607,500).........................................
987,010
------------
WARRANTS--0.1%
COMPUTERS (NETWORKING)--0.0%
Orion Network Systems, Inc. Warrants (e)..................
1,000 6,000
------------
FOREIGN GOVERNMENT--0.0%
Republic of Argentina Warrants (e)........................
3,050 14,640
------------
TELEPHONE--0.1%
FirstCom, Corp. 144A Warrants (b)(e)......................
64,050 80,063
Pathnet, Inc.144A Warrants (b)(e).........................
1,000 10,000
------------
90,063
------------
TOTAL WARRANTS
(Identified cost $0)...............................................
110,703
------------
TOTAL LONG-TERM INVESTMENTS--97.9%
(Identified cost $194,014,863).....................................
183,396,939
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- -------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.2%
COMMERCIAL PAPER--1.2%
Receivables Capital Corp. 5.15%, 1/4/99.............. A-1 $ 2,195 $ 2,194,058
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,194,058).................................................
2,194,058
-------------
TOTAL INVESTMENTS--99.1%
(Identified cost $196,208,921)...............................................
185,590,997(a)
Cash and receivables, less liabilities--0.9%.................................
1,772,413
-------------
NET ASSETS--100.0%.............................................................
$ 187,363,410
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $4,447,049 and gross
depreciation of $16,717,148 for federal income tax purposes. At December
31, 1998, the aggregate cost of securities for federal income tax purposes
was $197,861,096.
(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 qualified institutional buyers. At December 31,
1998, these securities amounted to a value of $43,046,806 or 23% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(e) Non-income producing.
(f) Security in default.
See Notes to Financial Statements
16
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$196,208,921)............................................. $ 185,590,997
Cash........................................................ 1,915,361
Receivables
Interest and dividends.................................... 3,953,211
Investment securities sold................................ 1,022,849
Fund shares sold.......................................... 95,283
Prepaid expenses............................................ 3,801
-------------
Total assets............................................ 192,581,502
-------------
LIABILITIES
Payables
Investment securities purchased........................... 4,887,703
Fund shares repurchased................................... 140,937
Investment advisory fee................................... 80,643
Financial agent fee....................................... 15,562
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 88,187
-------------
Total liabilities....................................... 5,218,092
-------------
NET ASSETS.................................................. $ 187,363,410
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 205,143,488
Undistributed net investment income....................... 896,193
Accumulated net realized loss............................. (8,058,347)
Net unrealized depreciation............................... (10,617,924)
-------------
NET ASSETS.................................................. $ 187,363,410
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,401,284
-------------
-------------
Net asset value and offering price per share................ $ 9.18
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 16,242,598
Dividends................................................. 167,510
------------
Total investment income................................. 16,410,108
------------
EXPENSES
Investment advisory fee................................... 993,926
Financial agent fee....................................... 162,234
Custodian................................................. 39,526
Professional.............................................. 25,102
Printing.................................................. 24,431
Trustees.................................................. 12,789
Miscellaneous............................................. 23,460
------------
Total expenses.......................................... 1,281,468
------------
NET INVESTMENT INCOME....................................... 15,128,640
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (8,037,422)
Net change in unrealized appreciation (depreciation) on
investments............................................. (15,423,527)
------------
NET LOSS ON INVESTMENTS..................................... (23,460,949)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (8,332,309)
------------
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 15,128,640 $ 11,667,589
Net realized gain (loss).................................. (8,037,422) 4,695,405
Net change in unrealized appreciation (depreciation)...... (15,423,527) 390,571
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. (8,332,309) 16,753,565
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (14,753,888) (11,945,923)
Net realized gains........................................ (1,233,525) (4,694,394)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (15,987,413) (16,640,317)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (8,615,846 and 8,085,010
shares, respectively)................................... 85,699,046 84,607,552
Net asset value of shares issued from reinvestment of
distributions (1,648,116 and 1,609,511 shares,
respectively)........................................... 15,987,413 16,640,317
Cost of shares repurchased (8,318,291 and 5,265,201
shares, respectively)................................... (81,629,911) (54,778,943)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 20,056,548 46,468,926
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (4,263,174) 46,582,174
NET ASSETS
Beginning of period....................................... 191,626,584 145,044,410
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $896,193 AND $336,142, RESPECTIVELY).......... $ 187,363,410 $ 191,626,584
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 10.38 $ 10.34 $ 10.22 $ 8.98 $ 10.27
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.77 0.75(1) 0.79(1) 0.83(1)(2) 0.72(1)(2)
Net realized and unrealized gain
(loss).......................... (1.17) 0.34 0.43 1.22 (1.28)
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... (0.40) 1.09 1.22 2.05 (0.56)
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.74) (0.77) (0.78) (0.81) (0.73)
Dividends from net realized
gains........................... (0.06) (0.28) (0.32) -- --
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (0.80) (1.05) (1.10) (0.81) (0.73)
----------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... (1.20) 0.04 0.12 1.24 (1.29)
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 9.18 $ 10.38 $ 10.34 $ 10.22 $ 8.98
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return........................ (4.02)% 10.93% 12.42% 23.54% (5.47)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $187,363 $191,627 $145,044 $109,046 $74,686
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.64% 0.65% 0.65% 0.65%(3) 0.66%
Net investment income............. 7.61% 7.25% 7.80% 8.55% 7.62%
Portfolio turnover rate............. 160% 151% 191% 147% 181%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001, $0.002, $0.007, and $0.006 per share, respectively.
(2) Computed using average shares outstanding
(3) The ratio of operating expenses to average net assets excludes the effect of
expense offsets for custodian fees: if expense offsets were included, the
ratio would not significantly differ.
See Notes to Financial Statements
18
<PAGE>
STRATEGIC ALLOCATION SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term appreciation through
investments in common stocks and fixed-income securities, including foreign and
high-yield debt issues. Investors should note that foreign investing involves
special risks, such as currency fluctuations, less public disclosure, and
economic and political risks, and high-yield fixed income securities generally
are subject to greater market fluctuations and risk of loss of income and
principal than are investments in lower-yielding fixed income securities.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned 20.79% compared
with a return of 19.67% for a composite benchmark index comprised of 55% of the
return for the S&P 500 Index(1), 35% of the return for the Lehman Aggregate Bond
Index(2) and 10% of the return of the 90-day T-bill.(3) The S&P 500 Index
returned 28.76% for the same period. All performance figures assume reinvestment
of distributions and are net of sales charges.
The 1998 calendar year proved to be one of the more difficult investment
years in recent memory given the extreme volatility in the global equity and
fixed income markets. In fact, U.S. equities by many measures had not seen this
level of volatility since the 1987 market crash. Not since 1990 were bond
investors punished so severely for owning anything other than U.S. Government
securities.
While 1998 turned out to be an excellent year for large-cap stocks,
small-capitalization stocks continued to underperform and profitability at many
cyclical companies came under pressure due to weakness in the international
markets and falling commodity prices. Recognizing these trends, we focused our
stock selection on large-capitalization companies with predictable revenue
streams and a domestic focus. The Fund's heavy bias towards large-cap names and
its overweighting in the health-care, consumer staples and technology sectors
were the primary drivers for our strong equity performance last year.
Despite the obvious temptation to raise cash during this summer's sell-off,
our decision to remain fully invested in stocks also paid off handsomely as the
market has rebounded dramatically from its early October lows. On the other side
of the equation, the most notable factor that held back performance over this
latest reporting period was the Fund's underweighted position in the strongly
performing consumer cyclical group during the final quarter. While we were not
expecting a recession anytime soon, we were somewhat surprised by the strength
of the U.S consumer over this latest quarter.
With respect to the fixed-income portion of the Fund, the interest rate
roller coaster ride of 1997 (with rates starting out at 6.64%, peaking at 7.15%,
and ending at 5.92%) turned into a "yield ride" in 1998, as many fixed-income
investors began the year reaching for yield in both domestic high-yield
securities and lower quality foreign bonds. Despite the favorable backdrop of a
moderate, stable U.S. economy and historically low rates, this strategy began to
lose favor as global uncertainty caused investor sentiment to shift in the
second half of the year toward a preference for the safety and liquidity of U.S.
Treasuries. With the benefit of three swift rate cuts by the Federal Reserve
Board, the markets began to calm in the fourth quarter, and the 30-year U.S.
Treasury bond closed out the year at 5.09%. While the most recent CPI figures
indicate that U.S. inflation remains benign at a modest 1.6% annualized rate--a
slight slowdown from 1997's 1.7% rate--the mood in the bond market remains
tenuous.
While we are not pleased with our results, they can be explained by a
"flight to quality" of unprecedented magnitude. As stated earlier, the US
Treasury sector was the best performing sector in 1998. While market
environments such as this happen relatively infrequently, they penalize managers
such as ourselves that have a significant underweighting to U.S. Treasuries. It
is noteworthy that since 1980 there was only one occurrence where U.S.
Treasuries were the best performing bond market sector two years in a row.
During this difficult time, we remained true to our discipline and remained
fully allocated to those non-core sectors we believed were the most attractive
from a risk-reward perspective. We believe that this is the most prudent manner
in which to manage assets particularly during extreme market moves.
OUTLOOK
As we enter 1999, the stock market and U.S. economy continue to be strong.
Despite some weakness in exports and the manufacturing sector, robust consumer
spending has made the U.S. economy the strongest in the industrialized world.
Recent data on employment, personal income, consumer spending, and consumer
confidence are all encouraging. Yet, there is a fundamental disconnect between
the economy and corporate profits. Profits for 1998 were about flat with 1997,
and we expect only slight improvement this year. This tough earnings environment
over the past year benefited steady growth groups, such as health-care and
communication services. We don't see this changing for the foreseeable future.
Actually, we see the torrid pace of economic growth slowing somewhat in 1999.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
(2) The Lehman Aggregate Bond Index is an unmanaged, commonly used measure of
bond market total return performance. The Index is not available for direct
investment.
(3) The 90-day T-bill is a commonly used measure of money market total return
performance.
19
<PAGE>
STRATEGIC ALLOCATION SERIES
Overall, we remain cautiously optimistic on the market. While we expect
corporate profits to remain under pressure, this current environment of benign
inflation and historically low interest rates should continue to be a positive
catalyst for financial assets. After four straight years of double-digit gains,
it is also likely that we will see more normalized (single-digit) returns for
U.S. equities in 1999. Lastly, we believe that the financial markets will remain
volatile over the near term, as there are still many crosscurrents at work in
the global financial systems.
Although we anticipate a slowdown in the U.S. economy, we do not expect the
recession that seems to be factored into the domestic high-yield market
currently. We do expect that this sector's defaults will pick up in 1999;
however, the level being priced into the market is extremely high. Our holdings
in this area represent a diversified group of securities in industries with good
fundamentals, and solid underlying businesses. In addition, we have significant
exposure to U.S. dollar-denominated below investment-grade foreign holdings.
This sector remains among the most attractive from a risk-reward perspective. We
own debt securities of countries that have good fundamentals and more stable
political situations, such as Mexico, Argentina, Panama, Bulgaria, and Peru.
We believe the fixed-income portion of the Fund is well structured to take
advantage of current market conditions, and we will continue to emphasize the
credit-sensitive sectors given their very favorable valuations. The market is
paying investors a large yield premium or yield advantage as compensation for
taking risk. Priced into this premium is much bad news. For those investors
willing and able to be patient and discerning, we believe these factors present
outstanding opportunities.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LIPPER ANALYTICAL SERVICES FLEXIBLE PORTFOLIO INDEX**
STRATEGIC ALLOCATION SERIES BALANCED BENCHMARK *
<S> <C> <C> <C>
12/31/1988 $10,000.00 $10,000.00 $10,000.00
12/31/1989 $11,977.55 $12,312.04 $11,725.08
12/31/1990 $12,666.26 $12,595.30 $11,834.86
12/31/1991 $16,369.75 $15,488.25 $15,027.78
12/31/1992 $18,116.24 $16,608.63 $15,880.20
12/31/1993 $20,113.57 $18,144.34 $17,903.98
12/31/1994 $19,822.66 $18,179.16 $17,426.38
12/31/1995 $23,434.68 $23,129.04 $21,537.75
12/31/1996 $25,554.68 $26,444.46 $24,564.00
12/31/1997 $30,851.56 $32,249.49 $29,177.75
12/31/1998 $37,266.79 $38,592.09 $34,006.77
<CAPTION>
S & P 500 INDEX ***
<S> <C>
12/31/1988 $10,000.00
12/31/1989 $13,143.49
12/31/1990 $12,723.63
12/31/1991 $16,609.89
12/31/1992 $17,887.30
12/31/1993 $19,676.05
12/31/1994 $19,936.37
12/31/1995 $27,413.96
12/31/1996 $33,787.07
12/31/1997 $45,063.71
12/31/1998 $58,022.45
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING
12/31/98
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
- - ---------------------------------------------------------------------
Strategic Allocation Series 20.79% 13.13% 14.06%
- - ---------------------------------------------------------------------
Balanced Benchmark* 19.67% 16.29% 14.46%
- - ---------------------------------------------------------------------
Lipper Analytical Services Flexible
Portfolio Index** 16.55% 13.69% 13.02%
- - ---------------------------------------------------------------------
S&P 500 Index*** 28.76% 24.15% 19.22%
- - ---------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/88.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares when redeemed, may be
worth more or less than the original cost. High yield fixed income securities
generally are subject to greater market fluctuations and risk of loss of income
and principal than are investments in lower-yielding fixed income securities.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
* The Balanced Benchmark is calculated based upon the performance of the
following indices: 55% S&P 500/35% Lehman Brothers Aggregate Bond Index/10%
90-day Treasury Bills and is produced by Frank Russell Company.
** The Lipper Analytical Services Flexible Portfolio Index is an average of the
largest mutual funds within the flexible portfolio category.
*** The S&P 500 Stock Index is an unmanaged, commonly used measure of stock
total return performance. The index is not available for direct investment.
20
<PAGE>
STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--12.5%
U.S. TREASURY BONDS--0.5%
U.S. Treasury Bonds 6.125%, 11/15/27............ AAA $ 2,300 $ 2,569,923
------------
U.S. TREASURY NOTES--12.0%
U.S. Treasury Notes 5.625%, 10/31/99............ AAA 800 806,149
U.S. Treasury Notes 5.50%, 2/29/00.............. AAA 15,000 15,143,763
U.S. Treasury Notes 4.50%, 9/30/00.............. AAA 2,025 2,021,528
U.S. Treasury Notes 5.75%, 11/15/00............. AAA 4,950 5,048,388
U.S. Treasury Notes 5.75%, 11/30/02............. AAA 1,630 1,690,903
U.S. Treasury Notes 5.50%, 1/31/03.............. AAA 11,960 12,307,426
U.S. Treasury Notes 5.50%, 2/28/03.............. AAA 7,000 7,206,790
U.S. Treasury Notes 5.75%, 4/30/03.............. AAA 3,725 3,875,178
U.S. Treasury Notes 5.50%, 2/15/08.............. AAA 2,550 2,701,957
U.S. Treasury Notes 5.625%, 5/15/08............. AAA 3,359 3,584,569
U.S. Treasury Notes 5.25%, 8/15/03.............. AAA 3,053 3,130,024
------------
57,516,675
------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $58,880,939).......................................... 60,086,598
------------
MUNICIPAL BONDS--3.2%
CALIFORNIA--1.5%
California State Department Water Resources
Revenue Series S 5%, 12/1/29.................. AA 415 410,331
Kern County Pension Obligation Revenue Taxable
7.26%, 8/15/14................................ AAA 1,500 1,657,500
Long Beach Pension Obligation Taxable 6.87%,
9/1/06........................................ AAA 840 901,950
Los Angeles County Public Works PJ V-B 5.125%,
12/1/29....................................... AAA 630 633,937
San Bernardino County Pension Obligation Revenue
Taxable 6.87%, 8/1/08......................... AAA 410 441,262
San Bernardino County Pension Obligation Revenue
Taxable 6.94%, 8/1/09......................... AAA 1,110 1,202,963
Sonoma County Pension Obligation 6.625%,
6/1/13........................................ AAA 925 967,781
Ventura County Pension Obligation Taxable 6.54%,
11/1/05....................................... AAA 975 1,024,969
------------
7,240,693
------------
FLORIDA--1.0%
Florida State Department of Transportation
Series A 5%, 7/1/27........................... AA+ 500 496,875
Miami Beach Special Obligation Revenue Taxable
8.60%, 9/1/21................................. AAA 3,210 3,667,425
University of Miami Revenue Taxable Series A
7.65%, 4/1/20................................. AAA 540 578,475
------------
4,742,775
------------
MASSACHUSETTS--0.2%
Massachusetts State Port Authority Revenue
Taxable Series C 6.05%, 7/1/02................ AA- 835 851,700
Massachusetts State Water Resources Authority
Revenue Series D 5%, 8/1/24................... AAA 500 493,750
------------
1,345,450
------------
NEW YORK--0.3%
New York State Dormitory Authority Pension
Obligation Revenue Taxable 6.90%,4/1/03....... BBB+ 725 755,813
New York State Environmental Facilities Corp.
Revenue Taxable 6.70%, 3/15/08................ AAA 670 711,875
------------
1,467,688
------------
TEXAS--0.2%
Houston Water & Sewer System Revenue Refunding,
Jr. Lien, Series D 5%, 12/1/25................ AAA 630 617,400
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
TEXAS--CONTINUED
Texas State General Obligation Series B 5.25%,
10/1/08....................................... AA $ 255 $ 276,038
------------
893,438
------------
TOTAL MUNICIPAL BONDS
(Identified cost $14,965,478).......................................... 15,690,044
------------
ASSET-BACKED SECURITIES--1.2%
AESOP Funding II LLC 97-1, A2 144A 6.40%,
10/20/03 (d).................................. AAA 2,000 2,045,000
Capita Equipment Receivables Trust 97-1, B
6.45%, 8/15/02................................ A+ 720 727,200
Copelco Capital Funding Corp., 98-A, A3 5.78%,
2/15/01....................................... AAA 1,250 1,251,563
Fleetwood Credit Corp. Grantor Trust 96-B, A
6.90%, 3/15/12................................ AAA 514 521,205
Green Tree Financial Corp. 96-2, M1 7.60%,
4/15/27....................................... AA- 1,075 1,115,648
------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $5,559,752)........................................... 5,660,616
------------
CORPORATE BONDS--0.9%
COMPUTERS (SOFTWARE & SERVICES)--0.1%
Computer Associates International Series B
6.375%, 4/15/05............................... A- 635 625,475
------------
HEALTH CARE (DIVERSIFIED)--0.2%
Tenet Healthcare Corp 144A 8.125%, 12/1/08
(d)........................................... BB- 1,200 1,243,500
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.2%
Boston Scientific Corp. 6.625%, 3/15/05......... BBB 900 849,375
------------
MANUFACTURING (DIVERSIFIED)--0.1%
Tyco International Group SA 6.375%, 6/15/05..... A- 500 508,125
------------
PAPER & FOREST PRODUCTS--0.1%
Buckeye Cellulose Corp. 9.25%, 9/15/08.......... BB- 350 363,562
------------
RETAIL (FOOD CHAINS)--0.1%
Meyer (Fred), Inc. 7.45%, 3/1/08................ BB+ 650 703,625
------------
TRUCKS & PARTS--0.1%
Cummins Engine Inc. 6.45%, 3/1/05............... BBB+ 320 312,400
------------
TOTAL CORPORATE BONDS
(Identified cost $4,540,977)........................................... 4,606,062
------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--3.1%
CS First Boston Mortgage Securities Corp.
95-AEW1, B 7.182%, 11/25/27................... AA- 1,346 1,343,903
First Union-Lehman Brothers 97-C1, B 7.43%,
4/18/07....................................... Aa(c) 850 918,797
G.E. Capital Mortgage Services, Inc. 96-8, 1M
7.25%, 5/25/26................................ AA 243 246,078
Lehman Large Loan 97-LLI, B 6.95%, 3/12/07...... AA 645 678,862
Mortgage Capital Funding, Inc. 96-MC2, A3,
7.008%, 9/20/06............................... Aaa(c) 1,800 1,892,812
Nationslink Funding Corp. 96-1, B 7.69%,
12/20/05...................................... AA 450 479,672
Norwest Asset Securities Corp. 96-9, A15 7.75%
1/25/27....................................... Aaa(c) 900 913,500
Residential Asset Securitization Trust 96-A8, A1
8%, 12/25/26.................................. AAA 136 136,526
Residential Funding Mortgage Securities I 96-S1,
A11 7.10%, 1/25/26............................ AAA 1,500 1,509,375
Residential Funding Mortgage Securities I 96-S4,
M1 7.25%, 2/25/26............................. AA 969 974,034
Securitized Asset Sales 93-J, 2B 6.81%,
11/28/23...................................... AA(c) 949 948,830
</TABLE>
See Notes to Financial Statements
21
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------- ------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES--CONTINUED
Structured Asset Securities Corp. 93-C1, 6.60%,
10/25/24...................................... A+ $ 1,150 $ 1,153,689
Structured Asset Securities Corp. 95-C4, B
7.00%, 6/25/26................................ AA 1,650 1,665,469
Triangle Funding Ltd. 98-2A, 3, 144A 7.163%,
10/15/04 (d).................................. BBB 2,000 1,992,500
------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $14,591,989).......................................... 14,854,047
------------
FOREIGN GOVERNMENT SECURITIES--1.9%
ARGENTINA--0.3%
Republic of Argentina 9.75%, 9/19/27............ BBB- 490 438,795
Republic of Argentina Bearer FRB 6.188%, 3/31/05
(e)........................................... BBB- 1,025 876,033
------------
1,314,828
------------
BRAZIL--0.1%
Republic of Brazil NMB-L Bearer 6.188%, 4/15/09
(e)........................................... BB- 1,185 655,453
------------
BULGARIA--0.1%
Republic of Bulgaria FLIRB Series A Bearer
2.50%, 7/28/12 (e)............................ B(c) 810 465,750
------------
COLOMBIA--0.2%
Republic of Colombia 7.25%, 2/23/04............. BBB- 1,000 852,500
------------
CROATIA--0.2%
Croatia Series A 6.563%, 7/31/10 (e)............ BBB- 550 440,000
Croatia Series B 6.563%, 7/31/06 (e)............ BBB- 475 384,758
------------
824,758
------------
KOREA--0.2%
Republic of Korea 8.875%, 4/15/08............... BB+ 1,095 1,127,850
------------
MEXICO--0.2%
United Mexican States Global Bond 11.50%,
5/15/26....................................... BB 1,175 1,251,962
------------
PANAMA--0.2%
Republic of Panama 8.875%, 9/30/27.............. BB+ 965 911,925
------------
PERU--0.1%
Peru PDI 4%, 3/7/17 (e)......................... BB 730 461,725
------------
POLAND--0.3%
Poland Bearer PDI 5%, 10/27/14 (e).............. BBB- 1,475 1,381,891
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $9,809,809)........................................... 9,248,642
------------
FOREIGN CORPORATE BONDS--0.6%
ARGENTINA--0.1%
Compania de Radiocomunicaciones Moviles SA 144A
9.25%, 5/8/08 (d)............................. BBB 450 416,250
------------
CHILE--0.1%
Compania Sud Americana de Vapores SA 7.375%,
12/8/03....................................... BBB 140 126,700
Petropower I Funding Trust 144A, 7.36%, 2/15/14
(d)........................................... BBB 500 421,875
------------
548,575
------------
JAPAN--0.3%
IBJ Preferred Capital Co. LLC 144A 8.79%,
12/29/49 (d).................................. Baa 830 715,094
SB Treasury Co. LLC 144A 9.40%, 12/29/49 (d).... BB+ 830 789,940
------------
1,505,034
------------
POLAND--0.1%
TPSA Finance 144A 7.75%, 12/10/08 (d)........... BBB- 355 350,119
------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $3,093,960)........................................... 2,819,978
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C> <C>
COMMON STOCKS--72.0%
BANKS (MAJOR REGIONAL)--2.7%
Bank One Corp.................................................... 59,902 $ 3,058,746
Mellon Bank Corp................................................. 38,900 2,674,375
U.S. Bancorp..................................................... 50,000 1,775,000
Wells Fargo & Co................................................. 134,600 5,375,587
------------
12,883,708
------------
BANKS (MONEY CENTER)--0.9%
BankAmerica Corp................................................. 74,774 4,495,787
------------
BEVERAGES (ALCOHOLIC)--0.7%
Anheuser-Busch Companies, Inc.................................... 54,400 3,570,000
------------
BEVERAGES (NON-ALCOHOLIC)--1.2%
PepsiCo, Inc..................................................... 141,000 5,772,187
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.6%
CBS Corp......................................................... 53,500 1,752,125
Chancellor Media Corp. (b)....................................... 47,300 2,264,487
Clear Channel Communications, Inc. (b)........................... 33,200 1,809,400
Fox Entertainment Group, Inc. Class A (b)........................ 43,000 1,083,062
Liberty Media Group Class A (b).................................. 90,400 4,164,050
Tele-Communications, Inc. Class A (b)............................ 111,900 6,189,469
------------
17,262,593
------------
COMMUNICATIONS EQUIPMENT--0.6%
Tellabs, Inc. (b)................................................ 40,200 2,756,212
------------
COMPUTERS (HARDWARE)--2.6%
International Business Machines Corp............................. 66,900 12,359,775
------------
COMPUTERS (NETWORKING)--1.2%
Cisco Systems, Inc. (b).......................................... 59,975 5,566,430
------------
COMPUTERS (PERIPHERALS)--1.2%
EMC Corp. (b).................................................... 65,600 5,576,000
------------
COMPUTERS (SOFTWARE & SERVICES)--8.5%
America Online, Inc. (b)......................................... 21,600 3,456,000
BMC Software, Inc. (b)........................................... 119,800 5,338,587
Compuware Corp. (b).............................................. 111,000 8,671,875
Edwards (J.D.) & Co. (b)......................................... 43,700 1,239,987
HBO & Co......................................................... 192,900 5,533,819
Microsoft Corp. (b).............................................. 83,100 11,524,931
Oracle Corp. (b)................................................. 74,000 3,191,250
Sterling Commerce, Inc. (b)...................................... 46,000 2,070,000
------------
41,026,449
------------
CONSUMER FINANCE--0.9%
Capital One Financial Corp....................................... 38,600 4,439,000
------------
DISTRIBUTORS (FOOD & HEALTH)--1.1%
Cardinal Health, Inc............................................. 69,600 5,280,900
------------
ELECTRICAL EQUIPMENT--1.9%
General Electric Co.............................................. 91,900 9,379,544
------------
ELECTRONICS (SEMICONDUCTORS)--3.5%
Intel Corp....................................................... 120,100 14,239,356
Micron Technology, Inc. (b)...................................... 47,400 2,396,662
------------
16,636,018
------------
FINANCIAL (DIVERSIFIED)--3.5%
Citigroup, Inc................................................... 100,050 4,952,475
Freddie Mac...................................................... 120,900 7,790,494
Morgan Stanley Dean Witter & Co.................................. 57,600 4,089,600
------------
16,832,569
------------
HEALTH CARE (DIVERSIFIED)--4.1%
Bristol-Myers Squibb Co.......................................... 70,400 9,420,400
Mylan Laboratories, Inc.......................................... 67,000 2,110,500
Warner-Lambert Co................................................ 110,400 8,300,700
------------
19,831,600
------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--4.8%
Pfizer, Inc...................................................... 88,900 11,151,394
Schering-Plough Corp............................................. 141,600 7,823,400
</TABLE>
See Notes to Financial Statements
22
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C> <C>
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--CONTINUED
Watson Pharmaceuticals, Inc. (b)................................. 64,400 $ 4,049,150
------------
23,023,944
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.8%
Baxter International, Inc........................................ 66,200 4,257,487
Becton, Dickinson and Co......................................... 34,500 1,472,719
Genzyme Corp. (b)................................................ 35,200 1,751,200
Medtronic, Inc................................................... 78,300 5,813,775
------------
13,295,181
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.7%
Clorox Co. (The)................................................. 12,200 1,425,112
Colgate-Palmolive Co............................................. 19,000 1,764,625
Procter & Gamble Co. (The)....................................... 53,500 4,885,219
------------
8,074,956
------------
INSURANCE (LIFE/HEALTH)--0.5%
UNUM Corp........................................................ 40,300 2,352,512
------------
INSURANCE (MULTI-LINE)--1.3%
American International Group, Inc................................ 45,250 4,372,281
ReliaStar Financial Corp......................................... 45,500 2,098,687
------------
6,470,968
------------
LODGING--HOTELS--0.4%
Carnival Corp.................................................... 36,900 1,771,200
------------
MANUFACTURING (DIVERSIFIED)--1.5%
Tyco International Ltd........................................... 98,800 7,453,225
------------
OIL & GAS (DRILLING & EQUIPMENT)--0.4%
Halliburton Co................................................... 22,500 666,562
Schlumberger Ltd................................................. 14,600 673,425
Transocean Offshore, Inc......................................... 22,700 608,644
------------
1,948,631
------------
OIL (DOMESTIC INTEGRATED)--1.3%
USX-Marathon Group............................................... 203,300 6,124,412
------------
OIL (INTERNATIONAL INTEGRATED)--1.5%
Amoco Corp....................................................... 100,000 6,037,500
Conoco, Inc. (b)................................................. 65,700 1,371,488
------------
7,408,988
------------
RETAIL (BUILDING SUPPLIES)--1.4%
Home Depot, Inc. (The)........................................... 108,300 6,626,606
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.3%
Tandy Corp....................................................... 33,300 1,371,544
------------
RETAIL (DRUG STORES)--3.1%
CVS Corp......................................................... 134,000 7,370,000
Rite Aid Corp.................................................... 147,800 7,325,338
------------
14,695,338
------------
RETAIL (FOOD CHAINS)--3.1%
Meyer (Fred), Inc. (b)........................................... 98,750 5,949,688
Safeway, Inc. (b)................................................ 147,600 8,994,375
------------
14,944,063
------------
RETAIL (GENERAL MERCHANDISE)--0.6%
Wal-Mart Stores, Inc............................................. 33,000 2,687,438
------------
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C> <C>
RETAIL (SPECIALTY)--1.3%
Borders Group, Inc. (b).......................................... 74,000 $ 1,845,375
Staples, Inc. (b)................................................ 103,000 4,499,813
------------
6,345,188
------------
SERVICES (COMMERCIAL & CONSUMER)--0.4%
ServiceMaster Co. (The).......................................... 85,000 1,875,313
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.4%
AirTouch Communications, Inc. (b)................................ 160,400 11,568,850
------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.3%
AT&T Corp........................................................ 67,700 5,094,425
MCI WorldCom, Inc. (b)........................................... 84,838 6,087,127
------------
11,181,552
------------
TELEPHONE--1.5%
BellSouth Corp. (b).............................................. 84,800 4,229,400
SBC Communications, Inc. (b)..................................... 58,100 3,115,613
------------
7,345,013
------------
WASTE MANAGEMENT--1.2%
Waste Management, Inc............................................ 125,100 5,832,788
------------
TOTAL COMMON STOCKS
(Identified cost $269,913,855)..................................................... 346,066,482
------------
FOREIGN COMMON STOCKS--0.6%
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--0.6%
Elan Corp. PLC Sponsored ADR (Ireland) (b)....................... 39,100 2,719,894
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $2,413,495)....................................................... 2,719,894
------------
TOTAL LONG-TERM INVESTMENTS--96.0%
(Identified cost $383,770,254)..................................................... 461,752,363
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000)
----------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.2%
COMMERCIAL PAPER--2.0%
SBC Communications, Inc. 5.95%, 1/6/99.......... A-1+ $ 3,390 3,387,198
Preferred Receivables Funding Corp. 5.17%,
1/7/99........................................ A-1 1,000 998,602
Corporate Receivables Corp.5.22%, 1/21/99....... A-1+ 1,000 997,265
Vermont American Corp. 5.45%, 1/27/99........... A-1+ 4,105 4,088,842
---------------
9,471,907
---------------
FEDERAL AGENCY SECURITIES--2.2%
FHLB 4.50%, 1/4/99.............................. 5,825 5,822,816
FMC 4.90%, 1/15/99.............................. 4,955 4,945,558
---------------
10,768,374
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $20,240,594).................................................. 20,240,281
---------------
TOTAL INVESTMENTS--100.2%
(Identified cost $404,010,848)................................................. 481,992,644(a)
Cash and receivables, less liabilities--(0.2%)................................. (1,095,967)
---------------
NET ASSET--100.0%................................................................ $ 480,896,677
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $82,815,955 and gross
depreciation of $5,901,655 for income tax purposes. At December 31, 1998,
the aggregate cost of securities for federal income tax purposes was
$405,078,344.
(b) Non-income producing.
