<PAGE>
PHOENIX INVESTMENT PARTNERS
OCTOBER 31, 1998
ANNUAL REPORT
- Phoenix Multi-Sector
Fixed Income Fund, Inc.
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
Mutual funds are not insured by the FDIC; are not
deposits or other obligations of a bank and are not
guaranteed by a bank; and are subject to
investment risks, including possible loss of the
principal invested.
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR SHAREHOLDER:
[PHOTO]
The 12 months ended October 31, 1998 were a particularly difficult time for
funds that invest in emerging markets. While problems in Russia were the
catalyst for the sudden drop in the value of emerging-markets debt, virtually
every country -- both developed and emerging -- was negatively affected on a
relative basis.
During periods of market extremes, we believe that by remaining true to our
discipline of focusing on the most undervalued sectors, we will continue to add
value for our shareholders over the long term. We believe that our disciplined
approach and past experience in investing during difficult markets will lead us
to the most attractive long-term opportunities. Of course, past performance is
no guarantee of future results.
On the following page, your Fund manager reviews the market environment during
this reporting period and offers his outlook for the next six months. We hope
you find his comments informative. If you have any questions, please contact
your financial advisor or call us toll-free at 1-800-243-1574.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
December 8, 1998
1
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, DAVID L. ALBRYCHT, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund is appropriate for moderate risk investors seeking to maximize
current income consistent with preservation of capital by investing in a broadly
diversified bond fund. Investors should note that foreign investments pose added
risks, such as currency fluctuation, less public disclosure, and political and
economic uncertainty, and that 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.
Q: HOW HAS THE FUND PERFORMED OVER THE LAST FISCAL YEAR?
A: For the 12 months ended October 31, 1998, Class A shares returned (6.86)%,
Class B shares returned (7.51)% and Class C shares returned (7.36)% compared
with a return of 9.34% for the Lehman Brothers Aggregate Bond Index.(1) In
contrast, the J.P. Morgan Emerging Market Bond Index Plus(2) was down 10.11% for
the year ended October 31, 1998. All performance figures assume reinvestment of
distributions and exclude the effect of sales charges.
Q: WHAT FACTORS AFFECTED PERFORMANCE?
A: 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.
Q: WHAT IS YOUR CURRENT STRATEGY?
A: 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 a well-diversified portfolio (investing
across 12 market sectors), with exposure to more credit-sensitive sectors, which
we perceive to be considerably undervalued.
Q: WHAT IS YOUR OUTLOOK?
A: 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.
NOVEMBER 12, 1998
(1) THE LEHMAN BROTHERS AGGREGATE BOND 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.
2
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 10/31/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEARS TO 10/31/1998 DATES
------ ------- ------------- ----------
<S> <C> <C> <C> <C>
Class A Shares at NAV(2) (6.86)% 4.68% 9.23% 12/18/89
Class A Shares at POP(3) (11.26) 3.67 8.64 12/18/89
Class B Shares at NAV(2) (7.51) 3.91 6.52 1/3/92
Class B Shares with CDSC(4) (10.70) 3.91 6.52 1/3/92
Class C Shares at NAV(2) (7.36) -- (11.49) 10/14/97
Class C Shares with CDSC(4) (7.36) -- (11.49) 10/14/97
Lehman Brothers Aggregate Bond Index(7) 9.34 7.02 -- Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and Capital Gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (Contingent Deferred Sales Charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied
at the time of purchase. CDSC charges for B shares decline from 5% to 0%
over a 5-year period. CDSC charges for C shares are 1% in the first
year and 0% thereafter.
(5) Index performance is 8.75% for Class A (since 12/31/89), 7.69% for
Class B (since 12/31/91) and 9.34% for Class C (since 10/31/97)
respectively.
(6) This chart illustrates POP returns on Class A. Returns on Class B and
C shares will vary due to differing sales charges.
(7) The Lehman Brothers Aggregate Bond Index is an unmanaged, commonly used
measure of broad bond market total return performance. The Index's
performance does not reflect sales charges.
All returns represent past performance which may not be indicative of future
performance. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 10/31
<TABLE>
<CAPTION>
Phoenix
Lehman Brothers Multi-Sector
Aggregate Fixed Income-
Bond Index(7) Class A(6)
--------------- --------------
<S> <C> <C>
12/31/89 $10,000 $9,528
10/31/90 $10,503 $9,704
10/31/91 $12,164 $12,378
10/31/92 $13,359 $14,125
10/31/93 $14,946 $16,605
10/31/94 $14,397 $15,845
10/31/95 $16,650 $18,035
10/31/96 $17,624 $20,515
10/31/97 $19,191 $22,405
10/31/98 $20,982 $20,869
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
12/18/89 in Class A shares and reflects the maximum sales charge of 4.75% on
the initial investment. Performance assumes dividends and capital gains are
reinvested. The performance of other share classes will be greater or less
than that shown based on differences in inception dates, fees and sales
charges.
