As fled with the Securities and Exchange Commission on August 4, 1999 Registration No. 333-___ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. ___ --------------------- PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND (Exact Name of Registrant as Specified in Declaration of Trust) 101 Munson Street, Greenfield, Massachusetts 01301 (Address of Principal Executive Offices) c/o Phoenix Equity Planning Corporation - Shareholder Services (800) 243-1574 (Registrants Telephone Number, including Area Code) --------------------- Nancy J. Engberg, Esq. Vice President and Counsel Phoenix Investment Partners, Ltd. 56 Prospect Street Hartford, Connecticut 06115-0479 (Name and address of Agent for Service) Copies of Communications to: Geoffrey R.T. Kenyon, Esq. Goodwin, Procter & Hoar LLP Exchange Place Boston, Massachusetts 02109-2881 --------------------- Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. --------------------- Registrant is relying on Section 24(f) of the Investment Company Act of 1940, as amended, which permits registration of an indefinite number of shares of beneficial interest, $.01 par value per share of the Registrant. Accordingly, no filing fee is due in connection with this Registration Statement. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND CROSS REFERENCE SHEET Pursuant to Rule 481(a) Caption or Location in Form N-14 Item No. and Caption Prospectus/Proxy Statement - ------------------------------ -------------------------- Part A Information Required in Prospectus/Proxy Statement ------ 1. Beginning of Registration Statement Cover Page; Cross Reference Sheet and Outside Front Cover Page of Prospectus 2. Beginning and Outside Back Cover Table of Contents Page of Prospectus 3. Fee Table, Synopsis Information and Risk Factors Synopsis; Principal Risk Factors; Comparison of Investment Objectives and Policies 4. Information about the Transaction Synopsis; The Proposed Reorganization; Comparative Information on Shareholder Rights; Exhibit A (Agreement and Plan of Reorganization) 5. Information about the Registrant Cover Page; Synopsis; Principal Risk Factors; Comparison of Investment Objectives and Policies; The Proposed Reorganization; Comparative Information on Distribution Arrangements; Comparative Information on Shareholder Services; Comparative Information on Shareholder Rights; Management and Other Service Providers; Additional Information About The Funds; Current Prospectus of Registrant 6. Information about the Company Being Acquired Synopsis; Comparison of Investment Objectives and Policies; The Proposed Reorganization; Comparative Information on Distribution Arrangements; Comparative Information on Shareholder Services; Comparative Information on Shareholder Rights; Additional Information About The Funds; Prospectus of the Phoenix-Engemann Global Growth Fund dated May 1, 1999 7. Voting Information Synopsis; The Proposed Reorganization; Comparative Information on Shareholder Rights; Voting Information 8. Interest of Certain Persons and Experts The Proposed Reorganization 9. Additional Information Required for Not Applicable Reoffering By Persons Deemed to be Underwriters Caption or Location in Form N-14 Item No. and Caption Prospectus/Proxy Statement - ------------------------------ -------------------------- Part B: Information Required in Statement of Additional Information ------ 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. Additional Information about the Registrant Cover Page; Statement of Additional Information of Registrant dated December 16, 1998 13. Additional Information about the Cover Page; Statement of Additional Information Company Being Acquired of The Phoenix-Engemann Funds dated May 3, 1999 14. Financial Statements Annual Report of the Registrant for the year ended June 30, 1999; Annual Report of The Phoenix-Engemann Funds for the year ended December 31, 1998; Semi-Annual Report of The Phoenix-Engemann Funds for the six-month period ended June 30, 1999; and Pro Forma Financial Statements Part C: Other Information ------ 15. Indemnification Indemnification 16. Exhibits Exhibits 17. Undertakings Undertakings PART A PHOENIX-ENGEMANN GLOBAL GROWTH FUND a series of The Phoenix-Engemann Funds 600 North Rosemead Boulevard Pasadena, California 91107-2133 ------------------------------------ September __, 1999 Dear Shareholder: The Phoenix-Engemann Global Growth Fund, a series of The Phoenix-Engemann Funds (the "Trust"), will hold a special meeting of shareholders at __ a.m., local time, on October 20, 1999 at the offices of the Trust. At the meeting, the shareholders of the Global Growth Fund will vote on an agreement and plan of reorganization under which the Global Growth Fund will be combined with the Phoenix-Aberdeen Worldwide Opportunities Fund, the sole series of the Phoenix-Aberdeen Worldwide Opportunities Fund (the "Acquiring Trust"). The Worldwide Opportunities Fund has substantially similar investment objectives to those of the Global Growth Fund. If the reorganization agreement is implemented, you will become a shareholder of the Worldwide Opportunities Fund and will receive shares of the corresponding class of the Worldwide Opportunities Fund with an aggregate value equal to the aggregate value of your investment in the Global Growth Fund. No sales charge will be imposed in connection with the reorganization. Phoenix Investment Counsel, Inc. will pay all costs of the reorganization. The reorganization will be conditioned upon receipt of an opinion of counsel indicating that the reorganization will qualify as a tax-free reorganization for federal income tax purposes. The Board of Trustees of the Trust believes that the reorganization offers you the opportunity to pursue your goals in a larger fund. The Board of Trustees has carefully considered and has unanimously approved the proposed reorganization, as described in the accompanying materials and believes that the reorganization is in the best interests of the Global Growth Fund and its shareholders. The Board of Trustees therefore recommends that you vote in favor of the reorganization agreement. We strongly urge you to review, complete, and return your proxy as soon as possible. Your vote is important no matter how many shares you own. Voting your shares early will help to avoid costly follow-up mail and telephone solicitation. After reviewing the enclosed materials, please exercise your right to vote today by completing, dating, and signing each proxy card you receive and mailing the proxy in the self-addressed, postage-paid envelope that we have enclosed for your convenience. It is very important that you vote and that your voting instructions be received no later than October __, 1999. Please note that you may receive more than one proxy package if you hold shares of the Global Growth Fund in more than one account. You should return separate proxy cards for such accounts. If you have any questions, please call (800) 243-1574. Sincerely, Roger Engemann Chairman of the Board and President PHOENIX-ENGEMANN GLOBAL GROWTH FUND a series of The Phoenix-Engemann Funds 600 North Rosemead Boulevard Pasadena, California 91107-2133 ---------------------------- Notice of Special Meeting of Shareholders to be Held October 20, 1999 ---------------------------- TO THE SHAREHOLDERS: The Phoenix-Engemann Global Growth Fund, a series of The Phoenix-Engemann Funds, a Massachusetts business trust, will hold a special meeting of shareholders at the offices of The Phoenix-Engemann Funds, 600 North Rosemead Boulevard, Pasadena, California 91107-2133, on October 20, 1999 at __ a.m., local time, for the following purposes: 1. To consider and act upon a proposal to approve the Agreement and Plan of Reorganization, dated August 4, 1999, and the transactions it contemplates, including (a) the transfer of all or substantially all of the assets of the Global Growth Fund to Phoenix-Aberdeen Worldwide Opportunities Fund in exchange solely for shares of the corresponding class of the Worldwide Opportunities Fund and the assumption by the Worldwide Opportunities Fund of all the liabilities of the Global Growth Fund and (b) the distribution of the shares of the Worldwide Opportunities Fund so received to shareholders of the Global Growth Fund in complete liquidation of the Global Growth Fund. 2. To consider and act upon any other business as may properly come before the meeting and any adjournments thereof. You are entitled to vote at the meeting and any adjournment(s) if you owned shares of the Global Growth Fund at the close of business on August __, 1999. If you attend the meeting, you may vote your shares in person. If you do not expect to attend the meeting, please complete, date, sign, and return the enclosed proxy card in the enclosed self-addressed, postage-paid return envelope. Please indicate your voting instructions on the enclosed proxy card, then please date and sign the card and return it in the envelope provided. If you sign, date, and return the proxy card but give no voting instructions, your shares will be voted "FOR" the proposal noticed above. In order to avoid the additional expense and delay of further solicitation, we ask your cooperation in mailing in your proxy card promptly. Unless proxy cards submitted by corporations and partnerships are signed by the appropriate persons as indicated in the voting instructions on the proxy card, such proxy cards cannot be voted. By Order of the Board of Trustees of The Phoenix-Engemann Funds, Tina L. Mitchell Secretary Pasadena, California September __, 1999 PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND a series of Phoenix-Aberdeen Worldwide Opportunities Fund 101 Munson Street Greenfield, Massachusetts 01301 1 (800) 243-1574 PHOENIX-ENGEMANN GLOBAL GROWTH FUND a series of The Phoenix-Engemann Funds 600 North Rosemead Boulevard Pasadena, California 91107-2133 1 (800) 243-1574 PROSPECTUS/PROXY STATEMENT Dated September __, 1999 This Prospectus/Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Trustees of The Phoenix-Engemann Funds, a Massachusetts business trust (the "Trust"), for use at the special meeting of shareholders of the Phoenix-Engemann Global Growth Fund to be held at __ a.m., local time, on October 20, 1999 at the offices of the Trust, 600 North Rosemead Boulevard, Pasadena, California 91107-2133, and at any adjournment(s). The purpose of the meeting is to consider an agreement and plan of reorganization that would effect the reorganization of the Global Growth Fund into the Phoenix-Aberdeen Worldwide Opportunities Fund, the sole portfolio series of the Phoenix-Aberdeen Worldwide Opportunities Fund (the "Acquiring Trust"), as described below. Under the reorganization agreement, which has been approved by the Board of Trustees of the Trust, all or substantially all of the assets of the Global Growth Fund would be transferred to the Worldwide Opportunities Fund in exchange solely for Class A, Class B and Class C shares of beneficial interest in the Worldwide Opportunities Fund and the assumption by the Worldwide Opportunities Fund of all the liabilities of the Global Growth Fund. These shares of the Worldwide Opportunities Fund would then be distributed pro rata to the shareholders of the corresponding classes of the Global Growth Fund, and then the Global Growth Fund would be liquidated. As a result of the proposed transactions, each shareholder of the Global Growth Fund would receive a number of full and fractional shares of the corresponding class of the Worldwide Opportunities Fund with an aggregate net asset value equal to the aggregate net asset value of the shareholder's Global Growth Fund shares on the effective date of the reorganization. The Worldwide Opportunities Fund and the Global Growth Fund are both portfolio series of open-end management investment companies. The Worldwide Opportunities Fund has an investment objective of capital appreciation. The Global Growth Fund has an investment objective of long-term growth of capital. The Worldwide Opportunities Fund employs an adviser, Phoenix Investment Counsel, Inc. to select securities of U.S. issuers, and a subadviser, Aberdeen Fund Managers, Inc. to select securities of all other issuers. Roger Engemann & Associates, Inc. serves as investment adviser to the Global Growth Fund. As used in this Prospectus/Proxy Statement the term "adviser" refers to Phoenix Investment Counsel or Roger Engemann & Associates, as the context requires. This Prospectus/Proxy Statement, which you should retain for future reference, sets forth concisely the information that you should know about the Global Growth Fund, the Worldwide Opportunities Fund, and the transactions contemplated by the reorganization agreement, before you vote on the proposed reorganization. As used in this Prospectus/Proxy Statement, the term "funds" refers to the Global Growth Fund and the Worldwide Opportunities Fund, collectively, and the term "trusts" refers to the Trust and the Acquiring Trust, collectively. A copy of the prospectus for the Worldwide Opportunities Fund, dated December 16, 1998, is included with this Prospectus/Proxy Statement and is incorporated by reference in this Prospectus/Proxy Statement. A Prospectus and a Statement of Additional Information for the Global Growth Fund, each dated May 1, 1999, have been filed with the Securities and Exchange Commission and are incorporated by reference in this Prospectus/Proxy Statement. A Statement of Additional Information for the Worldwide Opportunities Fund, dated December 16, 1998 has also been filed with the SEC and is incorporated by reference in this Prospectus/Proxy Statement. Copies of the above-referenced documents are available upon written or oral request and without charge by contacting Phoenix Equity Planning Corporation at 100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by telephoning Phoenix Equity Planning toll-free at 1-800- 243-4361. A Statement of Additional Information, dated September __, 1999 relating to the proposed transactions described in this Prospectus/Proxy Statement has been filed with the SEC and is incorporated by reference in this Prospectus/Proxy Statement. Copies of this Statement of Additional Information may be obtained without charge by contacting Phoenix Equity Planning, at 100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by telephoning Phoenix Equity Planning toll free at 1-800-243-4361. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains the Statement of Additional Information dated September __, 1999 and other material incorporated by reference, together with other information regarding the Worldwide Opportunities Fund and the Global Growth Fund. This Prospectus/Proxy Statement constitutes the proxy statement of the Global Growth Fund for the meeting and the prospectus for shares of the Worldwide Opportunities Fund that have been registered with the SEC and are being issued in connection with the reorganization. This Prospectus/Proxy Statement is expected to first be sent to shareholders on or about September __, 1999. ---------------------- - -------------------------------------------------------------------------------- The securities of the Worldwide Opportunities Fund have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus/Proxy Statement. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- ---------------------- The date of this Prospectus/Proxy Statement is September __, 1999. TABLE OF CONTENTS Page ---- SYNOPSIS.......................................................................1 PRINCIPAL RISK FACTORS.........................................................6 THE PROPOSED REORGANIZATION....................................................8 COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES..............................13 COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS..........................19 COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES...............................20 COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS.................................21 FISCAL YEAR...................................................................23 MANAGEMENT AND OTHER SERVICE PROVIDERS........................................23 VOTING INFORMATION............................................................24 ADDITIONAL INFORMATION ABOUT THE FUNDS........................................26 MISCELLANEOUS.................................................................26 OTHER BUSINESS................................................................29 - -------------------------------------------------------------------------------- SYNOPSIS Background The proposed reorganization is the outcome of deliberations by the Boards of Trustees of the trusts undertaken at the request of each adviser. Each adviser recommended that the Trustees of each trust consider the benefits that the shareholders of the funds would realize if the Global Growth Fund were to be combined with the Worldwide Opportunities Fund. In response to this recommendation, the independent trustees of each trust, trustees who are not "interested persons" of their respective trusts (as defined in Section 2(a)(19) of the 1940 Act), requested that management outline a specific reorganization proposal for their consideration and provide the independent trustees with an analysis of the specific benefits that shareholders would realize from the proposal. After considering the specific reorganization proposal, the Trustees of the Acquiring Trust, including the independent trustees, at meetings held on February 24, 1999 and May 26, 1999 unanimously approved the reorganization agreement. The Trustees of the Trust, including the independent trustees, unanimously approved the reorganization agreement at a meeting held on February 9, 1999. Summary of the Proposed Reorganization The reorganization will be effected in accordance with the terms of the reorganization agreement, a copy of which is attached to this Prospectus as Appendix A. The reorganization agreement provides for: o the acquisition of all or substantially all of the assets of the Global Growth Fund by the Worldwide Opportunities Fund in exchange solely for Class A, Class B and Class C shares of the Worldwide Opportunities Fund; o the assumption by the Worldwide Opportunities Fund of all the liabilities of the Global Growth Fund; o the pro rata distribution of the corresponding class of Worldwide Opportunities Fund shares to the Global Growth Fund shareholders; and o the cancellation of the outstanding Global Growth Fund shares. The reorganization is anticipated to occur on or about October 22, 1999. If the reorganization agreement is implemented, each Global Growth Fund shareholder would receive a number of full and fractional shares of the corresponding class of Worldwide Opportunities Fund shares with an aggregate net asset value equal in value to the aggregate net asset value of his or her Global Growth Fund shares, as of the closing date of the reorganization. The implementation of the reorganization agreement is subject to a number of conditions set forth in the reorganization agreement. See "The Proposed Reorganization." Among the significant conditions (which may not be waived) are: o the receipt by each trust of an opinion of counsel as to the federal income tax consequences of the reorganization; and o the approval of the reorganization agreement by the shareholders of the Global Growth Fund. The reorganization agreement provides that Phoenix Investment Counsel will bear all costs and expenses of the reorganization, including the costs of the meeting, the costs and expenses incurred in the preparation and mailing of the notice, this Prospectus/Proxy Statement and the proxy, and the solicitation of proxies. Investment Objectives and Policies The investment objectives and principal investment strategies of the Global Growth Fund and the Worldwide Opportunities Fund are substantially identical: o The Worldwide Opportunities Fund has an investment objective of capital appreciation. The Global Growth Fund has an investment objective of long-term growth of capital. o The Worldwide Opportunities Fund and the Global Growth Fund invest in securities of both U.S. and foreign issuers. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- o The Worldwide Opportunities Fund and the Global Growth Fund invest at least 65% of their assets in securities of issuers located in 3 or more countries, one of which is the United States. o Both funds may invest in companies in foreign countries with developed markets and countries with "emerging markets." See "Principal Risk Factors" and "Comparison of Investment Objectives and Policies" below, for further information on the similarities and differences between the investment objectives, policies and risks of the Worldwide Opportunities Fund and the Global Growth Fund. You can also find additional information in the Worldwide Opportunities Fund's Prospectus. Distribution and Purchase Arrangements The Global Growth Fund and the Worldwide Opportunities Fund both offer three classes of shares, Class A, Class B and Class C shares. Shares are offered to the public at a price equal to the net asset value per share plus a sales charge which, at the election of the purchaser, may be imposed as follows: o Class A shares--at the time of purchase. o Class B and Class C shares--on a contingent deferred basis. See "Comparative Information on Distribution Arrangements" below for further information on the distribution arrangements of the Global Growth Fund and the Worldwide Opportunities Fund. You can also find additional information on distribution arrangements in the Worldwide Opportunities Fund's Prospectus. Dividends and Distributions The dividend and distribution policies of the funds are substantially identical. o The Global Growth Fund distributes net investment income annually and distributes net realized capital gains, if any, at least annually. o The Worldwide Opportunities Fund distributes net investment income semi-annually and distributes net realized capital gains, if any, at least annually. All dividends and distributions of the Global Growth Fund and the Worldwide Opportunities Fund are paid in additional shares of the respective series unless shareholders elect to receive cash. You can also find additional information on dividends and distributions in the Worldwide Opportunities Fund's Prospectus. Exchanges The Global Growth Fund and the Worldwide Opportunities Fund currently offer shareholders identical exchange privileges. Shareholders of the Global Growth Fund and the Worldwide Opportunities Fund may exchange their shares for shares of a corresponding class of shares of other Phoenix funds or The Phoenix-Engemann Funds, Phoenix-Seneca Funds or any other mutual fund advised, subadvised or distributed by Phoenix Investment Counsel, Equity Planning or any of their corporate affiliates, except for the mutual funds of the Phoenix-Zweig Trust. On exchanges with share classes that carry a contingent deferred sales charge, the contingent deferred sales charge schedule of the original shares purchased continues to apply. You can also find additional information on exchanges in the Worldwide Opportunities Fund's Prospectus. Redemption Procedures Shareholders of both the Global Growth Fund and the Worldwide Opportunities Fund may redeem their shares at a redemption price equal to the net asset value of the shares (minus any applicable contingent deferred sales charge) as next determined following the receipt of a redemption order in proper form. Payments of redemption proceeds for redeemed Global Growth Fund and Worldwide Opportunities Fund shares ordinarily are made within seven days after receipt of a redemption request in proper form. See "Comparative Information on Shareholder Services" for more information. You can also find additional information on redemption procedures in the Worldwide Opportunities Fund's Prospectus. Federal Tax Consequences of Proposed Reorganization At the closing of the reorganization, the Trust and the Acquiring Trust will receive an opinion of - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- counsel that subject to customary assumptions and representations: o shareholders of the Global Growth Fund will recognize no gain or loss for federal income tax purposes on their receipt of shares of the Worldwide Opportunities Fund; o the aggregate tax basis of the Worldwide Opportunities Fund shares, including any fractional shares, received by each shareholder of the Global Growth Fund pursuant to the reorganization will be the same as the aggregate tax basis of the Global Growth Fund shares held by such shareholder immediately prior to the reorganization; and o the holding period of the Worldwide Opportunities Fund shares, including fractional shares, to be received by each shareholder of the Global Growth Fund will include the period during which the Global Growth Fund shares exchanged therefor were held by such shareholder (provided that the Global Growth Fund shares were held as a capital asset on the date of the reorganization). See "The Proposed Reorganization--Federal Income Tax Consequences" for more information. Risk Factors An investment in the Worldwide Opportunities Fund is subject to specific risks arising from the types of securities in which the Worldwide Opportunities Fund invests and general risks arising from investing in any mutual fund. Investors can lose money by investing in the Worldwide Opportunities Fund. There is no assurance that the Worldwide Opportunities Fund will meet its investment objective. Because the Worldwide Opportunities Fund's investment objective and policies are substantially similar to those of the Global Growth Fund, an investment in the Worldwide Opportunities Fund is subject to many of the same specific risks as an investment in the Global Growth Fund. See "Principal Risk Factors" for the principal risks associated with an investment in the Worldwide Opportunities Fund. Comparative Fee Tables The tables below are designed to assist an investor in understanding the various direct and indirect costs and expenses associated with an investment in the relevant class of shares of each fund. Each table also includes pro forma information for the combined Worldwide Opportunities Fund resulting from the reorganization assuming the reorganization took place on June 30, 1999, and after adjusting such information to reflect current fees. The expense information for the Worldwide Opportunities Fund and the Global Growth Fund is based upon expenses for the twelve months ended June 30, 1999. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- [As indicated in the table below, immediately upon effectiveness of the reorganization, the "Total Fund Operating Expenses" for the combined Worldwide Opportunities Fund are expected to be lower than the "Total Fund Operating Expenses" for the Global Growth Fund.] Worldwide Opportunities Fund Global Growth Fund ---------------------------- ------------------ Class A Class B Class C Class A Class B Class C Shares Shares Shares Shares Shares Shares ------ ------ ------ ------ ------ ------ Annual Fund Operating Expenses (expenses that are deducted from fund assets) Management Fees 0.75% 0.75% 0.75% 1.10% 1.10% 1.10% Distribution and Service (12b-1 Fees) (a) 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% Other Expenses 0.42% 0.42% 0.42% 0.76% 0.76% 0.76% ----- ----- ----- ----- ----- ----- Total Annual Fund Operating Expenses (b) 1.42% 2.17% 2.17% 2.11% 2.86% 2.86% ===== ===== ===== ===== ===== ===== Pro Forma Combined Worldwide Opportunities Fund --------------------------- Class A Class B Class C Shares Shares Shares ------ ------ ------ Annual Fund Operating Expenses (expenses that are deducted from fund assets) Management Fees % % % Distribution and Service (12b-1 Fees) (a) % % % Other Expenses % % % --- --- --- Total Annual Fund Operating Expenses (b) % % % === === === The following table shows shareholder transaction expenses currently applicable to the purchase of Class A, Class B and Class C shares of both funds. These expenses will remain in effect as to the combined Worldwide Opportunities Fund following the reorganization. Worldwide Opportunities Fund Class A Class B Class C Global Growth Fund Shares Shares Shares - ------------------ ------ ------ ------ Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases 4.75% None None (as a percentage of offering price) Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of the value redeemed or the amount invested) None 5%(c) 1%(d) Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None Redemption Fee None None None Exchange Fee None None None (a) Distribution and Service Fees represent an asset-based sales charge that, for a long-term shareholder, may be higher than the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc. ("NASD"). (b) The Global Growth Fund's administrator has agreed to waive a portion of its administration fee so that other operating expenses of the Global Growth Fund do not exceed 0.60% of the first $50 million of the average daily net assets. Total Annual Operating Expenses for the Global Growth Fund, after waiver of administration fees, are ___% for Class A shares, ___% for Class B shares and ___% for Class C shares. (c) The Maximum Deferred Sales charge is imposed on Class B shares redeemed during the first year; thereafter, it decreases 1% annually to 2% during the fourth and fifth years and to 0% after the fifth year. Class B shares of the Global Growth Fund purchased prior to January 20, 1998 are subject to the following sales load schedule; 5% during the first year; thereafter, it decreases 1% annually to 3% during the third and fourth years and to 0% after the fourth year. (d) The Deferred Sales Charge is imposed on Class C shares redeemed during the first year only. Class C shares of the Global Growth Fund purchased prior to January 20, 1998 are not subject to the 1% deferred Sales charge. - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Example These examples illustrate the impact of the above fees and expenses on an account with an initial investment of $10,000, based on the expenses shown above. They assume a 5% annual return, the reinvestment of all dividends and distributions and "annual fund operating expenses" remaining the same each year. These examples are hypothetical; actual fund expenses and returns vary from year to year, and may be higher or lower than those shown. In the case of Class B shares, it is assumed that your shares are converted to Class A shares after eight years and that the sales charges applicable to shares purchased after January 20, 1998 apply. Fees and expenses if you redeemed your shares at the end of each time period: Worldwide Opportunities Fund Global Growth Fund ---------------------------- ------------------ 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ------ ------- ------- -------- Class A shares $613 $903 $1,214 $2,096 $679 $1,104 $1,555 $2,800 Class B shares $620 $879 $1,164 $2,313 $689 $1,086 $1,508 $3,008 Class C shares $320 $679 $1,164 $2,503 $389 $ 886 $1,508 $3,185 Pro Forma Combined Worldwide Opportunities Fund -------------------------------------- 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- Class A shares $ $ $ $ Class B shares $ $ $ $ Class C shares $ $ $ $ Fees and expenses if you did not redeem your shares at the end of each time period: Worldwide Opportunities Fund Global Growth Fund ---------------------------- ------------------ 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ------ ------- ------- -------- Class A shares $613 $903 $1,214 $2,096 $679 $1,104 $1,555 $2,800 Class B shares $220 $679 $1,164 $2,313 $289 $ 886 $1,508 $3,008 Class C shares $220 $679 $1,164 $2,503 $289 $ 886 $1,508 $3,185 Pro Forma Combined Worldwide Opportunities Fund ------------------------------------- 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- Class A shares $ $ $ $ Class B shares $ $ $ $ Class C shares $ $ $ $ Note: Actual expenses for the Global Growth Fund may be lower than those shown in the tables above since the expense levels used to calculate the figures shown do not include the waiver of expenses over certain levels by the Global Growth Fund's administrator. The purpose of the tables above is to help the investor understand the various costs and expenses that the investor will bear directly or indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS OR EXPENSES. ACTUAL RETURNS OR EXPENSES MAY BE GREATER OR LESS THAN SHOWN. - -------------------------------------------------------------------------------- 5 PRINCIPAL RISK FACTORS An investment in the Worldwide Opportunities Fund is subject to specific risks arising from the types of securities in which the Worldwide Opportunities Fund invests and general risks arising from investing in any mutual fund. Investors can lose money by investing in the Worldwide Opportunities Fund. There is no assurance that the Worldwide Opportunities Fund will meet its investment objective. Because the Worldwide Opportunities Fund's investment objective and policies are substantially similar to those of the Global Growth Fund, an investment in the Worldwide Opportunities Fund is subject to many of the same specific risks as an investment in the Global Growth Fund. The principal specific risks associated with an investment in the Worldwide Opportunities Fund are listed below. The following discussion is qualified in its entirety by the more extensive discussion of risk factors in the Prospectuses and Statements of Additional Information for the Worldwide Opportunities Fund and the Global Growth Fund, respectively. Foreign Investing The Worldwide Opportunities Fund invests in non-U.S. companies. Investing in the securities of non-U.S. companies involves special risks and considerations not typically associated with investing in U.S. companies. These include: o differences in accounting, auditing and financial reporting standards; o generally higher commission rates on foreign portfolio transactions; o differences and inefficiencies in transaction settlement systems; o the possibility of expropriation or confiscatory taxation; o adverse changes in investment or exchange control regulations; o political instability; and o potential restrictions on the flow of international capital. Political and economic uncertainty as well as relatively less public information about foreign investments may negatively impact the Worldwide Opportunities Fund's portfolio. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Additionally, dividends and interest payable on foreign securities may be subject to foreign taxes withheld prior to receipt by the Worldwide Opportunities Fund. Many of the foreign securities held by the Worldwide Opportunities Fund will not be registered with, nor will the issuers of those securities be subject to the reporting requirements of, the Securities and Exchange Commission. Accordingly, there may be less publicly available information about the securities and about the foreign company or government issuing them than is available about a domestic company or government entity. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions. Foreign Currency Significant portions of the Worldwide Opportunities Fund's assets may be invested in securities denominated in foreign currencies. Changes in foreign exchange rates will affect the value of those securities denominated or quoted in currencies other than the U.S. dollar. The forces of supply and demand in the foreign exchange markets determine exchange rates and these forces are in turn affected by a range of economic, 6 political, financial, governmental and other factors. Exchange rate fluctuations can affect the Worldwide Opportunities Fund's net asset value (share price) and dividends either positively or negatively depending upon whether foreign currencies are appreciating or depreciating in value relative to the U.S. dollar. Exchange rates fluctuate over both the short and long terms. Emerging Market Investing The Worldwide Opportunities Fund may invest in companies located in emerging market countries and regions. Investment in less-developed countries whose markets are still emerging generally presents risks in greater degree than those presented by investment in foreign issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval of foreign investments may be required under certain circumstances in some developing countries, and the extent of foreign investment in domestic companies may be subject to limitation in other developing countries. The charters of individual companies in developing countries may impose limitations on foreign ownership to prevent, among other concerns, violation of foreign investment limitations. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been (and may continue to be) adversely affected by economic conditions in the countries with which they trade. Small Market Capitalization Investing The Worldwide Opportunities Fund may invest in large and small companies throughout the world. Companies with small capitalization are often companies with a limited operating history or companies in industries which have recently emerged due to cultural, economic, regulatory or technological developments. Such developments can have a significant positive or negative effect on small capitalization companies and their stock performance. Given the limited operating history and rapidly changing fundamental prospects, investment returns from smaller capitalization companies can be highly volatile. Smaller companies may find their ability to raise capital impaired by their size or lack of operating history. Product lines are often less diversified and subject to competitive threats. Smaller capitalization stocks are subject to varying patterns of trading volume and may, at times, be difficult to sell. Mutual Fund Investing The Worldwide Opportunities Fund may invest in other mutual funds to take advantage of investment opportunities in certain countries where the Worldwide Opportunities Fund otherwise would not be able to invest or where the size of a fund investment in any particular country would be too small. The Worldwide Opportunities Fund may invest up to 10% of its assets in the shares of other mutual funds, however the Worldwide Opportunities Fund will not invest more than 5% of its assets in any one mutual fund. When the Worldwide Opportunities Fund purchases shares of another mutual fund the assets invested in the other mutual fund incur a layering of expenses including operating costs, advisory fees, and administrative fees that you indirectly bear. Impact of the Year 2000 Issue on Fund Investments The Year 2000 issue is the result of computer programs being written using two rather than four digits to define the applicable year. There is the possibility that some or all of a company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If a company whose securities are held by the Worldwide Opportunities Fund does not "fix" its Year 2000 issue, it is possible that its operations and financial results would be hurt. Also, the cost of modifying computer programs to become Year 2000 compliant may hurt the financial performance and market price of companies whose securities are held by the Worldwide Opportunities Fund. 7 THE PROPOSED REORGANIZATION Agreement and Plan of Reorganization The terms and conditions under which the proposed reorganization may be consummated are set forth in the reorganization agreement. Significant provisions of the reorganization agreement are summarized below. This summary, however, is qualified in its entirety by reference to the reorganization agreement, a form of which is attached to this Prospectus/Proxy Statement as Appendix A. The Plan contemplates (a) the acquisition by the Worldwide Opportunities Fund, on the closing date of the reorganization, of all or substantially all of the assets of the Global Growth Fund by the Worldwide Opportunities Fund in exchange solely for Class A, Class B and Class C shares of the Worldwide Opportunities Fund and the assumption by the Worldwide Opportunities Fund of all the liabilities of the Global Growth Fund and (b) the distribution of shares of the corresponding class of the Worldwide Opportunities Fund to the shareholders of the Global Growth Fund in exchange for their respective shares of the Global Growth Fund. The assets of the Global Growth Fund to be acquired by the Worldwide Opportunities Fund include all property, including, without limitation, all cash, securities, and dividends or interest receivables which are owned by the Global Growth Fund and any deferred or prepaid expenses shown as an asset on the books of the Global Growth Fund on the closing date of the reorganization. The Worldwide Opportunities Fund will assume all liabilities, accrued expenses, costs, charges, and reserves of the Global Growth Fund reflected on an unaudited statement of assets and liabilities as of the closing date. The closing of the reorganization will occur on the first Friday following satisfaction (or waiver) of the conditions to closing set forth in the reorganization agreement (currently anticipated to be October 22, 1999), or such later date as the parties may agree. The value of the Global Growth Fund's assets to be acquired and the Global Growth Fund's liabilities to be assumed by the Worldwide Opportunities Fund and the net asset value of each class of shares of the Worldwide Opportunities Fund will be determined as of immediately after the close of regular trading on the New York Stock Exchange on the closing date, using the valuation procedures set forth in the Worldwide Opportunities Fund's then current Prospectus and Statement of Additional Information. The number of Class A, Class B and Class C shares of the Worldwide Opportunities Fund to be issued to the Global Growth Fund will be determined by dividing (a) the value of the aggregate net assets attributable to each class of shares of the Global Growth Fund by (b) the net asset value per share of the corresponding class of the Worldwide Opportunities Fund. On the closing date, the Global Growth Fund will liquidate and distribute pro rata to its shareholders of record the Worldwide Opportunities Fund shares received by the Global Growth Fund in exchange for their respective shares in the Global Growth Fund. This liquidation and distribution will be accomplished by opening an account on the books of the Worldwide Opportunities Fund in the name of each shareholder of record in the Global Growth Fund and by crediting to each account the shares due pursuant to the reorganization. Every Global Growth Fund shareholder will own shares of the corresponding class of the Worldwide Opportunities Fund immediately after the reorganization, the value of which will be equal to the value of the shareholder's Global Growth Fund shares immediately prior to the reorganization. At or prior to the closing date, the Global Growth Fund will declare a dividend or dividends which, together with all previous such dividends, will have the effect of distributing to the Global Growth Fund shareholders all of the Global Growth Fund's investment company taxable income for all taxable years ending at or prior to the closing date (computed without regard to any deduction for dividends paid) and all of its net capital gains realized (after reduction for any capital loss carry-forward) in all taxable years ending at or prior to the closing date. The consummation of the reorganization is subject to a number of conditions set forth in the reorganization agreement. Certain of these conditions may be waived by the Board of Trustees of either trust, or by an authorized officer of each trust, as appropriate. 8 Among the significant conditions which may not be waived are: (a) the receipt by the Trust and the Acquiring Trust of an opinion of counsel as to certain federal income tax aspects of the reorganization and (b) the approval of the reorganization agreement by the shareholders of the Global Growth Fund. The Plan may be terminated and the reorganization abandoned at any time, before or after approval by the shareholders of the Global Growth Fund, prior to the closing date, by either party by resolution of its Board of Trustees. In addition, the reorganization agreement may be amended by mutual agreement, except that no amendment may be made to the reorganization agreement subsequent to the meeting that would change the provisions for determining the number of Worldwide Opportunities Fund shares to be issued to shareholders of the Global Growth Fund without their further approval. Reasons for the Reorganization The proposed reorganization is the outcome of deliberations by the Board of Trustees of the trusts undertaken at the request of each adviser. Each adviser recommended that the Trustees of each trust consider the benefits that shareholders of the funds would realize if the Global Growth Fund were to be combined with the Worldwide Opportunities Fund. In response to this recommendation, the independent trustees of each trust requested that management authorize a specific reorganization proposal for their consideration and provide the independent trustees with an analysis of the specific benefits to be realized by shareholders for the proposal. In the course of their review, the Trustees of the Trust noted that the reorganization would be a means of combining two series with substantially similar investment objectives and principal investment strategies and would permit the shareholders of the Global Growth Fund to pursue their investment goals in a larger fund. In reaching this conclusion, the Board considered a number of additional factors, including the following: o the total expense ratio of the combined Worldwide Opportunities Fund following the reorganization is projected to be [lower] than the current total expense ratio of the Global Growth Fund; o the average annual return of Class A shares of the Worldwide Opportunities Fund of 31.21% and 19.84% for the one and three year periods ended December 31, 1998 compared favorably with the average annual return of 14.35% and 15.71% for the Class A shares of the Global Growth Fund for the same periods; o the reorganization provides for continuity of distribution and advisory arrangements and shareholder services; and o the reorganization will not result in the recognition of any gain or loss for federal income tax purposes either to the Global Growth Fund or the Worldwide Opportunities Fund or to the shareholders of either of the funds. o the reorganization could result in economies of scale through the spreading of fixed costs over a larger asset base. At only $22.4 million in net assets (as of December 31, 1998), the Global Growth Fund's fixed costs are spread over that relatively small asset base; After considering these and other factors, the Board of Trustees of the Trust, including the independent trustees, unanimously concluded at a meeting held on February 9, 1999 that the reorganization would be in the best interests of the Global Growth Fund and its shareholders and that the interests of existing Global Growth Fund shareholders will not be diluted as a result of the transactions contemplated by the reorganization. The Board of Trustees of the Trust then unanimously voted to approve the reorganization agreement and authorize the officers of the Trust to submit the reorganization agreement to shareholders for consideration. In addition, at meetings held on February 24, 1999 and May 26, 1999, the Board of Trustees of the Acquiring Trust, including the independent trustees, unanimously concluded that the reorganization would be in the best interests of the Worldwide Opportunities Fund and the shareholders and that the interests of existing Worldwide Opportunities 9 Fund shareholders will not be diluted as a result of the reorganization. The Board of Trustees of the Acquiring Trust also unanimously voted to approve the reorganization agreement. Federal Income Tax Consequences Counsel to the funds, Goodwin, Procter & Hoar LLP, is to opine that, subject to customary assumptions and representations, on the basis of the existing provisions of the Internal Revenue Code (the "Code"), the Treasury Regulations promulgated thereunder and current administrative and judicial interpretations thereof, for federal income tax purposes: (a) the transfer of all or substantially all of the assets of the Global Growth Fund solely in exchange for Worldwide Opportunities Fund shares and the assumption by the Worldwide Opportunities Fund of certain assumed liabilities of the Global Growth Fund, and the distribution of such shares to the shareholders of the Global Growth Fund, will constitute a "reorganization" within the meaning of Section 368(a)(1)(C); the Worldwide Opportunities Fund and the Global Growth Fund will each be a "party to a reorganization" within the meaning of Section 368(b); (b) no gain or loss will be recognized by the Worldwide Opportunities Fund on the transfer of the assets of the Global Growth Fund to the Worldwide Opportunities Fund in exchange for Worldwide Opportunities Fund shares and the assumption by the Worldwide Opportunities Fund of certain assumed liabilities of the Global Growth Fund or upon the distribution of Worldwide Opportunities Fund shares to the Global Growth Fund shareholders in exchange for their shares of the Global Growth Fund; (c) the tax basis of the Global Growth Fund's assets acquired by the Worldwide Opportunities Fund will be the same to the Worldwide Opportunities Fund as the tax basis of such assets to the Global Growth Fund immediately prior to the reorganization, and the holding period of the assets of the Global Growth Fund in the hands of the Worldwide Opportunities Fund will include the period during which those assets were held by the Global Growth Fund; (d) no gain or loss will be recognized by the Worldwide Opportunities Fund upon the receipt of the assets of the Global Growth Fund solely in exchange for the Worldwide Opportunities Fund shares and the assumption by the Worldwide Opportunities Fund of certain assumed liabilities of the Global Growth Fund; (e) no gain or loss will be recognized by shareholders of the Global Growth Fund upon the receipt of Worldwide Opportunities Fund shares by such shareholders, provided such shareholders receive solely Worldwide Opportunities Fund shares (including fractional shares) in exchange for their Global Growth Fund shares; and (f) the aggregate tax basis of the Worldwide Opportunities Fund shares, including any fractional shares, received by each shareholder of the Global Growth Fund pursuant to the reorganization will be the same as the aggregate tax basis of the Global Growth Fund shares held by such shareholder immediately prior to the reorganization, and the holding period of the Worldwide Opportunities Fund shares, including fractional shares, to be received by each shareholder of the Global Growth Fund will include the period during which the Global Growth Fund shares exchanged therefor were held by such shareholder (provided that the Global Growth Fund shares were held as a capital asset on the date of the reorganization). The receipt of such an opinion is a condition to the consummation of the reorganization. The Trust has not obtained an Internal Revenue Service ("IRS") private letter ruling regarding the federal income tax consequences of the reorganization, and the IRS is not bound by advice of counsel. If the transfer of the assets of the Global Growth Fund in exchange for Worldwide Opportunities Fund shares and the assumption by the Worldwide Opportunities Fund of certain liabilities of the Global Growth Fund do not constitute a tax-free reorganization, each Global Growth Fund shareholder will recognize gain or loss equal to the difference between the value of Worldwide Opportunities Fund shares such shareholder acquires and the tax basis of such shareholder's Global Growth Fund shares. Shareholders of the funds should consult their tax advisers regarding the effect, if any, of the proposed reorganization in light of their individual circumstances. Since the foregoing discussion relates only to the federal income tax consequences of the reorganization, shareholders of the funds should also consult tax advisers as to state and local tax consequences, if any, of the reorganization. Capitalization The following table sets forth the capitalization of the Worldwide Opportunities Fund and the Global Growth Fund, and on a pro forma basis for the Combined Worldwide Opportunities Fund as of June 30, 1999 giving effect to the proposed acquisition of net assets of the Global Growth Fund at net asset value. The pro forma data reflects an exchange ratio of ___________, _______________ and _________ for Class A, Class B and Class C shares, 10 respectively, of the Worldwide Opportunities Fund issued for each Class A, Class B and Class C share, respectively, of the Global Growth Fund. Global Combined Worldwide Worldwide Growth Opportunities Fund Opportunities Fund Fund Pro Forma ------------------ ------ ------------------ Net assets Class A $ $ $ Class B Class C Net asset value per share Class A $ $ $ Class B Class C Shares outstanding Class A Class B Class C The table set forth above should not be relied on to determine the number of Worldwide Opportunities Fund shares to be received in the reorganization. The actual number of shares to be received will depend upon the net asset value and number of shares outstanding of the Global Growth Fund and the Worldwide Opportunities Fund at the time of the reorganization. Historical Performance Information The following table sets forth the average annual total return of the Class A, Class B and Class C shares of the Worldwide Opportunities Fund and the Global Growth Fund for the periods indicated. Average Annual Total Returns for Periods Ending 6/30/99(a) Since Inception Fund Name 1 Year 5 Years 10 Years Inception Date --------- ------ ------- -------- --------- ----------- Worldwide Opportunities Fund Class A % % % % 5/13/1960 Class B % % N/A % 7/15/1994 Class C % % N/A % 12/16/1998 MSCI World(b) % % % N/A N/A Global Growth Fund Class A % % N/A % 11/1/1993 Class B % N/A N/A % 9/18/1996 Class C % N/A N/A % 10/21/1996 [MSCI AC World Index](c) % % N/A ___% N/A Returns indicate past performance, which is not predictive of future performance. Investment return and net asset value will fluctuate, so that shares, when redeemed, may be worth more or less than the original cost. (a) The fund's average annual returns in the table above reflect the deduction of the maximum sales charge for an investment in Class A shares and a full redemption of Class B and Class C shares. 11 (b) The Morgan Stanley Capital International World (net) Index (MSCI World) is an unmanaged index calculated as an arithmetical average weighted by the market value of approximately 1,600 companies listed on stock exchanges in 23 countries, including the U.S. and Canada. The index does not reflect any sales charges or fees but does include the effect of foreign tax withholding. (c) Morgan Stanley Capital International All Country World Index (MSCI AC) is an unmanaged, commonly used measure of global stock market total return performance. The index's performance does not reflect any sales charges. 12 COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES The following discussion summarizes some of the more significant similarities and differences in the investment objectives, policies and restrictions of the Worldwide Opportunities Fund and the Global Growth Fund. The discussion below is qualified in its entirety by the discussion elsewhere in this Prospectus/Proxy Statement, and in the Prospectus and Statement of Additional Information for each fund. Investment Objectives and Policies The investment objectives of the Worldwide Opportunities Fund and the Global Growth Fund are substantially similar. The Worldwide Opportunities Fund has an investment objective of capital appreciation. The Global Growth Fund has an investment objective of long-term growth of capital. The investment objectives of the Worldwide Opportunities Fund and the Global Growth Fund are policies which may not be changed without the approval of the holders of at least a "majority of the outstanding voting securities" (as that term is defined in the 1940 Act) of the respective fund. The principal investment strategies of the Worldwide Opportunities Fund are substantially similar to the principal investment strategies of the Global Growth Fund. o The Worldwide Opportunities Fund and the Global Growth Fund invest in securities of both U.S. and foreign issuers. o Each invests at least 65% of its assets in securities of issuers located in 3 or more countries, one of which will be the United States. o Both funds may invest in companies in foreign countries with developed markets and countries with "emerging markets." The Worldwide Opportunity Fund is managed by an adviser and subadviser. The subadviser determines how much of the Worldwide Opportunities Fund's assets will be invested in different countries and regions. The subadviser also decides which investments to buy and sell in all countries and regions other than the United States. The adviser decides which investments to buy and sell in the United States. The adviser uses a growth oriented approach in selecting investments. The subadviser uses a value-oriented approach in selecting investments. The Global Growth Fund invests primarily in common stock of U.S. and foreign companies that offer the potential for growth. Certain Investment Restrictions The Worldwide Opportunities Fund and the Global Growth Fund are both subject to certain investment restrictions that restrict the scope of their investments. Fundamental investment restrictions may not be changed without the affirmative vote of the holders of a majority of the outstanding securities (as defined in the 1940 Act) of the fund. However, investment restrictions that are not fundamental may be changed by the Board of Trustees without shareholder approval. The table below compares certain fundamental and non-fundamental investment restrictions of the Worldwide Opportunities Fund and the Global Growth Fund. Fundamental restrictions are followed by an (F); non-fundamental restrictions are followed by an (nf). 