(c) As rated by Moody's, Fitch or Duff & Phelps.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, these securities amounted to a value of $7,974,278 or 1.7% of net
assets.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
23
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$404,010,848)............................................. $ 481,992,644
Receivables
Investment securities sold................................ 2,396,556
Interest and dividends.................................... 1,875,664
Fund shares sold.......................................... 165,442
Prepaid expenses............................................ 8,563
-------------
Total assets............................................ 486,438,869
-------------
LIABILITIES
Payables
Investment securities purchased........................... 3,921,065
Custodian................................................. 877,094
Fund shares repurchased................................... 367,452
Investment advisory fee................................... 218,702
Financial agent fee....................................... 27,905
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 124,914
-------------
Total liabilities....................................... 5,542,192
-------------
NET ASSETS.................................................. $ 480,896,677
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 398,925,687
Undistributed net investment income....................... 487,041
Accumulated net realized gain............................. 3,502,153
Net unrealized appreciation............................... 77,981,796
-------------
NET ASSETS.................................................. $ 480,896,677
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 30,737,105
-------------
-------------
Net asset value and offering price per share................ $ 15.65
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 9,774,394
Dividends................................................. 2,079,791
-------------
Total investment income................................. 11,854,185
-------------
EXPENSES
Investment advisory fee................................... 2,567,526
Financial agent fee....................................... 290,435
Custodian................................................. 64,938
Professional.............................................. 38,169
Printing.................................................. 28,553
Trustees.................................................. 12,684
Miscellaneous............................................. 29,192
-------------
Total expenses.......................................... 3,031,497
-------------
NET INVESTMENT INCOME....................................... 8,822,688
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 19,330,598
Net change in unrealized appreciation (depreciation) on
investments............................................. 57,110,856
-------------
NET GAIN ON INVESTMENTS..................................... 76,441,454
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 85,264,142
-------------
-------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, YEAR ENDED
1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 8,822,688 $ 8,442,610
Net realized gain (loss).................................. 19,330,598 63,639,021
Net change in unrealized appreciation (depreciation)...... 57,110,856 3,449,569
------------- -----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 85,264,142 75,531,200
------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (8,371,532) (8,832,503)
Net realized gains........................................ (31,140,159) (52,948,379)
------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (39,511,691) (61,780,882)
------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (3,651,580 and 3,408,140
shares, respectively)................................... 52,916,356 50,911,029
Net asset value of shares issued from reinvestment of
distributions (2,607,238 and 4,363,884 shares,
respectively)........................................... 39,511,691 61,780,882
Cost of shares repurchased (5,904,172 and 4,807,163
shares, respectively)................................... (86,285,937) (71,683,788)
------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 6,142,110 41,008,123
------------- -----------------
NET INCREASE IN NET ASSETS................................ 51,894,561 54,758,441
NET ASSETS
Beginning of period....................................... 429,002,116 374,243,675
------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $487,041 AND $32,496, RESPECTIVELY)........... $480,896,677 $429,002,116
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 14.12 $ 13.65 $ 13.63 $ 12.68 $ 13.71
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)..... 0.29 0.32 0.32 0.45 0.36(1)(3)
Net realized and unrealized gain
(loss)......................... 2.57 2.46 0.91 1.84 (0.56)
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS................... 2.86 2.78 1.23 2.29 (0.20)
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income......................... (0.28) (0.33) (0.31) (0.45) (0.37)
Dividends from net realized
gains.......................... (1.05) (1.98) (0.90) (0.89) (0.46)
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............ (1.33) (2.31) (1.21) (1.34) (0.83)
----------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE.......... 1.53 0.47 0.02 0.95 (1.03)
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD..... $ 15.65 $ 14.12 $ 13.65 $ 13.63 $ 12.68
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return....................... 20.79% 20.73% 9.05% 18.22% (1.45)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)...................... $480,897 $429,002 $374,244 $353,838 $289,083
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses............... 0.68% 0.71% 0.70% 0.67%(2) 0.74%
Net investment income............ 1.97% 2.09% 2.26% 3.28% 2.71%
Portfolio turnover rate............ 139% 368% 287% 170% 220%
</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.
See Notes to Financial Statements
25
<PAGE>
INTERNATIONAL SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term capital appreciation
by investing primarily in an internationally diversified portfolio of equity
securities. The Fund essentially focuses on quality companies with strong
management, solid growth prospects and attractive relative valuations. Investors
should note that foreign investments pose added risks such as currency
fluctuation, less public disclosure, as well as economic and political risks.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned 27.92% compared
with 20.33% for the Morgan Stanley Capital International (MSCI) EAFE Index(1).
All performance figures assume reinvestment of distributions and are net of
sales charges.
For the first half of the year, the portfolio benefited from its overweight
exposure in Europe and its lack of exposure to Asia. The advent of the euro has
given European institutions access to a much greater pool of domestic currency
investments. Also, European markets attracted significant levels of foreign
investment enamored by a region with growing economies. This, coupled with the
need for corporations to restructure in order to be prepared for a more
competitive pan-European market and an emerging trend of improving shareholder
returns, enabled the European equity markets to post particularly strong
returns.
Meanwhile, the currency-led collapse in the Pacific Basin left the region's
markets in tatters with investors nursing heavy losses. Only a determined effort
by the International Monetary Fund 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 1998. 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 Hong Kong and Singapore saw
their stock markets fall heavily.
The second half of the calendar year was a period of amazing volatility for
global stock markets. After European and U.S. markets had reached their peak in
early July, markets worldwide tumbled on a flood of bad news. The initial
catalyst for the dramatic downturn was the financial crisis in Russia where the
ruble collapsed. Nervousness spread to other markets, particularly Latin America
where it was feared that Brazil was the next in line to devalue. All of the
region's currencies came under intense pressure, interest rates soared, and
equity markets plunged more the 50% in less than two months. Confirmation that
Japan was suffering its worst economic slump since 1945 added to international
market worries. The crash of the Russian ruble and the severe downturn in
worldwide markets also put many hedge funds in severe financial difficulties and
the announcement that U.S. hedge fund manager Long-Term Capital Management LP
had been bailed out to the extent of $3.5 billion sent shockwaves through the
financial community.
All this bad news completely wiped out the year-to-date gains for many
markets, and by early October markets had fallen to a one-year low. However,
concerted worldwide action since that time has resulted in a dramatic recovery
in worldwide markets as stocks rose on expectations that corporate profits would
benefit from lower interest rates. Much of the credit must be given to the U.S.
Federal Reserve, which cut interest rates three times in seven weeks to ensure
that the U.S economy did not slide into recession. We have also seen cuts in
European interest rates, and the Japanese government announced a major package
to stimulate its failing economy. Markets in Southeast Asia also showed signs of
recovery with the perception being that the worst is now over for that region.
The successful completion of an IMF rescue package for Brazil also helped
bolster world markets with a strong rebound for emerging markets that had been
particularly badly affected by the late summer downturn.
In the second half of the year we reduced our large overweighting to
European equities. This area had resulted in substantial outperformance for the
portfolio, but we were concerned that valuations had advanced too quickly in
many instances. We decided that it would be opportune to take profits in Europe
and reinvest the proceeds in Japan where the Fund had previously no holdings.
This strategy has proved successful to date. Although both the European and
Japanese markets have fallen since July, the Japanese yen has strengthened
significantly, resulting in net dollar gains for our Japanese investments.
OUTLOOK
While the manufacturing sector continues under pressure in most countries,
consumer confidence is rebounding once again in a number of economies,
suggesting still relatively buoyant consumer spending. The rally in the UK has
returned it to a level that is above most revised expectations for this year and
only around 10-12% below the more optimistic forecasts for next year. However,
in our opinion, it is the excellent technical position that provides the
strongest support together with the
- - ------------------------
(1) The Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged,
commonly used measure of foreign stock total return performance. The Index
is not available for direct investment.
26
<PAGE>
INTERNATIONAL SERIES
prospect of further monetary easing a certainty in the UK. Economic growth
forecasts meanwhile remain under pressure and will clearly impact further on
earnings expectations. As with the UK, Continental Europe appears less at risk
than the U.S. from a valuation perspective even given the degree to which
perceptions surrounding Europe's economic growth and earnings prospects have
deteriorated since the tremendous rally earlier in the year. We believe
additional rate cuts are on the agenda for early next year and should offset any
concerns over the launch of the euro.
In the Far East, sentiment towards Japan is improving, with fund managers
becoming increasingly nervous of their generally underweight positions in the
stock market and currency. There is growing optimism about the economy and
banking system following the government's recent measures, but possibly this is
due more to the hope that this will prevent imminent free-fall than belief that
the plans solve Japan's structural problems. Further short-term support for the
stock market may emerge from an eventual deal between the LDP and Liberals to
suspend the sales tax. Elsewhere in Asia, currencies have stabilized and
interest rates have fallen. A protracted recovery is likely provided that there
is no worsening of the U.S. and Japanese economies.
The emerging markets outside Asia have also bounced strongly, and a pause
now seems probable. In Latin America, the IMF restructure package has presented
Brazil with the opportunity to resolve structural issues that have held the
country back for some time.
Overall, the scale of recent rallies suggests a period of consolidation is
due. But, we believe liquidity-driven rallies tend to be stronger and continue
longer than most people expect, and it would be no surprise to see markets
squeezed higher over the short term. The U.S. will set the trends for other
equity markets and a soft landing, very low inflation, falling interest rates
and steady earnings growth scenario is a possibility. Add in excess liquidity,
continuing merger and acquisition activity, and valuations could go even higher,
in our opinion.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL SERIES MSCI EAFE INDEX *
<S> <C> <C>
05/01/1990 $10,000.00 $10,000.00
12/31/1990 $9,190.11 $9,639.77
12/31/1991 $10,997.45 $10,844.29
12/31/1992 $9,588.82 $9,559.06
12/31/1993 $13,274.32 $12,708.10
12/31/1994 $13,277.86 $13,732.16
12/31/1995 $14,551.69 $15,318.21
12/31/1996 $17,264.92 $16,292.86
12/31/1997 $19,344.17 $16,627.90
12/31/1998 $24,746 $20,907
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING
12/31/98
FROM
INCEPTION
5/1/90
TO
1 YEAR 5 YEARS 12/31/98
<S> <C> <C> <C>
- - ---------------------------------------------------------------------
International Series 27.92% 13.27% 11.01%
- - ---------------------------------------------------------------------
MSCI EAFE Index* 20.33% 9.50% 8.32%
- - ---------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 5/1/90
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost. Foreign
investing involves special risks such as currency fluctuation and less public
disclosure, as well as economic and political risks.
* The Morgan Stanley Capital International EAFE Index is an unmanaged, commonly
used measure of foreign stock fund performance which includes net dividends
reinvested. Total return figures are net of foreign withholding taxes. The
EAFE index is an aggregate of 19 individual country indexes in Europe,
Australia, New Zealand and the Far East.
27
<PAGE>
INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--95.2%
ARGENTINA--0.4%
Banco Frances SA Sponsored ADR (Banks (Major
Regional)).................................... 20,000 $ 415,000
Telecom Argentina Sponsored ADR (Telephone)..... 20,000 550,000
-------------
965,000
-------------
AUSTRALIA--1.0%
Australian Gas Light Co., Ltd. (Oil
(International Integrated))................... 175,000 1,261,654
QBE Insurance Group Ltd. (Insurance (Property-
Casualty)).................................... 300,000 1,242,057
-------------
2,503,711
-------------
BRAZIL--0.5%
Telecomunicacoes Brasileiras SA Sponsored ADR
(Telephone)................................... 17,900 1,301,106
-------------
DENMARK--0.5%
Tele Danmark A/S (Telecommunications (Cellular/
Wireless)).................................... 9,300 1,255,226
-------------
FINLAND--1.9%
Nokia Oyj Class A (Telecommunications (Cellular/
Wireless)).................................... 23,000 2,816,351
Raisio Group PLC (Foods)........................ 162,300 1,795,038
-------------
4,611,389
-------------
FRANCE--8.9%
Alcatel (Telecommunications
(Cellular/Wireless)).......................... 15,600 1,910,201
Alstom (Machinery (Diversified))................ 73,500 1,723,681
AXA-UAP (Insurance (Multi-Line))................ 23,369 3,388,624
Castorama Dubois (Retail (Building Supplies))... 4,000 912,995
Coflexip SA (Oil & Gas (Drilling &
Equipment))................................... 13,800 936,303
Compagnie Financiere de Paribas (Investment
Banking/Brokerage)............................ 24,500 2,130,259
Elf Aquitaine SA (Oil (International
Integrated)).................................. 14,250 1,647,956
Galeries Lafayette (Retail (Department
Stores))...................................... 1,730 1,858,214
Groupe Danone (Foods)........................... 7,350 2,105,259
Pechiney SA Class A (Aluminum).................. 24,300 793,903
Pinault-Printemps-Redoute SA (Retail (Department
Stores))...................................... 7,800 1,491,297
Rhodia SA (Chemicals (Specialty))(b)............ 73,000 1,110,811
Total SA Class B (Oil (International
Integrated)).................................. 14,900 1,509,736
-------------
21,519,239
-------------
GERMANY--8.6%
Adidas-Salomon AG (Textiles (Apparel)).......... 10,150 1,103,049
Bayerische Motoren Werke AG (Automobiles)....... 2,100 1,630,302
Bayerische Motoren Werke AG New
(Automobiles)(b).............................. 630 467,151
Bayerische Vereinsbank AG (Banks (Major
Regional)).................................... 25,600 2,005,860
DaimlerChrysler AG (Automobiles)................ 21,105 2,084,498
Hoechst AG (Chemicals).......................... 29,500 1,223,912
Mannesmann AG (Machinery (Diversified))......... 30,000 3,440,367
Metro AG (Retail (Department Stores))........... 40,920 3,267,664
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance (Reinsurance))..................... 5,720 2,771,531
RWE AG (Oil (International Integrated))......... 30,400 1,665,546
SAP AG (Computers (Software & Services))........ 2,300 1,098,132
-------------
20,758,012
-------------
GREECE--0.3%
Alpha Credit Bank (Banks (Major Regional))...... 6,150 641,701
-------------
HONG KONG--1.2%
Hongkong Electric Holdings Ltd. (Electric
Companies).................................... 500,000 1,516,712
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
HONG KONG--CONTINUED
Swire Pacific Ltd. Class B (Diversified
Miscellaneous)(b)............................. 2,000,000 $ 1,329,544
-------------
2,846,256
-------------
HUNGARY--0.6%
Magyar Tavkozlesi Rt Sponsored ADR
(Telecommunications (Long Distance)).......... 50,200 1,496,588
-------------
INDIA--0.3%
Mahanagar Telephone Nigam Ltd. GDR (Telephone).. 60,000 742,500
-------------
INDONESIA--0.4%
PT Indosat (Telecommunications
(Cellular/Wireless)).......................... 229,000 300,301
PT Indosat ADR (Telecommunications (Cellular/
Wireless)).................................... 50,000 609,375
-------------
909,676
-------------
ISRAEL--0.2%
Koor Industries Ltd. (Telephone)................ 6,110 533,156
-------------
ITALY--5.3%
Istituto Bancario San Paolo di Torino SPA (Banks
(Money Center))............................... 187,159 3,314,372
Mediolanum SPA (Insurance (Life/Health))........ 420,000 3,120,276
Telecom Italia Mobile SPA (Telecommunications
(Cellular/Wireless)).......................... 460,000 3,403,497
Telecom Italia SPA (Communications Equipment)... 356,000 3,044,225
-------------
12,882,370
-------------
JAPAN--16.5%
77 Bank Ltd. (The) (Banks (Major Regional))..... 190,000 1,903,426
Canon, Inc. (Office Equipment & Supplies)....... 90,000 1,926,920
Dai Nippon Printing Co., Ltd. (Specialty
Printing)..................................... 126,000 2,012,933
Fuji Photo Film Co. (Photography/Imaging)....... 45,000 1,675,582
Hitachi Credit Corp. (Consumer Finance)......... 100,000 2,225,244
Ito-Yokado Co., Ltd. (Retail (General
Merchandise))................................. 45,000 3,151,690
Kao Corp. (Personal Care)....................... 105,000 2,373,742
Kawasumi Laboratories, Inc. (Health Care
(Medical Products & Supplies))................ 98,000 1,928,781
Kirin Beverage Corp. (Beverages
(Non-Alcoholic)).............................. 83,000 1,640,918
Mabuchi Motor Co., Ltd. (Electronics (Component
Distributors))................................ 30,000 2,300,601
Nippon COMSYS Corp. (Communications
Equipment).................................... 148,000 2,019,316
Nippon Telegraph & Telephone Corp.
(Telephone)................................... 1,800 1,391,531
Rinnai Corp. (Building Materials)............... 107,000 1,874,454
Rohm Co., Ltd (Electronics (Semiconductors)).... 22,000 2,006,975
Sanwa Bank Ltd. (The) (Banks (Money Center)).... 279,000 2,154,400
Secom Co., Ltd. (Services (Commercial &
Consumer)).................................... 30,000 2,489,437
Shin-Etsu Chemical Co., Ltd. (Chemicals)........ 100,000 2,411,420
Suzuki Motor Corp. (Automobiles)................ 175,000 2,078,963
Takeda Chemical Industries Ltd. (Health Care
(Drugs-Major Pharmaceuticals))................ 60,000 2,313,899
-------------
39,880,232
-------------
MALAYSIA--0.2%
Carlsberg Brewery Malaysia Berhad (Beverages
(Alcoholic))(c)............................... 150,000 358,553
Malaysian Oxygen Berhad (Chemicals)(c).......... 104,000 164,211
-------------
522,764
-------------
MEXICO--1.7%
Cemex SA de C.V. Class B (Building Materials)... 185,000 457,369
Cemex SA de C.V. CPO (Building Materials)....... 5,550 11,869
Coca-Cola Femsa SA Sponsored ADR (Beverages
(Non-Alcoholic)).............................. 59,800 792,350
</TABLE>
See Notes to Financial Statements
28
<PAGE>
INTERNATIONAL SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
MEXICO--CONTINUED
Telefonos de Mexico SA Sponsored ADR Class L
(Telephone)................................... 56,700 $ 2,760,581
-------------
4,022,169
-------------
NETHERLANDS--7.1%
AKZO Nobel NV (Chemicals)....................... 48,450 2,207,354
ASM Lithography Holding NV (Electronics
(Semiconductors))(b).......................... 54,400 1,663,883
Fortis Amev NV (Insurance (Multi-Line))......... 22,700 1,882,121
Getronics NV (Computers (Software &
Services)).................................... 49,000 2,428,237
Koninklijke Ahold NV (Foods).................... 65,900 2,437,008
Koninklijke KPN NV (Telecommunications
(Cellular/ Wireless))......................... 31,100 1,557,759
Royal Dutch Petroleum Co. NV (Oil (International
Integrated)).................................. 50,500 2,516,026
Verenigde Nederlandse Uitgerersbedrijven NV
(Publishing).................................. 66,800 2,520,123
-------------
17,212,511
-------------
NEW ZEALAND--0.2%
Telecom Corporation of New Zealand Ltd.
(Telecommunications (Cellular/Wireless))...... 100,000 435,812
-------------
PHILIPPINES--0.4%
Ayala Land, Inc. (Real Estate Development)...... 1,500,000 424,177
Philippine Long Distance Telephone Co. Sponsored
ADR (Telephone)............................... 23,000 596,563
-------------
1,020,740
-------------
POLAND--0.3%
Elektrim Spolka Akcyjna SA (Electrical
Equipment).................................... 65,000 703,720
-------------
SINGAPORE--0.8%
Rothmans Industries Ltd. (Tobacco).............. 175,000 1,050,025
United Overseas Bank Ltd. (Banks (Money
Center))...................................... 140,000 899,416
-------------
1,949,441
-------------
SOUTH AFRICA--0.3%
Liberty Life Association of Africa (Insurance
(Life/ Health))............................... 35,000 481,928
South African Breweries Ltd. (Beverages
(Alcoholic)).................................. 19,000 320,079
-------------
802,007
-------------
SOUTH KOREA--0.2%
Pohang Iron & Steel Co. Ltd. (Iron & Steel)..... 6,000 382,989
-------------
SPAIN--3.7%
Argentaria, Caja Postal y Banco Hipotecario de
Espana SA (Banks (Major Regional))............ 89,300 2,316,144
Banco Popular Espanol SA (Banks (Major
Regional)).................................... 29,900 2,257,937
Banco Santander SA (Banks (Money Center))....... 2,387 47,507
Iberdrola SA (Electric Companies)............... 65,100 1,219,838
Telefonica de Espana SA (Telephone)............. 68,854 3,066,305
-------------
8,907,731
-------------
SWEDEN--4.5%
AssiDoman AB (Paper & Forest Products).......... 70,000 1,105,417
Astra AB Class A (Health Care (Drugs-Major
Pharmaceuticals))............................. 91,100 1,860,092
Forenings Sparbanken AB (Banks (Major
Regional)).................................... 40,400 1,046,692
Mandamus AB (Real Estate Development)(b)........ 2,020 11,339
Skandia Forsakrings AB (Insurance
(Multi-Line))................................. 159,700 2,443,119
Svenska Handlesbanken Class A (Banks (Major
Regional)).................................... 37,300 1,573,813
Telefonaktiebolaget LM Ericsson Class B
(Telecommunications (Cellular/Wireless))...... 44,500 1,059,584
Volvo AB Class B (Automobiles).................. 76,000 1,743,992
-------------
10,844,048
-------------
SWITZERLAND--7.9%
Nestle AG (Foods)............................... 490 1,066,706
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
SWITZERLAND--CONTINUED
Novartis AG Registered Shares (Health Care
(Drugs-Major Pharmaceuticals))................ 3,110 $ 6,113,668
Roche Holding AG (Health Care (Drugs-Major
Pharmaceuticals))............................. 270 3,294,697
Schweizerische Lebensversicherungs-und
Rentenanstalt Bearer (Insurance
(Life/Health))................................ 2,530 1,878,877
Schweizerische Rueckersicherungs-Gesellschaft
Registered Shares (Insurance (Reinsurance))... 500 1,303,623
UBS AG (Banks (Money Center))................... 6,700 2,058,567
Zurich Allied AG Registered Shares (Insurance
(Multi-Line))................................. 4,470 3,309,833
-------------
19,025,971
-------------
TAIWAN--0.1%
Standard Foods Taiwan Ltd. GDR (Foods).......... 35,000 345,625
-------------
UNITED KINGDOM--21.2%
3i Group PLC (Investment Banking/Brokerage)..... 110,800 1,069,231
BG PLC (Oil & Gas (Exploration & Production))... 141,000 889,710
Bank of Scotland (Banks (Money Center))......... 126,000 1,503,120
Barclays PLC (Banks (Money Center))............. 57,000 1,229,090
Bass PLC (Beverages (Alcoholic))................ 57,000 829,825
Berkeley Group PLC (The)
(Real Estate Development)..................... 70,000 511,289
British Aerospace PLC (Aerospace/Defense)....... 146,300 1,240,202
British Petroleum Co. PLC (Oil (International
Integrated)).................................. 160,000 2,389,232
British Telecommunications PLC
(Telecommunications (Cellular/Wireless))...... 190,000 2,862,503
Cable & Wireless PLC (Telecommunications
(Cellular/ Wireless))......................... 170,000 2,090,245
Compass Group PLC (Foods)....................... 166,000 1,901,586
FirstGroup PLC (Transportation-Services)........ 128,000 848,676
GKN PLC (Auto Parts & Equipment)................ 81,000 1,074,780
Glaxo Wellcome PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 105,000 3,612,798
Granada Group PLC (Leisure Time (Products))..... 69,000 1,219,781
HSBC Holdings PLC (Banks (Money Center))........ 51,600 1,399,398
Kingfisher PLC (Retail (Department Stores))..... 133,600 1,445,964
Ladbroke Group PLC (Gaming, Lottery & Parimutuel
Companies).................................... 180,000 723,258
Legal & General Group PLC (Insurance
(Life/Health))................................ 122,000 1,584,297
Lloyds TSB Group PLC (Banks (Money Center))..... 194,000 2,759,762
Logica PLC (Computers (Software & Services)).... 169,000 1,469,186
National Westminster Bank PLC (Banks (Money
Center))...................................... 83,000 1,600,536
Norwich Union PLC (Insurance (Life/Health))..... 133,000 966,470
RMC Group PLC (Building Materials).............. 69,000 941,384
Reuters Group PLC (Services (Commercial &
Consumer)).................................... 96,000 1,007,870
Safeway PLC (Foods)............................. 138,500 695,922
Schroders PLC (Banks (Money Center))............ 51,000 930,852
Siebe PLC (Electrical Equipment)................ 262,000 1,033,126
SmithKline Beecham PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 139,000 1,942,665
Southern Electric PLC (Electric Companies)...... 112,000 1,266,226
Tesco PLC (Foods)............................... 390,000 1,111,217
Thames Water PLC (Water Utilities).............. 43,000 822,754
Unilever PLC (Consumer Products
(Miscellaneous)).............................. 100,000 1,121,408
Vodafone Group PLC (Telecommunications
(Cellular/ Wireless))......................... 137,000 2,224,714
Woolwich PLC (Banks (Major Regional))........... 240,000 1,445,519
Zeneca Group PLC (Health Care (Drugs-Major
Pharmaceuticals))............................. 36,000 1,567,509
-------------
51,332,105
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $199,294,439)............................... 230,353,795
-------------
</TABLE>
See Notes to Financial Statements
29
<PAGE>
INTERNATIONAL SERIES
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
RIGHTS--0.0%
<S> <C> <C> <C>
SPAIN--0.0%
Telefonica SA Rights (Telephone)(b)............. 68,854 $ 61,229
-------------
TOTAL RIGHTS
(Identified cost $0)......................................... 61,229
-------------
WARRANTS--0.0%
GERMANY--0.0%
Muenchener Rueckversicherungs-Gesellschaft AG
Warrants (Insurance (Reinsurance))(b)......... 220 10,039
-------------
TOTAL WARRANTS
(Identified cost $0)......................................... 10,039
-------------
TOTAL LONG-TERM INVESTMENTS--95.2%
(Identified cost $199,294,439)............................... 230,425,063
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD &
POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.8%
COMMERCIAL PAPER--4.8%
American Home Products Corp. 5.25%, 1/4/99...... A-1+ $ 5,015 $ 5,012,806
Exxon Imperial U.S., Inc. 6%, 1/5/99............ A-1+ 2,541 2,539,306
Corporate Receivables Corp. 5.58%, 1/19/99...... A-1+ 1,635 1,630,438
Preferred Receivables Funding Corp. 5.40%,
2/2/99........................................ A-1 2,430 2,418,336
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $11,600,886)................................................ 11,600,886
---------------
TOTAL INVESTMENTS--100.0%
(Identified cost $210,895,325)............................................... 242,025,949(a)
Cash and receivables, less liabilities--(0.0%)............................... (111,000)
---------------
NET ASSETS--100.0%............................................................. $ 241,914,949
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $38,516,079 and gross
depreciation of $9,591,888 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$213,101,758.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the Trustees.
See Notes to Financial Statements
30
<PAGE>
INTERNATIONAL SERIES
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense.................................. 0.5%
Aluminum........................................... 0.3
Auto Parts & Equipment............................. 0.5
Automobiles........................................ 3.5
Banks (Major Regional)............................. 5.9
Banks (Money Center)............................... 7.8
Beverages (Alcoholic).............................. 0.6
Beverages (Non-Alcoholic).......................... 1.1
Building Materials................................. 1.4
Chemicals.......................................... 2.6
Chemicals (Specialty).............................. 0.5
Communications Equipment........................... 2.3
Computers (Software & Services).................... 2.2
Consumer Finance................................... 1.0
Consumer Products (Miscellaneous).................. 0.5
Diversified Miscellaneous.......................... 0.6
Electric Companies................................. 1.7
Electrical Equipment............................... 0.7
Electronics (Component Distributors)............... 1.0
Electronics (Semiconductors)....................... 1.6
Foods.............................................. 5.0
Gaming, Lottery & Parimutuel Companies............. 0.3
Health Care (Drugs-Major Pharmaceuticals).......... 9.0
Health Care (Medical Products & Supplies).......... 0.8
Insurance (Life/Health)............................ 3.5
Insurance (Multi-Line)............................. 4.8
Insurance (Property-Casualty)...................... 0.5
Insurance (Reinsurance)............................ 1.8
Investment Banking/Brokerage....................... 1.4
Iron & Steel....................................... 0.2
Leisure Time (Products)............................ 0.5
Machinery (Diversified)............................ 2.2
Office Equipment & Supplies........................ 0.8
Oil & Gas (Drilling & Equipment)................... 0.4
Oil & Gas (Exploration & Production)............... 0.4
Oil (International Integrated)..................... 4.7
Paper & Forest Products............................ 0.5
Personal Care...................................... 1.0
Photography/Imaging................................ 0.7
Publishing......................................... 1.1
Real Estate Development............................ 0.4
Retail (Building Supplies)......................... 0.4
Retail (Department Stores)......................... 3.5
Retail (General Merchandise)....................... 1.4
Services (Commercial & Consumer)................... 1.5
Specialty Printing................................. 0.9
Telecommunications (Cellular/Wireless)............. 8.8
Telecommunications (Long Distance)................. 0.6
Telephone.......................................... 4.8
Textiles (Apparel)................................. 0.5
Tobacco............................................ 0.5
Transportation-Services............................ 0.4
Water Utilities.................................... 0.4
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
31
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$210,895,325)............................................. $ 242,025,949
Cash........................................................ 74,722
Foreign currency at value (Identified cost $592,039)........ 592,040
Receivables
Dividends and interest.................................... 176,861
Investment securities sold................................ 27,193
Tax reclaim............................................... 172,304
Prepaid expenses............................................ 4,511
-------------
Total assets............................................ 243,073,580
-------------
LIABILITIES
Payables
Investment securities purchased........................... 611,879
Fund shares repurchased................................... 135,829
Investment advisory fee................................... 147,538
Financial agent fee....................................... 16,913
Trustees' fee............................................. 7,155
Accrued expenses.......................................... 239,317
-------------
Total liabilities....................................... 1,158,631
-------------
NET ASSETS.................................................. $ 241,914,949
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 199,365,963
Undistributed net investment income....................... 1,208,686
Accumulated net realized gain............................. 10,224,917
Net unrealized appreciation............................... 31,115,383
-------------
NET ASSETS.................................................. $ 241,914,949
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 15,651,855
-------------
-------------
Net asset value and offering price per share................ $ 15.46
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 3,482,925
Interest.................................................. 511,349
Foreign taxes withheld.................................... (129,367)
-------------
Total investment income................................. 3,864,907
-------------
EXPENSES
Investment advisory fee................................... 1,704,109
Financial agent fee....................................... 178,882
Custodian................................................. 211,366
Printing.................................................. 69,483
Professional.............................................. 27,179
Trustees.................................................. 21,583
Miscellaneous............................................. 20,501
-------------
Total expenses.......................................... 2,233,103
-------------
NET INVESTMENT INCOME....................................... 1,631,804
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 50,178,449
Net realized gain on foreign currency transactions........ 864,638
Net change in unrealized appreciation (depreciation) on
investments............................................. 562,170
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... (411,356)
-------------
NET GAIN ON INVESTMENTS..................................... 51,193,901
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 52,825,705
-------------
-------------
</TABLE>
See Notes to Financial Statements
32
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 1,631,804 $ 1,372,460
Net realized gain (loss).................................. 51,043,087 13,881,538
Net change in unrealized appreciation (depreciation)...... 150,814 5,898,443
----------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 52,825,705 21,152,441
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- (2,638,818)
Net realized gains........................................ (41,161,214) (18,496,435)
In excess of accumulated net realized gains............... -- (204,295)
----------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (41,161,214) (21,339,548)
----------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (3,647,895 and 3,308,827
shares, respectively)................................... 63,751,174 50,646,953
Net asset value of shares issued from reinvestment of
distributions
(2,641,331 and 1,433,541 shares, respectively).......... 41,161,214 21,339,548
Cost of shares repurchased (3,994,250 and 3,280,469
shares, respectively)................................... (68,770,405) (50,358,574)
----------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 36,141,983 21,627,927
----------------- -----------------
NET INCREASE IN NET ASSETS................................ 47,806,474 21,440,820
NET ASSETS
Beginning of period....................................... 194,108,475 172,667,655
----------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $1,208,686 AND ($1,443,875), RESPECTIVELY).... $241,914,949 $194,108,475
----------------- -----------------
----------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 14.53 $ 14.52 $ 12.70 $ 11.85 $ 12.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.12(1) 0.12(1) 0.11(1) 0.12(1) 0.08(1)
Net realized and unrealized gain
(loss).......................... 3.94 1.61 2.25 1.02 (0.07)
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS.................... 4.06 1.73 2.36 1.14 0.01
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... -- (0.22) (0.19) (0.04) (0.03)
Dividends from net realized
gains........................... (3.13) (1.50) (0.33) (0.25) (0.34)
In excess of net investment
income.......................... -- -- (0.02) -- --
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS............. (3.13) (1.72) (0.54) (0.29) (0.37)
----------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE........... 0.93 0.01 1.82 0.85 (0.36)
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD...... $ 15.46 $ 14.53 $ 14.52 $ 12.70 $ 11.85
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return........................ 27.92% 12.04% 18.65% 9.59% 0.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $241,915 $194,108 $172,668 $134,455 $134,627
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.98% 1.01% 1.04% 1.07% 1.10%
Net investment income............. 0.72% 0.72% 0.80% 0.95% 0.64%
Portfolio turnover rate............. 93% 184% 142% 249% 172%
</TABLE>
(1) Computed using average shares outstanding.
See Notes to Financial Statements
33
<PAGE>
BALANCED SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term appreciation through
investments in a combination of common stocks and fixed-income securities,
including foreign and high-yield debt issues. 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 12 months ended December 31, 1998, the Fund returned 19.01% compared
with 19.67% for a composite benchmark(1). All performance figures assume
reinvestment of distributions and are net of sales charges.
The 1998 calendar year proved to be one of the more difficult investment
years in recent memory given the extreme volatility in the global equity and
fixed income markets. In fact, U.S. equities by many measures had not seen this
level of volatility since the 1987 market crash. Not since 1990 were bond
investors punished so severely for owning anything other than U.S. Government
securities.
While 1998 turned out to be an excellent year for large-cap stocks,
small-capitalization stocks continued to underperform and profitability at many
cyclical companies came under pressure due to weakness in the international
markets and falling commodity prices. Recognizing these trends, we focused our
stock selection on large-capitalization companies with predictable revenue
streams and a domestic focus. The Fund's heavy bias towards large-cap names and
its overweighting in the health-care, consumer staples and technology sectors
were the primary drivers for our strong equity performance last year.
Despite the obvious temptation to raise cash during this summer's sell-off,
our decision to remain fully invested in stocks also paid off handsomely as the
market has rebounded dramatically from its early October lows. On the other side
of the equation, the most notable factor that held back performance over this
latest reporting period was the Fund's underweighted position in the strongly
performing consumer cyclical group during the final quarter. While we were not
expecting a recession anytime soon, we were somewhat surprised by the strength
of the U.S consumer over this latest quarter.
With respect to the fixed-income portion of the Fund, the interest rate
roller coaster ride of 1997 (with rates starting out at 6.64%, peaking at 7.15%,
and ending at 5.92%) turned into a "yield ride" in 1998, as many fixed-income
investors began the year reaching for yield in both domestic high-yield
securities and lower quality foreign bonds. Despite the favorable backdrop of a
moderate, stable U.S. economy and historically low rates, this strategy began to
lose favor as global uncertainty caused investor sentiment to shift in the
second half of the year toward a preference for the safety and liquidity of U.S.