<TABLE>
<CAPTION>
SECTOR WEIGHTINGS 10/31/98
<S> <C>
As a percentage of bond holdings
Foreign Government 33%
Non-Agency Mortgage 28%
Corporate 22%
Foreign Corporate 9%
Municipal 5%
Asset-Backed 1%
Foreign Convertible 1%
U.S. Government 1%
</TABLE>
3
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
TEN LARGEST HOLDINGS AT OCTOBER 31, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Poland PDI Bearer 3.6%
FOREIGN GOVERNMENT SECURITY
2. Republic of Brazil C Bond 3.0%
FOREIGN GOVERNMENT SECURITY
3. ContiMortgage Home Equity Loan Trust 3.0%
NON-AGENCY MORTGAGE-BACKED SECURITY
4. Middletown Trust Notes 2.4%
INSURANCE INDUSTRY CORPORATE BOND
5. Republic of Bulgaria IAB Series 2.4%
FOREIGN GOVERNMENT SECURITY
6. CS First Boston Mortgage Securities 2.0%
NON-AGENCY MORTGAGE-BACKED SECURITY
7. Structured Asset Securities Corp., 93-C1 1.9%
NON-AGENCY MORTGAGE-BACKED SECURITY
8. United Mexican States, 5/15/26 1.8%
FOREIGN GOVERNMENT SECURITY
9. Structured Asset Securities Corp., 95-C1 1.8%
NON-AGENCY MORTGAGE-BACKED SECURITY
10. Criimi Mae Trust I 1.8%
NON-AGENCY MORTGAGE-BACKED SECURITY
</TABLE>
INVESTMENTS AT OCTOBER 31, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--0.6%
U.S. TREASURY NOTES--0.6%
U.S. Treasury Notes 5.25%,
8/15/03......................... AAA $ 500 $ 521,852
U.S. Treasury Notes 5.625%,
5/15/08......................... AAA 1,000 1,077,583
--------------
1,599,435
--------------
- ---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $1,605,677) 1,599,435
- ---------------------------------------------------------------------------
MUNICIPAL BONDS--5.2%
CALIFORNIA--0.2%
Fresno California Pension
Obligation 7.80%, 6/1/14........ AAA 500 584,375
FLORIDA--1.7%
Palm Beach Waste Revenue Project
B Taxable 10.50%, 1/1/11(i)..... NR 3,750 2,925,000
University of Miami Exchangeable
Revenue Series A Taxable 7.65%,
4/1/20.......................... AAA 1,965 2,127,112
--------------
5,052,112
--------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
ILLINOIS--0.7%
Illinois Educational Facilities
Authority Revenue - Loyola
University Series A Taxable
7.84%, 7/1/24................... AAA $ 1,800 $ 2,011,500
PENNSYLVANIA--1.8%
Pennsylvania Economic
Development 9.50%,
1/1/12(i)(j).................... NR 3,500 1,995,000
Pittsburgh Taxable Pension
General Obligation 6.35%,
3/1/13.......................... AAA 3,000 3,172,500
--------------
5,167,500
--------------
WASHINGTON--0.8%
Snohomish County School District
5%, 12/1/08..................... AAA 2,000 2,190,000
- ---------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $16,192,981) 15,005,487
- ---------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.7%
Green Tree Financial Corp. 94-1,
B2 7.85%, 4/15/19............... Baa(c) 2,000 2,007,500
- ---------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $2,062,364) 2,007,500
- ---------------------------------------------------------------------------
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
CORPORATE BONDS--22.2%
AEROSPACE/DEFENSE--0.4%
BE Aerospace 144A 9.50%,
11/1/08(b)...................... B $ 1,000 $ 1,030,000
AUTO PARTS & EQUIPMENT--0.7%
Titan Tire 7%, 2/11/00.......... NR 2,000 1,920,000
BROADCASTING (TELEVISION, RADIO & CABLE)--3.1%
CBS Radio, Inc. 11.375%,
1/15/09......................... NR 2,000 2,310,000
Fox Family Worldwide, Inc. 0%,
11/1/07(d)...................... B 3,615 2,169,000
Fox/Liberty Networks LLC 0%,
8/15/07(d)...................... B 2,500 1,618,750
Fox/Liberty Networks LLC 8.875%,
8/15/07......................... B 3,000 2,917,500
--------------
9,015,250
--------------
BUILDING MATERIALS--0.7%
Nortek, Inc. 9.875%, 3/1/04..... B- 2,000 1,970,000
GAMING, LOTTERY & PARIMUTUEL COMPANIES--2.5%
Horseshoe Gaming LLC Series B,
12.75%, 9/30/00................. BB- 1,500 1,590,000
Majestic Star Casino LLC 12.75%,
5/15/03......................... B 1,000 1,030,000