13 Subject Matter of Restriction Worldwide Opportunities Fund Global Growth Fund - -------------- ---------------------------- ------------------ Borrowing The Worldwide Opportunities Fund may The Global Growth Fund may not borrow not borrow money, except from a bank money in excess of 20% of its total assets and then only if there is an asset coverage (taken at cost) and then only as a temporary of at least 300%; provided, however, that measure for extraordinary or emergency the fund may not purchase securities while reasons and not for investment. The fund outstanding borrowings exceed 5% of the may borrow only from banks. Immediately fund's total assets. (F) after any such borrowings there must be an asset coverage (total assets of the fund, including the amount borrowed, less liabilities other than such borrowings) of at least 300% of the amount of all borrowings. In the event that, due to market decline or other reason, asset coverage falls below 300%, the fund is required within three days, not including Sundays and holidays, to reduce the amount of its borrowings to the extent necessary so that the assets coverage of the borrowings is at last 300%. If this should happen, the fund may have to sell securities at a time when it would be disadvantageous to do so. (F) - ------------------------------------------------------------------------------------------------------------------------ Pledging No fundamental or non-fundamental The Global Growth Fund may not pledge restriction. more than 25% of its total assets (taken at cost) in connection with permissible borrowings. For the purpose of this restriction, the deposit of underlying securities and other assets in connection with the writing of put and call options and collateral arrangements with respect to margin for currency futures contracts are not deemed to be a pledge of assets. (F) - ------------------------------------------------------------------------------------------------------------------------ Debt Securities- The Worldwide Opportunities Fund may No fundamental or non-fundamental Credit Quality invest up to 35% of its assets in non- restriction. convertible fixed-income securities of U.S. and non-U.S. issuers that are rated within the three highest rating categories of Standard & Poor's or Moody's Investor Service. (F) - ------------------------------------------------------------------------------------------------------------------------ Foreign Under normal circumstances, at least 65% The Global Growth Fund may invest up to Securities of the total assets of the Worldwide 100% of its assets in foreign securities. (F) Opportunities Fund will be invested in the securities of issuers located in at least three different countries, one of which will be the United States. (F) 14 Subject Matter of Restriction Worldwide Opportunities Fund Global Growth Fund - -------------- ---------------------------- ------------------ Lending The Worldwide Opportunities Fund may The Global Growth Fund may not make not lend money, except in connection with loans, except (a) by purchase of marketable the acquisition of a portion of an issue of bonds, debentures, commercial paper or publicly distributed bonds, debentures or corporate notes, and similar marketable other corporate obligations. (F) evidences of indebtedness which are part of an issue to the public or to financial institutions, (b) by entry into repurchase agreements, or (c) through the lending of its portfolio securities with respect to not more than 25% of its total assets. (F) - ------------------------------------------------------------------------------------------------------------------------ Illiquid The Worldwide Opportunities Fund will The Global Growth Fund may not invest in Securities/ not invest more than 15% of its net assets (a) securities which at the time of such Restricted in illiquid securities, comprised of assets investment are not readily marketable, (b) which may not be sold or disposed of in securities restricted as to resale (excluding the ordinary course of business within securities determined to be readily seven days at approximately the value at marketable), and (c) repurchase agreements which the fund has valued the investment. maturing in more than seven days, if, as a (nf) result, more than 15% of the Global Growth Fund's net assets (taken at current value) would be invested in the aggregate in securities described in (a), (b) and (c) above. (nf) - ------------------------------------------------------------------------------------------------------------------------ Purchases of The Worldwide Opportunities Fund may The Global Growth Fund may not purchase Margin not purchase securities on margin except securities on margin (but it may obtain Securities and as may be permitted under the 1940 Act. short-term credits for the clearance of Short Sales For purposes of this restriction, the purchases and sales of its portfolio deposit or payment of margin in securities, and may make margin payments connection with the use of futures in connection with transactions in contracts will not be deemed to be a permissible futures and options contracts) or purchase of securities on margin. (F) make uncovered short sales. (nf) - ------------------------------------------------------------------------------------------------------------------------ Unseasoned The Worldwide Opportunities Fund will The Global Growth Fund may not invest Issuers not purchase any securities if, as a result, more than 5% of its total assets in securities the fund would then have more than 5% of any one issuer which, together with any of its total assets (taken at current value) predecessor, has been in continuous invested in securities of companies operation for less than three years. (F) (including their predecessors) with less than three years of operating history. (nf) - ------------------------------------------------------------------------------------------------------------------------ 15 Subject Matter of Restriction Worldwide Opportunities Fund Global Growth Fund - -------------- ---------------------------- ------------------ Other The Worldwide Opportunities Fund may The Global Growth Fund may not purchase Investment not invest in securities of other investment the securities of any other investment Companies companies except to the extent permitted company except (a) within the limits of the by the 1940 Act. (F) 1940 Act, (b) in a public offering or in the open market or in privately negotiated transactions where, in either case, to the best information of the fund, no commission, profit or sales charge to a sponsor or dealer, other than a customary broker's commission or underwriting discount, results from such purchase, (c) if such purchase is part of a merger, consolidation, or acquisition of assets, or (d) as part of a master-feeder arrangement. (F) - ------------------------------------------------------------------------------------------------------------------------ Diversification The Worldwide Opportunities Fund will The Global Growth Fund may not, with not purchase any securities (excluding respect to 75% of its total assets, purchase government securities) if more than 5% of any security (other than obligations issued the fund's total assets (taken at current or guaranteed by the U.S. Government, its value) would then be invested in securities agencies or instrumentalities) if, as a result, of a single issuer. (nf) more than 5% of the value of the fund's total assets would be invested in securities of any one issuer. This limitation does not apply with respect to the remaining 25% of the fund's total assets. (F) The Global Growth Fund also may not, with respect to 75% of its total assets, acquire more than 10% of any one class of securities of an issuer or more than 10% of the outstanding voting securities of any one issuer. (For this purpose all common stocks of an issuer are regarded as a single class, and all preferred stocks of an issuer are regarded as a single class.) (F) - ------------------------------------------------------------------------------------------------------------------------ Industry The Worldwide Opportunities Fund may The Global Growth Fund may not Concentration not invest more than 25% of its total concentrate its investments in particular assets in any one industry. For purposes industries, and in no event invest more than of this policy, foreign governments and 25% of the value of its total assets in any supranational agencies shall be deemed to one industry. (F) be separate industries. (F) 16 Subject Matter of Restriction Worldwide Opportunities Fund Global Growth Fund - -------------- ---------------------------- ------------------ Oil & Gas and The Worldwide Opportunities Fund will The Global Growth Fund may not buy or Commodity not invest in interests in oil, gas, or other sell oil, gas or other mineral leases, rights Contracts mineral exploration or development or royalty contracts or commodities or programs. (nf) commodity contracts, except for transactions in futures contracts and options The Worldwide Opportunities Fund may thereon entered into for hedging purposes. not purchase or sell commodities or (F) commodity contracts. The terms commodities and commodity contracts shall not include (a) forward foreign currency exchange contracts, (b) futures contracts on foreign currencies, (c) options on futures contracts, or (d) options on foreign currencies. (F) - ------------------------------------------------------------------------------------------------------------------------ Senior Securities The Worldwide Opportunities Fund may The Global Growth Fund may not issue not issue senior securities such as bonds, senior securities such as bonds, debentures, debentures, or senior equity securities. or senior equity securities. (F) However, to the extent that it is permitted by the 1940 Act, the fund may borrow money from banks pursuant to the fund's investment restriction regarding the borrowing of money and enter into transactions involving forward foreign currency exchange contracts, foreign currency futures contracts and options on foreign currency futures contracts, and options on foreign currencies as described in the fund's Prospectus and Statement of Additional Information. (F) - ------------------------------------------------------------------------------------------------------------------------ Futures and The Worldwide Opportunities Fund will The Global Growth Fund may not engage in Options not invest more than 5% of its total assets puts, calls, straddles, spreads or any in any combination of puts, calls, combination thereof, except that, to the straddles or spreads. (nf) extent described in the fund's Prospectus and Statement of Additional Information, The fund may purchase put or call options the fund may buy and sell put and call or combinations of put or call options options (and any combination thereof) on written by others if the aggregate securities, on financial futures contracts, on premiums paid for the options do not securities indices, on currency futures exceed 2% of the fund's net assets. (nf) contracts and on foreign currencies and may buy and sell put and call warrants, the values of which are based upon securities indices. (nf) 17 Subject Matter of Restriction Worldwide Opportunities Fund Global Growth Fund - -------------- ---------------------------- ------------------ Securities held No fundamental or non-fundamental The Global Growth Fund may not invest in by Trustees and restriction. securities of any company, if officers and Officers Trustees of the Trust and officers and directors of the adviser who beneficially own more than 0.5% of the shares or securities of that company collectively own more than 5% of such securities. (F) - ------------------------------------------------------------------------------------------------------------------------ Real Estate The Worldwide Opportunities Fund may The Global Growth Fund may not purchase not purchase or sell real estate. (F) or sell real property (including limited partnership interests), except that it may (a) purchase or sell readily marketable interests in real estate investment trusts or readily marketable securities of companies which invest in real estate, (b) purchase or sell securities that are secured by interests in real estate or interests therein, or (c) acquire real estate through exercise of its rights as a holder of obligations secured by real estate or interests therein or sell real estate so acquired. (F) - ------------------------------------------------------------------------------------------------------------------------ Underwriting The Worldwide Opportunities Fund may The Global Growth Fund may not act as an not underwrite the sale of securities of underwriter except that, in connection with other issuers, but the fund may be deemed the disposition of its portfolio securities, it to be an underwriter in connection with may be deemed to be an underwriter under any acquisition of restricted securities. certain federal securities laws. (F) (F) - ------------------------------------------------------------------------------------------------------------------------ Control The Worldwide Opportunities Fund may The Global Growth Fund may not make not invest in companies for the purpose of investments for the purpose of exercising exercising control or management. (F) control of a company's management. (nf) - ------------------------------------------------------------------------------------------------------------------------ Warrants The Worldwide Opportunities Fund will The Global Growth Fund may not purchase not purchase warrants, except warrants warrants if, as a result, its warrant acquired by the fund in units or attached holdings, valued at the lower of cost or to securities which may be deemed to be market, would exceed 5% of the fund's net without value, in amounts in excess of 5% assets, with no more than 2% of net assets of the fund's net assets. (nf) in warrants not listed on the New York or American Stock Exchanges. (nf) - ------------------------------------------------------------------------------------------------------------------------ Joint Account No fundamental or non-fundamental The Global Growth Fund may not restriction. participate on a joint or joint and several basis in any securities trading account. (nf) - ------------------------------------------------------------------------------------------------------------------------ Issuing The Worldwide Opportunities Fund may No fundamental or non-fundamental Securities not issue any of its securities other than restriction. for cash or securities (including securities of which the fund is the issuer), except as a dividend or distribution or in connection with a reorganization. (F) - ------------------------------------------------------------------------------------------------------------------------ 18 COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS Multiple Class Structure Both funds offer three classes of shares: Class A, Class B and Class C shares. The classes of the funds are substantially identical except that Class B shares of the Global Growth Fund purchased prior to January 20, 1998 convert to Class A shares six years after purchase rather than eight years. Class B shares of the Global Growth Fund purchased prior to January 20, 1998 will remain subject to the six year conversion period after the reorganization. Class B shares of the Global Growth Fund purchased prior to January 20, 1998 will also remain subject to the sales load schedule as it existed prior to that date. All Class B shares of the Global Growth Fund purchased after January 20, 1998 and all Worldwide Opportunities Fund Class B shares convert to Class A after eight years. Class A Shares o Are offered to the public at net asset value plus a maximum sales charge of 4.75% of the offering price (4.99% of the amount invested). The sales charge may be reduced or waived under certain conditions. o Are not subject to any charges when redeemed. o Have lower distribution and service fees (0.25%) and therefore pay higher dividends than Class B and Class C shares. Class B Shares o Are offered to the public at the next determined net asset value after receipt of the order with no sales charge at the time of purchase. o Are subject to a sales charge of up to 5% of the shares value if they are redeemed within the first five years of purchase (four years for Class B shares of the Global Growth Fund purchased prior to January 20, 1998). o Will automatically convert to Class A shares without a sales charge at the relative net asset value of each class eight years after the acquisition of the Class B shares (six years for Class B shares of the Global Growth Fund purchased prior to January 20, 1998.) o Have higher distribution and service fees (1.00%) and pay lower dividends than Class A shares. Class C Shares o Are offered to the public at the next determined net asset value after receipt of the order with no sales charge at the time of purchase. o Are subject to a sales charge of 1% if they are redeemed within the first year after they are purchased. o Have the same distribution and service fees (1%) as Class B shares and thereafter pay comparable dividends. o Class C shares do not convert to any other class of shares of the fund. In the proposed reorganization, you will receive the same class of shares of the Worldwide Opportunities Fund in exchange for your shares in the Global Growth Fund. The reorganization will be effected at net asset value. No sales charge will be imposed on your shares. 19 For purposes of calculating the contingent deferred sales charge that you may pay when you redeem any acquired Class B and Class C shares of the Worldwide Opportunities Fund, the holding period of the redeemed shares will be "tacked" to the holding period of the Global Growth Fund. If you acquire Class B and Class C shares as a result of the reorganization you will continue to be subject to a contingent deferred sales charge upon subsequent redemption to the same extent as if you had continued to hold your shares of the Global Growth Fund. Distribution Plans Phoenix Equity Planning Corporation serves as the distributor of shares of both the Worldwide Opportunities Fund and the Global Growth Fund. The Acquiring Trust has adopted separate amended and restated distribution plans under Rule 12b-1 of the 1940 Act for each class of shares of the Worldwide Opportunities Fund relating to the sale and promotion of Worldwide Opportunities Fund shares and the furnishing of shareholder services (the "Worldwide Opportunities Class A Plan," "Worldwide Opportunities Class B Plan," and the "Worldwide Opportunities Class C Plan," collectively the "Worldwide Opportunities Plans"). Under the Worldwide Opportunities Class B Plan and the Worldwide Opportunities Class C Plan, the Worldwide Opportunities Fund may reimburse Equity Planning Corporation monthly for actual expenses of Equity Planning Corporation up to 0.75% of the average daily net assets of the Worldwide Opportunities Fund's Class B and Class C shares, respectively. In addition, the Worldwide Opportunities Fund pays Equity Planning Corporation 0.25% annually of the average daily net assets for providing services to the shareholders, including assistance in connection with inquiries related to shareholder accounts. Equity Planning Corporation's distribution expenses from selling and servicing Class B shares may be more than the payments received from contingent deferred sales charges collected on redeemed shares and from the Acquiring Trust under the Worldwide Opportunities Class B Plan. Those expenses may be carried over and paid in future years. At June 30, 1999, Equity Planning had incurred unreimbursed expenses under the Worldwide Opportunities Class B Plan of $__________. The Trust also has adopted distribution plans pursuant to Rule 12b-1 on behalf of the Class B and Class C shares of the Global Growth Fund, (the "Trust Class B Plan" and "Trust Class C Plan," and collectively, the "Trust Plans"). Under the Trust Class B Plan and the Trust Class C Plan, the Global Growth Fund pays the Distributor 0.75% of the average daily net assets of the Class B and Class C shares. The Trust has also adopted a service agreement under which the Global Growth Fund will pay a continuing service fee to service providers, in an amount, computed and prorated on a daily basis, equal to 0.25% per annum of the fund's average daily net assets. COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES Both the Worldwide Opportunities Fund and the Global Growth Fund offer the same shareholder services, including a Systematic Withdrawal Program, telephone exchanges, telephone redemptions and access to the Investo-Matic Program, an automatic investment program. The Worldwide Opportunities Fund distributes net investment income semi-annually, and distributes net realized capital gains, if any, at least annually. The Global Growth Fund distributes net investment income annually, and distributes net realized capital gains, if any, at least annually. All dividends and distributions with respect to the shares of the Worldwide Opportunities Fund and the Global Growth Fund are paid in additional shares of the respective fund unless shareholders elect to receive cash. The number of shares received in connection with any reinvestment of dividends will be based upon the net asset value per share of the applicable class of shares of the Worldwide Opportunities Fund and the Global Growth Fund in effect on the record date. 20 The Worldwide Opportunities Fund and the Global Growth Fund currently offer shareholders identical exchange privileges. Shareholders of the Worldwide Opportunities Fund and the Global Growth Fund may exchange their shares for shares of a corresponding class of shares of other affiliated Phoenix funds, except for the mutual funds of the Phoenix-Zweig Trust. Shares of the Worldwide Opportunities Fund and shares of the Global Growth Fund may be redeemed at a redemption price equal to the net asset value of the shares as next determined following the receipt of a redemption order and any other required documentation in proper form. In the case of Class B and Class C shares redemption, investors will be subject to the applicable determined deferred sales charge, if any, for such shares. Payment of redemption proceeds for redeemed Global Growth Fund and Worldwide Opportunities Fund shares are made within seven days after receipt of a redemption request in proper form and documentation. Because both the Worldwide Opportunities Fund and the Global Growth Fund offer the same shareholder services, after the Closing the same services will continue to be available to the shareholders of the Global Growth Fund but in their capacity as shareholders of the Worldwide Opportunities Fund. COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS The following is a summary of certain provisions of the Declaration of Trust of each of the trusts. Form of Organization The Worldwide Opportunities Fund is a series of the Acquiring Trust, an unincorporated voluntary association organized under the laws of the Commonwealth of Massachusetts as a business trust, pursuant to a Declaration of Trust dated November 4, 1991, as amended. The Global Growth Fund is a series of the Trust, which is also an unincorporated voluntary association organized under the laws of the Commonwealth of Massachusetts as a business trust, pursuant to a Declaration of Trust dated May 28, 1986, as amended. The operations of the Worldwide Opportunities Fund and the Global Growth Fund are governed by their Declarations of Trust and by Massachusetts law, as applicable. Both the Acquiring Trust and the Trust are registered with the Securities and Exchange Commission as open-end management investment companies and are subject to the provisions of the 1940 Act and the rules and regulations of the Commission thereunder. Shares Each Declaration of Trust authorizes the Trustees to create an unlimited number of series in each trust. Within each series, the Trustees may create an unlimited number of classes, each with an unlimited number of full and fractional shares. The Trust currently has six series outstanding: the Phoenix-Engemann Balanced Return Fund, the Phoenix-Engemann Global Growth Fund, the Phoenix-Engemann Growth Fund, the Phoenix-Engemann Nifty Fifty Fund, the Phoenix-Engemann Small & Mid-Cap Growth Fund and the Phoenix-Engemann Value 25 Fund. The Acquiring Trust currently has one series outstanding: the Phoenix-Aberdeen Worldwide Opportunities Fund. In addition to the currently existing series, each trust may organize other series in the future. Both the Worldwide Opportunities Fund and the Global Growth Fund offer Class A, Class B and Class C shares. When issued, the shares are fully paid and non-assessable, have no preference, preemptive or similar rights (unless assigned by the Trustees), and are freely transferable. The assets and proceeds received by each trust from the issue or sale of shares of a series or class are allocated to that series and class and constitute the rights of that series or class, subject only to the rights of creditors. Any underlying assets of a series or class are required to be segregated on the books of account of the trusts. These assets are to be used to pay the expenses of the series or class as well as a share of the general expenses of each relevant trust. Meetings The Worldwide Opportunities Fund is not required to hold periodic, special shareholder meetings. The president may call shareholder meetings at any time. If a majority of trustees requests a meeting in writing or by 21 board resolution, or if holders of more than ten percent of the issued and outstanding stock entitled to vote at a meeting request a meeting in writing, the president and secretary shall call a meeting. The Global Growth Fund also is not required to hold periodic, special shareholder meetings. Trustees may call shareholder meetings as necessary. Shareholder Liability Unlike the stockholders of a corporation, under certain circumstances shareholders of a Massachusetts business trust may be held personally liable for the debts, claims or other obligations of a business trust. However, both the Phoenix Worldwide Opportunities Fund Declaration of Trust and the Phoenix-Engemann Funds Declaration of Trust limit shareholder liability. The Phoenix Worldwide Opportunities Fund Declaration of Trust provides that shareholders shall not be subject to any personal liability for the acts, obligations or affairs of the Phoenix Worldwide Opportunities Fund. The Phoenix Worldwide Opportunities Fund will indemnify shareholders for all losses and expenses which they incur if they are held personally liable for the obligations of the fund. Such indemnification will come out of the property of the fund. The Phoenix-Engemann Funds Declaration of Trust specifies that shareholders shall not be personally liable for claims against the Global Growth Fund, and it prevents the fund or any trustee, officer, employee or agent of the fund from personally binding any shareholder for payment other than for payment to which the shareholder agrees. The Global Growth Fund will indemnify shareholders for all losses and expenses which they incur if they are held personally liable for the obligations of the fund. Such indemnification will come out of the property of the fund. Due to the indemnification provisions in the declarations of trust of each trust, the risk of financial loss to shareholders on account of shareholder liability is considered remote. Liability of Trustees Each Declaration of Trust provides that a trustee will generally be personally liable only for the trustee's own willful misfeasance, bad faith, gross negligence or reckless disregard of duties. Under the Phoenix Worldwide Opportunities Declaration of Trust, a trustee will not be personally liable to any person, except to the trust or its shareholders, in connection with trust property or the affairs of the trust, unless the trustee acted in bad faith, willful misfeasance, gross negligence or reckless disregard of the trustee's duties. The Phoenix Worldwide Opportunities Declaration of Trust provides for indemnification of trustees for the expenses of proceedings against the trustee unless: o the trustee acted with willful misfeasance, bad faith, gross negligence or reckless disregard of duties with respect to the trust, a series of the trust, or shareholders of the trust; o the trustee did not act in good faith in the reasonable belief that the trustee's actions with respect to any matter were in the best interest of the trust; or o the proceeding against the trustee ends in a settlement or similar disposition in which the trustee is required to make payment, unless an appropriate authority determines that the trustee did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the trustee's duties. The Phoenix Worldwide Opportunities Declaration of Trust allows the trust to purchase insurance for a trustee to provide indemnification in the event of proceedings against the trustee and also permits the trust to advance money to a trustee for the expenses of litigation. If the trustee's conduct is later found to preclude indemnification, the trustee must repay the advance to the trust. 22 Under the Phoenix-Engemann Funds Declaration of Trust a trustee will not be liable for claims against the trust or actions of any other trustee, officer, agent or employee of the trust unless the trustee would be liable because of willful misfeasance, bad faith, gross negligence or reckless disregard of the trustee's duties. The trust will indemnify a trustee for the expenses of litigation against the trustee and may purchase insurance for a trustee to provide the indemnification. The trust also may advance money to the trustee for the expenses of litigation. Voting Requirements The Phoenix Worldwide Opportunities Declaration of Trust provides that whole shares which are entitled to vote on a matter are entitled to one vote, and fractional shares which are entitled to vote on a matter are entitled to a corresponding fractional vote. There is no cumulative voting in elections for trustees. The Phoenix-Engemann Funds Declaration of Trust provides that each whole share entitled to vote on a matter is entitled to one vote, and each fractional share entitled to vote on a matter is entitled to a proportionate fractional vote. There is no cumulative voting in elections for trustees. Liquidation or Dissolution In the event of the liquidation or dissolution of a class or series of either trust, the trustees shall distribute the assets of the terminating class or series to the shareholders, according to their respective rights, after accounting for the liabilities of the terminating class or series. FISCAL YEAR The Worldwide Opportunities Fund operates on a fiscal year which ends June 30. The Global Growth Fund operates on a fiscal year which ends December 31. MANAGEMENT AND OTHER SERVICE PROVIDERS Responsibility for the overall supervision of the Trust, including the Global Growth Fund, rests with the Trust's Board of Trustees. Roger Engemann and Associates serves as investment manager to the Trust. Responsibility for the overall supervision of the Acquiring Trust, including the Worldwide Opportunities Fund, rests with the Acquiring Trust's Board of Trustees. Phoenix Investment Counsel serves as the investment adviser to the Worldwide Opportunities Fund. National Securities & Research Corporation, a direct subsidiary of Phoenix Investment Partners, Ltd. (formerly known as Phoenix Duff & Phelps Corporation), acted as the adviser to the Worldwide Opportunities Fund prior to June 1, 1998. Effective June 1, 1998, National Securities & Research Corporation assigned its investment advisory contract to Phoenix Investment Counsel. Phoenix Investment Counsel is responsible for managing the Worldwide Opportunities Fund's investment program and the day-to-day management of the domestic portion of the fund's portfolio. Aberdeen Fund Managers, Inc., is the subadviser to the fund and is responsible for the day-to-day management of the foreign holdings of the fund. Roger Engemann, James E. Jair and John S. Tilson are primarily responsible for the day-to-day management of the Global Growth Fund. Equity Planning serves as administrative agent of the Worldwide Opportunities Fund and the Global Growth Fund and, as such, performs administrative, bookkeeping and pricing functions. Equity Planning also acts as transfer agent for the Worldwide Opportunities Fund and the Global Growth Fund. State Street Bank and Trust Company acts as custodian for the Global Growth Fund. Brown Brothers Harriman & Co. serves as custodian of the Worldwide Opportunities Fund. PricewaterhouseCoopers LLP serve as independent accountants for the funds. 23 VOTING INFORMATION Quorum and Voting Requirements This Prospectus/Proxy Statement is being furnished to the shareholders of the Global Growth Fund in connection with the solicitation by the Board of Trustees of The Phoenix-Engemann Funds of proxies to be used at the meeting. Shareholders of record of the Global Growth Fund at the close of business on August 23, 1999 will be entitled to vote at the meeting or at any adjournments thereof. As of the record date, there were ___________, __________ and _________ issued and outstanding Class A, Class B and Class C shares, respectively, of the Global Growth Fund. Shareholders are entitled to one vote for each share held and a proportionate vote for each fractional share held. Shareholders of the Global Growth Fund will vote together as a single class on the reorganization proposal. The holders of forty percent (40%) of the shares entitled to vote at the close of business on the record date present in person or represented by proxy will constitute a quorum for the meeting. A quorum being present, the approval of the reorganization proposal requires the affirmative vote of a majority of the outstanding shares of the Global Growth Fund. For purposes of determining the presence of a quorum for transacting business at the meeting and for determining whether sufficient votes have been received for approval of the proposal to be acted upon at the meeting, abstentions and broker "non-votes" (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated as shares that are present at the meeting, but which have not been voted. For this reason, abstentions and broker non-votes will assist the Global Growth Fund in obtaining a quorum, but both have the practical effect of a "no" vote for purposes of obtaining the requisite vote for approval of the proposal. If either (a) a quorum is not present at the meeting or (b) a quorum is present but sufficient votes in favor of the reorganization proposal have not been obtained, then the persons named as proxies may propose one or more adjournments of the meeting without further notice to shareholders to permit further solicitation of proxies provided such persons determine, after consideration of all relevant factors, including the nature of the proposal, the percentage of votes then cast, the percentage of negative votes then cast, the nature of the proposed solicitation activities and the nature of the reasons for such further solicitation, that an adjournment and additional solicitation is reasonable and in the interests of shareholders. The persons named as proxies will vote those proxies that such persons are required to vote FOR the reorganization proposal in favor of such an adjournment and will vote those proxies required to be voted AGAINST the reorganization proposal against such adjournment. The meeting may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning to another date and time, whether or not a quorum is present, and the meeting may be held as adjourned within a reasonable time after the date set for the original meeting without further notice. The individuals named as proxies on the enclosed proxy card will vote in accordance with the shareholder's direction, as indicated thereon, if the proxy card is received and is properly executed. If the shareholder properly executes a proxy and gives no voting instructions with respect to the reorganization proposal, the shares will be voted in favor of the reorganization proposal. The proxies, in their discretion, may vote upon such other matters as may properly come before the meeting. The Board of Trustees of the Trust is not aware of any other matters to come before the meeting. Approval of the reorganization proposal by the shareholders of the Global Growth Fund is a condition of the consummation of the reorganization. If the reorganization is not approved, the Global Growth Fund will continue as a series of the Trust and the Board of Trustees of the Trust may consider other alternatives in the best interests of the shareholders of the Global Growth Fund. Revocation of Proxies Any shareholder who has given a proxy has the right to revoke the proxy any time prior to its exercise 24 o by written notice of the proxy's revocation to the Secretary of the Trust at the above address prior to the meeting; o by the subsequent execution and return of another proxy prior to the meeting; o by submitting a subsequent telephone vote; or o by being present and voting in person at the meeting and giving oral notice of revocation to the Chairman of the meeting. No Appraisal Rights The staff of the SEC has taken the position that any rights to appraisal arising under state law are preempted by the provisions of the 1940 Act and Rule 22c-1 thereunder, which generally requires that shares of a registered open-end investment company be valued at their next determined net asset value. Solicitation of Proxies In addition to solicitation of proxies by mail, officers of the Trust and officers and regular employees of Phoenix Investment Counsel, affiliates of Phoenix Investment Counsel, or other representatives of the Trust may also solicit proxies by telephone or telegram or in person. The Trust may also use a proxy solicitation firm to assist with the mailing and tabulation effort and any special, personal solicitation of proxies. Shareholders of the Global Growth Fund may be asked by the proxy solicitor's representatives to cast their votes by authorizing the execution of a proxy by telephone. Shareholders will either be contacted by a representative of the proxy solicitor using information derived from a shareholder list provided by the Trust or shareholders may be sent a written communication or left a telephone message asking the shareholder to telephone the solicitor at a designated toll-free number. In all such cases, the representative of the solicitor will ask for the shareholder's full name and address, the last four digits of the shareholder's social security number or employer identification number, the person's title (in the case of a corporate shareholder) and confirmation that the person is authorized to direct the voting of the shares. The shareholder will be asked to confirm that the Prospectus/Proxy Statement and proxy form have been received. If answered in the affirmative, the solicitor representative will advise the shareholder that the shareholder may authorize the execution of a proxy over the telephone and ask the shareholder if the shareholder desires to authorize the execution of a proxy at that time. Telephone conversations will be recorded. If the shareholder chooses to proceed, the representative of the solicitor will then ask the shareholder if the shareholder wishes to support the reorganization proposal. If answered in the affirmative, the solicitor will read the reorganization proposal to the shareholder and ask for such shareholder's voting instruction on the reorganization proposal. Although the representative of the solicitor will assist with any questions, the answers to which are contained in the Proxy Statement, the representative of the solicitor will not make recommendations on how to vote on the reorganization proposal. Finally, the representative of the solicitor will explain that the solicitor will execute a written proxy as the shareholder's agent in accordance with the shareholder's instructions and will forward the proxy to the Trust. Within 72 hours after each telephone call, the solicitor will send to each shareholder who used the telephone proxy voting method a written confirmation of the shareholder's instructions. The shareholder will be asked to contact the solicitor immediately if the shareholder's instructions have not been properly recorded. If a shareholder wishes to participate in the meeting, but does not wish to authorize the execution of a proxy by telephone, the shareholder may still submit the proxy form included with this Prospectus/Proxy Statement or attend the meeting in person. The costs of the meeting, such as the preparation and mailing of the notice, the Prospectus/Proxy Statement and the proxy, and the solicitation of proxies, including reimbursement to persons who forward proxy materials to their clients, and the expenses connected with the solicitation of these proxies in person, by telephone, or by 25 telegraph, will be borne by Phoenix Investment Counsel. The costs of any additional solicitation and of any adjourned session of the meeting will be borne by Phoenix Investment Counsel. Phoenix Investment Counsel will reimburse banks, brokers, and other persons holding Global Growth Fund shares registered in their names or in the names of their nominees, for their expenses incurred in sending proxy material to and obtaining proxies from the beneficial owners of such Global Growth Fund shares. [Name of proxy solicitor], a proxy solicitation firm, has been engaged by ______________ to act as solicitor and will receive fees estimated at $___________, plus reimbursement of out-of-pocket expenses. Ownership of Voting Securities Based on holdings and total shares outstanding as of _________, 1999, the Trustees and officers of the Trust owned as a group less than 1% of the outstanding voting securities of the Global Growth Fund. If the reorganization were consummated as of __________, 1999, the Trustees and officers of the Trust would own less than 1% of the outstanding voting securities of the Combined Worldwide Opportunities Fund based on their holdings and total shares outstanding as of ___________, 1999. Based on holdings and total shares outstanding as of __________, 1999, and assuming consummation of the reorganization, no person would own beneficially or of record 5% or more of the outstanding shares of the Global Growth Fund or the Combined Worldwide Opportunities Fund. THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING THE INDEPENDENT TRUSTEES OF THE TRUST, RECOMMEND YOU APPROVE THE PLAN OF REORGANIZATION. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES. ADDITIONAL INFORMATION ABOUT THE FUNDS Additional information about the Worldwide Opportunities Fund, and the Acquiring Trust is included in the Worldwide Opportunities Fund Prospectus accompanying this document and is incorporated by reference herein. Further information about the Worldwide Opportunities Fund and the Acquiring Trust is included in the Statement of Additional Information for the Worldwide Opportunities Fund, dated September __, 1999, which has been filed with the Commission and is incorporated by reference herein. A copy of the Worldwide Opportunities Fund Statement of Additional Information may be obtained without charge by contacting Equity Planning at 100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by telephoning Equity Planning toll-free at 1-800-243-4361. Additional information about the Global Growth Fund is included in the current Prospectus for the Global Growth Fund dated May 1, 1999. A copy of the Global Growth Fund Prospectus has been filed with the Commission, and is incorporated by reference herein. Further information about the Global Growth Fund is included in the Statement of Additional Information for the Global Growth Fund dated May 1, 1999, which also has been filed with the Commission and is incorporated by reference herein. A copy of the Global Growth Fund's Prospectus and Statement of Additional Information may be obtained without charge by contacting Equity Planning at 100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by telephoning Equity Planning toll-free at 1-800-243-4361. MISCELLANEOUS Available Information The Acquiring Trust and the Trust are each registered under the 1940 Act and is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and, in accordance therewith, 26 files reports, proxy materials, and other information with the Commission. Such reports, proxy materials, and other information can be inspected at the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 as well as at the following regional offices: New York Regional Office, 75 Park Place, Room 1228, New York, NY 10007; and Chicago Regional Office, Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago, IL 60661. Copies of such material also can be obtained from the Public Relations Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web Site (http://www.sec.gov) that contains this Prospectus, Statement of Additional Information, material incorporated by reference, and other information regarding registrants that file electronically with the Commission. Management's Discussion of the Worldwide Opportunities Fund's Performance for the Year Ended June 30, 1999 [To be filed by Pre-Effective Amendment] Legal Matters Certain legal matters in connection with the issuance of the shares of the Worldwide Opportunities Fund will be passed upon by Goodwin, Procter & Hoar LLP. Additional Financial Information The table set forth below presents certain financial information for the Worldwide Opportunities Fund. This information is derived from the Worldwide Opportunities Fund audited financial statements for the year ended June 30, 1999. The data should be read in conjunction with the audited financial statements and related notes, which are included in the Statement of Additional Information related to this Prospectus/Proxy Statement. The financial highlights for the Worldwide Opportunities Fund for prior periods are contained in the Worldwide Opportunities Fund Prospectus, and the financial statements for the Worldwide Opportunities Fund for prior periods are contained in the Acquiring Trust's Annual Report to Shareholders which are included in the Statement of Additional Information related to this Prospectus Proxy/Statement. 27 PHOENIX WORLDWIDE OPPORTUNITIES FUND Financial Highlights For a share of beneficial interest outstanding throughout each period Year Ended June 30, 1999 ------------------------------------------ Class A Class B Class C ------- ------- ------- Net asset value, beginning of period $ $ $ Income from investment operations Net investment income Net realized and unrealized gain (loss) _________ _________ __________ Total from investment operations _________ _________ __________ Less distributions Dividends from net investment income Dividends from net realized gains In excess of accumulated net realized gains _________ _________ __________ Total distributions _________ _________ __________ Change in net asset value _________ _________ __________ Net asset value, end of period $ $ $ ========= ========= ========== Total return(1) % % % Ratios/supplemental data: Net assets, end of period (thousands) $ $ $ Ratio to average net assets of: Expenses % % % Net investment income % % % Portfolio turnover rate % % % - ------------------- (1) Maximum sales charge is not reflected in total return calculation. 28 OTHER BUSINESS The Board of Trustees of the Trust knows of no business to be brought before the meeting other than the matters set forth in this Prospectus/Proxy Statement. Should any other matter requiring a vote of Global Growth Fund shareholders arise, however, the proxies will vote thereon according to their best judgment in the interests of the Global Growth Fund and the shareholders of the Global Growth Fund. 29 AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this 4th day of August, 1999, by and between PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND (the "Worldwide Opportunities Trust"), a Massachusetts business trust with its principal place of business at 101 Munson Street, Greenfield, Massachusetts 01301, on behalf of the Phoenix-Aberdeen Worldwide Opportunities Fund, the sole portfolio series thereof (the "Acquiring Fund") and THE PHOENIX-ENGEMANN FUNDS (the "Phoenix-Engemann Trust"), a Massachusetts business trust with its principal place of business at 600 North Rosemead Boulevard, Pasadena, California 91107-2133, on behalf of the Phoenix-Engemann Global Growth Fund, a portfolio series thereof (the "Acquired Fund"). All references in this Agreement to action taken by the Acquiring Fund or the Acquired Fund shall be deemed to refer to action taken by the Worldwide Opportunities Trust or the Phoenix-Engemann Trust, on behalf of the respective portfolio series. This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization") will consist of the transfer by the Acquired Fund of all or substantially all of the assets of the Acquired Fund to the Acquiring Fund, in exchange solely for Class A, Class B and Class C shares of beneficial interest in the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund, and the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete liquidation of the Acquired Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement. WHEREAS, the Worldwide Opportunities Trust and the Phoenix-Engemann Trust are each open-end, registered investment companies of the management type; WHEREAS, the Board of Trustees of the Worldwide Opportunities Trust has determined that the exchange of all or substantially all of the assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all the liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquiring Fund and that the interests of the existing shareholders of the Acquiring Fund would not be diluted as a result of this transaction; and WHEREAS, the Board of Trustees of the Phoenix-Engemann Trust has determined that the exchange of all or substantially all of the assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all the liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquired Fund and that the interests of the existing shareholders of the Acquired Fund would not be diluted as a result of this transaction. NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. THE TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL THE LIABILITIES OF THE ACQUIRED FUND AND THE LIQUIDATION OF THE ACQUIRED FUND 1.1 Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Acquired Fund agrees to transfer all or substantially all of the Acquired Fund's assets, as set forth in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to deliver to the Acquired Fund the number of full and fractional Acquiring Fund Shares, computed in the manner and as of the time and date set forth in Article 2 and (ii) to assume all the liabilities of the Acquired Fund, as set forth in paragraph 1.3. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing"). 1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all property, including, without limitation, all cash, securities, commodities and futures interests, and dividends or interest receivable which are owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the closing date provided in paragraph 3.1 (the "Closing Date"). 1.3 The Acquired Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. The Acquiring Fund shall assume all liabilities, expenses, costs, charges and reserves reflected on an unaudited statement of assets and liabilities of the Acquired Fund, prepared by Phoenix Equity Planning Corporation, in its capacity as financial agent for the Acquired Fund as of the Valuation Date (as defined in paragraph 2.1) in accordance with generally accepted accounting principles consistently applied from the prior audited period. 1.4 Immediately after the transfer of assets provided for in paragraph 1.1, the Acquired Fund will distribute pro rata to the Acquired Fund's shareholders of record, determined as of immediately after the close of business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph 1.1 and will completely liquidate. Such distribution and liquidation will be accomplished by the transfer of the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares of the corresponding class due such shareholders. All issued and outstanding shares of the Acquired Fund will simultaneously be canceled on the books of the Acquired Fund, although share certificates representing interests in the Acquired Fund will represent a number of Acquiring Fund Shares after the Closing Date as determined in accordance with paragraph 2.2. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent. 2. VALUATION 2.1 The value of the Acquired Fund's net assets to be acquired by the Acquiring Fund hereunder and the net asset value of Acquiring Fund Shares of each class shall be computed as of immediately after the close of business of the New York Stock Exchange on the Closing Date (such time and date being hereinafter called the ("Valuation Date")), using the valuation procedures set forth in the Acquiring Fund's Declaration of Trust and then-current prospectus or statement of additional information. 2.2 The number of the Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Acquired Fund's assets and the assumption of liabilities shall be determined by dividing the value of the net assets of the Acquired Fund attributable to each class of shares of the Acquired Fund by the net asset value of an Acquiring Fund Share of the corresponding class. 3. CLOSING AND CLOSING DATE 3.1 The Closing Date shall be the next Friday that is a full business day following satisfaction (or waiver as provided herein) of all of the conditions set forth in Articles 6, 7, and 8 of this Agreement (other than those conditions which may by their terms be satisfied only at the Closing), or such later date as the parties may agree to in writing. All acts taking place at the Closing shall be deemed to take place simultaneously as of immediately after the close of business on the Closing Date unless otherwise agreed to by the parties. The close of business on the Closing Date shall be as of 4:00 p.m. New York Time. The Closing shall be held at the offices of Phoenix Investment Counsel, Inc. ("PIC"), 56 Prospect Street, Hartford, Connecticut 06115-0480, or at such other time and/or place as the parties may agree. 3.2 The Phoenix-Engemann Trust shall cause Phoenix Equity Planning Corporation (the "Transfer Agent"), transfer agent of the Acquired Fund, to deliver at the Closing a certificate of an authorized officer 2 stating that its records contain the names and addresses of the Acquired Fund Shareholders and the number and percentage ownership of outstanding shares of each class owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date to the Secretary of Phoenix-Engemann Trust or provide evidence satisfactory to the Phoenix-Engemann Trust that such Acquiring Fund Shares have been credited to the Acquired Fund's account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sales, checks, assignments, share certificates, if any, receipts or other documents as such other party or its counsel may reasonably request. 4. REPRESENTATIONS AND WARRANTIES 4.1 The Phoenix-Engemann Trust represents and warrants to the Worldwide Opportunities Trust as follows: (a) The Phoenix-Engemann Trust is a voluntary association with transferable shares of the type commonly referred to as a Massachusetts business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts. (b) The Phoenix-Engemann Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Securities and Exchange Commission (the "Commission"), as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and the registration of its shares under the Securities Act of 1933, as amended (the "1933 Act"), are in full force and effect. (c) The Phoenix-Engemann Trust is not, and the execution, delivery and performance of this Agreement will not result, in a material violation of its Declaration of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking relating to the Acquired Fund. (d) The Acquired Fund has no material contracts or other commitments (other than this Agreement) which will be terminated with liability to the Acquired Fund prior to the Closing Date. (e) No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquired Fund or any of its properties or assets. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated. (f) The Statement of Assets and Liabilities of the Acquired Fund at December 31, 1998 has been audited by PricewaterhouseCoopers, LLP, independent accountants, and is in accordance with generally accepted accounting principles consistently applied and such statement (copies of which have been furnished to Worldwide Opportunities Trust,) fairly reflects the financial condition of the Acquired Fund as of such date, and there are no known contingent liabilities of the Acquired Fund as of such date not disclosed therein. (g) Since December 31, 1998, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred. For the purposes of this subparagraph (g), a decline in net asset value per share of the Acquired Fund, the discharge of Acquired Fund liabilities, or the redemption of Acquired Fund shares by Acquired Fund Shareholders shall not constitute a material adverse change. 3 (h) All Federal and other tax returns and reports of the Acquired Fund required by law to have been filed have been filed and are correct, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports have been paid or provision has been made for the payment thereof, and to the best of the Acquired Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns. (i) For each taxable year of its operation, the Acquired Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such. (j) All issued and outstanding shares of the Acquired Fund are duly and validly issued and outstanding, fully paid and non-assessable by the Acquired Fund (recognizing that, under Massachusetts law, Acquired Fund Shareholders could, under certain circumstances be held personally liable for obligations of the Acquired Fund). The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Acquired Fund shares, nor is there outstanding any security convertible into any of the Acquired Fund shares (except for the conversion feature of the Class B shares into Class A shares as described in the current prospectus of the Acquired Fund). (k) The execution, delivery and performance of this Agreement has been duly authorized prior to the Closing Date by all necessary action on the part of the Board of Trustees of the Phoenix-Engemann Trust, and, subject to the approval of the Acquired Fund Shareholders, this Agreement constitutes a valid and binding obligation of the Phoenix-Engemann Trust enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights, and to general equity principles. 4.2 The Worldwide Opportunities Trust represents and warrants to the Phoenix-Engemann Trust as follows: (a) The Worldwide Opportunities Trust is a voluntary association with transferable shares of the type commonly referred to as a Massachusetts business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts. (b) The Worldwide Opportunities Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission, as an investment company under the 1940 Act, and the registration of its shares under the 1933 Act are in full force and effect. (c) The current prospectus and statement of additional information of the Acquiring Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. (d) The Worldwide Opportunities Trust is not, and the execution, delivery and performance of this Agreement will not result in a material violation of the Acquiring Fund's Declaration of Trust or By-laws or of any agreement, indenture, instrument, contract, lease or other undertaking relating to the Acquiring Fund. (e) No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any of its properties or assets. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body which materially and adversely affects the Acquiring Fund's business or its ability to consummate the transactions herein contemplated. 4 (f) The Statement of Assets and Liabilities of the Acquiring Fund at June 30, 1998, has been audited by PricewaterhouseCoopers, LLP, independent accountants and is in accordance with generally accepted accounting principles consistently applied and such statement (copies of which have been furnished to the Phoenix-Engemann Trust), fairly reflects the financial condition of the Acquiring Fund as of such date, and there are no known contingent liabilities of the Acquiring Fund as of such date not disclosed therein. (g) Since June 30, 1998, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred. For the purposes of this subparagraph (g), a decline in net asset value per share of the Acquiring Fund Shares, the discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund shares by Acquiring Fund shareholders, shall not constitute a material adverse change. (h) All Federal and other tax returns and reports of the Acquiring Fund required by law to have been filed have been filed and are correct, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports have been paid or provision has been made for the payment thereof, and, to the best of the Acquiring Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns. (i) For each taxable year of its operation, the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such. (j) All issued and outstanding Acquiring Fund Shares are duly and validly issued and outstanding, fully paid and non-assessable by the Acquiring Fund (recognizing that, under Massachusetts law, Acquiring Fund shareholders could under certain circumstances be held personally liable for the obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares (except for the conversion feature of the Class B shares into Class A shares as described in the current prospectus of the Acquiring Fund). (k) The execution, delivery and performance of this Agreement has been fully authorized prior to the Closing Date by all necessary action, if any, on the part of the Board of Trustees of the Worldwide Opportunities Trust and this Agreement constitutes a valid and binding obligation of the Acquiring Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors rights, and to general equity principles. (l) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders, pursuant to the terms of this Agreement at the Closing Date have been duly authorized. 5. COVENANTS OF THE ACQUIRING FUND, AND THE ACQUIRED FUND 5.1 The Acquiring Fund and the Acquired Fund each will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include the declaration and payment of customary dividends and distributions, the dividends contemplated by Section 8.6 hereof, and any other distribution that may be advisable. 5.2 The Phoenix-Engemann Trust will call a meeting of the Acquired Fund Shareholders to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein. 5 5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement. 5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund Shares 5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the Acquired Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. 5.6 The Phoenix-Engemann Trust will provide the Acquiring Fund with information reasonably necessary for the preparation of a registration statement on Form N-14 of the Worldwide Opportunities Trust (the "Registration Statement"), such Registration Statement to consist of, without limitation, a prospectus (the "Prospectus") that includes a proxy statement of the Acquired Fund (the "Proxy Statement"). 5.7 The Worldwide Opportunities Trust agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and such of the state blue sky or securities laws as may be necessary in order to continue the operations of the Acquiring Fund after the Closing Date. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND The obligations of the Phoenix-Engemann Trust to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Worldwide Opportunities Trust and the Acquiring Fund of all the obligations to be performed by them hereunder on or before the Closing Date, and, in addition thereto, to the following further conditions: 6.1 All representations and warranties of the Worldwide Opportunities Trust contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 6.2 The Worldwide Opportunities Trust shall have delivered to the Phoenix-Engemann Trust a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the Phoenix-Engemann Trust, and dated as of the Closing Date, to the effect that the representations and warranties of the Worldwide Opportunities Trust made in this Agreement are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement and as to such other matters as the Phoenix-Engemann Trust shall reasonably request. 6.3 The Acquiring Fund Shares to be issued and delivered to the Acquiring Fund, for the account of the Acquired Fund Shareholders when so issued and delivered, shall be duly and validly issued, and shall be fully paid and non-assessable by the Acquiring Fund (recognizing that, under Massachusetts law, shareholders of the Acquiring Fund could under certain circumstances be held personally liable for its obligations); 6.4 The Proxy Statement and Prospectus (only insofar as they relate to the Acquiring Fund), on the effective date of the Registration Statement and on the Closing Date, (i) shall comply in all material respects with the applicable provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act and the regulations thereunder and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement herein in light of the circumstances under which such statements were made, not materially misleading. 6 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND The obligations of the Worldwide Opportunities Trust to complete the transactions provided for herein shall be subject, at its election, to the performance by the Phoenix-Engemann Trust and the Acquired Fund of all of the obligations to be performed by them hereunder on or before the Closing Date and, in addition thereto, to the following conditions: 7.1 All representations and warranties of the Phoenix-Engemann Trust contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 7.2 The Phoenix-Engemann Trust shall have delivered to the Worldwide Opportunities Trust a statement of the Acquired Fund's assets and liabilities, as of the Closing Date, certified by the Treasurer of the Acquired Fund; and 7.3 The Phoenix-Engemann Trust shall have delivered to the Worldwide Opportunities Trust on the Closing Date a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Worldwide Opportunities Trust, and dated as of the Closing Date, to the effect that the representations and warranties of the Phoenix-Engemann Trust made in this Agreement are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Worldwide Opportunities Trust shall reasonably request. 7.4 The Acquired Fund shall have good and marketable title to the Acquired Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.1 and full right, power, and authority to sell, assign, transfer and deliver such assets hereunder, and, upon delivery and payment for such assets. 7.5 The Proxy Statement and Prospectus (other than information therein that relates to the Worldwide Opportunities Trust or the Acquiring Fund), on the effective date of the Registration Statement and on the Closing Date (i) shall comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act, the 1940 Act and the regulations thereunder and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE ACQUIRED FUND The obligations of the Phoenix-Engemann Trust and the Worldwide Opportunities Trust to consummate the transactions contemplated by this Agreement shall be subject, at their election (except as provided in paragraphs 8.1 and 8.5 below) to the following conditions: 8.1 The Agreement and the transactions contemplated herein shall have been approved by the holders of the outstanding shares of beneficial interest in the Acquired Fund in accordance with the provisions of the Declaration of Trust and By-Laws of the Phoenix-Engemann Trust and certified copies of the resolutions evidencing such approval shall have been delivered to the Worldwide Opportunities Trust. Notwithstanding anything herein to the contrary, neither the Worldwide Opportunities Trust nor the Phoenix-Engemann Trust may waive the conditions set forth in this paragraph 8.1; 8.2 On the Closing Date, no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or to obtain damages or other relief in connection with this Agreement or the transactions contemplated herein; 7 8.3 All consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities deemed necessary by the Worldwide Opportunities Trust or the Phoenix-Engemann Trust to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent order or permit would not involve a risk of a material adverse effect on the assets or properties of the Worldwide Opportunities Trust or the Phoenix-Engemann Trust. 8.4 The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act. 8.5 The parties shall have received an opinion from the law firm of Goodwin, Procter & Hoar LLP addressed to the Worldwide Opportunities Trust and Phoenix-Engemann Trust substantially to the effect that the transaction contemplated by this Agreement shall constitute a tax-free reorganization for Federal income tax purposes. The delivery of such opinion is conditioned upon receipt by the law firm of Goodwin, Procter & Hoar LLP of representations it shall request of the Worldwide Opportunities Trust and the Phoenix-Engemann Trust. Notwithstanding anything herein to the contrary, neither the Worldwide Opportunities Trust nor the Phoenix-Engemann Trust may waive the condition set forth in this paragraph 8.5. 8.6 At or immediately prior to the Closing, the Acquired Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to the Acquired Fund Shareholders all of such Acquired Fund's investment company taxable income for taxable years ending at or prior to the Closing and all of its net capital gain, if any, realized in taxable years ending at or prior to the Closing (after reduction for any capital loss carry-forward). 