Treasuries. With the benefit of three swift rate cuts by the Federal Reserve
Board, the markets began to calm in the fourth quarter, and the 30-year U.S.
Treasury bond closed out the year at 5.09%. While the most recent CPI figures
indicate that U.S. inflation remains benign at a modest 1.6% annualized rate--a
slight slowdown from 1997's 1.7% rate--the mood in the bond market remains
tenuous.
While we are not pleased with our fixed-income results, they can be
explained by a "flight to quality" of unprecedented magnitude. As stated
earlier, the US Treasury sector was the best performing sector in 1998. While
market environments such as this happen relatively infrequently, they penalize
managers such as ourselves that have a significant underweighting to U.S.
Treasuries. It is noteworthy that since 1980 there was only one occurrence where
U.S. Treasuries were the best performing bond market sector two years in a row.
During this difficult time, we remained true to our discipline and remained
fully allocated to those non-core sectors we believed were the most attractive
from a risk-reward perspective. We believe that this is the most prudent manner
in which to manage assets particularly during extreme market moves.
OUTLOOK
As we enter 1999, the stock market and U.S. economy continue to be strong.
Despite some weakness in exports and the manufacturing sector, robust consumer
spending has made the U.S. economy the strongest in the industrialized world.
Recent data on employment, personal income, consumer spending, and consumer
confidence are all encouraging. Yet, there is a fundamental disconnect between
the economy and corporate profits. Profits for 1998 were about flat with 1997,
and we expect only slight improvement this year. This tough earnings environment
over the past year benefited steady growth groups, such as health-care and
communication services. We don't see this changing for the foreseeable future.
Actually, we see the torrid pace of economic growth slowing somewhat in 1999.
Overall, we remain cautiously optimistic on the stock market. While we
expect corporate profits to remain under pressure, this current environment of
benign inflation and historically low interest rates should continue to be a
positive catalyst for
(1) The benchmark is calculated based upon the performance of the following
indices: 55% S&P 500/35% Lehman Brothers Aggregate Bond Index/10% 90-day
Treasury bills and is produced by Frank Russell Company. It is not available
for direct investment.
34
<PAGE>
BALANCED SERIES
financial assets. After four straight years of double-digit gains, it is also
likely that we will see more normalized (single-digit) returns for U.S. equities
in 1999. Lastly, we believe that the financial markets will remain volatile over
the near term, as there are still many cross currents at work in the global
financial systems.
Although we anticipate a slowdown in the U.S. economy, we do not expect the
recession that seems to be factored into the domestic high-yield market
currently. We do expect that this sector's defaults will pick up in 1999;
however, the level being priced into the market is extremely high. Our holdings
in this area represent a diversified group of securities in industries with good
fundamentals, and solid underlying businesses. In addition, we have significant
exposure to U.S. dollar-denominated below investment-grade foreign holdings.
This sector remains among the most attractive from a risk-reward perspective. We
own debt securities of countries that have good fundamentals and more stable
political situations, such as Mexico, Argentina, Panama, Bulgaria, Peru, and the
Philippines.
We believe the fixed-income portion of the Fund is well structured to take
advantage of current market conditions, and we will continue to emphasize the
credit-sensitive sectors given their very favorable valuations. The market is
paying investors a large yield premium or yield advantage as compensation for
taking risk. Priced into this premium is much bad news. For those investors
willing and able to be patient and discerning, we believe these factors present
outstanding opportunities.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED SERIES BALANCED BENCHMARK*
<S> <C> <C>
5/1/92 $10,000.00 $10,000.00
12/31/92 $10,971.78 $10,712.00
12/31/93 $11,912.44 $11,702.48
12/31/94 $11,578.97 $11,724.94
12/31/95 $14,274.25 $14,917.45
12/31/96 $15,781.89 $17,055.78
12/31/97 $18,611.77 $20,799.83
12/31/98 $22,150.60 $24,890.59
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING
12/31/98
FROM
INCEPTION
5/1/92
TO
1 YEAR 5 YEARS 12/31/98
<S> <C> <C> <C>
- - ---------------------------------------------------------------------
Balanced Series 19.01% 13.21% 12.66%
- - ---------------------------------------------------------------------
Balanced Benchmark* 19.67% 16.29% 14.65%
- - ---------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 5/1/92
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the
stated period. Returns indicate past performance, which is not predictive of
future performance. Investment return and net asset value will fluctuate so
that your shares, when redeemed, may be worth more or less than the original
cost. Foreign investing involves special risks such as currency fluctuation
and less public disclosure, as well as economic and political risks.
* The Balanced Benchmark is calculated based upon the performance of the
following indices: 55% S&P 500/35% Lehman Brothers Aggregate Bond
Index/10% 90-day Treasury Bills and is produced by Frank Russell Company.
The index is not available for direct investment.
35
<PAGE>
BALANCED SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--8.7%
U.S. TREASURY NOTES--8.7%
U.S. Treasury Notes 6.375%, 5/15/99....................... AAA $ 1,775 $ 1,786,215
U.S. Treasury Notes 5.375%, 1/31/00....................... AAA 4,075 4,106,708
U.S. Treasury Notes 5.50%, 3/31/00........................ AAA 750 757,695
U.S. Treasury Notes 6.875%, 3/31/00....................... AAA 3,100 3,181,639
U.S Treasury Notes 6.00%, 8/15/00......................... AAA 1,700 1,735,722
U.S. Treasury Notes 4.50%, 9/30/00........................ AAA 355 354,391
U.S. Treasury Notes 4.625%, 11/30/00...................... AAA 500 500,295
U.S. Treasury Notes 5.25%, 8/15/03........................ AAA 3,105 3,183,336
U.S. Treasury Notes 5.625%, 5/15/08....................... AAA 8,284 8,840,301
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $24,749,800)................................................. 24,446,302
-------------
AGENCY MORTGAGE-BACKED SECURITIES--3.0%
GNMA 6.50%, 11/15/23...................................... AAA 1,481 1,505,842
GNMA 6.50%, 2/15/24....................................... AAA 2,448 2,488,792
GNMA 6.50%, 12/15/23...................................... AAA 520 528,984
GNMA 6.50%, 6/15/28....................................... AAA 3,956 3,997,132
-------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $8,291,401).................................................. 8,520,750
-------------
MUNICIPAL BONDS--6.7%
CALIFORNIA--1.7%
California State Department Water Resources Revenue Series
S 5%, 12/1/29........................................... AA 450 444,937
Fresno County Pension Obligation Taxable 6.21%, 8/15/06... AAA 1,000 1,033,750
Kern County Pension Obligation Revenue Taxable 7.26%,
8/15/14................................................. AAA 420 464,100
Long Beach Pension Obligation Taxable 6.87%, 9/1/06....... AAA 230 246,962
Los Angeles County Public Works PJ V-B 5.125%, 12/1/29.... AAA 685 689,281
Orange County Pension Obligation Revenue Taxable Series A
7.62%, 9/1/08........................................... AAA 650 735,312
San Bernardino County Pension Obligation Revenue Taxable
6.87%, 8/1/08........................................... AAA 110 118,387
San Bernardino County Pension Obligation Revenue Taxable
6.94%, 8/1/09........................................... AAA 300 325,125
Sonoma County Pension Obligation 6.625%, 6/1/13........... AAA 495 517,894
Ventura County Pension Obligation Taxable 6.54%,
11/1/05................................................. AAA 260 273,325
-------------
4,849,073
-------------
FLORIDA--0.7%
Florida State Department of Transportation Series A 5%,
7/1/27.................................................. AA+ 545 541,594
Miami Beach Special Obligation Revenue Taxable 8.60%,
9/1/21.................................................. AAA 875 999,688
University of Miami Revenue Taxable Series A 7.65%,
4/1/20.................................................. AAA 270 289,238
-------------
1,830,520
-------------
ILLINOIS--0.6%
Illinois Educational Facilities Authority-Loyola
University Revenue Taxable Series A 7.84%, 7/1/24....... AAA 1,500 1,625,625
-------------
MASSACHUSETTS--0.4%
Massachusetts State Port Authority Revenue Taxable Series
C 6.05%, 7/1/02......................................... AA- 450 459,000
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
MASSACHUSETTS--CONTINUED
Massachusetts State Water Resources Authority Revenue
Series D 5%, 8/1/24..................................... AAA $ 545 $ 538,188
-------------
997,188
-------------
NEW YORK--1.1%
Metropolitan Transportation Authority Series A 5%,
4/1/23.................................................. AAA 760 756,200
New York State Dormitory Authority
Pension Obligation Revenue Taxable
6.90%, 4/1/03........................................... BBB+ 650 677,625
New York State Taxable Series C 6.35%, 3/1/07............. AAA 1,500 1,558,125
-------------
2,991,950
-------------
PENNSYLVANIA--0.7%
Pittsburgh Pension Taxable 6.50%, 3/1/17.................. AAA 1,250 1,303,125
Pittsburgh Water & Sewer Authority Series A 5.05%,
9/1/25.................................................. AAA 760 758,100
-------------
2,061,225
-------------
TEXAS--1.1%
Dallas-Fort Worth Taxable 6.40%, 11/1/07.................. AAA 1,000 1,045,000
Houston Water & Sewer System
Revenue Refunding, Jr. Lien,
Series D 5%, 12/1/25.................................... AAA 685 671,300
Texas State General Obligation Series B 5.25%, 10/1/08.... AA 275 297,688
Texas State Taxable Veterans Limited Series B 6.10%,
12/1/03................................................. AA 1,000 1,026,250
-------------
3,040,238
-------------
VIRGINIA--0.4%
Newport News Taxable Series B 7.05%, 1/15/25.............. AA 1,000 1,032,500
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $17,715,922)................................................. 18,428,319
-------------
ASSET-BACKED SECURITIES--1.1%
AESOP Funding II LLC 97-1, A2 144A 6.40%, 10/20/03 (c).... AAA 1,200 1,227,000
Capita Equipment Receivables Trust 97-1, B 6.45%,
8/15/02................................................. A+ 770 777,700
Fleetwood Credit Corp. Grantor Trust 96-B, A 6.90%,
3/15/12................................................. AAA 411 416,964
Green Tree Financial Corp. 96-2, M1 7.60%, 4/15/27........ AA- 675 700,523
-------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $3,056,773).................................................. 3,122,187
-------------
CORPORATE BONDS--4.4%
COMPUTERS (SOFTWARE & SERVICES)--0.5%
CSC Holdings Inc. 7.625%, 7/15/18......................... BB+ 1,000 1,003,750
Computer Associates International Series B 6.375%,
4/15/05................................................. A- 535 526,975
-------------
1,530,725
-------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES--0.2%
Station Casinos, Inc. 10.125%, 3/15/06.................... B+ 500 522,500
-------------
HEALTH CARE (DIVERSIFIED)--0.4%
Tenet Healthcare Corp 144A 8.125%, 12/1/08 (c)............ BB- 1,000 1,036,250
-------------
</TABLE>
See Notes to Financial Statements
36
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.3%
Boston Scientific Corp. 6.625%, 3/15/05................... BBB $ 975 $ 920,156
-------------
LEASING/RENTAL--0.1%
United Rentals, Inc. 9.50%, 6/01/08....................... BB- 250 252,500
-------------
MANUFACTURING (DIVERSIFIED)--0.2%
Tyco International Group SA 6.375%, 6/15/05............... A- 600 609,750
-------------
PAPER & FOREST PRODUCTS--0.3%
Buckeye Cellulose Corp. 8.50%, 12/15/05................... BB 700 726,250
-------------
PERSONAL CARE--0.2%
Revlon Consumer Products 144A 9%, 11/1/06 (c)............. B 500 495,000
-------------
PUBLISHING--0.2%
Hollinger International Publishing, Inc. 9.25%, 3/15/07... B 625 660,937
-------------
RETAIL (FOOD CHAINS)--0.4%
Meyer (Fred), Inc. 7.45%, 3/1/08.......................... BB+ 1,000 1,082,500
-------------
SERVICES (COMMERCIAL & CONSUMER)--0.1%
United Rentals, Inc. 144A 8.80%, 8/15/08 (c).............. BB- 250 244,375
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.4%
Comcast Cellular Holdings, Inc. Series B 9.50%, 5/1/07.... BB+ 1,000 1,065,000
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.4%
Quest Communications International Inc. 144A 7.50%,
11/1/08 (c)............................................. BB+ 1,100 1,148,125
-------------
TELEPHONE--0.1%
Nextlink Communications, Inc. 144A 10.75%, 11/15/08 (c)... B 370 379,250
-------------
TEXTILES (HOME FURNISHINGS)--0.4%
Westpoint Stevens, Inc. 7.875%, 6/15/05................... BB 1,000 1,025,000
-------------
TRUCKERS & MARINE--0.1%
Teekay Shipping Corp. 8.32%, 2/1/08....................... BB+ 230 228,563
-------------
TRUCKS & PARTS--0.1%
Cummins Engine Inc. 6.45%, 3/1/05......................... BBB+ 400 390,500
-------------
TOTAL CORPORATE BONDS
(Identified cost $11,921,026)................................................. 12,317,381
-------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--6.1%
CS First Boston Mortgage Securities Corp. 95-AEW1, B
7.182%, 11/25/27........................................ AA- 424 423,081
CS First Boston Mortgage Securities Corp. 97-C2, B 6.72%,
11/17/07................................................ Aa(d) 2,000 2,067,500
Case Equipment Loan Trust 98-A, A4, 5.83%, 2/15/05........ AAA 1,750 1,769,985
DLJ Mortgage Acceptance Corp. 144A 96-CF1, A1B 7.58%,
2/12/06 (c)(f).......................................... AAA 1,400 1,479,187
First Union-Lehman Brothers 97-C1, B 7.43%, 4/18/07....... Aa(d) 930 1,005,272
G.E. Capital Mortgage Services, Inc. 96-8, 1M 7.25%,
5/25/26................................................. AA 243 246,078
Lehman Large Loan 97-LLI, B 6.95%, 3/12/07................ AA 825 868,312
Mortgage Capital Funding, Inc. 96-MC2, A3, 7.008%,
9/20/06................................................. Aaa(d) 2,000 2,103,125
Nationslink Funding Corp. 96-1, B 7.69%, 12/20/05......... AA 450 479,672
Norwest Asset Securities Corp. 96-9, A15 7.75% 1/25/27.... Aaa(d) 2,000 2,030,000
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26................................................ AAA 96 95,568
Residential Funding Mortgage Securities I 96-S8, A4 6.75%,
3/25/11................................................. AAA 618 624,380
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES--CONTINUED
Residential Funding Mortgage Securities I 96-S1, A11
7.10%, 1/25/26.......................................... AAA $ 1,000 $ 1,006,250
Residential Funding Mortgage Securities I 96-S4, M1 7.25%,
2/25/26................................................. AA 969 974,034
Structured Asset Securities Corp. 93-C1, 6.60%,
10/25/24................................................ A+ 525 526,684
Triangle Funding Ltd. 98-2A, 3, 144A 7.163%, 10/15/04
(c)..................................................... BBB 1,500 1,494,375
-------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $16,952,519)................................................. 17,193,503
-------------
FOREIGN GOVERNMENT SECURITIES--1.5%
COLOMBIA--0.4%
Republic of Colombia 7.70% 7/14/03........................ NR 610 530,700
Republic of Colombia 7.25%, 2/23/04....................... BBB- 825 703,312
-------------
1,234,012
-------------
CROATIA--0.4%
Croatia Series B 6.563%, 7/31/06 (e)...................... BBB- 679 549,654
Croatia Series A 6.563%, 7/31/10 (e)...................... BBB- 775 620,000
-------------
1,169,654
-------------
POLAND--0.7%
Poland Bearer PDI 5%, 10/27/14............................ BBB- 1,450 1,358,469
Poland Discount Euro 6.78%, 10/27/24...................... BBB- 600 595,500
-------------
1,953,969
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $4,525,825).................................................. 4,357,635
-------------
FOREIGN CORPORATE BONDS--0.9%
ARGENTINA--0.2%
Compania de Radiocomunicaciones Moviles SA 144A 9.25%,
5/8/08 (c).............................................. BBB 300 277,500
Telefonica de Argentina 144A 9.125%, 5/7/08 (c)........... BBB- 290 268,250
-------------
545,750
-------------
CHILE--0.1%
Compania Sud Americana de Vapores SA 7.375%, 12/8/03...... BBB 120 108,600
Petropower I Funding Trust 144A, 7.36%, 2/15/14 (c)....... BBB 350 295,312
-------------
403,912
-------------
JAPAN--0.6%
IBJ Preferred Capital Co. LLC 144A 8.79%, 12/29/49
(c)(e).................................................. Baa(d) 910 784,019
SB Treasury Co. LLC 144A 9.40%, 12/29/49 (c)(e)........... BB+ 910 866,079
-------------
1,650,098
-------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $2,871,089).................................................. 2,599,760
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------
<S> <C> <C> <C>
COMMON STOCKS--61.0%
BANKS (MAJOR REGIONAL)--2.2%
Bank One Corp....................................................... 29,850 1,524,216
Mellon Bank Corp.................................................... 17,200 1,182,500
U.S. Bancorp........................................................ 24,400 866,200
Wells Fargo & Co.................................................... 67,000 2,675,812
-------------
6,248,728
-------------
</TABLE>
See Notes to Financial Statements
37
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
BANKS (MONEY CENTER)--0.8%
BankAmerica Corp................................ 36,882 $ 2,217,530
-------------
BEVERAGES (ALCOHOLIC)--0.6%
Anheuser-Busch Companies, Inc................... 26,600 1,745,625
-------------
BEVERAGES (NON-ALCOHOLIC)--0.9%
PepsiCo, Inc.................................... 64,500 2,640,469
-------------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.0%
CBS Corp........................................ 26,200 858,050
Chancellor Media Corp. (b)...................... 21,400 1,024,525
Clear Channel Communications, Inc. (b).......... 16,300 888,350
Fox Entertainment Group, Inc. Class A (b)....... 21,200 533,975
Liberty Media Group ClassA (b).................. 44,600 2,054,387
Tele-Communications, Inc. Class A (b)........... 55,200 3,053,250
-------------
8,412,537
-------------
COMMUNICATIONS EQUIPMENT--0.5%
Tellabs, Inc. (b)............................... 19,600 1,343,825
-------------
COMPUTERS (HARDWARE)--2.2%
International Business Machines Corp............ 33,000 6,096,750
-------------
COMPUTERS (NETWORKING)--1.0%
Cisco Systems, Inc. (b)......................... 29,125 2,703,164
-------------
COMPUTERS (PERIPHERALS)--1.0%
EMC Corp. (b)................................... 32,500 2,762,500
-------------
COMPUTERS (SOFTWARE & SERVICES)--7.3%
America Online, Inc. (b)........................ 10,700 1,712,000
BMC Software, Inc. (b).......................... 59,600 2,655,925
Compuware Corp. (b)............................. 54,500 4,257,812
Edwards (J.D.) & Co. (b)........................ 21,200 601,550
HBO & Co........................................ 95,300 2,733,919
Microsoft Corp. (b)............................. 41,300 5,727,794
Oracle Corp. (b)................................ 36,800 1,587,000
Sterling Commerce, Inc. (b)..................... 22,600 1,017,000
-------------
20,293,000
-------------
CONSUMER FINANCE--0.8%
Capital One Financial Corp...................... 18,900 2,173,500
-------------
DISTRIBUTORS (FOOD & HEALTH)--1.0%
Cardinal Health, Inc............................ 37,650 2,856,694
-------------
ELECTRICAL EQUIPMENT--1.7%
General Electric Co............................. 45,200 4,613,225
-------------
ELECTRONICS (SEMICONDUCTORS)--3.1%
Intel Corp...................................... 63,800 7,564,287
Micron Technology, Inc. (b)..................... 23,600 1,193,275
-------------
8,757,562
-------------
FINANCIAL (DIVERSIFIED)--3.0%
Citigroup, Inc.................................. 49,700 2,460,150
Freddie Mac..................................... 59,200 3,814,700
Morgan Stanley Dean Witter & Co. (b)............ 28,500 2,023,500
-------------
8,298,350
-------------
HEALTH CARE (DIVERSIFIED)--3.6%
Bristol-Myers Squibb Co. (b).................... 36,600 4,897,537
Mylan Laboratories, Inc......................... 33,300 1,048,950
Warner-Lambert Co............................... 56,300 4,233,056
-------------
10,179,543
-------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--4.1%
Pfizer, Inc..................................... 43,800 5,494,162
Schering-Plough Corp............................ 70,000 3,867,500
Watson Pharmaceuticals, Inc. (b)................ 31,800 1,999,425
-------------
11,361,087
-------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.3%
Baxter International, Inc. (b).................. 32,700 2,103,019
Becton, Dickinson and Co........................ 16,900 721,419
<CAPTION>
SHARES VALUE
---------- -------------
<S> <C> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--CONTINUED
Genzyme Corp. (b)............................... 17,200 $ 855,700
Medtronic, Inc.................................. 38,600 2,866,050
-------------
6,546,188
-------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.3%
Clorox Co. (The)................................ 5,600 654,150
Colgate-Palmolive Co............................ 8,600 798,725
Procter & Gamble Co. (The)...................... 24,600 2,246,287
-------------
3,699,162
-------------
INSURANCE (LIFE/HEALTH)--0.4%
UNUM Corp....................................... 19,000 1,109,125
-------------
INSURANCE (MULTI-LINE)--1.1%
American International Group, Inc............... 22,200 2,145,075
ReliaStar Financial Corp........................ 22,600 1,042,425
-------------
3,187,500
-------------
LODGING--HOTELS--0.3%
Carnival Corp................................... 18,300 878,400
-------------
MANUFACTURING (DIVERSIFIED)--1.3%
Tyco International Ltd.......................... 48,600 3,666,262
-------------
OIL & GAS (DRILLING & EQUIPMENT)--0.3%
Halliburton Co.................................. 11,100 328,838
Schlumberger Ltd................................ 7,200 332,100
Transocean Offshore, Inc........................ 11,200 300,300
-------------
961,238
-------------
OIL (DOMESTIC INTEGRATED)--1.1%
USX-Marathon Group.............................. 100,500 3,027,563
-------------
OIL (INTERNATIONAL INTEGRATED)--1.3%
Amoco Corp...................................... 49,400 2,982,525
Conoco, Inc. Class A (b)........................ 30,200 630,425
-------------
3,612,950
-------------
RETAIL (BUILDING SUPPLIES)--1.2%
Home Depot, Inc................................. 53,300 3,261,294
-------------
RETAIL (COMPUTERS & ELECTRONICS)--0.2%
Tandy Corp. (b)................................. 15,800 650,763
-------------
RETAIL (DRUG STORES)--2.5%
CVS Corp........................................ 61,500 3,382,500
Rite Aid Corp................................... 72,200 3,578,413
-------------
6,960,913
-------------
RETAIL (FOOD CHAINS)--2.6%
Meyer (Fred), Inc. (b).......................... 48,770 2,938,393
Safeway, Inc. (b)............................... 72,400 4,411,875
-------------
7,350,268
-------------
RETAIL (GENERAL MERCHANDISE)--0.5%
Wal-Mart Stores, Inc............................ 16,100 1,311,144
-------------
RETAIL (SPECIALTY)--1.1%
Borders Group, Inc. (b)......................... 33,600 837,900
Staples, Inc. (b)............................... 50,650 2,212,772
-------------
3,050,672
-------------
SERVICES (COMMERCIAL & CONSUMER)--0.3%
ServiceMaster Co. (The)......................... 40,000 882,500
-------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.1%
AirTouch Communications, Inc. (b)............... 80,800 5,827,700
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.0%
AT&T Corp....................................... 33,400 2,513,350
MCI WorldCom, Inc. (b).......................... 41,975 3,011,706
-------------
5,525,056
-------------
</TABLE>
See Notes to Financial Statements
38
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------
TELEPHONE--1.3%
<S> <C> <C> <C>
BellSouth Corp.................................. 41,600 $ 2,074,800
SBC Communications, Inc......................... 28,600 1,533,675
-------------
3,608,475
-------------
WASTE MANAGEMENT--1.0%
Waste Management, Inc........................... 62,000 2,890,750
-------------
TOTAL COMMON STOCKS
(Identified cost $123,662,416).............................. 170,712,012
-------------
FOREIGN COMMON STOCKS--0.5%
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--0.5%
Elan Corp. PLC Sponsored ADR (Ireland) (b)...... 19,300 1,342,546
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,125,896)................................ 1,342,546
-------------
TOTAL LONG-TERM INVESTMENTS--93.9%
(Identified cost $214,872,667).............................. 263,040,395
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
-------- -------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--6.1%
COMMERCIAL PAPER--5.4%
Coca-Cola Co. 4.90%, 1/4/99............................... A-1+ $ 2,735 $ 2,733,883
Potomac Electric Power Co. 4.95%, 1/4/99.................. A-1 1,845 1,844,239
SBC Communications Inc. 5.95%, 1/6/99..................... A-1+ 2,485 2,482,946
Corporate Asset Funding Co., Inc. 5.65%, 1/14/99.......... A-1+ 450 449,082
Shell Oil Co. 4.75%, 1/25/99.............................. A-1+ 2,495 2,487,099
Potomac Electric Power 5.50%, 1/26/99..................... A-1 1,930 1,922,629
Vermont American Corp. 4.45%, 1/27/99..................... A-1+ 2,270 2,261,065
Wisconsin Electric Power Co. 5.40%,
1/28/99................................................. A-1+ 915 911,294
-------------
15,092,237
-------------
FEDERAL AGENCY SECURITIES--0.7%
FHLB 4.50%, 1/4/99........................................ 2,025 2,024,241
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $17,116,478)................................................. 17,116,478
-------------
TOTAL INVESTMENTS--100.0%
(Identified cost $231,989,146)................................................ 280,156,873(a)
Cash and receivables, less liabilities--(0.0%)................................ (101,230)
-------------
NET ASSETS--100.0%.............................................................. $ 280,055,643
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $50,810,642 and gross
depreciation of $2,828,720 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$232,174,951.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, these securities amounted to a value of $9,994,722 or 3.6% 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.
(f) All or a portion segregated as collateral.
See Notes to Financial Statements
39
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$231,989,146)............................................. $ 280,156,873
Receivables
Interest and dividends.................................... 1,258,856
Investment securities sold................................ 1,168,691
Fund shares sold.......................................... 204,568
Prepaid expenses............................................ 5,008
-------------
Total assets............................................ 282,793,996
-------------
LIABILITIES
Payables
Custodian................................................. 11,312
Investment securities purchased........................... 2,113,929
Fund shares repurchased................................... 368,637
Investment advisory fee................................... 127,253
Financial agent fee....................................... 21,208
Trustees' fee............................................. 5,060
Accrued expenses............................................ 90,954
-------------
Total liabilities....................................... 2,738,353
-------------
NET ASSETS.................................................. $ 280,055,643
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of benefical interest........... $ 229,861,876
Undistributed net investment income....................... 244,131
Accumulated net realized gain............................. 1,781,909
Net unrealized appreciation............................... 48,167,727
-------------
NET ASSETS.................................................. $ 280,055,643
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 20,386,789
-------------
-------------
Net asset value and offering price per share................ $ 13.74
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 7,135,692
Dividends................................................. 1,052,674
Foreign taxes withheld.................................... (3,350)
-------------
Total investment income................................. 8,185,016
-------------
EXPENSES
Investment advisory fee................................... 1,378,437
Financial agent fee....................................... 191,836
Custodian................................................. 45,357
Printing.................................................. 29,325
Professional.............................................. 26,438
Trustees.................................................. 14,329
Miscellaneous............................................. 15,084
-------------
Total expenses.......................................... 1,700,806
-------------
NET INVESTMENT INCOME....................................... 6,484,210
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 1,823,127
Net change in unrealized appreciation (depreciation) on
investments............................................. 36,386,238
-------------
NET GAIN ON INVESTMENTS..................................... 38,209,365
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 44,693,575
-------------
-------------
</TABLE>
See Notes to Financial Statements
40
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 6,484,210 $ 6,313,137
Net realized gain (loss).................................. 1,823,127 28,928,777
Net change in unrealized appreciation (depreciation)...... 36,386,238 398,108
----------------- -----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 44,693,575 35,640,022
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (6,299,939) (6,626,999)
Net realized gains........................................ (9,082,295) (25,653,795)
----------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (15,382,234) (32,280,794)
----------------- -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (4,750,917 and 2,522,290
shares, respectively)................................... 60,237,782 32,463,957
Net asset value of shares issued from reinvestment of
distributions
(1,187,415 and 2,611,513 shares, respectively).......... 15,382,234 32,280,794
Cost of shares repurchased (4,412,737 and 3,214,459
shares, respectively)................................... (56,055,533) (41,209,392)
----------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 19,564,483 23,535,359
----------------- -----------------
NET INCREASE IN NET ASSETS................................ 48,875,824 26,894,587
NET ASSETS
Beginning of period....................................... 231,179,819 204,285,232
----------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $244,131 AND
$52,552, RESPECTIVELY).................................. $280,055,643 $231,179,819
----------------- -----------------
----------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.26 $ 12.06 $ 12.30 $ 10.53 $ 11.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).......... 0.33 0.38 0.36 0.40(2) 0.38(1)(2)
Net realized and unrealized gain
(loss).............................. 1.94 1.73 0.89 2.02 (0.70)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... 2.27 2.11 1.25 2.42 (0.32)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.32) (0.40) (0.35) (0.40) (0.36)
Dividends from net realized gains..... (0.47) (1.51) (1.14) (0.25) (0.10)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.79) (1.91) (1.49) (0.65) (0.46)
--------- --------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... 1.48 0.20 (0.24) 1.77 (0.78)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 13.74 $ 12.26 $ 12.06 $ 12.30 $ 10.53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return............................ 19.01% 17.93% 10.56% 23.28% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $280,056 $231,180 $204,285 $193,302 $161,105
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 0.68% 0.71% 0.68% 0.65%(3) 0.69%
Net investment income................. 2.58% 2.92% 2.93% 3.44% 3.44%
Portfolio turnover rate................. 110% 181% 229% 223% 171%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.001
per share.
(2) Computed using average shares outstanding.
(3) The ratio of operating expenses to average net assets excludes the effect of
expense offsets for custodian fees; if expense offsets were included, the
ratio would not significantly differ.
See Notes to Financial Statements
41
<PAGE>
REAL ESTATE SECURITIES SERIES
INVESTOR PROFILE
The Fund emphasizes capital appreciation and current yield equally. It is
appropriate for investors seeking investment in a diversified portfolio of real
estate investment trusts and real estate operating companies. Investors should
note that real estate investing involves certain risks, including refinancing,
economic impact on the industry, changes in the value of owned properties,
dependency on management skills and risks similar to those linked to small
company investing.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Real Estate Equity Securities
Series provided a return of (21.19)% compared with a return of (17.50)% for the
NAREIT Equity Total Return Index.(1) All performance figures assume reinvestment
of distributions and are net of sales charges.
The year has clearly been disappointing from a stock price performance
perspective. However, growth expectations in funds from operations (FFO)--the
proxy for earnings--that a year ago we indicated should be 9% to 12% per share,
have been met to date. Despite the negative press and broad-brush strokes of
criticism, the bottom-line earnings were delivered overall. In fact, FFO per
share grew by over 12% in the second and third quarters. This compares to flat
to negative earnings growth for the broader market for the same two quarters.
Earnings growth for equity REITs peaked this year as we have moved closer to
equilibrium in the real estate cycle. This was not a surprise, but the level of
erosion of investor confidence in the sector was. Some of the concerns that
surfaced in 1998 were valid, while others were exaggerated and were frequently
used to critique all equity REITs (over 170 companies in 14 sectors). The
concerns included the threats of overbuilding, legislative action, and a
softening economy. They also included legitimate questions about a lack of
demonstrated discipline by some equity REITs in issuing additional common shares
and debt.
More than a few management teams did not recognize when their cost of
capital was greater than the return available in the market for acquisitions,
development or redevelopment. The capital markets ultimately disciplined them
and private developers appropriately. However, discipline was meted out
throughout the sector with very little distinction between offending REITs and
REITs with demonstrated fiscal responsibility.
Larger, more liquid equity REITs underperformed their peers overall this
past year as investors were net sellers. Last year's "growth" REITs, with
significant imbedded internal growth, were nevertheless abandoned by investors
who no longer saw growth and momentum in those names. As we favor visible
earnings, particularly from internal growth, we were overweight in those
companies. We were also overweight in the two sectors that experienced the most
multiple contraction, office and hotels. The office and hotel sectors had the
highest earnings growth per share this year and traded at the deepest discount
to net asset value, but they were also subject to the largest swings on changes
of sentiment or fundamentals. These reasons caused us to underperform our
benchmark for the year.
OUTLOOK
Conservative growth estimates of funds from operations per share range from
5% to 7% in 1999, assuming no external growth, and 7% to 9%, assuming modest
external growth. Equity REIT earnings fundamentals will continue to beat the
broader market, in our opinion. In addition, the dividend payout ratio as a
percentage of cash flow is at its lowest in the history of equity REITs, thus
allowing companies to retain cash flow in capital-constrained times.
Based on this information, we believe the broader market is expensive
relative to REITs. Last year we could not make the claim that real estate was
cheaper on Wall Street than Main Street. This year we can. Whether one is
looking at office or industrial property values per square foot, apartment
values per unit, hotel values per key, health care property values per bed,
discounts to net asset value, or FFO yield versus cap rates, equity REITs are
cheaper today than private market real estate. Given the earnings expectation
for the broader market, combined with its record high multiple and a return to a
rational level of investor sentiment, equity REITs should offer an attractive
alternative to the broader market with continued attractive yields.
(1) The NAREIT (National Association of Real Estate Investment Trusts) Equity
Total Return Index is an unmanaged, commonly used measure of real estate
equity market total return performance. The Index is not available for
direct investment.