Mashantucket Pequot 144A 6.91%,
9/1/12(b)....................... AAA 1,400 1,513,750
Station Casinos, Inc. 10.125%,
3/15/06......................... B+ 3,000 2,985,000
--------------
7,118,750
--------------
INSURANCE (MULTI-LINE)--2.4%
Middletown Trust Notes Series C,
11.75%, 7/15/10(k).............. A+ 6,782 7,000,000
MANUFACTURING (SPECIALIZED)--0.5%
Collins & Aikman Products
11.50%, 4/15/06................. B 1,500 1,552,500
METALS MINING--0.3%
NSM Steel Ltd. 144A 12%,
2/1/06(b)....................... B- 2,800 756,000
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
PERSONAL CARE--2.1%
Bally Total Fitness Holding
Corp. Series B, 9.875%,
10/15/07........................ B- $ 2,750 $ 2,530,000
Revlon Consumer Products 8.625%,
2/1/06.......................... B- 3,790 3,420,475
--------------
5,950,475
--------------
RAILROADS--0.9%
American Commercial Lines LLC
144A 10.25%, 6/30/08(b)......... B 2,650 2,573,813
SERVICES (COMMERCIAL & CONSUMER)--0.0%
ARA Services, Inc. 10.625%,
8/1/00.......................... BBB- 54 57,240
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.5%
American Cellular Corp. 144A
10.50%, 5/15/08(b).............. CCC+ 2,500 2,375,000
Comcast Cellular Series B 9.50%,
5/1/07.......................... BB+ 1,900 1,966,500
--------------
4,341,500
--------------
TELECOMMUNICATIONS (LONG DISTANCE)--1.9%
RCN Corp. 0%, 10/15/07(d)....... B(c) 2,000 1,040,000
RCN Corp. Series B 0%,
2/15/08(d)...................... B(c) 9,000 4,320,000
--------------
5,360,000
--------------
TELEPHONE--3.4%
FirstCom, Corp. 144A 14%,
10/27/07(b)..................... NR 3,930 2,063,250
ICG Holdings, Inc. 0%,
9/15/05(d)...................... NR 2,100 1,617,000
Intermedia Communication 0%,
7/15/07(d)...................... B 2,400 1,620,000
Teligent, Inc. 11.50%,
12/1/07......................... CCC 3,330 2,763,900
Teligent, Inc. Series B 0%,
3/1/08(d)....................... CCC 3,500 1,540,000
--------------
9,604,150
--------------
TRUCKERS & MARINE--1.8%
Hvide Marine, Inc. 8.375%,
2/15/08......................... BB- 2,500 1,925,000
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
TRUCKERS & MARINE--CONTINUED
Sea Containers 7.875%,
2/15/08......................... BB- $ 3,500 $ 3,311,875
--------------
5,236,875
--------------
- ---------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $71,884,954) 63,486,553
- ---------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES--27.7%
BTC Mortgage Investors Trust
97-S1, D 144A 6.95%,
12/31/09(b)..................... BBB 3,000 3,000,000
ContiMortgage Home Equity Loan
Trust 98-1, B 7.86%, 4/15/29.... BBB- 8,495 8,548,094
Criimi Mae Trust I 96-C1, A2
144A 7.56%, 6/30/33(b).......... BBB 5,125 5,099,375
CS First Boston Corp. 97-SPCE, D
144A 7.332%, 4/20/08(b)......... BBB(c) 4,928 4,998,840
CS First Boston Corp. 98-C1, A1B
6.48%, 5/17/08.................. AAA 5,000 5,073,437
CS First Boston Mortgage
Securities 97-1R, 1M4 144A
7.312%, 2/28/22(b).............. Baa(c) 5,977 5,607,161
DLJ Mortgage Acceptance Corp.
97-CF2, B1 144A 7.14%,
11/15/08(b)..................... BBB- 3,900 3,630,656
First Boston Mortgage Securities
Corp. 93-5 B2 7.30%, 7/25/23.... A+(c) 3,248 3,198,484
First Chicago/Lennar Trust
97-CHL1, D 144A 8.11%,
5/29/08(b)...................... BB(c) 4,000 3,767,500
First Union Lehman Brothers Bank
of America 6.778%, 11/15/35..... BBB 3,000 2,898,750
General Growth Properties 97-1
D2 144A 6.992%, 11/10/07(b)..... Baa(c) 5,000 4,668,750
Norwest Asset Securities Corp.
96-3 B1 7.25%, 9/25/26.......... A(c) 3,435 3,478,218
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
Norwest Asset Securities Corp.
96-3, B2 7.25%, 9/25/26......... BBB(c) $ 2,144 $ 2,127,356
Prudential Home Mortgage
Securities 93-L, 3B2 144A
6.641%, 12/25/23(b)............. NR 4,770 4,692,487
Resolution Trust Corp. 92-C3, B
9.05%, 8/25/23.................. AA 2,071 2,018,741
Ryland Mortgage Securities Corp.