9. BROKERAGE FEES AND EXPENSES 9.1 The Worldwide Opportunities Trust and the Phoenix-Engemann Trust each represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2 All of the expenses and costs of the Reorganization and the transactions contemplated thereby shall be borne by PIC. 10. ENTIRE AGREEMENT 10.1 The Worldwide Opportunities Trust and the Phoenix-Engemann Trust agree that neither party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties. 11. TERMINATION This Agreement and the transactions contemplated hereby may be terminated and abandoned by either party by resolution of the party's Board of Trustees, at any time prior to the Closing Date, if circumstances should develop that, in the opinion of such Board, make proceeding with the Agreement inadvisable. In the event of any such termination, there shall be no liability for damages on the part of either the Worldwide Opportunities Trust or the Phoenix-Engemann Trust, or their respective Trustees or officers, to the other party. 12. AMENDMENTS This agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Phoenix-Engemann Trust and the Worldwide Opportunities 8 Trust; provided, however, that following the meeting of the Acquired Fund Shareholders called by the Phoenix-Engemann Trust pursuant to paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval. 13. NOTICES Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to the parties hereto at their principal place of business. 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY 14.1 The Article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2 This Agreement may be executed in any number of counterparts each of which shall be deemed an original. 14.3 This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5 It is expressly agreed that the obligations of the Phoenix-Engemann Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents, or employees of the Phoenix-Engemann Trust personally, but shall bind only the trust property of the Phoenix-Engemann Trust, as provided in the Declaration of Trust of the Phoenix-Engemann Trust. The execution and delivery by such officers of the Phoenix-Engemann Trust shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Acquired Fund as provided in the Declaration of Trust of the Phoenix-Engemann Trust. The Phoenix-Engemann Trust is a series company with multiple series, and has entered into this Agreement on behalf of one such series, the Acquired Fund. With respect to any obligation of the Phoenix-Engemann Trust arising hereunder, the Worldwide Opportunities Trust and the Acquiring Fund shall look for payment or satisfaction of such obligations solely to the assets and property of the Acquired Fund. 14.6 It is expressly agreed that the obligations of the Worldwide Opportunities Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Worldwide Opportunities Trust personally, but shall bind only the trust property of the Worldwide Opportunities Trust, as provided in the Declaration of Trust of the Worldwide Opportunities Trust. The execution and delivery by such officers of the Worldwide Opportunities Trust shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Worldwide Opportunities Trust as provided in the Declaration of Trust of the Worldwide Opportunities Trust. The Worldwide Opportunities Trust is a series company with a sole portfolio series, the Acquiring Fund and has entered into this Agreement on behalf of such series. With respect to any obligation of the Worldwide Opportunities Trust arising hereunder, the Phoenix-Engemann Trust and the Acquired Fund shall look for payment or satisfaction of such obligations solely to the assets and property of the Acquiring Fund. 9 14.7 The sole remedy of a party hereto for a breach of any representation or warranty made in this Agreement by the other party shall be an election by the non-breaching party not to complete the transactions contemplated herein as set forth in Paragraph 6.1 and 7.1. 10 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its President or Vice President and its seal to be affixed hereto and arrested by its Secretary or Assistant Secretary. PHOENIX WORLDWIDE OPPORTUNITIES FUND, on behalf of the Phoenix-Aberdeen Worldwide Opportunities Fund ATTEST: By:________________________________________ ___________________________ Name: Philip R. McLoughlin G. Jeffrey Bohne Title: President Secretary THE PHOENIX-ENGEMANN FUNDS, on behalf of the Phoenix-Engemann Global Growth Fund ATTEST: By:________________________________________ ___________________________ Name: Roger Engemann Tina L. Mitchell Title: President Secretary 11 Phoenix Investment Partners | | Prospectus | | December 16, 1998 | | | | | | | |-------Aberdeen Phoenix-Aberdeen Worldwide Opportunities Fund Phoenix-Aberdeen Worldwide Opportunities Fund is a mutual fund that mainly invests in common stocks of U.S. and foreign companies with the investment objective of capital appreciation. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This Prospectus contains important information about the Phoenix-Aberdeen Worldwide Opportunities Fund that you should know before investing. Please read it carefully and retain it for future reference. [LOGO] PHOENIX INVESTMENT PARTNERS, LTD. > Phoenix- Aberdeen Worldwide Opportunities Fund Table of Contents - ------------------------------------- Investment Risk and Return Summary ............. page 2 Fund Expenses .................................. page 5 Investment Strategies .......................... page 6 Risks Related to Investment Strategies ......... page 8 Management of the Fund ......................... page 12 Pricing of Fund Shares ......................... page 15 Sales Charges .................................. page 16 Your Account ................................... page 19 How to Buy Shares .............................. page 20 How to Sell Shares ............................. page 20 Things You Should Know When Selling Shares ................................ page 21 Account Policies ............................... page 23 Investor Services .............................. page 24 Tax Status ..................................... page 25 Financial Highlights ........................... page 26 Additional Information ......................... page 27 Investment Risk and Return Summary - --------------------------------------------------------------- Investment Objective Phoenix-Aberdeen Worldwide Opportunities Fund has an investment objective of capital appreciation. Distributions of investment income, such as dividends and interest, are incidental in the selection of investments. There is no guarantee that the fund will achieve the objective. Principal Investment Strategies [arrow] The fund may invest in a diversified portfolio of equity and fixed income securities. The fund will invest at least 65% of its assets in securities of issuers located in 3 or more countries, one of which will be the United States. [arrow] The fund intends to invest at least 65% of its total assets in common stocks. [arrow] The fund may invest in other types of equity securities including preferred stock, other securities that can be converted into common stock or preferred stock, and warrants to purchase common stock or preferred stock. [arrow] An adviser and subadviser will manage the fund. The subadviser will determine how much of the fund's assets will be invested in different countries and regions. The subadviser will also decide which investments to buy and sell in all countries and regions other than the United States. The adviser will decide which investments to buy and sell in the United States. [arrow] The subadviser uses a value-oriented approach in selecting investments. The adviser uses a growth-oriented approach in selecting investments. [arrow] Up to 35% of the fund's assets may be invested in fixed income securities such as corporate and government notes and bonds. Up to 5% of the fund's assets can be invested in high-yield securities ("junk bonds"). The rest must be invested in investment grade securities. [arrow] The fund may invest in small companies as well as larger companies. [arrow] The fund may invest in companies in foreign countries with developed markets and countries with "emerging markets." | 2 | | Principal Risks If you invest in this fund, you risk that you may lose your investment. The fund will seek to increase the value of your shares by investing in securities the adviser or subadviser expect to increase in value. Most of the fund's investments will be in common stocks and other equity investments. Conditions affecting the overall economy, specific industries or companies in which the fund invests can be worse than expected. As a result, the value of your shares may decrease. Increases in interest rates affecting the global economy, particular industries or specific companies can cause fixed income investments that the fund may own to decline in value. This, too, can cause your share value to decrease. Unlike many other mutual funds, this fund may make significant investments in companies in foreign countries and in foreign governments, including some "emerging market" countries (those with markets that are not fully developed). Political and economic uncertainty as well as relatively less public information about investments may negatively impact the fund's portfolio. Some investments may be made in currencies other than U.S. dollars that will fluctuate in value as a result of changes in the currency exchange rate. Foreign markets and currencies may not perform as well as U.S. markets. Emerging market countries and companies doing business in emerging markets may not have the same range of opportunities as countries and their companies in developed nations. They may also have more obstacles to financial success. This fund may also invest in small companies as well as larger companies. Smaller companies, regardless of their location, may be affected to a greater extent than larger companies by changes in general economic conditions and conditions in particular industries. Smaller companies may also be relatively new and not have the same operating history and "track record" as larger companies. This could make future performance of smaller companies more difficult to predict. 3 | | | Performance Tables The bar chart below provides an indication of the risks of investing in the Phoenix-Aberdeen Worldwide Opportunities Fund by showing changes in the fund's Class A Shares performance from year to year over a 10-year period(1). The table below shows how the fund's Class A Shares average annual returns for one, five and ten years compare to those of a broad-based securities market index. The fund's past performance is not necessarily an indication of how the fund will perform in the future. Worldwide Opportunities Fund [Tabular representation of bar chart] Calendar Year ------------------------------------------------------------------------------------- 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Annual Return (%) 11.1 9.1 (22.7) 24.5 3.2 37.8 0.0 15.1 15.0 14.1 (1) The fund's average annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the 10-year period shown in the chart above, the highest return for a quarter was 16.61% (quarter ending March 31, 1991) and the lowest return for a quarter was -19.72% (quarter ending September 30, 1990). Year to date performance (through September 30, 1998) was 10.07%. - --------------------------------------------------------------------------------------------------------- Average Annual Total Returns (for the periods ending 12/31/97)(1) One Year Five Years Ten Years Life of the Fund(2) - --------------------------------------------------------------------------------------------------------- Class A Shares 8.66% 14.67% 9.07% 8.92% - --------------------------------------------------------------------------------------------------------- Class B Shares 9.43% N/A N/A 11.09% - --------------------------------------------------------------------------------------------------------- Class C Shares(3) N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------- MSCI World(4) 15.76% 15.34% 10.56% N/A - --------------------------------------------------------------------------------------------------------- (1) The fund's average annual returns in the table above reflect the deduction of the maximum sales charge for an investment in the fund's Class A Shares and a full redemption in the fund's Class B Shares. (2) Class A Shares since May 13, 1960 and Class B Shares since July 15, 1994. (3) Class C Shares will be offered as of the effective date of this prospectus. (4) The Morgan Stanley Capital International World (net) Index (MSCI World) is an unmanaged index calculated as an arithmetical average weighted by the market value of approximately 1,600 companies listed on stock exchanges in 23 countries, including the U.S. and Canada. The index does not reflect any sales charges or fees but does include the effect of foreign tax withholding. | 4 | | Fund Expenses - ------------------------------------------ This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund. Class A Class B Class C Shares Shares Shares(b) -------- -------- --------- Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price) 4.75% None None Maximum Deferred Sales Charge (load) (as a None 5%(a) 1% during the percentage of the lesser of the value redeemed or first year the amount invested) Maximum Sales Charge (load) Imposed on Reinvested Dividends None None None Redemption Fee None None None Exchange Fee None None None ------------------------------------------- Class A Class B Class C Shares Shares Shares(b) -------- -------- --------- Annual Fund Operating Expenses (expenses that are deducted from fund assets) Management Fees 0.75% 0.75% 0.75% Distribution and Service (12b-1) Fees(c) 0.25% 1.00% 1.00% Other Expenses 0.42% 0.42% 0.42% ---- -------- ---- Total Annual Fund Operating Expenses 1.42% 2.17% 2.17% ==== ======== ==== ------------------ (a) The maximum deferred sales charge is imposed on Class B Shares redeemed during the first year; thereafter, it decreases 1% annually to 2% during the fourth and fifth years and to 0% after the fifth year. (b) Class C Shares will be offered as of the effective date of this prospectus. (c) Distribution and Service Fees represent an asset-based sales charge that, for a long-term shareholder, may be higher than the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc. ("NASD"). Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. In the case of Class B Shares, it is assumed that your shares are converted to Class A after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 5 | | | - ---------------------------------------------------------- Class 1 year 3 years 5 years 10 years - ---------------------------------------------------------- Class A $613 $903 $1,214 $2,096 - ---------------------------------------------------------- Class B $620 $879 $1,164 $2,313 - ---------------------------------------------------------- Class C $320 $679 $1,164 $2,503 - ---------------------------------------------------------- You would pay the following expenses if you did not redeem your shares: - ---------------------------------------------------------- Class 1 year 3 years 5 years 10 years - ---------------------------------------------------------- Class A $613 $903 $1,214 $2,096 - ---------------------------------------------------------- Class B $220 $679 $1,164 $2,313 - ---------------------------------------------------------- Class C $220 $679 $1,164 $2,503 - ---------------------------------------------------------- Investment Strategies - -------------------------------------------------- Investment Objective The fund's investment objective is capital appreciation. Income distribution (yield) will not be a factor. There is no guarantee that the fund will achieve its investment objective. Principal Investment Strategies The fund invests in a diversified portfolio of securities of domestic and non-U.S. issuers, including companies, governments, governmental agencies and international organizations. The fund may invest in any region of the world. Under normal circumstances, the fund will invest at least 65% of its total assets in the securities of issuers located in at least three different countries, one of which will be the United States. The fund employs an adviser, Phoenix Investment Counsel, Inc., to select securities of U.S. issuers, and a subadviser, Aberdeen Fund Managers, Inc., to select securities of all other issuers. Each month the subadviser's investment strategy committee determines how much (what percentage) of the fund's assets will be invested in each region of the world (e.g., continental Europe, United Kingdom, Asia, etc.). The adviser will invest the amount allocated for investment in the United States. The subadviser invests all other amounts. | 6 | | The fund will invest at least 65% of its assets in common stocks. The fund may also invest in other equity securities including preferred stocks, securities convertible into common stocks, warrants and rights to purchase common stock. The adviser uses a top down/bottom up, growth-oriented stock selection process. The subadviser uses a bottom up, value-oriented process that selects companies that exhibit growth in recurring earnings, clean balance sheets, strong management, clear and credible business vision and a history of fair treatment of minority shareholders. The fund may invest in securities of issuers of any size, in countries with developed markets and countries with emerging markets. The fund may also invest up to 35% of its assets in non-convertible fixed-income securities of U.S. and non-U.S. issuers (described below) when the adviser or subadviser feels that such securities are appropriate for the achievement of the fund's investment objective. Market values of fixed-income securities typically move in the opposite direction from changes in interest rates. Therefore, investing in fixed-income securities can provide an opportunity for capital appreciation when interest rates are expected to decline. The non-convertible fixed-income securities referred to above may consist of: o corporate notes, bonds and debentures of U.S. issuers that are rated high grade (i.e., rated within the three highest rating categories by a nationally recognized statistical rating organization) or, if unrated, are considered by the fund's adviser to be of comparable quality; o corporate notes, bonds, debentures and other securities (such as Euro-currency instruments) of non-U.S. issuers that are rated within the three highest rating categories of rating services or, if unrated, are deemed by the fund's subadviser to be of comparable credit quality; o Treasury bills, notes and bonds issued by the United States Government or related agencies; and o securities issued by foreign governments and supranational agencies (such as the World Bank). The fund may invest up to 5% of its net assets in fixed-income securities rated below investment grade (commonly referred to as "junk bonds"). 7 | | | Temporary defensive strategy: if the adviser or subadviser believes that market conditions are not favorable to the fund's principal strategies, the fund may invest without limit in U.S. government securities and in money market instruments. When this happens, the fund may not achieve its investment objective. Risks Related to Investment Strategies - ------------------------------------------------------------------- General The fund's focus is capital appreciation. The adviser and subadviser intend to invest fund assets so that your shares increase in value. However, the value of the fund's investments that support your share value can decrease as well as increase. If between the time you purchase shares and the time you sell shares the value of the fund's investments decreases you will lose money. The value of the fund's investments can decrease for a number of reasons. For example, changing economic conditions may cause a decline in the value of many or even most equity and fixed income investments. Particular industries can face poor markets for their products or services so that companies engaged in those businesses do not do as well as companies in other industries. Interest rate changes may improve prospects for certain types of businesses and they may worsen prospects for others. To the extent that the fund's investments are affected by general economic declines, declines in industries, and interest rate changes that negatively affect the companies in which the fund invests, fund share values may decline. Share values can also decline if the specific companies selected for fund investment fail to perform as the adviser or subadviser expects, regardless of general economic trends, industry trends, interest rates and other economic factors. In addition to these general risks of investing in the fund, there are several specific risks of investing in the fund that you should note. | 8 | | Foreign Investing The fund will invest in non-U.S. companies. Investing in the securities of non-U.S. companies involves special risks and considerations not typically associated with investing in U.S. companies. These include: [arrow] differences in accounting, auditing and financial reporting standards, [arrow] generally higher commission rates on foreign portfolio transactions, [arrow] differences and inefficiencies in transaction settlement systems, [arrow] the possibility of expropriation or confiscatory taxation, [arrow] adverse changes in investment or exchange control regulations, [arrow] political instability, and [arrow] potential restrictions on the flow of international capital. Political and economic uncertainty as well as relatively less public information about investments may negatively impact the fund's portfolio. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Additionally, dividends and interest payable on foreign securities may be subject to foreign taxes withheld prior to receipt by the fund. Many of the foreign securities held by the fund will not be registered with, nor will the issuers of those securities be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. Accordingly, there may be less publicly available information about the securities and about the foreign company or government issuing them than is available about a domestic company or government entity. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions. 9 | | | Foreign Currency Significant portions of the fund's assets may be invested in securities denominated in foreign currencies. Changes in foreign exchange rates will affect the value of those securities denominated or quoted in currencies other than the U.S. dollar. The forces of supply and demand in the foreign exchange markets determine exchange rates and these forces are in turn affected by a range of economic, political, financial, governmental and other factors. Exchange rate fluctuations can affect the fund's net asset value (share price) and dividends either positively or negatively depending upon whether foreign currencies are appreciating or depreciating in value relative to the U.S. dollar. Exchange rates fluctuate over both the short and long terms. Effective January 1, 1999, eleven European countries will begin converting from their sovereign currency to the European Union common currency called the "Euro." This conversion may expose the fund to certain risks including the reliability and timely reporting of pricing information of the fund's portfolio holdings. In addition, one or more of the following may adversely affect specific securities in the fund's portfolio: [arrow] known trends or uncertainties related to the Euro conversion that an issuer reasonably expects will have a material impact on revenues, expenses or income from its operations; [arrow] competitive implications of increased price transparency of European Union markets (including labor markets) resulting from adoption of a common currency and issuers' plans for pricing their own products and services in the Euro; [arrow] issuers' ability to make required information technology updates on a timely basis, and costs associated with the conversion (including costs of dual currency operations through January 1, 2002); [arrow] currency exchange rate risk and derivatives exposure (including the disappearance of price sources, such as certain interest rate indices); and [arrow] potential tax consequences. The subadviser does not expect to invest in any securities that may be adversely affected by the conversion to the Euro. | 10 | | Emerging Market Investing The fund may invest in companies located in emerging market countries and regions. Investment in less-developed countries whose markets are still emerging generally presents risks in greater degree than those presented by investment in foreign issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval of foreign investments may be required under certain circumstances in some developing countries, and the extent of foreign investment in domestic companies may be subject to limitation in other developing countries. The charters of individual companies in developing countries may impose limitations on foreign ownership to prevent, among other concerns, violation of foreign investment limitations. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been (and may continue to be) adversely affected by economic conditions in the countries with which they trade. Small Market Capitalization Investing The fund may invest in large and small companies throughout the world. Companies with small capitalization are often companies with a limited operating history or companies in industries which have recently emerged due to cultural, economic, regulatory or technological developments. Such developments can have a significant positive or negative effect on small capitalization companies and their stock performance. Given the limited operating history and rapidly changing fundamental prospects, investment returns from smaller capitalization companies can be highly volatile. Smaller companies may find their ability to raise capital impaired by their size or lack of operating history. Product lines are often less diversified and subject to competitive threats. Smaller capitalization stocks are subject to varying patterns of trading volume and may, at times, be difficult to sell. Mutual Fund Investing The fund may invest in other mutual funds to take advantage of investment opportunities in certain countries where the fund otherwise would not be able to invest or where the size of a fund 11 | | | investment in any particular country would be too small. The fund may invest up to 10% of its assets in the shares of other mutual funds, however the fund will not invest more than 5% of its assets in any one mutual fund. When the fund purchases shares of another mutual fund the assets invested in the other mutual fund incur a layering of expenses including operating costs, advisory fees, and administrative fees that you indirectly bear. Impact of the Year 2000 Issue on Fund Investments The Year 2000 issue is the result of computer programs being written using two rather than four digits to define the applicable year. There is the possibility that some or all of a company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If a company whose securities are held by the fund does not "fix" its Year 2000 issue, it is possible that its operations and financial results would be hurt. Also, the cost of modifying computer programs to become Year 2000 compliant may hurt the financial performance and market price of companies whose securities are held by the fund. Management of the Fund - --------------------------------------------------- The Advisers Phoenix Investment Counsel, Inc. ("Phoenix") is the investment adviser to the fund and is located at 56 Prospect Street, Hartford, CT 06115. Phoenix also acts as the investment adviser for 14 other mutual funds, as subadviser to three additional mutual funds and as adviser to institutional clients. As of September 30, 1998, Phoenix had $21.3 billion in assets under management. Phoenix has acted as an investment adviser for over sixty years. Aberdeen Fund Managers Inc. ("Aberdeen") is the subadviser to the fund and is located at 1 Financial Plaza, Suite 2210, Fort Lauderdale, FL 33394. Aberdeen is a wholly-owned subsidiary of Aberdeen Asset Management PLC based in Aberdeen, Scotland. Together with its subsidiaries, Aberdeen Asset Management PLC provides investment management services to unit and investment trusts, segregated pension funds and other institutional and private portfolios, and through Aberdeen, U.S. mutual funds. Aberdeen has served as subadviser for the following mutual funds since their inception in 1996: Phoenix-Aberdeen New Asia Fund, Phoenix- 12 | | | Aberdeen Global Small Cap Fund and the Aberdeen New Asia Series of The Phoenix Edge Series Fund. As of September 30, 1998, Aberdeen Asset Management PLC had $22.3 billion in assets under management. Subject to the direction of the fund's Board of Trustees, Phoenix is responsible for managing the fund's investment program and the day-to-day management of the domestic portion of the fund's portfolio. Aberdeen, as subadviser, is responsible for the day-to-day management of the foreign holdings of the fund. Both Phoenix and Aberdeen manage the fund's assets to conform with the investment policies as described in this prospectus. The fund pays Phoenix a monthly investment management fee that is accrued daily against the value of the fund's net assets at the following rates. - ------------------------------------------------------------------------------------------- 1st billion $1+ billion through $2 billion $2+ billion - ------------------------------------------------------------------------------------------- Management Fee 0.75% 0.70% 0.65% - ------------------------------------------------------------------------------------------- Phoenix pays Aberdeen a fee for that portion of the fund's net assets that are invested in non-U.S. securities as follows. - -------------------------------------------------------------------------------------------- 1st billion $1+ billion through $2 billion $2+ billion - -------------------------------------------------------------------------------------------- Subadvisory Fee 0.375% 0.35% 0.325% - -------------------------------------------------------------------------------------------- During the fund's last fiscal year, the fund paid total management fees of $1,278,505. The ratio of management fees to average net assets for the fiscal year ended June 30, 1998 was 0.75%. The total advisory fee of 0.75% of the aggregate net assets of the fund is greater than that for most mutual funds; however, the Trustees have determined that it is comparable to fees charged by other mutual funds whose investment objectives are similar to those of the fund. On June 1, 1998, National Securities & Research Corporation ("National") assigned its investment management agreement to Phoenix Investment Counsel, Inc. Phoenix and National are subsidiaries of Phoenix Investment Partners, Ltd. (formerly Phoenix Duff & Phelps Corporation). Of the total management fees paid by the fund during the last fiscal year, National was paid $1,161,194 and Phoenix was paid $117,311. 13 | | | Portfolio Management Aberdeen's senior strategy committee determines and monitors the fund's regional allocations across the globe on a monthly basis. An Aberdeen team of investment professionals located in offices spread around the world selects securities for the foreign portion of the fund's portfolio. At the same time, a Phoenix team of investment professionals manages the U.S. portion of the fund's portfolio. Impact of the Year 2000 Issue on Fund Operations The Trustees have directed management to ensure that the systems used by service providers (Phoenix and its affiliates) in support of the fund's operations be assessed and brought into Year 2000 compliance. Based upon preliminary assessments, Phoenix has determined that it will be required to modify or replace portions of its software so that its computer systems will properly utilize dates beyond December 31, 1999. Phoenix management believes that the majority of these systems are already Year 2000 compliant. Phoenix believes that with modifications to existing software and conversions to new software, the Year 2000 issue will be mitigated. It is anticipated that such modifications and conversions will be completed on a timely basis. It is not known at this time if there could be a material impact on the operations of Phoenix or its affiliates or the fund if such modifications and conversions are not timely completed. Phoenix will utilize both internal and external resources to reprogram, or replace, and test the software for Year 2000 modifications. Certain systems are already in the process of being converted due to previous initiatives and it is expected that all core systems will be remediated by December 31, 1998 and tested by June 1999. The total cost to become Year 2000 compliant is not an expense of the fund and is not expected to have a material impact on the operating results of Phoenix. | 14 | | Pricing of Fund Shares - --------------------------------------------------- How is the Share Price determined? The fund calculates a share price for each class of its shares. The share price is based on the net assets of the fund and the number of outstanding shares. In general, the fund calculates net asset value by: [arrow] adding the values of all securities and other assets of the fund, [arrow] subtracting liabilities, and [arrow] dividing by the total number of outstanding shares of the fund. Asset Value: The fund's investments are valued at market value. If market quotations are not available, the fund determines a "fair value" for an investment according to rules and procedures approved by the Trustees. Foreign and domestic debt securities (other than short-term investments) are valued on the basis of broker quotations or valuations provided by a pricing service approved by the Trustees when such prices are believed to reflect the fair value of such securities. Foreign and domestic equity securities are valued at the last sale price or, if there has been no sale that day, at the last bid price, generally. Short-term investments having a remaining maturity of sixty days or less are valued at amortized cost, which the Trustees have determined approximates market value. Liabilities: Class specific expenses, distribution fees, service fees and other liabilities are deducted from the assets of each class. Expenses and liabilities that are not class specific (such as management fees) are allocated to each class in proportion to each class's net assets except where an alternative allocation can be more fairly made. Net Asset Value: The liability allocated to a class plus any other expenses are deducted from the proportionate interest of such class in the assets of the fund. The resulting amount for each class is then divided by the number of shares outstanding of that class to produce each class's net asset value per share. The net asset value per share of each class of the fund is determined on days when the New York Stock Exchange (the "NYSE") is open for trading as of the close of trading (normally 15 | | | 4:00 PM eastern time). The fund will not calculate its net asset values per share on days when the NYSE is closed for trading. Trading of securities held by the fund in foreign markets may negatively or positively impact the value of such securities on days when the fund neither trades securities nor calculates its net asset values (i.e., weekends and certain holidays). At what price are shares purchased? All investments received by the fund's authorized agents prior to the close of regular trading on the NYSE (normally 4:00 PM eastern time) will be executed based on that day's net asset value. Shares credited to your account from the reinvestment of fund distributions will be in full and fractional shares that are purchased at the closing net asset value on the next business day on which the fund's net asset value is calculated following the dividend record date. Sales Charges - ------------------------------------------ What are the classes and how do they differ? The fund presently offers three classes of shares that have different sales and distribution charges (see "Fund Expenses" previously in this prospectus). The fund has adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940 that authorize the fund to pay distribution and service fees for the sale of its shares and for services provided to shareholders. The distribution and service fees represent an asset-based sales charge that, for a long-term shareholder, may be higher than the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc. ("NASD"). What arrangement is best for you? The different classes permit you to choose the method of purchasing shares that is most beneficial to you. In choosing a class, consider the amount of your investment, the length of time you expect to hold the shares, whether you decide to receive distributions in cash or to reinvest them in additional shares, and any other personal circumstances. Depending upon these considerations, the accumulated distribution and service fees and contingent deferred sales charges of one class may be more or less than the initial sales charge and accumulated distribution and service fees of another class of shares bought at the same time. | 16 | | Because distribution and service fees are paid out of the fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Class A Shares. If you purchase Class A Shares, you will pay a sales charge at the time of purchase equal to 4.75% of the offering price (4.99% of the amount invested). The sales charge may be reduced or waived under certain conditions. Class A Shares are not subject to any charges by the fund when redeemed. Class A Shares have lower distribution and service fees (0.25%) and pay higher dividends than any other class. Class B Shares. If you purchase Class B Shares, you will not pay a sales charge at the time of purchase. If you sell your Class B Shares within the first 5 years after they are purchased, you will pay a sales charge of up to 5% of your shares' value. See "Deferred Sales Charge Alternative--Class B and C Shares" below. This charge declines to 0% over a period of 5 years and may be waived under certain conditions. Class B shares have higher distribution and service fees (1.00%) and pay lower dividends than Class A Shares. Class B Shares automatically convert to Class A Shares eight years after purchase. Purchases of Class B Shares may be inappropriate for any investor who may qualify for reduced sales charges of Class A Shares and anyone who is over 85 years of age. The underwriter may decline purchases in such situations. Class C Shares. If you purchase Class C Shares, you will not pay a sales charge at the time of purchase. If you sell your Class C Shares within the first year after they are purchased, you will pay a sales charge of 1%. See "Deferred Sales Charge Alternative--Class B and C Shares" below. Class C Shares have the same distribution and service fees (1.00%) and pay comparable dividends as Class B Shares. Class C Shares do not convert to any other class of shares of the fund. Initial Sales Charge Alternative--Class A Shares The public offering price of Class A Shares is the net asset value plus a sales charge that varies depending on the size of your purchase (see "Class A Shares--Reduced Sales Charges: Combination Purchase Privilege" in the Statement of Additional Information). Shares purchased based on the automatic reinvestment of income dividends or capital gains distributions are not subject to any sales charges. The sales charge is divided between your investment dealer and the fund's underwriter (Phoenix Equity Planning Corporation or "PEPCO"). 17 | | | Sales Charge you may pay to purchase Class A Shares Sales Charge as a percentage of ------------------------------ Amount of Net Transaction Offering Amount at Offering Price Price Invested ------------------------------------------------------------ Under $50,000 4.75% 4.99% $50,000 but under $100,000 4.50 4.71 $100,000 but under $250,000 3.50 3.63 $250,000 but under $500,000 3.00 3.09 $500,000 but under $1,000,000 2.00 2.04 $1,000,000 or more None None Deferred Sales Charge Alternative-- Class B and C Shares Class B and C Shares are purchased without an initial sales charge; however, shares sold within a specified time period are subject to a declining contingent deferred sales charge ("CDSC") at the rates listed below. The sales charge will be multiplied by the then current market value or the initial cost of the shares being redeemed, whichever is less. No sales charge will be imposed on increases in net asset value or on shares purchased through the reinvestment of income dividends or capital gains distributions. To minimize the sales charge, shares not subject to any charge will be redeemed first, followed by shares held the longest time. To calculate the amount of shares owned and time period held, all Class B Shares purchased in any month are considered purchased on the last day of the preceding month, and all Class C Shares are considered purchased on the trade date. Deferred Sales charge you may pay to sell Class B Shares Year 1 2 3 4 5 6+ -------------------------------------------------- CDSC 5% 4% 3% 2% 2% 0% Deferred Sales charge you may pay to sell Class C Shares Year 1 2+ -------------------------------------------------- CDSC 1% 0% | 18 | | Your Account - ----------------------------------------- Opening an Account Your financial advisor can assist you with your initial purchase as well as all phases of your investment program. If you are opening an account by yourself, please follow the instructions outlined below. Step 1. Your first choice will be the initial amount you intend to invest. Minimum initial investments: [arrow] $25 for individual retirement accounts, or accounts that use the systematic exchange privilege, or accounts that use the Investo-Matic program (see below for more information on the Investo-Matic program). [arrow] There is no initial dollar requirement for defined contribution plans, profit-sharing plans, or employee benefit plans. There is also no minimum for reinvesting dividends and capital gains into another account. [arrow] $500 for all other accounts. Minimum additional investments: [arrow] $25 for any account. [arrow] There is no minimum for defined contribution plans, profit-sharing plans, or employee benefit plans. There is also no minimum for reinvesting dividends and capital gains into an existing account. Step 2. Your second choice will be what class of shares to buy. The fund offers three classes of shares for individual investors. Each has different sales and distribution charges. Because all future investments in your account will be made in the share class you choose when you open your account, you should make your decision carefully. Your financial advisor can help you pick the share class that makes the most sense for your situation. 19 | | | Step 3. Your next choice will be how you want to receive any dividends and capital gain distributions. Your options are: [arrow] Receive both dividends and capital gain distributions in additional shares [arrow] Receive dividends in cash and capital gain distributions in additional shares [arrow] Receive both dividends and capital gain distributions in cash No interest will be paid on uncashed distribution checks. How To Buy Shares - ------------------------------------------------- - ------------------------------------------------------------------------------------------------ To Open An Account - ------------------------------------------------------------------------------------------------ Through a financial advisor Contact your advisor. Some advisors may charge a fee. - ------------------------------------------------------------------------------------------------ Complete a New Account Application and send it with a check Through the mail payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. - ------------------------------------------------------------------------------------------------ By Federal Funds wire Call us at 1-800-243-1574 (press 1, then 0). - ------------------------------------------------------------------------------------------------ Complete the appropriate section on the application and send it By Investo-Matic with your initial investment payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. - ------------------------------------------------------------------------------------------------ By telephone exchange Call us at 1-800-243-1574 (press 1, then 0). - ------------------------------------------------------------------------------------------------ How to Sell Shares - ----------------------------------------------- You have the right to have the fund buy back shares at the net asset value next determined after receipt of a redemption order by the fund's Transfer Agent or an authorized agent. In the case of a Class B or C Share redemption, you will be subject to the applicable deferred sales charge, if any, for such shares. Subject to certain restrictions, shares may be redeemed by telephone or in writing. In | 20 | | addition, shares may be sold through securities dealers, brokers or agents who may charge customary commissions or fees for their services. The fund does not charge any redemption fees. Payment for shares redeemed is made within seven days; however, redemption proceeds will not be disbursed until each check used for purchases of shares has been cleared for payment by your bank, which may take up to 15 days after receipt of the check. - -------------------------------------------------------------------------------------------------- Through a financial advisor Contact your advisor. Some advisors may charge a fee. - -------------------------------------------------------------------------------------------------- Send a letter of instruction and any share certificates (if you hold certificate shares) to: State Street Bank, P.O. Box 8301, Through the mail Boston, MA 02266-8301. Be sure to include the registered owner's name, fund and account number, number of shares or dollar value you wish to sell. - -------------------------------------------------------------------------------------------------- For sales up to $50,000, requests can be made by calling By telephone 1-800-243-1574. - -------------------------------------------------------------------------------------------------- By telephone exchange Call us at 1-800-243-1574 (press 1, then 0). - -------------------------------------------------------------------------------------------------- Things You Should Know When Selling Shares - ----------------------------------------------------------------------- You may realize a taxable gain or loss (for federal income tax purposes) if you redeem shares of the fund. The fund reserves the right to pay large redemptions "in-kind" (in securities owned by the fund rather than in cash). Large redemptions are those over $250,000 or 1% of the fund's net assets. Additional documentation will be required for redemptions by organizations, fiduciaries, or retirement plans, or if redemption is requested by anyone but the shareholder(s) of record. Transfers between broker-dealer "street" accounts are governed by the accepting broker-dealer. Questions regarding this type of transfer should be directed to your financial advisor. Redemption requests will not be honored until all required documents in proper form have been received. To avoid delay in redemption or transfer, shareholders having questions about specific requirements should contact the fund's Transfer Agent at (800) 243-1574. Redemptions by Mail [arrow] Send a clear letter of instructions if all of these apply: 21 | | | o Your shares are registered individually, jointly, or as custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. o The proceeds do not exceed $50,000. o The proceeds are payable to the registered owner at the address on record. [arrow] Send a clear letter of instructions with a signature guarantee when any of these apply: o You are selling more than $50,000 worth of shares. o The name or address on the account has changed within the last 60 days. o You want the proceeds to go to a different name or address than on the account. If you are selling shares held in a corporate or fiduciary account, please contact the fund's Transfer Agent at (800) 243-1574. The signature on your request must be guaranteed by an eligible guarantor institution as defined by the fund's Transfer Agent in accordance with its signature guarantee procedures. Currently, such procedures generally permit guarantees by banks, broker dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. Selling Shares by Telephone The Transfer Agent will use reasonable procedures to confirm that telephone instructions are genuine. Address and bank account information are verified, redemption instructions are taped, and all redemptions are confirmed in writing. The individual investor bears the risk from instructions given by an unauthorized third party that the Transfer Agent reasonably believed to be genuine. The Transfer Agent may modify or terminate the telephone redemption privilege at any time with 60 days notice to shareholders. During times of drastic economic or market changes, telephone redemptions may be difficult to make or temporarily suspended. | 22 | | Account Policies - --------------------------------------------- Account Reinstatement Privilege For 180 days after you sell your Class A, B, or C Shares, you can purchase Class A Shares of any fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more. Send your written request to State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. You can call us at 1-800-243-1574 for more information. Please remember, a redemption and reinvestment are considered to be a sale and purchase for tax-reporting purposes. Class B shareholders who have had the contingent deferred sales charge waived because they are in the Systematic Withdrawal Program are not eligible for this reinstatement privilege. Redemption of Small Accounts Due to the high cost of maintaining small accounts, if your account balance is less than $200, you may receive a notice requesting you to bring the balance up to $200 within 60 days. If you do not, the shares in the account will be sold at net asset value, and a check will be mailed to the address of record. Exchange Privileges You should read the prospectus carefully before deciding to make an exchange. You can obtain a prospectus from your financial advisor or by calling us at 1-800-243-4361 or accessing our Web site at www.phoenixinvestments.com. o You may exchange shares for another fund in the same class of shares; e.g., Class A for Class A. o Exchanges may be made by phone (1-800-243-1574) or by mail (State Street Bank, P.O. Box 8301, Boston, MA 02266-8301). o The amount of the exchange must be equal to the minimum initial investment required. o The exchange of shares is treated as a sale and purchase for federal income tax purposes. o Because excessive trading can hurt fund performance and harm other shareholders, the fund reserves the right to temporarily or permanently end exchange privileges or reject an order from 23 | | | anyone who appears to be attempting to time the market, including investors who request more than one exchange in any 30-day period. The fund's underwriter has entered into agreements with certain market timing firms permitting them to exchange by telephone. These privileges are limited, and the fund distributor has the right to reject or suspend them. Retirement Plans Shares of the fund may be used as investments under the following qualified prototype retirement plans: traditional IRA, rollover IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing, money purchase plans, and 403(b) plans. For more information, call 1-800-243-4361. Investor Services - ---------------------------------------------- Investo-Matic is a systematic investment plan that allows you to have a specified amount automatically deducted from your checking or savings account and then deposited into your mutual fund account. Just complete the Investo-Matic Section on the application and include a voided check. Systematic Exchange allows you to automatically move money from one Phoenix Fund to another on a monthly, quarterly, semi-annual or annual basis. Shares of one Phoenix Fund will be exchanged for shares of the same class of another fund at the interval you select. To sign up, just complete the Systematic Exchange Section on the application. Telephone Exchange lets you exchange shares of one fund for the same class of shares in another fund, using our customer service telephone service. See the Telephone Exchange Section on the application. Systematic Withdrawal Program allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual, or annual basis. Sufficient shares will be redeemed on the 15th of the month at the closing net asset value so that the payment is made about the 20th of the month. The program also provides for redemptions on or about the 10th, 15th, or 25th with proceeds directed through Automated Clearing House (ACH) to your bank. The minimum withdrawal is $25.00, and minimum account balance requirements continue. Shareholders in the program must own fund shares worth at least $5,000. | 24 | | Tax Status - --------------------------------------- The fund intends to continue to qualify annually as a regulated investment company (mutual fund) under Subchapter M of the Internal Revenue Code. The fund also intends to annually distribute to shareholders all of its net investment income and net realized capital gains, after utilization of any capital loss carryovers. If the fund continues to qualify, it generally will not be subject to federal income tax on the income it distributes. The discussion below is based on the assumption that the fund will continue to qualify as a regulated investment company. The fund will be subject to a nondeductible 4% excise tax if it fails to meet certain annual distribution requirements. In order to prevent imposition of the excise tax, it may be necessary for the fund to make distributions more frequently than described in the previous paragraph. Dividends and Distributions The fund plans to make distributions from net investment income semiannually, and to distribute net realized capital gains, if any, at least annually. Distributions of short-term capital gains and net investment income are taxable to shareholders as ordinary income. Long-term capital gains, if any, distributed to shareholders and which are designated by the fund as capital gain distributions, are taxable to shareholders as long-term capital gain distributions regardless of the length of time you have owned your shares. Unless you elect to receive distributions in cash, dividends and capital gain distributions are paid in additional shares. All distributions, cash or additional shares, are subject to federal income tax and may be subject to state, local and other taxes. Backup Withholding By law, 31% of fund distributions and any redemption proceeds must be withheld if you have not provided complete, correct taxpayer identification number and certain required certifications. The fund reserves the right to refuse to open an account for any person failing to provide the necessary taxpayer information. 25 | | | Financial Highlights - ------------------------------------------------- This table is intended to help you understand the fund's financial performance for the past five years. Class C Shares are a new class of shares and as such have no financial performance to report as of the effective date of this prospectus. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, independent accountants. Their report, together with the fund's financial statements, are included in the fund's most recent Annual Report, which is available upon request. Class A ---------------------------------------------------------------------------- Year Ended June 30, ---------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Net asset value, beginning of period $ 10.75 $ 10.29 $ 9.04 $ 10.17 $ 8.00 Income from investment operations:(5) Net investment income (loss) 0.02 0.03(1) (0.02)(1) 0.01(1) 0.01 Net realized and unrealized gains 2.97 1.25 1.87 0.56 2.19 --------- ---------- --------- --------- -------- Total from investment operations 2.99 1.28 1.85 0.57 2.20 --------- ---------- --------- --------- -------- Less distributions: Dividends from net investment income (0.13 (0.04) -- -- (0.03) Distributions from net realized gains (1.20 (0.78) (0.60) ( 1.37) -- In excess of net investment income (0.01 -- -- -- -- In excess of net realized gains -- -- -- ( 0.33) -- --------- ---------- --------- --------- -------- Total distributions (1.34 (0.82) (0.60) ( 1.70) (0.03) --------- ---------- --------- --------- -------- Change in net asset value 1.65 0.46 1.25 ( 1.13) 2.17 --------- ---------- --------- --------- -------- Net asset value, end of period $ 12.40 $ 10.75 $ 10.29 $ 9.04 $ 10.17 ========= ========== ========= ========= ======== Total return(2) 31.45% 13.40% 21.39% 6.53% 27.46% Ratios/supplemental data: Net assets, end of period (thousands) $ 183,188 $ 153,005 $ 146,052 $ 126,481 $118,707 Ratio to average net assets of: Operating expenses 1.42% 1.53% 1.60% 1.80% 1.50% Net investment income (loss) 0.21% 0.34% (0.19)% 0.16% 0.09% Portfolio turnover 156% 234% 245% 277% 259% Class B ----------------------------------------------------------------- From Inception Year Ended June 30, 7/15/94 --------------------------------------------- to 1998 1997 1996 6/30/95 ---- ---- ---- ----------- Net asset value, beginning of period $ 10.53 $ 10.14 $ 8.98 $ 10.40 Income from investment operations:(5) Net investment income (loss) (0.06) (0.03)(1) (0.08)(1) (0.02)(1) Net realized and unrealized gains 2.90 1.21 1.84 0.30 --------- --------- --------- ----------- Total from investment operations 2.84 1.18 1.76 0.28 --------- --------- --------- ----------- Less distributions: Dividends from net investment income (0.11) (0.01) -- -- Distributions from net realized gains (1.20) (0.78) (0.60) (1.37) In excess of net investment income (0.02) -- -- -- In excess of net realized gains -- -- -- (0.33) --------- --------- --------- ----------- Total distributions (1.33) (0.79) (0.60) (1.70) --------- --------- --------- ----------- Change in net asset value 1.51 0.39 1.16 (1.42) --------- --------- --------- ----------- Net asset value, end of period $ 12.04 $ 10.53 $ 10.14 $ 8.98 ========= ========= ========= =========== Total return(2) 30.61% 12.46% 20.50% 3.54%(3) Ratios/supplemental data: Net assets, end of period (thousands) $ 10,855 $ 8,412 $ 5,709 $ 2,849 Ratio to average net assets of: Operating expenses 2.17% 2.29% 2.34% 2.61%(4) Net investment income (loss) (0.54)% (0.35)% (0.86)% (0.33)%(4) Portfolio turnover 156% 234% 245% 277% ------------------ (1) Computed using average shares outstanding. (2) Sales charges are not reflected in the total return calculation. (3) Not annualized. (4) Annualized. (5) Distributions are made in accordance with the prospectus; however, class level income per share from investment operations may vary from anticipated results depending on the timing of share purchases and redemptions. | 26 | | Additional Information - --------------------------------------------------- Statement of Additional Information The fund has filed a Statement of Additional Information about the fund, dated December 16, 1998 with the Securities and Exchange Commission. The Statement contains more detailed information about the fund. It is incorporated into this prospectus by reference and is legally part of the prospectus. You may obtain a free copy of the Statement: [arrow] by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or [arrow] by calling (800) 243-4361. You may also obtain information about the fund from the Securities and Exchange Commission: [arrow] through its internet site (http://www.sec.gov), [arrow] by visiting its Public Reference Room in Washington, DC or [arrow] by writing to its Public Reference Section, Washington, DC 20549-6009 (a fee may be charged). Information about the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Shareholder Reports The fund semiannually mails to its shareholders detailed reports containing information about the fund's investments. The fund's Annual Report contains a detailed discussion of the market conditions and investment strategies that significantly affected the fund's performance from July 1 through June 30. You may request a free copy of the fund's Annual and Semiannual Reports: [arrow] by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or [arrow} by calling (800) 243-4361. Customer Service: (800) 243-1574 Marketing: (800) 243-4361 Telephone Orders: (800) 367-5877 Telecommunication Device (TTY): (800) 243-1926 SEC File Nos. 2-16590 & 811-945 [LOGO] Printed on recycled paper using soybean ink 27 | | | Phoenix Equity Planning Corporation Bulk Rate Mail PO Box 2200 US Postage Enfield CT 06083-2200 PAID Springfield, MA Permit No. 444 PART B STATEMENT OF ADDITIONAL INFORMATION Acquisition of the Assets of PHOENIX-ENGEMANN GLOBAL GROWTH FUND a series of The Phoenix-Engemann Funds 600 North Rosemead Boulevard Pasadena, California 91107-2133 (626) 351-9686 By and in Exchange for Shares of PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND a series of Phoenix-Aberdeen Worldwide Opportunities Fund 101 Munson Street Greenfield, Massachusetts 01301 (800) 243-1574 This Statement of Additional Information, relating specifically to the proposed transfer of all or substantially all of the assets and all the liabilities of the Phoenix-Engemann Global Growth Fund, a series of The Phoenix-Engemann Funds, to the Phoenix-Aberdeen Worldwide Opportunities Fund, the sole portfolio series of the Phoenix-Aberdeen Worldwide Opportunities Fund, in exchange for shares of the corresponding class of the Worldwide Opportunities Fund, consists of this cover page and the following described documents, each of which is attached hereto and incorporated by reference herein: (1) the Statement of Additional Information of the Phoenix-Aberdeen Worldwide Opportunities Fund dated December 16, 1998; (2) the Statement of Additional Information of The Phoenix-Engemann Funds dated May 1, 1999; (3) the Annual Report of the Phoenix-Aberdeen Worldwide Opportunities Fund for the year ended June 30, 1999; (4) the Annual Report of The Phoenix-Engemann Funds for the year ended December 31, 1998; (5) the Semiannual Report of The Phoenix-Engemann Funds for the six-month period ended June 30, 1999; and (6) the Pro Forma Financial Statements. This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the Prospectus/Proxy Statement dated September __, 1999. A copy of the Prospectus/Proxy Statement may be obtained without charge by contacting Equity Planning, at 100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200 or by telephoning Equity Planning toll free at 1 (800) 243-4361. The date of this Statement of Additional Information is September ___, 1999 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page Statement of Additional Information of the Phoenix-Aberdeen Worldwide Opportunities Fund dated December 16, 1998. B- Statement of Additional Information of The Phoenix-Engemann Funds dated May 1, 1999. B- Annual Report of the Phoenix-Aberdeen Worldwide Opportunities Fund for the year ended June 30, 1999. B- Annual Report of The Phoenix-Engemann Funds for the year ended December 31, 1998. B- Semi-Annual Report of The Pohenix-Engemann Funds for the six-month period ended June 30, 1999. B- Pro Forma Financial Statements. B- PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND 101 Munson Street Greenfield, MA 01301 Statement of Additional Information December 16, 1998 This Statement of Additional Information is not a prospectus, but expands upon and supplements the information contained in the current prospectus of Phoenix-Aberdeen Worldwide Opportunities Fund (the "Fund"), dated December 16, 1998, and should be read in conjunction with it. The Fund's prospectus may be obtained by calling Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200. TABLE OF CONTENTS PAGE ----- THE FUND ...................................... 1 INVESTMENT OBJECTIVE AND POLICIES ............. 1 INVESTMENT RESTRICTIONS ....................... 1 PERFORMANCE INFORMATION ....................... 4 PORTFOLIO TRANSACTIONS AND BROKERAGE .......... 5 SERVICES OF THE ADVISER ....................... 6 NET ASSET VALUE ............................... 8 HOW TO BUY SHARES ............................. 8 INVESTOR ACCOUNT SERVICES ..................... 10 REDEMPTION OF SHARES .......................... 