42
<PAGE>
REAL ESTATE SECURITIES SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES
SERIES NAREIT*
<S> <C> <C>
05/01/1995 $10,000.00 $10,000.00
12/31/1995 $11,779.19 $11,547.95
12/31/1996 $15,677.21 $15,618.28
12/31/1997 $19,133.73 $18,787.22
12/31/1998 $15,078.60 $15,498.99
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
5/1/95 TO
1 YEAR 12/31/98
<S> <C> <C>
- - ----------------------------------------------------------------------
Real Estate Securities Series (21.19)% 11.84%
- - ----------------------------------------------------------------------
NAREIT Equity Index(*) (17.50)% 12.68%
- - ----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 5/1/95
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate, so that your
shares, when redeemed, may be worth more or less than the original cost.
* The National Association of Real Estate Investment Trusts (NAREIT) Equity
Index is a commonly used, unmanaged indicator of REIT performance.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
COMMON STOCKS--95.5%
REAL ESTATE INVESTMENT TRUSTS--95.1%
COMMERCIAL--39.9%
OFFICE/INDUSTRIAL--37.6%
Alexandria Real Estate Equities, Inc......................... 10,000 $ 309,375
Boston Properties, Inc....................................... 95,500 2,912,750
Duke Realty Investments, Inc................................. 31,600 734,700
Equity Office Properties Trust............................... 34,173 820,152
First Industrial Realty Trust, Inc........................... 52,600 1,410,337
Highwoods Properties, Inc.................................... 59,900 1,542,425
Mack-Cali Realty Corp........................................ 47,200 1,457,300
Reckson Associates Realty Corp............................... 57,200 1,269,125
Spieker Properties, Inc...................................... 68,200 2,361,425
Weeks Corp................................................... 30,500 859,719
---------------
13,677,308
---------------
STORAGE--2.3%
Storage USA, Inc............................................. 25,900 836,894
---------------
TOTAL COMMERCIAL............................................................... 14,514,202
---------------
DIVERSIFIED--13.5%
Colonial Properties Trust.................................... 36,700 977,137
Crescent Real Estate Equities Co............................. 79,900 1,837,700
Vornado Realty Trust......................................... 62,200 2,099,250
---------------
4,914,087
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
HEALTH CARE--4.5%
Health Care Property Investors, Inc.......................... 5,650 $ 173,738
Nationwide Health Properties, Inc............................ 47,900 1,032,844
OMEGA Healthcare Investors, Inc.............................. 14,000 422,625
---------------
1,629,207
---------------
HOTELS--2.7%
Patriot American Hospitality, Inc............................ 55,800 334,800
Starwood Hotel & Resorts combined certificate................ 29,900 678,356
---------------
1,013,156
---------------
NET LEASE--5.0%
TriNet Corporate Realty Trust, Inc........................... 68,000 1,819,000
---------------
RESIDENTIAL--17.4%
APARTMENTS--13.0%
Avalon Bay Communities, Inc.................................. 33,900 1,161,075
Equity Residential Properties Trust.......................... 65,600 2,652,700
Essex Property Trust, Inc.................................... 30,700 913,325
---------------
4,727,100
---------------
MANUFACTURED HOMES--4.4%
Manufactured Home Communities, Inc........................... 33,800 847,113
Sun Communities, Inc......................................... 21,300 741,506
---------------
1,588,619
---------------
TOTAL RESIDENTIAL.............................................................. 6,315,719
---------------
</TABLE>
See Notes to Financial Statements
43
<PAGE>
REAL ESTATE SECURITIES SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
RETAIL--12.1%
FACTORY OUTLET--3.7%
Chelsea GCA Realty, Inc...................................... 37,600 $ 1,339,500
---------------
REGIONAL MALLS--6.5%
Macerich Co. (The)........................................... 44,300 1,135,188
Simon Property Group, Inc.................................... 17,796 507,186
Urban Shopping Centers, Inc.................................. 21,700 710,675
---------------
2,353,049
---------------
STRIP CENTERS--1.9%
Developers Diversified Realty Corp........................... 40,000 710,000
---------------
TOTAL RETAIL................................................................... 4,402,549
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $38,306,940)................................................ 34,607,920
---------------
REAL ESTATE OPERATING COMPANIES--0.4%
COMMERCIAL--0.3%
OFFICE/INDUSTRIAL--0.3%
Reckson Services Industries, Inc. (b)........................ 27,456 113,256
---------------
DIVERSIFIED--0.1%
Vornado Operating, Inc. (b).................................. 3,110 25,074
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
HEALTH CARE--0.0%
OMEGA Worldwide Inc. (b)..................................... 4,641 $ 20,304
---------------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $111,859)................................................... 158,634
---------------
TOTAL COMMON STOCKS
(Identified cost $38,418,799)................................................ 34,766,554
---------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000)
------------ --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.9%
COMMERCIAL PAPER--3.9%
Coca-Cola Co. 4.90%, 1/14/99......................... A-1+ $ 1,425 1,424,418
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,424,418).................................................. 1,424,418
---------------
TOTAL INVESTMENTS--99.4%
(Identified cost $39,843,217)................................................. 36,190,972(a)
Cash and receivables, less liabilities--0.6%.................................. 216,820
---------------
NET ASSETS--100.0%.............................................................. $ 36,407,792
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $1,980,603 and gross
depreciation of $5,632,848 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$39,843,217.
(b) Non-income producing.
See Notes to Financial Statements
44
<PAGE>
REAL ESTATE SECURITIES SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$39,843,217).............................................. $ 36,190,972
Cash........................................................ 56
Receivables
Dividends and interest.................................... 280,315
Fund shares sold.......................................... 20,808
Prepaid expenses............................................ 720
------------
Total assets............................................ 36,492,871
------------
LIABILITIES
Payables
Fund shares repurchased................................... 22,659
Investment advisory fee................................... 2,242
Financial agent fee....................................... 5,109
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 50,009
------------
Total liabilities....................................... 85,079
------------
NET ASSETS.................................................. $ 36,407,792
------------
------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 40,173,537
Accumulated net realized loss............................. (113,500)
Net unrealized depreciation............................... (3,652,245)
------------
NET ASSETS.................................................. $ 36,407,792
------------
------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 2,965,496
------------
------------
Net asset value and offering price per share................ $ 12.28
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 2,301,791
Interest.................................................. 63,275
------------
Total investment income................................. 2,365,066
------------
EXPENSES
Investment advisory fee................................... 350,294
Financial agent fee....................................... 53,733
Printing.................................................. 29,630
Professional.............................................. 17,761
Trustees.................................................. 12,954
Custodian................................................. 4,221
Miscellaneous............................................. 4,227
------------
Total expenses.......................................... 472,820
Less expenses borne by investment adviser............... (5,762)
------------
Net expenses............................................ 467,058
------------
NET INVESTMENT INCOME....................................... 1,898,008
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (109,430)
Net change in unrealized appreciation (depreciation) on
investments............................................. (13,109,206)
------------
NET LOSS ON INVESTMENTS..................................... (13,218,636)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(11,320,628)
------------
------------
</TABLE>
See Notes to Financial Statements
45
<PAGE>
REAL ESTATE SECURITIES SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 1,898,008 $ 1,402,058
Net realized gain (loss).................................. (109,430) 1,766,075
Net change in unrealized appreciation (depreciation)...... (13,109,206) 5,041,754
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. (11,320,628) 8,209,887
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (1,978,391) (1,330,417)
Net realized gains........................................ (49,416) (1,843,915)
Tax return of capital..................................... (45,581) --
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (2,073,388) (3,174,332)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,369,232 and 2,796,827
shares, respectively)................................... 20,540,759 42,663,506
Net asset value of shares issued from reinvestment of
distributions (154,542 and 196,112 shares,
respectively)........................................... 2,073,388 3,174,332
Cost of shares repurchased (1,894,769 and 1,242,092
shares, respectively)................................... (27,471,348) (18,924,144)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (4,857,201) 26,913,694
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS..................... (18,251,217) 31,949,249
NET ASSETS
Beginning of period....................................... 54,659,009 22,709,760
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $0 AND $80,383, RESPECTIVELY)................. $ 36,407,792 $ 54,659,009
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 5/1/95 TO
1998 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 (loss).......... 0.78(3) 0.50(3) 0.50(3) 0.33(3)
Net realized and unrealized gain
(loss).............................. (4.20) 2.62 3.14 1.42
----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS.... (3.42) 3.12 3.64 1.75
----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment
income.............................. (0.65) (0.48) (0.50) (0.33)
Dividends from net realized gains..... (0.02) (0.58) (0.15) (0.06)
Tax return of capital................. (0.01) -- -- (0.03)
----------- --------- --------- ---------
TOTAL DISTRIBUTIONS................. (0.68) (1.06) (0.65) (0.42)
----------- --------- --------- ---------
CHANGE IN NET ASSET VALUE............... (4.10) 2.06 2.99 1.33
----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.......... $ 12.28 $ 16.38 $ 14.32 $ 11.33
----------- --------- --------- ---------
----------- --------- --------- ---------
Total return............................ (21.19)% 22.05% 33.09% 17.79%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)... $36,408 $54,659 $22,710 $8,473
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................... 1.00% 1.00% 1.00% 1.00%(1)
Net investment income................. 5.07% 3.59% 4.36% 4.80%(1)
Portfolio turnover rate................. 18% 41% 21% 10%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.002, $0.01, $0.05 and $0.07 per share, respectively.
See Notes to Financial Statements
46
<PAGE>
STRATEGIC THEME SERIES
INVESTOR PROFILE
This Fund is appropriate for investors seeking long-term capital
appreciation. Investors should note that small company investing involves added
risks, including greater price volatility, less liquidity and increased
competitive threat.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned 44.69% compared
with 28.76% for the S&P 500 Index.(1) All performance figures assume
reinvestment of distributions and are net of sales charges.
While 1998 turned out to be an excellent year for the U.S. stock market, it
was marked with exceptional volatility. Last year was also marked by large
disparity in returns between asset classes. Small-capitalization stocks
continued to be underperformers, and profitability at many cyclical companies
was under pressure due to weakness in international markets and falling
commodity prices. Recognizing these trends, we made a concerted shift last
spring to focus on large-capitalization stocks with predictable revenue streams
and domestic focus. Overweighting large-capitalization stocks was one of the key
reasons for the outperformance of the Fund.
The other major factor influencing performance was the thematic selection of
the Fund. The theme INTERNET ECONOMY represented a sizable portion of the
portfolio as we believe that the Internet is the next major technology wave that
will affect the way the world works, communicates, shops, and plays. Internet
stocks have been exceptionally powerful over the last year, as well as stocks of
companies that are considered beneficiaries of the Internet. Another important
theme, 21ST CENTURY MEDICINE, has benefited from the remarkable advance of new
drugs like Viagra, implant devices, and non-invasive surgical techniques.
Breakthroughs in health-care are continuing to have important changes in the way
medicine is practiced, enhancing the quality of life.
As a result of the Fed easing, small- and mid-cap stocks have been
performing better. Concurrent with the Fed rate cuts, we began to add to smaller
capitalization stocks in semiconductor, financial, energy, and
telecommunications industries. Primarily our new additions have been niche
companies. We believe that we were able to invest in some great franchises that
were being given away at outstanding values.
OUTLOOK
Our current outlook is for economic growth to be slightly better than
consensus. Recent rises in long-term interest rates and strong economic data
seem to indicate that the Fed's efforts to inject liquidity into the system
through Fed rate cuts in the fall have worked. It is also our expectation that
the financial markets will remain volatile in 1999, as there are still many
cross-currents at work in the global financial systems. We believe that our
timely themes, however, will prove to be resilient in the face of continued
uncertainty.
(1) 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.
47
<PAGE>
STRATEGIC THEME SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STRATEGIC THEME
SERIES S & P MIDCAP 400 INDEX* S & P 500 INDEX**
<S> <C> <C> <C>
1/29/1996 $10,000.00 $10,000.00 $10,000.00
12/31/1996 $11,032.96 $11,959.38 $12,144.20
12/31/1997 $12,926.73 $15,818.21 $16,197.39
12/31/1998 $18,704 $18,841 $20,855
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS
ENDING 12/31/98
FROM
INCEPTION
1/29/96 TO
1 YEAR 12/31/98
<S> <C> <C>
- - ---------------------------------------------------------
Strategic Theme Series 44.69% 23.89%
- - ---------------------------------------------------------
S&P MidCap 400 Index* 19.11% 24.20%
- - ---------------------------------------------------------
S&P 500 Stock Index** 28.76% 28.59%
- - ---------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 1/29/96
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost. Foreign
investing involves special risks such as currency fluctuation and less public
disclosure, as well as economic and political risks.
* The S&P MidCap 400 is an unmanaged index composed of companies with market
capitalizations between $300 million and $5 billion.
** The S&P 500 Index is an unmanaged, commonly used measure of stock total
return performance. The Index is not available for direct investment.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------------- -------------
<S> <C> <C> <C>
COMMON STOCKS--96.2%
BANKS-MONEY CENTER--0.9%
BankAmerica Corp...................................................... 11,239 $ 675,745
-------------
BANKS-SUPER REGIONAL--2.0%
BankBoston Corp....................................................... 17,300 673,619
Firstar Corp.......................................................... 8,700 811,275
-------------
1,484,894
-------------
COMMERCIAL SERVICES-MISCELLANEOUS--0.4%
ServiceMaster Co. (The)............................................... 13,000 286,812
-------------
COMPUTER-LOCAL NETWORKS--4.3%
Cisco Systems, Inc. (b)............................................... 25,700 2,385,281
Newbridge Networks Corp. (b).......................................... 27,300 829,237
-------------
3,214,518
-------------
COMPUTER-MEMORY DEVICES--2.0%
EMC Corp. (b)......................................................... 18,000 1,530,000
-------------
COMPUTER-SERVICES--7.3%
America Online, Inc. (b).............................................. 14,500 2,320,000
At Home Corp. (b)..................................................... 10,000 742,500
Mastech Corp. (b)..................................................... 21,100 603,987
Usweb Corp. (b)....................................................... 34,500 909,937
Yahoo!, Inc. (b)...................................................... 3,900 916,744
-------------
5,493,168
-------------
COMPUTER-SOFTWARE--14.5%
Apple Computer, Inc. (b).............................................. 18,600 761,437
BMC Software, Inc. (b)................................................ 22,200 989,288
Compuware Corp. (b)................................................... 17,000 1,328,125
<CAPTION>
SHARES VALUE
------------- -------------
<S> <C> <C> <C>
COMPUTER-SOFTWARE--CONTINUED
Edwards (J.D.) & Co. (b).............................................. 22,900 $ 649,788
Inktomi Corp. (b)..................................................... 2,700 349,313
International Business Machines Corp.................................. 12,800 2,364,800
Microsoft Corp. (b)................................................... 20,100 2,787,619
Oracle Corp. (b)...................................................... 18,700 806,438
Sapient Corp. (b)..................................................... 14,700 823,200
-------------
10,860,008
-------------
CONSUMER PRODUCTS-MISCELLANEOUS--3.9%
Clorox Co. (The)...................................................... 8,000 934,500
Colgate-Palmolive Co.................................................. 6,800 631,550
Procter & Gamble Co. (The)............................................ 14,500 1,324,031
-------------
2,890,081
-------------
COSMETICS/PERSONAL CARE--1.0%
Gillette Co........................................................... 14,900 719,856
-------------
ELECTRIC-SEMICONDUCTOR EQUIPMENT--4.3%
Cymer, Inc. (b)....................................................... 54,400 795,600
Rambus, Inc........................................................... 8,600 827,750
Uniphase Corp. (b).................................................... 22,800 1,581,750
-------------
3,205,100
-------------
ELECTRIC-SEMICONDUCTOR MANUFACTURING--1.7%
Novellus Systems, Inc. (b)............................................ 25,500 1,262,250
-------------
ELECTRICAL-EQUIPMENT--2.5%
General Electric Co................................................... 18,700 1,908,569
-------------
FINANCE-INVESTMENT BANKERS--0.9%
Merrill Lynch & Co., Inc.............................................. 10,100 674,175
-------------
</TABLE>
48
<PAGE>
STRATEGIC THEME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------------- -------------
<S> <C> <C> <C>
FINANCIAL SERVICES-MISCELLANEOUS--9.4%
American Express Co................................................... 6,100 $ 623,725
Capital One Financial Corp............................................ 10,600 1,219,000
Citigroup, Inc........................................................ 27,100 1,341,450
Equitable Companies, Inc. (The)....................................... 16,100 931,788
Freddie Mac........................................................... 21,500 1,385,406
Morgan Stanley Dean Witter & Co....................................... 8,600 610,600
SunAmerica, Inc....................................................... 12,000 973,500
-------------
7,085,469
-------------
LEISURE-SERVICES--1.2%
Carnival Corp......................................................... 18,000 864,000
-------------
MEDIA-RADIO/TV--2.6%
Clear Channel Communications, Inc. (b)................................ 21,400 1,166,300
Tele-Communications, Inc. Class A (b)................................. 13,700 757,781
-------------
1,924,081
-------------
MEDICAL-BIOMED/GENETICS--0.9%
Chiron Corp. (b)...................................................... 27,000 707,063
-------------
MEDICAL-GENERIC DRUGS--1.2%
Mylan Laboratories, Inc............................................... 29,400 926,100
-------------
MEDICAL-PRODUCTS--11.6%
Becton, Dickinson and Co.............................................. 28,600 1,220,862
Genzyme Corp. (b)..................................................... 20,800 1,034,800
Medtronic, Inc........................................................ 15,600 1,158,300
Pfizer, Inc........................................................... 14,400 1,806,300
Schering-Plough Corp.................................................. 25,200 1,392,300
Warner-Lambert Co..................................................... 15,900 1,195,481
Watson Pharmaceuticals, Inc. (b)...................................... 15,200 955,700
-------------
8,763,743
-------------
MEDICAL-WHOLESALE DRUG/SUNDRY--1.8%
Cardinal Health, Inc.................................................. 18,000 1,365,750
-------------
POLLUTION CONTROL-SERVICES--0.9%
Allied Waste Industries, Inc.......................................... 28,500 673,313
-------------
RETAIL-DEPARTMENT STORES--2.7%
Kohl's Corp. (b)...................................................... 32,700 2,009,006
-------------
RETAIL-DISCOUNT & VARIETY--2.5%
Wal-Mart Stores, Inc.................................................. 23,100 1,881,206
-------------
<CAPTION>
SHARES VALUE
------------- -------------
<S> <C> <C> <C>
RETAIL-MAJOR DISCOUNT CHAINS--1.1%
Costco Companies, Inc. (b)............................................ 11,400 $ 822,938
-------------
RETAIL-SPECIALTY--1.6%
Amazon.com, Inc. (b).................................................. 3,700 1,188,625
-------------
RETAIL-SUPERMARKETS--2.2%
Safeway, Inc. (b)..................................................... 27,500 1,675,781
-------------
RETAIL/WHOLESALE-BUILDING PRODUCTS--2.4%
Home Depot, Inc. (The)................................................ 29,900 1,829,506
-------------
TELECOMMUNICATIONS-EQUIPMENT--0.9%
Tellabs, Inc. (b)..................................................... 10,100 692,481
-------------
TELECOMMUNICATIONS-SERVICES--7.5%
AT&T Corp............................................................. 12,200 918,050
AirTouch Communications, Inc. (b)..................................... 32,600 2,351,275
BellSouth Corp. (b)................................................... 22,800 1,137,150
MCI WorldCom, Inc. (b)................................................ 16,900 1,212,575
-------------
5,619,050
-------------
TOTAL COMMON STOCKS
(Identified cost $57,165,211)........................................................ 72,233,288
-------------
FOREIGN COMMON STOCKS--1.7%
MEDICAL-ETHICAL DRUGS--1.7%
Elan Corp. PLC Sponsored ADR (Ireland) (b)............................ 18,200 1,266,037
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,278,008)......................................................... 1,266,037
-------------
TOTAL LONG-TERM INVESTMENTS --97.9%
(Identified cost $58,443,219)........................................................ 73,499,325
-------------
SHORT-TERM OBLIGATIONS--2.8%
FEDERAL AGENCY SECURITIES--2.8%
FHLB 4.50%, 1/4/99%................................................... 2,105 2,104,211
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,104,211)......................................................... 2,104,211
-------------
TOTAL INVESTMENTS --100.7%
(Identified cost $60,547,430)........................................................ 75,603,536(a)
Cash and receivables, less liabilities--(0.7%)....................................... (505,820)
-------------
NET ASSETS--100.0%..................................................................... $ 75,097,716
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $16,055,847 and gross
depreciation of $1,202,766 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$60,750,455.
(b) Non-income producing.
49
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$60,547,430).............................................. $ 75,603,536
Cash........................................................ 2,131
Receivables
Investment securities sold................................ 1,172,342
Fund shares sold.......................................... 164,418
Interest and dividends.................................... 23,171
Prepaid expenses............................................ 1,283
-------------
Total assets............................................ 76,966,881
-------------
LIABILITIES
Payables
Investment securities purchased........................... 1,759,577
Investment advisory fee................................... 47,509
Financial agent fee....................................... 8,066
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 48,953
-------------
Total liabilities....................................... 1,869,165
-------------
NET ASSETS.................................................. $ 75,097,716
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 55,673,321
Accumulated net realized gain............................. 4,368,289
Net unrealized appreciation............................... 15,056,106
-------------
NET ASSETS.................................................. $ 75,097,716
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 4,876,534
-------------
-------------
Net asset value and offering price per share................ $ 15.40
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 276,875
Dividends................................................. 261,437
Foreign taxes withheld.................................... (90)
-------------
Total investment income................................. 538,222
-------------
EXPENSES
Investment advisory fee................................... 426,848
Financial agent fee....................................... 61,586
Professional.............................................. 15,350
Trustees.................................................. 13,743
Printing.................................................. 12,381
Custodian................................................. 10,881
Miscellaneous............................................. 2,778
-------------
Total expenses.......................................... 543,567
-------------
NET INVESTMENT LOSS......................................... (5,345)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 10,385,680
Net change in unrealized appreciation (depreciation) on
investments............................................. 12,160,802
-------------
NET GAIN ON INVESTMENTS..................................... 22,546,482
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 22,541,137
-------------
-------------
</TABLE>
See Notes to Financial Statements
50
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ (5,345) $ 161,027
Net realized gain (loss).................................. 10,385,680 4,293,916
Net change in unrealized appreciation (depreciation)...... 12,160,802 1,374,168
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 22,541,137 5,829,111
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... -- (161,027)
Net realized gains........................................ (4,406,657) (5,484,196)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (4,406,657) (5,645,223)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,899,576 and 2,325,529
shares, respectively)................................... 24,310,681 27,902,960
Net asset value of shares issued from reinvestment of
distributions (289,988 and 504,343 shares,
respectively)........................................... 4,406,657 5,645,223
Cost of shares repurchased (1,521,202 and 987,193 shares,
respectively)........................................... (19,373,613) (12,084,569)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 9,343,725 21,463,614
-------------- --------------
NET INCREASE IN NET ASSETS................................ 27,478,205 21,647,502
NET ASSETS
Beginning of period....................................... 47,619,511 25,972,009
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $0 AND $0, RESPECTIVELY)...................... $ 75,097,716 $ 47,619,511
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
INCEPTION
YEAR YEAR 1/29/96
ENDED ENDED TO
12/31/98 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 (loss)............... 0.01 0.05(3) 0.04(3)
Net realized and unrealized gain (loss).... 5.03 1.82 0.99
----------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS......... 5.04 1.87 1.03
----------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.01) (0.05) (0.04)
Dividends from net realized gains.......... (0.95) (1.16) --
In excess of net realized gains............ -- (0.31) --
Tax return of capital...................... -- (0.01) (0.01)
----------- --------- ---------
TOTAL DISTRIBUTIONS...................... (0.96) (1.53) (0.05)
----------- --------- ---------
CHANGE IN NET ASSET VALUE.................... 4.08 0.34 0.98
----------- --------- ---------
NET ASSET VALUE, END OF PERIOD............... $ 15.40 $ 11.32 $ 10.98
----------- --------- ---------
----------- --------- ---------
Total return................................. 44.69% 17.16% 10.33%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $75,098 $47,620 $25,972
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.99% 1.00% 1.00%(1)
Net investment income...................... (0.01)% 0.42% 0.64%(1)
Portfolio turnover rate...................... 364% 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
51
<PAGE>
ABERDEEN NEW ASIA SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term capital appreciation
by investing primarily in a diversified portfolio of equity securities in
countries throughout Asia, with the exception of Japan. The Fund essentially
focuses on quality companies with strong management, solid growth prospects and
attractive relative valuations. Investors should note that foreign investments
pose added risks such as currency fluctuation, less public disclosure, as well
as economic and political risks.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned (4.44)%
compared with a return of (5.21)% for the Morgan Stanley Capital International
(MSCI) All Country (AC) Asia Pacific ex Japan Index.(1) All performance figures
assume reinvestment of all distributions and are net of sales charges.
In 1998 it became steadily clear that Asia as a whole was entering a sharp
downward trend after what had been a decade or so of tremendous growth. The
domino effect across the region, which started with Thailand, spread to China
and India. While both escaped the early vicissitudes of the currency crisis due
to the non-convertibility of their currencies, they had limited scope to avoid
the wider economic fallout.
Across the region, attention was focused on the International Monetary Fund
(IMF), whose initial recommendation was primarily aimed at stabilizing
currencies in the crisis hit countries by following tight monetary and fiscal
policies. This led to a severe contraction in output and growing social unrest
in many countries. After being widely criticized for its prescriptions, the IMF
is now stressing the prevention of output contraction and is therefore
recommending a combination of loose monetary and fiscal policies.
Meanwhile, the policy response of governments around the region has been
varied. Korea and Thailand, two of the worst affected economies, have, under
newly elected democratic governments, been following policies set out by the
IMF. The solutions are obvious; i.e., the enforcement of a "clearing" mechanism,
such as an effective bankruptcy law and openness towards overseas capital for
takeovers, etc. The implementation of such "simple" solutions is, however,
impeded by cultural constraints--either unwillingness to break up cozy ties
between business and politics or a touch of xenophobia. Even China, which has
been relatively insulated from the effects of the regional financial crisis, has
moved to strengthen its financial sector. In a landmark move, the government
shut two trust and investment companies, GITIC and GZTIC, that were unable to
pay off their debts.
In contrast, the Malaysian government tried its best to stick its head in
the sand, imposing draconian capital controls. In Taiwan, the government
introduced new securities regulatory measures after the benchmark stock index
tumbled, and set up a NT$200 billion stabilization fund to help prop up the
stock market. And in a surprise move, the Hong Kong government abandoned its
hands off policy as it bought stocks and futures contracts in a defensive move
against speculators.
Over the past few months, exchange rates have stabilized leading to lower
interest rates across Asia. The IMF has declared that the regional economies
have bottomed out and should stage a recovery in late 1999. This has sparked off
a rally in the equity and bond markets. But is this relative steadiness
sustainable? Exchange rate stabilization, which has been partly achieved by
accumulating current account surpluses, in effect came about on the back of
import compression not export growth (exports in most countries have actually
fallen in U.S. dollar terms). In addition the IMF's initial policy mix of tight
monetary and fiscal policy has killed off domestic economic activity. The
priority now is to kick start domestic demand, as Asia can no longer rely on
exports to pull itself out of its mire.
Japan is in no position to absorb Asia's produce, while the U.S. has
predicted its trade deficit to reach a massive US$300 billion in 1999,
re-igniting fears of protectionism. Lower interest rates and higher government
spending alone will not spur growth. What the region needs is to get banks to
lend again. But this will not happen until the capital structures of both banks
and corporations are improved and, encouragingly, governments are taking steps
to recapitalize banks in countries, such as Korea, Japan and Thailand.
Clearing mechanisms are also being put in place. The Korean Asset Management
Company, which buys assets from banks and finance companies, will hold the
country's first asset-backed securities sales; Thailand's Financial Sector
Restructuring Authority's property auction has been well received; the majority
of Malaysian banks have finally cut a deal with regulators to sell their bad
debt; and even in well-managed Singapore, companies are planning to sell off
assets to strengthen their balance sheets. However, across Asia, a lot more
needs to be done--debt needs restructuring and corporations still need to
conduct major refocusing exercises. A good example is Korea, where conglomerates
are still resisting the government's call to downsize their bloated empires. In
addition, mergers and restructurings have not led to the closure of excess
capacity nor
52
<PAGE>
ABERDEEN NEW ASIA SERIES
the laying-off of workers. All this is being postponed as evidenced by news that
Korea Exchange Bank and Cho Hung Bank rehired almost all of their workers.
OUTLOOK
Restructuring and the closure of excess capacity should gradually lay the
foundation for an economic recovery. However, the socio-political aspect needs
to be handled with care. The bulk of the workforce in these crisis-hit
countries, with virtually non-existent safety nets, has never before seen
economic contraction, unemployment and the resulting deterioration in living
standards. Long used to rising incomes and virtually full employment these
people have excused corrupt leadership and cronyism. Indonesia has shown us that
they are not willing to do the same now. The Suharto family's wealth accumulated
through kickbacks, monopolies and preferential treatment is much resented, and
attacks on the minority Chinese are symptomatic of popular frustration at income
inequality. Many of the bankrupt conglomerates, which have all but collapsed the
banking system, are linked to leading government members and the ex-president's
clan. We believe that even a year into the financial crisis, Indonesia remains a
flash point, as ethnic violence continues to rack the nation. But hopefully, the
result of this post-crisis, will be the emergence of effective, transparent and
accountable governance in these countries, which will benefit the high quality
professional companies that survive the donwturn.
We believe that China is another country that holds the key to the region's
stability. Although recent GDP growth figures showed the economy expanding at
7%, below the targeted growth of 8%, anecdotal evidence suggests that the real
economy is slowing at a more alarming pace. It is important for China to grow at
about 8% to be able to absorb the cost of restructuring the state-owned sector
and recapitalize the banking sector. In an attempt to maintain the growth level,
the government has ordered state-owned enterprises and local governments to
increase expenditure to boost demand. The risk is that the spending carried out
will contribute to the structural problems that the government is attempting to
tackle. It has also become apparent that the government's commitment to reform
in the state owned enterprises is wavering. Senior leaders have called for a
more cautious approach to unemployment as well as pushing commercial banks to
resume lending to the moribund state-owned enterprises. But directed lending,
where banks are forced to make commercially non-viable investments, lies at the
heart of the problem banks face. Banking problems in China, and a possible
devaluation of the renminbi, would result in another round of volatility in
regional currencies.
The safest and strongest country in which to invest in, we believe, is
Singapore, where the government has tremendous financial flexibility. The wild
card, in our opinion, is Indonesia, where, if the country survives, amazing
value can be found. We can see little sign that China will look after the
underlying shareholder, and, as for Taiwan, which has some well-run companies,
we think it simply too expensive. In between, one has the whole range--from
India offering solid relatively cheap companies, albeit with a rather stifling
bureaucratic environment, to Korea and Thailand, which have made all the right
political moves but where substance is still somewhat wanting. As stock pickers,
nothing in the environment beats "kicking the tires" and identifying value and
"survivability" at the company level. And, it is at this level, spread broadly
across the region, that we are finding some great value.
What we have seen over recent weeks, however, is a clear sign that there is
light at the end of the tunnel, and we believe that Asian stock markets,
generally, have seen their lows. The economic recovery, however, is unlikely to
be smooth and sharp--and indeed we would say that a sharp recovery would
actually be a bad thing, as it would lead to the postponement of necessary
reforms. Investors, therefore, should be cautiously optimistic.
(1) The Morgan Stanley Capital International (MSCI) All Country (AC) Asia
Pacific ex Japan Index is an unmanaged, commonly used measure of total
return performance for Pacific Basin countries, with the exception of Japan.
The Index is not available for direct investment.
53
<PAGE>
ABERDEEN NEW ASIA SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ABERDEEN NEW ASIA MSCI AC ASIA PACIFIC EX JAPAN
SERIES INDEX*
<S> <C> <C>
9/17/96 $10,000.00 $10,000.00
12/31/96 $10,010.49 $10,456.78
12/31/97 $6,768.08 $6,994.88
12/31/98 $6,467.28 $6,630.69
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
9/17/96 TO
1 YEAR 12/31/98
<S> <C> <C>
- - ------------------------------------------------------------------------
Aberdeen New Asia Series (4.44)% (17.33)%
- - ------------------------------------------------------------------------
MSCI AC Asia Pacific Ex Japan Index* (5.21)% (16.44)%
- - ------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 9/17/96
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost.
* Morgan Stanley Capital International All Country Asia Pacific (excluding
Japan) Index is a market-value weighted average of the performance of
securities listed on the stock exchanges of 14 countries in Asia and the
Pacific Basin. Performance is calculated on a total return basis, as reported
by Frank Russell Company.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--97.5%
AUSTRALIA--17.1%
Australian Gas Light Co., Ltd. (Oil (International Integrated))......................
30,000 $ 216,284
BRL Hardy Ltd. (Beverages (Alcoholic))............................................... 85,000 287,789
Commonwealth Bank of Australia (Banks (Major Regional))..............................
10,000 142,073
Leighton Holdings Ltd. (Engineering & Construction).................................. 50,000 214,676
Pacifica Group Ltd. (Manufacturing (Diversified)).................................... 65,000 183,714
QBE Insurance Group Ltd. (Insurance (Property-Casualty)).............................
85,000 351,916
Telstra Corp. Ltd. (Communications Equipment)........................................ 50,000 233,997
---------------
1,630,449
---------------
HONG KONG--19.1%
CDL Hotels International Ltd. (Lodging-Hotels)....................................... 850,000 218,342
Citybus Group Ltd. (Services (Commercial & Consumer))................................
750,000 156,834
Giordano International Ltd. (Retail (General Merchandise))...........................
1,000,000 187,169
Hongkong Electric Holdings Ltd. (Electric Companies)................................. 95,000 288,175
Johnson Electric Holdings Ltd. (Electronics (Component Distributors))................
80,000 205,498
National Mutual Asia Ltd. (Insurance (Multi-Line))................................... 450,000 336,904
Smartone Telecommunications (Telecommunications (Cellular/Wireless)).................