III 92-A, 1A 8.259%, 3/29/30.... A- 316 300,175
Structured Asset Securities
Corp. 95-C1, D 7.375%,
9/25/24......................... BBB 5,110 5,102,016
Structured Asset Securities
Corp. 93-C1, B 6.60%,
10/25/24........................ A+ 5,250 5,314,401
Team Fleet Financing Corp. 96-1,
B 144A 7.10%, 12/15/02(b)....... BBB 3,000 2,976,562
Wilshire Funding Corp. 97-WFC1,
M3 7.25%, 8/25/27............... Baa(c) 3,424 2,913,346
- ---------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $79,531,451) 79,414,349
- ---------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES--32.8%
ALGERIA--0.2%
Algeria Tranch 1 Loans 6.375%,
4/9/09(d)....................... NR 1,364 647,727
ARGENTINA--6.5%
Republic of Argentina RegS
8.75%, 7/10/02.................. BBB- 3,200(g) 2,528,000
Republic of Argentina 9.75%,
9/19/27......................... BB 2,775 2,410,781
Republic of Argentina RegS
11.75%, 2/12/07................. BBB- 3,500(g) 2,866,485
Republic of Argentina 144A
11.75%, 2/12/07(b).............. BBB- 3,000(g) 2,456,987
Republic of Argentina Bearer FRB
6.188%, 3/31/05(d).............. BB 4,465 3,712,645
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
ARGENTINA--CONTINUED
Republic of Argentina Bocon Pro1
M1, PIK interest capitalization,
2.996%, 4/1/07(d)............... BBB- $ 4,291(g) $ 2,676,646
Republic of Argentina Series
BGL4 11%, 10/9/06............... BB 1,975 1,970,062
--------------
18,621,606
--------------
BRAZIL--3.2%
Republic of Brazil C Bond, PIK
interest capitalization, 8%,
4/15/14(d)...................... BB- 13,860 8,654,145
Republic of Brazil Series EI - L
6.125%, 4/15/06(d).............. BB- 960 623,400
--------------
9,277,545
--------------
BULGARIA--3.3%
Republic of Bulgaria FLIRB
Series A Bearer Euro 2.50%,
7/28/12(d)...................... B(c) 4,750 2,636,250
Republic of Bulgaria IAB Series
PDI Euro 6.688%, 7/28/11(d)..... B(c) 10,350 6,947,438
--------------
9,583,688
--------------
COLOMBIA--1.1%
Republic of Colombia 7.625%,
2/15/07......................... BBB- 3,400 2,592,500
Republic of Colombia Global Bond
8.375%, 2/15/27................. BBB- 750 534,375
--------------
3,126,875
--------------
CROATIA--1.0%
Croatia Series B 6.562%,
7/31/06(d)...................... BBB- 1,810 1,483,837
Croatia Series A 6.562%,
7/31/10(d)...................... BBB- 1,700 1,326,000
--------------
2,809,837
--------------
ECUADOR--1.8%
Ecuador Bearer PDI, PIK interest
capitalization, 6.625%,
2/27/15(d)...................... B(c) 9,902 4,319,740
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
ECUADOR--CONTINUED
Ecuador Registered PDI Euro, PIK
interest capitalization, 6.625%,
2/27/15(d)...................... B(c) $ 1,980 $ 863,948
--------------
5,183,688
--------------
IVORY COAST--0.2%
Ivory Coast FLIRB Series US1 2%,
3/29/18(d)...................... NR 2,506 626,500
KOREA--1.7%
Korea Development Bank 7.125%,
9/17/01......................... BB+ 2,850 2,529,375
Republic of Korea 0%, 4/26/99... NR 3,445(h) 2,468,098
--------------
4,997,473
--------------
MEXICO--4.6%
Banco Nacional de Mexico 144A
7.57%, 12/31/00(b).............. NR 4,400 4,384,187
United Mexican States Global
Bond 11.375%, 9/15/16........... BB 3,250 3,258,125
United Mexican States Global
Bond 11.50%, 5/15/26............ BB 5,135 5,289,050
--------------
12,931,362
--------------
PANAMA--0.2%
Republic of Panama 8.875%,
9/30/27......................... BB+ 500 461,250
PERU--1.6%
Peru FLIRB 144A 3.25%,
3/7/17(b)(d).................... BB 1,750 890,313
Peru PDI 144A 4%,
3/7/17(b)(d).................... BB 980 563,500
Peru PDI 4%, 3/7/17(d).......... BB 5,250 3,018,750
--------------
4,472,563
--------------
POLAND--5.3%
Poland PDI Bearer 5%,
10/27/14(d)..................... BBB- 11,350 10,335,594
Poland Treasury Bill 0%,
1/13/99......................... NR 9,690(e) 2,728,766
Poland Treasury Bill 0%,
2/17/99......................... NR 7,620(e) 2,108,276
--------------
15,172,636
--------------
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
RUSSIA--0.6%
Russia IAN Series US 6.625%,
12/15/15(d)..................... Ca(c) $ 1,500 $ 146,252
Russia Principal Loans Series 24
Yr 6.625%, 12/15/20(d).......... NR 15,300 1,204,875
Russia Treasury Bills OFZ Linked
Notes 14%, 9/12/01.............. NR 41,898(f) 389,386
--------------
1,740,513
--------------
SOUTH AFRICA--0.7%
Republic of South Africa 8.50%,
6/23/17......................... BB+ 2,790 1,921,613
VENEZUELA--0.8%
Republic of Venezuela 9.25%,
9/15/27......................... B+ 1,475 899,750
Venezuela FLIRB Series B 6.125%,
3/31/07(d)...................... B+ 2,631 1,479,904
--------------
2,379,654
--------------
- ---------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $115,840,625) 93,954,530
- ---------------------------------------------------------------------------
FOREIGN CORPORATE BONDS--8.5%
BERMUDA--0.1%
AES China Generating Co. Yankee
10.125%, 12/15/06............... BB- 500 282,500
BRAZIL--1.3%
Globo Communicacoes Co. 144A
10.625%, 12/5/08(b)............. BB- 3,500 1,903,125
Globo Communicacoes Co. RegS
10.625%, 12/5/08................ BB- 650 353,437
Radio TV Bandeirantes 144A
12.875%, 5/15/06(b)............. B- 3,000 1,500,000
--------------
3,756,562
--------------
CANADA--0.6%
Metronet Communications Corp.
