[FRONT COVER] OCTOBER 31, 1996
PHOENIX
ANNUAL REPORT
Phoenix Multi-Sector
Short Term Bond Fund
Annual Report
[LOGOTYPE] PHOENIX
DUFF & PHELPS
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
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MARKET AND PORTFOLIO REVIEW
Fund Description
Phoenix Multi-Sector Short Term Bond Fund invests in a wide variety of
short-term fixed-income securities. These securities may include U.S. Treasury,
agency, corporate and yankee bonds, as well as mortgage-backed and asset- backed
securities. The Fund emphasizes the most undervalued sectors of the market and
de-emphasizes the most overvalued sectors.
Investment Environment
Shifting market opinion over the direction of the U.S. economy was
responsible for much of the volatility in interest rates during this latest
twelve-month reporting period. During December and January, the Federal Reserve
cut the Fed Funds Rate in an effort to stimulate what was believed to be a
sluggish economy. Although it was widely anticipated that the Fed would have to
lower rates again, a surprisingly strong February employment report provided
conflicting evidence about the economy's condition. As more information became
available, it became evident that the economy had grown robustly over the first
half of 1996. During this period, interest rates were pushed higher as the
financial markets had to consider the threat of future inflation.
By late summer, the consensus view on Wall Street shifted once again as
signs of more moderate economic growth became increasingly more apparent and
concerns over inflation declined. These signs of a slower economy allowed
interest rates to fall for the remainder of the reporting period. Overall, as
measured by the two-year Treasury note, interest rates on short-term bonds
ranged from as low as 4.79% to high as 6.43% over the last twelve months.
Despite all these market gyrations, the yield on the two-year Treasury note
finished the reporting period at 5.73%--only 22 basis points higher than where
it started one year ago.
Portfolio Review
Despite a challenging bond market environment, the Fund posted outstanding
results over this latest reporting cycle. For the twelve-month period ended
October 31, 1996, the Fund's class A shares provided a total return of 10.91%
and class B shares returned 10.36%. As measured by the Merrill Lynch Medium
Quality Corporate Short-Term Bond Index, the market returned 6.71% for the same
period. All of these returns assume reinvestment of any distributions, but
exclude the effect of sales charges.
The Fund's strong performance over the latest reporting period can be
attributed primarily to its holdings in the emerging markets and corporate
high-yield sectors as well as its commercial and non-agency residential
mortgage- backed exposure. Although often overlooked by many bond investors, our
focus on taxable municipal securities also enhanced the Fund's overall results.
As of October 31, 1996, the Fund had an average credit quality of "BBB" and its
average duration was 2.38 years.
Outlook
As we move closer to year-end, we are pleased to see that much of the
pessimism that has afflicted the bond market during 1996 appears to have
subsided. Although concerns over inflation are still present, the latest
economic data suggests that we could see a slower economy going forward. If this
outlook is correct, it will be a welcome relief for the fixed-income market.
Looking ahead, we have not made any drastic modifications to the Fund's
sector strategy. As a result of an improving real estate market and growing
institutional investor demand, we still favor commercial mortgage- backed
securities relative to investment-grade corporates. Non-agency residential
mortgage-backed securities also look attractive versus agency mortgage-backed
securities, as they offer a significant yield advantage. We continue to maintain
our exposure to the taxable municipal sector as well as Treasuries. Lastly,
despite the extended rally in the emerging markets sector, we are finding
attractive valuations in countries like Mexico, Argentina, Peru and Venezuela.
As always, we will continue to overweight undervalued sectors of the bond market
as our primary means of adding value.
1
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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[GRAPHIC]
[LINE CHART]
Phoenix Phoenix Merrill Lynch
Multi-Sector Multi-Sector Medium Quality
Short Term Short Term Corporate
--Class B --Class A Short-Term
Bond Index*
----------- ------------ ------------
7/6/92 10000 9775 10000
10/31/92 10006.7 9818.76 10281
10/31/93 10809.6 10652.8 11049
10/31/94 10806.1 10695 11263
10/31/95 11855.2 11794 12332
10/31/96 13083.3 13080.8 13159
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/96
<TABLE>
<CAPTION>
From Inception
7/6/92 to
1 Year 10/31/96
----------------------------------------- -------- ----------------
<S> <C> <C>
Class A with 2.25% sales charge 8.40% 6.42%
Class A at net asset value 10.91% 6.96%
Class B with CDSC 8.86% 6.42%
Class B at net asset value 10.36% 6.42%
Merrill Lynch Medium Quality Corporate
Short-Term Bond Index* 6.71% 6.53%**
</TABLE>
This chart assumes an initial gross investment of $10,000 made on July 6,
1992 (inception of the Fund).