80,000 222,021
Swire Pacific Ltd. Class B (Diversified Miscellaneous)(b)............................ 300,000 199,432
---------------
1,814,375
---------------
INDIA--8.7%
BSES Ltd. GDR (Diversified Miscellaneous)............................................ 17,000 216,750
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
INDIA--CONTINUED
Industrial Credit & Investment Corporation of India Ltd. Sponsored GDR (Financial
(Diversified))..................................................................... 30,000 $ 199,500
Mahanagar Telephone Nigam Ltd. Sponsored GDR (Telephone).............................
20,000 244,000
Ranbaxy Laboratories Ltd. GDR (Health Care (Drugs-Major Pharmaceuticals))............
18,000 164,700
---------------
824,950
---------------
INDONESIA--3.0%
PT Indosat (Telecommunications (Cellular/Wireless)).................................. 100,000 131,136
PT Indosat ADR (Telecommunications (Cellular/ Wireless)).............................
12,500 153,906
---------------
285,042
---------------
MALAYSIA--5.8%
Carlsberg Brewery Malaysia Berhad (Beverages (Alcoholic))(c).........................
70,000 167,325
Malaysian Oxygen Berhad (Chemicals)(c)............................................... 100,000 157,895
Muhibbah Engineering Berhad (Engineering & Construction)(c)..........................
88,000 24,316
Sime UEP Properties Berhad (Real Estate Development)(c)..............................
250,000 197,368
---------------
546,904
---------------
NEW ZEALAND--2.7%
Telecom Corporation of New Zealand Ltd. (Telecommunications (Cellular/Wireless)).....
60,000 261,487
---------------
PHILIPPINES--9.4%
Ayala Land, Inc. (Real Estate Development)........................................... 900,000 254,506
Bank of The Philippine Islands (Banks (Major Regional)).............................. 90,000 190,880
</TABLE>
See Notes to Financial Statements
54
<PAGE>
ABERDEEN NEW ASIA SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
PHILIPPINES--CONTINUED
La Tondena Distillers, Inc. (Beverages (Alcoholic)).................................. 175,000 $ 139,464
Philippine Long Distance Telephone Co. Sponsored ADR (Telephone).....................
12,000 311,250
---------------
896,100
---------------
SINGAPORE--14.8%
Chemical Industries (Far East) Ltd. (Chemicals)...................................... 100,000 103,033
Clipsal Industries (Holdings) Ltd. (Electrical Equipment)............................ 175,000 175,000
Robinson & Co. Ltd. (Retail (Department Stores))..................................... 80,000 179,398
Rothmans Industries Ltd. (Tobacco)................................................... 75,000 450,011
Singapore Press Holdings Ltd. (Publishing (Newspapers))..............................
25,600 279,279
United Overseas Bank Ltd. (Banks (Money Center))..................................... 35,000 224,854
---------------
1,411,575
---------------
SOUTH KOREA--3.4%
Pohang Iron & Steel Co. Ltd. (Iron & Steel).......................................... 5,000 319,157
---------------
SRI LANKA--2.8%
John Keells Holdings Ltd. (Diversified Miscellaneous)(b)............................. 35,000 114,062
National Development Bank Ltd. (Banks (Major Regional))(b)...........................
79,000 147,776
---------------
261,838
---------------
TAIWAN--2.5%
Standard Foods Taiwan Ltd. GDR (Foods)(b)............................................ 25,000 240,625
---------------
THAILAND--3.5%
Phatra Insurance Public Company, Ltd. Foreign (Insurance (Multi-Line))...............
71,600 167,502
Ruam Pattana Fund II (Financial (Diversified))(b).................................... 1,250,000 165,135
---------------
332,637
---------------
UNITED KINGDOM--4.7%
HSBC Holdings PLC (Banks (Money Center))............................................. 10,000 271,201
Rowe Evans Investments Group PLC (Agricultural Products).............................
200,000 178,028
---------------
449,229
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $11,305,888)....................................................................... 9,274,368
---------------
<CAPTION>
SHARES VALUE
------------- ---------------
<S> <C> <C> <C>
RIGHTS--0.2%
MALAYSIA--0.2%
Muhibbah Engineering Berhad Rights (Engineering &
Construction)(b)(c)................................................................ 225,000 $ 12,829
---------------
TOTAL RIGHTS
(Identified cost $68,335)........................................................................... 12,829
---------------
TOTAL LONG-TERM INVESTMENTS--97.7%
(Identified cost $11,374,223)....................................................................... 9,287,197
---------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
-------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.1%
REPURCHASE AGREEMENT--2.1%
Credit Suisse repurchase agreement, 4.75%, dated 12/31/98 due 1/4/99, repurchase
price $204,104, collateralized by U.S. Treasury Note 5.50%, 4/15/00, market value
$202,188............................................................................. $ 200 200,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $200,000).......................................................................... 200,000
---------------
TOTAL INVESTMENTS--99.8%
(Identified cost $11,574,223)....................................................................... 9,487,197(a)
Cash and receivables, less liabilities--0.2%........................................................ 23,243
---------------
NET ASSETS--100.0%.................................................................................... $ 9,510,440
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $992,718 and gross
depreciation of $3,114,197 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purpose was
$11,608,676.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the Trustees.
See Notes to Financial Statements
55
<PAGE>
ABERDEEN NEW ASIA SERIES
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Agricultural Products.............................. 1.9%
Banks (Major Regional)............................. 5.2
Banks (Money Center)............................... 5.3
Beverages (Alcoholic).............................. 6.4
Chemicals.......................................... 2.8
Communications Equipment........................... 2.5
Diversified Miscellaneous.......................... 5.7
Electric Companies................................. 3.1
Electrical Equipment............................... 1.9
Electronics (Component Distributors)............... 2.2
Engineering & Construction......................... 2.7
Financial (Diversified)............................ 3.9
Foods.............................................. 2.6
Health Care (Drugs-Major Pharmaceuticals).......... 1.8
Insurance (Multi-Line)............................. 5.4
Insurance (Property-Casualty)...................... 3.8
Iron & Steel....................................... 3.4
Lodging-Hotels..................................... 2.4
Manufacturing (Diversified)........................ 2.0
Oil (International Integrated)..................... 2.3
Publishing (Newspapers)............................ 3.0
Real Estate Development............................ 4.9
Retail (Department Stores)......................... 1.9
Retail (General Merchandise)....................... 2.0
Services (Commercial & Consumer)................... 1.7
Telecommunications (Cellular/Wireless)............. 8.3
Telephone.......................................... 6.0
Tobacco............................................ 4.9
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
56
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$11,574,223).............................................. $ 9,487,197
Cash........................................................ 30,157
Foreign currency at value (Identified cost $48)............. 44
Receivables
Investment securities sold................................ 86,167
Dividends and interest.................................... 24,633
Fund shares sold.......................................... 2,619
Tax reclaim............................................... 104
Prepaid expenses............................................ 192
-------------
Total assets............................................ 9,631,113
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 21,240
Investment advisory fee................................... 11,914
Trustees' fee............................................. 7,155
Financial agent fee....................................... 3,642
Accrued expenses.......................................... 76,722
-------------
Total liabilities....................................... 120,673
-------------
NET ASSETS.................................................. $ 9,510,440
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 14,914,668
Undistributed net investment income....................... 94,548
Accumulated net realized loss............................. (3,411,454)
Net unrealized depreciation............................... (2,087,322)
-------------
NET ASSETS.................................................. $ 9,510,440
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 1,552,096
-------------
-------------
Net asset value and offering price per share................ $ 6.13
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 274,732
Interest.................................................. 46,532
Foreign taxes withheld.................................... (8,630)
-------------
Total investment income................................. 312,634
-------------
EXPENSES
Investment advisory fee................................... 93,715
Financial agent fee....................................... 27,570
Custodian................................................. 37,445
Professional.............................................. 29,874
Printing.................................................. 22,344
Trustees.................................................. 19,179
Miscellaneous............................................. 3,657
-------------
Total expenses.......................................... 233,784
Less expenses borne by investment adviser............... (117,074)
-------------
Net expenses............................................ 116,710
-------------
NET INVESTMENT INCOME....................................... 195,924
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (2,782,700)
Net realized loss on foreign currency transactions........ (16,142)
Net change in unrealized appreciation (depreciation) on
investments............................................. 2,312,994
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions...... 4,137
-------------
NET LOSS ON INVESTMENTS..................................... (481,711)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (285,787)
-------------
-------------
</TABLE>
See Notes to Financial Statements
57
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 195,924 $ 211,171
Net realized gain (loss).................................. (2,798,842) (526,096)
Net change in unrealized appreciation (depreciation)...... 2,317,131 (4,381,851)
------------------ -----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS...... (285,787) (4,696,776)
------------------ -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (36,125) (211,171)
Net realized gain......................................... -- (6,760)
In excess of net investment income........................ (4,147) (143,676)
Tax return of capital..................................... -- (76,927)
------------------ -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (40,272) (438,534)
------------------ -----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (2,726,957 and 1,188,914
shares, respectively)................................... 16,221,934 10,623,009
Net asset value of shares issued from reinvestment of
distributions (6,603 and 66,703 shares, respectively)... 40,272 438,534
Cost of shares repurchased (2,736,922 and 862,809 shares,
respectively)........................................... (16,442,409) (7,494,737)
------------------ -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS............................................ (180,203) 3,566,806
------------------ -----------------
NET DECREASE IN NET ASSETS................................ (506,262) (1,568,504)
NET ASSETS
Beginning of period....................................... 10,016,702 11,585,206
------------------ -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $94,548 AND ($159,799), RESPECTIVELY)......... $ 9,510,440 $10,016,702
------------------ -----------------
------------------ -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
YEAR ENDED YEAR ENDED 9/17/96 TO
12/31/98 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 (loss)............... 0.13(1)(4) 0.15(1) 0.05(1)
Net realized and unrealized gain (loss).... (0.41) (3.36) (0.04)
----------- ---------- -------
TOTAL FROM INVESTMENT OPERATIONS......... (0.28) (3.21) 0.01
----------- ---------- -------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.03) (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...................... (0.03) (0.31) (0.05)
----------- ---------- -------
CHANGE IN NET ASSET VALUE.................... (0.31) (3.52) (0.04)
----------- ---------- -------
NET ASSET VALUE, END OF PERIOD............... $ 6.13 $ 6.44 $ 9.96
----------- ---------- -------
----------- ---------- -------
Total return................................. (4.44)% (32.39)% 0.16%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $9,510 $10,017 $11,585
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 1.25% 1.25% 1.25%(2)
Net investment income...................... 2.09% 1.63% 2.40%(2)
Portfolio turnover rate...................... 46% 27% 2%(3)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.08,
$0.07 and $0.03 per share, respectively.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
58
<PAGE>
RESEARCH ENHANCED INDEX SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term capital
appreciation.
INVESTMENT ADVISER'S REPORT
For the 12 months ended December 31, 1998, the Fund returned 31.68% compared
with a return of 28.76% for the S&P 500 Index.(1) All performance figures assume
reinvestment of distributions and are net of sales charges.
The U.S. stock market ended a very volatile year in a rally driven by size
and growth. U.S. stocks staged an impressive rise during the fourth quarter,
driving results for the full year and extending the S&P 500 Index's streak of
20% plus returns to an unprecedented four years. Liquidity flooded financial
markets as the Federal Reserve cut interest rates three times in the space of
seven weeks in September, October and November. As such, early fourth-quarter
stock market advances were fairly broad based. However, gains that elevated the
S&P 500 became increasingly more narrow as analysts lowered earnings
expectations and as interest rates stagnated.
While 1998 was difficult for most active managers, stock selection and risk
control were the main contributors to the Fund's outperformance. In particular,
the Fund's holding in drug stock WARNER LAMBERT benefited as sales of its
cholesterol-reducing drug Lipitor surpassed the $1 billion mark. Favorable stock
selection in the consumer cyclical and telephone sectors also enhanced
performance. The Fund's overweight position in WORLDCOM enhanced returns on news
of an approved merger with MCI. In the latter part of the year, our decision to
underweight money center banks and brokerage stocks within the finance sector
had a positive impact on the Fund's performance. Stocks in these sectors traded
sharply lower due to the financial and economic meltdown in emerging markets,
the declining U.S. stock market and the large potential losses from exposure to
the hedge fund Long-Term Capital Management. Conversely, the Fund's holding in
MONSANTO held back performance in the last quarter as the company announced its
decision to end merger talks with AMERICAN HOME PRODUCTS. MONSANTO will now be
forced to issue equity, since its balance sheet has been weakened by $8 billion
dollars of seed acquisitions.
OUTLOOK
For 1999, we expect moderation with respect to earnings, economic growth and
share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a
plethora of macro uncertainties has the potential to deflect stocks from
extending their recent gains: the impact of the euro, the year 2000 problem or
further international financial turmoil or international hostilities.
INVESTMENT REVIEW
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RESEARCH ENHANCED INDEX SERIES S&P 500 INDEX(1)
<S> <C> <C>
07/15/1997 $10,000.00 $10,000.00
12/31/1997 $10,582.49 $10,566.54
12/31/1998 $13,934.65 $13,605.10
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD ENDING 12/31/98
FROM
INCEPTION
7/15/97 TO
1 YEAR 12/31/98
<S> <C> <C>
- - -----------------------------------------------------------------------
Research Enhanced Index Series 31.68% 25.40%
- - -----------------------------------------------------------------------
S&P 500 Index(1) 28.76% 23.42%
- - -----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 7/15/97
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate so that your
shares when redeemed, may be worth more or less than the original cost.
(1)The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The index is not available for direct investment.
59
<PAGE>
RESEARCH ENHANCED INDEX SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ----- --------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--0.2%
U.S. TREASURY NOTES--0.2%
U.S. Treasury Notes 5.875%, 11/15/99 (c)........ AAA $ 30 $ 30,314
U.S. Treasury Notes 6%, 6/30/99 (c)............. AAA 80 80,581
--------
110,895
--------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $110,655).......................................... 110,895
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
COMMON STOCKS--94.7%
AEROSPACE/DEFENSE--0.4%
Boeing Co. (The).......................................... 7,400 241,425
Coltec Industries, Inc. (b)............................... 1,200 23,400
Precision Castparts Corp.................................. 100 4,425
------------
269,250
------------
AGRICULTURAL PRODUCTS--0.1%
Pioneer Hi-Bred International, Inc........................ 2,100 56,700
------------
AIRLINES--0.2%
AMR Corp. (b)............................................. 1,600 95,000
Delta Air Lines, Inc...................................... 1,200 62,400
------------
157,400
------------
ALUMINUM--0.4%
Aluminum Company of America............................... 2,600 193,862
Reynolds Metals Co........................................ 1,000 52,687
------------
246,549
------------
AUTO PARTS & EQUIPMENT--0.6%
Cooper Tire & Rubber Co................................... 900 18,394
Dana Corp................................................. 2,700 110,362
Genuine Parts Co. (b)..................................... 3,000 100,312
Goodyear Tire & Rubber Co. (The).......................... 2,600 131,137
Lear Corp. (b)............................................ 1,300 50,050
------------
410,255
------------
AUTOMOBILES--1.0%
Ford Motor Co............................................. 4,700 275,831
General Motors Corp....................................... 4,400 314,875
General Motors Corp. Class H.............................. 3,000 119,062
------------
709,768
------------
BANKS (MAJOR REGIONAL)--4.5%
Associated Banc-Corp...................................... 500 17,094
Bank One Corp............................................. 8,500 434,031
BankBoston Corp........................................... 2,500 97,344
Charter One Financial, Inc................................ 1,300 36,075
Colonial BancGroup, Inc. (The)............................ 600 7,200
Compass Bancshares, Inc................................... 600 22,837
Crestar Financial Corp.................................... 2,400 172,800
First American Corp....................................... 800 35,500
First Union Corp.......................................... 8,500 516,906
First Virginia Banks, Inc................................. 400 18,800
Fleet Financial Group, Inc................................ 1,600 71,500
Glendale Federal Bank..................................... 1,000 16,625
Hibernia Corp. Class A.................................... 1,300 22,587
Huntington Bancshares, Inc................................ 1,200 36,075
KeyCorp................................................... 3,800 121,600
M & T Bank Corp........................................... 100 51,894
Marshall & Ilsley Corp.................................... 1,200 70,125
Mellon Bank Corp.......................................... 1,900 130,625
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
BANKS (MAJOR REGIONAL)--CONTINUED
Mercantile Bancorporation, Inc............................ 1,300 $ 59,962
North Fork Bancorporation, Inc............................ 1,200 28,725
PNC Bank Corp............................................. 2,400 129,900
Pacific Century Financial Corp............................ 700 17,062
Regions Financial Corp.................................... 1,500 60,469
Republic New York Corp.................................... 900 41,006
SouthTrust Corp........................................... 1,900 70,181
Sovereign Bancorp, Inc.................................... 2,600 37,050
U.S. Bancorp.............................................. 6,100 216,550
Union Planters Corp....................................... 1,200 54,375
Wells Fargo & Co.......................................... 13,500 539,156
Wilmington Trust Corp..................................... 200 12,325
------------
3,146,379
------------
BANKS (MONEY CENTER)--2.1%
BankAmerica Corp.......................................... 14,900 895,862
Bankers Trust Corp........................................ 800 68,350
Chase Manhattan Corp. (The)............................... 6,900 469,631
------------
1,433,843
------------
BEVERAGES (ALCOHOLIC)--0.1%
Anheuser-Busch Companies, Inc............................. 1,100 72,187
------------
BEVERAGES (NON-ALCOHOLIC)--2.3%
Coca-Cola Co. (The)....................................... 15,700 1,049,937
PepsiCo, Inc.............................................. 13,900 569,031
------------
1,618,968
------------
BIOTECHNOLOGY--0.5%
Amgen, Inc. (b)........................................... 3,300 345,056
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.4%
Comcast Corp. Special Class A............................. 6,300 369,731
Tele-Communications, Inc. Class A (b)..................... 3,600 199,125
Time Warner, Inc.......................................... 6,900 428,231
------------
997,087
------------
BUILDING MATERIALS--0.0%
Owens Corning............................................. 900 31,894
------------
CHEMICALS--1.3%
Dow Chemical Co. (The).................................... 3,400 309,187
Du Pont (E.I.) de Nemours & Co............................ 7,700 408,581
Praxair, Inc.............................................. 1,800 63,450
Rohm & Haas Co............................................ 3,100 93,387
Union Carbide Corp........................................ 1,200 51,000
------------
925,605
------------
CHEMICALS (DIVERSIFIED)--0.6%
Lyondell Chemical Co...................................... 800 14,400
Monsanto Co............................................... 7,800 370,500
------------
384,900
------------
CHEMICALS (SPECIALTY)--0.1%
Crompton & Knowles Corp................................... 500 10,344
Cytec Industries, Inc. (b)................................ 300 6,375
IMC Global, Inc........................................... 500 10,687
Solutia, Inc.............................................. 1,600 35,800
USEC, Inc................................................. 1,100 15,262
------------
78,468
------------
COMMUNICATIONS EQUIPMENT--2.4%
Lucent Technologies, Inc.................................. 11,900 1,309,000
Motorola, Inc............................................. 5,800 354,162
------------
1,663,162
------------
</TABLE>
See Notes to Financial Statements
60
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
COMPUTERS (HARDWARE)--4.2%
Compaq Computer Corp...................................... 16,700 $ 700,356
Dell Computer Corp. (b)................................... 3,600 263,475
Hewlett-Packard Co........................................ 1,800 122,962
International Business Machines Corp...................... 8,100 1,496,475
Sun Microsystems, Inc. (b)................................ 3,700 316,812
------------
2,900,080
------------
COMPUTERS (NETWORKING)--2.2%
3Com Corp. (b)............................................ 4,700 210,619
Cisco Systems, Inc. (b)................................... 14,300 1,327,219
------------
1,537,838
------------
COMPUTERS (PERIPHERALS)--0.7%
EMC Corp. (b)............................................. 4,900 416,500
Seagate Technology, Inc. (b).............................. 2,400 72,600
------------
489,100
------------
COMPUTERS (SOFTWARE & SERVICES)--5.3%
America Online, Inc. (b).................................. 4,200 672,000
Autodesk, Inc............................................. 400 17,075
BMC Software, Inc. (b).................................... 2,100 93,581
Computer Associates International, Inc.................... 5,200 221,650
Electronic Arts, Inc. (b)................................. 500 28,062
Microsoft Corp. (b)....................................... 15,500 2,149,656
Network Associates, Inc. (b).............................. 1,100 72,875
Oracle Corp. (b).......................................... 8,300 357,937
Parametric Technology Corp. (b)........................... 2,100 34,387
PeopleSoft, Inc. (b)...................................... 2,300 43,556
Symantec Corp. (b)........................................ 400 8,700
------------
3,699,479
------------
CONSUMER FINANCE--0.3%
Capital One Financial Corp................................ 500 57,500
Household International, Inc.............................. 4,200 166,425
Provident Financial Group, Inc............................ 300 11,325
------------
235,250
------------
CONTAINERS & PACKAGING (PAPER)--0.2%
Smurfit-Stone Container Corp. (b)......................... 3,900 61,669
Temple-Inland, Inc........................................ 700 41,519
Union Camp Corp........................................... 900 60,750
------------
163,938
------------
ELECTRIC COMPANIES--2.3%
Allegheny Energy, Inc..................................... 1,300 44,850
Baltimore Gas & Electric Co............................... 1,700 52,487
CMS Energy Corp........................................... 1,200 58,125
Central & South West Corp................................. 6,200 170,112
Cinergy Corp.............................................. 1,700 58,437
Duke Energy Corp.......................................... 1,400 89,687
Edison International...................................... 4,100 114,287
Entergy Corp.............................................. 2,800 87,150
FPL Group, Inc............................................ 500 30,812
GPU, Inc.................................................. 1,400 61,862
Illinova Corp............................................. 700 17,500
NIPSCO Industries, Inc.................................... 600 18,262
New England Electric System............................... 700 33,687
Niagara Mohawk Power Corp. (b)............................ 1,900 30,637
Northeast Utilities (b)................................... 1,400 22,400
Northern States Power Co.................................. 1,700 47,175
PG&E Corp................................................. 4,200 132,300
PP&L Resources, Inc....................................... 1,800 50,175
Pinnacle West Capital Corp................................ 900 38,137
Potomac Electric Power Co................................. 1,000 26,312
Southern Co. (The)........................................ 3,500 101,719
TECO Energy, Inc.......................................... 1,400 39,462
Texas Utilities Co........................................ 3,000 140,062
Union Electric Co......................................... 1,500 64,031
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
ELECTRIC COMPANIES--CONTINUED
Wisconsin Energy Corp..................................... 1,300 $ 40,869
------------
1,570,537
------------
ELECTRICAL EQUIPMENT--2.9%
Emerson Electric Co....................................... 500 31,281
General Electric Co....................................... 18,500 1,888,156
Rockwell International Corp............................... 2,600 126,262
------------
2,045,699
------------
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.1%
Grainger (W.W.), Inc...................................... 1,400 58,275
------------
ELECTRONICS (DEFENSE)--0.4%
Raytheon Co., Class A..................................... 5,300 273,944
------------
ELECTRONICS (INSTRUMENTATION)--0.2%
Parker-Hannifin Corp...................................... 1,500 49,125
Perkin-Elmer Corp. (The).................................. 600 58,537
Sensormatic Electronics Corp.............................. 800 5,550
------------
113,212
------------
ELECTRONICS (SEMICONDUCTORS)--3.0%
Intel Corp................................................ 14,100 1,671,731
National Semiconductor Corp............................... 1,600 21,600
Texas Instruments, Inc.................................... 3,800 325,137
Xilinx, Inc. (b).......................................... 700 45,587
------------
2,064,055
------------
ENGINEERING & CONSTRUCTION--0.0%
Foster Wheeler Corp....................................... 200 2,637
------------
ENTERTAINMENT--0.1%
Walt Disney Co. (The)..................................... 3,200 96,000
------------
FINANCIAL (DIVERSIFIED)--4.3%
AMRESCO, Inc. (b)......................................... 200 1,750
American Express Co....................................... 3,800 388,550
Associates First Capital Corp............................. 5,600 237,300
Bear Stearns Companies, Inc. (The)........................ 900 33,637
CIT Group, Inc. (The)..................................... 800 25,450
Citigroup, Inc............................................ 19,600 970,200
FINOVA Group, Inc. (The).................................. 500 26,969
Fannie Mae................................................ 7,200 536,079
Greenpoint Financial Corp................................. 800 28,100
Lehman Brothers Holdings, Inc............................. 1,200 52,875
MBIA, Inc................................................. 1,200 78,675
Morgan Stanley, Dean Witter & Co. (b)..................... 5,000 355,000
National Commerce Bancorporation.......................... 1,900 35,744
TCF Financial Corp........................................ 700 16,931
Tele-Communications TCI Ventures Group Class A (b)........ 7,000 164,937
Waddell & Reed Financial, Inc. Class A.................... 100 2,369
------------
2,954,566
------------
FOODS--1.3%
Bestfoods................................................. 2,700 143,775
Campbell Soup Co.......................................... 4,000 220,000
Corn Products International, Inc.......................... 100 3,037
General Mills, Inc........................................ 1,400 108,850
Hershey Foods Corp........................................ 1,300 80,844
Nabisco Holdings Corp..................................... 400 16,600
Ralston-Ralston Purina Group.............................. 2,900 93,887
Sara Lee Corp............................................. 8,200 231,137
------------
898,130
------------
FOOTWEAR--0.2%
Nike, Inc. Class B........................................ 2,900 117,631
Nine West Group, Inc. (b)................................. 100 1,556
Reebok International Ltd.................................. 700 10,413
------------
129,600
------------
</TABLE>
See Notes to Financial Statements
61
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES--0.2%
Circus Circus Enterprises, Inc. (b)....................... 1,000 $ 11,438
International Game Technology............................. 1,700 41,331
MGM Grand, Inc. (b)....................................... 300 8,138
Mirage Resorts Inc. (b)................................... 3,200 47,800
------------
108,707
------------
HEALTH CARE (DIVERSIFIED)--5.7%
Abbott Laboratories....................................... 8,300 406,700
American Home Products Corp............................... 15,100 850,319
Bristol-Myers Squibb Co. (b).............................. 9,300 1,244,456
Johnson & Johnson......................................... 9,300 780,038
Warner-Lambert Co......................................... 8,700 654,131
------------
3,935,644
------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--3.7%
Agouron Pharmaceuticals, Inc. (b)......................... 100 5,875
Biogen, Inc. (b).......................................... 900 74,700
Chiron Corp. (b).......................................... 2,200 57,613
Forest Laboratories, Inc. (b)............................. 1,000 53,188
Immunex Corp. (b)......................................... 500 62,906
Lilly (Eli) & Co.......................................... 5,300 471,038
MedImmune, Inc. (b)....................................... 300 29,831
Merck & Co., Inc.......................................... 5,600 827,050
Pfizer, Inc............................................... 5,700 714,994
Schering-Plough Corp...................................... 3,800 209,950
Watson Pharmaceuticals, Inc. (b).......................... 1,100 69,163
------------
2,576,308
------------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.5%
Columbia/HCA Healthcare Corp.............................. 7,200 178,200
Health Management Associates, Inc. Class A (b)............ 2,900 62,713
Tenet Healthcare Corp. (b)................................ 3,700 97,125
------------
338,038
------------
HEALTH CARE (MANAGED CARE)--0.3%
Health Care & Retirement Corp............................. 1,400 41,125
Humana, Inc. (b).......................................... 2,500 44,531
United Healthcare Corp.................................... 2,300 99,044
Wellpoint Health Networks, Inc. (b)....................... 200 17,400
------------
202,100
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.7%
Bausch & Lomb, Inc........................................ 800 48,000
Baxter International, Inc. (b)............................ 600 38,588
Boston Scientific Corp. (b)............................... 4,500 120,656
Genzyme Corp. (b)......................................... 1,000 49,750
Medtronic, Inc............................................ 2,600 193,050
Stryker Corp.............................................. 600 33,038
------------
483,082
------------
HEALTH CARE (SPECIALIZED SERVICES)--0.2%
ALZA Corp. (b)............................................ 1,100 57,475
HEALTHSOUTH Corp. (b)..................................... 4,400 67,925
------------
125,400
------------
HOUSEHOLD FURNITURE & APPLIANCES--0.2%
Furniture Brands International, Inc. (b).................. 600 16,350
Leggett & Platt, Inc...................................... 3,200 70,400
Whirlpool Corp............................................ 1,300 71,988
------------
158,738
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.1%
Colgate-Palmolive Co...................................... 1,800 167,175
Kimberly-Clark Corp....................................... 5,200 283,400
Procter & Gamble Co. (The) (b)............................ 10,900 995,306
------------
1,445,881
------------
INSURANCE (LIFE/HEALTH)--0.7%
Aetna, Inc................................................ 1,800 141,525
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
INSURANCE (LIFE/HEALTH)--CONTINUED
Equitable Companies, Inc. (The)........................... 1,500 $ 86,813
Torchmark Corp............................................ 1,000 35,313
Transamerica Corp......................................... 800 92,400
UNUM Corp................................................. 1,700 99,238
------------
455,289
------------
INSURANCE (MULTI-LINE)--1.3%
Ambac Financial Group, Inc................................ 900 54,169
American International Group, Inc......................... 8,700 840,638
Financial Security Assurance Holdings Ltd................. 300 16,275
PMI Group, Inc. (The)..................................... 300 14,813
------------
925,895
------------
INSURANCE (PROPERTY-CASUALTY)--1.0%
Allstate Corp............................................. 9,800 378,525
Chubb Corp. (The)......................................... 1,500 97,313
Fremont General Corp...................................... 800 19,800
Mercury General Corp...................................... 600 26,288
Ohio Casualty Corp........................................ 200 8,225
SAFECO Corp............................................... 1,600 68,700
St. Paul Companies, Inc. (The)............................ 2,900 100,775
Travelers Property Casualty Corp. Class A................. 800 24,800
------------
724,426
------------
INSURANCE BROKERS--0.4%
Aon Corp.................................................. 1,800 99,675
Marsh & McLennan Companies, Inc........................... 3,100 181,156
------------
280,831
------------
INVESTMENT BANKING/BROKERAGE--0.3%
Merrill Lynch & Co., Inc.................................. 2,900 193,575
Paine Webber Group, Inc................................... 1,200 46,350
------------
239,925
------------
IRON & STEEL--0.1%
Allegheny Teledyne, Inc................................... 3,500 71,531
------------
LEISURE TIME (PRODUCTS)--0.3%
Hasbro, Inc............................................... 2,700 97,538
Mattel, Inc............................................... 5,700 130,031
------------
227,569
------------
LODGING-HOTELS--0.1%
Extended Stay America, Inc. (b)........................... 500 5,250
Hilton Hotels Corp........................................ 4,300 82,238
------------
87,488
------------
MACHINERY (DIVERSIFIED)--0.6%
Caterpillar, Inc.......................................... 4,600 211,600
Cooper Industries, Inc.................................... 1,600 76,300
Deere & Co................................................ 3,500 115,938
Ingersoll-Rand Co......................................... 500 23,469
------------
427,307
------------
MANUFACTURING (DIVERSIFIED)--2.4%
AlliedSignal, Inc......................................... 9,300 412,106
Eaton Corp................................................ 1,000 70,688
ITT Industries, Inc....................................... 1,700 67,575
Illinios Tool Works, Inc.................................. 900 52,200
Johnson Controls, Inc..................................... 1,400 82,600
Minnesota Mining & Manufacturing Co....................... 3,000 213,375
National Service Industries, Inc.......................... 500 19,000
Tenneco, Inc.............................................. 2,800 95,375
Tyco International Ltd.................................... 8,900 671,394
------------
1,684,313
------------
METALS MINING--0.0%
Freeport-McMoRan Copper & Gold, Inc....................... 3,300 31,969
------------
</TABLE>
See Notes to Financial Statements
62
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
NATURAL GAS--0.6%
Columbia Energy Group..................................... 900 $ 51,975
Consolidated Natural Gas Co............................... 1,100 59,400
El Paso Energy Corp....................................... 1,300 45,256
Enron Corp................................................ 3,800 216,838
K N Energy, Inc........................................... 400 14,550
------------
388,019
------------
OFFICE EQUIPMENT & SUPPLIES--0.1%
Harris Corp............................................... 1,500 54,938
------------
OIL & GAS (DRILLING & EQUIPMENT)--0.2%
Cooper Cameron Corp. (b).................................. 600 14,700
Diamond Offshore Drilling, Inc............................ 1,000 23,688
ENSCO International, Inc.................................. 1,600 17,100
Global Marine, Inc. (b)................................... 1,700 15,619
Input/Output, Inc. (b).................................... 200 1,463
R&B Falcon Corp. (b)...................................... 3,700 28,213
Smith International, Inc. (b)............................. 500 12,594
------------
113,377
------------
OIL & GAS (EXPLORATION & PRODUCTION)--0.0%
Union Pacific Resources Group, Inc........................ 2,600 23,563
------------
OIL & GAS (REFINING & MARKETING)--0.1%
Sunoco, Inc............................................... 900 32,456
Tosco Corp................................................ 2,100 54,338
Valero Energy Corp........................................ 500 10,625
------------
97,419
------------
OIL (DOMESTIC INTEGRATED)--0.8%
Atlantic Richfield Co..................................... 4,200 274,050
Occidental Petroleum Corp................................. 3,900 65,813
Phillips Petroleum Co..................................... 2,800 119,350
Unocal Corp............................................... 3,200 93,400
------------
552,613
------------
OIL (INTERNATIONAL INTEGRATED)--3.5%
Chevron Corp.............................................. 1,000 82,938
Exxon Corp................................................ 15,900 1,162,688
Mobil Corp................................................ 9,500 827,688
Texaco, Inc............................................... 6,300 333,113
------------
2,406,427
------------
PAPER & FOREST PRODUCTS--0.4%
Boise Cascade Corp........................................ 700 21,700
Bowater, Inc.............................................. 700 29,006
Fort James Corp........................................... 2,500 100,000
Georgia-Pacific Group..................................... 1,200 70,275
Louisiana-Pacific Corp.................................... 1,400 25,638
Mead Corp. (The).......................................... 1,100 32,244
------------
278,863
------------
PERSONAL CARE--0.5%
Gillette Co............................................... 7,500 362,344
------------
PHOTOGRAPHY/IMAGING--0.8%
Eastman Kodak Co.......................................... 5,400 388,800
Xerox Corp................................................ 1,200 141,600
------------
530,400
------------
PUBLISHING (NEWSPAPERS)--1.0%
Gannett Co., Inc.......................................... 3,700 244,894
Knight-Ridder, Inc........................................ 1,100 56,238
New York Times Co. Class A................................ 2,800 97,125
Times Mirror Co. (The) Class A............................ 1,400 78,400
Tribune Co................................................ 2,300 151,800
Washington Post Co. (The) Class B......................... 100 57,794
------------
686,251
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
RAILROADS--0.6%
Burlington Northern Santa Fe Corp......................... 3,800 $ 128,250
CSX Corp.................................................. 2,000 83,000
Norfolk Southern Corp..................................... 3,400 107,738
Union Pacific Corp........................................ 2,400 108,150
Wisconsin Central Transportation Corp. (b)................ 200 3,438
------------
430,576
------------
RESTAURANTS--0.8%
McDonald's Corp........................................... 7,200 551,700
------------
RETAIL (BUILDING SUPPLIES)--0.7%
Home Depot, Inc. (The).................................... 4,500 275,344
Lowe's Companies, Inc..................................... 2,100 107,494
Sherwin-Williams Co....................................... 2,800 82,250
------------
465,088
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.1%
Best Buy Co., Inc. (b).................................... 200 12,275
Circuit City Stores-Circuit City Group.................... 1,500 74,906
CompUSA, Inc. (b)......................................... 1,000 13,063
------------
100,244
------------
RETAIL (DEPARTMENT STORES)--0.9%
Dillard's, Inc., Class A.................................. 1,500 42,563
Federated Department Stores, Inc. (b)..................... 3,200 139,400
May Department Stores Co. (The)........................... 3,500 211,313
Nordstrom, Inc............................................ 1,900 65,906
Penney (J.C.) Co., Inc.................................... 3,900 182,813
------------
641,995
------------
RETAIL (DRUG STORES)--0.0%
General Nutrition Companies, Inc. (b)..................... 900 14,625
------------
RETAIL (FOOD CHAINS)--1.1%
Albertson's, Inc.......................................... 1,200 76,425
American Stores Co........................................ 8,700 321,356
Hannaford Brothers Co..................................... 600 31,800
Kroger Co. (The) (b)...................................... 800 48,400
Safeway, Inc. (b)......................................... 4,100 249,844
------------
727,825
------------
RETAIL (GENERAL MERCHANDISE)--2.6%
Costco Companies, Inc. (b)................................ 3,200 231,000
Dayton Hudson Corp........................................ 6,800 368,900
Kmart Corp. (b)........................................... 7,500 114,844
Sears, Roebuck and Co..................................... 5,900 250,750
Wal-Mart Stores, Inc...................................... 10,600 863,238
------------
1,828,732
------------
RETAIL (SPECIALTY)--0.2%
Autozone, Inc............................................. 2,300 75,756
Corporate Express, Inc. (b)............................... 900 4,669
Toys 'R' Us, Inc. (b)..................................... 3,800 64,125
------------
144,550
------------
RETAIL (SPECIALTY-APPAREL)--0.8%
Gap, Inc. (The)........................................... 7,500 421,875
Limited, Inc. (The)....................................... 300 8,738
TJX Companies, Inc. (The)................................. 5,100 147,900
------------
578,513
------------
SAVINGS & LOAN COMPANIES--0.5%
Astoria Financial Corp.................................... 600 27,450
Commercial Federal Corp................................... 400 9,275
Dime Bancorp, Inc......................................... 900 23,794
Golden West Financial Corp................................ 500 45,844
Ocwen Financial Corp. (b)................................. 300 3,694
Peoples Heritage Financial Group, Inc..................... 600 12,000
Washington Federal, Inc................................... 200 5,338
</TABLE>
See Notes to Financial Statements
63
<PAGE>
RESEARCH ENHANCED INDEX SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
SAVINGS & LOAN COMPANIES--CONTINUED
Washington Mutual, Inc.................................... 5,100 $ 194,756
------------
322,151
------------
SERVICES (COMMERCIAL & CONSUMER)--0.7%
Cendant Corp. (b)......................................... 14,000 266,875
Service Corp. International............................... 4,800 182,700
Western Resources, Inc.................................... 700 23,275
------------
472,850
------------
SERVICES (DATA PROCESSING)--0.3%
Equifax, Inc.............................................. 2,700 92,306
First Data Corp........................................... 4,300 136,256
------------
228,562
------------
SPECIALTY PRINTING--0.1%
Donnelley (R.R.) & Sons Co................................ 2,200 96,388
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.6%
AirTouch Communications, Inc. (b)......................... 5,400 389,475
------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.8%
AT&T Corp................................................. 16,700 1,256,675
MCI WorldCom, Inc. (b).................................... 17,000 1,219,750
Sprint Corp............................................... 1,600 134,600
------------
2,611,025
------------
TELEPHONE--3.8%
Ameritech Corp............................................ 6,300 399,263
Bell Atlantic Corp........................................ 11,700 664,706
BellSouth Corp............................................ 5,600 279,300
Cincinnati Bell, Inc...................................... 1,200 45,249
Frontier Corp............................................. 2,200 74,800
GTE Corp.................................................. 10,300 694,606
SBC Communications, Inc................................... 8,500 455,813
------------
2,613,737
------------
TEXTILES (APPAREL)--0.0%
Fruit of The Loom, Inc. Class A (b)....................... 800 11,050
Unifi, Inc................................................ 700 13,694
------------
24,744
------------
TOBACCO--1.8%
Philip Morris Companies, Inc.............................. 22,800 1,219,800
------------
TRUCKERS--0.0%
CNF Transportation, Inc................................... 400 15,025
Ryder System, Inc......................................... 600 15,600
------------
30,625
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
TRUCKS & PARTS--0.0%
PACCAR, Inc............................................... 400 $ 16,450
------------
WASTE MANAGEMENT--0.8%
Browning-Ferris Industries, Inc........................... 2,700 76,781
Waste Management, Inc..................................... 10,400 484,900
------------
561,681
------------
TOTAL COMMON STOCKS
(Identified cost $55,387,293)...................................... 65,875,802
------------
FOREIGN COMMON STOCKS--2.8%
ALUMINUM--0.2%
Alcan Aluminum Ltd. (Canada).............................. 3,700 100,131
------------
BEVERAGES (ALCOHOLIC)--0.4%
Seagram Company Ltd. (The) (Canada)....................... 7,600 288,800
------------
OIL (INTERNATIONAL INTEGRATED)--1.5%
Royal Dutch Petroleum Co. NY Registered Shares
(Netherlands)........................................... 21,300 1,019,737
------------
PERSONAL CARE--0.7%
Unilever NV NY Registered Shares (Netherlands)............ 6,000 497,625
------------
TELEPHONE--0.0%
Northern Telecom Ltd. (Canada)............................ 500 25,063
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,870,790)....................................... 1,931,356
------------
TOTAL LONG-TERM INVESTMENTS--97.7%
(Identified cost $57,368,738)...................................... 67,918,053
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
-------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.2%
FEDERAL AGENCY SECURITIES--4.2%
FHLB 4.5%, 1/4/99......................................... $2,920 2,918,905
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,918,905)....................................... 2,918,905
------------
TOTAL INVESTMENTS--101.9%
(Identified cost $60,287,643)...................................... 70,836,958(a)
Cash and receivables, less liabilities--(1.9%)..................... (1,315,033)
------------
NET ASSETS--100.0%................................................... $ 69,521,925
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $12,979,481 and gross
depreciation of $2,474,350 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$60,331,827.