144A 0%, 6/15/08(b)(d).......... B 3,250 1,820,000
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
CHILE--2.1%
Compania Sud Amer Vapore 144A
7.375%, 12/8/03(b).............. BBB $ 5,000 $ 4,650,000
Petropower I Funding Trust 144A
7.36%, 2/15/14(b)............... BBB 1,450 1,225,250
--------------
5,875,250
--------------
CHINA--0.5%
Greater Beijing RegS 9.75%,
6/15/04......................... BB 2,000 800,000
Greater Beijing 144A 10%,
6/15/07(b)...................... BB 1,700 748,000
--------------
1,548,000
--------------
INDONESIA--0.7%
APP Finance II Mauritius Ltd
12%, 12/29/49(d)................ CCC+ 3,670 2,101,075
JAMAICA--0.2%
Mechala Group Jamaica 12.75%,
12/30/99........................ NR 1,000 775,000
JAPAN--0.9%
IBJ Preferred Capital Co. LLC
144A 8.79%, 12/29/49(b)(d)...... Baa(c) 1,985 1,590,839
SB Treasury Co. LLC 144A 9.40%,
12/29/49(b)(d).................. BBB- 1,000 901,632
--------------
2,492,471
--------------
MEXICO--0.6%
Innova S. De. R.L. 12.875%,
4/1/07.......................... B- 3,000 1,635,000
NETHERLANDS--0.5%
Netia Holdings 144A 0%,
11/1/07(b)(d)................... B 3,250 1,527,500
UNITED KINGDOM--0.8%
RSL Communications PLC 0%,
3/1/08(d)....................... B- 5,000 2,400,000
VENEZUELA--0.2%
Petrozuata Finance, Inc. 144A
8.22% 4/1/17(b)................. BBB- 650 517,745
- ---------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $35,111,256) 24,731,103
- ---------------------------------------------------------------------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
FOREIGN CONVERTIBLE BONDS--0.8%
CANADA--0.1%
Petersburg Long Cv. 144A 9%,
6/1/06(b)....................... NR $ 600 $ 237,000
MEXICO--0.2%
Consorcio Groupo Dina Cv. 8%,
8/8/04.......................... NR 1,000 475,000
RUSSIA--0.5%
Lukinter Finance Cv. BV RegS
3.50%, 5/6/02................... CC 3,875 1,336,876
- ---------------------------------------------------------------------------
TOTAL FOREIGN CONVERTIBLE BONDS
(IDENTIFIED COST $6,564,644) 2,048,876
- ---------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--98.5%
(IDENTIFIED COST $328,793,952) 282,247,833
- ---------------------------------------------------------------------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- --------- --------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.7%
COMMERCIAL PAPER--1.7%
Anheuser Busch Companies, Inc.
5.55%, 11/2/98.................. A-1+ $ 4,765 $ 4,764,266
- ---------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $4,764,266) 4,764,266
- ---------------------------------------------------------------------------
</TABLE>
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $333,558,218) 287,012,099(a)
Cash and receivables, less liabilities--(0.2%) (683,616)
--------------
NET ASSET--100.0% $ 286,328,483
--------------
--------------
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $3,172,150 and gross
depreciation of $51,851,430 for federal income tax purposes. At October 31,
1998, the aggregate cost of securities for federal income tax purposes was
$335,691,379.
(b) Security Exempt from registration under Rule 144A of Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1998, these securities amounted to a value of $73,669,222 or 25.7% of net
assets.
(c) As rated by Moody's, Fitch or Duff & Phelps.
(d) Variable or step coupon security, interest rate shown reflects the rate
currently in effect.
(e) Par value represents Polish Zloty.
(f) Par value represents Russian Rubles.
(g) Par value represents Argentine Pesos.
(h) Par value represents South Korean Won, rounded in millions.
(i) Security in default.
(j) Non-income producing.
(k) Security valued at fair value as determined in good faith by or under the
direction of the Directors.