Total returns for Class A shares reflect the maximum sales charge of 2.25% on
the initial investment and assume reinvestment of dividends and capital gains.
Class B shares reflect the 2% contingent deferred sales charge (CDSC), which is
applicable on all shares redeemed during the 1st year after purchase and 1.5%
for all shares redeemed during the 2nd year after purchase (scaled down to
1%-3rd year and 0% thereafter). Investment return and net asset value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost. Returns indicate past performance, which is not
predictive of future performance.
Foreign investing involves special risks, such as currency fluctuation, less
public disclosure as well as economic and political risks.
*The Merrill Lynch Medium Quality Corporate Short-Term Bond Index is an
unmanaged but commonly used index that tracks the returns of 336 corporate
issues rated between BBB and A by Standard & Poor's, with maturities from 1
to 3 years. The index's performance does not reflect sales charges.
**Index information from 6/30/92 to 10/31/96.
2
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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INVESTMENTS AT OCTOBER 31, 1996
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ----- -----
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS--62.4%
Airlines--0.8%
AMR Corp. 7.75%, '97 Baa $155 $ 157,974
----------
Asset-Backed Securities--15.2%
Airplanes Pass Through Trust 1D
10.875%, '19 Ba 250 271,250
Case Equipment Loan Trust 6.45%,
'02 A 500 497,969
Countrywide Funding Corp. 93-12,
B3 6.625%, '24 Baa 161 158,750
Eagle 96-1 B 144A 6.55%, '02 (b) Baa 379 379,694
First Sierra Equipment TR 96-1,
A 6.85%, '03 (g) Aaa 250 253,311
Fleetwood Credit Corp. 96-A, B
6.95%, '11 A 260 261,631
Ford Credit Auto Owner Trust
96-B, 6.55%, '02 A 250 251,367
Green Tree Financial Corp. 93-3,
A3 5.20%, '18 Aa 400 399,250
Green Tree Financial Corp. 96-1,
A2 5.85%, '27 (g) Aaa 250 244,648
Standard Credit Card Master
Trust 93-1, B 5.50%, '98 (g) A 265 264,655
----------
2,982,525
----------
Banks--1.9%
Banponce Financial Corp. 5.48%,
'98 A 375 369,932
----------
Entertainment, Leisure & Gaming--2.2%
Caesar's World, Inc.
8.875%, '02 Ba 250 260,625
Time Warner, Inc.
6.46%, '00 (d) BBB-(c) 162 162,405
----------
423,030
----------
Healthcare - Diversified--1.3%
Manor Care, Inc. 9.50%, '02 BBB-(c) 250 264,688
----------
Hospital Management Services--2.1%
Tenet Healthcare Corp. 9.625%,
'02 Ba 375 411,563
----------
Metals & Mining--1.3%
USX Corp. 6.375%, '98 Baa 250 250,623
----------
Natural Gas--1.3%
Arkla Inc. 9.875%, '97 Baa 250 254,290
----------
Non-Agency Mortgage-Backed Securities--27.3%
Bear Stearns Mortgage 95-1, 2B3
144A 7.40%, '10 (b) NR 309 274,203
G.E. Capital Mortgage Service
94-26, B2 7.03%, '09 Ba 273 259,956
Non-Agency Mortgage-Backed Securities--continued
Kidder Peabody Acceptance Corp.
94-C2, D 7.18%, '05 BBB(c) $350 $ 345,134
Merrill Lynch Mortgage, Inc.
95-C2, C 7.79%, '21 A 337 345,137
Nomura Asset Securities Corp.