11 DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 12 TAX SHELTERED RETIREMENT PLANS ................ 14 THE DISTRIBUTOR ............................... 14 DISTRIBUTION PLANS ............................ 15 MANAGEMENT OF THE FUND ........................ 16 OTHER INFORMATION ............................. 22 Customer Service: (800) 243-1574 Marketing: (800) 243-4361 Telephone Orders: (800) 367-5877 TTY: (800) 243-1926 PXP 691B (12/98) THE FUND The Fund was originally incorporated in New York in 1956, and on January 13, 1992, the Fund was reorganized as a Massachusetts business trust. The Fund has operated as an open-end, diversified management investment company since May 1960. On June 30, 1993, the Trustees voted to change the name of the Fund to "Phoenix Worldwide Opportunities Fund" to reflect the purchase of the former adviser by Phoenix Home Life Mutual Insurance Company and the affiliation with other Phoenix Funds. On November 18, 1998, the Trustees voted to change the name of the Fund to "Phoenix-Aberdeen Worldwide Opportunities Fund." INVESTMENT OBJECTIVE AND POLICIES The Fund's investment objective is capital appreciation. The Fund's investment objective is a fundamental policy and may not be changed without shareholder approval. Under normal circumstances, at least 65% of the total assets of the Fund will be invested in the securities of issuers located in at least three different countries, one of which will be the United States. The Fund intends to invest at least 65% of its total assets in common stocks. The Fund may invest in other types of equity securities including preferred stocks, securities convertible into common stocks, warrants and any rights to purchase common stocks. The Fund may also invest up to 35% of its assets in non-convertible fixed-income securities of U.S. and non-U.S. issuers (described below) when the Adviser or Subadviser has determined that such securities are appropriate for the achievement of the Fund's investment objective. Because the market value of fixed-income securities can be expected to vary inversely to changes in prevailing interest rates, investing in such fixed-income securities can provide an opportunity for capital appreciation when interest rates are expected to decline. The non-convertible fixed-income securities referred to above will consist of (1) corporate notes, bonds and debentures of U.S. issuers that are rated high grade (i.e. within the three highest rating categories of Standard & Poor's or Moody's Investors Service) or, if unrated, are deemed by the Adviser or Subadviser to be of comparable quality to those securities that are rated high grade, (2) corporate notes, bonds, debentures and other securities (such as Euro-currency instruments) of non-U.S. issuers that are rated within the three highest rating categories of rating services chosen by the Adviser or Subadviser to rate foreign debt obligations or, if unrated, are deemed by the Adviser or Subadviser to be of comparable credit quality to rated securities that may be purchased and (3) Treasury bills, notes and bonds issued by the United States Government or its agencies or instrumentalities and securities issued by foreign governments and supranational agencies (such as World Bank). The Fund may, for daily cash management purposes, invest in the non-convertible fixed income securities described above or in high quality money market securities. In addition, the Fund may invest, without limit, in any combination of the U.S. Government securities and money market instruments referred to above when, in the opinion of the Adviser or Subadviser, it is determined that a temporary defensive position is warranted based upon current market conditions. In such instances, the Fund will not be achieving its stated investment objective. The percentage of the Fund's assets invested in particular geographic sectors will shift from time to time in accordance with the judgment of the Subadviser. Capital appreciation will more often than not be sought through long-term holdings but the Fund may attempt to take advantage of apparent short-term trends, and such operations will occasion more trading, and hence, more than normal brokerage commissions and other expenses. Investments are selected for the Fund in such proportions and amounts as deemed advisable, subject to the investment restrictions set forth herein (see "Investment Restrictions"), in accordance with the Adviser's or Subadviser's judgment of investment opportunities and the general economic outlook. INVESTMENT RESTRICTIONS Fundamental Policies The following investment restrictions are fundamental policies that cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities (which means the lesser of (a) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (b) more than 50% of the outstanding shares). The Fund may not: 1. Borrow money, except from a bank and then only if there is an asset coverage of at least 300%; provided, however, that the Fund may not purchase securities while outstanding borrowings exceed 5% of the Fund's total assets. 2. Underwrite the sale of securities of other issuers (but the Fund may be deemed to be an underwriter in connection with any acquisition of restricted securities). 3. Purchase or sell real estate. 4. Purchase or sell commodities or commodity contracts; provided, however, that the terms commodities and commodity contracts shall not be deemed to include (i) forward foreign currency exchange contracts (ii) futures contracts on foreign currencies, (iii) options on futures contracts or (iv) options on foreign currencies. 1 5. Lend money, except in connection with the acquisition of a portion of an issue of publicly distributed bonds, debentures or other corporate obligations. 6. Issue senior securities except to the extent that it is permitted (a) to borrow money from banks pursuant to the Fund's investment restriction regarding the borrowing of money, and (b) to enter into transactions involving forward foreign currency exchange contracts, foreign currency futures contracts and options thereon, and options on foreign currencies as described in the Fund's Prospectus and this Statement of Additional Information. 7. Invest more than 25% of its total assets in any one industry. For purposes of this policy, foreign governments and supranational agencies shall be deemed to be separate industries. 8. Make short sales unless at the time of the sale the Fund owns, or by virtue of ownership of other securities, has the right to obtain, at least an equal amount of the securities sold short. 9. Issue bonds, debentures, or senior equity securities. 10. Issue any of its securities other than for cash or securities (including securities of which the Fund is the issuer), except as a dividend or distribution or in connection with a reorganization. 11. Purchase securities on margin, except as may be permitted under the Investment Company Act of 1940 (the "1940 Act"), and except that, for purposes of this restriction, the deposit or payment of initial or variation margin in connection with the entry into or use of futures contracts will not be deemed to be a purchase of securities on margin. 12. Invest in companies for the purpose of exercising control or management. 13. Invest in securities of other investment companies except to the extent permitted by the 1940 Act. Other Policies The following investment restrictions do not constitute fundamental policies and may, therefore, be changed without shareholder approval. The Fund intends to comply with the Statement of Policy on investment companies approved by certain state securities commissioners. Additional investment restrictions currently imposed by the Statement of Policy are as follows: The Fund will not: 1. Purchase any securities (excluding government securities) if by reason thereof more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer. 2. Purchase any securities if, as a result, the Fund would then have more than 5% of its total assets (taken at current value) invested in securities of companies (including their predecessors) with less than three years of operating history. 3. Invest more than 5% of its total assets in puts, calls, straddles, spreads, and/or any combination thereof. 4. Invest in interests in oil, gas, or other mineral exploration or development programs. 5. Invest more than 15% of its net assets in illiquid securities, comprised of assets which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment. In addition, the Fund has given undertakings to certain state securities commissioners to the effect that (a) the Fund will not purchase warrants (except warrants acquired by the Fund in units or attached to securities which may be deemed to be without value) in amounts in excess of 5% of the Fund's net assets, and (b) the Fund may purchase put or call options or combinations thereof written by others, provided the aggregate premiums paid for all such options held do not exceed 2% of the Fund's net assets. Writing Covered Call Options The Fund may write covered call option contracts, which are options on securities that the Fund owns, if such options are listed on an organized securities exchange and the Adviser determines that such activity is consistent with the Fund's investment objective. A call option gives the purchaser of the option the right to buy the underlying security from the writer at the exercise price at any time prior to the expiration of the contract, regardless of the market price of the security during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract. The writer forgoes 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. The writing of option contracts is a highly specialized activity which involves investment techniques and risks different from those ordinarily associated with investment companies, and the restrictions listed above would tend to reduce such risks. Securities for the Fund's portfolio will continue to be bought and sold on the basis of investment considerations and appropriateness to the fulfillment of the Fund's investment objective. In order to close out a position, the Fund will normally make a "closing purchase transaction"--the purchase of a call option on the same security with the same exercise price and expiration 2 date as the call option which it has previously written on any particular security. When a security is sold from the Fund's portfolio, the Fund will effect a closing purchase transaction so as to close out any existing call option on that security. Forward Foreign Currency Exchange Contracts In order to hedge against adverse movements in exchange rates between currencies, the Fund may enter into forward foreign currency exchange contracts ("forward currency contracts") for the purchase or sale of a specified currency at a specified future date. Such contracts may involve the purchase or sale of a foreign currency against the U.S. dollar or may involve two foreign currencies. The Fund may enter into forward currency contracts either with respect to specific transactions or with respect to the Fund's portfolio positions. Futures Contracts on Foreign Currencies and Options on Futures Contracts The Fund may engage in futures contracts on foreign currencies and options on these futures transactions as a hedge against changes in the value of the currencies to which the Fund is subject or to which the Fund expects to be subject in connection with future purchases, in accordance with the rules and regulations of the Commodity Futures Trading Commission (the "CFTC"). The Fund also may engage in such transactions when they are economically appropriate for the reduction of risks inherent in the ongoing management of the Fund. The Fund may buy and sell futures contracts on foreign currencies and groups of foreign currencies. The Fund will engage in transactions in only those futures contracts and options thereon that are traded on a commodities exchange or a board of trade. A "sale" of a futures contract means the assumption of a contractual obligation to deliver the specified amount of foreign currency at a specified price in a specified future month. A "purchase" of a futures contract means the assumption of a contractual obligation to acquire the currency called for by the contract at a specified price in a specified future month. At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as a deposit payment (initial margin). Thereafter, the futures contract is valued daily and the payment of "variation margin" may be required, resulting in the Fund's providing or receiving cash that reflects any decline or increase in the contract's value, a process known as "marking to market". Options on Foreign Currencies The Fund may purchase and write put and call options on foreign currencies traded on securities exchanges or boards of trade (foreign and domestic) for hedging purposes in a manner similar to that in which forward currency contracts and futures contracts on foreign currencies will be employed. Options on foreign currencies are similar to options on stock, except that the Fund has the right to take or make delivery of a specified amount of foreign currency, rather than stock. The Fund may purchase and write options to hedge the Fund's portfolio securities denominated in foreign currencies. If there is a decline in the dollar value of a foreign currency in which the Fund's portfolio securities are denominated, the dollar value of such securities will decline even though foreign currency value remains the same. See "Special Considerations and Risk Factors." To hedge against the decline of the foreign currency, the Fund may purchase put options on such foreign currency. If the value of the foreign currency declines, the gain realized on the put option would offset, in whole or in part, the adverse effect such decline would have on the value of the portfolio securities. Alternatively, the Fund may write a call option on the foreign currency. If the value of the foreign currency declines, the option would not be exercised and the decline in the value of the portfolio securities denominated in such foreign currency would be offset in part by the premium the Fund received for the option. If, on the other hand, the Adviser anticipates purchasing a foreign security and also anticipates a rise in the value of such foreign currency (thereby increasing the cost of such security), the Fund may purchase call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements of the exchange rates. Alternatively, the Fund could write a put option on the currency and, if the exchange rates move as anticipated, the option would expire unexercised. Segregated Accounts At the time of purchase of a futures contract, option on futures contract or 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 contract's market value minus initial margin deposit will be deposited in a pledged account with the Fund's custodian bank to fully collateralize the position. Other Policies The Fund is authorized to invest in the securities of other investment companies subject to the limitations contained in the 1940 Act. In certain countries, investments by the Fund may only be made through investments in other investment companies that, in turn, are authorized to invest in the securities that are issued in such countries. Investors should recognize that the Fund's purchase of the securities of such other investment companies results in the layering of expenses such that investors indirectly bear a proportionate part of the expenses for such investment companies including operating costs and investment advisory and administrative fees. Special Considerations and Risk Factors Investing in the securities of foreign companies involves special risks and considerations not typically associated with investing in U.S. companies. These include: differences in accounting, auditing and financial reporting standards, generally higher 3 commission rates on foreign portfolio transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions on the flow of international capital. Additionally, dividends payable on foreign securities may be subject to foreign taxes withheld prior to distribution. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility, and changes in foreign exchange rates will affect the value of those securities which are denominated or quoted in securities which are denominated or quoted in currencies other than the U.S. dollar. Many of the foreign securities held by the Fund will not be registered with, nor the issuers thereof be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. Accordingly, there may be less publicly available information about the securities and about the foreign company or government issuing them than is available about a domestic company or government entity. Moreover, individual foreign economies may differ favorably or unfavorably for the United States economy in such respects as growth of Gross National Product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions. The Fund's use of forward currency contracts involves certain investment risks and transaction costs to which it might not otherwise be subject. These include: (1) the Adviser may not always be able to accurately predict movements within currency markets, (2) the skills and techniques needed to use forward currency contracts are different from those needed to select the securities in which the Fund invests and (3) there is no assurance that a liquid secondary market will exist that would enable the Adviser to "close out" existing forward contracts when doing so is desirable. The Fund's successful use of forward currency contracts, options on foreign currencies, futures contracts on foreign currencies and options on such contracts depends upon the Adviser's ability to predict the direction of the market and political conditions, which require different skills and techniques than predicting changes in the securities markets generally. For instance, if the value of the securities being hedged moves in a favorable direction, the advantage to the Fund would be wholly or partially offset by a loss in the forward contracts or futures contracts. Further, if the value of the securities being hedged does not change, the Fund's net income would be less than if the Fund had not hedged since there are transaction costs associated with the use of these investment practices. These practices are subject to various additional risks. The correlation between movements in the price of options and futures contracts and the price of the currencies being hedged is imperfect. The use of these instruments will hedge only the currency risks associated with investments in foreign currency advances before it invests in securities denominated in such currency and the currency market declines, the Fund might incur a loss on the futures contract. The Fund's ability to establish and maintain positions will depend on market liquidity. The ability of the Fund to close out a futures position or an option depends upon a liquid secondary market. There is no assurance that liquid secondary markets will exist for any particular futures contract or option at any particular time. The Fund may invest up to 5% of its net assets in fixed income securities rated below investment grade (commonly referred to as "junk bonds"). Fixed income securities rated below investment grade are deemed to be predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. Fixed income securities rated below investment grade may involve a substantial risk of default or may be in default. Changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility and weaken the capacity of the issuers of such securities to make principal and interest payments than is the case for higher grade debt securities. An economic downturn affecting the issuer may result in an increased incidence of default and a decline in prices of the issuer's lower-rated securities. The market for fixed income securities rated below investment grade may be thinner and less active than for higher-rated securities. The secondary market in which fixed income securities rated below investment grade are traded is generally less liquid than the market for higher grade debt securities. PERFORMANCE INFORMATION The Fund may, from time to time, include its total return in advertisements, sales literature or reports to shareholders or prospective investors. Performance information in advertisements and sales literature may be expressed as a yield of a class of shares and as a total return of a class of shares. Standardized quotations of average annual total return for Class A, Class B or Class C Shares will be expressed in terms of the average annual compounded rate of return for a hypothetical investment in either Class A, Class B or Class C Shares over periods of 1, 5 and 10 years or up to the life of the class of shares), calculated for each class separately pursuant to the following formula: P(1+T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of each Class's expenses (on an annual basis), deduction of the maximum initial sales load in the case of Class A Shares and the maximum contingent deferred sales charge applicable to a complete redemption of the investment in the case of Class B and Class C Shares, and assume that all dividends and distributions on Class A, Class B and Class C Shares are reinvested when paid. Performance information for the Fund may be compared, in reports and promotional literature, to: (i) the EAFE (Europe, Australia, and Far East) Index, the MSCI World (Net) Index, the Europac Index, or other unmanaged indices so that investors may compare the Fund's results with those of a group of unmanaged securities widely regarded by investors as representative of the securities markets 4 in general; (ii) other groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely used independent research firm which ranks mutual funds by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons who rate or rank mutual funds on overall performance or other criteria; and (iii) the Consumer Price Index (measure for inflation) to assess the real rate of return from an investment in the Fund. Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for administrative and management costs and expenses. The Fund may from time to time include in advertisements containing total return the ranking of those performance figures relative to such figures for groups of mutual funds having similar investment objectives as categorized by ranking services such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc. Additionally, the Fund may compare its performance results to other investment or savings vehicles (such as certificates of deposit) and may refer to results published in various publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business Week, Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street Journal, The New York Times, Consumer Reports, Registered Representative, Financial Planning, Financial Services Weekly, Financial World, U.S. News and World Report, Standard & Poor's The Outlook, and Personal Investor. The Fund may from time to time illustrate the benefits of tax deferral by comparing taxable investments to investments made through tax-deferred retirement plans. The total return may also be used to compare the performance of the Fund against certain widely acknowledged outside standards or indices for stock and bond market performance, such as the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far East Index (EAFE), Morgan Stanley Capital International World (net) Index, Consumer Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index. Advertisements, sales literature and other communications may contain information about the Fund and Adviser's current investment strategies and management style. Current strategies and style may change to allow the Fund to respond quickly to changing market and economic conditions. From time to time the Fund may include specific portfolio holdings or industries, in such communications. To illustrate components of overall performance, the Fund may separate its cumulative and average annual returns into income and capital gains components; or cite separately as a return figure the equity or bond portion of the Fund's portfolio; or compare the Fund's equity or bond return figures to well-known indices of market performance, including, but not limited to: the S&P 500, Dow Jones Industrial Average, CS First Boston High Yield Index and Salomon Brothers Corporate Bond and Government Bond Indices. For the 1, 5 and 10 year periods ended June 30, 1998, the average annual total return of the Class A Shares was 25.16%, 18.53% and 9.76%, respectively. For the one year ended June 30, 1998 and, since inception, July 15, 1994 for Class B Shares, the average annual total return was 26.61% and 16.20%, respectively. Performance information reflects only the performance of a hypothetical investment in each class during the particular time period on which the calculations are based. Performance information should be considered in light of the Fund's investment objectives and policies, characteristics and quality of the portfolio, and the market condition during the given time period, and should not be considered as a representation of what may be achieved in the future. The Fund may also compute aggregate total return for specified periods based on a hypothetical Class A or Class B account with an assumed initial investment of $10,000. The aggregate total return is determined by dividing the net asset value of this account at the end of the specified period by the value of the initial investment and is expressed as a percentage. Calculation of aggregate total return reflects payment of the Class A Shares's maximum sales charge of 4.75% and assumes reinvestment of all income dividends and capital gain distributions during the period. Based on the foregoing, the Class A Share's aggregate total return quotation for the period commencing May 13, 1960 and ending June 30, 1998 was 3,048%. The Fund also may quote annual, average annual and annualized total return and aggregate total return performance data, for both classes of shares of the Fund, both as a percentage and as a dollar amount based on a hypothetical $10,000 investment for various periods other than those noted above. Such data will be computed as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charge will not be included with respect to annual, annualized or aggregate rate of return calculations. PORTFOLIO TRANSACTIONS AND BROKERAGE The Adviser places orders for the purchase and sale of securities, supervises their execution and negotiates brokerage commissions on behalf of the Fund. It is the practice of the Adviser to seek the best prices and execution of orders and to negotiate brokerage commissions which in its opinion are reasonable in relation to the value of the brokerage services provided by the executing broker. Brokers who have executed orders for the Fund are asked to quote a fair commission for their services. If the execution is satisfactory and if the requested rate approximates rates currently being quoted by the other brokers selected by the Adviser, the rate is deemed by the Adviser to be reasonable. Brokers may ask for higher rates of commission if all or a portion of the securities involved in the transaction are positioned by the broker, if the broker believes it has brought the Fund an unusually favorable trading opportunity, or if the broker regards its research services as being of exceptional value. Payment of such commissions is authorized by the Adviser after the transaction has been consummated. If the Adviser more than occasionally differs with the broker's appraisal of opportunity or value, the broker would not be selected to execute trades in the future. 5 The Adviser believes that the Fund benefits with a securities industry comprised of many diverse firms and that the long-term interests of shareholders of the Fund are best served by their brokerage policies which include paying a fair commission rather than seeking to exploit their leverage to force the lowest possible commission rate. The primary factors considered in determining the firms to which brokerage orders are given are the Adviser's appraisal of: the firm's ability to execute the order in the desired manner, the value of research services provided by the firm, and the firm's attitudes toward and interest in mutual funds in general including those managed and sponsored by the Adviser. The Adviser does not offer or promise to any broker an amount or percentage of brokerage commissions as an inducement or reward for the sale of shares of the Fund. Over-the-counter purchases and sales are transacted directly with principal market-makers except in those circumstances where, in the opinion of the Adviser, better prices and executions are available elsewhere. In the over-the-counter market, securities are usually traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually contains a profit to the dealer. The Fund also expects that securities will be purchased at times in underwritten offerings where the price includes a fixed amount of compensation, usually referred to as the underwriter's concession or discount. The foregoing discussion does not relate to transactions effected on foreign securities exchanges which do not permit the negotiation of brokerage commissions and where the Adviser would, under the circumstances, seek to obtain best price and execution on orders for the Fund. In general terms, the nature of research services provided by brokers encompasses statistical and background information, and forecasts and interpretations with respect to U.S. and foreign economies, U.S. and foreign money markets, fixed income markets and equity markets, specific industry groups, and individual issues. Research services will vary from firm to firm, with broadest coverage generally from the large full-line firms. Smaller firms in general tend to provide information and interpretations on a smaller scale, frequently with a regional emphasis. In addition, several firms monitor federal, state, local, and foreign political developments. Many of the brokers also provide access to outside consultants. The outside research assistance is particularly useful to the Adviser's staff since the brokers, as a group, tend to monitor a broader universe of securities and other matters than the Adviser's staff can follow. In addition, it provides the Adviser with a diverse perspective on financial markets. Research and investment information is provided by these and other brokers at no cost to the Adviser and is available for the benefit of other accounts advised by the Adviser and its affiliates and not all of the information will be used in connection with the Fund. While this information may be useful in varying degrees and may tend to reduce the Adviser's expenses, it is not possible to estimate its value and in the opinion of the Adviser it does not reduce the Adviser's expenses in a determinable amount. The extent to which the Adviser makes use of statistical, research and other services furnished by brokers is considered by the Adviser in the allocation of brokerage business but there is no formula by which such business is allocated. The Adviser does so in accordance with its judgment of the best interests of the Fund and its shareholders. 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 Adviser 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 Fund. No advisory account of the Adviser 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 Adviser in that security on a given business day, with all transaction costs shared pro rata based on the Fund's participation in the transaction. If the aggregated order is filled in its entirety, it shall be allocated among the Adviser's 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 Adviser whose orders are allocated receive fair and equitable treatment and the reason for such different allocation is explained in writing and is approved in writing by the Adviser's compliance officer as soon as practicable after the opening of the markets on the trading day following the day on which the order is executed. If an aggregated order is partially filled and allocated on a basis different from that specified in the allocation order, no account that is benefited by such different allocation may intentionally and knowingly effect any purchase or sale for a reasonable period following the execution of the aggregated order that would result in it receiving or selling more shares than the amount of shares it would have received or sold had the aggregated order been completely filled. The Trustees will annually review these procedures or as frequently as shall appear appropriate. During the fiscal years ended June 30, 1996, 1997, and 1998, brokerage commissions paid by the Fund totalled $1,279,610, $1,136,406 and $911,734, respectively. Brokerage commissions of $729,387 were paid during the last fiscal year on portfolio transactions aggregating $325,528,828 and executed by brokers who provided research and other statistical and factual information. SERVICES OF THE ADVISER Effective June 1, 1998, National Securities & Research Corporation ("National") assigned its investment advisory contract to Phoenix Investment Counsel, Inc. ("PIC"). PIC now serves as adviser for the Fund. National and PIC are both subsidiaries of Phoenix Investment Partners, Ltd. (formerly Phoenix Duff & Phelps Corporation) whose majority shareholder is Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life"). Phoenix Home Life's principal place of business is located at One American Row, Hartford, Connecticut, where it is engaged in the insurance and investment business. 6 Phoenix Investment Partners, Ltd. is the 10th largest publicly traded investment company in the nation, and has served investors for over 70 years. It manages approximately $50 billion in assets through its seven investment partners: Aberdeen Fund Managers, Inc. (Aberdeen) in Aberdeen, London, Singapore and Fort Lauderdale; Duff & Phelps Investment Management Co. (Duff & Phelps) in Chicago and Cleveland; Roger Engemann & Associates, Inc. (Engemann) in Pasadena; Seneca Capital Management LLC (Seneca) in San Francisco; and Phoenix Investment Counsel, Inc. (Goodwin, Hollister, and Oakhurst divisions) in Hartford, Sarasota, and Scotts Valley, CA, respectively. The Adviser provides certain services and facilities required to carry on the day-to-day operations of the Fund (for which it receives a management fee) other than the costs of printing and mailing proxy materials, reports and notices to shareholders; outside legal and auditing accounting services, regulatory filing fees and expenses of printing the Fund's registration statements (but the Distributor purchases such copies of the Fund's prospectuses and reports and communication to shareholders as it may require for sales purposes), insurance expense, association membership dues, brokerage fees, and taxes. The current Management Agreement was approved by the Trustees of the Fund on March 16, 1993 and by the shareholders of the Fund on May 7, 1993. The Management Agreement became effective on May 14, 1993, and it will continue in effect until lapsed or terminated. The Management Agreement will continue in effect from year to year if specifically approved annually by a majority of the Trustees who are not interested persons of the parties thereto, as defined in the 1940 Act, and by either (a) the Trustees of the Fund or (b) the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act). The Agreement may be terminated without penalty at any time by the Trustees or by a vote of a majority of the outstanding voting securities of the Fund or by the Adviser upon 60 days' written notice and will automatically terminate in the event of its "assignment" as defined in Section (2)(a)(4) of the 1940 Act. The Management Agreement provides that the Adviser is not liable for any act or omission in the course of, or in connection with, rendering services under the Agreement in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties under the Agreement. The Agreement permits the Adviser to render services to others and to engage in other activities. As compensation for its services, the Adviser receives a fee, which is accrued daily against the value of the Fund's net assets and is paid by the Fund monthly. The fee is computed at an annual rate of 0.75% of the Fund's average daily net assets of up to $1 billion, 0.70% of the Fund's average daily net assets from $1 billion to $2 billion, and 0.65% of the Fund's average daily net assets in excess of $2 billion. Total management fees for the fiscal years ended June 30, 1996, 1997, and 1998 amounted to $1,037,386, $1,137,290 and $1,278,505, respectively. The Adviser makes its personnel available to serve as officers and "interested" Trustees of the Fund. The Fund has not directly compensated any of its officers or Trustees for services in such capacities except to pay fees to the Trustees who are not otherwise affiliated with the Fund. The Fund reimburses all Trustees for their out-of-pocket expenses. The Trustees of the Fund are not prohibited from authorizing the payment of salaries to the officers pursuant to the Management Agreement, including out-of-pocket expenses, at some future time. In addition to the management fee, expenses paid by the Fund include: fees of Trustees who are not compensated by the Adviser, interest charges, taxes, fees and commissions of every kind, including brokerage fees, expenses of issuance, repurchase or redemption of shares, expenses of registering or qualifying shares for sale (including the printing and filing of the Fund's registration statements, reports and prospectuses excluding those copies used for sales purposes which the Distributor purchases at printer's over-run cost), accounting services fees, insurance expenses, association membership dues, all charges of custodians, transfer agents, registrars, auditors and legal counsel, expenses of preparing, printing and distributing all proxy material, reports and notices to shareholders, and, all costs incident to the Fund's existence as a Massachusetts business trust. Philip R. McLoughlin, a Trustee and officer of the Fund, is also a director of the Adviser. Michael E. Haylon and William R. Moyer, officers of the Fund, are also directors and officers of the Adviser. G. Jeffrey Bohne, Nancy G. Curtiss, William E. Keen, III, Leonard J. Saltiel, Thomas N. Steenburg and Pierre G. Trinque, officers of the Fund, are also officers of the Adviser. The Subadviser Aberdeen Fund Managers Inc. ("Aberdeen") serves as sub-advisor for the Fund. Aberdeen has been an investment advisor since 1995 and is a wholly-owned subsidiary of Aberdeen Asset Management PLC which was established in 1983 to provide investment management services to unit and investment trusts, segregated pension funds and other institutional and private portfolios. As of June 30, 1998 Aberdeen managed in excess of $286 million in assets for institutional portfolios. Aberdeen's principal offices are located at 1 Financial Plaza, Suite 2210, Nations Bank Tower, Fort Lauderdale, Florida 33394. The address of Aberdeen Asset Management PLC is 10 Queens Terrace, Aberdeen, Scotland AB101QG. The Subadvisory Agreement provides that the advisor, PIC, will delegate to Aberdeen the performance of certain of its investment management services under the Management Agreement. Aberdeen will furnish at its own expense the office facilities and personnel necessary to perform such services. For its services as subadvisor, PIC will pay Aberdeen compensation at the annual rate of .375% of the Fund's average daily net assets up to $1 billion, .35% of the Fund's average daily net assets from $1 billion to $2 billion and 7 .325% of the Fund's average daily net assets in excess of $2 billion. The Subadvisory Agreement was approved by the Board of Trustees at its meeting on May 27, 1998 and by shareholders at a meeting on October 27, 1998. It will continue in effect thereafter only so long as its continuance has been specifically approved at least annually by the Trustees, including a majority of the disinterested Trustees. NET ASSET VALUE The net asset value per share of the Fund is determined as of the close of trading of the New York Stock Exchange (the "Exchange") on days when the Exchange is open for trading. The Exchange will be closed on the following observed national holidays: New Year's Day, Martin Luther King, Jr. Day, President's 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 value of the Fund's foreign assets may be significantly affected on days when the investor has no access to the Fund. The net asset value per share of the Fund is determined by adding the values of all securities and other assets of the Fund, subtracting liabilities, and dividing by the total number of outstanding shares of the Fund. Assets and liabilities are determined in accordance with generally accepted accounting principles and applicable rules and regulations of the Securities and Exchange Commission. The total liability allocated to a class, plus that class's distribution fee and any other expenses allocated solely to that class, are deducted from the proportionate interest of such class in the assets of the Fund, and the resulting amount of each is divided by the number of shares of that class outstanding to produce the net asset value per share. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange 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 the Fund which invests in foreign securities contemporaneously with the determination of the prices of the majority of the portfolio securities of the Fund. 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 the Fund 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. HOW TO BUY SHARES The minimum initial investment is $500 and the minimum subsequent investment is $25. However, both the minimum initial and subsequent investment amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank draft investing program administered by Distributor, or pursuant to the Systematic Exchange privilege or for an individual retirement account (IRA). In addition, there are no subsequent investment minimum amounts in connection with the reinvestment of dividend or capital gain distributions. Completed applications for the purchase of shares should be mailed to: Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. See the Fund's current Prospectus for more information. The Fund has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Fund's net asset value next computed after they are accepted by an authorized broker or the broker's authorized designee. Class A Shares -- Reduced Sales Charges Investors choosing the initial sales charge alternative under certain circumstances may be entitled to pay reduced sales charges. The circumstances under which such investors may pay reduced sales charges are described below. Qualified Purchasers. No sales charge will be imposed on sales of shares to: (1) any trustee, director or officer of the Phoenix Funds, Phoenix-Engemann Funds, Phoenix-Seneca Funds or other mutual funds advised, subadvised or distributed by the Adviser, Distributor or any of their corporate affiliates (an "Affiliated Phoenix Fund"); (2) any director or officer, or any full-time employee or sales representative (who has acted as such for at least 90 days) of the Adviser or of Equity Planning; (3) registered representatives and employees of securities dealers with whom Equity Planning has sales agreements; (4) any qualified retirement plan exclusively for persons described above; (5) any officer, director or employee of a corporate affiliate of the Adviser or Equity Planning; (6) any spouse, child, parent, grandparent, brother or sister of any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for employees of the Adviser, Equity Planning and/or their corporate affiliates; (8) any employee or agent who retires from Phoenix Home Life Mutual Insurance Company or Equity Planning; (9) any account held in the name of a qualified employee benefit plan, endowment fund or foundation if, on the date of initial investment, the plan, fund or foundation has assets of $10,000,000 or more or at least 100 eligible employees; (10) any person with a direct rollover transfer of shares from an established Affiliated Phoenix Fund qualified plan; (11) any Phoenix Home Life separate account which funds group annuity contracts offered to qualified employee benefit plans; (12) any state, county, 8 city, instrumentality, department, authority or agency prohibited by law from paying a sales charge; (13) any fully matriculated student in a U.S. service academy; (14) any unallocated accounts held by a third party administrator, registered investment adviser, trust company, or bank trust department which exercises discretionary authority and holds the account in a fiduciary, agency, custodial or similar capacity if in the aggregate such accounts held by such entity equal or exceed $1,000,000; (15) any person who is investing redemption proceeds from investment companies other than Affiliated Phoenix Funds if, in connection with the purchases or redemption of the redeemed shares, the investor paid a prior sales charge provided such investor supplies verification that the redemption occurred within 90 days of the Affiliated Phoenix Fund purchase and that a sales charge was paid; or (16) any deferred compensation plan established for the benefit of any Affiliated Phoenix Fund trustee or director; provided that sales made to persons listed in (1) through (16) above are made upon the written assurance of the purchaser that the purchase is made for investment purposes and that the shares so acquired will not be resold except to the Fund. In addition, Class A shares purchased by the following investors are not subject to any Class A sales charge: (1) investment advisers and financial planners who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients, and (2) retirement plans and deferred compensation plans and trusts used to fund those plans (including, for example, plans qualified or created under sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in each case if those purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for those purchases; (3) clients of such investment advisers or financial planners who buy shares for their own accounts may also purchase shares without sales charge but only if their accounts are linked to a master account of their investment adviser or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements (each of these investors may be charged a fee by the broker, agent or financial intermediary for purchasing shares). Combination Purchase Privilege. Purchases, either singly or in any combination, of shares of the Fund or shares of any other Affiliated Phoenix Fund, (including Class B Shares and excluding Money Market Fund Series Class A Shares) if made at a single time by a single purchaser, will be combined for the purpose of determining whether the total dollar amount of such purchases entitles the purchaser to a reduced sales charge on any such purchases of Class A Shares. Each purchase of Class A Shares will then be made at the public offering price, as described in the then current Prospectus relating to such shares, which at the time of such purchase is applicable to a single transaction of the total dollar amount of all such purchases. The term "single purchaser" includes an individual, or an individual, his spouse and their children under the age of majority purchasing for his or their own account (including an IRA account) including his or their own trust, commonly known as a living trust; a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account, although more than one beneficiary is involved; multiple trusts or 403(b) plans for the same employer; multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to funds over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held in record in the name, or nominee name, of the entity placing the order. Letter of Intent. Class A Shares or shares of any other Affiliated Phoenix Fund (including Class B Shares and excluding Money Market Fund Series Class A Shares) may be purchased by a "single purchaser" (as defined above) within a period of thirteen months pursuant to a Letter of Intent, in the form provided by Equity Planning, stating the investor's intention to invest in such shares during such period an amount which, together with the value (at their maximum offering prices on the date of the Letter) of the Class A Shares of the Fund or Class A or Class B Shares of any other Affiliated Phoenix Fund then owned by such investor, equals a specified dollar amount. Each purchase of shares made pursuant to a Letter of Intent will be made at the public offering price, as described in the then current Prospectus relating to such shares, which at the time of purchase is applicable to a single transaction of the total dollar amount specified in the Letter of Intent. An investor's Letter of Intent is not a binding commitment of the investor to purchase or a binding obligation of the Fund or Equity Planning to sell a specified dollar amount of shares qualifying for a reduced sales charge. Accordingly, out of an initial purchase (and subsequent purchases if necessary), 5% of the dollar amount of purchases required to complete his investment (valued at the purchase price thereof) is held in escrow in the form of shares registered in the investor's name until completion of the investment, at which time escrowed shares are deposited to the investor's account. If the investor does not complete the investment and does not within 20 days after written request by Equity Planning or the dealer pay the difference between the sales charge on the dollar amount specified in his Letter of Intent and the sales charge on the dollar amount of actual purchases, the difference will be realized through the redemption of an appropriate number of the escrowed shares and any remaining escrowed shares will be deposited to his account. Right of Accumulation. "Single purchasers" (as defined above) may also qualify for reduced sales charges based on the combined value of purchases of either class of shares of the Fund, or any other Affiliated Phoenix Fund, made over time. Reduced sales charges are offered to investors whose shares, in the aggregate, are valued (i.e., the dollar amount of such purchases plus the then current value (at the public offering price as described in the then current prospectus relating to such shares) of shares of all Affiliated Phoenix Funds owned) in excess of the threshold amounts described in the section entitled "Initial Sales Charge Alternative--Class A Shares." To use this option, the investor must supply sufficient information as to account registrations and account numbers to permit verification that one or more of the purchases qualifies for a reduced sales charge. 9 Associations. A group or association may be treated as a "single purchaser" and qualify for reduced initial sales charges under the Combination Purchase Privilege and Right of Accumulation if the group or association (1) has been in existence for at least six months; (2) has a legitimate purpose other than to purchase mutual fund shares at a reduced sales charge; (3) gives its endorsements or authorization to the investment program to facilitate solicitation of the membership by the investment dealer, thus effecting economies of sales effort; and (4) is not a group whose sole organizational nexus is that the members are credit card holders of a company, policyholders of an insurance company, customers of a bank or a broker-dealer or clients of an investment adviser. Class B and C Shares -- Waiver of Sales Charges The contingent deferred sales charge is waived on redemptions of shares (a) if redemption is made within one year of death (i) of the sole shareholder on an individual account, (ii) of a joint tenant where the surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial account; (b) if redemption is made within one year of disability, as defined in Section 72(m)(7) of the Code; (c) in connection with mandatory distributions upon reaching age 701/2 under any retirement plan qualified under Sections 401, 408 or 403(b) of the Code or any redemption resulting from the tax-free return of an excess contribution to an IRA; (d) in connection with redemptions by 401(k) plans using an approved participant tracking system for: participant hardships, death, disability or normal retirement, and loans which are subsequently repaid; (e) in connection with the exercise of certain exchange privileges among Class B or Class C Shares of the Fund and Class B or Class C Shares of other Affiliated Phoenix Funds; (f) in connection with any direct rollover transfer of shares from an established Affiliated Phoenix Fund qualified plan into a Affiliated Phoenix Fund IRA by participants terminating from the qualifying plan; and (g) in accordance with the terms specified under the Systematic Withdrawal Program. If, upon the occurrence of a death as outlined above, the account is transferred to an account registered in the name of the deceased's estate, the contingent deferred sales charge will be waived on any redemption from the estate account occurring within one year of the death. If the Class B Shares are not redeemed within one year of the death, they will remain Class B Shares and be subject to the applicable contingent deferred sales charge when redeemed. Automatic Conversion of Class B Shares Class B Shares of the Fund will automatically convert to Class A Shares without a sales charge at the relative net asset values of each of the classes after eight years from the acquisition of the Class B Shares, and as a result, will thereafter be subject to the lower distribution and services fee under the Class A Plan. Such conversion will be on the basis of the relative net asset value of the two classes without the imposition of any sales load, fee or other charge. The purpose of the conversion feature is to relieve the holders of Class B Shares that have been outstanding for a period of time sufficient for the Distributor to have been compensated for distribution related expenses from the burden of such distribution related expenses. For purposes of conversion to Class A, shares purchased through the reinvestment of dividends and distributions paid in respect of Class B Shares in a shareholder's Fund account will be considered to be held in a separate sub-account. Each time any Class B Shares in the shareholder's Fund account (other than those in the sub-account) are converted to Class A Shares, an equal pro rata portion of the Class B Shares in the sub-account will also be converted to Class A Shares. The conversion of Class B Shares to Class A Shares is subject to the continuing availability of an opinion of counsel or a ruling from the Internal Revenue Service ("IRS") to the effect: (i) that the conversion of shares does not constitute a taxable event under federal income tax law; and (ii) the assessment of higher distribution and services fees and transfer agency costs with respect to Class B Shares does not result in dividends or distributions constituting "preferential dividends" under the Code. The conversion of Class B Shares to Class A Shares may be suspended if such an opinion or ruling is no longer available. In that event, no further conversion of Class B Shares would occur, and shares might continue to be subject to the higher distribution and services fee for an indefinite period which may extend beyond the period ending eight (8) years after the end of the month in which affected Class B Shares were purchased. If the Fund were unable to obtain such assurances with respect to the assessment of distribution and services fees and transfer agent costs relative to the Class B Shares it might make additional distributions if doing so would assist in complying with the Fund's general practice of distributing sufficient income to reduce or eliminate U.S. federal taxes. INVESTOR ACCOUNT SERVICES The Fund offers accumulation plans, withdrawal plans and reinvestment and exchange privileges. Certain privileges may not be available in connection with all classes. In most cases, changes to account services may be accomplished over the phone. Inquiries regarding policies and procedures relating to shareholder account services should be directed to Shareholder Services at (800) 243-1574. Exchanges Under certain circumstances, shares of the Fund may be exchanged for shares of the same class of any other Affiliated Phoenix Fund on the basis of the relative net asset values per share at the time of the exchange. Exchanges are subject to the minimum initial investment requirement of the designated Series, Fund, or Portfolio, except if made in connection with the Systematic Exchange privilege. Shareholders may exchange shares held in book-entry form for an equivalent number (value) of the same class of shares of any other Affiliated Phoenix Fund, if currently offered. On exchanges with share classes that carry a contingent deferred 10 sales charge, the CDSC schedule of the original shares purchased continues to apply. The exchange of shares is treated as a sale and purchase for federal income tax purposes (see also "Dividends, Distributions and Taxes"). Systematic Exchanges. If the conditions above have been met, you or your broker may, by telephone or written notice, elect to have shares exchanged for the same class of shares of another Affiliated Phoenix Fund automatically on a monthly, quarterly, semi-annual or annual basis or may cancel this privilege at any time. If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that shares be automatically exchanged at predetermined intervals for shares of the same class of another Affiliated Phoenix Fund. This requirement does not apply to Phoenix "Self Security" program participants. Systematic exchanges will be executed upon the close of business on the 10th day of each month or the next succeeding business day. Systematic exchange forms are available from the Distributor. Dividend Reinvestment Across Accounts If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that any dividends and distributions paid with respect to shares in that account be automatically reinvested in a single account of one of the other Affiliated Phoenix Funds at net asset value. You should obtain a current prospectus and consider the objectives and policies of each fund carefully before directing dividends and distributions to another fund. Reinvestment election forms and prospectuses are available from Equity Planning. Distributions may also be mailed to a second payee and/or address. Requests for directing distributions to an alternate payee must be made in writing with a signature guarantee of the registered owner(s). To be effective with respect to a particular dividend or distribution, notification of the new distribution option must be received by the Transfer Agent at least three days prior to the record date of such dividend or distribution. If all shares in your account are repurchased or redeemed or transferred between the record date and the payment date of a dividend or distribution, you will receive cash for the dividend or distribution regardless of the distribution option selected. REDEMPTION OF SHARES Under the 1940 Act, payment for shares redeemed must ordinarily be made within seven days after tender. The right to redeem shares may be suspended and payment therefor postponed during periods when the New York Stock Exchange is closed, other than customary weekend and holiday closings, or if permitted by rules of the Securities and Exchange Commission, during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Fund to dispose of its securities or to determine fairly the value of its net assets or during any other period permitted by order of the Securities and Exchange Commission for the protection of investors. Furthermore, the Transfer Agent will not mail redemption proceeds until checks received for shares purchased have cleared, which may take up to 15 days after receipt of the check. Redemptions by Class B and Class C shareholders will be subject to the applicable deferred sales charge, if any. See the Fund's current Prospectus for further information. The Fund has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Fund's net asset value next computed after they are accepted by an authorized broker or the broker's authorized designee. A shareholder should contact his/her broker/dealer if he/she wishes to transfer shares from an existing broker/dealer street name account to a street name account with another broker/dealer. The Fund has no specific procedures governing such account transfers. Redemption of Small Accounts Due to the relatively high cost of maintaining small accounts, the Fund reserves the right to redeem, at net asset value, the shares of any shareholder whose account has a value, due to redemptions, of less than $200. Before the Fund redeems these shares, the shareholder will be given notice that the value of the shares in the account is less than the minimum amount and will be allowed 30 days to make an additional investment in an amount which will increase the value of the account to at least $200. By Mail Shareholders may redeem shares by making written request, executed in the full name of the account, directly to Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates for shares are in the possession of the shareholder, they must be mailed or presented, duly endorsed in the full name of the account, with a written request to Equity Planning that the Fund redeem the shares. See the Fund's current Prospectus for more information. Telephone Redemptions Shareholders may redeem by telephone up to $50,000 worth of their shares held in book-entry form. See the Fund's current Prospectus for additional information. 