See Notes to Financial Statements 9
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments securities at value
(Identified cost $333,558,218) $ 287,012,099
Foreign currency at value
(Identified cost $437,632) 165,736
Cash 178,916
Receivables
Investment securities sold 1,582,472
Fund shares sold 403,308
Interest 4,944,356
--------------
Total assets 294,286,887
--------------
LIABILITIES
Payables
Investment securities purchased 6,641,271
Income distribution payable 389,436
Fund shares repurchased 365,993
Distribution fee 152,640
Investment advisory fee 128,014
Transfer agent fee 22,918
Financial agent fee 103,426
Directors' fee 3,726
Accrued expenses 150,980
--------------
Total liabilities 7,958,404
--------------
NET ASSETS $ 286,328,483
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of common stock $ 343,037,767
Undistributed net investment income 880,311
Accumulated net realized loss (10,771,580)
Net unrealized depreciation (46,818,015)
--------------
NET ASSETS $ 286,328,483
--------------
--------------
CLASS A
Shares of common stock outstanding, $0.10 par value,
166,666,667 shares authorized
(Net Assets $156,317,038) 13,957,514
Net asset value per share $11.20
Offering price per share $11.20/(1-4.75%) $11.76
CLASS B
Shares of common stock outstanding, $0.10 par value,
166,666,667 shares authorized
(Net Assets $124,074,871) 11,093,371
Net asset value and offering price per share $11.18
CLASS C
Shares of common stock outstanding, $0.10 par value,
166,666,666 shares authorized (Net Assets $5,936,574) 529,622
Net asset value and offering price per share $11.21
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 30,512,704
Dividends 1,266,851
Foreign taxes withheld (114,213)
--------------
Total investment income 31,665,342
--------------
EXPENSES
Investment advisory fee 1,875,258
Distribution fee, Class A 474,342
Distribution fee, Class B 1,492,003
Distribution fee, Class C 38,036
Distribution fee, Class M 1,134
Financial Agent fee 211,515
Transfer agent 447,166
Custodian 111,574
Printing 85,632
Registration 70,424
Professional 37,774
Directors 16,465
Miscellaneous 20,727
--------------
Total expenses 4,882,050
--------------
NET INVESTMENT INCOME 26,783,292
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on securities (8,196,692)
Net realized loss on foreign currency (793,051)
Net realized gain on written options 29,400
Net change in unrealized appreciation (depreciation)
on investments (41,063,667)
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transaction (271,896)
--------------
NET LOSS ON INVESTMENTS (50,295,906)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (23,512,614)
--------------
--------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
10/31/98 10/31/97
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 26,783,292 $ 23,459,692
Net realized gain (loss) (8,960,343) 18,266,122
Net change in unrealized appreciation (depreciation) (41,335,563) (13,926,558)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (23,512,614) 27,799,256
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (15,872,614) (13,142,727)
Net investment income, Class B (11,337,234) (9,715,503)
Net investment income, Class C (293,230) (518)
Net investment income, Class M (18,101) (361)
Net realized gains, Class A (5,130,635) --
Net realized gains, Class B (4,099,438) --
Net realized gains, Class C (23,783) --
Net realized gains, Class M (3,353) --
In excess of net realized gains, Class A (902,131) --
In excess of net realized gains, Class B (720,813) --
In excess of net realized gains, Class C (4,182) --
In excess of net realized gains, Class M (589) --
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (38,406,103) (22,859,109)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (3,001,172 and 4,562,676
shares, respectively) 38,782,884 62,841,128
Net asset value of shares issued from reinvestment of
distributions (1,178,336 and 619,297 shares,
respectively) 15,112,655 8,494,539
Cost of shares repurchased (4,402,648 and 3,789,497
shares, respectively) (54,806,672) (52,071,617)
------------- -------------
Total (911,133) 19,264,050
------------- -------------
CLASS B
Proceeds from sales of shares (1,791,306 and 2,633,503
shares, respectively) 23,227,300 36,085,338
Net asset value of shares issued from reinvestment of
distributions (616,801 and 284,957 shares, respectively) 7,896,496 3,902,825
Cost of shares repurchased (2,809,056 and 2,207,175
shares, respectively) (35,444,257) (30,270,502)
------------- -------------
Total (4,320,461) 9,717,661
------------- -------------
CLASS C
Proceeds from sales of shares (595,059 and 21,052 shares,
respectively) 7,751,415 297,100
Net asset value of shares issued from reinvestment of
distributions (18,346 and 22 shares, respectively) 227,373 303
Cost of shares repurchased (104,857 and 0 shares,
respectively) (1,306,530) --
------------- -------------
Total 6,672,258 297,403
------------- -------------
CLASS M
Proceeds from sales of shares (13,228 and 9,212 shares,
respectively) 176,977 130,970
Net asset value of shares issued from reinvestment of
distributions (1,085 and 17 shares, respectively) 13,901 240
Cost of shares repurchased (23,542 and 0 shares,
respectively) (268,015) --
------------- -------------
Total (77,137) 131,210
------------- -------------
INCREASE IN NET ASSETS FROM SHARES TRANSACTIONS 1,363,527 29,410,324
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (60,555,190) 34,350,471
NET ASSETS
Beginning of period 346,883,673 312,533,202
------------- -------------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $880,311 AND $971,287, RESPECTIVELY] $ 286,328,483 $ 346,883,673
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.50 $ 13.27 $ 12.56 $ 11.94 $ 14.13