94-MD2, A6 6.687%, '03 (d) AA(c) 195 195,419
Prudential Home Mortgage 93-L,
3B2 144A 6.641%, '23 (b) NR 250 243,281
Residential Asset Securitization
Trust
96-A8, C2 8%, '26 AAA(c) 500 508,438
Resolution Trust Corp. 92-C3, B
9.05%, '23 (g) AA(c) 173 177,042
Resolution Trust Corp. 92-CHF, B
7.15%, '20 AA(c) 480 483,162
Resolution Trust Corp. 93-C1, B
8.75%, '24 Aa 500 512,948
Resolution Trust Corp. 93-C2, B
7.75%, '25 AA(c) 250 254,926
Resolution Trust Corp. 93-C3, A4
6.55%, '24 Aaa 53 52,757
Resolution Trust Corp. 95-1, C2
7.50%, '28 A 297 296,145
Resolution Trust Corp. 95-2, C1
7.45%, '29 Baa 419 416,198
Resolution Trust Corp. 95-2, M1
7.15%, '29 Aa 384 385,224
Resolution Trust Corp.
95-C1, B 6.90%, '27 Aa 425 419,156
Salomon Brothers Mortgage
Securities VII 93-C1, A1 6.47%,
'23 Aa 96 95,639
Structured Asset Securities
Corp. 96-CFL, C 6.525%, '28 A(c) 100 96,906
----------
5,361,671
----------
Oil--1.8%
Tosco Corp. 9%, '97 Baa 350 353,479
----------
Paper & Forest Products--1.1%
Buckeye Cellulose Corp. 8.50%,
'05 Ba 225 221,063
----------
Publishing, Broadcasting, Printing & Cable--3.5%
Poland Communications, Inc. 144A
9.875%, '03 (b) BB-(c) 450 450,000
Tele-Communications, Inc.
7.375%, '00 BBB-(c) 250 248,778
----------
698,778
----------
See Notes to Financial Statements
3
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ----- -----
NON-CONVERTIBLE BONDS--(Continued)
Telecommunications Equipment--1.6%
Panamsat L.P. 9.75%, '00 Ba $ 300 $ 317,250
-----------
Utility-Electric--1.0%
Coso Funding Corp. 144A 7.99%,
'97 (b) Baa 190 192,483
-----------
TOTAL NON-CONVERTIBLE BONDS
$12,259,349
-----------
FOREIGN NON-CONVERTIBLE BONDS--4.6%
Colombia--1.3%
Financiera Energ Nacional 9%,
'99 BBB(c) 250 260,313
----------
Indonesia--0.7%
Asia Pulp & Paper Co.
Yankee 11.75%, '05 Ba 125 129,843
-----------
Mexico--1.3%
Grupo Elektra SA DE CV 12.75%,
'01 B(c) 250 262,188
-----------
Philippines--1.3%
JG Summit Philippines 144A 8%,
'02 (b) (f) NR 250 249,688
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $892,152) 902,032
-----------
FOREIGN GOVERNMENT SECURITIES--24.8%
Argentina--4.5%
Republic of Argentina Bearer FRB
6.625%, '05 (d) BB-(c) 1,078 889,350
-----------
Brazil--3.7%
Republic of Brazil DCB-L Euro
6.563%, '12 (d) B 1,000 718,125
-----------
Colombia--2.6%
Republic of Colombia Euro 9%,
'97 Baa 500 505,380
-----------
Croatia--1.2%
Croatia Series B 6.688%,
'06 (d) NR 250 236,250
-----------
Mexico--2.8%
United Mexican Discount B Euro
6.391%, '19 (d) (e) Ba 250 205,625
United Mexican States 144A
7.688%, '01 (b) (d) Baa 350 350,105
-----------
555,730
-----------
Panama--3.0%
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (b)
(d) NR $ 800 $ 595,000
-----------
Peru--1.5%
Peru FLIRB WI 3.25%,
'49 (d) (f) NR 250 138,125
Peru PDI WI 4%, '49 (d) (f) NR 250 150,938
-----------
289,063
-----------
Poland--2.4%
Poland Discount Euro 6.50%, '24
(d) Baa 500 478,437
-----------
Venezuela--3.1%
Banco Central Venezuela NMB B-NP
6.625%, '05 (d) Ba 250 205,156
Republic of Venezuela DCB Euro
6.625%, '07 (d) Ba 500 410,937
-----------
616,093
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $4,824,288) 4,883,428
-----------
MUNICIPAL BONDS--2.8%
Chicago O'Hare Taxable Revenue
6.37%, '00 Aaa 150 150,407
University of Miami
Exchange Revenue A Taxable
5.95%, '98 Aaa 395 393,502
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $545,000) 543,909
-----------
TOTAL LONG-TERM INVESTMENTS--94.6%
(Identified cost $18,374,738) 18,588,718
-----------
SHORT-TERM OBLIGATIONS--3.0%
Commercial Paper--3.0%
Corporate Receivables Corp.