(b) Non-income producing.
(c) All or portion segregated as collateral.
See Notes to Financial Statements
64
<PAGE>
RESEARCH ENHANCED INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$60,287,643).............................................. $ 70,836,958
Receivables
Fund shares sold.......................................... 252,861
Investment securities sold................................ 169,444
Dividends and interest.................................... 71,993
Variation margin for future contracts..................... 3,424
Prepaid expenses............................................ 1,207
-------------
Total assets............................................ 71,335,887
-------------
LIABILITIES
Payables
Custodian................................................. 36,249
Investment securities purchased........................... 1,571,163
Fund shares repurchased................................... 147,283
Investment advisory fee................................... 709
Financial agent fee....................................... 7,052
Trustees' fee............................................. 5,060
Accrued expenses.......................................... 46,446
-------------
Total liabilities....................................... 1,813,962
-------------
NET ASSETS.................................................. $ 69,521,925
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $ 58,737,990
Accumulated net realized gain............................. 171,670
Net unrealized appreciation............................... 10,612,265
-------------
NET ASSETS.................................................. $ 69,521,925
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 5,313,885
-------------
-------------
Net asset value and offering price per share................ $ 13.08
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 681,247
Interest.................................................. 114,175
Foreign taxes withheld.................................... (3,799)
-------------
Total investment income................................. 791,623
-------------
EXPENSES
Investment advisory fee................................... 218,150
Financial agent fee....................................... 62,025
Custodian................................................. 48,435
Professional.............................................. 21,318
Trustees.................................................. 13,949
Printing.................................................. 24,456
Miscellaneous............................................. 6,166
-------------
Total expenses.......................................... 394,499
Less expenses borne by investment adviser............... (126,575)
-------------
Net expenses............................................ 267,924
-------------
NET INVESTMENT INCOME....................................... 523,699
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities........................... 2,902,631
Net realized gain on futures contracts.................... 105,462
Net change in unrealized appreciation (depreciation) on
investments............................................. 9,780,453
-------------
NET GAIN ON INVESTMENTS..................................... 12,788,546
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 13,312,245
-------------
-------------
</TABLE>
See Notes to Financial Statements
65
<PAGE>
RESEARCH ENHANCED INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
JULY 15, 1997
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 523,699 $ 155,598
Net realized gain (loss).................................. 3,008,093 296,041
Net change in unrealized appreciation (depreciation)...... 9,780,453 831,812
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... 13,312,245 1,283,451
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (532,936) (146,361)
Net realized gains........................................ (2,994,712) (137,752)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (3,527,648) (284,113)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (5,285,851 and 3,153,122
shares, respectively)................................... 63,644,481 31,994,673
Net asset value of shares issued from reinvestment of
distributions (271,800 and 27,107 shares,
respectively)........................................... 3,527,648 284,113
Cost of shares repurchased (3,186,084 and 237,911 shares,
respectively)........................................... (38,286,173) (2,426,752)
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 28,885,956 29,852,034
-------------- --------------
NET INCREASE IN NET ASSETS................................ 38,670,553 30,851,372
NET ASSETS
Beginning of period....................................... 30,851,372 0
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $0 AND $9,237, RESPECTIVELY).................. $ 69,521,925 $ 30,851,372
-------------- --------------
-------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
YEAR INCEPTION
ENDED 7/15/97 TO
12/31/98 12/31/97
----------- -----------
<S> <C> <C>
Net asset value, beginning of period......... $10.49 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............... 0.12(2) 0.05(2)
Net realized and unrealized gain (loss).... 3.19 0.54
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS......... 3.31 0.59
----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.12) (0.05)
Dividends from net realized gains.......... (0.60) (0.05)
----------- -----------
TOTAL DISTRIBUTIONS...................... (0.72) (0.10)
----------- -----------
CHANGE IN NET ASSET VALUE.................... 2.59 0.49
----------- -----------
NET ASSET VALUE, END OF PERIOD............... $13.08 $10.49
----------- -----------
----------- -----------
Total return................................. 31.68% 5.83%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $69,522 $30,851
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.55% 0.55%(1)
Net investment income...................... 1.08% 1.46%(1)
Portfolio turnover rate...................... 45% 9%(3)
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.02 per share, respectively.
(3) Not annualized.
See Notes to Financial Statements
66
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
INVESTOR PROFILE
The Fund seeks to achieve long-term capital appreciation by investing in
approximately 50 companies management considers to have the best prospects for
appreciation potential.
INVESTMENT ADVISER'S REPORT
Since the Fund's inception on March 2 through December 31, 1998, the Fund
returned 26.26% compared with a return of 18.95% for the S&P 500 Index(1) for
the same period. All performance figures assume reinvestment of distributions
and net of sales charges.
Both market trends and individual stock selections impacted absolute as well
as relative performance of the Fund. While the Fund's performance tracked
closely to the S&P 500 Index during the first half of 1998, it outperformed the
Index by 5.7% during the second half of 1998.
The Fund aggressively shifted into the technology, consumer cyclical, and
financial services sectors during the September time frame where the market
began to bottom from its summer correction. The market recovered strongly from
its lows of October, and our concentration in these groups contributed to the
outperformance of the Fund.
The sell-off or mini bear market during the summer of 1998 provided
interesting buying opportunities. We used weakness in the market to upgrade the
portfolio by concentrating on high quality growth companies that were selling at
what we felt were very depressed valuations. We took the opportunity to increase
positions and add new names in the technology and financial services sectors. We
also reduced our exposure in the consumer staples sector, which was continuing
to experience poor financial results due to weakness in their international
operations.
We remain very bullish on the outlook for the technology sector, which is
experiencing continued strong growth driven by a variety of factors. In the
communication segment, leading companies such as Lucent, Tellabs, Cisco Systems,
and MCI/WorldCom are experiencing explosive growth driven by the continued build
out of the worldwide communication infrastructure. In addition, proliferation of
the Internet and e-commerce, which allows the creation of new businesses, will
continue to be a major driver of the communication infrastructure build out. In
the semiconductor segment, the industry has begun to recover from the downturn
triggered by the aggressive capacity expansion of the mid 1990's, along with the
weakening demand in Asia.
OUTLOOK
The corporate earnings cycle of the past few years was one of the longest
and most resilient on record. However, as we enter 1999, the earnings growth
prospects for the AVERAGE S&P 500 company are expected to slow to their historic
rate in the single-digit range. This could be good news for the Nifty Fifty
Fund, which focuses on high quality growth companies whose earnings we expect to
grow much faster than those of the average company could could. The Fund had
some of its best years, both on an absolute and relative basis, when the S&P 500
Index produced negative earnings growth. Of course, past performance is no
guarantee of future results.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
67
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ENGEMANN NIFTY FIFTY
SERIES S&P 500 INDEX*
<S> <C> <C>
3/2/98 $10,000.00 $10,000.00
12/31/98 $12,625.86 $11,895.30
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
3/2/98 TO
12/31/98
<S> <C>
- - -----------------------------------------------------------------------
Engemann Nifty-Fifty Series 26.26%
- - -----------------------------------------------------------------------
S&P 500 Index* 18.95%
- - -----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 3/2/98.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
* The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
market total return performance. The index is not available for direct
investment.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C> <C>
COMMON STOCKS--98.7%
BANKS (MAJOR REGIONAL)--3.3%
State Street Corp..................................................... 880 $ 61,215
Wells Fargo & Co...................................................... 9,360 373,815
-----------
435,030
-----------
BEVERAGES (NON-ALCOHOLIC)--2.2%
Coca-Cola Co. (The)................................................... 3,050 203,969
PepsiCo, Inc.......................................................... 2,170 88,834
-----------
292,803
-----------
CHEMICALS (DIVERSIFIED)--0.5%
Monsanto Co........................................................... 1,380 65,550
-----------
COMMUNICATIONS EQUIPMENT--6.0%
Lucent Technologies, Inc.............................................. 4,520 497,200
Tellabs, Inc.(b)...................................................... 4,170 285,906
-----------
783,106
-----------
COMPUTERS (HARDWARE)--3.7%
Compaq Computer Corp.................................................. 6,890 288,949
Dell Computer Corp.(b)................................................ 2,770 202,729
-----------
491,678
-----------
COMPUTERS (NETWORKING)--3.6%
Cisco Systems, Inc. (b)............................................... 5,135 476,592
-----------
COMPUTERS (PERIPHERALS)--3.8%
EMC Corp. (b)......................................................... 5,910 502,350
-----------
COMPUTERS (SOFTWARE & SERVICES)--8.0%
BMC Software, Inc. (b)................................................ 6,250 278,516
Compuware Corp. (b)................................................... 1,970 153,906
Microsoft Corp. (b)................................................... 2,940 407,741
Oracle Corp. (b)...................................................... 4,780 206,137
-----------
1,046,300
-----------
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C> <C>
CONSUMER FINANCE--0.5%
MBNA Corp............................................................. 2,595 $ 64,713
-----------
ELECTRICAL EQUIPMENT--3.1%
General Electric Co................................................... 3,990 407,229
-----------
ELECTRONICS (SEMICONDUCTORS)--7.0%
Intel Corp............................................................ 3,870 458,837
Texas Instruments, Inc................................................ 5,350 457,759
-----------
916,596
-----------
ENTERTAINMENT--0.9%
Walt Disney Co. (The)................................................. 3,880 116,400
-----------
FINANCIAL (DIVERSIFIED)--7.7%
American Express Co................................................... 2,300 235,175
Citigroup, Inc........................................................ 5,220 258,390
Freddie Mac........................................................... 5,830 375,671
Morgan Stanley, Dean Witter & Co...................................... 2,080 147,680
-----------
1,016,916
-----------
HEALTH CARE (DIVERSIFIED)--2.5%
American Home Products Corp........................................... 2,260 127,266
Johnson & Johnson..................................................... 2,350 197,106
-----------
324,372
-----------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--7.0%
Merck & Co., Inc...................................................... 1,960 289,467
Pfizer, Inc........................................................... 4,230 530,601
Schering-Plough Corp.................................................. 1,740 96,135
-----------
916,203
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--4.2%
Medtronic, Inc........................................................ 7,520 558,360
-----------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.6%
Colgate-Palmolive Co.................................................. 2,280 211,755
-----------
</TABLE>
See Notes to Financial Statements
68
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C> <C>
INSURANCE (MULTI-LINE)--2.0%
American International Group, Inc..................................... 2,665 $ 257,506
-----------
INVESTMENT BANKING/BROKERAGE--2.0%
Merrill Lynch & Co., Inc.............................................. 4,030 269,002
-----------
INVESTMENT MANAGEMENT--1.1%
Franklin Resources, Inc............................................... 3,110 99,520
Price (T. Rowe) Associates, Inc....................................... 1,400 47,950
-----------
147,470
-----------
LODGING-HOTELS--2.7%
Carnival Corp......................................................... 7,450 357,600
-----------
MANUFACTURING (DIVERSIFIED)--0.6%
United Technologies Corp.............................................. 700 76,125
-----------
PERSONAL CARE--2.4%
Gillette Co........................................................... 6,610 319,346
-----------
RESTAURANTS--2.0%
McDonald's Corp....................................................... 3,510 268,954
-----------
RETAIL (BUILDING SUPPLIES)--3.4%
Home Depot, Inc. (The)................................................ 4,520 276,568
Lowe's Companies, Inc................................................. 3,460 177,109
-----------
453,677
-----------
RETAIL (DEPARTMENT STORES)--0.6%
Kohl's Corp. (b)...................................................... 1,390 85,398
-----------
RETAIL (DRUG STORES)--1.5%
Walgreen Co........................................................... 3,300 193,256
-----------
RETAIL (GENERAL MERCHANDISE)--2.1%
Dayton Hudson Corp.................................................... 5,040 273,423
-----------
RETAIL (SPECIALTY)--1.0%
Staples, Inc. (b)..................................................... 2,880 125,820
-----------
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C> <C>
SERVICES (ADVERTISING/MARKETING)--1.3%
Interpublic Group of Companies, Inc. (The)............................ 2,090 $ 166,678
-----------
SERVICES (COMMERCIAL & CONSUMER)--3.4%
Cendant Corp. (b)..................................................... 23,530 448,541
-----------
SERVICES (DATA PROCESSING)--0.5%
Automatic Data Processing, Inc........................................ 870 69,763
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--4.9%
MCI WorldCom, Inc. (b)................................................ 8,890 637,858
-----------
TOBACCO--1.6%
Philip Morris Companies, Inc.......................................... 3,860 206,510
-----------
TOTAL COMMON STOCKS
(Identified cost $10,684,999)..................................................... 12,982,880
-----------
TOTAL LONG-TERM INVESTMENTS--98.7%
(Identified cost $10,684,999)..................................................... 12,982,880
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000)
----------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.0%
COMMERCIAL PAPER--4.0%
Receivables Capital Corp. 5.15%, 1/4/99......... A-1+ $ 530 529,772
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $529,772)................................................. 529,772
------------
TOTAL INVESTMENTS--102.7%
(Identified cost $11,214,771).............................................. 13,512,652(a)
Cash and receivables, less liabilities--(2.7%)............................. (359,170)
------------
NET ASSETS--100.0%........................................................... $ 13,153,482
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,253,583 and gross
depreciation of $195,750 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$11,454,819.
(b) Non-income producing.
See Notes to Financial Statements
69
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$11,214,771).................................... $ 13,512,652
Cash.............................................. 834
Receivables
Investment securities sold...................... 43,775
Fund shares sold................................ 42,127
Dividends and interest.......................... 4,942
Prepaid expenses.................................. 201
-------------
Total assets.................................. 13,604,531
-------------
LIABILITIES
Payables
Investment securities purchased................. 401,888
Fund shares repurchased......................... 3,119
Investment advisory fee......................... 2,625
Trustees' fee................................... 5,044
Financial agent fee............................. 3,612
Accrued expenses................................ 34,761
-------------
Total liabilities............................. 451,049
-------------
NET ASSETS........................................ $ 13,153,482
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 11,099,730
Accumulated net realized loss................... (244,129)
Net unrealized appreciation..................... 2,297,881
-------------
NET ASSETS........................................ $ 13,153,482
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 1,042,192
-------------
-------------
Net asset value and offering price per share...... $ 12.62
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 45,163
Interest.................................................. 14,709
-------------
Total investment income................................. 59,872
-------------
EXPENSES
Investment advisory fee................................... 48,195
Financial agent fee....................................... 25,042
Custodian................................................. 21,061
Professional.............................................. 13,516
Printing.................................................. 12,683
Trustees.................................................. 12,647
Miscellaneous............................................. 5,393
-------------
Total expenses.......................................... 138,537
Less expense borne by investment adviser................ (82,263)
-------------
Net expenses............................................ 56,274
-------------
NET INVESTMENT INCOME....................................... 3,598
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (244,129)
Net change in unrealized appreciation (depreciation) on
investments............................................. 2,297,881
-------------
NET GAIN ON INVESTMENTS..................................... 2,053,752
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,057,350
-------------
-------------
</TABLE>
See Notes to Financial Statements
70
<PAGE>
ENGEMANN NIFTY FIFTY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
DECEMBER 31,
1998
----------------
<S> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 3,598
Net realized gain (loss).................................. (244,129)
Net change in unrealized appreciation (depreciation)...... 2,297,881
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 2,057,350
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (3,598)
In excess of net investment income........................ (1,543)
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (5,141)
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,342,696 shares).......... 14,285,565
Net asset value of shares issued from reinvestment of
distributions (406 shares).............................. 5,141
Cost of shares repurchased (300,910 shares)............... (3,189,433)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 11,101,273
----------------
NET INCREASE IN NET ASSETS................................ 13,153,482
NET ASSETS
Beginning of period....................................... --
----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $0)........................................... $13,153,482
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
INCEPTION
3/2/98 TO
12/31/98
------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. 0.01(3)(4)
Net realized and unrealized gain (loss)................... 2.62
------------
TOTAL FROM INVESTMENT OPERATIONS........................ 2.63
------------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.01)
In excess of net investment income........................ --
------------
TOTAL DISTRIBUTIONS..................................... (0.01)
------------
CHANGE IN NET ASSET VALUE................................... 2.62
------------
NET ASSET VALUE, END OF PERIOD.............................. $12.62
------------
------------
Total return................................................ 26.26%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $13,153
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1)
Net investment income..................................... 0.07%(1)
Portfolio turnover rate..................................... 90%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.13
per share.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
71
<PAGE>
SENECA MID-CAP GROWTH SERIES
INVESTOR PROFILE
Seneca Mid Cap Growth Series is appropriate for investors seeking long-term
capital appreciation by investing primarily in stocks of dynamic, rapidly
growing companies and focusing on strong relative earnings growth. The Fund
primarily invests in companies with small to medium size capitalizations, and
investors should note that small company investing involves added risks,
including greater price volatility, less liquidity and increased competitive
threat.
INVESTMENT ADVISER'S REPORT
Since its inception on March 2, 1998 through year-end, the Fund returned
21.75% compared with a return of 12.21% for the S&P MidCap 400 Index(1) and
(5.72)% for the Russell 2000 Growth Index(2). All performance figures assume
reinvestment of distributions and are net of sales charges.
The U.S. stock market rebounded strongly from the third quarter's economic
crisis. The S&P 500 Index was up 21.3%, the biggest quarterly gain since the
first quarter of 1987. The S&P 500 Index was up 28.8% for 1998, an unprecedented
fourth year that the market has produced a return above 20%. Corporate bonds
also recovered from their "crisis lows" as corporate profits and the interest
rate environment remained positive. During the fourth quarter, the market
broadened somewhat, and mid-capitalization stocks actually outperformed the
largest companies. However, small-capitalization stocks once again
underperformed. Technology was the real story for the quarter and the year. Huge
gains in the largest technology stocks, such as IBM and Microsoft, were eclipsed
only by the Internet craze.
Seneca's "Earnings Driven Growth" strategy performed well as we benefited
from good stock selection within the technology and financial services sectors.
Among our "best performers" in the year's fourth and best quarter were Outdoor
Systems, PMC-Sierra, and Compuware. Stocks in our portfolio continue to produce
significantly above-market earnings growth rates. Of course, past performance is
no guarantee of future results.
OUTLOOK
Though the U.S. economy is slowing, we believe earnings should continue to
grow and should produce moderate equity returns. Upside is possible via good
stock selection and potentially, equity multiple expansion if interest rates
decline further. Growth stocks should continue to excel as investors seek
companies that can deliver above-average growth in a challenging environment. We
see particular opportunity in small- and mid-capitalization stocks due to their
higher-than-market earnings growth rates and lower-than-market valuations.
However, the increased volatility we experienced in 1998 should persist into
1999, particularly if further cracks appear in the global financial structure,
and because the Y2K problem is approaching.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SENECA MID CAP GROWTH SERIES S&P 400 MIDCAP INDEX(1)
<S> <C> <C>
3/2/98 $10,000.00 $10,000.00
12/31/98 $12,175.20 $11,220.92
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
3/2/98 TO
12/31/98
<S> <C>
- - ----------------------------------------------------------------------
Seneca Mid-Cap Growth Series 21.75%
- - ----------------------------------------------------------------------
S&P 400 MidCap Index(1) 12.21%
- - ----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 3/2/98.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
(1) The S&P 400 MidCap Index is an unmanaged, commonly used measure of total
return performance of mid-capitalization companies. The Index is not
available for direct investment.
(2) The Russell 2000 Growth Index is an unmanaged, commonly used measure of
total return performance for small-capitalization companies with
above-average growth orientation. The Index is not available for direct
investment.
72
<PAGE>
SENECA MID-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
COMMON STOCKS--100.6%
BANKS (MAJOR REGIONAL)--8.9%
AmSouth Bancorporation.............................................. 3,950 $ 180,218
Comerica, Inc....................................................... 3,885 264,908
Northern Trust Corp................................................. 2,900 253,206
-----------
698,332
-----------
BEVERAGES (ALCOHOLIC)--2.9%
Coors (Adolph) Co. Class B.......................................... 4,050 228,572
-----------
BEVERAGES (NON-ALCOHOLIC)--2.7%
Whitman Corp........................................................ 8,270 209,851
-----------
BIOTECHNOLOGY--3.0%
Centocor, Inc. (b).................................................. 5,250 236,906
-----------
BROADCASTING (TELEVISION, RADIO & CABLE)--3.0%
Chancellor Media Corp. (b).......................................... 5,010 239,854
-----------
COMMUNICATIONS EQUIPMENT--3.2%
Ascend Communications, Inc. (b)..................................... 3,810 250,508
-----------
COMPUTERS (SOFTWARE & SERVICES)--23.3%
America Online, Inc. (b)............................................ 1,580 252,800
BMC Software, Inc. (b).............................................. 3,320 147,948
Citrix Systems, Inc. (b)............................................ 1,750 169,859
Computer Horizons Corp. (b)......................................... 5,530 147,236
Compuware Corp. (b)................................................. 3,770 294,531
Documentum, Inc. (b)................................................ 4,270 228,178
Electronic Arts, Inc. (b)........................................... 3,080 172,865
Legato Systems. Inc. (b)............................................ 3,030 199,791
VERITAS Software Co. (b)............................................ 3,765 225,665
-----------
1,838,873
-----------
CONSUMER FINANCE--2.5%
Providian Financial Corp............................................ 2,660 199,500
-----------
ELECTRONICS (INSTRUMENTATION)--0.4%
Micron Electronics, Inc. (b)........................................ 1,620 28,046
-----------
ELECTRONICS (SEMICONDUCTORS)--8.4%
Advanced Micro Devices, Inc......................................... 6,850 198,222
Micron Technology, Inc. (b)......................................... 3,450 174,440
Xilinx, Inc. (b).................................................... 4,520 294,365
-----------
667,027
-----------
ENTERTAINMENT--3.0%
SFX Entertainment, Inc. Class A (b)................................. 4,330 237,609
-----------
HEALTH CARE (DIVERSIFIED)--6.8%
McKesson Corp....................................................... 3,130 247,466
Mylan Laboratories, Inc............................................. 9,140 287,910
-----------
535,376
-----------
HEALTH CARE (HOSPITAL MANAGMENT)--0.7%
Health Management Associates Inc. Class A (b)....................... 2,690 58,171
-----------
HEALTH CARE (LONG TERM CARE)--3.1%
Omnicare, Inc....................................................... 7,020 243,946
-----------
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C> <C>
INSURANCE (MULTI-LINE)--2.3%
Annuity and Life Re (Holdings), Ltd................................. 6,590 $ 177,930
-----------
OFFICE EQUIPMENT & SUPPLIES--3.5%
Lexmark International Group, Inc. (b)............................... 1,600 160,800
Miller (Herman), Inc................................................ 4,280 115,025
-----------
275,825
-----------
OIL (DOMESTIC INTEGRATED)--2.8%
USX-Marathon Group.................................................. 7,380 222,323
-----------
RETAIL (DISCOUNTERS)--3.4%
Dollar Tree Stores, Inc (b)......................................... 6,175 269,770
-----------
RETAIL (SPECIALTY)--3.1%
Staples, Inc. (b)................................................... 5,580 243,776
-----------
RETAIL (SPECIALTY--APPAREL)--2.8%
TJX Companies, Inc. (The)........................................... 7,710 223,590
-----------
SERVICES (ADVERTISING/MARKETING)--4.9%
Lamar Advertising Co. (b)........................................... 2,080 77,480
Outdoor Systems, Inc. (b)........................................... 10,175 305,250
-----------
382,730
-----------
SERVICES (COMPUTER SYSTEMS)--0.6%
International Network Services (b).................................. 770 51,205
-----------
SERVICES (DATA PROCESSING)--1.3%
Administaff, Inc. (b)............................................... 3,960 99,000
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.5%
Crown Castle International Corp. (b)................................ 5,200 122,200
-----------
WASTE MANAGEMENT--2.5%
Republic Services, Inc. Class A (b)................................. 10,850 200,047
-----------
TOTAL COMMON STOCKS
(Identified cost $6,526,227)................................................... 7,940,967
-----------
TOTAL LONG-TERM INVESTMENTS--100.6%
(Identified cost $6,526,227)................................................... 7,940,967
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.6%
COMMERCIAL PAPER--3.6%
Receivables Capital Corp. 5.15% 1/4/99.......... A-1+ $ 285 284,877
---------------
TOTAL SHORT-TERM OBLIGATIONS--3.6%
(Identified cost $284,877)................................................... 284,877
---------------
TOTAL INVESTMENTS--104.2%
(Identified cost $6,811,104)................................................. 8,225,844(a)
Cash and receivables, less liabilities--(4.2%)............................... (328,700)
---------------
NET ASSETS--100.0%............................................................. $ 7,897,144
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,570,230 and gross
depreciation of $163,954 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$6,819,568.
(b) Non-income producing.
See Notes to Financial Statements
73
<PAGE>
SENECA MID-CAP GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$6,811,104)..................................... $ 8,225,844
Cash.............................................. 967
Receivables
Investment securities sold...................... 299,567
Fund shares sold................................ 23,767
Interest and dividends.......................... 10,635
Prepaid expenses.................................. 126
-------------
Total assets.................................. 8,560,906
-------------
LIABILITIES
Payables
Investment securities purchased................. 616,193
Trustees' fee................................... 5,044
Financial agent fee............................. 3,491
Investment advisory fee......................... 3,451
Accrued expenses................................ 35,583
-------------
Total liabilities............................. 663,762
-------------
NET ASSETS........................................ $ 7,897,144
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest...................................... $ 6,655,698
Distributions in excess of net investment
income........................................ (697)
Accumulated net realized loss................... (172,597)
Net unrealized appreciation..................... 1,414,740
-------------
NET ASSETS........................................ $ 7,897,144
-------------
-------------
Shares of beneficial interest outstanding, $1 par
value, unlimited authorization.................. 649,208
-------------
-------------
Net asset value and offering price per share...... $ 12.16
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................. $ 24,455
Dividends................................................. 22,084
Foreign taxes withheld.................................... (15)
-------------
Total investment income................................. 46,524
-------------
EXPENSES
Investment advisory fee................................... 31,013
Financial agent fee....................................... 24,059
Professional.............................................. 13,453
Trustees.................................................. 12,647
Printing.................................................. 12,434
Custodian................................................. 11,701
Miscellaneous............................................. 4,123
-------------
Total expenses.......................................... 109,430
Less expense borne by investment adviser................ (68,689)
-------------
Net expenses............................................ 40,741
-------------
NET INVESTMENT INCOME....................................... 5,783
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (172,597)
Net change in unrealized appreciation (depreciation) on
investments............................................. 1,414,740
-------------
NET GAIN ON INVESTMENTS..................................... 1,242,143
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,247,926
-------------
-------------
</TABLE>
See Notes to Financial Statements
74
<PAGE>
SENECA MID-CAP GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
DECEMBER 31,
1998
----------------
<S> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 5,783
Net realized gain (loss).................................. (172,597)
Net change in unrealized appreciation (depreciation)...... 1,414,740
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 1,247,926
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (5,783)
In excess of net investment income........................ (697)
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (6,480)
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (958,184 shares)............ 9,826,161
Net asset value of shares issued from reinvestment of
distributions (557 shares).............................. 6,480
Cost of shares repurchased (309,533 shares)............... (3,176,943)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 6,655,698
----------------
NET INCREASE IN NET ASSETS................................ 7,897,144
NET ASSETS
Beginning of period....................................... --
----------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME OF ($697))............................ $7,897,144
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM
INCEPTION
3/2/98 TO
12/31/98
------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. 0.01(3)(4)
Net realized and unrealized gain (loss)................... 2.16
------------
TOTAL FROM INVESTMENT OPERATIONS........................ 2.17
------------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.01)
In excess of net investment income........................ --
------------
TOTAL DISTRIBUTIONS..................................... (0.01)
------------
CHANGE IN NET ASSET VALUE................................... 2.16
------------
NET ASSET VALUE, END OF PERIOD.............................. $12.16
------------
------------
Total return................................................ 21.75%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $7,897
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.05%(1)
Net investment income..................................... 0.15%(1)
Portfolio turnover rate..................................... 127%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.15
per share.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
75
<PAGE>
GROWTH AND INCOME SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking dividend growth, current
income and capital appreciation through investments in common stocks.