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.07 1.03 0.94 0.96 0.76
Net realized and unrealized gain
(loss) (1.88) 0.18 0.72 0.61 (1.35)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.81) 1.21 1.66 1.57 (0.59)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (1.07) (0.98) (0.95) (0.95) (0.77)
Dividends from net realized gains (0.36) -- -- -- (0.63)
In excess of net investment income -- -- -- -- (0.05)
In excess of net realized gains (0.06) -- -- -- --
Tax return of capital -- -- -- -- (0.15)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.49) (0.98) (0.95) (0.95) (1.60)
----- ----- ----- ----- -----
CHANGE IN NET ASSET VALUE (2.30) 0.23 0.71 0.62 (2.19)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 11.20 $ 13.50 $ 13.27 $ 12.56 $ 11.94
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) (6.86)% 9.22% 13.75% 13.83% (4.57)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $156,317 $191,486 $169,664 $168,875 $172,966
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.08% 1.04%(2) 1.07% 1.10% 1.13%
Net investment income 8.17% 7.28% 7.56% 8.10% 7.05%
Portfolio turnover 157% 295% 255% 201% 123%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.48 $ 13.25 $ 12.54 $ 11.93 $ 14.10
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.96 0.92 0.85 0.86 0.68
Net realized and unrealized gain
(loss) (1.87) 0.18 0.71 0.61 (1.36)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.91) 1.10 1.56 1.47 (0.68)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.97) (0.87) (0.85) (0.86) (0.67)
Dividends from net realized gains (0.36) -- -- -- (0.63)
In excess of net investment income -- -- -- -- (0.05)
In excess of net realized gains (0.06) -- -- -- --
Tax return of capital -- -- -- -- (0.14)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.39) (0.87) (0.85) (0.86) (1.49)
----- ----- ----- ----- -----
CHANGE IN NET ASSET VALUE (2.30) 0.23 0.71 0.61 (2.17)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 13.48 $ 13.25 $ 12.54 $ 11.93
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) (7.51)% 8.42% 12.84% 12.96% (5.21)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $124,075 $154,989 $142,869 $144,020 $156,629
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.84% 1.79%(2) 1.82% 1.85% 1.78%
Net investment income 7.36% 6.52% 6.80% 7.30% 6.46%
Portfolio turnover 157% 295% 255% 201% 123%
<CAPTION>
CLASS C
YEAR FROM INCEPTION
ENDED 10/14/97 TO
10/31/98 10/31/97
<S> <C> <C>
Net asset value, beginning of period $ 13.48 $ 14.22
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.97 0.04
Net realized and unrealized gain
(loss) (1.85) (0.74)
----- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.88) (0.70)
----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.97) (0.04)
Dividends from net realized gains (0.36) --
In excess of net investment income -- --
In excess of net realized gains (0.06) --
Tax return of capital
----- -----
TOTAL DISTRIBUTIONS (1.39) (0.04)
----- -----
CHANGE IN NET ASSET VALUE (2.27) (0.74)
----- -----
NET ASSET VALUE, END OF PERIOD $ 11.21 $ 13.48
----- -----
----- -----
Total return(1) (7.36)% (5.00)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $5,937 $284
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.88% 1.62%(2)(4)
Net investment income 7.46% 4.75%(4)
Portfolio turnover 157% 295%
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
(3) Not annualized
(4) Annualized
12 See Notes to Financial Statements
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fund") is organized as a
Maryland corporation and is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The Fund's
investment objective is to maximize current income consistent with the
preservation of capital by investing in fixed income securities. The Fund offers
Class A, Class B and Class C. Class M shares have been closed. Class A shares
are sold with a front-end sales charge of up to 4.75%. Class B shares are sold
with a contingent deferred sales charge which declines from 5% to zero depending
on the period of time the shares are held. Class C shares are sold with a 1%
contingent deferred sales charge if redeemed within one year of purchase. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. Income and expenses of the Fund are borne pro rata by the
holders of all classes of shares, except that each class bears distribution
expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
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 Directors.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized to income
using the effective interest method. Realized gains and losses are determined on
the identified cost basis.
C. INCOME TAXES:
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code (the "Code"), applicable to regulated investment companies, and to
distribute substantially all of its taxable income to its shareholders. In
addition, the Fund intends to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Code. Therefore, no
provision for federal income taxes or excise taxes has been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders are declared and recorded daily. 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 expiring capital loss carryforwards,
foreign currency gain/loss, 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. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS:
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains collateral for
the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
G. OPTIONS
The Fund 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.
The Fund 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
13
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (CONTINUED)
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.