5.70%, 11-1-96 A-1 585 585,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $585,000) 585,000
-----------
TOTAL INVESTMENTS--97.6%
(Identified cost $18,959,738) 19,173,718(a)
Cash and receivables, less liabilities--2.4% 471,400
-----------
NET ASSETS--100.0% $19,645,118
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $270,066 and gross
depreciation of $56,086 for income tax purposes. At October 31, 1996, the
aggregate cost of securities for federal income tax purposes was
$18,959,738. At October 31, 1996, the Fund had capital loss carryforwards
aggregating $36,672 available to offset future gains and expiring in
2003.
(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 October 31,
1996, these securities amounted to a value of $2,734,454 or 13.9% of net
assets.
(c) As rated by Standard & Poor's, Fitch and/or Duff & Phelp's.
(d) Variable rate; interest rate shown reflects the rate currently in effect.
(e) Recovery Euro Rights incorporated as a unit.
(f) When issued.
(g) Segregated as collateral.
See Notes to Financial Statements
4
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $18,959,738) $19,173,718
Receivables
Interest 239,511
Investment securities sold 2,983,917
Receivable from adviser 7,179
Fund shares sold 41,621
Deferred organization expense 11,897
----------
Total assets 22,457,843
----------
Liabilities
Payables
Investment securities purchased 2,714,245
Income distribution payable 20,475
Fund shares repurchased 1,002
Trustees' fee 8,215
Distribution fee 6,548
Transfer agent fee 6,188
Financial agent fee 489
Accrued expenses 55,563
----------
Total liabilities 2,812,725
----------
Net Assets $19,645,118
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $19,488,764
Distributions in excess of net investment income (16,157)
Accumulated net realized loss (41,469)
Net unrealized appreciation 213,980
----------
Net Assets $19,645,118
==========
Class A
Shares of beneficial interest outstanding,
$0.01 par value, unlimited authorization
(Net Assets $13,701,710) 2,792,165
Net asset value per share $4.91
Offering price per share
$4.91/(1-2.25%) $5.02
Class B
Shares of beneficial interest outstanding,
$0.01 par value, unlimited authorization
(Net Assets $5,943,408) 1,210,861
Net asset value and offering price per share $4.91
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $1,239,101
---------
Total investment income 1,239,101
---------
Expenses
Investment advisory fee 86,482
Distribution fee--Class A 27,005
Distribution fee--Class B 36,914
Financial agent fee 4,717
Transfer agent 54,552
Registration 38,119
Professional 36,823
Printing 25,975
Trustees 17,193
Amortization of deferred organization expense 16,395
Custodian 14,588
Miscellaneous 10,669
---------
Total expenses 369,432
Less expenses borne by investment adviser (187,582)
---------
Net expenses 181,850
---------
Net investment income 1,057,251
---------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 475,148
Net change in unrealized appreciation (depreciation) on
investments 68,949
---------
Net gain on investments 544,097
---------
Net increase in net assets resulting from operations $1,601,348
=========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1996 October 31, 1995
----------------- -----------------
<S> <C> <C>
From Operations
Net investment income $ 1,057,251 $ 990,986
Net realized gain (loss) 475,148 (340,004)
Net change in unrealized appreciation (depreciation) 68,949 716,254
----------- -----------
Increase in net assets resulting from operations 1,601,348 1,367,236
----------- -----------
From Distributions to Shareholders
Net investment income--Class A (737,150) (661,287)
Net investment income--Class B (311,273) (326,755)
----------- -----------
Decrease in net assets resulting from distributions to shareholders (1,048,423) (988,042)
----------- -----------
From Share Transactions
Class A
Proceeds from sales of shares (1,883,600 and 1,676,012 shares, respectively) 9,085,891 7,796,116