INVESTMENT ADVISER'S REPORT
The period from March 2, 1998, the Fund's inception date, to December 31,
1998 was an unusually strong and tumultuous period for common stocks. The S&P
500 Index(1) returned 18.95%. A Russian currency devaluation and bond default,
and the potential demise of hedge fund manager Long-Term Capital Management
resulted in a mid-summer liquidity crisis that sent stocks into a tail-spin.
Responding to the impending crisis, the Federal Open Market Committee lowered
interest rates on three separate occasions. Several European countries followed
suit and the decline in interest rates worldwide helped stock prices to rebound
to new highs in December.
From the Fund's inception (March 2) to year-end, the Fund posted a return of
20.45%, 150 basis points ahead of the S&P 500 Index. All performance figures
assume reinvestment of distributions and are net of sales charges.
The portfolio 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 S&P 500 benchmark
index.
During the period, three of our most successful stocks were: Microsoft
Corporation, Intel Corporation and AT&T Corporation. Despite its Government
lawsuit, Microsoft traded up on the strength of its new product cycle that
includes Windows 98, a new version of Windows NT due out next year, and a new
version of its database software. Microsoft also beat earnings estimates in each
of its reporting periods in calendar 1998. Intel benefited from robust demand
for personal computers. Late in the year, the company revised its expectations
for the fourth quarter because demand was stronger-than-anticipated. This
resulted in a flurry of analyst upgrades, raising earnings estimates and target
prices. AT&T stock performed well as a result of a series of earnings reports
that exceeded analysts' estimates. Under the leadership of CEO C. Michael
Armstrong, the company has positioned itself to be a viable competitor in the
global telecommunications market through mergers and alliances. Pending
acquisitions include: cable operator Tele-Communications Inc., Vanguard Cellular
and IBM's Global Network business. An alliance with British Telecommunications
PLC is viewed positively for the company's overseas growth prospects.
OUTLOOK
A recent WALL STREET JOURNAL survey of economists predicts: moderating
economic growth, declining short-term interest rates, continued low inflation
and a slight uptick in the unemployment rate. S&P 500 earnings are expected to
grow next year at a modest pace, with the strongest performance coming from the
technology, communications and consumer cyclical sectors.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
76
<PAGE>
GROWTH AND INCOME SERIES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH AND INCOME
SERIES S&P 500 INDEX*
<S> <C> <C>
3/2/98 $10,000.00 $10,000.00
12/31/98 $12,045.30 $11,895.30
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
3/2/98 TO
12/31/98
<S> <C>
- - -----------------------------------------------------------------------
Phoenix Growth and Income Series 20.45%
- - -----------------------------------------------------------------------
S&P 500 Index* 18.95%
- - -----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 3/2/98.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
* The S&P 500 Index is an unmanaged but commonly used measure of stock market
total return performance. The index is not available for direct investment.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
COMMON STOCKS--96.9%
AEROSPACE/DEFENSE--0.8%
Boeing Co. (The).................................................... 600 $ 19,575
Cordant Technologies, Inc........................................... 2,200 82,500
Gulfstream Aerospace Corp. (b)...................................... 1,300 69,225
Sundstrand Corp..................................................... 2,800 145,250
------------
316,550
------------
AIRLINES--0.8%
AMR Corp. (b)....................................................... 3,100 184,062
Alaska Air Group, Inc. (b).......................................... 400 17,700
Comair Holdings, Inc................................................ 1,300 43,875
Delta Air Lines, Inc................................................ 1,400 72,800
US Airways Group, Inc. (b).......................................... 200 10,400
------------
328,837
------------
ALUMINUM--0.8%
Aluminum Company of America......................................... 2,400 178,950
Reynolds Metals Co.................................................. 3,300 173,869
------------
352,819
------------
AUTO PARTS & EQUIPMENT--0.1%
Arvin Industries, Inc............................................... 300 12,506
Meritor Automotive.................................................. 800 16,950
------------
29,456
------------
AUTOMOBILES--2.1%
Ford Motor Co....................................................... 14,700 862,706
------------
BANKS (MAJOR REGIONAL)--6.3%
Bank One Corp....................................................... 7,574 386,747
City National Corp.................................................. 2,600 108,225
Cullen/Frost Bankers, Inc........................................... 1,500 82,312
First Union Corp.................................................... 8,200 498,662
Fleet Financial Group, Inc.......................................... 11,000 $ 491,562
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
BANKS (MAJOR REGIONAL)--CONTINUED
Hibernia Corp. Class A.............................................. 6,700 116,412
Mellon Bank Corp.................................................... 1,400 96,250
PNC Bank Corp....................................................... 400 21,650
SunTrust Banks, Inc................................................. 3,900 298,350
Trustmark Corp...................................................... 500 11,312
UnionBanCal Corp.................................................... 14,400 490,500
Wells Fargo & Co.................................................... 400 15,975
------------
2,617,957
------------
BANKS (MONEY CENTER)--2.1%
BankAmerica Corp.................................................... 1,600 96,200
Chase Manhattan Corp. (The)......................................... 11,200 762,300
------------
858,500
------------
BEVERAGES (ALCOHOLIC)--1.1%
Anheuser-Busch Companies, Inc....................................... 6,000 393,750
Canandaigua Brands, Inc. Class A (b)................................ 1,100 63,594
Coors (Adolph) Co. Class B.......................................... 200 11,287
------------
468,631
------------
BIOTECHNOLOGY--0.8%
Amgen, Inc. (b)..................................................... 3,300 345,056
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--0.2%
Chris-Craft Industries, Inc. (b).................................... 1,500 72,281
------------
BUILDING MATERIALS--1.3%
Centex Construction Products, Inc................................... 600 24,375
Fleetwood Enterprises, Inc.......................................... 1,700 59,075
Johns Manville Corp................................................. 1,300 21,369
Lafarge Corp........................................................ 2,700 109,350
Lennar Corp......................................................... 500 12,625
Masco Corp.......................................................... 6,100 175,375
</TABLE>
See Notes to Financial Statements
77
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
BUILDING MATERIALS--CONTINUED
Owens Corning....................................................... 200 $ 7,087
Southdown, Inc...................................................... 400 23,675
Vulcan Materials Co................................................. 700 92,094
------------
525,025
------------
CHEMICALS (DIVERSIFIED)--0.5%
Goodrich Co., B.F. (The)............................................ 5,200 186,550
Polaris Industries, Inc............................................. 300 11,756
------------
198,306
------------
CHEMICALS (SPECIALTY)--0.4%
CMP Group, Inc...................................................... 3,400 64,175
Engelhard Corp...................................................... 400 7,800
International Speciality Products, Inc. (b)......................... 3,000 40,687
NL Industries, Inc.................................................. 500 7,094
Schulman (A.), Inc.................................................. 2,700 61,256
------------
181,012
------------
COMMUNICATIONS EQUIPMENT--1.7%
ECI Telecommunications Ltd.......................................... 800 28,500
Lucent Technologies, Inc............................................ 5,300 583,000
QUALCOMM, Inc. (b).................................................. 2,000 103,625
Tekelec............................................................. 800 13,250
------------
728,375
------------
COMPUTERS (HARDWARE)--4.7%
Apple Computer, Inc. (b)............................................ 3,400 139,187
Compaq Computer Corp................................................ 4,600 192,912
Dell Computer Corp. (b)............................................. 5,500 402,531
Gateway 2000, Inc. (b).............................................. 1,700 87,019
Hewlett-Packard Co.................................................. 4,100 280,081
International Business Machines Corp................................ 4,200 775,950
Sun Microsystems, Inc. (b).......................................... 900 77,062
------------
1,954,742
------------
COMPUTERS (NETWORKING)--1.3%
3Com Corp. (b)...................................................... 500 22,406
Cisco Systems, Inc. (b)............................................. 5,000 464,062
Novell, Inc......................................................... 2,500 45,312
Xircom, Inc. (b).................................................... 100 3,400
------------
535,180
------------
COMPUTERS (PERIPHERALS)--0.4%
EMC Corp. (b)....................................................... 1,800 153,000
Seagate Technology, Inc. (b)........................................ 800 24,200
------------
177,200
------------
COMPUTERS (SOFTWARE & SERVICES)--6.7%
Affiliated Computer Services, Inc. (b).............................. 500 22,500
Autodesk, Inc....................................................... 500 21,344
BMC Software, Inc. (b).............................................. 1,300 57,931
Computer Associates International, Inc.............................. 1,300 55,412
Computer Horizons Corp. (b)......................................... 1,300 34,612
Computer Sciences Corp. (b)......................................... 1,400 90,212
Compuware Corp. (b)................................................. 800 62,500
Comverse Technology, Inc. (b)....................................... 1,100 78,100
Electronic Arts, Inc. (b)........................................... 600 33,675
HBO & Co............................................................ 6,400 183,600
Mastech Corp. (b)................................................... 600 17,175
Microsoft Corp. (b)................................................. 10,200 1,414,612
NCR Corp. (b)....................................................... 3,100 129,425
Network Associates, Inc. (b)........................................ 500 33,125
Oracle Corp. (b).................................................... 5,000 215,625
Platinum Technology, Inc. (b)....................................... 500 9,562
Rational Software Corp. (b)......................................... 100 2,650
Reynolds & Reynolds Co. Class A..................................... 1,300 29,819
Siebel Systems, Inc. (b)............................................ 800 27,150
Sterling Commerce, Inc. (b)......................................... 1,400 63,000
Sterling Software, Inc. (b)......................................... 1,500 40,594
Unisys Corp. (b).................................................... 4,200 144,637
Whittman-Hart, Inc. (b)............................................. 1,200 33,150
------------
2,800,410
------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)--0.5%
Fortune Brands, Inc................................................. 4,200 132,825
Zale Corp. (b)...................................................... 1,900 $ 61,275
------------
194,100
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
CONSUMER FINANCE--0.6%
Capital One Financial Corp.......................................... 100 11,500
Countrywide Credit Industries, Inc.................................. 4,800 240,900
------------
252,400
------------
DISTRIBUTORS (FOOD & HEALTH)--0.5%
Cardinal Health, Inc................................................ 2,700 204,862
------------
ELECTRIC COMPANIES--5.9%
Ameren Electric Corp................................................ 2,400 102,450
Baltimore Gas & Electric Co......................................... 1,400 43,225
Central & South West Corp........................................... 13,700 375,894
Dominion Resources, Inc............................................. 6,400 299,200
Duke Energy Corp.................................................... 6,000 384,375
Edison International................................................ 9,700 270,387
FPL Group, Inc...................................................... 1,300 80,112
Hawaiian Electric Industries........................................ 2,100 84,525
Houston Industries, Inc............................................. 8,300 266,637
LG&E Energy Corp.................................................... 13,700 387,881
Minnesota Power, Inc................................................ 3,600 158,400
OGE Energy Corp..................................................... 700 20,300
Puget Sound Energy, Inc............................................. 300 8,362
------------
2,481,748
------------
ELECTRICAL EQUIPMENT--2.8%
Briggs & Stratton Corp.............................................. 1,400 69,825
General Electric Co................................................. 9,600 979,800
Honeywell, Inc...................................................... 1,800 135,562
------------
1,185,187
------------
ELECTRONICS (INSTRUMENTATION)--0.4%
EG&G, Inc........................................................... 4,900 136,281
General Instrument Corp. (b)........................................ 600 20,362
Smart Modular Technologies, Inc..................................... 500 13,875
------------
170,518
------------
ELECTRONICS (SEMICONDUCTORS)--2.7%
Intel Corp.......................................................... 8,600 1,019,637
Texas Instruments, Inc.............................................. 1,200 102,675
Vitesse Semiconductor Corp. (b)..................................... 300 13,687
------------
1,135,999
------------
ENGINEERING & CONSTRUCTION--0.2%
Fluor Corp.......................................................... 2,200 93,637
------------
ENTERTAINMENT--0.3%
Royal Caribbean Cruises Ltd......................................... 1,600 59,200
Viacom, Inc. Class B (b)............................................ 900 66,600
------------
125,800
------------
FINANCIAL (DIVERSIFIED)--3.6%
American General Corp............................................... 1,100 85,800
Citigroup, Inc...................................................... 4,200 207,900
Doral Financial Corp................................................ 3,700 81,862
Fannie Mae.......................................................... 9,500 703,000
Freddie Mac......................................................... 1,100 70,881
Morgan Stanley Dean Witter & Co..................................... 4,700 333,700
Old Kent Financial Corp............................................. 400 18,600
------------
1,501,743
------------
FOODS--1.0%
Earthgrains Co. (The)............................................... 1,700 52,594
Flowers Industries, Inc............................................. 900 21,544
Quaker Oats Co...................................................... 5,800 345,100
------------
419,238
------------
HEALTH CARE (DIVERSIFIED)--3.6%
Abbott Laboratories................................................. 3,200 156,800
American Home Products Corp......................................... 300 16,894
AmeriSource Health Corp. Class A (b)................................ 200 13,000
Bristol-Myers Squibb Co............................................. 2,500 334,531
Johnson & Johnson................................................... 1,900 159,362
McKesson Corp....................................................... 2,200 173,938
Mylan Laboratories, Inc............................................. 1,500 47,250
</TABLE>
See Notes to Financial Statements
78
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
HEALTH CARE (DIVERSIFIED)--CONTINUED
Warner-Lambert Co................................................... 8,300 $ 624,056
------------
1,525,831
------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--4.8%
Barr Laboratories, Inc. (b)......................................... 500 24,000
Biogen, Inc. (b).................................................... 300 24,900
Genentech, Inc. (b)................................................. 3,300 262,969
Lilly (Eli) & Co.................................................... 4,300 382,163
Medicis Pharmaceutical Corp. Class A (b)............................ 400 23,850
Merck & Co., Inc.................................................... 1,800 265,838
Pfizer, Inc......................................................... 2,500 313,594
Pharmacia & Upjohn, Inc............................................. 5,100 288,788
Schering-Plough Corp................................................ 7,800 430,950
------------
2,017,052
------------
HEALTH CARE (HOSPITAL MANAGEMENT)--0.4%
Pacificare Health Systems, Inc. Class B (b)......................... 2,100 166,950
------------
HEALTH CARE (LONG TERM CARE)--0.2%
Omnicare, Inc....................................................... 2,500 86,875
------------
HEALTH CARE (MANAGED CARE)--0.4%
Humana, Inc. (b).................................................... 1,100 19,594
Trigon Healthcare, Inc. (b)......................................... 1,100 41,044
United Healthcare Corp.............................................. 300 12,919
Wellpoint Health Networks, Inc. (b)................................. 1,300 113,100
------------
186,657
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.1%
Allegiance Corp..................................................... 1,600 74,600
Allergan, Inc....................................................... 1,700 110,075
Bausch & Lomb, Inc.................................................. 500 30,000
Bergen Brunswig Corp. Class A....................................... 2,200 76,725
Hillenbrand Industries, Inc......................................... 1,800 102,375
Mallinckrodt, Inc................................................... 600 18,488
Visx, Inc. (b)...................................................... 400 34,975
------------
447,238
------------
HEALTH CARE (SPECIALIZED SERVICES)--0.1%
Total Renal Care Holdings, Inc. (b)................................. 1,300 38,431
------------
HOMEBUILDING--0.4%
Centex Corp......................................................... 2,400 108,150
D. R. Horton, Inc................................................... 600 13,800
Kaufman & Broad Home Corp........................................... 400 11,500
Pulte Corp.......................................................... 1,600 44,500
------------
177,950
------------
HOUSEHOLD FURNITURE & APPLIANCES--0.9%
Maytag Corp......................................................... 1,400 87,150
Premark International, Inc.......................................... 5,600 193,900
Whirlpool Corp...................................................... 1,800 99,675
------------
380,725
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.0%
Church & Dwight, Inc................................................ 300 10,781
Procter & Gamble Co. (The).......................................... 4,300 392,644
------------
403,425
------------
HOUSEWARES--0.2%
Tupperware Corp..................................................... 4,500 73,969
------------
INSURANCE (LIFE/HEALTH)--1.5%
Aetna, Inc.......................................................... 1,600 125,800
Lincoln National Corp............................................... 3,900 319,069
Transamerica Corp................................................... 1,500 173,250
------------
618,119
------------
INSURANCE (MULTI-LINE)--1.3%
Ambac Financial Group, Inc.......................................... 800 48,150
American International Group, Inc................................... 500 48,313
CIGNA Corp.......................................................... 5,500 425,219
Everest Reinsurance Holdings, Inc................................... 300 11,681
HCC Insurance Holdings.............................................. 1,200 21,150
------------
554,513
------------
INSURANCE (PROPERTY-CASUALTY)--1.9%
Allstate Corp. (The)................................................ 15,700 606,413
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
INSURANCE (PROPERTY-CASUALTY)--CONTINUED
Fidelity National Financial, Inc.................................... 1,540 $ 46,970
First American Financial Corp. (The)................................ 2,200 70,675
LandAmerica Financial Group, Inc.................................... 1,000 55,813
Reliance Group Holdings, Inc........................................ 1,500 19,313
------------
799,184
------------
INSURANCE BROKERS--1.3%
Arthur J. Gallagher & Co............................................ 2,600 114,725
Marsh & McLennan Companies, Inc..................................... 7,100 414,906
------------
529,631
------------
IRON & STEEL--0.1%
Nucor Corp.......................................................... 1,400 60,550
------------
MACHINERY (DIVERSIFIED)--0.9%
Ingersoll-Rand Co................................................... 5,400 253,463
Manitowoc Co., Inc. (The)........................................... 1,000 44,375
York International Corp............................................. 1,900 77,544
------------
375,382
------------
MANUFACTURING (DIVERSIFIED)--2.8%
AlliedSignal, Inc................................................... 300 13,294
Crane Co............................................................ 2,800 84,525
McDermott International, Inc........................................ 300 7,406
Pentair, Inc........................................................ 1,700 67,681
Tredegar Industries, Inc............................................ 1,100 24,750
Tyco International Ltd.............................................. 5,200 392,275
United Technologies Corp............................................ 5,500 598,125
------------
1,188,056
------------
METALS MINING--0.1%
Placer Dome, Inc.................................................... 2,600 29,900
------------
NATURAL GAS--3.3%
El Paso Energy Corp................................................. 1,600 55,700
Enron Corp.......................................................... 1,100 62,769
K N Energy, Inc..................................................... 200 7,275
Keyspan Corp........................................................ 9,500 294,500
Sempra Energy....................................................... 17,800 451,675
Southwest Gas Corp.................................................. 7,200 193,500
UGI Corp............................................................ 800 19,000
Utilicorp United, Inc............................................... 8,200 300,838
------------
1,385,257
------------
OFFICE EQUIPMENT & SUPPLIES--0.2%
Miller (Herman), Inc................................................ 700 18,813
United Stationers, Inc. (b)......................................... 3,100 80,600
------------
99,413
------------
OIL & GAS (DRILLING & EQUIPMENT)--0.5%
Diamond Offshore Drilling, Inc...................................... 600 14,213
Halliburton Co...................................................... 700 20,738
Schlumberger Ltd.................................................... 500 23,063
Tidewater, Inc...................................................... 2,800 64,925
Transocean Offshore, Inc............................................ 3,500 93,844
------------
216,783
------------
OIL & GAS (EXPLORATION & PRODUCTION)--0.1%
MDU Resources Group, Inc............................................ 900 23,681
------------
OIL & GAS (REFINING & MARKETING)--0.3%
Imperial Oil Ltd.................................................... 8,900 142,956
------------
OIL (DOMESTIC INTEGRATED)--0.2%
Atlantic Richfield Co............................................... 900 58,725
Coastal Corp........................................................ 400 13,975
------------
72,700
------------
OIL (INTERNATIONAL INTEGRATED)--1.0%
Exxon Corp.......................................................... 5,700 416,813
------------
PAPER & FOREST PRODUCTS--0.2%
Chesapeake Corp..................................................... 2,200 81,125
------------
PHOTOGRAPHY/IMAGING--1.5%
Eastman Kodak Co.................................................... 7,700 554,400
Xerox Corp.......................................................... 600 70,800
------------
625,200
------------
</TABLE>
See Notes to Financial Statements
79
<PAGE>
GROWTH AND INCOME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
PUBLISHING (NEWSPAPERS)--0.2%
Hollinger International, Inc........................................ 1,400 $ 19,513
Knight-Ridder, Inc.................................................. 1,600 81,800
------------
101,313
------------
RETAIL (BUILDING SUPPLIES)--0.9%
Home Depot, Inc. (The).............................................. 4,300 263,106
Lowe's Companies, Inc............................................... 2,100 107,494
------------
370,600
------------
RETAIL (COMPUTERS & ELECTRONICS)--0.3%
Best Buy Co., Inc. (b).............................................. 1,800 110,475
Tandy Corp.......................................................... 400 16,475
------------
126,950
------------
RETAIL (DEPARTMENT STORES)--0.0%
Federated Department Stores, Inc. (b)............................... 200 8,713
------------
RETAIL (FOOD CHAINS)--0.2%
Supervalu, Inc...................................................... 3,500 98,000
------------
RETAIL (GENERAL MERCHANDISE)--2.6%
Dayton Hudson Corp.................................................. 700 37,975
Kmart Corp. (b)..................................................... 4,800 73,500
Loews Corp.......................................................... 1,100 108,075
Ross Stores, Inc.................................................... 1,100 43,313
Wal-Mart Stores, Inc................................................ 10,200 830,663
------------
1,093,526
------------
RETAIL (SPECIALTY-APPAREL)--0.6%
Gap, Inc. (The)..................................................... 1,950 109,688
TJX Companies, Inc. (The)........................................... 4,500 130,500
------------
240,188
------------
SAVINGS & LOAN COMPANIES--0.2%
Dime Bancorp, Inc................................................... 1,100 29,081
Golden West Financial Corp.......................................... 500 45,844
------------
74,925
------------
SERVICES (ADVERTISING/MARKETING)--0.4%
Omnicom Group, Inc.................................................. 1,300 75,400
Snyder Communications Corp., Inc. (b)............................... 2,800 94,500
------------
169,900
------------
SERVICES (COMMERCIAL & CONSUMER)--2.1%
American Management Systems, Inc. (b)............................... 1,000 40,000
Deluxe Corp......................................................... 11,000 402,188
Hertz Corp. Class A................................................. 1,500 68,438
Interim Services, Inc. (b).......................................... 700 16,363
Ogden Corp.......................................................... 7,900 197,994
Robert Half International, Inc. (b)................................. 500 22,344
Romac International, Inc. (b)....................................... 700 15,575
Sylvan Learning Systems Inc......................................... 400 12,200
Viad Corp........................................................... 3,500 106,313
------------
881,415
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.1%
AirTouch Communications, Inc. (b)................................... 500 36,063
------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.2%
AT&T Corp........................................................... 17,200 1,294,300
MCI WorldCom, Inc. (b).............................................. 500 35,875
------------
1,330,175
------------
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
TELEPHONE--3.6%
Ameritech Corp...................................................... 2,400 $ 152,100
Bell Atlantic Corp.................................................. 5,100 289,744
BellSouth Corp...................................................... 6,600 329,175
GTE Corp............................................................ 3,600 242,775
SBC Communications, Inc............................................. 6,200 332,475
US West, Inc........................................................ 2,700 174,488
------------
1,520,757
------------
TEXTILES (APPAREL)--0.6%
Fruit of The Loom, Inc. Class A (b)................................. 1,400 19,338
Jones Apparel Group, Inc. (b)....................................... 2,000 44,125
Tommy Hilfiger Corp. (b)............................................ 1,300 78,000
V.F. Corp........................................................... 2,500 117,188
------------
258,651
------------
TOBACCO--0.9%
Philip Morris Companies, Inc........................................ 6,100 326,350
Universal Corp...................................................... 1,800 63,225
------------
389,575
------------
TRUCKS & PARTS--0.1%
PACCAR, Inc......................................................... 800 32,900
------------
TOTAL COMMON STOCKS
(Identified cost $35,661,759)................................................ 40,576,292
------------
FOREIGN COMMON STOCKS--0.8%
PERSONAL CARE--0.4%
Unilever NV NY Registered Shares (Netherlands)...................... 1,800 149,288
------------
TELEPHONE--0.4%
Northern Telecom Ltd. (Canada)...................................... 3,600 180,450
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $304,590)................................................... 329,738
------------
UNIT INVESTMENT TRUSTS--1.5%
S&P 500 Depository Receipts......................................... 5,200 639,600
------------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $533,589)................................................... 639,600
------------
TOTAL LONG-TERM INVESTMENTS--99.2%
(Identified cost $36,499,938)................................................ 41,545,630
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000)
----------- ------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.4%
COMMERCIAL PAPER--2.4%
Receivables Capital Corp. 5.15%, 1/4/99......... A-1+ $ 980 979,579
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $979,579)................................................... 979,579
---------------
TOTAL INVESTMENTS--101.6%
(Identified cost $37,479,517)................................................ 42,525,209(a)
Cash and receivables, less liabilities--(1.6%)............................... (665,060)
---------------
NET ASSETS--100.0%............................................................. $ 41,860,149
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,759,197 and gross
depreciation of $794,280 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$37,560,292.
(b) Non-income producing.
See Notes to Financial Statements
80
<PAGE>
GROWTH AND INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$37,479,517).............................................. $ 42,525,209
Cash........................................................ 636
Receivables
Fund shares sold.......................................... 146,427
Investment securities sold................................ 82,215
Dividends and interest.................................... 53,339
Prepaid expenses............................................ 669
-------------
Total assets............................................ 42,808,495
-------------
LIABILITIES
Payables
Investment securities purchased........................... 866,058
Fund shares repurchased................................... 25,159
Investment advisory fee................................... 4,017
Financial agent fee....................................... 5,975
Trustees' fee............................................. 5,044
Accrued expenses............................................ 42,093
-------------
Total liabilities....................................... 948,346
-------------
NET ASSETS.................................................. $ 41,860,149
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... 37,248,956
Distribution in excess of net investment income........... (4,389)
Accumulated net realized loss............................. (430,110)
Net unrealized appreciation............................... 5,045,692
-------------
NET ASSETS.................................................. $ 41,860,149
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 3,490,294
-------------
-------------
Net asset value and offering price per share................ $ 11.99
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 264,843
Interest.................................................. 28,154
-------------
Total investment income................................. 292,997
-------------
EXPENSES
Investment advisory fee................................... 109,232
Financial agent fee....................................... 33,806
Custodian................................................. 38,249
Professional.............................................. 13,865
Printing.................................................. 13,069
Trustees.................................................. 12,657
Miscellaneous............................................. 8,434
-------------
Total expenses.......................................... 229,312
Less expenses borne by investment adviser............... (96,206)
-------------
Net expenses............................................ 133,106
-------------
NET INVESTMENT INCOME....................................... 159,891
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (437,760)
Net realized gains on written options..................... 7,393
Net change in unrealized appreciation (depreciation) on
investments............................................. 5,045,692
-------------
NET GAIN ON INVESTMENTS..................................... 4,615,325
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 4,775,216
-------------
-------------
</TABLE>
See Notes to Financial Statements
81
<PAGE>
GROWTH AND INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
DECEMBER 31,
1998
----------------
<S> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 159,891
Net realized gain (loss).................................. (430,367)
Net change in unrealized appreciation (depreciation)...... 5,045,692
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 4,775,216
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (159,891)
In excess of net investment income........................ (4,132)
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (164,023)
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (4,102,319 shares).......... 43,754,814
Net asset value of shares issued from reinvestment of
distributions (14,099 shares)........................... 164,023
Cost of shares repurchased (626,124 shares)............... (6,669,881)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 37,248,956
----------------
NET INCREASE IN NET ASSETS................................ 41,860,149
NET ASSETS
Beginning of period....................................... --
----------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME OF ($4,389)).......................... $41,860,149
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
12/31/98
--------------
<S> <C>
Net asset value, beginning of period......... $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............... 0.05(3)
Net realized and unrealized gain (loss).... 1.99
-------
TOTAL FROM INVESTMENT OPERATIONS......... 2.04
-------
LESS DISTRIBUTIONS
Dividends from net investment income....... (0.05)
In excess of net investment income......... --
-------
TOTAL DISTRIBUTIONS...................... (0.05)
-------
CHANGE IN NET ASSET VALUE.................... 1.99
-------
NET ASSET VALUE, END OF PERIOD............... $11.99
-------
-------
Total return................................. 20.45%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........ $41,860
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses......................... 0.85%(1)
Net investment income...................... 1.02%(1)
Portfolio turnover rate...................... 81%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.05
per share.
See Notes to Financial Statements
82
<PAGE>
VALUE EQUITY SERIES
INVESTOR PROFILE
Phoenix Value Equity Series is appropriate for investors seeking long-term
capital appreciation.
INVESTMENT ADVISER'S REPORT
Since its inception on March 2 through December 31, 1998, the Fund returned
10.79% compared with a return of 18.95% for the S&P 500 Index(1) for the same
period. All performance figures assume reinvestment of distributions and are net
of sales charges.
After months of unprecedented volatility, the U.S. stock market ended 1998
with the S&P 500 Index posting double-digit gains for the fourth year in a row.
However, this broad measure of stock market performance does not reflect the
wide disparity in performance of large versus small stocks or growth versus
value. While the S&P 500 showed impressive gains, the Russell 2000 Index(2), a
measure of small stocks, was down (2.55)% for the year. And, 1998 can be
characterized as the year when value stocks were left behind as investors sought
growth and liquidity at almost any price. The S&P 500 Barra Growth Index(3) rose
42.1% for the year, but the S&P Barra Value Index(4) lagged substantially and
returned only 13.8% for the 12 months ended December 31, 1998.
Fund performance was held back as we maintained our investment discipline,
focusing on heavily discounted, low-expectation stocks that reflect our strong
value bias. For example, we continued to overweight the financial sector, which
underperformed significantly as investors reacted to events in Asia and Brazil.
Individual stocks also held back performance. Philip Morris came under pressure
once again, and Allied Signal's tender offer for UTI negatively affected the
stock's price. Some of the Fund's strong performers included Emulex, IBM,
Compaq, Dayton-Hudson and Sun Microsystems.
OUTLOOK
We will continue to follow our disciplined, classic value approach. The
Fund's primary positions will remain attractively valued holdings in technology,
banks and financial institutions with global franchises, telecommunications and
retailers that we believe possess recession-resistant characteristics.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE EQUITY SERIES S&P 500 INDEX(1)
<S> <C> <C>
03/02/1998 $10,000.00 $10,000.00
12/31/1998 $11,079.20 $11,895.30
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
3/2/98 TO
12/31/98
<S> <C>
- - ----------------------------------------------------------------------
Phoenix Value Equity Series 10.79%
- - ----------------------------------------------------------------------
S&P 500 Index(1) 18.95%
- - ----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 3/2/98.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
(2) The Russell 2000 Index is an unmanaged, commonly used measure of performance
of small stocks. The Index is not available for direct investment.
(3) The S&P 500 Barra Growth Index is an unmanaged, commonly used measure of
large-cap, growth-oriented companies. The Index is not available for direct
investment.
(4) The S&P 500 Barra Value Index is an unmanaged, commonly used measure of
large-cap, value-oriented stocks. The Index is not available for direct
investment.