The Fund may purchase options which are included in the 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.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
Effective June 1, 1998 National Securities and Research Corporation assigned
its investment advisory agreement to Phoenix Investment Counsel, Inc. ("PIC"),
both an indirect majority-owned subsidiary of Phoenix Home Life Mutual Insurance
Company ("PHL"). As compensation for its services to the Fund, PIC is entitled
to a fee at an annual rate of 0.55% for the first $1 billion of the average
daily net assets of the Fund.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp. ("PEPCO"),
an indirect majority-owned subsidiary of PHL, has advised the Fund that it
retained net selling commissions of $59,440 for Class A shares, and deferred
sales charges of $217,890 for Class B and $4,546 for Class C shares for the year
ended October 31, 1998. In addition, the Fund pays PEPCO a distribution fee at
an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and 1.00%
for Class C shares of the average daily net assets of the Fund. The Distribution
Plan for Class A shares provides for fees to be paid up to a maximum on an
annual basis of 0.30%; the Distributor has voluntarily agreed to limit the fee
to 0.25%. The Distributor has advised the Fund that of the total amount expensed
for the year ended October 31, 1998, 1,272,993 was earned by the Distributor,
673,487 was paid to unaffiliated participants, and 59,035 was paid to W.S.
Griffith, an indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services through May 31, 1998, at an annual rate of
0.05% of average daily net assets up to $100 million. 0.04% of average daily net
assets up to $100 million to $300 million, 0.03% of average daily net assets of
$300 million through $500 million, and 0.015% of average daily net assets
greater than $500 million; a minimum fee applied. 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 of 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.
PEPCO serves as the Fund's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended October 31, 1998, transfer
agent fees were $447,166 of which PEPCO retained $191,853 which is net of the
fees paid to State Street.
At October 31, 1998, PHL and affiliates held 105,323 Class A shares, 14 Class
B shares and 7,850 Class C shares of the Fund with a combined value of
$1,267,773.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
options, during the year ended October 31, 1998, aggregated 536,995,251 and
557,549,553, including 95,382,288 and 114,838,431 respectively, of U.S.
Government and agency securities.
Written option activity for the year ended October 31, 1998 aggregated the
following:
<TABLE>
<CAPTION>
CALL OPTIONS
----------------------------
NUMBER OF AMOUNT OF
OPTIONS PREMIUM
--------------- -----------
<S> <C> <C>
Options outstanding at October 31, 1997 -- $ --
Options written 10 29,400
Options canceled in closing purchase
transactions -- --
Options expired (10) (29,400)
Options exercised -- --
--
-----------
Options outstanding at October 31, 1998 -- $ --
--
--
-----------
-----------
</TABLE>
4. 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.
5. 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
14
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (CONTINUED)
Fund has the right to receive payments of principal, interest and any fees to
which it is entitled only from the lender selling the loan agreement and only
upon receipt by the lender of payments from the borrower. The Fund generally has
no right to enforce compliance with the terms of the loan agreement with the
borrower. As a result, the Fund may be subject to the credit risk of both the
borrower and the lender that is selling the loan agreement. For loans which the
Fund is a participant, the Fund may not sell its participation in the loan
without the lender's prior consent. When the Fund purchases assignments from
lenders it acquires direct rights against the borrower on the loan. Direct
indebtedness of emerging countries involves a risk that the government entities
responsible for the repayment of the debt may be unable, or unwilling to pay the
principal and interest when due.
6. CAPITAL LOSS CARRYFORWARDS
At October 31, 1998, the Fund had a capital loss carryover of $8,638,419
expiring in 2006, which may be used to offset future capital gains.
7. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund and are designed generally to present
undistributed income and realized gains on a tax basis which is considered to be
more informative to the shareholder. As of October 31, 1998, the Fund increased
undistributed net investment income by $646,911, decreased accumulated net
realized loss by $183,521 and decreased capital paid in on shares of common
stock by $463,390.
TAX INFORMATION NOTICE (UNAUDITED)
LONG-TERM CAPITAL GAINS
The Fund hereby designates $4,647,071 including $3,687,422 of 28% net gain
distributions as a long-term capital gain dividend for purposes of the dividend
paid deduction on its federal income tax return.
This report is not authorized for distribution to prospective investors in the
Phoenix Multi-Sector Fixed Income Fund, Inc. unless preceded or accompanied by
an effective Prospectus which includes information concerning the sales charge,
Fund's record and other pertinent information.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Directors and Shareholders of
Phoenix Multi-Sector Fixed Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fund") at October 31, 1998,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 18, 1998
16
<PAGE>
PHOENIX MULTI-SECTOR FIXED
INCOME FUND, INC.
101 Munson Street
Greenfield, Massachusetts 01301
DIRECTORS
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
James D. Wehr, Senior Vice President
David L. Albrycht, Vice President
William E. Keen, III, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
INVESTMENT ADVISER
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO CONTACT US
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
Internet access:
WWW.PHOENIXINVESTMENTS.COM
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION ----------------
PO Box 2200 Bulk Rate Mail
Enfield CT 06083-2200 U.S. Postage
PAID
Springfield, MA
Permit No. 444
----------------
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 660 (12/98)
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