Net asset value of shares issued from reinvestment of distributions
(119,182 and 103,434 shares, respectively) 573,651 479,080
Cost of shares repurchased (1,171,859 and 1,851,728 shares, respectively) (5,645,597) (8,606,909)
----------- -----------
Total 4,013,945 (331,713)
----------- -----------
Class B
Proceeds from sales of shares (439,768 and 259,029 shares, respectively) 2,129,724 1,195,146
Net asset value of shares issued from reinvestment of distributions
(42,139 and 47,980 shares, respectively) 202,745 221,981
Cost of shares repurchased (253,126 and 717,637 shares, respectively) (1,216,818) (3,290,924)
----------- -----------
Total 1,115,651 (1,873,797)
----------- -----------
Increase (decrease) in net assets from share transactions 5,129,596 (2,205,510)
----------- -----------
Net increase (decrease) in net assets 5,682,521 (1,826,316)
Net Assets
Beginning of period 13,962,597 15,788,913
----------- -----------
End of period (including distributions in excess of net investment income of
($16,157) and ($15,205), respectively) $19,645,118 $13,962,597
=========== ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
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FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
From
Inception
Year Ended October 31, 7/6/92 to
1996 1995 1994 1993 10/31/92
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.74 $4.61 $ 4.91 $ 4.83 $ 4.89
Income from investment operations
Net investment income 0.33(2) 0.33(2) 0.29(2) 0.32(2) 0.08(2)
Net realized and unrealized gain (loss) 0.17 0.13 (0.26) 0.08 (0.06)
------ ----- ------ ------ ------
Total from investment operations 0.50 0.46 0.03 0.40 0.02
------ ----- ------ ------ ------
Less distributions
Dividends from net investment income (0.33) (0.33) (0.29) (0.32) (0.08)
Dividends from net realized gains -- -- (0.03) -- --
Tax return of capital -- -- (0.01) -- --
------ ------ ------ ------ ------
Total distributions (0.33) (0.33) (0.33) (0.32) (0.08)
------ ----- ------ ------ ------
Change in net asset value 0.17 0.13 (0.30) 0.08 (0.06)
------ ----- ------ ------ ------
Net asset value, end of period $ 4.91 $4.74 $4.61 $ 4.91 $ 4.83
====== ===== ====== ====== ======
Total return(1) 10.91% 10.27% 0.40% 8.49% 0.40%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $13,702 $9,303 $9,371 $6,829 $6,531
Ratio to average net assets of:
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Net investment income 6.88% 7.07% 5.99% 6.39% 5.79%(4)
Portfolio turnover 232% 344% 121% 128% 6%(4)
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------
From
Inception
Year Ended October 31, 7/6/92 to
1996 1995 1994 1993 10/31/92
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.74 $ 4.61 $ 4.91 $ 4.83 $ 4.89
Income from investment operations
Net investment income 0.31(3) 0.30(3) 0.27(3) 0.30(3) 0.07(3)
Net realized and unrealized gain (loss) 0.17 0.13 (0.26) 0.08 (0.06)
------ ------ ------ ----- ------
Total from investment operations 0.48 0.43 0.01 0.38 0.01
------ ------ ------ ----- ------
Less distributions
Dividends from net investment income (0.31) (0.30) (0.27) (0.30) (0.07)
Dividends from net realized gains -- -- (0.03) -- --
Tax return of capital -- -- (0.01) -- --
------ ------ ------ ----- ------
Total distributions (0.31) (0.30) (0.31) (0.30) (0.07)
------ ------ ------ ----- ------
Change in net asset value 0.17 0.13 (0.30) 0.08 (0.06)
------ ------ ------ ----- ------
Net asset value, end of period $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83
====== ====== ====== ===== ======
Total return(1) 10.36% 9.71% -0.03% 8.02% 0.20%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $5,943 $4,659 $6,418 $3,968 $1,357
Ratio to average net assets of:
Operating expenses 1.50% 1.50% 1.45% 1.45% 1.45%(4)
Net investment income 6.38% 6.59% 5.74% 5.79% 5.30%(4)
Portfolio turnover 232% 344% 121% 128% 6%(4)
</TABLE>
(1)Maximum sales charges are not included in total return calculation.