83
<PAGE>
VALUE EQUITY SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCKS--84.5%
AEROSPACE/DEFENSE--0.3%
Boeing Co. (The).................................................... 1,000 $ 32,625
-----------
BANKS (MAJOR REGIONAL)--1.9%
Bank One Corp....................................................... 2,000 102,125
Wells Fargo & Co.................................................... 2,000 79,875
-----------
182,000
-----------
BANKS (MONEY CENTER)--4.4%
BankAmerica Corp.................................................... 3,200 192,400
Chase Manhattan Corp. (The)......................................... 3,300 224,606
-----------
417,006
-----------
BEVERAGES (ALCOHOLIC)--1.4%
Anheuser-Busch Companies, Inc....................................... 2,000 131,250
-----------
BIOTECHNOLOGY--1.1%
Cell Genesys, Inc. (b).............................................. 18,000 108,000
-----------
COMMUNICATIONS EQUIPMENT--2.9%
Motorola, Inc....................................................... 3,000 183,187
Terayon Communications Systems, Inc. (b)............................ 2,500 92,500
-----------
275,687
-----------
COMPUTERS (HARDWARE)--8.8%
Compaq Computer Corp................................................ 4,800 201,300
Data General Corp. (b).............................................. 8,000 131,500
International Business Machines Corp................................ 1,100 203,225
Sun Microsystems, Inc. (b).......................................... 3,500 299,687
-----------
835,712
-----------
COMPUTERS (NETWORKING)--2.5%
Emulex Corp. (b).................................................... 6,000 240,000
-----------
COMPUTERS (PERIPHERALS)--1.2%
Hutchinson Technology, Inc. (b)..................................... 1,500 53,437
Maxtor Corp. (b).................................................... 4,000 56,000
-----------
109,437
-----------
COMPUTERS (SOFTWARE & SERVICES)--0.8%
Black Box Corp. (b)................................................. 2,000 75,750
-----------
CONSUMER FINANCE--0.6%
Countrywide Credit Industries, Inc.................................. 1,200 60,225
-----------
ELECTRICAL EQUIPMENT--1.6%
Honeywell, Inc...................................................... 2,000 150,625
-----------
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.9%
CHS Electronics, Inc. (b)........................................... 5,000 84,687
-----------
ELECTRONICS (DEFENSE)--0.6%
Raytheon Co. Class B (b)............................................ 1,000 53,250
-----------
ELECTRONICS (SEMICONDUCTORS)--3.6%
Advanced Micro Devices, Inc. (b).................................... 1,500 43,406
Dallas Semiconductor Corp........................................... 3,000 122,250
Intel Corp.......................................................... 1,500 177,844
-----------
343,500
-----------
ENTERTAINMENT--2.3%
Royal Caribbean Cruises Ltd......................................... 3,300 122,100
Walt Disney Co. (The)............................................... 3,300 99,000
-----------
221,100
-----------
FINANCIAL (DIVERSIFIED)--10.9%
American Express Co................................................. 1,400 143,150
Citigroup, Inc...................................................... 4,000 198,000
Fannie Mae.......................................................... 3,000 222,000
Freddie Mac......................................................... 3,000 193,312
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
FINANCIAL (DIVERSIFIED)--CONTINUED
SLM Holding Corp.................................................... 5,800 $ 278,400
-----------
1,034,862
-----------
HEALTH CARE (DIVERSIFIED)--1.3%
Bristol-Myers Squibb Co............................................. 250 33,453
Johnson & Johnson................................................... 1,100 92,262
-----------
125,715
-----------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--1.9%
Lilly (Eli) & Co.................................................... 2,000 177,750
-----------
HEALTH CARE (MANAGED CARE)--1.2%
Foundation Health Systems, Inc Class A (b).......................... 4,200 50,137
Humana, Inc. (b).................................................... 3,500 62,344
-----------
112,481
-----------
INSURANCE (MULTI-LINE)--4.4%
Ambac Financial Group, Inc.......................................... 1,300 78,244
American International Group, Inc................................... 3,000 289,875
CIGNA Corp.......................................................... 700 54,119
-----------
422,238
-----------
INVESTMENT BANKING/BROKERAGE--1.2%
Merrill Lynch & Co., Inc............................................ 1,700 113,475
-----------
LEISURE TIME (PRODUCTS)--0.5%
Mattel, Inc......................................................... 2,200 50,187
-----------
MANUFACTURING (DIVERSIFIED)--1.3%
AlliedSignal, Inc................................................... 1,500 66,469
Illinios Tool Works, Inc............................................ 1,000 58,000
-----------
124,469
-----------
MANUFACTURING (SPECIALIZED)--2.9%
Diebold, Inc........................................................ 7,700 274,794
-----------
OFFICE EQUIPMENT & SUPPLIES--1.9%
Pitney Bowes, Inc................................................... 2,800 184,975
-----------
RAILROADS--0.7%
Union Pacific Corp.................................................. 1,500 67,594
-----------
REITS--1.8%
LaSalle Hotel Properties............................................ 7,500 77,813
Sunstone Hotel Investors, Inc....................................... 10,000 94,375
-----------
172,188
-----------
RESTAURANTS--1.8%
McDonald's Corp..................................................... 2,300 176,238
-----------
RETAIL (GENERAL MERCHANDISE)--1.3%
Dayton Hudson Corp.................................................. 2,200 119,350
-----------
RETAIL (SPECIALTY)--1.4%
Claire's Stores, Inc................................................ 4,400 90,200
Talbots, Inc. (The)................................................. 1,500 47,063
-----------
137,263
-----------
SAVINGS & LOAN COMPANIES--0.7%
Washington Mutual, Inc.............................................. 1,700 64,919
-----------
SERVICES (COMMERCIAL & CONSUMER)--0.6%
C-Cube Microsystems, Inc. (b)....................................... 2,000 54,250
-----------
SERVICES (DATA PROCESSING)--0.9%
First Data Corp..................................................... 2,700 85,556
-----------
SPECIALTY PRINTING--1.0%
World Color Press, Inc. (b)......................................... 3,000 91,313
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.2%
Iridium World Communications Ltd. Class A (b)....................... 3,000 118,688
-----------
</TABLE>
See Notes to Financial Statements
84
<PAGE>
VALUE EQUITY SERIES
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)--5.2%
AT&T Corp........................................................... 3,300 $ 248,325
MCI WorldCom, Inc. (b).............................................. 3,500 251,125
-----------
499,450
-----------
TELEPHONE--3.3%
BellSouth Corp...................................................... 2,600 129,675
GTE Corp............................................................ 2,000 134,875
SBC Communications, Inc............................................. 1,000 53,625
-----------
318,175
-----------
TEXTILES (APPAREL)--0.3%
Supreme International Corp. (b)..................................... 2,000 24,000
-----------
TOBACCO--1.9%
Philip Morris Companies, Inc........................................ 3,400 181,900
-----------
TOTAL COMMON STOCKS
(Identified cost $7,090,148)................................................ 8,052,684
-----------
FOREIGN COMMON STOCKS--2.4%
PERSONAL CARE--1.7%
Unilever NV NY Registered Shares (Netherlands)...................... 2,000 165,875
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.2%
Telesp Celular Participacoes SA ADR (Brazil) (b).................... 1,100 19,250
-----------
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)--0.3%
Embratel Participacoes SA ADR (Brazil) (b).......................... 1,800 $ 25,087
-----------
TELEPHONE--0.2%
Telesp Participacoes SA ADR (Brazil) (b)............................ 900 19,913
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $228,084).................................................. 230,125
-----------
UNIT INVESTMENT TRUSTS--13.4%
AMEX Consumer Staples Select Sector Depository Receipts.............
7,000 190,094
AMEX Financial Select Sector Depository Receipts.................... 12,100 283,594
AMEX Technology Select Sector Depository Receipts................... 11,600 378,450
S&P 500 Depository Receipts......................................... 3,500 430,500
-----------
1,282,638
-----------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $1,250,626)................................................ 1,282,638
-----------
TOTAL INVESTMENTS--100.3%
(Identified cost $8,568,858)................................................ 9,565,447(a)
Cash and receivables, less liabilities--(0.3%).............................. (32,460)
-----------
NET ASSETS--100.0%............................................................ $ 9,532,987
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,283,776 and gross
depreciation of $293,727 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$8,575,398.
(b) Non-income producing.
See Notes to Financial Statements
85
<PAGE>
VALUE EQUITY SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
8,568,858)................................................ $ 9,565,447
Cash........................................................ 5,034
Receivables
Dividends and interest.................................... 10,545
Investment securities sold................................ 8,964
Prepaid expenses............................................ 155
-------------
Total assets............................................ 9,590,145
-------------
LIABILITIES
Payables
Fund shares repurchased................................... 778
Investment advisory fee................................... 17,482
Trustees' fee............................................. 5,000
Financial agent fee....................................... 2,228
Accrued expenses............................................ 31,670
-------------
Total liabilities....................................... 57,158
-------------
NET ASSETS.................................................. $ 9,532,987
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... 8,647,424
Distribution in excess of net investment income........... (388)
Accumulated net realized loss............................. (110,638)
Net unrealized appreciation............................... 996,589
-------------
NET ASSETS.................................................. $ 9,532,987
-------------
-------------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 864,222
-------------
-------------
Net asset value and offering price per share................ $ 11.03
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 62,512
Interest.................................................. 13,297
Foreign taxes withheld.................................... (705)
---------
Total investment income................................. 75,104
---------
EXPENSES
Investment advisory fee................................... 30,941
Financial agent fee....................................... 23,130
Professional.............................................. 13,521
Trustees.................................................. 12,602
Printing.................................................. 12,129
Custodian................................................. 11,840
Miscellaneous............................................. 4,965
---------
Total expenses.......................................... 109,128
Less expense borne by investment adviser................ (71,521)
---------
Net expenses............................................ 37,607
---------
NET INVESTMENT INCOME....................................... 37,497
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (110,638)
Net change in unrealized appreciation (depreciation) on
investments............................................. 996,589
---------
NET GAIN ON INVESTMENTS..................................... 885,951
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 923,448
---------
---------
</TABLE>
See Notes to Financial Statements
86
<PAGE>
VALUE EQUITY SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998 TO
DECEMBER 31,
1998
----------------
<S> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 37,497
Net realized gain (loss).................................. (110,638)
Net change in unrealized appreciation (depreciation)...... 996,589
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 923,448
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (37,497)
In excess of net investment income........................ (388)
----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (37,885)
----------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (990,498 shares)............ 9,960,882
Net asset value of shares issued from reinvestment of
distributions (3,586 shares)............................ 37,885
Cost of shares repurchased (129,862 shares)............... (1,351,343)
----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 8,647,424
----------------
NET INCREASE IN NET ASSETS................................ 9,532,987
NET ASSETS
Beginning of period....................................... --
----------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME OF ($388))............................ $9,532,987
----------------
----------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
12/31/98
--------------
<S> <C>
Net asset value, beginning of
period............................ $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)...... 0.05(3)
Net realized and unrealized gain
(loss).......................... 1.03
-------
TOTAL FROM INVESTMENT
OPERATIONS..................... 1.08
-------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... (0.05)
In excess of net investment
income.......................... --
-------
TOTAL DISTRIBUTIONS............. (0.05)
-------
CHANGE IN NET ASSET VALUE........... 1.03
-------
NET ASSET VALUE, END OF PERIOD...... $11.03
-------
-------
Total return........................ 10.79%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands)....................... $9,533
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses................ 0.85%(1)
Net investment income............. 0.85%(1)
Portfolio turnover rate............. 77%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.13
per share.
See Notes to Financial Statements
87
<PAGE>
SCHAFER MID-CAP VALUE SERIES
INVESTOR PROFILE
The Fund is appropriate for investors seeking long-term capital
appreciation. Investors should note that the Fund may invest in
mid-capitalization stocks, which may involve greater risks, including greater
price volatility, less liquidity and increased competition.
INVESTMENT ADVISER'S REPORT
From the Fund's inception on March 2 through December 31, 1998, the Fund
returned (11.37)% compared with a return of 18.95% for the S&P 500 Index.(1) All
performance figures assume reinvestment of distributions and are net of sales
charges.
The market's strong performance, as measured by the S&P 500's 28.76% return
for the year, masked an important split in the market. Investors pursued safety
in well-known, large-cap companies, while selling small- and mid-cap stocks as
global events raised investors' concerns. Our investment discipline led us to
continue to buy more mid-cap stocks and sell large-cap as we continued to see
their valuations rise. During the reporting period, we sold Progressive Corp.,
Northern Trust and SBC Communications. These positions were replaced with
mid-cap stocks, with price-to-earnings ratios well below market levels.
Not only do these mid-cap stocks trade more cheaply than their large-cap
counterparts, but they also typically have better near-term earnings growth
prospects coupled with less exposure to foreign economies than most large-cap
companies. Unfortunately, thus far, low valuations have not led to
outperformance. It is possible that struggling foreign economies may not worsen,
but it could be a long time before things really start improving for many of the
involved countries and the companies doing business there. For this reason, we
sold Cummins Engine and Asia Pulp & Paper, both companies with significant sales
to Asia.
OUTLOOK
Looking forward, we think the market will continue to react in a volatile
manner to economic news. We also believe the long-running neglect of mid- and
small-cap stocks by investors may soon begin to reverse. We are positioned very
well, in our opinion, to take advantage of such a change in investor sentiment
should it begin.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHAEFER MID-CAP VALUE SERIES S&P 500 INDEX(1)
<S> <C> <C>
03/02/1998 $10,000.00 $10,000.00
12/31/1998 $8,862.77 $11,895.30
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIODS ENDING 12/31/98
FROM
INCEPTION
3/2/98 TO
12/31/98
<S> <C>
- - ----------------------------------------------------------------------
Schafer Mid-Cap Value Series (11.37 )%
- - ----------------------------------------------------------------------
S&P 500 Index(1) 18.95%
- - ----------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 3/2/98.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
88
<PAGE>
SCHAFER MID CAP VALUE SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCKS--81.5%
AIR FREIGHT--3.6%
FDX Corp.(b)........................................................ 3,200 $ 284,800
-----------
AUTO PARTS & EQUIPMENT--2.7%
Borg-Warner Automotive, Inc......................................... 3,800 212,087
-----------
AUTOMOBILES--2.2%
Ford Motor Co....................................................... 3,000 176,062
-----------
BANKS (MAJOR REGIONAL)--4.9%
Mellon Bank Corp.................................................... 2,800 192,500
Summit Bancorp...................................................... 4,500 196,594
-----------
389,094
-----------
BANKS (MONEY CENTER)--5.0%
BankAmerica Corp.................................................... 2,800 168,350
Chase Manhattan Corp. (The)......................................... 3,300 224,606
-----------
392,956
-----------
BUILDING MATERIALS--9.1%
Armstrong World Industries, Inc..................................... 3,100 186,969
Lafarge Corp........................................................ 5,100 206,550
Owens Corning....................................................... 4,100 145,294
Southdown, Inc...................................................... 3,000 177,562
-----------
716,375
-----------
COMPUTERS (PERIPHERALS)--2.7%
Storage Technology Corp.(b)......................................... 5,900 209,819
-----------
ELECTRICAL EQUIPMENT--2.1%
Harman International Industries, Inc................................ 4,400 167,750
-----------
ELECTRONICS (COMPONENT DISTRIBUTORS)--6.9%
Arrow Electronics, Inc.(b).......................................... 11,100 296,231
Avnet, Inc.......................................................... 4,100 248,050
-----------
544,281
-----------
FOODS--2.6%
IBP, Inc............................................................ 7,100 206,788
-----------
HOMEBUILDING--3.1%
Champion Enterprises, Inc.(b)....................................... 9,000 246,375
-----------
INSURANCE (MULTI-LINE)--4.8%
Berkley (W.R.) Corp................................................. 5,500 187,344
Old Republic International Corp..................................... 8,500 191,250
-----------
378,594
-----------
INVESTMENT BANKING/BROKERAGE--5.9%
Merrill Lynch & Co., Inc............................................ 3,800 253,650
Paine Webber Group, Inc............................................. 5,400 208,575
-----------
462,225
-----------
IRON & STEEL--2.2%
UCAR International, Inc.(b)......................................... 9,600 171,000
-----------
METALS MINING--2.5%
Cleveland-Cliffs, Inc............................................... 4,800 193,500
-----------
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)--4.6%
Diamond Offshore Drilling, Inc...................................... 8,400 $ 198,975
R&B Falcon Corp.(b)................................................. 21,800 166,225
-----------
365,200
-----------
OIL & GAS (REFINING & MARKETING)--2.2%
Sunoco, Inc......................................................... 4,800 173,100
-----------
OIL (DOMESTIC INTEGRATED)--2.2%
Phillips Petroleum Co............................................... 4,100 174,763
-----------
RAILROADS--5.0%
Burlington Northern Santa Fe Corp................................... 5,400 182,250
Kansas City Southern Industries, Inc................................ 4,400 216,425
-----------
398,675
-----------
RETAIL (SPECIALTY)--2.4%
Jo-Ann Stores, Inc. Class A(b)...................................... 11,700 188,663
-----------
SERVICES (COMMERCIAL & CONSUMER)--2.1%
Western Resources, Inc.............................................. 5,000 166,250
-----------
TELEPHONE--2.7%
GTE Corp............................................................ 3,200 215,800
-----------
TOTAL COMMON STOCKS
(Identified cost $6,477,092)................................................ 6,434,157
-----------
FOREIGN COMMON STOCKS--18.3%
AIRLINES--2.6%
KLM Royal Dutch Airlines NV NY Registered Shares (Netherlands)......
6,900 207,000
-----------
BANKS (MAJOR REGIONAL)--2.3%
National Bank of Canada (Canada).................................... 11,400 184,110
-----------
HOUSEHOLD FURNITURE & APPLIANCES--2.5%
Koninklijke (Royal) Philips Electronics NV NY Registered Shares
(Netherlands)..................................................... 2,900 196,294
-----------
INSURANCE (MULTI-LINE)--2.2%
PartnerRe Ltd. (Bermuda)............................................ 3,800 173,850
-----------
MACHINERY (DIVERSIFIED)--2.3%
New Holland NV (Netherlands)........................................ 13,500 184,781
-----------
METALS MINING--1.5%
Inco Ltd. (Canada).................................................. 10,900 115,131
-----------
OIL & GAS (EXPLORATION & PRODUCTION)--4.9%
Petroleum Geo-Services Sponsored ADR (Norway)(b).................... 13,300 209,475
Repsol SA Sponsored ADR (Spain)..................................... 3,200 174,800
-----------
384,275
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,674,963)................................................ 1,445,441
-----------
TOTAL INVESTMENTS--99.8%
(Identified cost $8,152,055)................................................ 7,879,598(a)
Cash and receivables, less liabilities--0.2%................................ 15,994
-----------
NET ASSETS--100.0%............................................................ $ 7,895,592
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $737,204 and gross
depreciation of $1,009,661 for federal income tax purposes. At December 31,
1998, the aggregate cost of securities for federal income tax purposes was
$8,152,055.
(b) Non-income producing.
See Notes to Financial Statements
89
<PAGE>
SCHAFER MID-CAP VALUE SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value (Identified cost
$8,152,055)............................................... $7,879,598
Cash........................................................ 82,965
Receivables
Dividends and interest.................................... 8,606
Prepaid expenses............................................ 141
----------
Total assets............................................ 7,971,310
----------
LIABILITIES
Payables
Fund shares repurchased................................... 7,980
Investment advisory fee................................... 25,669
Trustees' fee............................................. 5,044
Financial agent fee....................................... 3,725
Accrued expenses.......................................... 33,300
----------
Total liabilities....................................... 75,718
----------
NET ASSETS.................................................. $7,895,592
----------
----------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest.......... $8,509,731
Distributions in excess of net investment income.......... (118)
Accumulated net realized loss............................. (341,564)
Net unrealized depreciation............................... (272,457)
----------
NET ASSETS.................................................. $7,895,592
----------
----------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization................................... 893,567
----------
----------
Net asset value and offering price per share................ $ 8.84
-----
-----
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 2, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends................................................. $ 69,321
Interest.................................................. 8,433
Foreign taxes withheld.................................... (1,356)
----------
Total investment income................................. 76,398
----------
EXPENSES
Investment advisory fee................................... 46,644
Financial agent fee....................................... 24,098
Professional.............................................. 13,507
Trustees.................................................. 12,647
Printing.................................................. 12,041
Custodian................................................. 9,623
Miscellaneous............................................. 4,758
----------
Total expenses.......................................... 123,318
Less expenses borne by investment adviser............... (69,977)
----------
Net expenses............................................ 53,341
----------
NET INVESTMENT INCOME....................................... 23,057
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities........................... (341,564)
Net change in unrealized appreciation (depreciation) on
investments............................................. (272,457)
----------
NET LOSS ON INVESTMENTS..................................... (614,021)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (590,964)
----------
----------
</TABLE>
See Notes to Financial Statements
90
<PAGE>
SCHAFER MID-CAP VALUE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
MARCH 2, 1998
TO
DECEMBER 31,
1998
--------------
<S> <C>
FROM OPERATIONS
Net investment income (loss).............................. $ 23,057
Net realized gain (loss).................................. (341,564)
Net change in unrealized appreciation (depreciation)...... (272,457)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS...... (590,964)
--------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income..................................... (23,057)
In excess of net investment income........................ (118)
--------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS............................................ (23,175)
--------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (1,051,036 shares).......... 9,921,823
Net asset value of shares issued from reinvestment of
distributions (2,696 shares)............................ 23,175
Cost of shares repurchased (160,165 shares)............... (1,435,267)
--------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS............ 8,509,731
--------------
NET INCREASE IN NET ASSETS................................ 7,895,592
NET ASSETS
Beginning of period....................................... 0
--------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME OF ($118))............................ $ 7,895,592
--------------
--------------
</TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
FROM INCEPTION
3/2/98 TO
12/31/98
--------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).............................. 0.03(3)(4)
Net realized and unrealized gain (loss)................... (1.16)
-------
TOTAL FROM INVESTMENT OPERATIONS........................ (1.13)
-------
LESS DISTRIBUTIONS
Dividends from net investment income...................... (0.03)
In excess of net investment income........................ --
-------
TOTAL DISTRIBUTIONS..................................... (0.03)
-------
CHANGE IN NET ASSET VALUE................................... (1.16)
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 8.84
-------
-------
Total return................................................ (11.37)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)....................... $ 7,896
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses........................................ 1.20%(1)
Net investment income..................................... 0.52%(1)
Portfolio turnover rate..................................... 21%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of $0.11
per share.
(4) Computed using average shares outstanding.
See Notes to Financial Statements
91
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 subaccounts 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.
On September 1, 1998, the Central Bank of Malaysia, announced measures that
significantly restrict the rights of non-residents with respect to
transactions in Malaysian securities with the intention to insulate Malaysia
from the problems confronting the international financial markets.
92
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Beginning September 1, 1998 the Malaysian government fixed the exchange rate
of its currency, the Ringgit, at 3.80 Ringgit equal to US$1.00 and adopted
stringent controls over currency and stock trading which had the effect of
forcing all offshore holdings of Malaysian currency and securities back into
the country. In addition, the government suspended foreign investors' ability
to convert proceeds from the sale of Malaysian securities into foreign
currency for one year from the date of initial purchase, with repatriation of
the proceeds from the sale of all securities held at September 1, 1998
prohibited for one year. As a result of the imposition of the above
restrictions over currency and stock trading, the Fund's Board of Trustees
have deemed all holdings of the Fund in Malaysian securities as illiquid and
have fair valued holdings in such securities using an exchange rate of 4.56
Ringgit equal to US$1.00. At December 31, 1998, investments in Malaysia for
the International Series aggregating $522,764 (0.2% of net assets) and for
the Aberdeen New Asia Series aggregating $546,904 (5.75% of net assets) have
been fair valued in good faith by, or under the direction of, the Fund's
Board of Trustees.
B. SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified. 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.
93
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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, 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%
Growth............................................ 0.70 0.65 0.60
Multi-Sector Fixed Income......................... 0.50 0.45 0.40
Strategic Allocation.............................. 0.60 0.55 0.50
International..................................... 0.75 0.70 0.65
Balanced.......................................... 0.55 0.50 0.45
Strategic Theme................................... 0.75 0.70 0.65
Aberdeen New Asia................................. 1.00 1.00 1.00
Enhanced Index.................................... 0.45 0.45 0.45
Engemann Nifty Fifty.............................. 0.90 0.85 0.80
Seneca Mid-Cap Growth............................. 0.80 0.80 0.80
Growth and Income................................. 0.70 0.65 0.60
Value Equity...................................... 0.70 0.65 0.60
Schafer Mid-Cap Value............................. 1.05 1.05 1.05
<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>
94
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Phoenix Investment Council ("PIC") is adviser to each Series except the Real
Estate Series and Aberdeen New Asia Series. Pursuant to a subadvisory
agreement with the Fund, 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 Growth Series............................. Seneca Capital Management, LLC ("Seneca")
Schafer Mid-Cap Value 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 Growth Series.
In accordance with the subadvisory agreement with the 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 Value Series up to
$175 million and .80% of such value in excess of $175 million.
Effective November 24, 1998, Aberdeen Fund Managers, Inc. ("Aberdeen") was
appointed subadvisor to the International Series. For its services, Aberdeen
is paid a fee by the Advisers equal to 0.375% of the average daily net assets
of the International Series up to $250 million, 0.35% of such value between
$250 million to $500 million and 0.325% of such value in excess of $500
million. Aberdeen is a subsidiary of Aberdeen Asset Management PLC, of which
PHL owns approximately 11%.
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, received
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.
95
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
At December 31, 1998, PHL and affiliates held shares in The Phoenix Edge
Series Fund which had the following aggregate value:
<TABLE>
<S> <C>
Real Estate Series............................... $ 3,313,172
Aberdeen New Asia Series......................... 1,885,989
Engemann Nifty Fifty Series...................... 2,499,272
Seneca Mid-Cap Growth Series..................... 2,388,100
Growth and Income Series......................... 2,384,514
Value Equity Series.............................. 2,197,472
Schafer Mid-Cap Value Series..................... 1,754,054
</TABLE>
NOTE 4--PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities during the period ended December 31, 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.......................... $1,623,280,248 $1,619,706,351
Multi-Sector Fixed Income Series....... 233,895,415 197,086,009
Strategic Allocation Series............ 529,142,388 502,610,192
International Series................... 202,357,792 214,439,616
Balanced Series........................ 282,447,552 258,900,399
Real Estate Series..................... 7,732,285 9,846,099
Strategic Theme Series................. 195,397,197 185,996,003
Aberdeen New Asia Series............... 4,993,427 3,959,516
Research Enhanced Index Series......... 46,318,196 20,947,863
Engemann Nifty Fifty Series............ 17,010,118 6,080,962
Seneca Mid-Cap Growth Series........... 12,295,627 5,596,788
Growth and Income Series............... 53,386,812 16,444,743
Value Equity Series.................... 12,958,808 4,279,319
Schafer Mid-Cap Value Series........... 9,669,802 834,650
</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 December 31, 1998 aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Multi-Sector Fixed Income Series..... $91,713,764 $110,151,084
Strategic Allocation Series.......... 24,650,801 51,883,816
Balanced Series...................... 59,109,060 56,841,567
</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.
Written call option activity for the year ended December 31, 1998 aggregated
the following:
<TABLE>
<CAPTION>
GROWTH AND INCOME
SERIES
-------------------
AMOUNT
# OF OF
OPTIONS PREMIUMS
-------- --------
<S> <C> <C>
Options outstanding at December 31,
1997............................... -- $ --
Options written...................... 70 11,727
Options canceled in closing purchase
transactions....................... -- --
Options expired...................... (48) (7,393)
Options exercised.................... (22) (4,334)
--
--------
Options outstanding at December 31,
1998............................... -- --
--
--
--------
--------
</TABLE>
At December 31, 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.............. 2 $ 578,475 $ 622,750 $44,275
Standard & Poor's 500 Index.............. 1 298,575 311,375 12,800
Standard & Poor's 500 Index.............. 1 305,500 311,375 5,875
--- ---------- ---------- ------------
4 $1,182,550 $1,245,500 $62,950
--- ---------- ---------- ------------
--- ---------- ---------- ------------
</TABLE>
96
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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
owed 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. When the Fund purchases
assignments from lenders it acquires direct rights against the borrower on
the loan. Direct indebtedness of emerging countries involves a risk that the
government entities responsible for the repayment of the debt may be unable,
or unwilling to pay the principal and interest when due.
NOTE 7--CAPITAL LOSS CARRYOVERS
At December 31, 1998, the following Series have capital loss carryforwards
which may be used to offset future capital gains.
<TABLE>
<S> <C>
Multi-Sector Fixed Income Series....... $ 566,989
Real Estate Series..................... 113,500
Aberdeen New Asia Series............... 2,887,698
Engemann Nifty Fifty Series............ 4,085
Seneca Mid-Cap Growth Series........... 164,133
Growth and Income Series............... 349,419
Value Equity Series.................... 104,098
Schafer Mid-Cap Value Series........... 285,733
</TABLE>
Capital loss carryforwards expire in 2006 for all Series except for Aberdeen
New Asia Series which expires as follows: $143,419 in 2005 and $2,744,279 in
2006.
Under current tax law, capital and foreign currency losses realized after
October 31, 1998 may be deferred and treated as occurring on the first day of
the following tax year. For the calendar year ended December 31, 1998 the
Aberdeen New Asia Series, Multi-Sector Fixed Income Series, and Schafer
Mid-Cap Growth Series elected to defer losses occurring between November 1,
1998 and December 31, 1998 in the amount of $496,277, $5,850,282, and
$55,831, respectively. In addition, the International Series, Aberdeen New
Asia Series, Growth Series and Strategic Theme Series were able to utilize
losses deferred in the prior year in the amount of $761,290, $379,802, $1,144
and $1,280,577, respectively.
NOTE 8--RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Series have recorded
several reclassifications in the capital accounts. These reclassifications
have no impact on the net asset value of the Series and are designed
generally to present undistributed net investment income and realized gains
on a tax basis which is considered to be more informative to the shareholder.
As of December 31, 1998, the Series recorded the following reclassifications
to increase (decrease) the accounts listed below:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET CAPITAL PAID IN ON
NET INVESTMENT REALIZED SHARE OF BENEFICIAL
INCOME (LOSS) GAIN (LOSS) INTEREST
-------------- ----------- -------------------
<S> <C> <C> <C>
Multi-Sector Fixed Income Series.................. $ 185,299 $ (20,925) $(164,374)
Strategic Allocation Series....................... 3,389 (3,389) --
International Series.............................. 1,020,757 (1,020,757) --
Balanced Series................................... 7,308 (7,308) --
Strategic Theme Series............................ 5,345 (5,345) --
Aberdeen New Asia Series.......................... 98,695 (98,695) --
Engemann Nifty-Fifty Series....................... 1,543 -- (1,543)
Growth and Income Series.......................... (257) 257 --
</TABLE>
97
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
TAX INFORMATION NOTICE (UNAUDITED)
For the fiscal year ended December 31, 1998, the following Series
distributed long-term capital gain dividends as follows:
<TABLE>
<CAPTION>
TOTAL LONG-TERM
DISTRIBUTIONS
---------------
<S> <C>
Growth Series..................................... $29,385,512
Multi-Sector Fixed Income Series.................. 788,837
Strategic Allocation Series....................... 562,474
International Series.............................. 22,045,574
Balanced Series................................... 3,589,015
Real Estate Securities Series..................... 26,597
Research Enhanced Index Series.................... 620,322
</TABLE>
This report is not authorized for distribution to prospective investors in The
Phoenix Edge Series Fund unless preceded or accompanied by and effective
Prospectus which includes information concerning the sales charges, Fund's
record and other pertinent information.
98
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
TO THE SHAREHOLDERS AND TRUSTEES OF
THE PHOENIX EDGE SERIES FUND
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Money Market Series, Growth Series, Multi-Sector Fixed Income Series,
Strategic Allocation Series, International Series, Balanced Series, Real Estate
Securities Series, Strategic Theme Series, Aberdeen New Asia Series, Research
Enhanced Index Series, Engemann Nifty Fifty Series, Seneca Mid-Cap Growth
Series, Growth and Income Series, Value Equity Series, and Schafer Mid-Cap Value
Series (constituting the Phoenix Edge Series Fund, hereafter referred to as the
"Fund") at December 31, 1998, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodians and brokers, provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
<PAGE>
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
MEETING 1: A special meeting of Shareholders of the Phoenix Aberdeen New Asia
Series of The Phoenix Edge Series Fund was held on October 21, 1998 to approve
the following matters:
1. Approval of an advisory agreement with Phoenix-Aberdeen International
Advisors LLC.
2. Approval of a subadvisory agreement with Aberdeen Fund Managers, Inc.
3. Approval of a subadvisory agreement with Phoenix Investment Counsel, Inc.
On the record date for this meeting there were 1,542,936 shares outstanding
and 100% of the shares outstanding and entitled to vote were present by proxy.
NUMBER OF VOTES
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- --------- ---------
<S> <C> <C> <C>
1. Approval of investment advisory agreement 1,331,496 84,905 126,535
2. Approval of investment subadvisory agreement 1,326,736 85,559 130,641
3. Approval of investment subadvisory agreement 1,339,160 78,984 124,792
</TABLE>
MEETING 2: A special meeting of Shareholders of the Phoenix Edge Series Fund was
held on November 24, 1998 to approve the following matters:
1. Fix the number of trustees at twelve and elect such number as detailed below.
2. Ratify selection of PricewaterhouseCoopers LLP, independent accountants, as
auditors for the fiscal year ending
December 31, 1998.
3. Approval of a subadvisory agreement with Aberdeen Fund Managers, Inc.
(International Series only)
On the record date for this meeting, for the Phoenix Edge Series Fund, there
were 195,708,457 shares outstanding and 100% of the shares outstanding and
entitled to vote were present by proxy. For the International Series, there were
13,164,334 shares outstanding and 100% of the shares outstanding and entitled to
vote were present by proxy.
NUMBER OF VOTES:
<TABLE>
<CAPTION>
FOR WITHHELD
------------- ----------
<S> <C> <C> <C>
1. Election of Trustees
Robert Chesek 187,977,973 7,703,484
E. Virgil Conway 187,762,694 7,945,763
Harry Dalzell-Payne 187,684,410 8,024,047
Francis E. Jeffries 187,938,831 7,769,626
Leroy Keith, Jr. 188,134,540 7,573,917
Philip R. McLoughlin 188,173,681 7,534,776
Everett L. Morris 187,938,831 7,769,626
James M. Oates 188,154,111 7,554,346
Calvin J. Pedersen 188,173,681 7,534,776
Herbert Roth, Jr. 187,860,548 7,847,909
Richard E. Segerson 188,154,111 7,554,346
Lowell P. Weicker, Jr. 187,136,427 8,572,030
FOR AGAINST ABSTAIN
------------- ---------- ----------
2. PricewaterhouseCoopers LLP 188,545,527 1,741,805 5,421,124
FOR AGAINST ABSTAIN
------------- ---------- ----------
3. Approval of investment subadvisory agreement 11,596,462 667,432 900,400
</TABLE>
<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
David K. Schafer, Senior Vice President
Gail P. Seneca, 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
Ron K. Jacks, Vice President
John D. Kattar, Vice President
Christopher J. Kelleher, Vice President
Richard D. Little, Vice President
James E. Mair, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Julie L. Sapia, Vice President
Michael Schatt, Vice President
John S. Tilson, 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
P.O. Box 351
Boston, Massachusetts 02101
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