(2)Includes reimbursement of operating expenses by investment adviser of
$0.06, $0.08, $0.08, $0.09 and $0.14, respectively.
(3)Includes reimbursement of operating expenses by investment adviser of
$0.06, $0.08, $0.08, $0.09 and $0.21, respectively.
(4)Annualized.
(5)Not annualized.
See Notes to Financial Statements
7
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Multi-Sector Short Term Bond Fund (the "Fund"), formerly the Phoenix
Asset Reserve, is organized as a Massachusetts business trust 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 provide high current income relative to short-term
alternatives, while attempting to limit fluctuations in the net asset value
of Fund shares resulting from movements in interest rates. The Fund offers
both Class A and Class B shares. Class A shares are sold with a front-end
sales charge of up to 2.25%. Class B shares are sold with a contingent
deferred sales charge which declines from 2% to zero depending on the period
of time the shares are held. Both classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions,
except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Income and
expenses of the Fund are borne pro rata by the holders of both classes of
shares, except that each class bears distribution expenses unique to that
class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount 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 Trustees.
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, 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. Organization expense:
In 1992 the Fund incurred organizational expenses in the amount of
$82,967. The Fund has deferred these expenses and is amortizing such expenses
on a straight line basis over five years from the date of commencement of
operations.
G. 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.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual
8
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 (Continued)
Insurance Company ("PHL"), is entitled to a fee at an annual rate of 0.55% of
the average daily net assets of the Fund. The Adviser has agreed to assume
expenses of the Fund in excess of 1.00% and 1.50% of the average aggregate
daily net asset value of Class A and Class B shares, respectively. For the
year ended October 31, 1996, the Adviser has reimbursed the Fund $187,582 for
such expenses.
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 $1,877 for Class A shares and
deferred sales charges of $15,695
for Class B shares for the year ended October 31, 1996. In addition, the Fund
pays PEPCO a distribution fee at an annual rate of 0.25% for Class A shares
and 0.75% for Class B 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, 1996, $33,962 was earned
by the Distributor and $29,957 was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust as sub-transfer agent. For the year
ended October 31, 1996, transfer agent fees were $54,552 of which PEPCO
retained $957 which is net of the fees paid to State Street.
At October 31, 1996, PHL and affiliates held 26,259 Class A shares of the
Fund with a value of $128,930.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities, for the
year ended October 31, 1996, aggregated $40,166,474 and $34,901,760,
including $14,618,806 and $16,101,119, respectively, of U.S. Government and
agency securities.
4. CAPITAL LOSS CARRYOVERS
For the year ended October 31, 1996, the Fund was able to utilize losses
deferred in the prior year against current year capital gains in the amount
of $464,114.
5. 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, 1996,
the Fund decreased undistributed net investment income by $9,780 and
decreased accumulated net realized loss by $9,780.
This report is authorized for use by other than shareholders only when
accompanied or preceded by the delivery of a current prospectus showing the
sales charge and other material information.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICE WATERHOUSE LLP LOGOTYPE]
To the Trustees and Shareholders of
Phoenix Multi-Sector Short Term Bond Fund
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 Short Term Bond Fund, formerly Phoenix Asset
Reserve, (the "Fund") at October 31, 1996, and the results of its operations,
the changes in its net assets and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at October 31, 1996 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 13, 1996
10
<PAGE>
PHOENIX MULTI-SECTOR
SHORT TERM BOND FUND
101 Munson Street
Greenfield, Massachusetts 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
David L. Albrycht, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
National Securities & Research Corporation
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
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[BACK COVER]
Phoenix Multi-Sector Short Term Bond Fund [Bulk Rate Mail
U.S. POSTAGE
P.O. Box 2200 PAID
Enfield, CT 06083-2200 Springfield, MA
Permit No. 444]
[LOGOTYPE] PHOENIX
DUFF & PHELPS [DALBAR LOGO]
PDP 681 (12/96)
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