11 Reinvestment Privilege Shareholders who may have overlooked features of their investment at the time they redeemed have the privilege of reinvesting their investment at net asset value. See the Fund's current Prospectus for more information and conditions attached to this privilege. Redemption in Kind To the extent consistent with state and federal law, the Fund may make payment of the redemption price either in cash or in kind. However, the Fund has elected to pay in cash all requests for redemption by any shareholder of record, limited in respect to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of such period. This election has been made pursuant to Rule 18f-1 under the Investment Company Act of 1940 and is irrevocable while the Rule is in effect unless the Securities and Exchange Commission, by order, permits the withdrawal thereof. In case of a redemption in kind, securities delivered in payment for shares would be readily marketable and valued at the same value assigned to them in computing the net asset value per share of the Fund. A shareholder receiving such securities would incur brokerage costs when selling the securities. DIVIDENDS, DISTRIBUTIONS AND TAXES The Fund intends to remain qualified as a regulated investment company under certain provisions of the Code. Under such provisions, the Fund will not be subject to federal income tax on such part of its ordinary income and net realized capital gains which it distributes to shareholders provided it meets certain distribution requirements. To qualify for treatment as a regulated investment company, the Fund generally must, among other things (a) derive in each taxable year at least 90% of its gross income from (i) dividends, (ii) interest, (iii) payments with respect to securities loans, (iv) gains from the sale or other disposition of stock or securities or foreign currencies, and (v) other income derived with respect to its business of investing in such stock, securities or currencies; and (b) meet certain diversification requirements imposed under the Code at the end of each quarter of the taxable year. Dividends paid by the Fund will be taxable to shareholders as ordinary income, except for (a) such portion as may exceed a shareholder's ratable share of the Fund's earnings and profits, which excess will be applied against and reduce the shareholder's cost or other tax basis for his shares, and (b) amounts representing a distribution of net capital gains, if any, which are designated by the Fund as capital gain distributions. If the amount described in (a) above exceeds the shareholder's tax basis for his shares, the excess over basis will be treated as gain from the sale or exchange of such shares. The excess of any net long-term capital gains over net short-term capital losses recognized and distributed by the Fund and designated by the Fund as a capital gain distribution, will be taxable to shareholders as a long-term capital gain regardless of the length of time a particular shareholder may have held his shares in the Fund. Dividends and distributions are taxable as described, whether received in cash or reinvested in additional shares of the Fund. Under certain circumstances, the sales charge incurred in acquiring shares of the Fund may not be taken in account in determining the gain or loss on the disposition of those shares. This rule applies where shares of the Fund are disposed of within 90 days after the date on which they were acquired and new shares of a regulated investment company are acquired without a sales charge or at a reduced sales charge. In that case, the gain or loss realized on the disposition will be determined by excluding from the tax basis of the shares disposed all or a portion of the sales charge incurred in acquiring those shares. This exclusion applies to the extent that the otherwise applicable sales charge with respect to the newly acquired shares is reduced as a result of the shareholder having incurred a sales charge initially. The portion of the sales charge affected by this rule will be treated as a sales charge paid for the new shares. Distributions by the Fund reduce the net asset value of the Fund's shares. Should a distribution reduce the net asset value of a share below a shareholder's cost for the share, such a distribution nevertheless generally would be taxable to the shareholder as ordinary income or long-term capital gain, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, investors should be careful to consider the tax implications of buying shares just prior to the declaration of a dividend or distribution, but the dividend or distribution generally would be taxable to them. Some shareholders may be subject to withholding of federal income tax on dividends and redemption payments from the Fund ("backup withholding") at the rate of 31%. Corporate shareholders and certain other shareholders specified in the Code generally are exempt from such backup withholding. Generally, shareholders subject to backup withholding will be (i) those for whom a certified taxpayer identification number is not on file with the Fund, (ii) those about whom notification has been received (either by the shareholder or the Fund) from the Internal Revenue Service that they are subject to backup withholding or (iii) those who, to the Fund's knowledge, have furnished an incorrect taxpayer identification number. Generally, to avoid backup withholding, an investor must, at the time an account is opened, certify under penalties of perjury that the taxpayer identification number furnished is correct and that he or she is not subject to backup withholding. It is anticipated that the Fund will receive dividends from its investments, in which case dividends paid by the Fund from net investment income may qualify for the 70% corporate dividends received deduction, but only to the extent that such income is derived from dividends of domestic corporations. 12 The Code imposes a 4% nondeductible excise tax on a regulated investment company, such as the Fund, if it does not distribute to its shareholders during the calendar year an amount equal to at least 98% of the Fund's capital gains net income for the 12-month period ending on October 31 of each calendar year. In addition, an amount equal to any undistributed investment company taxable income or capital gain net income from the previous calendar year must also be distributed to avoid the excise tax. The excise tax is imposed on the amount by which the regulated investment company does not meet the foregoing distribution requirements. If the Fund has taxable income that would be subject to the excise tax, the Fund generally intends to distribute such income so as to avoid payment of the excise tax. Under another provision of the Code, any dividend declared by the Fund to shareholders of record in October, November, and December of any calendar year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by, and will be taxable to shareholders as of December 31 of such calendar year, provided that the dividend is actually paid by the Fund before February 1 of the following year. Based on the foregoing, the Fund's policy is to distribute to its shareholders at least 90% of net investment company taxable income, as defined above and in the Code, and any net realized capital gains for each year and, consistent therewith, to meet the distribution requirements of Part I of subchapter m of the Code. The Fund intends to meet the other requirements of Part I of subchapter m, including the requirements with respect to diversification of assets and sources of income, so that the Fund will continue to qualify as a regulated investment company. Equity options written by the Fund (covered call options on portfolio stock) will be subject to the provisions under Section 1234 of the Code. If the Fund writes a call option, no gain is recognized upon its receipt of a premium. If the option lapses or is closed out, any gain or loss is treated as a short-term capital gain or loss. If a call option is exercised, any resulting gain or loss is a short-term or long-term capital gain or loss depending on the holding period of the underlying stock. Many futures contracts entered into by the Fund and all listed non-equity options written or purchased by the Fund (including covered call options written on debt securities and options written or purchased on futures contracts) will be governed by Section 1256 of the Code. Absent a tax election to the contrary, gain or loss attributable to the lapse, exercise or closing out of any such position will be treated as 60% long-term and 40% short-term capital gain or loss, and on the last trading day of the Fund's fiscal year (and, generally on October 31 for purposes of the 4% excise tax), all outstanding Section 1256 positions will be marked to market (i.e. treated as if such positions were closed out at their closing price on such day), with any resulting gain or loss recognized as 60% long-term and 40% short-term capital gain or loss. Under certain circumstances, entry into a futures contract to sell a security may constitute a short sale for federal income tax purposes, causing an adjustment in the holding period of the underlying security or a substantially identical security in the Fund's portfolio. Positions of the Fund which consist of at least one stock and at least one stock option or other position with respect to a related security which substantially diminishes the Fund's risk of loss with respect to such stock could be treated as a "straddle" which is governed by Section 1092 of the Code, the operation of which may cause deferral of losses, adjustments in the holding periods of stock or securities and conversion of short-term capital losses into long-term capital losses. An exception to these straddle rules exists for any "qualified covered call options" on stock options written by the Fund. If the Fund invests in stock of certain passive foreign investment companies, the Fund may be subject to U.S. federal income taxation on a portion of any "excess distribution" with respect to, or gain from the disposition of, such stock. The tax would be determined by allocating such distribution or gain ratably to each day of the Fund's holding period for the stock. The distributions or gain so allocated to any taxable year of the Fund, other than the taxable year of the excess distribution or disposition, would be taxed to the Fund at the highest ordinary income rate in effect for such year, and the tax would be further increased by an interest charge to reflect the value of the tax deferral deemed to have resulted from the ownership of the foreign company's stock. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the Fund's investment company taxable income and, accordingly, would not be taxable to the Fund to the extent distributed by the Fund as a dividend to its shareholders. The Fund may elect to mark to market (i.e., treat as if sold at their closing market price on same day), its investments in passive foreign investment companies and avoid any tax and or interest charge on excess distributions. The foregoing discussion of U.S. federal income tax law relates solely to the application of that law to U.S. persons, i.e., U.S. citizens and residents and U.S. corporations, partnerships, trusts and estates. Each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the Fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 31% (or at a lower rate under an applicable income tax treaty) on amounts constituting ordinary income received by him or her, where such amounts are treated as income from U.S. sources under the Code. The Fund furnishes all shareholders, within 31 days after the end of the calendar year, with information which is required by the Internal Revenue Service for preparing federal income tax returns. Investors are urged to consult their attorney or tax adviser regarding specific questions as to federal, foreign, state or local taxes. 13 Important Notice Regarding Taxpayer IRS Certification Pursuant to IRS Regulations, the Fund may be required to withhold 31% of all reportable payments including any taxable dividends, capital gains distributions or share redemption proceeds, for an account which does not have a taxpayer identification number or social security number and certain required certifications. The Fund reserves the right to refuse to open an account for any person failing to provide a taxpayer identification number along with the required certifications. TAX SHELTERED RETIREMENT PLANS Shares of the Fund and other Affiliated Phoenix Funds may be offered in connection with employer-sponsored 401(k) plans. PIC and its affiliates may provide administrative services to these plans and to their participants, in addition to the services that PIC and its affiliates provide to the Phoenix Funds, and receive compensation therefor. For information on the terms and conditions applicable to employee participation in such plans, including information on applicable plan administrative charges and expenses, prospective investors should consult the plan documentation and employee enrollment information which is available from participating employers. THE DISTRIBUTOR Phoenix Equity Planning Corporation, ("Equity Planning" or "Distributor"), acts as the Distributor of the Fund and as such will conduct a continuous offering pursuant to a "best efforts" arrangement requiring it to take and pay for only such securities as may be sold to the public. Equity Planning is an indirect less than wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company and an affiliate of PIC. Shares of the Fund may be purchased through investment dealers who have sales agreements with the Distributor. During the fiscal years 1996, 1997, and 1998, purchasers of shares of the Fund paid aggregate sales charges of $132,820, $111,630 and $115,136, respectively, of which the Distributor received net commissions of $21,894, $32,104 and $36,903, respectively, for its services, the balance being paid to dealers. The Underwriting Agreement may be terminated at any time on not more than 60 days written notice, without payment of a penalty, by the Distributor, by vote of a majority of the outstanding voting securities of the Fund, or by vote of a majority of the Fund's Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of the Distribution Plans or in any related agreements. The Underwriting Agreement will terminate automatically in the event of its assignment. Dealers with whom the Distributor has entered into sales agreements receive a discount or commission as set forth below. Dealer Discount Sales Charge Sales Charge or Agency Fee Amount of Transaction as Percentage as Percentage as Percentage of at Offering Price of Offering Price of Amount Invested Offering Price - ------------------------------------------------------------------------------------------------------ Less than $50,000 4.75% 4.99% 4.25% $50,000 but under $100,000 4.50% 4.71% 4.00% $100,000 but under $250,000 3.50% 3.63% 3.00% $250,000 but under $500,000 3.00% 3.09% 2.75% $500,000 but under $1,000,000 2.00% 2.04% 1.75% $1,000,000 or more None None None In addition to the dealer discount on purchases of Class A Shares, the Distributor intends to pay investment dealers a sales commission of 4% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class C Shares sold by such dealers. Your broker, dealer or investment adviser may also charge you additional commissions or fees for their services in selling shares to you provided they notify the Distributor of their intention to do so. Dealers and other entities who enter into special arrangements with the Distributor may receive compensation for the sale and promotion of shares of the Funds and/or for providing other shareholder services. Depending on the nature of the services, these fees may be paid either from the Funds through distribution fees, service fees or transfer agent fees or in some cases, the Distributor may pay certain fees from its own profits and resources. From its own profits and resources, the Distributor does intend to: (a) sponsor sales contests, training and educational meetings and provide additional compensation to qualifying dealers in the form of trips, merchandise or expense reimbursements; (b) from time to time pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (d) excluding purchases as described in (c) above, pay broker/dealers an amount equal to 1% of the amount of Class A Shares sold above $1 million but under $3 million, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million. If part or all of such investment, including investments by qualified employee benefit plans, is 14 subsequently redeemed within one year of the investment date, the broker-dealer will refund to the Distributor such amounts paid with respect to the investment. In addition, the Distributor may pay the entire applicable sales charge on purchases of Class A Shares to selected dealers and agents. Any dealer who receives more than 90% of a sales charge may be deemed to be an "underwriter" under the Securities Act of 1933. Administrative Services Equity Planning also acts as administrative agent of the Fund and as such performs administrative, bookkeeping and pricing functions for the Fund. For its services, Equity Planning will be paid a fee equal to the sum of (1) the documented cost of fund accounting and related services provided by PFPC, Inc., as subagent, plus (2) the documented cost to Equity Planning to provide financial reporting and tax services and to oversee the subagent's performance. The current fee schedule of PFPC, Inc. is based upon the average of the aggregate daily net asset values of the Fund, at the following incremental annual rates. First $200 million .085% $200 million to $400 million .05% $400 million to $600 million .03% $600 million to $800 million .02% $800 million to $1 billion .015% Greater than $1 billion .0125% Percentage rates are applied to the aggregate daily net asset values of the Fund. PFPC, Inc. also charges minimum fees and additional fees for each additional class of fund shares. Equity Planning retains PFPC, Inc. as subagent for each of the funds for which Equity Planning serves as administrative agent. PFPC, Inc. agreed to a modified fee structure and waived certain charges. Because PFPC, Inc.'s arrangement would have favored smaller funds over larger funds, Equity Planning reallocates PFPC, Inc.'s overall asset-based charges among all funds for which it serves as administrative agent on the basis of the relative net assets of each fund. As a result, the PFPC, Inc. charges to the Fund are expected to be slightly less than the amount that would be found through direct application of the table illustrated above. For its services during the Fund's fiscal year ended June 30, 1998, Equity Planning received $97,030. DISTRIBUTION PLANS The Fund has adopted separate amended and restated distribution plans under Rule 12b-1 of the 1940 Act for each class of shares of the Fund (the "Class A Plan," the "Class B Plan," the "Class C Plan," and collectively the "Plans"). The Plans permit the Fund to reimburse the Distributor for expenses incurred in connection with activities intended to promote the sale of shares of each class of shares of the Fund and require the Fund to pay for the furnishing of shareholder services. Under the Class B and Class C Plans, the Fund may reimburse the Distributor monthly for actual expense of the Distributor up to 0.75% of the average daily net assets of the Fund's Class B and Class C Shares, respectively. Expenditures under the Plans shall consist of: (i) commissions to sales personnel for selling shares of the Fund (including underwriting fees and financing expenses incurred in connection with the payment of commissions); (ii) compensation, sales incentives and payments to sales, marketing and service personnel; (iii) payments to broker-dealers and other financial institutions which have entered into agreements with the Distributor in the form of the Dealer Agreement for Phoenix Funds for services rendered in connection with the sale and distribution of shares of the Fund; (iv) payment of expenses incurred in sales and promotional activities, including advertising expenditures related to the Fund; (v) the costs of preparing and distributing promotional materials; (vi) the cost of printing the Fund's Prospectus and Statement of Additional Information for distribution to potential investors; and (vii) such other similar services that the Trustees of the Fund determine are reasonably calculated to result in the sale of shares of the Fund. In addition, the Fund shall pay the Distributor 0.25% annually of the average daily net assets of the Fund for providing services to the shareholders, including assistance in connection with inquiries related to shareholder accounts (the "Service Fee"). From the Service Fee the Distributor expects to pay a quarterly fee to qualifying broker/dealer firms, as compensation for providing personal services and/or the maintenance of shareholder accounts, with respect to shares sold by such firms. This fee will not exceed on an annual basis 0.25% of the average annual net asset value of such shares, and will be in addition to sales charges on Fund shares which are re-allowed to such firms. To the extent that the entire amount of the Service Fee is not paid to such firms, the balance will serve as compensation for personal and account maintenance services furnished by the Distributor. In order to receive payments under the Plans, participants must meet such qualifications to be established in the sole discretion of the Distributor, such as services to the Fund's shareholders; or services providing the Fund with more efficient methods of offering shares to coherent groups of clients, members or prospects of a participant; or services permitting bulking of purchases or sales, or transmission of such purchases or sales by computerized tape or other electronic equipment; or other processing. In addition to the amount paid to dealers pursuant to the sales charge table in the section above, the Distributor may from time to time pay, from its own resources or pursuant to the Plans, a bonus or other incentive to dealers (other than the Distributor) which employ a registered representative who sells a minimum dollar amount of the shares of the Fund during a specific period of time. 15 Such bonus or other incentive may take the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives and members of their families to places within or without the United States or other bonuses such as gift certificates or the cash equivalent of such bonuses. The Distributor may, from time to time, re-allow the entire portion of the sales charge on Class A Shares which it normally retains to individual selling dealers. However, such additional re-allowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings. For the fiscal year ended June 30, 1998 the Fund paid Rule 12b-1 Fees in the amount of $494,443 of which the Distributor received $196,013, W.S. Griffith & Co., an affiliate, received $13,032 and unaffiliated broker-dealers received $285,398. The Rule 12b-1 payments were used for (1) compensation to dealers ($353,361), (2) compensation to sales personnel ($172,649), (3) advertising ($88,808), (4) service costs ($44,327), (5) printing and mailing of prospectuses to other than current shareholders ($11,871) and (6) other ($35,251). The Distributor's expenses from selling and servicing Class B Shares may be more than the payments received from contingent deferred sales charges collected on redeemed shares and from the Fund under the Class B Plan. Those expenses may be carried over and paid in future years. At June 30, 1998, the end of the last Plan year, the Distributor had incurred unreimbursed expenses under the Class B Plan of $354,718 (equal to 0.18% of the Fund's net assets) which have been carried over into the present Class B Plan year. On a quarterly basis, the Fund's Trustees review a report on expenditures under the Plans and the purposes for which expenditures were made. The Trustees conduct an additional, more extensive review annually in determining whether the Plans will be continued. By their terms, continuation of the Plans from year to year is contingent on annual approval by a majority of the Fund's Trustees and by a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plans or any related agreements (the "Plan Trustees"). The Plans provide that they may not be amended to increase materially the costs which the Fund may bear pursuant to the Plans without approval of the shareholders of the Fund and that other material amendments to the Plans must be approved by a majority of the Plan Trustees by vote cast in person at a meeting called for the purpose of considering such amendments. The Plans further provide that while they are in effect, the selection and nomination of Trustees who are not "interested persons" shall be committed to the discretion of the Trustees who are not "interested persons". The Plans may be terminated at any time by vote of a majority of the Plan Trustees or a majority of the outstanding shares of the Fund. The Trustees have concluded that there is a reasonable likelihood that the Plans will benefit the Fund and all classes of shareholders. The National Association of Securities Dealers, Inc. (the "NASD") regards certain distribution fees as asset-based sales charges subject to NASD sales load limits. The NASD's maximum sales charge rule may require the Trustees to suspend distribution fees or amend the Plans. MANAGEMENT OF THE FUND The Trustees of the Fund are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on Trustees by the 1940 Act and Massachusetts business trust law. Trustees and Officers The following table sets forth information concerning the Trustees and executive officers of the Fund, including their principal occupations during the past five years. 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: Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - ------------------------ ---------------- ------------------------------------------------------------ Robert Chesek (64) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), 49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund and Wethersfield, CT 06109 Phoenix Duff & Phelps Institutional Mutual Funds (1996- present). Vice President, Common Stock, Phoenix Home Life Mutual Insurance Company (1980-1994). Director/Trustee, the National Affiliated Investment Companies (until 1993). 16 Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - --------------------------- --------------- ---------------------------------------------------------------- E. Virgil Conway (69) Trustee Chairman, Metropolitan Transportation Authority (1992- 9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company of Bronxville, NY 10708 New York, Inc. (1970-present), Pace University (1978- present), Atlantic Mutual Insurance Company (1974-present), HRE Properties (1989-present), Greater New York Councils, Boy Scouts of America (1985-present), Union Pacific Corp. (1978-present), Blackrock Freddie Mac Mortgage Securities Fund (Advisory Director) (1990-present), Centennial Insurance Company (1974-present), Josiah Macy, Jr., Foundation (1975- present), The Harlem Youth Development Foundation (1987- present), Accuhealth (1994-present), Trism, Inc. (1994- present), Realty Foundation of New York (1972-present), New York Housing Partnership Development Corp. (Chairman) (1981-present) and Fund Directions (Advisory Director) (1993-present). Director/Trustee, Phoenix Funds (1993- present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Director, Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc. (1995- present). Member, Audit Committee of the City of New York (1981-1996). Advisory Director, Blackrock Fannie Mae Mortgage Securities Fund (1989-1996). Member (1990-1995), Chairman (1992-1995), Financial Accounting Standards Advisory Council. Director/Trustee, the National Affiliated Investment Companies (until 1993). Harry Dalzell-Payne (69) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee, 330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff & New York, NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-present). Director, Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, the National Affiliated Investment Companies (1983-1993). Formerly a Major General of the British Army. *Francis E. Jeffries (68) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee, 6585 Nicholas Blvd. Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff & Naples, FL 33963 Phelps Utilities Income Inc. (1987-present), Duff & Phelps Utilities Tax-Free Income Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond Trust Inc. (1993-present). Director, The Empire District Electric Company (1984- present). Director (1989-1997), Chairman of the Board (1993- 1997), President (1989-1993), and Chief Executive Officer (1989-1995), Phoenix Investment Partners, Ltd. Leroy Keith, Jr. (59) Trustee Chairman and Chief Executive Officer, Carson Products Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund and Carson Product Company Phoenix Duff & Phelps Institutional Mutual Funds (1996- 64 Ross Road present). Director, Equifax Corp. (1991-present) and Savannah, GA 30750 Evergreen International Fund, Inc. (1989-present). Trustee, Evergreen Liquid Trust, Evergreen Tax Exempt Trust, Evergreen Tax Free Fund, Master Reserves Tax Free Trust, and Master Reserves Trust. President, Morehouse College (1987-1994). Chairman and Chief Executive Officer, Keith Ventures (1992-1994). Director/Trustee, the National Affiliated Investment Companies (until 1993). 17 Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - ---------------------------- --------------- ----------------------------------------------------------------- *Philip R. McLoughlin (52) Trustee and Chairman (1997-present), Director (1995-present), Vice President Chairman (1995-1997) and Chief Executive Officer (1995- present), Phoenix Investment Partners, Ltd. Director (1994- present) and Executive Vice President, Investments (1988- present), Phoenix Home Life Mutual Insurance Company. Director/Trustee and President, Phoenix Funds (1989-present). Trustee and President, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds (1996- present). Director, Duff & Phelps Utilities Tax-Free Income Inc. (1995-present) and Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-present). Director (1983-present) and Chairman (1995-present), Phoenix Investment Counsel, Inc. Director (1984-present) and President (1990- present), Phoenix Equity Planning Corporation. Director (1993-present), Chairman (1993- present) and Chief Executive Officer (1993-1995), National Securities & Research Corporation. Director, Phoenix Realty Group, Inc. (1994-present), Phoenix Realty Advisors, Inc. (1987- present), Phoenix Realty Investors, Inc. (1994-present), Phoenix Realty Securities, Inc. (1994-present), PXRE Corporation (Delaware) (1985-present), and World Trust Fund (1991-present). Director and Executive Vice President, Phoenix Life and Annuity Company (1996-present). Director and Executive Vice President, PHL Variable Insurance Company (1995-present). Director, Phoenix Charter Oak Trust Company (1996-present). Director and Vice President, PM Holdings, Inc. (1985-present). Director, PHL Associates, Inc. (1995-present). Director and President, Phoenix Securities Group, Inc. (1993-1995). Director (1992- present) and President (1992-1994), W.S. Griffith & Co., Inc. Director/Trustee, the National Affiliated Investment Companies (until 1993). Everett L. Morris (70) Trustee Vice President, W.H. Reaves and Company (1993-present). 164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee, Colts Neck, NJ 07722 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Director, Duff & Phelps Utilities Tax-Free Income Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond Trust Inc. (1993- present). *James M. Oates (52) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing Director Managing Director, Wydown Group (1994-present). Director, The Wydown Group Phoenix Investment Partners, Ltd. (1995-present). Director/ IBEX Capital Markets LLC Trustee, Phoenix Funds (1987-present). Trustee, Phoenix- 60 State Street Aberdeen Series Fund and Phoenix Duff & Phelps Suite 950 Institutional Mutual Funds (1996-present). Director, AIB Boston, MA 02109 Govett Funds. (1991-present), Blue Cross and Blue Shield of New Hampshire (1994-present), Investors Financial Service Corporation (1995-present), Investors Bank & Trust Corporation (1995-present), Plymouth Rubber Co. (1995- present), Stifel Financial (1996-present) and Command Systems, Inc. (1998-present). Vice Chairman, Massachusetts Housing Partnership (1992-present). Member, Chief Executives Organization (1996-present). Director (1984-1994), President (1984-1994) and Chief Executive Officer (1986- 1994), Neworld Bank. Director/Trustee, the National Affiliated Investment Companies (until 1993). 18 Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - ----------------------------- --------------- --------------------------------------------------------------- *Calvin J. Pedersen (56) Trustee Director (1986-present), President (1993-present) and Phoenix Investment Executive Vice President (1992-1993), Phoenix Investment Partners, Ltd. Partners, Ltd. Director/Trustee, Phoenix Funds (1995-present). 55 East Monroe Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Suite 3600 Phelps Institutional Mutual Funds (1996-present). President Chicago, IL 60603 and Chief Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utilities Income Inc. (1994-present) and Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-present). Herbert Roth, Jr. (70) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, 134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston Sherborn, MA 01770 Edison Company (1978-present), Landauer, Inc. (medical services) (1970-present),Tech Ops./Sevcon, Inc. (electronic controllers) (1987-present), and Mark IV Industries (diversified manufacturer) (1985-present). Member, Directors Advisory Counsel, Phoenix Home Life Mutual Insurance Company (1998-present). Director, Key Energy Group (oil rig service) (1988-1994) and Phoenix Home Life Mutual Insurance Company (1972-1998). Director/Trustee, the National Affiliated Investment Companies (until 1993). Richard E. Segerson (52) Managing Director, Mullin Associates (1993-present). 102 Valley Road Director/Trustee, Phoenix Funds (1993-present). Trustee, New Canaan, CT 07840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Vice President and General Manager, Coats & Clark, Inc. (previously Tootal American, Inc.) (1991-1993). Director/Trustee, the National Affiliated Investment Companies (1984-1993). Lowell P. Weicker, Jr. (67) Trustee/Director, Phoenix Funds (1995-present). Trustee, 731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc. (1995-present), Burroughs Wellcome Fund (1996-present), HPSC Inc. (1995-present), and Compuware (1996-present). Visiting Professor, University of Virginia (1997-present). Director, Duty Free International, Inc. (1997) Chairman, Dresing, Lierman, Weicker (1995-1996). Governor of the State of Connecticut (1991-1995). Michael E. Haylon (40) Executive Director and Executive Vice President--Investments, Phoenix Vice Investment Partners, Ltd. (1995-present). Executive Vice President 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 Investments, Phoenix Home Life Mutual Insurance Company (1993-1995). Various other positions with Phoenix Home Life Mutual Insurance Company (1990-1993). 19 Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - --------------------------- --------------- -------------------------------------------------------------- John F. Sharry (46) Executive Managing Director, Retail, Phoenix Equity Planning Vice Corporation (1995-present). Executive Vice President, Phoenix President Funds and Phoenix-Aberdeen Series Fund (1998-present). Managing Director, Director and National Sales Manager (December 1993-November 1995), Senior Vice President, Director and National Sales Manager (December 1992- December 1993), Putnam Funds. William E. Keen, III (35) Vice Assistant Vice President (1996-present), Director of Mutual 100 Bright Meadow Blvd. President Fund Compliance (1995-1996), Phoenix Equity Planning P.O. Box 2200 Corporation. Vice President, Phoenix Funds (1996-present), Enfield, CT 06083-2200 Phoenix Duff & Phelps Institutional Mutual Funds (1996- present), and Phoenix-Aberdeen Series Fund (1996-present). Assistant Vice President, USAffinity Investments LP (1994- 1995). Treasurer and Secretary, USAffinity Funds (1994- 1995). Manager, Fund Administration, SEI Corporation (1991- 1994). William R. Moyer (54) Vice Senior Vice President and Chief Financial Officer, Phoenix 100 Bright Meadow Blvd. President Investment Partners, Ltd. (1995-present). Senior Vice P.O. Box 2200 President, Finance (1990-present), Chief Financial Officer Enfield, CT 06083-2200 (1996-present), and Treasurer (1994-1996 and 1998-present), Phoenix Equity Planning Corporation. Director (1998-present), Senior Vice President (1990-present), Chief Financial Officer (1996-present) and Treasurer (1994-present), Phoenix Investment Counsel, Inc. Director (1998-present), Senior Vice President, Finance (1993-present), Chief Financial Officer (1996-present), and Treasurer (1994-present), National Securities & Research Corporation. Senior Vice President and Chief Financial Officer, Duff & Phelps Investment Management Co. (1996-present). Vice President, Phoenix Funds (1990-present), Phoenix-Duff & Phelps Institutional Mutual Funds (1996-present), Phoenix-Aberdeen Series Fund (1996-present). Vice President, Investment Products Finance, Phoenix Home Life Mutual Insurance Company (1990-1995). Senior Vice President and Chief Financial Officer, W. S. Griffith & Co., Inc. (1992-1995) and Townsend Financial Advisers, Inc. (1993-1995). Vice President, the National Affiliated Investment Companies (until 1993). Leonard J. Saltiel (44) Vice Managing Director, Operations and Service, (1996-present), President Senior Vice President (1994-1996), Phoenix Equity Planning Corporation. Vice President, Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional Mutual Funds (1996- present), Phoenix-Aberdeen Series Fund (1996-present). Vice President, National Securities & Research Corporation (1994- 1996). Vice President, Investment Operations, Phoenix Home Life Mutual Insurance Company (1994-1995). Various positions with Home Life Insurance Company and Phoenix Home Life Mutual Insurance Company (1987-1994). 20 Positions Held Principal Occupations Name, Address and Age With the Fund During the Past 5 Years - ------------------------ --------------- ---------------------------------------------------------------- Pierre G. Trinque (43) Vice Managing Director, Large Cap Growth Team (1997-present), President Managing Direcor, Director of Equity Research (1996-1997), Senior Research Analyst (1996) and Associate Portfolio Manager--Institutional Funds (1992-1995), Phoenix Investment Counsel, Inc. Vice President, The Phoenix Edge Series Fund (1997-present), Phoenix Series Fund (1997- present), Phoenix Duff & Phelps Institutional Mutual Funds (1997-present), Phoenix Multi-Portfolio Fund (1998-present) and Phoenix Worldwide Opportunities Fund (1998-present). Nancy G. Curtiss (46) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer (1996-present), Phoenix Equity Planning Corporation. Treasurer, Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional Mutual Funds (1996-present), Phoenix-Aberdeen Series Fund (1996-present). Second Vice President and Treasurer, Fund Accounting, Phoenix Home Life Mutual Insurance Company (1994-1995). Various positions with Phoenix Home Life Insurance Company (1987-1994). G. Jeffrey Bohne (51) Secretary Vice President and General Manager, Phoenix Home Life 101 Munson Street Mutual Insurance Co. (1993-present). Vice President, Mutual Greenfield, MA 01301 Fund Customer Service (1996-present), Vice President, Transfer Agency Operations (1993-1996), Phoenix Equity Planning Corporation. Secretary/Clerk, Phoenix Funds (1993- present), Phoenix Duff & Phelps Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund (1996- present). - ----------- *Indicates that the Trustee is an "interested person" of the Trust within the meaning of the definition set forth in Section 2(a)(19) of the Investment Company Act of 1940. For services rendered to the Fund for the fiscal year ended June 30, 1998, the Trustees received aggregate remuneration of $19,397. For service on the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is not a full-time employee of the Adviser or any of its affiliates currently receives a retainer at the annual rate of $40,000 and $2,500 per joint meeting of the Boards. Each Trustee who serves on the Audit Committee receives a retainer at the annual rate of $2,000 and $2,000 per joint Audit Committee meeting attended. Each Trustee who serves on the Nominating Committee receives a retainer at the annual rate of $1,000 and $1,000 per joint Nominating Committee meeting attended. Each Trustee who serves on the Executive Committee and who is not an interested person of the Fund receives a retainer at the annual rate of $2,000 and $2,000 per joint Executive Committee meeting attended. The function of the Executive Committee is to serve as a contract review, compliance review and performance review delegate of the full Board of Trustees. Trustees costs are allocated equally to each of the Series and Funds within the complex. The foregoing fees do not include the reimbursement of expenses incurred in connection with meetings attended. Officers and employees of the Adviser who are "interested persons" are compensated for their services by the Adviser and receive no compensation from the Fund. 21 For the Fund's last fiscal year, the Trustees received the following compensation: Total Compensation Pension or From Fund and Aggregate Retirement Benefits Estimated Fund Complex Compensation Accrued as Part Annual Benefits (14 Funds) Name From Fund of Fund Expenses Upon Retirement Paid to Directors - ------------------------ -------------- --------------------- ----------------- ------------------ Robert Chesek $ 1,495 $58,500 E. Virgil Conway+ $ 2,044 $79,750 Harry Dalzell-Payne+ $ 1,819 $71,000 Francis E. Jeffries $ 1,525* $60,000 Leroy Keith, Jr. $ 1,553 None None $61,000 Philip R. McLoughlin+ $ 0 for any for any $ 0 Everett L. Morris+ $ 1,790* $70,750 James M. Oates+ $ 1,790 Trustee Trustee $70,000 Calvin J. Pedersen $ 0 $ 0 Herbert Roth, Jr.+ $ 2,102* $81,000 Richard E. Segerson $ 1,808 $70,750 Lowell P. Weicker, Jr. $ 1,808 $70,000 - --------- *This compensation (and the earnings thereon) will be deferred pursuant to the Directors' Deferred Compensation Plan. At July 1, 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 $99,645, $141,647 and $142,534, 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. +Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members of the Executive Committee. On December 4, 1998, the Trustees and officers of the Fund beneficially owned less than 1% of the outstanding shares of the Fund. Principal Shareholders The following table sets forth information as of December 8, 1998 with respect to each person who owns of record or is known by the Fund to own of record or beneficially own 5% or more of any class of the Fund's equity securities. Percent Name of shareholder Class Number of shares of Class - ----------------------------------------------- --------- ------------------ --------- Trustees of Phoenix Savings & Investment Plan Class A 782,894.909 5.35% 100 Bright Meadow Blvd. Enfield, CT 06082 MLPF&S for the sole Class B 95,205.404 10.81% benefit of its customers 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 OTHER INFORMATION Capital Stock The Declaration of Trust provides that the Trustees are authorized to create an unlimited number of series and, with respect to each series, to issue an unlimited number of full and fractional shares of beneficial interest of one or more classes and to divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interests in the series. All shares have equal voting rights, except that only shares of the respective series or separate classes within a series are entitled to vote on matters concerning only that series or class. At the date of this Prospectus, there is only one existing series of the Fund, which has three classes of shares. The shares of the Fund, when issued, will be fully paid and non-assessable, have no preference, preemptive, or similar rights, and will be freely transferable. There will normally be no meetings of shareholders for the purpose of electing Trustees unless and until such time as less than a majority of the Trustees holding office have been elected by shareholders, at which time the Trustees then in office will call a shareholders' meeting for the election of Trustees. Shareholders may, in accordance with the Declaration of Trust, as amended, cause a meeting of shareholders to be held for the purpose of voting on the removal of Trustees. 22 Meetings of the shareholders may be called upon written request of shareholders holding in the aggregate not less than 10% of the outstanding shares having voting rights. Except as set forth above and subject to the 1940 Act, the Trustees will continue to hold office and appoint successor Trustees. Shares do not have cumulative voting rights and the holders of more than 50% of the shares of the Fund voting for the election of Trustees can elect all of the Trustees of the Trust if they choose to do so and in such event the holders of the remaining shares would not be able to elect any Trustees. Shareholders are entitled to redeem their shares as described in the prospectus and in this Statement of Additional Information. The Declaration of Trust establishing the Fund (a copy of which, together with all amendments thereto, is on file in the office of the Secretary of the Commonwealth of Massachusetts), provides that the Fund's name refers to the Trustees under the Declaration of Trust collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of the Fund shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim of said Fund, but the "Trust Property" only shall be liable. Independent Accountants PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, serves as independent accountants for the Fund (the "Accountants"). The Accountants audit the Fund's annual financial statements and express an opinion thereon. Custodian and Transfer Agent Brown Brothers Harriman & Co., having its principal place of business at 40 Water Street, Boston, Massachusetts 02109, serves as custodian of the Fund's assets (the "Custodian"). Equity Planning, 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200, acts as Transfer Agent for the Fund (the "Transfer Agent"). As compensation, Equity Planning receives a fee equivalent to $17.95 for each designated shareholder account plus out-of-pocket expenses. Transfer Agent fees are also utilized to offset costs and fees paid to subtransfer agents employed by Equity Planning. State Street Bank and Trust Company serves as a subtransfer agent pursuant to a Subtransfer Agency Agreement. Report to Shareholders The fiscal year of the Fund ends on June 30. The Fund will send financial statements to its shareholders at least semi-annually. An annual report, containing financial statements audited by the Fund's independent accountants, will be sent to shareholders each year. Financial Statements The Financial Statements for the Fund's fiscal year ended June 30, 1998, appearing in the Fund's 1998 Annual Report to Shareholders, are incorporated herein by reference. 23 PHOENIX-ENGEMANN GROWTH FUND PHOENIX-ENGEMANN NIFTY-FIFTY FUND PHOENIX-ENGEMANN BALANCED RETURN FUND PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP FUND PHOENIX-ENGEMANN VALUE 25 FUND 600 North Rosemead Boulevard Pasadena, California 91107-2133 Statement of Additional Information May 1, 1999 This Statement of Additional Information is not a prospectus, but expands upon and supplements the information contained in the current prospectus of The Phoenix-Engemann Funds (the "Trust"), dated May 1, 1999 (the "Prospectus"), and should be read in conjunction with it. Such Prospectus may be obtained by calling Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200. TABLE OF CONTENTS PAGE ----- THE TRUST ................................................................. 1 INVESTMENT OBJECTIVES AND POLICIES ........................................ 1 INVESTMENT RESTRICTIONS ................................................... 9 PERFORMANCE INFORMATION ................................................... 11 PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 13 PORTFOLIO TURNOVER ........................................................ 14 SERVICES OF THE ADVISER ................................................... 14 NET ASSET VALUE ........................................................... 15 HOW TO BUY SHARES ......................................................... 16 ALTERNATIVE PURCHASE ARRANGEMENTS ......................................... 16 INVESTOR ACCOUNT SERVICES ................................................. 18 HOW TO REDEEM SHARES ...................................................... 19 TAX SHELTERED RETIREMENT PLANS ............................................ 20 DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 20 THE DISTRIBUTOR ........................................................... 21 DISTRIBUTION PLANS ........................................................ 23 MANAGEMENT OF THE TRUST ................................................... 24 OTHER INFORMATION ......................................................... 27 APPENDIX .................................................................. 28 Customer Service: (800) 243-1574 Marketing: (800) 243-4361 Telephone Orders: (800) 367-5877 Telecommunications Device (TTY)-(800) 243-1926 PXP 2011 (5/99) THE TRUST The Phoenix-Engemann Funds (the "Trust") (formerly called the "Pasadena Investment Trust") is a diversified open-end management investment company which was organized under Massachusetts law in 1986 as a business trust. The name change of the Trust was made on September 3, 1997 in connection with the merger of an acquisition subsidiary of Phoenix Investment Partners, Ltd. and Pasadena Capital Corporation. The Trust presently comprises six series: Phoenix-Engemann Growth Fund, Phoenix-Engemann Nifty Fifty Fund, Phoenix-Engemann Balanced Return Fund, Phoenix-Engemann Global Growth Fund, Phoenix-Engemann Small & Mid-Cap Growth Fund and Phoenix-Engemann Value 25 Fund, each a "Fund" and, collectively, the "Funds." INVESTMENT OBJECTIVES AND POLICIES The investment objective of each Fund is deemed to be a fundamental policy which may not be changed without the approval of the holders of a majority of the outstanding shares of each Fund. Investment restrictions described in this Statement of Additional Information as a fundamental policy may not be changed without the approval of such Fund's shareholders. Notwithstanding the foregoing, certain investment restrictions affect more than one series of the Trust and therefore modifications may require the consent of other shareholders. There is no assurance that any Fund will meet its investment objective. Foreign Securities Each Fund may invest (directly and/or through Depositary Receipts) in securities principally traded in markets outside the United States. Foreign investments can be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. There may be less publicly available information about a foreign company than about a U.S. company, and the information available may not be of the same quality. Foreign companies also may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Securities of some foreign companies are less liquid or more volatile than securities of U.S. companies, and foreign brokerage commissions and custodian fees are generally higher than in the United States. Investments in foreign securities can involve other risks different from those affecting U.S. investments, including local political or economic developments, expropriation or nationalization of assets and imposition of withholding taxes on dividend or interest payments. To hedge against possible variations in currency exchange rates, a Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) may purchase and sell forward currency exchange contracts. These are agreements to purchase or sell specified currencies at specified dates and prices. A Fund will only purchase and sell forward currency exchange contracts in amounts which the Adviser deems appropriate to hedge existing or anticipated portfolio positions and will not use such forward contracts for speculative purposes. Foreign securities, like other assets of a Fund, will be held by such Fund's custodian or by an authorized subcustodian. While none of the Growth, Nifty Fifty and Balanced Return Funds anticipates investing a significant portion of its assets in foreign securities, each of these Funds may invest up to 15% of the value of its total assets (at time of purchase, giving effect thereto) in the securities of foreign issuers and obligors. The Small & Mid-Cap Growth Fund may invest up to 50% of its assets, the Value 25 Fund may invest up to 25% of its assets and the Global Growth Fund may invest up to 100% of its assets in foreign securities. Depositary Receipts. Each Fund's investments in the securities of foreign issuers may be in the form of Depositary Receipts ("DRs"), e.g., American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Continental Depositary Receipts ("CDRs"), or other forms of DRs. DRs are receipts typically issued by a United States or foreign bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. The Fund may invest in DRs through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depository, whereas a depository may establish an unsponsored facility without participation by the issuer of the deposited security. The depository of unsponsored DRs generally bears all the costs of such facilities and the depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts in respect of the deposited securities. Foreign Currency Transactions In General. As described below, each Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) may engage in certain foreign currency exchange and option transactions. These transactions involve investment risks and transaction costs to which a Fund would not be subject absent the use of these strategies. If the Adviser's predictions of movements in the direction of securities prices or currency exchange rates are inaccurate, the adverse consequences to a Fund may leave such Fund in a worse position than if it had not used such strategies. Risks inherent in the use of option and foreign currency forward and futures contracts include: (1) dependence on the Adviser's ability to correctly predict movements in the direction of securities prices and currency exchange rates; (2) imperfect correlation between the price of options and futures contracts and movements in the prices of the securities or currencies being hedged; (3) the fact that the skills needed to use these strategies are different from those needed to select portfolio securities; (4) the possible absence of a liquid secondary market for any particular instrument at any time; and (5) the possible need to defer closing out certain hedged positions to avoid adverse tax consequences. 1 Each Fund's ability to enter into futures contracts is also limited by the requirements of the Internal Revenue Code of 1986, as amended, (the "Code") for qualification as a regulated investment company. The Global Growth Fund, Small & Mid-Cap Growth Fund and Value 25 Fund may engage in currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. In addition, each Fund may write covered put and call options on foreign currencies for the purpose of increasing its return. Generally, each of the above Funds may engage in both "transaction hedging" and "position hedging." When it engages in transaction hedging, a Fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. A Fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging, a Fund will attempt to protect itself against a possible loss resulting from an adverse change in the exchange rate between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received. Each of the above Funds may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. Each Fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes, each of the above Funds may also purchase exchange-listed and over-the-counter put and call options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives a Fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives a Fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives a Fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives a Fund the right to purchase the currency at the exercise price until the expiration of the option. When it engages in position hedging, a Fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the values of currency for securities which such Fund expects to purchase, when such Fund holds cash or short-term investments). In connection with position hedging, each of the Funds may purchase put or call options on foreign currency and on foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. Each Fund may also purchase or sell foreign currency on a spot basis. The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the dates the currency exchange transactions are entered into and the dates they mature. It is also impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency such Fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency a Fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which a Fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. Each of the above Funds may seek to increase its return or to offset some of the costs of hedging against fluctuations in currency exchange rates by writing covered put options and covered call options on foreign currencies. A Fund receives a premium from writing a put or call option, which increases such Fund's current return if the option expires unexercised or is closed out at a net profit. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. A Fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. The Adviser will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for a Fund. Cross hedging transactions by a Fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. 2 None of the Funds is a commodity pool. The Funds' transactions in futures and options thereon as described herein will constitute bona fide hedging or other permissible transactions under regulations promulgated by the Commodity Futures Trading Commission ("CFTC"). In addition, no Fund may engage in such transactions if the sum of the amount of initial margin deposits and premiums paid for unexpired futures and options thereon would exceed 5% of the value of such Fund's net assets, with certain exclusions as defined in the applicable CFTC rules. At the time of purchase of a foreign currency exchange contract, a foreign currency futures contract or related option, liquid assets, such as cash, U.S. government securities or other appropriate high-grade debt obligations, marked to market daily equal to the market value of the foreign currency contract or related option minus the Fund's initial margin deposit will be deposited in a pledged account with the Funds' custodian to collateralize the position and thereby ensure that it is not leveraged. Currency forward and futures contracts. 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 as agreed by the parties, at a price set at the time of the contract. The holder of a cancelable forward contract has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a future date at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, a Fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Although each Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. Foreign currency options. In general, options on foreign currencies operate similarly to options on securities and are subject to many similar risks. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies have recently been listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the European Currency Unit, which is composed of amounts of a number of currencies and is the official medium of exchange of the European Community's European Monetary System. Each Fund (except the Growth, Nifty Fifty and Balanced Return Funds) will only purchase or write foreign currency options when the Fund's Adviser believes that a liquid market exists for such options. There can be, however, no assurance that a liquid market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options) may be affected significantly, fixed, or supported directly or indirectly, by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option reflects the value of an exchange rate, which in turn reflects the relative values of two currencies, generally the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information 3 is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd- lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. Settlement procedures. Settlement procedures relating to the Funds' investments in foreign securities and to the Funds' foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the Funds' domestic investments. For example, settlement of transactions involving foreign securities or foreign currency may occur within a foreign country, and a Fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. Settlement procedures in many foreign countries are less established than those in the United States, and some foreign country settlement periods can be significantly longer than those in the United States. Foreign currency conversion. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should such Fund desire to resell that currency to the dealer. Futures Contracts and Related Options A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade--known as "contract markets"--approved for such trading by the CFTC, and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. None of the Funds that can invest in futures contracts and related options will invest more than 5% of its net assets in such contracts and options. No Fund will deal in commodity contracts per se, and the Global Growth, Small & Mid-Cap Growth and Value 25 Funds will deal only in futures contracts involving financial instruments. Although 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 a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. Similarly, the closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. Futures contracts traded on an exchange approved by the CFTC are "marked to market" at the end of each year, whether or not they are closed out. In general, 40% of the gain or loss arising from the closing out or marking to market of a futures contract traded on an exchange approved by the CFTC is treated as short-term capital gain or loss, and 60% is treated as long-term capital gain or loss. Unlike when a Fund purchases or sells a security, no price is paid or received by such Fund upon the purchase or sale of a futures contract. Upon entering into a contract, such Fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash and/or certain liquid securities. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to such Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin," to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when a Fund has purchased a futures contract on a security and the price of the underlying security has risen, that position would increase in value and such Fund would receive from the broker a variation margin payment based on that increase in value. Conversely, when a Fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and such Fund would be required to make a variation margin payment to the broker. A Fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by such Fund. A Fund may close its positions by taking opposite positions which will operate 4 to terminate such Fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to such Fund, and such Fund realizes a loss or a gain. Such closing transactions involve additional commission costs. At the time of purchase of a financial futures contract or a call option on a futures contract, liquid assets, such as cash, U.S. government securities or other appropriate high-grade debt obligations, marked to market daily equal to the market value of the futures contract minus the Fund's initial margin deposit will be deposited in a pledged account with the Funds' custodian to collateralize the position and thereby ensure that it is not leveraged. Options on futures contracts. Each Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) may purchase and write put and call options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. Options on future contracts give the purchaser the right, in return for the premium paid, to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. Each of the above Funds may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, a Fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, a Fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which such Fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate its position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The Global Growth, Small & Mid-Cap Growth and Value 25 Funds will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by such Funds pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. Risks of transactions in futures contracts and related options. Successful use of futures contracts by a Fund is subject to the Adviser's ability to predict movements in the direction of interest rates and other factors affecting securities markets. For example, if a Fund has hedged against the possibility of decline in the values of its investments and the values of its investments increase instead, such Fund will lose part or all of the benefit of the increase through payments of daily maintenance margin. A Fund may have to sell investments at a time when it may be disadvantageous to do so in order to meet margin requirements. The loss from investing in futures transactions is potentially unlimited. Compared to the purchase or sale of futures contracts, the purchase of put or call options on futures contracts involves less potential risk to a Fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a put or call option on a futures contract would result in a loss to a Fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a hedge position held by a Fund, such Fund may seek to close out a position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. Index futures contracts. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. Each of the Global Growth, Small 5 & Mid-Cap Growth and Value 25 Funds may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective. Each of these Funds may also purchase and sell options on index futures contracts. For example, the Standard & Poor's Composite 500 Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). A stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if a Fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the Fund will gain $2,000 (500 units x gain of $4 per unit). If a Fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the Fund will lose $1,000 (500 units x loss of $2 per unit). There are several risks in connection with the use by the Funds of index futures as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. The Funds' Adviser will, however, when engaging in this type of activity, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by a Fund for hedging purposes is also subject to the Adviser's ability to predict movements in the direction of the market. It is possible that, where a Fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in such Fund's portfolio may decline. If this occurred, such Fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if a Fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, such Fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if such Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends may not result in a successful hedging transaction over a short time period. Options on stock index futures. Options on stock index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures 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. Upon exercise of the option, 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 futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. Options on Indices As an alternative to purchasing put and call options on index futures, each of the Global Growth, Small & Mid-Cap Growth and Value 25 Funds may purchase and sell put and call options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. Index Warrants Each Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying 6 index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If a Fund were not to exercise an index warrant prior to its expiration, then such Fund would lose the amount of the purchase price paid by it for the warrant. A Fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of a Fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although each Fund will normally invest only in exchange listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit a Fund's ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do. Securities Loans Each Fund may make secured loans of its portfolio securities amounting to not more than 25% of its total assets, thereby increasing its total return. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that loans be continuously secured by collateral consisting of cash or high-grade short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to such Fund an amount equal to any dividends or interest received on securities lent. A Fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities pass to the borrower, a Fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the Fund to exercise the voting rights on any matters materially affecting the investment. A Fund may also call such loans in order to sell securities. Forward Commitments Each Fund (except the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund) may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the Fund holds, and maintains until settlement date in a segregated account, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or if the Fund enters into offsetting contracts for the forward sale of other securities it owns. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Fund's other assets. Where such purchases are made through dealers, the Fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the Fund of an advantageous yield or price. Although each Fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, such Fund may dispose of a commitment prior to settlement if the Adviser deems it appropriate to do so. A Fund may realize short-term profits or losses upon the sale of forward commitments. Illiquid Securities Each of the Global Growth, Small & Mid-Cap Growth, and Value 25 Funds may invest up to 15% and each of the Growth, Nifty Fifty and Balanced Return Funds may invest up to 10% of the value of its net assets in securities as to which a liquid trading market does not exist, provided such investments are consistent with such Fund's objective and other policies. Such securities may include securities that are not readily marketable, such as certain securities that are subject to legal or contractual restrictions on resale, repurchase agreements providing for settlement in more than seven days after notice, certain options traded in the over-the-counter market and securities used to cover such options. As to these securities, a Fund is subject to a risk that should the Fund desire to sell them when a ready buyer is not available at a price the Fund deems representative of their value, the value of the Fund could be adversely affected. When purchasing securities that have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), and are not readily marketable, each Fund will endeavor to obtain the right to registration at the expense of the issuer. Generally, there will be a lapse of time between a Fund's decision to sell any such security and the registration of the security permitting sale. During any such period, the price of the securities will be subject to market fluctuations. However, if a substantial market of qualified institutional buyers develops pursuant to Rule 144A under the 1933 Act for certain unregistered securities held by a Fund, such Fund intends to treat such securities as liquid securities in accordance with procedures approved by the Trust's Board of Trustees. Because it is not possible to predict with any assurance how the market for restricted securities pursuant to Rule 144A will develop, the Board of Trustees has directed the Adviser to monitor carefully any Fund investments in such securities with particular regard to trading activity, availability or reliable price information and other relevant 7 information. To the extent that, for a period of time, qualified institutional buyers cease purchasing such restricted securities pursuant to Rule 144A, a Fund's investing in such securities may have the effect of increasing the level of illiquidity in the Fund's portfolio during such period. Repurchase Agreements Each Fund may, for temporary defensive purposes, invest its assets in eligible U.S. Government securities and concurrently enter into repurchase agreements with respect to such securities. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase prices may be the same, with interest at a stated rate due to the Fund together with the repurchase price on repurchase. In either case, the income to the Fund is unrelated to the interest rate on the U.S. Government security itself. Such repurchase agreements will be made only with banks with assets of $1 billion or more that are insured by the Federal Deposit Insurance Corporation or with Government securities dealers recognized as primary dealers by the Federal Reserve Board and registered as broker-dealers with the SEC or exempt from such registration. In addition, to the extent a Fund has over $10 million in assets, the Fund will limit the amount of its transactions with any one bank or Government securities dealer to a maximum of 25% of its assets. Any repurchase agreements entered into by a Fund will be of short duration, from overnight to one week, although the underlying securities generally have longer maturities. No Fund may enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the value of the Growth, Nifty Fifty or Balanced Return Funds' or 15% of the value of the Global Growth, Small & Mid-Cap Growth or Value 25 Funds' net assets would be invested in such repurchase agreements and other illiquid assets. For purposes of the Investment Company Act of 1940 (the "1940 Act"), a repurchase agreement is deemed to be a loan from a Fund to the seller of the U.S. Government security subject to the repurchase agreement. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the U.S. Government security before its repurchase under a repurchase agreement, a Fund may encounter delays and incur costs before being able to sell the security. Delays may involve loss of interest or a decline in price of the U.S. Government security. If a court characterizes the transaction as a loan and the Fund has not perfected a security interest in the U.S. Government security, the Fund may be required to return the security to the seller's estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, the Fund would be at risk of losing some or all of the principal and income involved in the transaction. As with any unsecured debt instrument purchased for a Fund, the Adviser seeks to minimize the risk of loss through repurchase agreements by analyzing the creditworthiness of the obligor, in this case the seller of the U.S. Government security. Apart from the risk of bankruptcy or insolvency proceedings, there is also the risk that the seller may fail to repurchase the security. However, each Fund will always receive as collateral for any repurchase agreement to which it is a party U.S. Government securities acceptable to it, the market value of which is equal to at least 100% of the amount invested by the Fund plus accrued interest, and the Fund will make payment against such securities only upon physical delivery or evidence of book entry transfer to the account of its Custodian or other entity authorized by the Trust's Board of Trustees to have custody for purposes of repurchase agreement transactions. If the market value of the U.S. Government security subject to the repurchase agreement becomes less than the repurchase price (including interest), the Fund will direct the seller of the U.S. Government security to deliver additional securities so that the market value of all securities subject to the repurchase agreement will equal or exceed the repurchase price. It is possible that the Fund will be unsuccessful in seeking to impose on the seller a contractual obligation to deliver additional securities, however. Special Situations Subject to the limitations in the Prospectus, each Fund (except the Global Growth Fund) may invest in special situations that the Adviser believes present opportunities for capital growth. Such situations most typically include corporate restructurings, mergers, and tender offers. A special situation arises when, in the opinion of the Adviser, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development particularly or uniquely applicable to that company and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others, the following: liquidations, reorganizations, recapitalizations, mergers, or tender offers; material litigation or resolution thereof; technological breakthroughs; and new management or management policies. Although large and well-known companies may be involved, special situations often involve much greater risk than is inherent in ordinary investment securities. Unseasoned Companies As a matter of operating policy, the Funds may invest to a limited extent in securities of unseasoned companies and new issues. The Adviser regards a company as unseasoned when, for example, it is relatively new to or not yet well established in its primary line of business. Such companies generally are smaller and younger than companies whose shares are traded on the major stock exchanges. Accordingly, their shares are often traded over-the-counter and their share prices may be more volatile than those of larger, exchange-listed companies. In order to avoid undue risks, a Fund will not invest more than 5% of its total assets in securities 8 of any one company with a record of fewer than three years' continuous operation (including that of predecessors). Investments by the Nifty Fifty Fund and the Balanced Return Fund in the securities of unseasoned companies may not exceed 5% and 30% respectively of each Fund's total assets. New Issues The Funds may invest in new issues. A new issue may be an initial public offering by a previously private company. There may be less public information about the company and the company may have a limited operating history and rapidly changing fundamental prospects. This may make investment returns of new issues highly volatile. New issues may also be subject to varying patterns of trading volume and may, at times, be difficult to sell. INVESTMENT RESTRICTIONS The following restrictions have been adopted as matters of fundamental or operating policy for the Funds. Fundamental policies may not be changed without the approval of a majority of the Fund's outstanding voting securities and approval of the Board of Trustees. Operating policies can be changed by vote of the Board of Trustees. The Funds may not: (1) With respect to 75% of a Fund's total assets, purchase any security (other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a result, more than 5% of the value of the Fund's total assets would be invested in securities of any one issuer. This limitation does not apply with respect to the remaining 25% of a Fund's total assets (except that neither the Growth Fund nor the Balanced Return Fund will invest more than 10% of its total assets in any one non-U.S. Government issuer). [Fundamental Policy] (2) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of its portfolio securities, and may make margin payments in connection with transactions in permissible futures and options contracts) or make uncovered short sales. [Operating Policy] (3) With respect to 75% of the Global Growth, Small & Mid-Cap Growth and Value 25 Funds' total assets and 100% of the Growth, Nifty Fifty and Balanced Return Funds' total assets, acquire more than 10% of any one class of securities of an issuer or more than 10% of the outstanding voting securities of any one issuer. (For this purpose all common stocks of an issuer are regarded as a single class, and all preferred stocks of an issuer are regarded as a single class.) [Fundamental Policy] (4) Borrow money in excess of 20% (5% for the Growth, the Nifty Fifty and Balanced Return Funds) of its total assets (taken at cost) and then only as a temporary measure for extraordinary or emergency reasons and not for investment. (Each Fund may borrow only from banks and immediately after any such borrowings there must be an asset coverage [total assets of the Fund, including the amount borrowed, less liabilities other than such borrowings] of at least 300% of the amount of all borrowings. In the event that, due to market decline or other reasons, such asset coverage should at any time fall below 300%, the Fund is required within three days, not including Sundays and holidays, to reduce the amount of its borrowings to the extent necessary to cause the asset coverage of such borrowings to be at least 300%. If this should happen, the Fund may have to sell securities at a time when it would be disadvantageous to do so.) [Fundamental Policy] (5) With respect to the Global Growth, the Small & Mid-Cap Growth and the Value 25 Funds, pledge more than 25% of its total assets (taken at cost) in connection with permissible borrowings. For the purposes of this restriction, the deposit of underlying securities and other assets in connection with the writing of put and call options and collateral arrangements with respect to margin for currency futures contracts are not deemed to be a pledge of assets. [Fundamental Policy] (6) Invest more than 5% (30% for the Balanced Return Fund) of its total assets in securities of any one issuer which, together with any predecessor, has been in continuous operation for less than three years. [Fundamental Policy] (7) Invest in securities of any company, if officers and Trustees of the Trust and officers and directors of the Adviser who beneficially own more than 0.5% of the shares or securities of that company collectively own more than 5% of such securities. [Fundamental Policy with respect to the Growth, Nifty Fifty, Balanced Return, Global Growth and Small & Mid-Cap Growth Funds] (8) Make loans, except (a) by purchase of marketable bonds, debentures, commercial paper or corporate notes, and similar marketable evidences of indebtedness which are part of an issue to the public or to financial institutions, (b) by entry into repurchase agreements, or (c) through the lending of its portfolio securities with respect to not more than 25% of its total assets. [Fundamental Policy] (9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts or commodities or commodity contracts, except for transactions in futures contracts and options thereon entered into for hedging purposes, and the Growth, Nifty Fifty and Balanced Return Funds may purchase marketable securities of companies or partnerships holding such interests. [Fundamental Policy for the Global Growth, Small & Mid-Cap Growth and Value 25 Funds] (10) Act as an underwriter except to the extent that, in connection with the disposition of its portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. [Fundamental Policy] 9 (11) Make investments for the purpose of exercising control of a company's management. [Operating Policy] (12) Concentrate its investments in particular industries, and in no event invest more than 25% of the value of its total assets in any one industry. [Fundamental Policy] (13) Engage in puts, calls, straddles, spreads or any combination thereof, except that, to the extent described in the Prospectus and this Statement of Additional Information, a Fund may buy and sell put and call options (and any combination thereof) on securities, on financial futures contracts, on securities indices, on currency futures contracts and on foreign currencies and may buy and sell put and call warrants, the values of which are based upon securities indices. [Operating Policy] (14) Purchase warrants if, as a result, its warrant holdings, valued at the lower of cost or market, would exceed 5% of the Fund's net assets, with no more than 2% of net assets in warrants not listed on the New York or American Stock Exchanges. [Operating Policy] (15) Invest in (a) securities which at the time of such investment are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the Funds, or by a person designated by the Trustees of the Funds, to make such determinations pursuant to procedures adopted by the Trustees to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 10% of the Growth, Nifty Fifty and Balanced Return Funds' and more than 15% of the Global Growth, Small & Mid-Cap Growth and Value 25 Funds' net assets (taken at current value) would be invested in the aggregate in securities described in (a), (b) and (c) above. [Operating Policy] (16) Purchase or sell real property (including limited partnership interests), except that the Fund may (a) purchase or sell readily marketable interests in real estate investment trusts or readily marketable securities of companies which invest in real estate, (b) purchase or sell securities that are secured by interests in real estate or interests therein, or (c) acquire real estate through exercise of its rights as a holder of obligations secured by real estate or interests therein or sell real estate so acquired. [Fundamental Policy] (17) Participate on a joint or joint and several basis in any securities trading account. [Operating Policy] (18) Purchase the securities of any other investment company except (a) within the limits of the 1940 Act, (b) in a public offering or in the open market or in privately negotiated transactions where, in either case, to the best information of the Fund, no commission, profit or sales charge to a sponsor or dealer (other than a customary broker's commission or underwriting discount) results from such purchase, (c) if such purchase is part of a merger, consolidation, or acquisition of assets, or (d) as part of a master-feeder arrangement (see below). [Fundamental Policy] (19) With respect to the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund, purchase or sell financial futures, commodities or commodities contracts, including futures contracts on physical commodities. [Fundamental Policy] (20) Issue senior securities, as such term is defined in the Investment Company Act of 1940, as amended, except as otherwise permitted under these fundamental investment restrictions. [Fundamental Policy] Each Fund, notwithstanding any other investment policy or limitation (whether or not fundamental), may invest all of its assets in the securities or beneficial interests of a single pooled investment fund having substantially the same objective, policies and limitations as such Fund. Some of the practices referred to above are subject to restrictions contained in the 1940 Act. In addition to the restrictions described above, a Fund may from time to time agree to additional investment restrictions for purposes of compliance with the securities laws of those states and foreign jurisdictions where such Fund intends to offer or sell its shares. Any such additional restrictions that would have a material bearing on a Fund's operations will be reflected in the Prospectus or a Prospectus supplement and may require shareholder approval. 10 PERFORMANCE INFORMATION The Funds may, from time to time, include total return in advertisements or reports to shareholders or prospective investors. Performance information in advertisements and sales literature may be expressed as a yield of a class or Fund and as a total return of any Class or Fund. Standardized quotations of average annual total return for each Class of Shares of a Fund will be expressed in terms of the average annual compounded rate of return for a hypothetical investment in either Class A, Class B, or Class C Shares of a Fund over periods of 1, 5 and 10 years or up to the life of the class of shares of a Fund, calculated for each class separately pursuant to the formula below. All total return figures reflect the deduction of a proportional share of each class's expenses (on an annual basis), deduction of the maximum initial sales load in the case of Class A Shares and the maximum contingent deferred sales charge applicable to a complete redemption of the investment in the case of Class B and C Shares, and assume that all dividends and distributions are reinvested when paid. P(T + 1)n = ERV where P = a hypothetical initial payment of $1,000, T = average annual total return, n = number of years, ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or 10 year periods (or fractional portion thereof). The Funds may from time to time include in advertisements containing total return the ranking of those performance figures relative to such figures for groups of mutual funds having similar investment objectives as categorized by ranking services such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc. Additionally, the Funds may compare performance results to other investment or savings vehicles (such as certificates of deposit) and may refer to results published in various publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business Week, Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street Journal, The New York Times, Consumer Reports, Registered Representative, Financial Planning, Financial Services Weekly, Financial World, U.S. News and World Report, Standard & Poor's The Outlook, and Personal Investor. The Funds may from time to time illustrate the benefits of tax deferral by comparing taxable investments to investments made through tax-deferred retirement plans. The total return may also be used to compare the performance of the Funds against certain widely acknowledged outside standards or indices for stock and bond market performance, such as the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Russell 2000 Index, Morgan Stanley Capital International All Country World Index, Dow Jones Industrial Average, Europe Australia Far East Index (EAFE), Consumer Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index. Advertisements, sales literature and other communications may contain information about the Funds and Adviser's current investment strategies and management style. Current strategies and style may change to allow the Funds to respond quickly to changing market and economic conditions. From time to time the Funds may include specific portfolio holdings or industries in such communications. To illustrate components of overall performance, the Funds may separate its cumulative and average annual returns into income and capital gains components. Performance information reflects only the performance of a hypothetical investment in each class during the particular time period on which the calculations are based. Performance information should be considered in light of each Fund's investment objectives and policies, characteristics and quality of the portfolio, and the market condition during the given time period, and should not be considered as a representation of what may be achieved in the future. The Funds may also compute aggregate cumulative total return for specified periods based on a hypothetical Class A, Class B, or Class C account with an assumed initial investment of $10,000. The aggregate total return is determined by dividing the net asset value of this account at the end of the specified period by the value of the initial investment and is expressed as a percentage. Calculation of aggregate total return reflects payment of the Class A Shares' maximum sales charge of 4.75% and assumes reinvestment of all income dividends and capital gain distributions during the period. The Funds also may quote annual, average annual and annualized total return and aggregate total return performance data, for each class of shares of the Funds, both as a percentage and as a dollar amount based on a hypothetical $10,000 investment for various periods other than those noted below. Such data will be computed as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charge will not be included with respect to annual, annualized or aggregate rate of return calculations. 11 The average annual compounded rates of return, or total return, for the Class A, Class B and Class C shares of each of the Funds for the indicated periods ended December 31, 1998 were as follows: One Five Ten Inception(1) to Year Years Years December 31, 1998 Class A ---- ----- ----- ----------------- The Growth Fund 30.88% 17.88% 17.06% 14.93% The Balanced Return Fund 22.98% 15.93% 15.23% 15.72% The Nifty Fifty Fund 28.70% 20.27% N/A 20.01% The Global Growth Fund* 8.91% 18.11% N/A 20.05% The Small & Mid-Cap Growth Fund* 8.87% N/A N/A 31.53% The Value 25 Fund 2.11% N/A N/A 11.59% One Inception(2) to Year December 31, 1998 Class B ---- ----------------- The Growth Fund 32.53% 18.13% The Balanced Return Fund 24.21% 16.06% The Nifty Fifty Fund 30.30% 20.53% The Global Growth Fund 9.47% 13.94% The Small & Mid-Cap Growth Fund 9.54% 22.06% The Value 25 Fund 2.57% 9.87% One Inception(2) to Year December 31, 1998 Class C ---- ----------------- The Growth Fund 36.38% 18.32% The Balanced Return Fund 28.07% 16.26% The Nifty Fifty Fund 34.14% 20.70% The Global Growth Fund 13.26% 14.37% The Small & Mid-Cap Growth Fund 13.34% 18.74% The Value 25 Fund 6.42% 12.88% (1)The inception dates of the Funds are as follows: Growth Fund--June 24, 1986 Balanced Return Fund--June 8, 1987 Nifty Fifty Fund--December 17, 1990 Global Growth Fund--November 1, 1993 Small & Mid-Cap Growth Fund--October 10, 1994 Value 25 Fund--December 17, 1996 (2)The inception date for Class B and Class C shares for the Growth, Nifty Fifty and Balanced Return Funds was January 3, 1994; the inception date for the Class B shares for the Global Growth* and Small & Mid-Cap* Growth Funds was September 18, 1996; the inception date for the Class C shares for the Global Growth Fund* was October 21, 1996 and the inception date for the Class C shares of the Small & Mid-Cap Growth Fund* was October 8, 1996. The inception date for Class B and C shares for the Value 25 Fund was January 9, 1997. * Prior to September 1, 1996, the Global Growth and Small & Mid-Cap Growth Funds' shares were not offered to the public and, although each Fund's portfolio was managed substantially in accordance with the investment policies described in its current Prospectus during that period, some management differences did occur due primarily to each Fund's small asset size. Accordingly, each Fund's performance during periods prior to September 1, 1996 may not be relevant to an assessment of such Fund's performance subsequent to such date. Additionally, the Adviser waived all management, administrative and service fees otherwise payable to it by the Global Growth Fund during 1993, 1994 and 1995 and the Small & Mid-Cap Growth Fund during 1994 and 1995, which had the effect of increasing each Fund's total return for those periods. A Fund may also, from time to time, include a reference to the current distribution rate of each Class of shares in investor communications and sales literature preceded or accompanied by a prospectus for such Fund, reflecting the amounts actually distributed to shareholders of each Class which could include capital gains and other items of income, as well as interest and dividend income received by a Fund and distributed to the shareholders. All calculations of a Class's distribution rate are based on the distributions per share which are declared, but not necessarily paid, during the fiscal year. The distribution rate for a Class is determined by dividing the distributions declared during the period by the maximum offering price per share of the Class on the last day of the period and annualizing the resulting figure. The distribution rate does not reflect capital appreciation or depreciation in the price of a Fund's shares and should not be confused with yield or considered to be a complete indicator of the return to the investor on his investment. 12 Investors should note that the investment results of each Fund will fluctuate over time, and any presentation of a Fund's current yield, total return or distribution rate for any period should not be considered as a representation of what an investment may earn or what an investor's total return, yield or distribution rate may be in any future period. PORTFOLIO TRANSACTIONS AND BROKERAGE The Adviser places orders for the purchase and sale of securities, supervises their execution and negotiates brokerage commissions on behalf of the Funds. It is the practice of the Adviser to seek the best prices and execution of orders and to negotiate brokerage commissions which in the Adviser's opinion are reasonable in relation to the value of the brokerage services provided by the executing broker. Brokers who have executed orders for the Funds are asked to quote a fair commission for their services. If the execution is satisfactory and if the requested rate approximates rates currently being quoted by the other brokers selected by the Adviser, the rate is deemed by the Adviser to be reasonable. Brokers may ask for higher rates of commission if all or a portion of the securities involved in the transaction are positioned by the broker, if the broker believes it has brought the Funds an unusually favorable trading opportunity, or if the broker regards its research services as being of exceptional value, and payment of such commissions is authorized by the Adviser after the transaction has been consummated. If the Adviser more than occasionally differs with the broker's appraisal of opportunity or value, the broker would not be selected to execute trades in the future. The Adviser believes that the Funds benefit with a securities industry comprised of many and diverse firms and that the long-term interest of shareholders of the Funds is best served by brokerage policies which include paying a fair commission rather than seeking to exploit its leverage to force the lowest possible commission rate. The primary factors considered in determining the firms to which brokerage orders are given are the Adviser's appraisal of: the firm's ability to execute the order in the desired manner; the value of research services provided by the firm; and the firm's attitude toward and interest in mutual funds in general including the sale of mutual funds managed and sponsored by the Adviser. The Adviser does not offer or promise to any broker an amount or percentage of brokerage commissions as an inducement or reward for the sale of shares of the Funds. Over-the-counter purchases and sales are transacted directly with principal market-makers except in those circumstances where in the opinion of the Adviser better prices and execution are available elsewhere. In general terms, the nature of research services provided by brokers encompasses statistical and background information, and forecasts and interpretations with respect to U.S. and foreign economies, U.S. and foreign money markets, fixed income markets and equity markets, specific industry groups, and individual issues. Research services will vary from firm to firm, with broadest coverage generally from the large full-line firms. Smaller firms in general tend to provide information and interpretations on a smaller scale, frequently with a regional emphasis. In addition, several firms monitor federal, state, local and foreign political developments; many of the brokers also provide access to outside consultants. The outside research assistance is particularly useful to the Adviser's staff since the brokers as a group tend to monitor a broader universe of securities and other matters than the Adviser's staff can follow. In addition, it provides the Adviser with a diverse perspective on financial markets. Research and investment information is provided by these and other brokers at no cost to the Adviser and is available for the benefit of other accounts advised by the Adviser and its affiliates and not all of this information will be used in connection with the Funds. While this information may be useful in varying degrees and may tend to reduce the Adviser's expenses, it is not possible to estimate its value and in the opinion of the Adviser it does not reduce the Adviser's expenses in a determinable amount. The extent to which the Adviser makes use of statistical, research and other services furnished by brokers is considered by the Adviser in the allocation of brokerage business but there is no formula by which such business is allocated. The Adviser does so in accordance with its judgment of the best interest of the Funds and shareholders. A high rate of portfolio turnover involves a correspondingly higher amount of brokerage commissions and other costs which must be borne directly by the Funds and indirectly by shareholders. Stolper & Company, Inc., of which Michael Stolper, a former Trustee of the Trust and a Director of Pasadena Capital Corporation, is the sole shareholder, has in the past received brokerage business from the Adviser. Stolper & Company, Inc. assists its clients in selecting an investment adviser and offers a service measuring the performance of investment advisers, in return for which the client pays cash or directs the investment adviser to execute a portion of the brokerage business through Bear, Stearns & Company for the credit of Stolper & Company, Inc. Stolper & Company, Inc. and the Adviser anticipate that such brokerage allocation from the Adviser will continue. However, neither Michael Stolper nor Stolper & Company, Inc. will receive or participate in commissions paid by a Fund nor receive any reciprocal business as a result of commissions paid by a Fund, although a Fund may pay usual and customary brokerage commissions to Bear, Stearns & Company for brokerage business by such Fund. It is possible that purchases or sales of securities for a Fund also may be considered for other clients of the Adviser or its affiliates, including the other series of the Trust. Any transactions in such securities at or about the same time will be allocated among such Fund and such other clients in a manner deemed equitable to all by the Adviser, taking into account the respective sizes of the Fund and the other clients' accounts, and the amount of securities to be purchased or sold. It is recognized that it is possible that in some cases this procedure could have a detrimental effect on the price or volume of the security so far as that Fund is concerned. However, in other cases, it is possible that the ability to participate in volume transactions and to negotiate lower commissions will be beneficial to such Fund. 13 The Board of Trustees of the Trust periodically monitors the operation of these brokerage policies by reviewing the allocation of brokerage orders. For the fiscal years ended December 31, 1996, 1997 and 1998, brokerage commissions paid by the Trust on Fund transactions totaled $2,875,432, $3,928,310 and $2,322,602, respectively. Brokerage commissions of $316,877 paid during the fiscal year ended December 31, 1998 were paid on fund transactions aggregating $279,064,805 executed by brokers who provided research and other statistical and factual information. None of such commissions was paid to a broker who was an affiliated person of the Trust or and affiliated person of such a person, or to the knowledge of the Trust, to a broker an affiliated person of which was an affiliated person of the Trust, its advisers or its national distributor. PORTFOLIO TURNOVER The Funds pay brokerage commissions for purchases and sales of portfolio securities. A high rate of portfolio turnover generally involves a correspondingly greater amount of brokerage commissions and other costs which must be borne directly by a Fund and thus indirectly by its shareholders. It may also result in the realization of larger amounts of short-term capital gains, which are taxable to shareholders as ordinary income. If such rate of turnover exceeds 100%, the Funds will pay more in brokerage commissions than would be the case if they had lower portfolio turnover rates. Historical turnover rates can be found under the heading "Financial Highlights" located in the Trust's Prospectus. Portfolio turnover rates varied between 1997 and 1998 due to market conditions and the various investment strategies employed by the funds' managers. SERVICES OF THE ADVISER The following information concerning the investment management and administrative services provided to the Funds supplements the information contained in the section in the Prospectus entitled "Management of the Funds." Investment Management Agreement The Adviser, Roger Engemann & Associates, Inc., ("REA") has entered into an Investment Management Agreement (the "Management Agreement") with the Trust, on behalf of each series of the Trust including the Funds, to provide investment advice and investment management services with respect to the assets of each Fund, provide personnel, office space, facilities and equipment as may be needed by the Funds in their day-to-day operations and provide the officers of the Trust. The Management Agreement has been approved by the Board of Trustees of the Trust with respect to each Fund, including a majority of the Trustees who are not a party to the Management Agreement or interested persons of a party to the Management Agreement, and by a majority of the outstanding voting shares of each Fund at a special meeting of shareholders on August 28, 1997. The Management Agreement dated as of September 3, 1997 will be in effect through September 2, 1999. The Management Agreement may be continued thereafter for successive periods not to exceed one year, provided that such continuance is specifically approved annually by a vote of a majority of each Fund's outstanding voting securities or by the Board of Trustees, and by the vote of a majority of the Trustees who are not parties to the Management Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. REA is an indirect subsidiary of Phoenix Investment Partners, Ltd. ("PXP"). PXP is a publicly-traded, independent registered investment advisory firm, and has served investors for over 70 years. It manages over $57 billion in assets through its investment partners: Aberdeen Fund Managers, Inc. (Aberdeen) in Aberdeen, London, Singapore and Fort Lauderdale; Duff & Phelps Investment Management Co. (Duff & Phelps) in Chicago and Cleveland; Roger Engemann & Associates, Inc. (Engemann) in Pasadena; Seneca Capital Management LLC (Seneca) in San Francisco and Zweig/Glaser Advisers LLC in New York; and Phoenix Investment Counsel, Inc. (Goodwin, Hollister, and Oakhurst divisions) in Hartford, Sarasota, and Scotts Valley, CA, respectively. Expenses Except as set forth in the separate Administration Agreement discussed below, the Adviser is not responsible under the Management Agreement for any expenses related to the operation of the Funds. Under the Management Agreement, each Fund is responsible and has assumed the obligation for paying all of its expenses, including but not limited to: (i) brokerage and commission expenses, (ii) federal, state, or local taxes, including issue and transfer taxes, incurred by or levied on a Fund, (iii) interest charges on borrowings, (iv) charges and expenses of a Fund's custodian and transfer agent, (v) payment of all investment advisory and management fees, (vi) insurance premiums on a Fund's property and personnel, including the fidelity bond and liability insurance for officers and Trustees, (vii) printing and mailing of all reports, including semi-annual and annual reports, prospectuses, and statements of additional information to existing shareholders, (viii) fees and expenses of registering a Fund's shares under the federal securities laws and of qualifying its shares under applicable state securities (Blue Sky) laws subsequent to a Fund's initial fiscal period, including expenses attendant upon renewing and increasing such registrations and qualifications, (ix) legal fees and expenses including legal expenses of the independent Trustees, (x) independent Trustees' fees and auditing expenses, including auditing fees of independent public accountants, (xi) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, except for meetings called solely for the Adviser's benefit, (xii) dues and other costs of membership in industry associations, subject to the approval of any such membership by the Board of Trustees, (xiii) service fees paid to dealers and other shareholder service providers pursuant to Services Agreements between the Trust and such service providers, and (xiv) any extraordinary and non-recurring expenses, except as otherwise prescribed therein. 14 As compensation for its services under the Management Agreement, the Adviser is paid a monthly fee based on a Fund's average daily net assets at the following annual rates: First Next Over $50 $450 $500 Million Million Million ------- ------- ------- Growth Fund 0.90% 0.80% 0.70% Nifty Fifty Fund 0.90% 0.80% 0.70% Balanced Return Fund 0.80% 0.70% 0.60% Global Growth Fund 1.10% 1.00% 0.90% Small & Mid-Cap Growth Fund 1.00% 0.90% 0.80% Value 25 Fund 0.90% 0.80% 0.70% For services to the Trust during the fiscal years ended December 31, 1996, 1997 and 1998, pursuant to the then-effective management agreements with the former adviser (the "Former Adviser") (Roger Engemann Management Co., Inc.) and the current Adviser (REA), the Trust paid management fees (approximately) of $5,160,858, $6,614,000 and $8,380,000, respectively. Of these totals, the Former Adviser and/or REA received fees from each Fund as follows: Fund 1996 1997 1998 ---- ---- ---- ---- Growth Fund $3,202,000 $3,490,000 $3,842,000 Nifty Fifty Fund $1,391,000 $1,967,000 $2,617,000 Balanced Return Fund $ 528,000 $ 551,000 $ 603,000 Global Growth Fund $ 22,646* $ 143,000 $ 247,000 Small & Mid-Cap Fund $ 17,212** $ 288,000 $ 741,000 Value 25 Fund N/A $ 175,000 $ 330,000 * Former Adviser was entitled to $49,798; however, the Former Adviser waived $27,147 of such fees for the first eight months of 1996. ** Former Adviser was entitled to $25,255; however, the Former Adviser waived $8,043 of such fees for the first eight months of 1996. The Management Agreement is terminable with respect to each Fund on 60-days' written notice by vote of a majority of such Fund's outstanding shares, by vote of a majority of the Board of Trustees, or by the Adviser on 60-days' written notice. The Management Agreement automatically terminates in the event of its assignment as defined in the 1940 Act. The Management Agreement provides that in the absence of willful misfeasance, bad faith, or gross negligence on the part of the Adviser, or of reckless disregard of its obligations thereunder, the Adviser is not liable for any action or failure to act in accordance with its duties. NET ASSET VALUE The net asset value per share of each Fund is determined as of the close of trading of the New York Stock Exchange (the "Exchange") on days when the Exchange is open for trading. The Exchange will be closed on the following observed national holidays: New Year's Day, Martin Luther King, Jr. Day, President's 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 Fund's 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 Fund is determined by adding the values of all securities and other assets of the Fund, subtracting liabilities, and dividing by the total number of outstanding shares of the Fund. Assets and liabilities are determined in accordance with generally accepted accounting principles and applicable rules and regulations of the Securities and Exchange Commission. The total liability allocated to a class, plus that class's distribution fee and any other expenses allocated solely to that class, are deducted from the proportionate interest of such class in the assets of the Fund, and the resulting amount of each is divided by the number of shares of that class outstanding to produce the net asset value per share. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange 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 Fund which invests in foreign securities contemporaneously with the determination of the prices of the majority of the portfolio securities of such Fund. 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 Fund 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. 15 HOW TO BUY SHARES The minimum initial investment is $500 and the minimum subsequent investment is $25. However, both the minimum initial and subsequent investment amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank draft investing program administered by Distributor, or pursuant to the Systematic Exchange privilege or for an individual retirement account (IRA). In addition, there are no subsequent investment minimum amounts in connection with the reinvestment of dividend or capital gain distributions. Completed applications for the purchase of shares should be mailed to: Phoenix-Engemann Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. ALTERNATIVE PURCHASE ARRANGEMENTS Shares may be purchased from investment dealers at a price equal to their net asset value per share, plus a sales charge which, at the election of the purchaser, may be imposed either (i) at the time of the purchase (the "initial sales charge alternative") or (ii) on a contingent deferred basis (the "deferred sales charge alternative"). Orders received by dealers prior to the close of trading on the New York Stock Exchange are confirmed at the offering price effective at that time, provided the order is received by the Authorized Agent prior to its close of business. The alternative purchase arrangements permit an investor to choose the method of purchasing shares that is more beneficial given the amount of the purchase, the length of time the investor expects to hold the shares, whether the investor wishes to receive distributions in cash or to reinvest them in additional shares of the Funds, and other circumstances. Investors should consider whether, during the anticipated life of their investment in the Trust, the accumulated continuing distribution and services fees and contingent deferred sales charges on Class B or C Shares would be less than the initial sales charge and accumulated distribution and services fees on Class A Shares purchased at the same time. Dividends paid by the Funds, if any, with respect to each class of shares will be calculated in the same manner at the same time on the same day, except that fees such as higher distribution and services fees and any incremental transfer agency costs relating to each class of shares will be borne exclusively by that class. See "Dividends, Distributions and Taxes." Class A Shares Class A Shares incur a sales charge when they are purchased and enjoy the benefit of not being subject to any sales charge when they are redeemed. Class A Shares are subject to an ongoing services fee at an annual rate of 0.25% of the Trust's aggregate average daily net assets attributable to the Class A Shares. In addition, certain purchases of Class A Shares qualify for reduced initial sales charges. See the Funds' current Prospectus for additional information. Class B Shares Class B Shares do not incur a sales charge when they are purchased, but they are subject to a sales charge if they are redeemed within five years of purchase. The deferred sales charge may be waived in connection with certain qualifying redemptions. Class B Shares purchased prior to January 20, 1998 are subject to the sales charge schedule as it existed prior to that date. See the Funds' current Prospectus for additional information. Class B Shares are subject to ongoing distribution and services fees at an annual rate of up to 1.00% of the Fund's aggregate average daily net assets attributable to the Class B Shares. Class B Shares enjoy the benefit of permitting all of the investor's dollars to work from the time the investment is made. The higher ongoing distribution and services fees paid by Class B Shares will cause such shares to have a higher expense ratio and to pay lower dividends, to the extent any dividends are paid, than those related to Class A Shares. Class B Shares will automatically convert to Class A Shares eight years after the end of the calendar month in which the shareholder's order to purchase was accepted (six years for Class B Shares purchased prior to January 20, 1998), in the circumstances and subject to the qualifications described in the Funds' Prospectus. The purpose of the conversion feature is to relieve the holders of the Class B Shares that have been outstanding for a period of time sufficient for the adviser and the Distributor to have been compensated for distribution expenses related to the Class B Shares from most of the burden of such distribution related expenses. Class B Shares include all shares purchased pursuant to the deferred sales charge alternative which have been outstanding for less than the period ending eight years after the end of the month in which the shares were issued. At the end of this period, Class B Shares will automatically convert to Class A Shares and will no longer be subject to the higher distribution and services fees. Such conversion will be on the basis of the relative net asset value of the two classes without the imposition of any sales load, fee or other charge. For purposes of conversion to Class A, shares purchased through the reinvestment of dividends and distributions paid in respect of Class B Shares in a shareholder's Fund account will be considered to be held in a separate sub-account. Each time any Class B Shares in the shareholder's Fund account (other than those in the sub-account) convert to Class A, an equal pro rata portion of the Class B Share dividends in the sub-account will also convert to Class A Shares. Class C Shares Class C Shares are purchased without an initial sales charge but are subject to a deferred sales charge if redeemed within one year of purchase. Class C Shares of the Growth Fund, Balanced Return Fund and Nifty Fifty Fund purchased prior to January 16 20, 1998 are not subject to the deferred sales charge. The deferred sales charge may be waived in connection with certain qualifying redemptions. Shares issued in conjunction with the automatic reinvestment of income distributions and capital gain distributions are not subject to any sales charges. Class C Shares are subject to ongoing distribution and services fees of up to 1.00% of the Funds' aggregate average daily net assets attributable to Class C Shares. See the Funds' current Prospectus for more information. Class A Shares--Reduced Initial Sales Charges Investors choosing the initial sales charge alternative under certain circumstances may be entitled to pay reduced sales charges. The circumstances under which such investors may pay reduced sales charges are described below. Qualified Purchasers. If you fall within any one of the following categories, you will not have to pay a sales charge on your purchase of Class A Shares: (1) any trustee, director or officer of the Phoenix Funds or any other open-end management investment company advised, subadvised or distributed by the Adviser, Distributor or any corporate affiliate of either or both the Adviser and Distributor (an "Affiliated Phoenix Fund"); (2) any director or officer, or any full-time employee or sales representative (for at least 90 days), of the Adviser or Distributor; (3) registered representatives and employees of securities dealers with whom Distributor has sales agreements; (4) any qualified retirement plan exclusively for persons described above; (5) any officer, director or employee of a corporate affiliate of the Adviser or Distributor; (6) any spouse, child, parent, grandparent, brother or sister of any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for employees of the Adviser, Distributor and/or their corporate affiliates; (8) any employee or agent who retires from Phoenix Home Life, Distributor and/or their corporate affiliates; (9) any account held in the name of a qualified employee benefit plan, endowment fund or foundation if, on the date of the initial investment, the plan, fund or foundation has assets of $10,000,000 or more or at least 100 eligible employees; (10) any person with a direct rollover transfer of shares from an established Phoenix-Engemann Fund or other Phoenix Fund qualified plan; (11) any Phoenix Home Life separate account which funds group annuity contracts offered to qualified employee benefit plans; (12) any state, county, city, department, authority or similar agency prohibited by law from paying a sales charge; (13) any fully matriculated student in any U.S. service academy; (14) any unallocated account held by a third party administrator, registered investment adviser, trust company, or bank trust department which exercises discretionary authority and holds the account in a fiduciary, agency, custodial or similar capacity, if in the aggregate such accounts held by such entity equal or exceed $1,000,000; (15) any person who is investing redemption proceeds from investment companies other than the Phoenix Funds if, in connection with the purchases or redemption of the redeemed shares, the investor paid a prior sales charge provided such investor supplies verification that the redemption occurred within 90 days of the Phoenix-Engemann Fund purchase and that a sales charge was paid; (16) any deferred compensation plan established for the benefit of any Phoenix-Engemann Fund or other Affiliated Phoenix Fund trustee or director; provided that sales to persons listed in (1) through (15) above are made upon the written assurance of the purchaser that the purchase is made for investment purposes and that the shares so acquired will not be resold except to the Trust; (17) purchasers of Class A Shares bought through investment advisors (including President's Circle clients of REA) and financial planners who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients; (18) retirement plans and deferred compensation plans and trusts used to fund those plans (including, for example, plans qualified or created under sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in each case if those purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for such purchases; or (19) clients of investment advisors or financial planners who buy shares for their own accounts but only if their accounts are linked to a master account of their investment advisor or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements (each of the investors described in (17) through (19) may be charged a fee by the broker, agent or financial intermediary for purchasing shares). Class A shareholders who made their initial investment prior to January 20, 1998 and qualified to purchase shares without a sales charge, will not have to pay a sales charge on subsequent purchases of Class A Shares. Combination Purchase Privilege. Your purchase of any class of shares of the Funds or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund Series Class A Shares), if made at the same time by the same "person," will be added together to determine whether the combined sum entitles you to an immediate reduction in sales charges. A "person" is defined in this and the following sections as (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account) including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to funds over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order. An "Affiliated Phoenix Fund" means any other mutual fund advised, subadvised or distributed by the Adviser or Distributor or any corporate affiliate of either or both the Adviser and Distributor provided such other mutual fund extends reciprocal privileges to shareholders of the Phoenix Funds. 17 Letter of Intent. If you sign a Letter of Intent, your purchase of any class of shares of the Funds or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund Series Class A Shares), if made by the same person within a thirteen month period, will be added together to determine whether you are entitled to an immediate reduction in sales charges. Sales charges are reduced based on the overall amount you indicate that you will buy under the Letter of Intent. The Letter of Intent is a mutually non-binding arrangement between you and the Distributor. Since the Distributor doesn't know whether you will ultimately fulfill the Letter of Intent, shares worth 5% of the amount of each purchase will be set aside until you fulfill the Letter of Intent. When you buy enough shares to fulfill the Letter of Intent, these shares will no longer be restricted. If, on the other hand, you do not satisfy the Letter of Intent, or otherwise wish to sell any restricted shares, you will be given the choice of either buying enough shares to fulfill the Letter of Intent or paying the difference between any sales charge you previously paid and the otherwise applicable sales charge based on the intended aggregate purchases described in the Letter of Intent. You will be given 20 days to make this decision. If you do not exercise either election, the Distributor will automatically redeem the number of your restricted shares needed to make up the deficiency in sales charges received. The Distributor will redeem restricted Class A or M Shares before Class C or B Shares, respectively. Oldest shares will be redeemed before selling newer shares. Any remaining shares will then be deposited to your account. Right of Accumulation. Your purchase of any class of shares of the Funds or any other Affiliated Phoenix Fund, if made over time by the same person may be added together to determine whether the combined sum entitles you to a prospective reduction in sales charges. You must provide certain account information to the Distributor to exercise this right. Associations. Certain groups or associations may be treated as a "person" and qualify for reduced Class A Share sales charges. The group or association must: (1) have been in existence for at least six months; (2) have a legitimate purpose other than to purchase mutual fund shares at a reduced sales charge; (3) work through an investment dealer; or (4) not be a group whose sole reason for existing is to consist of members who are credit card holders of a particular company, policyholders of an insurance company, customers of a bank or a broker-dealer or clients of an investment adviser. Class B and C Shares--Waiver of Sales Charges The CDSC is waived on the redemption (sale) of Class B and C Shares if the redemption is made (a) within one year of death (i) of the sole shareholder on an individual account, (ii) of a joint tenant where the surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial account; (b) within one year of disability, as defined in Code Section 72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting from the tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using an approved participant tracking system for participant hardships, death, disability or normal retirement, and loans which are subsequently repaid; (e) based on the exercise of exchange privileges among Class B and C Shares of this or any other Affiliated Phoenix Fund; (f) based on any direct rollover transfer of shares from an established Affiliated Phoenix Fund qualified plan into an Affiliated Phoenix Fund IRA by participants terminating from the qualified plan; and (g) based on the systematic withdrawal program (Class B Shares only). If, as described in condition (a) above, an account is transferred to an account registered in the name of a deceased's estate, the CDSC will be waived on any redemption from the estate account occurring within one year of the death. If the Class B or C Shares are not redeemed within one year of the death, they will remain subject to the applicable CDSC. Conversion Feature--Class B Shares Class B Shares will automatically convert to Class A Shares of the same Fund eight years after they are purchased. Conversion will be on the basis of the then prevailing net asset value of Class A and B Shares. There is not sales load, fee or other charge for this feature. Class B Shares acquired through dividend or distribution reinvestments will be converted into Class A Shares at the same time that other Class B Shares are converted based on the proportion that the reinvested shares bear to purchased Class B Shares. The conversion feature is subject to the continuing availability of an opinion of counsel or a ruling of the Internal Revenue Service that the assessment of the higher distribution fees and associated costs with respect to Class B Shares does not result in any dividends or distributions constituting "preferential dividends" under the Code, and that the conversion of shares does not constitute a taxable event under federal income tax law. If the conversion feature is suspended, Class B Shares would continue to be subject to the higher distribution fee for an indefinite period. Even if the Funds were unable to obtain such assurances, it might continue to make distributions if doing so would assist in complying with its general practice of distributing sufficient income to reduce or eliminate federal taxes otherwise payable by the Funds. INVESTOR ACCOUNT SERVICES The Funds offer accumulation plans, withdrawal plans and reinvestment and exchange privileges. Certain privileges may not be available in connection with all classes. In most cases, changes to account services may be accomplished over the phone. Inquiries regarding policies and procedures relating to shareholder account services should be directed to Shareholder Services at (800) 243-1574. Exchanges. Under certain circumstances, shares of any Phoenix-Engemann Fund may be exchanged for shares of the same Class of another Phoenix-Engemann Fund or any other Affiliated Phoenix Fund on the basis of the relative net asset values per 18 share at the time of the exchange. Exchanges are subject to the minimum initial investment requirement of the designated Fund, except if made in connection with the Systematic Exchange privilege. Shareholders may exchange shares held in book-entry form for an equivalent number (value) of the same class of shares of any other Phoenix-Engemann Fund or any other Affiliated Phoenix Fund, if currently offered. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. The exchange of shares is treated as a sale and purchase for federal income tax purposes (see also "Dividends, Distributions and Taxes"). Systematic Exchanges. If the conditions above have been met, you or your broker may, by telephone or written notice, elect to have shares exchanged for the same class of shares of another Phoenix-Engemann Fund or any other Affiliated Phoenix Fund automatically on a monthly, quarterly, semi-annual or annual basis or may cancel this privilege at any time. If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that shares be automatically exchanged at predetermined intervals for shares of the same class of another Phoenix-Engemann Fund or any other Affiliated Phoenix Fund. This requirement does not apply to Phoenix "Self Security" program participants. Systematic exchanges will be executed upon the close of business on the 10th day of each month or the next succeeding business day. Systematic exchange forms are available from the Distributor. Exchanges will be based upon each Fund's net asset value per share next computed after the close of business on the 10th day of each month (or next succeeding business day), without sales charge. On Class B and C Share exchanges, the CDSC schedule of the original shares purchased continues to apply. Dividend Reinvestment Across Accounts. If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that any dividends and distributions paid with respect to shares in that account be automatically reinvested in a single account of one of the other Phoenix-Engemann Fund or any other Affiliated Phoenix Fund at net asset value. You should obtain a current prospectus and consider the objectives and policies of each Fund carefully before directing dividends and distributions to another Fund. Reinvestment election forms and prospectuses are available from Equity Planning. Distributions may also be mailed to a second payee and/or address. Requests for directing distributions to an alternate payee must be made in writing with a signature guarantee of the registered owner(s). To be effective with respect to a particular dividend or distribution, notification of the new distribution option must be received by the Transfer Agent at least three days prior to the record date of such dividend or distribution. If all shares in your account are repurchased or redeemed or transferred between the record date and the payment date of a dividend or distribution, you will receive cash for the dividend or distribution regardless of the distribution option selected. Systematic Withdrawal Program. The Systematic Withdrawal Program allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual or annual basis. A sufficient number of full and fractional shares will be redeemed so that the designated payment is made on or about the 20th day of the month. Shares are tendered for redemption by the Transfer Agent, as agent for the shareowner, on or about the 15th of the month at the closing net asset value on the date of redemption. The Systematic Withdrawal Program also provides for redemptions to be tendered on or about the 10th, 15th or 25th of the month with proceeds to be directed through Automated Clearing House (ACH) to your bank account. In addition to the limitations stated below, withdrawals may not be less than $25 and minimum account balance requirements shall continue to apply. Shareholders participating in the Systematic Withdrawal Program must own shares of a Fund worth $5,000 or more, as determined by the then current net asset value per share, and elect to have all dividends reinvested. Participants in the Program redeeming Class C Shares will be subject to any applicable contingent deferred sales charge. The purchase of shares while participating in the withdrawal program will ordinarily be disadvantageous to the Class A Shares investor since a sales charge will be paid by the investor on the purchase of Class A Shares at the same time as other shares are being redeemed. For this reason, investors in Class A Shares may not participate in an automatic investment program while participating in the Systematic Withdrawal Program. Through the Program, Class B shareholders may withdraw up to 1% of their aggregate net investments (purchases, at initial value, to date net of non-Program redemptions) each month or up to 3% of their aggregate net investments each quarter without incurring otherwise applicable contingent deferred sales charges. Class B shareholders redeeming more shares than the percentage permitted by the withdrawal program will be subject to any applicable contingent deferred sales charge on all shares redeemed. Accordingly, the purchase of Class B Shares will generally not be suitable for an investor who anticipates withdrawing sums in excess of the above limits shortly after purchase. HOW TO REDEEM SHARES Under the 1940 Act, payment for shares redeemed must ordinarily be made within seven days after tender. The right to redeem shares may be suspended and payment therefor postponed during periods when the New York Stock Exchange is closed, other than customary weekend and holiday closings, or if permitted by rules of the Securities and Exchange Commission, during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Fund to dispose of its 19 securities or to determine fairly the value of its net assets or during any other period permitted by order of the Securities and Exchange Commission for the protection of investors. Furthermore, the Transfer Agent will not mail redemption proceeds until checks received for shares purchased have cleared, which may take up to 15 days or more. See the Funds' current Prospectus for further information. Redemptions by Class B and C shareholders will be subject to the applicable deferred sales charge, if any. The Trust has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Trust's behalf. The Trust will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Funds' net asset values next computed after they are accepted by an authorized broker or the broker's authorized designee. Redemption of Small Accounts Each shareholder account in the Funds which has been in existence for at least one year and has a value of less than $200 may be redeemed upon the giving of not less than 60 days written notice to the shareholder mailed to the address of record. During the 30 day period the shareholder has the right to add to the account to bring its value to $200 or more. Telephone Redemptions Shareholders may redeem up to $50,000 worth of their shares by telephone. See the Funds' current Prospectus for additional information. Account Reinstatement Privilege Shareholders who may have overlooked features of their investment at the time they redeemed have a privilege of reinvestment of their investment at net asset value. See the Funds' current Prospectus for more information and conditions attached to this privilege. Redemption in Kind To the extent consistent with state and federal law, the Funds may make payment of the redemption price in cash or in kind. However, the Funds have elected to pay in cash all requests for redemption by any shareholder of record, limited in respect to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of such period. This election has been made pursuant to Rule 18f-1 under the Investment Company Act of 1940 and is irrevocable while the Rule is in effect unless the Securities and Exchange Commission, by order, permits the withdrawal thereof. In case of a redemption in kind, securities delivered in payment for shares would be readily marketable and valued at the same value assigned to them in computing the net asset value per share of the Fund. A shareholder receiving such securities would incur brokerage costs when selling the securities. TAX SHELTERED RETIREMENT PLANS Shares of the Funds and other Phoenix Funds may be offered in connection with the following qualified prototype retirement plans: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, 401(k) Profit Sharing and Money Purchase Pension Plans and 403(b) Retirement Plans. REA and its affiliates may provide administrative services to these plans and to their participants, in addition to the services that REA and its affiliates provide to the Phoenix-Engemann Funds and other Affiliated Phoenix Funds, and may receive compensation therefor. For information on the terms and conditions applicable to employee participation in such plans, including information on applicable plan administrative charges and expenses, prospective investors should consult the plan documentation and employee enrollment information which is available from participating employers. Write or call Equity Planning at (800) 243-4361 for information about the plans. DIVIDENDS, DISTRIBUTIONS AND TAXES Each Fund is treated as a separate entity for federal income tax purposes. Each Fund intends to elect to be treated as a regulated investment company ("RIC") and qualify annually as such under certain provision of the Internal Revenue Code (the "Code"). Under such provisions, each Fund will not be subject to federal income tax on such part of its ordinary income and net realized capital gains which it distributes to shareholders provided it meets certain distribution requirements. To qualify for treatment as a regulated investment company, each Fund must, among other things: (a) derive in each taxable year at least 90% of its gross income from dividends, interest and gains from the sale or other disposition of securities; and (b) meet certain diversification requirements imposed under the Code at the end of each quarter of the taxable year. The Code imposes a 4% nondeductible excise tax on a regulated investment company if it does not distribute to its shareholders during the calendar year an amount equal to 98% of the Fund's net ordinary income, with certain adjustments, for such calendar year, plus 98% of each Fund' net capital gains for the 12-month period ending on October 31 of such calendar year. In addition, an amount equal to any undistributed investment company taxable income or capital gain net income from the previous calendar year must also be distributed to avoid the excise tax. The excise tax is imposed on the amount by which the regulated investment company does not meet the foregoing distribution requirements. If each Fund has taxable income that would be subject to the excise tax, each Fund intends to distribute such income so as to avoid payment of the excise tax. 20 Under another provision of the Code, any dividend declared by each Fund to shareholders of record in October, November and December of any year will be deemed to have been received by, and will be taxable to shareholders as of December 31 of such year, provided that the dividend is actually paid by each Fund before February 1, of the following year. The Funds' policy is to distribute to its shareholders substantially all investment company taxable income as defined in the Code and any net realized capital gains for each year and consistent therewith to meet the distribution requirements of Part I of subchapter M of the Code. The Funds intend to meet the other requirements of Part I of subchapter M, including the requirements with respect to diversification of assets and sources of income, so that the Funds will pay no taxes on net investment income and net realized capital gains distributed to shareholders. Under certain circumstances, the sales charge incurred in acquiring shares of the Funds may not be taken into account in determining the gain or loss on the disposition of those shares. This rule applies where shares of the Funds are disposed of within 90 days after the date on which they were acquired and new shares of a regulated investment company are acquired without a sales charge or at a reduced sales charge. In that case, the gain or loss realized on the disposition will be determined by excluding from the tax basis of the shares disposed of all or a portion of the sales charge incurred in acquiring those shares. This exclusion applies to the extent that the otherwise applicable sales charge with respect to the newly acquired shares is reduced as a result of the shareholder having incurred a sales charge initially. The portion of the sales charge affected by this rule will be treated as a sales charge paid for the new shares. Distributions by the Funds reduce the net asset value of the Funds' shares. Should a distribution reduce the net asset value of a share below a shareholder's cost for the shares, such a distribution nevertheless generally would be taxable to the shareholder as ordinary income or long-term capital gain, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, investors should be careful to consider the tax implications of buying shares just prior to a distribution by a Fund. The price of shares purchased at that time may include the amount of the forthcoming distribution, but the distribution generally would be taxable to them. Transactions in options on stock indices are subject to the Code rules of section 1256. Pursuant to these rules, such options, whether sold by the Funds during a taxable year or held by the Funds at the close of its taxable year, will be treated as if sold for their market value, with 40% of any resulting gain or loss treated as short-term and 60% long-term. A high portfolio turnover rate may result in the realization of larger amounts of short-term gains, which are taxable to shareholders as ordinary income. Important Notice Regarding Taxpayer IRS Certification Pursuant to IRS Regulations, the Funds may be required to withhold 31% of all reportable payments including any taxable dividends, capital gains distributions or share redemption proceeds, for an account which does not have a taxpayer identification number or social security number and certain required certifications. The Funds reserve the right to refuse to open an account for any person failing to provide a taxpayer identification number along with the required certifications. The Funds will furnish shareholders, within 31 days after the end of the calendar year, with information which is required by the Internal Revenue Service for preparing income tax returns. Investors are urged to consult their attorney or tax adviser regarding specific questions as to Federal, foreign, state or local taxes. THE DISTRIBUTOR Pursuant to a Distribution Agreement with the Funds, Phoenix Equity Planning Corporation (the "Distributor"), a wholly-owned subsidiary of Phoenix Investment Partners, Ltd. and an affiliate of the Adviser, serves as distributor for the Funds. As such, the Distributor conducts a continuous offering pursuant to a "best efforts" arrangement requiring the Distributor to take and pay for only such securities as may be sold to the public. The address of the Distributor is 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200. The Distribution Agreement may be terminated at any time on not more than 60 days written notice, without payment of a penalty, by the Distributor, by vote of a majority of the outstanding voting securities of the Funds, or by vote of a majority of the Funds' Trustees who are not "interested persons" of the Funds and who have no direct or indirect financial interest in the operation of the Distribution Plan or in any related agreements. The Distribution Agreement will terminate automatically in the event of its assignment. Dealers with whom the Distributor has entered into sales agreements receive sales charges in accordance with the commission table set forth in the Prospectus. The Distributor may from time to time pay, from its own resources or pursuant to the Plan of Distribution described below, a bonus or other incentive to dealers (other than the Distributor) which employ a registered representative who sells a minimum dollar amount of the shares of the Funds during a specific period of time. Such bonus or other incentive may take the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives and members of their families to places within or without the United States or other bonuses such as 21 gift certificates or the cash equivalent of such bonuses. The Distributor may, from time to time, reallow the entire portion of the sales charge which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings. Pasadena Fund Services, Inc. ("PFSI") served as the principal underwriter for the Funds prior to September 3, 1997. For the fiscal years ended December 31, 1996, 1997 and 1998, purchasers of shares of the Funds paid aggregate sales charges of $1,370,002, $2,038,126 and $2,334,408, respectively, of which PFSI and/or the Distributor received net commissions of $623,002, $897,831 and $707,783, respectively, for its services, the balance being paid to dealers. For the fiscal year ended December 31, 1998, the Distributor received net commissions of $101,674 for Class A Shares and deferred sales charges of $606,109 for Class B and Class C Shares. Dealer Concessions Dealers with whom the Distributor has entered into sales agreements receive a discount or commission as set forth below. Dealer Discount Sales Charge Sales Charge or Agency Fee Amount of Transaction as Percentage as Percentage as Percentage of at Offering Price of Offering Price of Amount Invested Offering Price --------------------- ----------------- ------------------ ---------------- Less than $50,000 4.75% 4.99% 4.25% $50,000 but under $100,000 4.50% 4.71% 4.00% $100,000 but under $250,000 3.50% 3.63% 3.00% $250,000 but under $500,000 3.00% 3.09% 2.75% $500,000 but under $1,000,000 2.00% 2.04% 1.75% $1,000,000 or more None None None In addition to the dealer discount on purchases of Class A Shares, the Distributor intends to pay investment dealers a sales commission of 4% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class C Shares sold by such dealers. Your broker, dealer or investment adviser may also charge you additional commissions or fees for their services in selling shares to you provided they notify the Distributor of their intention to do so. Dealers and other entities who enter into special arrangements with the Distributor may receive compensation for the sale and promotion of shares of the Funds and/or for providing other shareholder services. Depending on the nature of the services, these fees may be paid either from the Funds through distribution fees, service fees or transfer agent fees or in some cases, the Distributor may pay certain fees from its own profits and resources. From its own profits and resources, the Distributor does intend to: (a) sponsor training and educational meetings and provide additional compensation to qualifying dealers in the form of trips, merchandise or expense reimbursements; (b) from time to time pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (d) excluding purchases as described in (c) above, pay broker/dealers an amount equal to 1% of the amount of Class A Shares sold above $1 million but under $3 million, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million. If part or all of such investment as described in (c) and (d) above, including investments by qualified employee benefit plans, is subsequently redeemed within one year of the investment date, the broker-dealer will refund to the Distributor such amounts paid with respect to the investment. In addition, the Distributor may pay the entire applicable sales charge on purchases of Class A Shares to selected dealers and agents. Any dealer who receives more than 90% of a sales charge may be deemed to be an "underwriter" under the Securities Act of 1933. Administration Agreement Phoenix Equity Planning Corporation ("PEPCO") has entered into an Administration Agreement with the Trust on behalf of each series of the Trust including each Fund. Under the Administration Agreement, PEPCO, in its capacity as Administrator, (a) furnishes each Fund with various administrative and shareholder services including, but not limited to, (i) preparing and distributing all shareholder reports, (ii) preparing all tax returns and other regulatory filings, (iii) Blue Sky compliance services, and (iv) expenses related to fund accounting and net asset value determination, and (b) pays for all of the normal operating fees and expenses of a Fund, except for the fees and expenses related to the services to be provided by the Adviser under the Investment Management Agreement, certain professional, fiduciary and audit expenses, including the legal expenses of the independent Trustees, the independent auditing expenses and expenses related to compensation of the independent Trustees and the services fees paid under the Services Agreements, the distribution fees paid under the Rule 12b-1 distribution plans, brokerage and commission expenses and certain de minimis fees of its independent auditors, legal counsel and trustees. See "Plans of Distribution." The Administration Agreement dated as of September 3, 1997, was approved, with respect to each Fund, by the Board of Trustees of the Trust, including a majority of the Trustees who are not parties to the Administration Agreement, and continues in effect until terminated on behalf of any Fund by either party on 60-days' written notice. 22 As compensation for its services and obligations under the Administration Agreement, the Administrator is paid a monthly fee at an annual rate equal to 0.60% of each Funds' average daily net assets up to $50 million, which rate is reduced at higher levels of net assets. For services to the Trust during the fiscal years ended December 31, 1996, 1997 and 1998, pursuant to the then- effective Administration Agreement with the former adviser (the "Former Adviser") (Roger Engemann Management Co., Inc.) and the current Distributor (PEPCO), the Trust paid administrative fees (approximately) of $5,517,679, $5,458,000, and $5,305,000, respectively. Of these totals, the Former Adviser and/or PEPCO received fees from each Fund as follows: Fund 1996 1997 1998 - ---- ---- ---- ---- Growth Fund $3,453,000 $3,078,000 $2,420,000 Nifty Fifty Fund $1,485,000 $1,612,000 $1,655,000 Balanced Return Fund $ 557,000 $ 400,000 $ 445,000 Global Growth Fund $ 12,352* $ 78,000 $ 131,000 Small & Mid-Cap Fund $ 10,327** $ 173,000 $ 434,000 Value 25 Fund N/A $ 117,000 $ 219,000 * Former Adviser was entitled to $40,856; however, the Former Adviser waived $28,504 of such fees for 1996. ** Former Adviser was entitled to $18,772; however, the Former Adviser waived $8,445 of such fees for 1996. PEPCO has voluntarily agreed to waive, when necessary, a portion of its administration fee so that Other Operating Expenses (operating expenses excluding management fees and 12b-1 fees) do not exceed the following limits. Fund 1st $50 million next $450 million next $125 million over $625 million - ---- --------------- ----------------- ----------------- ----------------- Growth 0.99% 0.50% 0.30% 0.30% Nifty Fifty 0.99% 0.50% 0.30% 0.30% Balanced Return 1.09% 0.60% 0.40% 0.40% Global Growth 0.60% 0.50% 0.40% 0.40% Small & Mid-Cap Growth 0.60% 0.50% 0.40% 0.40% Value 25 0.60% 0.50% 0.40% 0.40% DISTRIBUTION PLANS The Trust has adopted separate distribution plans under Rule 12b-1 of the 1940 Act for Class B and Class C of each series of the Trust (the "Class B Plan," the "Class C Plan," and collectively the "12b-1 Plans"). The 12b-1 Plans permit the Funds to reimburse the Distributor for expenses incurred in connection with activities intended to promote the sale of shares of each class of shares of the Funds. Pursuant to the 12b-1 Plans, the Funds pay the Distributor 0.75% of the average daily net assets of the Funds' Class B and Class C Shares, respectively. Expenditures under the 12b-1 Plans shall consist of: (i) commissions to sales personnel for selling shares of the Funds (including underwriting fees and financing expenses incurred in connection with the sale of Class B Shares); (ii) compensation, sales incentives and payments to sales, marketing and service personnel; (iii) payments to broker-dealers and other financial institutions which have entered into agreements with the Distributor in the form of the Dealer Agreement for Phoenix Funds for services rendered in connection with the sale and distribution of shares of the Funds; (iv) payment of expenses incurred in sales and promotional activities, including advertising expenditures related to the Funds; (v) the costs of preparing and distributing promotional materials; (vi) the cost of printing the Funds' Prospectuses and Statements of Additional Information for distribution to potential investors; and (vii) such other similar services that the Trustees of the Funds determine are reasonably calculated to result in the sale of shares of the Funds. From its own resources or pursuant to the Plan, and subject to the dealers' prior approval, the Distributor may provide additional compensation to registered representatives of dealers in the form of travel expenses, meals, and lodging associated with training and educational meetings sponsored by the Distributor. The Distributor may also provide gifts amounting in value to less than $100, and occasional meals or entertainment, to registered representatives of dealers. Any such travel expenses, meals, lodging, gifts or entertainment paid will not be preconditioned upon the registered representatives' or dealers' achievement of a sales target. The Distributor may, from time to time, reallow the entire portion of the sales charge on Class A shares which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings. In order to receive payments under the 12b-1 Plans and/or Services Agreements (described below), participants must meet such qualifications to be established in the sole discretion of the Distributor, such as services to the Funds' shareholders; or services providing the Funds with more efficient methods of offering shares to coherent groups of clients, members or prospects of a participant; or services permitting bulking of purchases or sales, or transmission of such purchases or sales by computerized tape or other electronic equipment; or other processing. If the 12b-1 Plans are terminated in accordance with their terms, the obligations 23 of the Funds to make payments to the Distributor pursuant to the 12b-1 Plans will cease and the Funds will not be required to make any payments past the date on which each 12b-1 Plan terminates. On a quarterly basis, the Funds' Trustees review a report on expenditures under the 12b-1 Plans and the purposes for which expenditures were made. The Trustees conduct an additional, more extensive review annually in determining whether the 12b-1 Plans will be continued. By its terms, continuation of the 12b-1 Plans from year to year is contingent on annual approval by a majority of the Funds' Trustees and by a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the 12b-1 Plans or any related agreements (the "12b-1 Plan Trustees"). The 12b-1 Plans provide that they may not be amended to increase materially the costs which the Funds may bear pursuant to the 12b-1 Plans without approval of the shareholders of the Funds and that other material amendments to the 12b-1 Plans must be approved by a majority of the 12b-1 Plan Trustees by vote cast in person at a meeting called for the purpose of considering such amendments. The 12b-1 Plans further provides that while it is in effect, the selection and nomination of Trustees who are not "interested persons" shall be committed to the discretion of the Trustees who are not "interested persons." The 12b-1 Plans may be terminated at any time by vote of a majority of the 12b-1 Plan Trustees or a majority of the outstanding shares of the Funds. The National Association of Securities Dealers, Inc. (the "NASD") regards certain distribution fees as asset-based sales charges subject to NASD sales load limits. The NASD's maximum sales charge rule may require the Trustees to suspend distribution fees or amend the Plans. For the fiscal year ended December 31, 1998, the Funds paid Rule 12b-1 distribution fees in the amount of $3,898,100, of which the principal underwriter received $1,470,657. W.S. Griffith & Co., Inc., an affiliate, received $16,306, and unaffiliated broker-dealers reeived $2,411,137. Distribution fees were used by the Distributor to compensate dealers for the sale of the Fund's Class B and Class C Shares. Services Agreements Under the Services Agreement, each Fund will pay a continuing service fee to service providers, in an amount, computed and prorated on a daily basis, equal to 0.25% per annum of the Fund's average daily net assets, which will include the Adviser or Phoenix Equity Planning Corporation (the "Distributor"), for shareholder accounts not serviced by other service providers. (Prior to September 3, 1997, Pasadena Fund Services, Inc. (the "Former Distributor") served as distributor of the Funds' shares.) Such amounts are compensation for providing certain services to clients owning shares of such Fund, including personal services such as processing purchase and redemption transactions, assisting in change of address requests and similar administrative details, and providing other information and assistance with respect to such Fund, including responding to shareholder inquiries. For the fiscal year ended December 31, 1998, the Funds paid service fees in the amount of $665,554, of which the principal underwriter received $446,872, and unaffiliated broker-dealers received $218,682. MANAGEMENT OF THE TRUST The Trustees of the Trust are responsible for the overall supervision of the Funds and perform the various duties imposed on Trustees by the 1940 Act and Massachusetts business trust law. Trustees And Officers The Trustees and Officers of the Trust and their business affiliations for the past five years are set forth below. Positions Held Principal Occupations Name, Address and Age With the Trust During the Past 5 Years - --------------------- --------------- ----------------------- Roger Engemann* (58) Chairman of the Chairman, President and Director of the Adviser since 1969. 600 North Rosemead Board, President and Chairman, President and Director, Pasadena Capital Boulevard Trustee Corporation (1988-present) and Roger Engemann Management Pasadena, California 91107 Co., Inc. (1985-present). John S. Tilson (55) Chief Financial Executive Vice President, Portfolio Manager and Securities 600 North Rosemead Officer and Secretary Analyst with the Adviser since 1983. Executive Vice Boulevard President and Director of Pasadena Capital Corporation. Pasadena, California 91107 Executive Vice President, Roger Engemann Management Co., Inc. (1994-present) 24 Positions Held Principal Occupations Name, Address and Age With the Trust During the Past 5 Years - --------------------- -------------- ----------------------- Barry E. McKinley (63) Trustee Certified Public Accountant; head of B.E. McKinley & 201 South Lake Avenue Associates, an accounting firm, since its inception in 1971. Suite 400 Pasadena, California 91101 Robert L. Peterson (61) Trustee Private investor. From 1988-1995, Regional Manager for P.O. Box 80784 Commercial Real Estate Brokerage in the Pasadena office San Marino, California 91118 of Jon Douglas Company, a real estate firm. Prior thereto he was associated with the real estate brokerage firm of R.A. Rowan & Co. Richard C. Taylor (52) Trustee President of Richard Taylor Company, Inc., a food ingredients 2100 Huntington Drive, #9 broker, since 1987. San Marino, California 91108 Angela Wong (47) Trustee Since 1986, Ms. Wong has been of counsel to the law firm of 11355 West Olympic Manatt, Phelps, Phillips & Kantor, specializing in employee Boulevard benefits. Los Angeles, California 90064 *Indicates that the Trustee is an "interested person" of the Trust within the meaning of the definition set forth in Section 2(a)(19) of the Investment Company Act of 1940. For services rendered to the Trust for the fiscal year ended December 31, 1998, the Trustees received an aggregate of $80,000. For services on the Board of Trustees, each Trustee who is not an employee of the Adviser or any of its affiliates currently receives $2,500 per quarter plus $2,500 for each meeting attended. The officers of the Trust and the Trustees affiliated with the Adviser receive no direct compensation for performing the duties of such offices. However, those officers and Trustees who are affiliated with the Adviser may receive remuneration indirectly because the Adviser receives management fees from the Funds. For the Trust's last fiscal year, the Trustees received the following compensation: Total Pension or Compensation Aggregate Retirement Benefits Estimated From Fund and Compensation Accrued as Part Annual Benefits Fund Complex Name From Fund of Fund Expenses Upon Retirement Paid to Trustees ---- ------------ ------------------- --------------- ---------------- Roger Engemann None None None None John S. Tilson None None None None Barry E. McKinley $20,000 None None $20,000 Robert L. Peterson $20,000 None None $20,000 Richard C. Taylor $20,000 None None $20,000 Angela Wong $20,000 None None $20,000 As of April 9, 1999, the Trustees and Officers of the Trust, as a group, owned less than 1% of the outstanding shares of the Nifty Fifty Fund and the Balanced Return Fund. As of April 9, 1999, the Trustees and Officers of the Trust, as a group, owned 1.08% of the Growth Fund Class A Shares, 10.99% of the Global Growth Fund Class A Shares, 22.89% of the Value 25 Fund Class A Shares, and 3.98% of the Small & Mid-Cap Growth Fund Class A Shares. Principal Shareholders As of April 9, 1999 the following shareholders, to the Trust's knowledge, owned of record 5% or more of each Fund's outstanding shares by class, as noted: Class A Class B Class C ------- ------- ------- Phoenix-Engemann Growth Fund 45.78% 48.53% 66.23% Merrill Lynch, Pierce, Fenner & Smith, Inc.* Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32246-6485 25 Class A Class B Class C ------- ------- ------- Phoenix-Engemann Balanced Return Fund 21.85% 41.94% 65.10% Merrill Lynch, Pierce, Fenner & Smith, Inc.* Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32246-6485 Phoenix-Engemann Nifty Fifty Fund 40.61% 46.73% 71.04% Merrill Lynch, Pierce, Fenner & Smith, Inc.* Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32216 Phoenix-Engemann Global Growth Fund Merrill Lynch, Pierce, Fenner & Smith, Inc.* 25.29% 34.96% 48.86% Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32216 Pasadena National Trust 7.89% Cust for IRA of Roger Engemann 731 S. Madre Street Pasadena, California 91107-5662 Union Bank of California 5.94% FBO Barney Sofro 475 Sansome Street, 11th Floor San Francisco, California 94111- 3103 Phoenix-Engemann Small & Mid-Cap Growth Fund Merrill Lynch, Pierce, 35.89% 35.79% 53.25% Fenner & Smith, Inc.* Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32216 Phoenix-Engemann Value 25 Fund Pasadena National Trust 16.56% Cust for IRA #1 of Roger Engemann 731 S. Madre Street Pasadena, California 91107-5662 Union Bank of California Cust 7.41% FBO Moore Investment Partnership PO Box 109 San Diego, California 92112-4103 Merrill Lynch, Pierce, 7.07% 36.02% 59.34% Fenner & Smith, Inc.* Attn: Book Entry 4800 Deer Lake Drive East Jacksonville, Florida 32216 Pasadena National Trust 6.15% Cust for IRA #2 of Roger Engemann 731 S. Madre Street Pasadena, California 91107-5662 *Record owner only for its individual customers. To the Trust's knowledge, no customer beneficially owned 5% or more of the total outstanding shares of any Class of any Fund. 26 OTHER INFORMATION Capital Stock The Trust was established on May 28, 1986 as a Massachusetts business trust. The capitalization of the Trust consists solely of an unlimited number of shares of beneficial interest. The Trust currently offers shares in different Funds and different classes of those Funds. Holders of shares of a Fund have equal rights with regard to voting, redemptions, dividends, distributions, and liquidations with respect to that Fund, except that Class B and C Shares of any Fund, which bear higher distribution fees and certain incrementally higher expenses associated with the deferred sales arrangement, pay correspondingly lower dividends per share than Class A and M Shares of the same Fund. Shareholders of all Funds vote on the election of Trustees. On matters affecting an individual Fund (such as approval of an investment advisory agreement or a change in fundamental investment policies) and on matters affecting an individual class (such as approval of matters relating to a Plan of Distribution for a particular class of shares), a separate vote of that Fund or class is required. The Trustees will call a meeting when at least 10% of the outstanding shares so request in writing. If the Trustees fail to call a meeting after being so notified, the Shareholders may call the meeting. The Trustees will assist the Shareholders by identifying other shareholders or mailing communications, as required under Section 16(c) of the Investment Company Act of 1940. Shares are fully paid, nonassessable, redeemable and fully transferable when they are issued. Shares do not have cumulative voting rights, preemptive rights or subscription rights. The assets received by the Funds for the issue or sale of shares of each Fund, and any class thereof and all income, earnings, profits and proceeds thereof, are allocated to such Fund, and class, respectively, subject only to the rights of creditors, and constitute the underlying assets of such Fund or class. The underlying assets of each Fund are required to be segregated on the books of account, and are to be charged with the expenses in respect to such Fund and with a share of the general expenses of the Trust. Any general expenses of the Trust not readily identifiable as belonging to particular Fund or class will be allocated by or under the direction of the Trustees as they determine fair and equitable. Unlike the stockholders of a corporation, there is a possibility that the shareholders of a business trust such as the Trust may be personally liable for debts or claims against the Trust. The Declaration of Trust provides that shareholders shall not be subject to any personal liability for the acts or obligations of the Trust and that every written agreement, undertaking or obligation made or issued by the Trust shall contain a provision to that effect. The Declaration of Trust provides for indemnification out of the Trust property for all losses and expenses of any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability, which is considered remote, is limited to circumstances in which the Trust itself would be unable to meet its obligations. Independent Accountants PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110, is the independent accountants for the Funds. PricewaterhouseCoopers LLP audits the Funds' annual financial statements and expresses an opinion thereon. Custodian and Transfer Agent The custodian of the assets of the Funds (other than the Global Growth Fund) is Union Bank of California, 475 Sansome Street, San Francisco, California 94111. The custodian of the assets of the Global Growth Fund is State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts 02101. Pursuant to a Transfer Agent and Service Agreement with the Trust, Equity Planning serves as transfer agent for the Funds (the "Transfer Agent") for which it is paid $14.95 plus certain out of pocket expenses for each designated shareholder account. The Transfer Agent engages sub-agents to perform certain shareholder servicing functions for which such agents are paid a fee by Equity Planning. Report to Shareholders The fiscal year of the Trust ends on December 31. The Trust will send financial statements to its shareholders at least semiannually. An Annual Report containing financial statements audited by the Trust's independent accountants will be sent to shareholders each year. Financial Statements The Financial Statements for the Fund's fiscal year ended December 31, 1998, appearing in the Fund's 1998 Annual Report to Shareholders, are incorporated herein by reference. 27 APPENDIX Moody's Investors Service, Inc. Corporate Bond Ratings Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa--Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa Group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba--Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B--Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa--Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca--Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C--Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Standard & Poor's Corporation's Corporate Bond Ratings AAA--This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from AAA issues only in small degree. A--Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB--Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. D--Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. 28 ANNUAL REPORT OF THE PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND FOR THE YEAR ENDED JUNE 30, 1999 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT] Phoenix Investment Partners DECEMBER 31, 1998 Engemann ANNUAL REPORT Phoenix-Engemann Growth Fund Phoenix-Engemann Nifty Fifty Fund Phoenix-Engemann Balanced Return Fund Phoenix-Engemann Global Growth Fund Phoenix-Engemann Small & Mid-Cap Growth Fund Phoenix-Engemann Value 25 Fund [LOGO] PHOENIX INVESTMENT PARTNERS TABLE OF CONTENTS The Growth Fund........................................................... 3 The Nifty Fifty Fund...................................................... 12 The Balanced Return Fund.................................................. 20 The Global Growth Fund.................................................... 29 The Small & Mid-Cap Growth Fund........................................... 40 The Value 25 Fund......................................................... 48 Notes to Financial Statements............................................. 55 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. MESSAGE FROM THE CHAIRMAN DEAR FELLOW SHAREHOLDERS: [PHOTO] ROGER ENGEMANN The year 1998 had a little something for the bears, much more for the bulls, a lot of scary stuff for the press--and, happily, good news for shareholders of the Phoenix-Engemann Funds. More details are on the following pages, but here is a performance snapshot. Based on the net asset value (NAV) of Class A Shares, all the funds in the family showed positive returns for the year. Other than the Phoenix-Engemann Value 25 Fund, all the Funds had double-digit gains and surpassed the average fund in their respective categories, based on net asset value.(1) Further, the Phoenix-Engemann Growth, Nifty Fifty and Balanced Return Funds beat the impressive performance of the S&P 500 Index.(2) The market in 1998 was both selective and volatile. Selectivity showed up in investors' preference for large growth stocks over value stocks--one reason the Value 25 Fund lagged in its returns. Not only does this Fund emphasize value, it focuses on a narrow range of just 25 stocks. Last year wasn't the year for value. But, like all market phenomena, that is subject to change. Last year, small also played second fiddle to large. Small stocks suffered a third quarter that was their third worst quarter since 1979. However, interest rate cuts and waning fears of recession brought a nice fourth-quarter rally to small stocks and to the Phoenix-Engemann Small & Mid-Cap Fund in particular. Volatility, the other key feature of 1998, gave us a lot of what we call "white knuckle time." The third quarter was the worst for stock funds since 1990. Then the market turned around abruptly, as it is wont to do, making the fourth quarter the best for stocks since 1987. After many placid years, what the market dished out in 1998 might make now a good time to dust off some old, forgotten investment practices. Three of my favorites are: (1) DIVERSIFY, (2) STICK WITH YOUR PLAN, and (3) IGNORE THE HERD. DIVERSIFICATION can't cure volatility, yet it can be a great balm for its pain. If you include large-cap, small-cap, growth, balanced, and value funds in your portfolio, you may not earn the peak return of the best one ... but you'll avoid having everything in the one that takes the biggest fall. STICK WITH YOUR PLAN is what I refer to as "stay on the train." Decide on your goal, select the investments to get you there, and then muster the courage to hang on through a bumpy ride. Trying to time the market is something even experts seldom do successfully. And if you chase after the current best performer, you're apt to catch it just as it heads in the other direction. (1) ACCORDING TO LIPPER INC. (2) THE S&P 500 INDEX, WHICH IS AN UNMANAGED, COMMONLY USED MEASURE OF STOCK MARKET TOTAL RETURN PERFORMANCE, RETURNED 28.8% FOR THE YEAR ENDED DECEMBER 31, 1998. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT. 1 MESSAGE FROM THE CHAIRMAN (CONTINUED) IGNORE THE HERD. When the market sinks and headlines rail against the risk of stocks, it's tempting to pull out and tuck your dollars under the mattress. That's when it's time to remind yourself that company fundamentals propel stock prices over the long term. Periodically, investor psychology may be a controlling factor. But attitudes can change. Bull markets can follow bear markets. Investing in stocks for the short term is clearly a risky practice, but history shows us that stocks of solid, profitable companies move up over time. Finally, a word about the future. Some analysts say the market can't have another strong year, and it is true that past performance is no guarantee of future performance. However, we see nothing on the horizon we think will impede good progress. Though corporate profits may cool somewhat, we believe there will always be companies with good, solid earnings prospects. And we will do our best to find them and place them in your portfolios. Thank you for your confidence and for "staying on the train" through these volatile times. s Roger Engemann Roger Engemann Chairman of the Board and President JANUARY 15, 1999 2 PHOENIX-ENGEMANN GROWTH FUND A DISCUSSION WITH JIM MAIR AND JOHN TILSON, THE PORTFOLIO MANAGERS OF THE PHOENIX-ENGEMANN MUTUAL FUNDS Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE? A: The Phoenix-Engemann Growth Fund's objective is to achieve long-term capital appreciation by investing in common stocks with rapidly growing earnings per share. The Fund invests in stocks of various capitalizations. Q: HOW DID THE FUND PERFORM OVER THE YEAR ENDED DECEMBER 31, 1998? A: This was an excellent year for the Fund. The NAV for Class A Shares increased 37.4%, surpassing both the 28.8% return of the S&P 500 Index(1) as well as the 22.9% return of the average growth fund in a universe of 980 funds as measured by Lipper Inc. Class B and C shares returned 36.4% for the year. All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Q: WHAT WERE SOME OF THE FACTORS THAT AFFECTED THE FUND'S PERFORMANCE? A: There were several key elements responsible for the Fund's outperformance. First, the Fund was overweighted in communication equipment and service companies that are benefiting from the dramatic growth of the Internet. Second, the Fund had solid performance in several retail stocks as these companies experienced a solid domestic economy. Finally, during the market correction in August and October we reduced our exposure to consumer products that we believed would be negatively impacted by weak economies in Asia and Latin America. Subsequently, we used the proceeds from these sales to increase our holdings in financial services companies, which were selling at what we believed to be very compelling valuation levels. Q: PLEASE DISCUSS SOME OF THE INDIVIDUAL WINNERS IN THE FUND. A: For the second year in a row America Online was the Fund's best performer. The stock rose nearly six-fold during 1998. Now the Fund's largest position, largely because of price appreciation, the company is riding the Internet boom and is leveraging its dominant franchise into tremendous profit growth. Another way we have been playing the explosive growth of the Internet is through communications equipment companies that are building the infrastructure or backbone of the Internet. Both Cisco and Lucent Technologies are among the leaders in this fast growing area and each stock more than doubled during the year. Other stocks that performed extremely well were MCI WorldCom, Microsoft, and Texas Instruments. Q: WHAT WERE SOME AREAS THAT PROVED DISAPPOINTING? A: Consumer staple companies are one area where the Fund has historically invested a large part of its assets. For many years companies such as Gillette and Coca-Cola were able to provide above-average consistent growth. The Asian crisis, however, proved to be a very difficult challenge for these companies. Their growth slowed dramatically and in some cases profits actually declined. Although these companies are excellent franchises and dominate their markets, the near-term outlook for profit growth is uncertain at best. Therefore, (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. 3 PHOENIX-ENGEMANN GROWTH FUND (CONTINUED) we trimmed our positions in several of these companies. That being said, one company that performed extremely well, despite its global presence, was McDonald's. After several years of sub-par performance, management implemented a strategy to improve their domestic operations and continue their global expansion--efforts that investors rewarded nicely. Q: WHAT IS YOUR OUTLOOK FOR 1999? A: Our outlook has not changed much since we last communicated with you. Despite tremendous volatility in the second half the year, the stock market rebounded vigorously and posted a fourth year of better than 20% gains. Although we do not believe that such levels of returns are sustainable, we are still able to find opportunities we feel have the potential for exceptional growth. More importantly, the investment backdrop remains favorable as inflation is well contained and the U.S. economy continues to grow at a solid pace. As such, we believe that valuations are justifiable, provided companies continue to deliver the earnings. We have positioned the Fund in the companies that we believe have the best earnings prospects and expect will be rewarded over time. In summary, we believe that growth stocks are still a good place to be. JANUARY 29, 1999 4 Phoenix-Engemann Growth Fund AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 123198 INCEPTION INCEPTION 1 YEAR 5 YEARS 10 YEARS TO 123198 DATE ------ ------- -------- --------- --------- Class A Shares at NAV(2) 37.41% 19.04% 17.64% -- -- Class A Shares at POP(3) 30.88 17.88 17.06 -- -- Class B Shares at NAV(2) 36.38 -- -- 18.32% 1394 Class B Shares with CDSC(4) 32.53 -- -- 18.13 1394 Class C Shares at NAV(2) 36.38 -- -- 18.32 1394 Class C Shares with CDSC(4) 36.38 -- -- 18.32 1394 (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. Prior to 12098, the maximum front-end sales charge was 5.5%. (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 five year period. CDSC charges for C shares are 1% in the first year and 0% thereafter. (5) This chart illustrates POP returns on Class A Shares for ten years. Returns on Class B and Class C Shares will vary due to differing sales charges. (6) The S&P 500 Index is an unmanaged, commonly used measure of stock 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 1231 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PHOENIX-ENGEMANN S&P GROWTH FUND 500 CLASS A(5) INDEX(6) 12301988 $ 9,525.00 12311988 $10,000.00 12291989 $13,119.02 12311989 $13,143.49 12311990 $12,522.67 12311990 $12,723.63 12311991 $21,017.31 12311991 $16,609.89 12311992 $21,488.47 12311992 $17,887.30 12311993 $20,227.25 12311993 $19,676.05 12301994 $19,468.73 12311994 $19,936.37 12291995 $24,755.99 12311995 $27,413.96 12311996 $30,324.36 12311996 $33,787.07 12311997 $35,187.14 12311997 $45,063.71 This Growth of $10,000 chart assumes an initial investment of $10,000 made on 123188 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. SECTOR WEIGHTINGS 123198 As a percentage of equity holdings EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Technology 40% Consumer Cyclicals 17 Financials 15 Health-Care 11 Consumer Staples 7 Communication Services 6 Capital Goods 3 5 Phoenix-Engemann Growth Fund TEN LARGEST HOLDINGS AT DECEMBER 31, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS) 1. America Online, Inc. 5.9% MAJOR PROVIDER OF ONLINE SERVICES TO CONSUMERS 2. MCI WorldCom, Inc. 5.6% COMPREHENSIVE TELECOMMUNICATIONS SERVICE PROVIDER 3. Cisco Systems, Inc. 5.1% LEADING PRODUCER OF SWITCHES AND ROUTERS FOR INTERNETWORKING 4. Lucent Technologies, Inc. 4.9% LEADING SUPPLIER OF TELECOMMUNICATIONS EQUIPMENT 5. Medtronic, Inc. 4.8% LEADING PRODUCER OF IMPLANTABLE CARDIAC DEVICES 6. Microsoft Corp. 4.6% WORLD'S LEADING COMPUTER SOFTWARE COMPANY 7. Texas Instruments, Inc. 4.0% LEADING SUPPLIER OF DIGITAL SIGNAL PROCESSORS FOR THE COMMUNICATION MARKET 8. Home Depot, Inc. (The) 4.0% LEADING HOME IMPROVEMENT RETAILER 9. Pfizer, Inc. 4.0% PRODUCES AND DISTRIBUTES PROPRIETARY HEALTH-RELATED ITEMS 10. General Electric Co. 3.2% INVESTMENTS AT DECEMBER 31, 1998 SHARES VALUE -------- ------------- COMMON STOCKS--98.9% AIR FREIGHT--1.1% FDX Corp.(b)............................ 68,000 $ 6,052,000 BANKS (MAJOR REGIONAL)--1.8% Wells Fargo & Co........................ 247,700 9,892,519 BEVERAGES (NON-ALCOHOLIC)--1.2% Coca-Cola Co. (The)..................... 97,900 6,547,062 CHEMICALS (DIVERSIFIED)--0.2% Monsanto Co............................. 25,000 1,187,500 COMMUNICATIONS EQUIPMENT--7.1% Lucent Technologies, Inc................ 243,000 26,730,000 Tellabs, Inc.(b)........................ 170,550 11,693,334 ------------- 38,423,334 ------------- COMPUTERS (HARDWARE)--3.0% Compaq Computer Corp.................... 135,000 5,661,562 Dell Computer Corp.(b).................. 141,000 10,319,437 ------------- 15,980,999 ------------- COMPUTERS (NETWORKING)--5.1% Cisco Systems, Inc.(b).................. 296,112 27,482,895 COMPUTERS (PERIPHERALS)--2.1% EMC Corp.(b)............................ 132,000 11,220,000 COMPUTERS (SOFTWARE & SERVICES)--15.2% America Online, Inc.(b)................. 200,000 32,000,000 At Home Corp.(b)........................ 65,000 4,826,250 BMC Software, Inc.(b)................... 185,000 8,244,062 SHARES VALUE -------- ------------- COMPUTERS (SOFTWARE & SERVICES)--CONTINUED Compuware Corp.(b)...................... 156,000 $ 12,187,500 Microsoft Corp.(b)...................... 181,300 25,144,044 ------------- 82,401,856 ------------- CONSUMER FINANCE--1.6% MBNA Corp............................... 340,450 8,489,972 ELECTRICAL EQUIPMENT--3.2% General Electric Co..................... 170,000 17,350,625 ELECTRONICS (SEMICONDUCTORS)--6.8% Intel Corp.............................. 126,400 14,986,300 Texas Instruments, Inc.................. 254,600 21,784,212 ------------- 36,770,512 ------------- ENTERTAINMENT--0.9% Walt Disney Co. (The)................... 163,850 4,915,500 FINANCIAL (DIVERSIFIED)--6.6% American Express Co..................... 92,000 9,407,000 Citigroup, Inc.......................... 220,000 10,890,000 Freddie Mac............................. 239,150 15,410,228 ------------- 35,707,228 ------------- HEALTH CARE (DIVERSIFIED)--0.8% Johnson & Johnson....................... 54,200 4,546,025 HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--5.7% Merck & Co., Inc........................ 64,100 9,466,769 Pfizer, Inc............................. 170,600 21,399,638 ------------- 30,866,407 ------------- 6 See Notes to Financial Statements Phoenix-Engemann Growth Fund SHARES VALUE -------- ------------- HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--4.8% Medtronic, Inc.......................... 350,100 $ 25,994,925 INSURANCE (MULTI-LINE)--1.8% American International Group, Inc....... 102,500 9,904,063 INVESTMENT BANKING/BROKERAGE--2.1% Merrill Lynch & Co., Inc................ 174,000 11,614,500 INVESTMENT MANAGEMENT--0.6% Price (T. Rowe) Associates, Inc......... 93,400 3,198,950 LEISURE TIME (PRODUCTS)--1.0% Harley-Davidson, Inc.................... 116,000 5,495,500 LODGING-HOTELS--1.9% Carnival Corp........................... 215,500 10,344,000 PERSONAL CARE--1.9% Gillette Co............................. 216,300 10,449,994 RESTAURANTS--1.3% McDonald's Corp......................... 95,000 7,279,375 RETAIL (BUILDING SUPPLIES)--4.0% Home Depot, Inc. (The).................. 350,000 21,415,625 RETAIL (DEPARTMENT STORES)--1.6% Kohl's Corp.(b)......................... 142,700 8,767,131 RETAIL (DRUG STORES)--0.9% Walgreen Co............................. 84,000 4,919,250 RETAIL (GENERAL MERCHANDISE)--1.0% Dayton Hudson Corp...................... 100,000 5,425,000 SHARES VALUE -------- ------------- RETAIL (SPECIALTY)--1.7% Republic Industries, Inc. (b)........... 270,000 $ 3,982,500 Staples, Inc.(b)........................ 125,000 5,460,938 ------------- 9,443,438 ------------- SERVICES (ADVERTISING/MARKETING)--1.3% Interpublic Group of Companies, Inc. (The)................................... 85,750 6,838,563 SERVICES (COMMERCIAL & CONSUMER)--2.9% Cendant Corp.(b)........................ 832,333 15,866,348 SERVICES (PAYROLL PROCESSING)--1.3% Paychex, Inc............................ 135,975 6,994,214 TELECOMMUNICATIONS (LONG DISTANCE)--5.6% MCI WorldCom, Inc.(b)................... 420,600 30,178,050 TOBACCO--0.8% Philip Morris Companies, Inc............ 82,450 4,411,075 - - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $265,361,571) 536,374,435 - - ----------------------------------------------------------------------------- TOTAL INVESTMENTS--98.9% (IDENTIFIED COST $265,361,571) 536,374,435(a) Cash and receivables, less liabilities--1.1% 5,337,261 -------------- NET ASSETS--100.0% $ 541,711,696 -------------- -------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $271,214,995 and gross depreciation of $1,710,258 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $266,869,698. (b) Non-income producing. See Notes to Financial Statements 7 Phoenix-Engemann Growth Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $265,361,571) $ 536,374,435 Cash 6,886,252 Receivables Fund shares sold 292,021 Dividends and interest 203,502 -------------- Total assets 543,756,210 -------------- LIABILITIES Payables Fund shares repurchased 975,014 Distribution fee 452,276 Investment advisory fee 351,482 Administration fee 221,926 Trustees' fee 5,210 Accrued expenses 38,606 -------------- Total liabilities 2,044,514 -------------- NET ASSETS $ 541,711,696 -------------- -------------- NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $ 213,641,486 Accumulated net realized gain 57,057,346 Net unrealized appreciation 271,012,864 -------------- NET ASSETS $ 541,711,696 -------------- -------------- CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $441,146,043) 16,448,639 Net asset value per share $26.82 Offering price per share $26.82/(1-4.75%) $28.16 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $65,986,007) 2,589,052 Net asset value and offering price per share $25.49 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $34,579,646) 1,356,769 Net asset value and offering price per share $25.49 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 3,651,796 Interest 458,470 Foreign taxes withheld (10,662) ------------- Total investment income 4,099,604 ------------- EXPENSES Investment advisory fee 3,841,502 Distribution fee, Class A 965,685 Distribution fee, Class B 573,110 Distribution fee, Class C 302,676 Distribution fee, Class M 427 Administration 2,419,689 Professional 41,369 Trustees 14,667 ------------- Total expenses 8,159,125 ------------- NET INVESTMENT LOSS (4,059,521) ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on securities 77,374,130 Net realized loss on foreign currency transactions (11,008) Net change in unrealized appreciation (depreciation) on investments 80,943,604 ------------- NET GAIN ON INVESTMENTS 158,306,726 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 154,247,205 ------------- ------------- 8 See Notes to Financial Statements Phoenix-Engemann Growth Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------- ------------- FROM OPERATIONS Net investment income (loss) $ (4,059,521) $ (4,678,000) Net realized gain (loss) 77,363,122 95,837,000 Net change in unrealized appreciation (depreciation) 80,943,604 (18,157,000) ------------- ------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 154,247,205 73,002,000 ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized gains, Class A (19,191,036) (74,825,000) Net realized gains, Class B (3,003,744) (10,906,000) Net realized gains, Class C (1,570,635) (5,880,000) ------------- ------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (23,765,415) (91,611,000) ------------- ------------- FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (554,463 and 419,000 shares, respectively) 12,769,077 9,864,000 Net asset value of shares issued from reinvestment of distributions (665,077 and 3,374,000 shares, respectively) 17,245,429 66,573,000 Cost of shares repurchased (3,536,921 and 4,478,000 shares, respectively) (79,785,149) (106,146,000) ------------- ------------- Total (49,770,643) (29,709,000) ------------- ------------- CLASS B Proceeds from sales of shares (245,967 and 284,000 shares, respectively) 5,372,379 6,477,000 Net asset value of shares issued from reinvestment of distributions (110,700 and 529,000 shares, respectively) 2,728,756 10,026,000 Cost of shares repurchased (534,746 and 357,000 shares, respectively) (11,527,013) (8,373,000) ------------- ------------- Total (3,425,878) 8,130,000 ------------- ------------- CLASS C Proceeds from sales of shares (164,645 and 187,000 shares, respectively) 3,582,593 4,261,000 Net asset value of shares issued from reinvestment of distributions (58,568 and 284,000 shares, respectively) 1,443,709 5,374,000 Cost of shares repurchased (356,278 and 254,000 shares, respectively) (7,561,830) (5,945,000) ------------- ------------- Total (2,535,528) 3,690,000 ------------- ------------- CLASS M Proceeds from sales of shares (4,866 and 0 shares, respectively) 100,100 -- Cost of shares repurchased (4,866 and 0 shares, respectively) (108,609) -- ------------- ------------- Total (8,509) -- ------------- ------------- DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (55,740,558) (17,889,000) ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS 74,741,232 (36,498,000) NET ASSETS Beginning of period 466,970,464 503,468,000 ------------- ------------- END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $ 541,711,696 $ 466,970,000 ------------- ------------- ------------- ------------- See Notes to Financial Statements 9 Phoenix-Engemann Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A ------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 Net asset value, beginning of period $ 20.43 $ 21.94 $ 19.28 $ 15.40 $ 16.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.16)(1) (0.16)(1)(2) (0.14)(1)(3) (0.06)(1) (0.03)(1) Net realized and unrealized gain (loss) 7.76 3.51 4.47 4.24 (0.57) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 7.60 3.35 4.33 4.18 (0.60) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- Change in net asset value 6.39 (1.51) 2.66 3.88 (0.60) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 26.82 $ 20.43 $ 21.94 $ 19.28 $ 15.40 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 37.41% 16.04%(2) 22.49%(3) 27.16% (3.75)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $441,146 $383,481 $426,785 $415,416 $391,831 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.58% 1.6%(2) 1.6%(3) 1.6% 1.6% Net investment income (loss) (0.72)% (0.7)%(2) (0.6)%(3) (0.3)% (0.2)% Portfolio turnover 119% 70.6% 70.1% 65.9% 53.8% CLASS B ------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $ 19.61 $ 21.40 $ 18.99 $ 15.28 $ 15.89 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.32)(1) (0.34)(1)(2) (0.31)(1)(3) (0.20)(1) (0.14)(1) Net realized and unrealized gain (loss) 7.41 3.41 4.39 4.21 (0.47) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 7.09 3.07 4.08 4.01 (0.61) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- Change in net asset value 5.88 (1.79) 2.41 3.71 (0.61) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 25.49 $ 19.61 $ 21.40 $ 18.99 $ 15.28 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 36.38% 15.13%(2) 21.52%(3) 26.26% (3.84)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $65,986 $54,267 $49,444 $34,786 $11,349 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.33% 2.4%(2) 2.3%(3) 2.4% 2.3% Net investment income (loss) (1.47)% (1.5)%(2) (1.5)%(3) (1.1)% (1.0)% Portfolio turnover 119% 70.6% 70.1% 65.9% 53.8% 10 See Notes to Financial Statements Phoenix-Engemann Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $ 19.61 $ 21.40 $ 18.99 $ 15.28 $ 15.89 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.32)(1) (0.34)(1)(2) (0.31)(1)(3) (0.20)(1) (0.14)(1) Net realized and unrealized gain (loss) 7.41 3.41 4.39 4.21 (0.47) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 7.09 3.07 4.08 4.01 (0.61) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (1.21) (4.86) (1.67) (0.30) -- -------- -------- -------- -------- -------- Change in net asset value 5.88 (1.79) 2.41 3.71 (0.61) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 25.49 $ 19.61 $ 21.40 $ 18.99 $ 15.28 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 36.38% 15.13%(2) 21.52%(3) 26.26% (3.84)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $34,580 $29,222 $27,239 $20,497 $6,136 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.33% 2.4%(2) 2.3%(3) 2.4% 2.3% Net investment income (loss) (1.47)% (1.5)%(2) (1.5)%(3) (1.1)% (1.0)% Portfolio turnover 119% 70.6% 70.1% 65.9% 53.8% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Growth Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $18,196. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would not have changed. (3) These amounts reflect the impact of a waiver of administration fees of $30,000. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would have been $(.14), $(.31) and $(.31), respectively, 22.49%, 21.52% and 21.52%, respectively, 1.6%, 2.4% and 2.4%, respectively, and (0.7)%, (1.5)% and (1.5)%, respectively. (4) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front- end or contingent deferred sales charge. (5) Inception date for Class B and Class C is January 3, 1994. See Notes to Financial Statements 11 INVESTMENTS AT DECEMBER 31, 1998 SHARES VALUE -------- ------------- COMMON STOCKS--99.4% BANKS (MAJOR REGIONAL)--3.3% State Street Corp....................... 25,000 $ 1,739,062 Wells Fargo & Co........................ 269,400 10,759,162 ------------- 12,498,224 ------------- BEVERAGES (NON-ALCOHOLIC)--2.2% Coca-Cola Co. (The)..................... 87,850 5,874,969 PepsiCo, Inc............................ 62,000 2,538,125 ------------- 8,413,094 ------------- CHEMICALS (DIVERSIFIED)--0.5% Monsanto Co............................. 40,000 1,900,000 COMMUNICATIONS EQUIPMENT--5.9% Lucent Technologies, Inc................ 130,000 14,300,000 Tellabs, Inc.(b)........................ 120,000 8,227,500 ------------- 22,527,500 ------------- COMPUTERS (HARDWARE)--3.7% Compaq Computer Corp.................... 198,200 8,312,012 Dell Computer Corp.(b).................. 80,000 5,855,000 ------------- 14,167,012 ------------- COMPUTERS (NETWORKING)--3.6% Cisco Systems, Inc.(b).................. 147,937 13,730,403 COMPUTERS (PERIPHERALS)--3.8% EMC Corp.(b)............................ 170,000 14,450,000 SHARES VALUE -------- ------------- COMPUTERS (SOFTWARE & SERVICES)--7.9% BMC Software, Inc.(b)................... 180,000 $ 8,021,250 Compuware Corp.(b)...................... 57,000 4,453,125 Microsoft Corp.(b)...................... 84,400 11,705,225 Oracle Corp.(b)......................... 137,550 5,931,844 ------------- 30,111,444 ------------- CONSUMER FINANCE--0.5% MBNA Corp............................... 75,000 1,870,312 ELECTRICAL EQUIPMENT--3.1% General Electric Co..................... 115,000 11,737,187 ELECTRONICS (SEMICONDUCTORS)--6.9% Intel Corp.............................. 111,500 13,219,719 Texas Instruments, Inc.................. 154,000 13,176,625 ------------- 26,396,344 ------------- ENTERTAINMENT--0.9% Walt Disney Co. (The)................... 111,600 3,348,000 FINANCIAL (DIVERSIFIED)--7.7% American Express Co..................... 66,000 6,748,500 Citigroup, Inc.......................... 150,000 7,425,000 Freddie Mac............................. 168,250 10,841,609 Morgan Stanley, Dean Witter & Co........ 60,000 4,260,000 ------------- 29,275,109 ------------- HEALTH CARE (DIVERSIFIED)--2.5% American Home Products Corp............. 65,000 3,660,313 Johnson & Johnson....................... 68,000 5,703,500 ------------- 9,363,813 ------------- 14 See Notes to Financial Statements Phoenix-Engemann Nifty Fifty Fund SHARES VALUE -------- ------------- HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--6.9% Merck & Co., Inc........................ 56,300 $ 8,314,806 Pfizer, Inc............................. 121,950 15,297,103 Schering-Plough Corp.................... 50,000 2,762,500 ------------- 26,374,409 ------------- HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--4.2% Medtronic, Inc.......................... 216,300 16,060,275 HOUSEHOLD PRODUCTS (NON-DURABLES)--1.6% Colgate-Palmolive Co.................... 65,600 6,092,600 INSURANCE (MULTI-LINE)--2.0% American International Group, Inc....... 77,000 7,440,125 INVESTMENT BANKING/BROKERAGE--2.0% Merrill Lynch & Co., Inc................ 116,000 7,743,000 INVESTMENT MANAGEMENT--1.1% Franklin Resources, Inc................. 90,400 2,892,800 Price (T. Rowe) Associates, Inc......... 40,000 1,370,000 ------------- 4,262,800 ------------- LODGING-HOTELS--2.7% Carnival Corp........................... 214,700 10,305,600 MANUFACTURING (DIVERSIFIED)--0.6% Tyco International Ltd.................. 365 27,541 United Technologies Corp................ 20,000 2,175,000 ------------- 2,202,541 ------------- PERSONAL CARE--2.4% Gillette Co............................. 190,600 9,208,363 RESTAURANTS--2.0% McDonald's Corp......................... 101,000 7,739,125 RETAIL (BUILDING SUPPLIES)--3.4% Home Depot, Inc. (The).................. 130,000 7,954,375 SHARES VALUE -------- ------------- RETAIL (BUILDING SUPPLIES)--CONTINUED Lowe's Companies, Inc................... 100,300 $ 5,134,106 ------------- 13,088,481 ------------- RETAIL (DEPARTMENT STORES)--0.7% Kohl's Corp.(b)......................... 40,000 2,457,500 RETAIL (DRUG STORES)--1.5% Walgreen Co............................. 95,000 5,563,438 RETAIL (GENERAL MERCHANDISE)--2.1% Dayton Hudson Corp...................... 145,000 7,866,250 RETAIL (SPECIALTY)--1.0% Staples, Inc.(b)........................ 82,500 3,604,219 SERVICES (ADVERTISING/MARKETING)--1.3% Interpublic Group of Companies, Inc. (The)................................... 60,000 4,785,000 SERVICES (COMMERCIAL & CONSUMER)--3.4% Cendant Corp.(b)........................ 677,000 12,905,313 SERVICES (DATA PROCESSING)--0.5% Automatic Data Processing, Inc.......... 25,000 2,004,688 TELECOMMUNICATIONS (LONG DISTANCE)--5.9% MCI WorldCom, Inc.(b)................... 315,000 22,601,250 TOBACCO--1.6% Philip Morris Companies, Inc............ 110,650 5,919,775 - - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $198,933,779) 378,013,194 - - ----------------------------------------------------------------------------- TOTAL INVESTMENTS --99.4% (IDENTIFIED COST $198,933,779) 378,013,194(a) Cash and receivables, less liabilities--0.6% 2,436,072 -------------- NET ASSETS--100.0% $ 380,449,266 -------------- -------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $178,052,473 and gross depreciation of $2,319,680 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $202,280,401. (b) Non-income producing. See Notes to Financial Statements 15 Phoenix-Engemann Nifty Fifty Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $198,933,779) $378,013,194 Cash 2,897,862 Receivables Fund shares sold 605,483 Dividends and interest 167,239 ------------ Total assets 381,683,778 ------------ LIABILITIES Payables Fund shares repurchased 341,177 Distribution fee 446,038 Investment advisory fee 250,368 Administration fee 158,073 Trustees' fee 1,784 Accrued expenses 37,072 ------------ Total liabilities 1,234,512 ------------ NET ASSETS $380,449,266 ------------ ------------ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $184,321,838 Accumulated net realized gain 17,048,013 Net unrealized appreciation 179,079,415 ------------ NET ASSETS $380,449,266 ------------ ------------ CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $235,064,848) 6,057,862 Net asset value per share $38.80 Offering price per share $38.80/(1-4.75%) $40.73 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $96,983,082) 2,606,496 Net asset value and offering price per share $37.21 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $48,401,336) 1,300,849 Net asset value and offering price per share $37.21 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 2,870,327 Interest 320,928 Foreign taxes withheld (8,352) ------------ Total investment income 3,182,903 ------------ EXPENSES Investment advisory fee 2,617,212 Distribution fee, Class A 499,686 Distribution fee, Class B 790,426 Distribution fee, Class C 418,993 Distribution fee, Class M 429 Administration 1,654,508 Professional 39,187 Trustees 14,667 ------------ Total expenses 6,035,108 ------------ NET INVESTMENT LOSS (2,852,205) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on securities 24,005,577 Net change in unrealized appreciation (depreciation) on investments 76,678,083 ------------ NET GAIN ON INVESTMENTS 100,683,660 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 97,831,455 ------------ ------------ 16 See Notes to Financial Statements Phoenix-Engemann Nifty Fifty Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------- ------------- FROM OPERATIONS Net investment income (loss) $ (2,852,205) $ (2,495,000) Net realized gain (loss) 24,005,577 23,555,000 Net change in unrealized appreciation (depreciation) 76,678,083 21,916,000 ------------- ------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 97,831,455 42,976,000 ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized gains, Class A (3,938,869) (13,104,000) Net realized gains, Class B (1,688,560) (5,183,000) Net realized gains, Class C (844,698) (3,031,000) ------------- ------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (6,472,127) (21,318,000) ------------- ------------- FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (1,393,163 and 1,403,000 shares, respectively) 45,389,712 42,888,000 Net asset value of shares issued from reinvestment of distributions (94,125 and 417,000 shares, respectively) 3,589,938 11,853,000 Cost of shares repurchased (1,467,112 and 1,272,000 shares, respectively) (47,556,423) (38,417,000) ------------- ------------- Total 1,423,227 16,324,000 ------------- ------------- CLASS B Proceeds from sales of shares (498,534 and 681,000 shares, respectively) 15,592,450 19,549,000 Net asset value of shares issued from reinvestment of distributions (40,281 and 166,000 shares, respectively) 1,473,476 4,576,000 Cost of shares repurchased (341,912 and 259,000 shares, respectively) (10,575,072) (7,706,000) ------------- ------------- Total 6,490,854 16,419,000 ------------- ------------- CLASS C Proceeds from sales of shares (213,942 and 551,000 shares, respectively) 6,658,822 15,687,000 Net asset value of shares issued from reinvestment of distributions (20,953 and 101,000 shares, respectively) 766,453 2,780,000 Cost of shares repurchased (342,357 and 252,000 shares, respectively) (10,440,823) (7,370,000) ------------- ------------- Total (3,015,548) 11,097,000 ------------- ------------- CLASS M Proceeds from sales of shares (3,392 and 0 shares, respectively) 100,100 -- Net asset value of shares issued from reinvestment of distributions (0 and 0 shares, respectively) -- -- Cost of shares repurchased (3,392 and 0 shares, respectively) (111,184) -- ------------- ------------- Total (11,084) -- ------------- ------------- INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 4,887,449 43,840,000 ------------- ------------- NET INCREASE IN NET ASSETS 96,246,777 65,498,000 NET ASSETS Beginning of period 284,202,489 218,704,000 ------------- ------------- END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $ 380,449,266 $ 284,202,000 ------------- ------------- ------------- ------------- See Notes to Financial Statements 17 Phoenix-Engemann Nifty Fifty Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994 Net asset value, beginning of period $ 29.21 $ 26.50 $ 22.18 $ 17.30 $ 17.12 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.20)(1) (0.20)(1)(2) (0.12)(1)(3) (0.05)(1) (0.03)(1) Net realized and unrealized gain (loss) 10.45 5.23 6.00 4.93 0.21 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 10.25 5.03 5.88 4.88 0.18 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- Change in net asset value 9.59 2.71 4.32 4.88 0.18 -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 38.80 $ 29.21 $ 26.50 $ 22.18 $ 17.30 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 35.13% 19.23%(2) 26.53%(3) 28.21% 1.05% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $235,065 $176,378 $145,469 $122,322 $100,596 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.60% 1.6%(2) 1.7%(3) 1.9% 1.9% Net investment income (loss) (0.61)% (0.7)%(2) (0.4)%(3) (0.3)% (0.2)% Portfolio turnover 92% 68.8% 41.9% 26.5% 23.2% CLASS B ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $ 28.24 $ 25.88 $ 21.85 $ 17.17 $ 17.02 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.43)(1) (0.42)(1)(2) (0.30)(1)(3) (0.21)(1) (0.14)(1) Net realized and unrealized gain (loss) 10.06 5.10 5.89 4.89 0.29 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 9.63 4.68 5.59 4.68 0.15 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- Change in net asset value 8.97 2.36 4.03 4.68 0.15 -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 37.21 $ 28.24 $ 25.88 $ 21.85 $ 17.17 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 34.14% 18.33%(2) 25.60%(3) 27.26% 0.88% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $96,983 $68,051 $47,143 $27,462 $6,722 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.35% 2.4%(2) 2.5%(3) 2.6% 2.6% Net investment income (loss) (1.35)% (1.4)%(2) (1.2)%(3) (1.0)% (0.9)% Portfolio turnover 92% 68.8% 41.9% 26.5% 23.2% 18 See Notes to Financial Statements Phoenix-Engemann Nifty Fifty Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $ 28.24 $ 25.88 $ 21.85 $ 17.17 $ 17.02 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.43)(1) (0.42)(1)(2) (0.30)(1)(3) (0.21)(1) (0.15)(1) Net realized and unrealized gain (loss) 10.06 5.10 5.89 4.89 0.30 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 9.63 4.68 5.59 4.68 0.15 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- Dividends from net realized gains (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.66) (2.32) (1.56) -- -- -------- -------- -------- -------- -------- Change in net asset value 8.97 2.36 4.03 4.68 0.15 -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 37.21 $ 28.24 $ 25.88 $ 21.85 $ 17.17 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 34.14% 18.33%(2) 25.60%(3) 27.26% 0.88% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $48,401 $39,773 $26,092 $15,105 $4,283 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.35% 2.4%(2) 2.5%(3) 2.6% 2.6% Net investment income (loss) (1.35)% (1.4)%(2) (1.2)%(3) (1.0)% (0.9)% Portfolio turnover 92% 68.8% 41.9% 26.5% 23.2% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Nifty Fifty Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $42,459. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would have been $(.20), $(.42) and $(.42), respectively, 19.23%, 18.33% and 18.33%, respectively, 1.6%, 2.4% and 2.4%, respectively, and (0.7)%, (1.5)% and (1.5)%, respectively. (3) These amounts reflect the impact of a waiver of administration fees of $70,000. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would have been $(.13), $(.31) and $(.31), respectively, 26.48%, 25.55% and 25.55%, respectively, 1.8%, 2.5% and 2.5%, respectively, and (0.5)%, (1.3)% and (1.3)%, respectively. (4) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front- end or contingent deferred sales charge. (5) Inception date for Class B and Class C is January 3, 1994. See Notes to Financial Statements 19 INVESTMENTS AT DECEMBER 31, 1998 STANDARD & POOR'S PAR RATING VALUE (Unaudited) (000) VALUE ------------ --------- ------------ U.S. GOVERNMENT SECURITIES--27.2% U.S. TREASURY BONDS-- 13.9% U.S. Treasury Bonds 6%, 2/15/26......... AAA $ 11,700 $ 12,791,443 U.S. TREASURY NOTES--13.3% U.S. Treasury Notes 6.50%, 8/15/05...... AAA 11,100 12,203,635 - - --------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $23,936,183) 24,995,078 - - --------------------------------------------------------------------------------- SHARES ------- COMMON STOCKS--69.7% BANKS (MAJOR REGIONAL)--2.6% State Street Corp....................... 11,000 765,187 Wells Fargo & Co........................ 41,000 1,637,437 ------------- 2,402,624 ------------- BEVERAGES (NON-ALCOHOLIC)--1.0% Coca-Cola Co. (The)..................... 13,900 929,562 COMMUNICATIONS EQUIPMENT--3.8% Lucent Technologies, Inc................ 19,000 2,090,000 Tellabs, Inc.(b)........................ 20,000 1,371,250 ------------- 3,461,250 ------------- COMPUTERS (HARDWARE)--1.6% Compaq Computer Corp.................... 35,000 1,467,812 SHARES VALUE ------- ------------- COMPUTERS (NETWORKING)--2.1% Cisco Systems, Inc.(b).................. 20,400 $ 1,893,375 COMPUTERS (PERIPHERALS)--2.1% EMC Corp.(b)............................ 23,000 1,955,000 COMPUTERS (SOFTWARE & SERVICES)--5.4% BMC Software, Inc.(b)................... 29,000 1,292,313 Compuware Corp.(b)...................... 10,000 781,250 Microsoft Corp.(b)...................... 13,920 1,930,530 Oracle Corp.(b)......................... 21,800 940,125 ------------- 4,944,218 ------------- ELECTRICAL EQUIPMENT--1.7% General Electric Co..................... 15,000 1,530,938 ELECTRONICS (SEMICONDUCTORS)--6.8% Intel Corp.............................. 34,000 4,031,125 Texas Instruments, Inc.................. 26,000 2,224,625 ------------- 6,255,750 ------------- ENTERTAINMENT--1.4% Walt Disney Co. (The)................... 41,670 1,250,100 FINANCIAL (DIVERSIFIED)--5.4% American Express Co..................... 11,500 1,175,875 Citigroup, Inc.......................... 20,000 990,000 Freddie Mac............................. 37,100 2,390,631 Morgan Stanley, Dean Witter & Co.(b).... 6,000 426,000 ------------- 4,982,506 ------------- See Notes to Financial Statements 23 Phoenix-Engemann Balanced Return Fund SHARES VALUE ------- ------------- HEALTH CARE (DIVERSIFIED)--1.1% Johnson & Johnson....................... 12,000 $ 1,006,500 HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--5.7% Merck & Co., Inc........................ 18,000 2,658,375 Pfizer, Inc............................. 20,300 2,546,381 ------------- 5,204,756 ------------- HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.1% Medtronic, Inc.......................... 25,800 1,915,650 HOUSEHOLD PRODUCTS (NON-DURABLES)--1.6% Colgate-Palmolive Co.................... 15,500 1,439,563 INSURANCE (MULTI-LINE)--2.1% American International Group, Inc....... 20,000 1,932,500 INVESTMENT BANKING/BROKERAGE--0.5% Merrill Lynch & Co., Inc................ 7,000 467,250 INVESTMENT MANAGEMENT--1.7% Franklin Resources, Inc................. 29,000 928,000 Price (T. Rowe) Associates, Inc......... 19,000 650,750 ------------- 1,578,750 ------------- LODGING-HOTELS--2.6% Carnival Corp........................... 50,000 2,400,000 PERSONAL CARE--1.5% Gillette Co............................. 28,000 1,352,750 RAILROADS--1.3% Kansas City Southern Industries, Inc.... 25,000 1,229,688 SHARES VALUE ------- ------------- RESTAURANTS--2.5% McDonald's Corp......................... 29,450 $ 2,256,606 RETAIL (BUILDING SUPPLIES)--1.9% Home Depot, Inc. (The).................. 29,000 1,774,438 RETAIL (DRUG STORES)--0.8% Walgreen Co............................. 11,800 691,038 RETAIL (GENERAL MERCHANDISE)--2.2% Dayton Hudson Corp...................... 38,000 2,061,500 SERVICES (ADVERTISING/MARKETING)--2.1% Interpublic Group of Companies, Inc. (The)................................... 24,000 1,914,000 SERVICES (COMMERCIAL & CONSUMER)--0.8% Cendant Corp.(b)........................ 38,000 724,375 TELECOMMUNICATIONS (LONG DISTANCE)--3.6% MCI WorldCom, Inc.(b)................... 46,000 3,300,500 TOBACCO--1.7% Philip Morris Companies, Inc............ 30,000 1,605,000 - - --------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $31,126,112) 63,927,999 - - --------------------------------------------------------------------------------------------- TOTAL INVESTMENTS--96.9% (IDENTIFIED COST $55,062,295) 88,923,077(a) Cash and receivables, less liabilities--3.1% 2,819,210 ------------- NET ASSETS--100.0% $ 91,742,287 ------------- ------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $33,737,432 and gross depreciation of $53,178 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $55,238,823. (b) Non-income producing. 24 See Notes to Financial Statements Phoenix-Engemann Balanced Return Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $55,062,295) $ 88,923,077 Cash 2,361,921 Receivables Dividends and interest 588,155 Fund shares sold 174,923 ------------- Total assets 92,048,076 ------------- LIABILITIES Payables Fund shares repurchased 89,784 Distribution fee 84,986 Investment advisory fee 56,927 Administration fee 41,876 Trustees' fee 6,464 Accrued expenses 25,752 ------------- Total liabilities $ 305,789 ------------- NET ASSETS $ 91,742,287 ------------- ------------- NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $ 54,879,407 Accumulated net realized gain 3,002,098 Net unrealized appreciation 33,860,782 ------------- NET ASSETS $ 91,742,287 ------------- ------------- CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $72,619,667) 2,085,244 Net asset value per share $34.83 Offering price per share $34.83/(1-4.75%) $36.57 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $11,512,253) 334,934 Net asset value and offering price per share $34.37 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $7,610,367) 220,980 Net asset value and offering price per share $34.44 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 546,292 Interest 1,650,792 Foreign taxes withheld (3,257) ------------- Total investment income 2,193,827 ------------- EXPENSES Investment advisory fee 602,837 Distribution fee, Class A 158,546 Distribution fee, Class B 90,270 Distribution fee, Class C 64,475 Distribution fee, Class M 414 Administration 444,883 Professional 27,087 Trustees 14,667 ------------- Total expenses 1,403,179 ------------- NET INVESTMENT INCOME 790,648 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on securities 8,795,193 Net change in unrealized appreciation (depreciation) on investments 11,029,950 ------------- NET GAIN ON INVESTMENTS 19,825,143 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,615,791 ------------- ------------- See Notes to Financial Statements 25 Phoenix-Engemann Balanced Return Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------ ------------ FROM OPERATIONS Net investment income (loss) $ 790,648 $ 562,000 Net realized gain (loss) 8,795,193 7,971,000 Net change in unrealized appreciation (depreciation) 11,029,950 2,552,000 ------------ ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 20,615,791 11,085,000 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A (718,900) (537,000) Net investment income, Class B (51,501) (22,000) Net investment income, Class C (31,607) (15,000) Net realized gains, Class A (4,454,688) (6,686,000) Net realized gains, Class B (700,523) (824,000) Net realized gains, Class C (468,778) (659,000) ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (6,425,997) (8,743,000) ------------ ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (511,438 and 173,000 shares, respectively) 16,268,814 5,340,000 Net asset value of shares issued from reinvestment of distributions (140,176 and 233,000 shares, respectively) 4,824,840 6,692,000 Cost of shares repurchased (514,775 and 308,000 shares, respectively) (16,514,937) (9,485,000) ------------ ------------ Total 4,578,717 2,547,000 ------------ ------------ CLASS B Proceeds from sales of shares (138,818 and 92,000 shares, respectively) 4,376,531 2,810,000 Net asset value of shares issued from reinvestment of distributions (20,594 and 28,000 shares, respectively) 699,581 781,000 Cost of shares repurchased (72,187 and 38,000 shares, respectively) (2,275,763) (1,166,000) ------------ ------------ Total 2,800,349 2,425,000 ------------ ------------ CLASS C Proceeds from sales of shares (69,806 and 64,000 shares, respectively) 2,171,650 1,952,000 Net asset value of shares issued from reinvestment of distributions (13,470 and 22,000 shares, respectively) 458,553 633,000 Cost of shares repurchased (56,060 and 42,000 shares, respectively) (1,759,923) (1,322,000) ------------ ------------ Total 870,280 1,263,000 ------------ ------------ CLASS M Proceeds from sales of shares (3,393 and 0 shares, respectively) 100,100 -- Net asset value of shares issued from reinvestment of distributions (0 and 0 shares, respectively) -- -- Cost of shares repurchased (3,393 and 0 shares, respectively) (112,685) -- ------------ ------------ Total (12,585) -- ------------ ------------ INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 8,236,761 6,235,000 ------------ ------------ NET INCREASE IN NET ASSETS 22,426,555 8,577,000 NET ASSETS Beginning of period 69,315,732 60,739,000 ------------ ------------ END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $11,002, RESPECTIVELY] $ 91,742,287 $ 69,316,000 ------------ ------------ ------------ ------------ 26 See Notes to Financial Statements Phoenix-Engemann Balanced Return Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994 Net asset value, beginning of period $ 29.05 $ 28.08 $ 25.39 $ 20.54 $ 21.97 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.40 0.30(1)(2) 0.29(1)(3) 0.27(1) 0.39(1) Net realized and unrealized gain (loss) 8.03 4.98 4.23 5.31 (1.36) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 8.43 5.28 4.52 5.58 (0.97) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income (0.40) (0.32) (0.30) (0.29) (0.46) Dividends from net realized gains (2.25) (3.99) (1.53) (0.44) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (2.65) (4.31) (1.83) (0.73) (0.46) -------- -------- -------- -------- -------- Change in net asset value 5.78 0.97 2.69 4.85 (1.43) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 34.83 $ 29.05 $ 28.08 $ 25.39 $ 20.54 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 29.12% 18.98%(2) 17.78%(3) 27.18% (4.43)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $72,620 $56,610 $51,947 $52,028 $53,047 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.63% 1.7%(2) 2.0%(3) 2.1% 2.1% Net investment income (loss) 1.15% 1.0%(2) 1.1%(3) 1.2% 1.8% Portfolio turnover 124% 40.3% 35.1% 51.1% 28.2% CLASS B ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $28.76 $ 27.85 $ 25.26 $ 20.49 $ 21.89 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.13 0.08(1)(2) 0.09(1)(3) 0.08(1) 0.26(1) Net realized and unrealized gain (loss) 7.91 4.93 4.16 5.29 (1.32) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 8.04 5.01 4.25 5.37 (1.06) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income (0.18) (0.11) (0.13) (0.16) (0.34) Dividends from net realized gains (2.25) (3.99) (1.53) (0.44) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (2.43) (4.10) (1.66) (0.60) (0.34) -------- -------- -------- -------- -------- Change in net asset value 5.61 0.91 2.59 4.77 (1.40) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $34.37 $ 28.76 $ 27.85 $ 25.26 $ 20.49 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 28.06% 18.15%(2) 16.82%(3) 26.20% (4.85)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $ 11,512 $ 7,125 $ 4,609 $ 2,721 $ 1,223 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.38% 2.4%(2) 2.7%(3) 2.9% 2.9% Net investment income (loss) 0.39% 0.3%(2) 0.3%(3) 0.3% 1.3% Portfolio turnover 124% 40.3% 35.1% 51.1% 28.2% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Balanced Return Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $33,360. Absent the waiver, net investment income per share, total return and the ratios of expenses and net investment income to average net assets for Class A, Class B and Class C shares would have been $.29, $.06 and $.06, respectively, 18.98%, 18.15% and 18.11%, respectively, 1.7%, 2.5% and 2.5%, respectively, and 0.9%, 0.2% and 0.2%, respectively. (3) These amounts reflect the impact of a waiver of administration fees of $55,000. Absent the waiver, net investment income per share, total return and the ratios of expenses and net investment income to average net assets for Class A, Class B and Class C shares would have been $.27, $.06 and $.06, respectively, 17.66%, 16.74% and 16.71%, respectively, 2.1%, 2.8% and 2.8%, respectively, and 1.0%, 0.2% and 0.2%, respectively. (4) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front- end or contingent deferred sales charge. (5) Inception date for Class B and Class C is January 3, 1994. See Notes to Financial Statements 27 Phoenix-Engemann Balanced Return Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------- 1998 1997 1996 1995 1994(5) Net asset value, beginning of period $ 28.80 $ 27.88 $ 25.28 $ 20.48 $ 21.89 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.14 0.08(1)(2) 0.09(1)(3) 0.07(1) 0.25(1) Net realized and unrealized gain (loss) 7.92 4.92 4.16 5.30 (1.31) -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 8.06 5.00 4.25 5.37 (1.06) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income (0.17) (0.09) (0.12) (0.13) (0.35) Dividends from net realized gains (2.25) (3.99) (1.53) (0.44) -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (2.42) (4.08) (1.65) (0.57) (0.35) -------- -------- -------- -------- -------- Change in net asset value 5.64 0.92 2.60 4.80 (1.41) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 34.44 $ 28.80 $ 27.88 $ 25.28 $ 20.48 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 28.07% 18.11%(2) 16.79%(3) 26.23% (4.85)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $ 7,610 $ 5,581 $ 4,183 $ 2,809 $ 1,449 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.38% 2.4%(2) 2.7%(3) 2.9% 2.9% Net investment income (loss) 0.39% 0.3%(2) 0.3%(3) 0.3% 1.3% Portfolio turnover 124% 40.3% 35.1% 51.1% 28.2% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Balanced Return Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $33,360. Absent the waiver, net investment income per share, total return and the ratios of expenses and net investment income to average net assets for Class A, Class B and Class C shares would have been $.29, $.06 and $.06, respectively, 18.98%, 18.15% and 18.11%, respectively, 1.7%, 2.5% and 2.5%, respectively, and 0.9%, 0.2% and 0.2%, respectively. (3) These amounts reflect the impact of a waiver of administration fees of $55,000. Absent the waiver, net investment income per share, total return and the ratios of expenses and net investment income to average net assets for Class A, Class B and Class C shares would have been $.27, $.06 and $.06, respectively, 17.66%, 16.74% and 16.71%, respectively, 2.1%, 2.8% and 2.8%, respectively, and 1.0%, 0.2% and 0.2%, respectively. (4) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front- end or contingent deferred sales charge. (5) Inception date for Class B and Class C is January 3, 1994. 28 See Notes to Financial Statements INVESTMENTS AT DECEMBER 31, 1998 SHARES VALUE --------- ------------ FOREIGN COMMON STOCKS--52.0% FINLAND--3.3% Nokia Corp. Sponsored ADR Class A (Communications Equipment).............. 6,100 $ 734,669 FRANCE--6.9% AXA-UAP Sponsored ADR (Insurance (Life/Health)).......................... 4,800 346,800 Alcatel SA ADR (Communications Equipment).............................. 10,100 246,819 Rhone-Poulenc Class A (Health Care (Drugs-Major Pharmaceuticals)).......... 6,000 308,915 Vivendi (Services (Commercial & Consumer)).............................. 2,500 648,943 ------------ 1,551,477 ------------ GERMANY--9.1% DaimlerChrysler AG (Automobiles)(b)..... 3,758 361,003 Hoechst AG (Chemicals).................. 6,500 269,676 SAP AG Sponsored ADR (Computers (Software & Services))(b)............... 23,000 829,437 Siemens AG (Manufacturing (Diversified)).......................... 4,100 269,555 Volkswagen AG (Automobiles)............. 3,900 315,649 ------------ 2,045,320 ------------ IRELAND--3.0% Allied Irish Banks PLC Sponsored ADR (Banks (Major Regional))................ 2,300 253,862 Elan Corp. PLC Sponsored ADR (Health Care (Drugs-Major Pharmaceuticals))(b).................... 6,100 424,331 ------------ 678,193 ------------ SHARES VALUE --------- ------------ ITALY--2.9% Luxottica Group SPA Sponsored ADR (Health Care (Medical Products & Supplies)).............................. 25,000 $ 300,000 Telecom Italia SPA Sponsored ADR (Communications Equipment).............. 4,000 348,000 ------------ 648,000 ------------ NETHERLANDS--7.5% ING Groep NV (Banks (Money Center))..... 11,725 715,370 Koninklijke Philips Electronics NV NY Registered Shares (Electrical Equipment).............................. 2,100 142,144 Unilever NV NY Registered Shares (Personal Care)......................... 3,100 257,106 Wolters Kluwer NV (Publishing).......... 2,626 562,234 ------------ 1,676,854 ------------ SINGAPORE--1.4% Datacraft Asia Ltd. (Communications Equipment).............................. 172,250 304,882 SOUTH KOREA--0.0% Kookmin Bank Sponsored GDR 144A (Banks (Money Center))(c)...................... 1 7 SWEDEN--2.1% Telefonaktiebolaget LM Ericsson Sponsored ADR (Communications Equipment).............................. 19,500 466,781 SWITZERLAND--5.8% Nestle SA Sponsored ADR (Foods)......... 2,200 239,465 Novartis AG NY Registered Shares (Health Care (Drugs--Major Pharmaceuticals)).... 160 314,530 32 See Notes to Financial Statements Phoenix-Engemann Global Growth Fund SHARES VALUE --------- ------------ SWITZERLAND--CONTINUED Zurich Allied AG Registered Shares (Insurance (Multi-Line))................ 1,020 $ 755,264 ------------ 1,309,259 ------------ UNITED KINGDOM--10.0% Amvescap PLC Sponsored ADR (Banks (Major Regional)).............................. 14,200 546,700 Cable & Wireless Communications PLC (Telecommunications (Cellular/Wireless))(b)................. 5,200 235,950 Hays PLC (Professional Services)........ 37,000 324,734 Ladbroke Group PLC (Gaming, Lottery & Parimutuel Companies)(b)................ 34,653 139,239 Rentokil Initial PLC (Services (Facilities & Environmental))........... 55,500 418,307 Vodafone Group PLC Sponsored ADR (Telecommunications (Cellular/Wireless)).................... 3,600 580,050 ------------ 2,244,980 ------------ - - ----------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $8,917,446) 11,660,422 - - ----------------------------------------------------------------------------- COMMON STOCKS--46.4% UNITED STATES--46.4% Affiliated Managers Group, Inc. (Investment Management)(b).............. 8,000 239,000 American Express Co. (Financial (Diversified)).......................... 2,785 284,766 American International Group, Inc. (Insurance (Multi-Line))................ 2,395 231,417 BMC Software, Inc. (Computers (Software & Services))(b)......................... 3,725 165,995 Carnival Corp. (Lodging-Hotels)......... 6,350 304,800 Cendant Corp. (Services (Commercial & Consumer))(b)........................... 5,184 98,820 Cisco Systems, Inc. (Computers (Networking))(b)........................ 3,910 362,897 Citigroup, Inc. (Financial (Diversified)).......................... 3,480 172,260 Coca-Cola Co. (The) (Beverages (Non-Alcoholic))........................ 2,775 185,578 Colgate-Palmolive Co. (Household Products (Non-Durables))................ 2,400 222,900 Compaq Computer Corp. (Computers (Hardware))............................. 4,140 173,621 SHARES VALUE --------- ------------ UNITED STATES--CONTINUED Compuware Corp. (Computers (Software & Services))(b)........................... 1,285 $ 100,391 Dayton Hudson Corp. (Retail (General Merchandise))........................... 5,445 295,391 EMC Corp. (Computers (Peripherals))(b)....................... 3,230 274,550 Federated Investors, Inc. (Investment Management)............................. 12,500 226,563 Franklin Resources, Inc. (Investment Management)............................. 3,365 107,680 Freddie Mac (Financial (Diversified))... 5,670 365,361 General Electric Co. (Electrical Equipment).............................. 2,245 229,130 Gillette Co. (Personal Care)............ 4,120 199,048 Home Depot, Inc. (The) (Retail (Building Supplies)).............................. 3,970 242,914 Intel Corp. (Electronics (Semiconductors))....................... 4,160 493,220 Interpublic Group of Companies, Inc. (The) (Services (Advertising/Marketing))................ 3,110 248,023 Johnson & Johnson (Health Care (Diversified)).......................... 1,880 157,685 Kansas City Southern Industries, Inc. (Railroads)............................. 3,410 167,729 Liberty Financial Co. (Financial (Diversified)).......................... 4,300 116,100 Lucent Technologies, Inc. (Communications Equipment).............. 2,675 294,250 MCI WorldCom, Inc. (Telecommunications (Long Distance))(b)..................... 5,690 408,258 McDonald's Corp. (Restaurants).......... 3,910 299,604 Medtronic, Inc. (Health Care (Medical Products & Supplies))................... 4,305 319,646 Merck & Co., Inc. (Health Care (Drugs-Major Pharmaceuticals)).......... 2,620 386,941 Microsoft Corp. (Computers (Software & Services))(b)........................... 2,050 284,309 Oracle Corp. (Computers (Software & Services))(b)........................... 2,785 120,103 Pfizer, Inc. (Health Care (Drugs-Major Pharmaceuticals))....................... 3,115 390,738 Philip Morris Companies, Inc. (Tobacco)............................... 4,500 240,750 Price (T. Rowe) Associates, Inc. (Investment Management)................. 3,640 124,670 Scottish Annuity & Life Holdings Ltd. (Insurance (Multi-Line))(b)............. 30,000 412,500 State Street Corp. (Banks (Major Regional)).............................. 1,940 134,951 Tellabs, Inc. (Communications Equipment)(b)........................... 2,500 171,406 See Notes to Financial Statements 33 Phoenix-Engemann Global Growth Fund SHARES VALUE --------- ------------ UNITED STATES--CONTINUED Texas Instruments, Inc. (Electronics (Semiconductors))....................... 3,870 $ 331,127 Waddell & Reed Financial, Inc. Class A (Financial (Diversified))............... 9,190 217,688 Walgreen Co. (Retail (Drug Stores))..... 1,895 110,976 Walt Disney Co. (The) (Entertainment)... 7,275 218,250 Wells Fargo & Co. (Banks (Major Regional)).............................. 7,075 282,558 ------------ 10,414,564 ------------ - - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $8,382,280) 10,414,564 - - ----------------------------------------------------------------------------- TOTAL INVESTMENTS--98.4% (IDENTIFIED COST $17,299,726) 22,074,986(a) Cash and receivables, less liabilities--1.6% 389,186 ------------- NET ASSETS--100.0% $ 22,464,172 ------------- ------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $5,013,095 and gross depreciation of $286,167 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $17,348,058. (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 $7 or less than 1% of net assets. 34 See Notes to Financial Statements Phoenix-Engemann Global Growth Fund INDUSTRY DIVERSIFICATION AS A PERCENTAGE OF THE VALUE OF TOTAL INVESTMENTS (UNAUDITED) Automobiles............................. 3.1% Banks (Major Regional).................. 5.5 Banks (Money Center).................... 3.2 Beverages (Non-Alcoholic)............... 0.8 Chemicals............................... 1.2 Communications Equipment................ 11.6 Computers (Hardware).................... 0.8 Computers (Networking).................. 1.7 Computers (Peripherals)................. 1.2 Computers (Software & Services)......... 6.8 Electrical Equipment.................... 1.7 Electronics (Semiconductors)............ 3.7 Entertainment........................... 1.0 Financial (Diversified)................. 5.2 Foods................................... 1.1 Gaming, Lottery & Parimutuel Companies............................... 0.6 Health Care (Diversified)............... 0.7 Health Care (Drugs-Major Pharmaceuticals)........................ 8.3 Health Care (Medical Products & Supplies)............................... 2.8 Household Products (Non-Durables)....... 1.0 Insurance (Life/Health)................. 1.6 Insurance (Multi-Line).................. 6.3 Investment Management................... 3.2 Lodging-Hotels.......................... 1.4 Manufacturing (Diversified)............. 1.2 Personal Care........................... 2.1 Professional Services................... 1.5 Publishing.............................. 2.5 Railroads............................... 0.8 Restaurants............................. 1.4 Retail (Building Supplies).............. 1.1 Retail (Drug Stores).................... 0.5 Retail (General Merchandise)............ 1.3 Services (Advertising/Marketing)........ 1.1 Services (Commercial & Consumer)........ 3.4 Services (Facilities & Environmental)... 1.9 Telecommunications (Cellular/Wireless)..................... 3.7 Telecommunications (Long Distance)...... 1.9 Tobacco................................. 1.1 --------- 100.0% --------- --------- See Notes to Financial Statements 35 Phoenix-Engemann Global Growth Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $17,299,726) $ 22,074,986 Receivables Investment securities sold 826,380 Fund shares sold 41,915 Dividends and interest 19,539 ------------- Total assets 22,962,820 ------------- LIABILITIES Payables Custodian 359,212 Fund shares repurchased 67,493 Distribution fee 16,728 Investment advisory fee 12,952 Administration fee 11,775 Trustees' fee 5,823 Accrued expenses 24,665 ------------- Total liabilities 498,648 ------------- NET ASSETS $ 22,464,172 ------------- ------------- NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $ 19,486,294 Accumulated net realized loss (1,798,408) Net unrealized appreciation 4,776,286 ------------- NET ASSETS $ 22,464,172 ------------- ------------- CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $13,452,636) 602,051 Net asset value per share $22.34 Offering price per share $22.34/(1-4.75%) $23.45 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $4,729,841) 215,634 Net asset value and offering price per share $21.93 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $4,281,695) 195,318 Net asset value and offering price per share $21.92 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 271,191 Interest 1,582 Foreign taxes withheld (21,640) ------------- Total investment income 251,133 ------------- EXPENSES Investment advisory fee 246,560 Distribution fee, Class A 34,832 Distribution fee, Class B 42,531 Distribution fee, Class C 41,424 Distribution fee, Class M 401 Administration 131,429 Professional 25,834 Trustees 12,923 ------------- Total expenses 535,934 Less expenses borne by investment adviser (38,757) ------------- Net expenses 497,177 ------------- NET INVESTMENT LOSS (246,044) ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on securities (1,655,274) Net realized gain on foreign currency transactions 6,574 Net change in unrealized appreciation (depreciation) on investments 4,509,782 Net change in unrealized appreciation (depreciation) on foreign currency and foreign currency transactions 1,017 ------------- NET GAIN ON INVESTMENTS 2,862,099 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,616,055 ------------- ------------- 36 See Notes to Financial Statements Phoenix-Engemann Global Growth Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------ ------------ FROM OPERATIONS Net investment income (loss) $ (246,044) $ (149,000) Net realized gain (loss) (1,648,700) 760,000 Net change in unrealized appreciation (depreciation) 4,510,799 203,000 ------------ ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,616,055 814,000 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized gains, Class A (120,705) (703,000) Net realized gains, Class B (41,681) (217,000) Net realized gains, Class C (36,810) (238,000) In excess of accumulated net realized gains, Class A (81,653) -- In excess of accumulated net realized gains, Class B (28,196) -- In excess of accumulated net realized gains, Class C (24,901) -- ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (333,946) (1,158,000) ------------ ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (243,697 and 391,000 shares, respectively) 5,188,236 8,211,000 Net asset value of shares issued from reinvestment of distributions (8,717 and 34,000 shares, respectively) 190,194 653,000 Cost of shares repurchased (253,582 and 223,000 shares, respectively) (5,341,266) (4,567,000) ------------ ------------ Total 37,164 4,297,000 ------------ ------------ CLASS B Proceeds from sales of shares (82,048 and 138,000 shares, respectively) 1,741,279 2,861,000 Net asset value of shares issued from reinvestment of distributions (3,137 and 10,000 shares, respectively) 67,204 199,000 Cost of shares repurchased (38,086 and 25,000 shares, respectively) (810,368) (492,000) ------------ ------------ Total 998,115 2,568,000 ------------ ------------ CLASS C Proceeds from sales of shares (47,457 and 180,000 shares, respectively) 1,013,490 3,790,000 Net asset value of shares issued from reinvestment of distributions (2,766 and 11,000 shares, respectively) 59,214 200,000 Cost of shares repurchased (47,553 and 4,000 shares, respectively) (985,469) (84,000) ------------ ------------ Total 87,235 3,906,000 ------------ ------------ CLASS M Proceeds from sales of shares (5,050 and 0 shares, respectively) 100,100 -- Net asset value of shares issued from reinvestment of distributions (0 and 0 shares, respectively) -- -- Cost of shares repurchased (5,050 and 0 shares, respectively) (101,405) -- ------------ ------------ Total (1,305) -- ------------ ------------ INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 1,121,209 10,771,000 ------------ ------------ NET INCREASE IN NET ASSETS 3,403,318 10,427,000 NET ASSETS Beginning of period 19,060,854 8,634,000 ------------ ------------ END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $ 22,464,172 $ 19,061,000 ------------ ------------ ------------ ------------ See Notes to Financial Statements 37 Phoenix-Engemann Global Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A ------------------------------------------------------------------------ YEAR ENDED DECEMBER 31 ------------------------------------------------------------------------ 1998 1997 1996 1995 1994 Net asset value, beginning of period $ 19.83 $ 19.06 $ 17.27 $ 14.06 $ 11.18 INCOME FROM INVESTMENT OPERATIONS(6) Net investment income (loss) (0.18)(1)(5) (0.19)(1)(2) 0.03(1)(3) 0.24(1)(3) 0.10(1)(3) Net realized and unrealized gain (loss) 3.02 2.29 3.55 3.11 2.78 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 2.84 2.10 3.58 3.35 2.88 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- (0.04) -- -- Dividends from net realized gains (0.20) (1.33) (1.75) (0.14) -- In excess of accumulated net realized gains (0.13) -- -- -- -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.33) (1.33) (1.79) (0.14) -- -------- -------- -------- -------- -------- Change in net asset value 2.51 0.77 1.79 3.21 2.88 -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 22.34 $ 19.83 $ 19.06 $ 17.27 $ 14.06 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 14.35% 11.27%(2) 21.77%(3) 23.84%(3) 25.76%(3) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $13,453 $11,964 $7,654 $3,203 $141 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.94% 2.0%(2) 0.8%(3) --%(3) --%(3) Net investment income (loss) (0.81)% (0.9)%(2) 0.1%(3) 1.4%(3) 0.8%(3) Portfolio turnover 95% 237.2% 220.3% 29.0% 479.3% CLASS B ---------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------- 1998 1997 1996 Net asset value, beginning of period $ 19.65 $ 19.04 $ 17.44(7) INCOME FROM INVESTMENT OPERATIONS(6) Net investment income (loss) (0.34)(1)(5) (0.35)(1)(2) (0.08)(1) Net realized and unrealized gain (loss) 2.95 2.29 1.82 ----- ----- ----- TOTAL FROM INVESTMENT OPERATIONS 2.61 1.94 1.74 ----- ----- ----- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- Dividends from net realized gains (0.20) (1.33) (0.14) In excess of accumulated net realized gains (0.13) -- -- ----- ----- ----- TOTAL DISTRIBUTIONS (0.33) (1.33) (0.14) ----- ----- ----- Change in net asset value 2.28 0.61 1.60 ----- ----- ----- NET ASSET VALUE, END OF PERIOD $ 21.93 $ 19.65 $ 19.04 ----- ----- ----- ----- ----- ----- Total return(4) 13.31% 10.44%(2) 9.98% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $4,730 $3,312 $874 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.69% 2.8%(2) 2.7%(8) Net investment income (loss) (1.59)% (1.7)%(2) (1.9)%(8) Portfolio turnover 95% 237.2% 220.3% 38 See Notes to Financial Statements Phoenix-Engemann Global Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ---------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------- 1998 1997 1996 Net asset value, beginning of period $ 19.65 $ 19.03 $ 17.88(7) INCOME FROM INVESTMENT OPERATIONS(6) Net investment income (loss) (0.33)(1)(5) (0.37)(1)(2) (0.04)(1) Net realized and unrealized gain (loss) 2.93 2.32 1.34 ----- ----- ----- TOTAL FROM INVESTMENT OPERATIONS 2.60 1.95 1.30 ----- ----- ----- LESS DISTRIBUTIONS Dividends from net investment income -- -- (0.01) Dividends from net realized gains (0.20) (1.33) (0.14) In excess of accumulated net realized gains (0.13) -- -- ----- ----- ----- TOTAL DISTRIBUTIONS (0.33) (1.33) (0.15) ----- ----- ----- Change in net asset value 2.27 0.62 1.15 ----- ----- ----- NET ASSET VALUE, END OF PERIOD $ 21.92 $ 19.65 $ 19.03 ----- ----- ----- ----- ----- ----- Total return(4) 13.26%(2) 10.50%(2) 7.28% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $4,282 $3,785 $106 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.69% 2.7%(2) 2.7%(8) Net investment income (loss) (1.57)% (1.8)%(2) (1.6)%(8) Portfolio turnover 95% 237.2% 220.3% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Global Growth Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $708. Absent the waiver, net investment income (loss) per share, total return and the ratios of expenses and net investment income (loss) to average net assets for Class A, Class B and Class C shares would have been $(.19), $(.35) and $(.37), respectively, 11.27%, 10.44% and 10.50%, respectively, 2.0%, 2.8% and 2.8%, respectively, and (0.9)%, (1.7)% and (1.8)%, respectively. (3) These amounts reflect the impact of a waiver of Manager fees of $62,438, $42,545 and $2,784 for the periods ended December 31, 1996, 1995 and 1994, respectively, and the Manager's reimbursement for income taxes of $13,109 during 1994. Absent waivers and reimbursement, net investment income (loss) per share, total return and ratios of expenses and net investment income (loss) to average net assets would have been $(.21), 21.71% and 2.0%, respectively, $(.15), 22.88% and 2.3%, respectively, and $(.21), 14.40% and 10.4% (2.3% if only normal and recurring expenses are taken into account), respectively, and $(.03), 11.40% and 2.3%, respectively, for the periods ended December 31, 1996, 1995 and 1994, respectively. (4) Total return measures the change in the value of an investment during each of the periods presented and does not include the impact of paying any sales charge. Total return for the periods ended December 31, 1996 (Class B and Class C only) have not been annualized. (5) Includes reimbursement of operating expenses by investment adviser of $0.04. (6) Distributions are made in accordance with the prospectus; however, class level per share income from investment operations may vary from anticipated results depending on the timing of share purchases and redemptions. (7) The beginning net asset value per share of Class B and Class C shares equals the net asset value per share of the Class A shares as of the first day Class B and Class C shares were sold, September 18, 1996 and October 21, 1996, respectively. (8) Annualized. See Notes to Financial Statements 39 INVESTMENTS AT DECEMBER 31, 1998 SHARES VALUE -------- ------------ COMMON STOCKS--97.1% BIOTECHNOLOGY--3.0% Coulter Pharmaceutical, Inc.(b)......... 30,000 $ 900,000 Incyte Pharmaceuticals, Inc.(b)......... 16,250 607,344 Inhale Therapeutic Systems(b)........... 30,000 990,000 Texas Biotechnology Corp.(b)............ 100,000 493,750 ------------ 2,991,094 ------------ COMPUTERS (NETWORKING)--0.8% Xylan Corp.(b).......................... 46,000 807,875 COMPUTERS (SOFTWARE & SERVICES)--12.2% Aspect Development, Inc.(b)............. 50,000 2,215,625 i2 Technologies, Inc.(b)................ 30,000 911,250 Inktomi Corp.(b)........................ 6,600 853,875 Legato Systems, Inc.(b)................. 30,000 1,978,125 Peregrine Systems, Inc.(b).............. 25,000 1,159,375 Rational Software Corp.(b).............. 40,000 1,060,000 Sapient Corp.(b)........................ 7,000 392,000 Software AG Systems, Inc.(b)............ 85,000 1,540,625 VeriSign, Inc.(b)....................... 20,000 1,182,500 Walker Interactive Systems, Inc.(b)..... 150,000 1,012,500 ------------ 12,305,875 ------------ CONSUMER FINANCE--2.5% Metris Companies, Inc................... 50,000 2,515,625 ELECTRONICS (INSTRUMENTATION)--3.7% Flextronics International Ltd.(b)....... 15,000 1,284,375 SHARES VALUE -------- ------------ ELECTRONICS (INSTRUMENTATION)--CONTINUED Micrel, Inc.(b)......................... 45,000 $ 2,475,000 ------------ 3,759,375 ------------ ELECTRONICS (SEMICONDUCTORS)--4.0% Applied Micro Circuits Corp.(b)......... 51,800 1,759,581 Vitesse Semiconductor Corp.(b).......... 50,000 2,281,250 ------------ 4,040,831 ------------ FINANCIAL (DIVERSIFIED)--2.5% American Capital Strategies Ltd......... 50,000 862,500 Federal Agricultural Mortgage Corp. Class C(b).............................. 21,000 779,625 HealthCare Financial Partners, Inc.(b)................................. 22,500 897,187 ------------ 2,539,312 ------------ HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.9% PharmaPrint, Inc.(b).................... 70,000 918,750 HEALTH CARE (HOSPITAL MANAGEMENT)--2.9% Curative Health Services, Inc.(b)....... 50,000 1,675,000 Health Management Associates, Inc. Class A(b).................................... 56,500 1,221,812 ------------ 2,896,812 ------------ HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.2% Schein (Henry), Inc.(b)................. 50,000 2,237,500 HEALTH CARE (SPECIALIZED SERVICES)--2.3% ALZA Corp.(b)........................... 30,000 1,567,500 42 See Notes to Financial Statements Phoenix-Engemann Small & Mid-Cap Growth Fund SHARES VALUE -------- ------------ HEALTH CARE (SPECIALIZED SERVICES)--CONTINUED PAREXEL International Corp.(b).......... 30,000 $ 750,000 ------------ 2,317,500 ------------ INSURANCE (MULTI-LINE)--3.1% Annuity and Life Re (Holdings) Ltd...... 56,250 1,518,750 Scottish Annuity & Life Holdings Ltd.(b)................................. 119,000 1,636,250 ------------ 3,155,000 ------------ INVESTMENT BANKING/BROKERAGE--0.8% Donaldson, Lufkin & Jenrette, Inc....... 20,000 820,000 LEISURE TIME (PRODUCTS)--7.1% Action Performance Companies, Inc.(b)... 83,000 2,936,125 International Speedway Corp. Class A.... 105,000 4,252,500 ------------ 7,188,625 ------------ OIL & GAS (EXPLORATION & PRODUCTION)--4.2% Pinnacle Oil International, Inc.(b)..... 224,500 4,265,500 RAILROADS--1.8% Kansas City Southern Industries, Inc.... 38,000 1,869,125 RESTAURANTS--4.9% CKE Restaurants, Inc.................... 86,900 2,558,119 Cheesecake Factory, Inc. (The)(b)....... 80,000 2,372,500 ------------ 4,930,619 ------------ RETAIL (COMPUTERS & ELECTRONICS)--1.3% CDW Computer Centers, Inc.(b)........... 13,800 1,323,937 RETAIL (FOOD CHAINS)--2.9% Whole Foods Market, Inc.(b)............. 60,000 2,902,500 RETAIL (GENERAL MERCHANDISE)--10.5% 99 Cents Only Stores(b)................. 62,500 3,070,312 Bed, Bath & Beyond, Inc.(b)............. 122,000 4,163,250 Cost Plus, Inc.(b)...................... 67,900 2,130,363 Lands' End, Inc.(b)..................... 18,500 498,344 Smart & Final, Inc...................... 75,000 721,875 ------------ 10,584,144 ------------ RETAIL (SPECIALTY)--10.7% Claire's Stores, Inc.................... 100,000 2,050,000 SHARES VALUE -------- ------------ RETAIL (SPECIALTY)--CONTINUED Lithia Motors, Inc. Class A(b).......... 55,000 $ 907,500 MSC Industrial Direct Co., Inc. Class A(b).................................... 120,000 2,715,000 Restoration Hardware, Inc.(b)........... 113,000 3,036,875 Sonic Automotive, Inc.(b)............... 45,000 1,549,688 United Auto Group, Inc.(b).............. 55,000 505,313 ------------ 10,764,376 ------------ SAVINGS & LOAN COMPANIES--0.6% Staten Island Bancorp, Inc.............. 30,000 598,125 SERVICES (ADVERTISING/MARKETING)--1.6% Abacus Direct Corp.(b).................. 35,000 1,592,500 SERVICES (COMMERCIAL & CONSUMER)--7.1% Budget Group, Inc. Class A(b)........... 80,400 1,276,350 MAXIMUS, Inc.(b)........................ 30,000 1,110,000 United Rentals (North America), Inc.(b)................................. 144,000 4,770,000 ------------ 7,156,350 ------------ SERVICES (DATA PROCESSING)--2.4% NCO Group, Inc.(b)...................... 53,000 2,385,000 TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.1% WinStar Communications, Inc.(b)......... 28,000 1,092,000 - - ---------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $74,530,617) 97,958,350 - - ---------------------------------------------------------------------------- FOREIGN COMMON STOCKS--1.0% OIL & GAS (EXPLORATION & PRODUCTION)--1.0% Encal Energy Ltd. (Canada)(b)........... 270,200 1,002,734 - - ---------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $987,612) 1,002,734 - - ---------------------------------------------------------------------------- TOTAL INVESTMENTS--98.1% (IDENTIFIED COST $75,518,229) 98,961,084(a) Cash and receivables, less liabilities--1.9% 1,879,463 -------------- NET ASSETS--100.0% $ 100,840,547 -------------- -------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $25,127,406 and gross depreciation of $2,161,509 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $75,995,187. (b) Non-income producing. See Notes to Financial Statements 43 Phoenix-Engemann Small & Mid-Cap Growth Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $75,518,229) $ 98,961,084 Cash 2,051,179 Receivables Fund shares sold 646,150 Dividends and interest 17,016 ------------- Total assets 101,675,429 ------------- LIABILITIES Payables Investment securities purchased 473,434 Fund shares repurchased 94,465 Distribution fee 122,081 Investment advisory fee 69,667 Administration fee 42,614 Trustees' fee 6,812 Accrued expenses 25,809 ------------- Total liabilities 834,882 ------------- NET ASSETS $ 100,840,547 ------------- ------------- NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest 88,412,046 Accumulated net realized loss (11,014,354) Net unrealized appreciation 23,442,855 ------------- NET ASSETS $ 100,840,547 ------------- ------------- CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $54,186,652) 2,250,328 Net asset value per share $24.08 Offering price per share $24.08/(1-4.75%) $25.28 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $31,631,170) 1,337,864 Net asset value and offering price per share $23.64 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $15,022,725) 635,861 Net asset value and offering price per share $23.63 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 141,693 Interest 160,603 ------------- Total investment income 302,296 ------------- EXPENSES Investment advisory fee 740,594 Distribution fee, Class A 102,801 Distribution fee, Class B 236,341 Distribution fee, Class C 118,976 Distribution fee, Class M 426 Administration 433,926 Professional 27,083 Trustees 14,648 ------------- Total expenses 1,674,795 Less expenses borne by investment adviser (41,731) ------------- Net expenses 1,633,064 ------------- NET INVESTMENT LOSS (1,330,768) ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on securities (10,304,077) Net realized gain on foreign currency transactions 375 Net change in unrealized appreciation (depreciation) on investments 22,375,638 ------------- NET GAIN ON INVESTMENTS 12,071,936 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,741,168 ------------- ------------- 44 See Notes to Financial Statements Phoenix-Engemann Small & Mid-Cap Growth Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------- ------------ FROM OPERATIONS Net investment income (loss) $ (1,330,768) $ (498,000) Net realized gain (loss) (10,303,702) 4,530,000 Net change in unrealized appreciation (depreciation) 22,375,638 698,000 ------------- ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 10,741,168 4,730,000 ------------- ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS In excess of accumulated net realized gains, Class A (48,557) (2,443,000) In excess of accumulated net realized gains, Class B (28,857) (1,543,000) In excess of accumulated net realized gains, Class C (13,819) (718,000) ------------- ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (91,233) (4,704,000) ------------- ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (1,832,747 and 1,013,000 shares, respectively) 39,721,245 21,556,000 Net asset value of shares issued from reinvestment of distributions (2,097 and 115,000 shares, respectively) 46,145 2,307,000 Cost of shares repurchased (901,103 and 239,000 shares, respectively) (19,287,058) (4,740,000) ------------- ------------ Total 20,480,332 19,123,000 ------------- ------------ CLASS B Proceeds from sales of shares (776,437 and 706,000 shares, respectively) 16,692,888 15,726,000 Net asset value of shares issued from reinvestment of distributions (1,267 and 67,000 shares, respectively) 27,357 1,327,000 Cost of shares repurchased (268,731 and 25,000 shares, respectively) (5,454,844) (514,000) ------------- ------------ Total 11,265,401 16,539,000 ------------- ------------ CLASS C Proceeds from sales of shares (389,879 and 364,000 shares, respectively) 8,174,670 7,688,000 Net asset value of shares issued from reinvestment of distributions (580 and 33,000 shares, respectively) 12,526 659,000 Cost of shares repurchased (141,833 and 13,000 shares, respectively) (2,899,692) (279,000) ------------- ------------ Total 5,287,504 8,068,000 ------------- ------------ CLASS M Proceeds from sales of shares (5,260 and 0 shares, respectively) 110,536 -- Net asset value of shares issued from reinvestment of distributions (0 and 0 shares, respectively) -- -- Cost of shares repurchased (5,260 and 0 shares, respectively) (102,183) -- ------------- ------------ Total 8,353 -- ------------- ------------ INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 37,041,590 43,730,000 ------------- ------------ NET INCREASE IN NET ASSETS 47,691,525 43,756,000 NET ASSETS Beginning of period 53,149,022 9,393,000 ------------- ------------ END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $ 100,840,547 $ 53,149,000 ------------- ------------ ------------- ------------ See Notes to Financial Statements 45 Phoenix-Engemann Small & Mid-Cap Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A ------------------------------------------------------------------------ INCEPTION YEAR ENDED DECEMBER 31 10/10/94 -------------------------------------------------------- THROUGH 1998 1997 1996 1995 12/31/94 Net asset value, beginning of period $ 21.09 $ 18.39 $ 14.90 $ 12.07 $ 10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.30)(1)(7) (0.31)(1)(2) (0.12)(1)(3) 0.22(1)(3) 0.07(1)(3) Net realized and unrealized gain (loss) 3.31 5.07 7.45 2.87 2.00 -------- -------- -------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 3.01 4.76 7.33 3.09 2.07 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income -- -- (0.28) (0.08) -- Dividends from net realized gains -- (2.06) (3.56) (0.18) -- In excess of accumulated net realized gains (0.02) -- -- -- -- -------- -------- -------- -------- -------- TOTAL DISTRIBUTIONS (0.02) (2.06) (3.84) (0.26) -- -------- -------- -------- -------- -------- Change in net asset value 2.99 2.70 3.49 2.83 2.07 -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 24.08 $ 21.09 $ 18.39 $ 14.90 $ 12.07 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total return(4) 14.29% 26.41%(2) 52.37%(3) 25.68%(3) 20.70%(3) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $54,187 $27,771 $7,859 $1,742 $121 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.78% 1.80%(2) 1.10%(3) --%(3) --%(5) Net investment income (loss) (1.39)% (1.40)%(2) (0.70)%(3) 1.50%(3) 2.60%(5) Portfolio turnover 147% 313.5% 297.1% 121.4% 157.9% CLASS B ---------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------- 1998 1997 1996 Net asset value, beginning of period $ 20.87 $ 18.35 $ 16.44(6) INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.45)(1)(7) (0.46)(1)(2) (0.32)(1) Net realized and unrealized gain (loss) 3.24 5.04 2.43 ----- ----- ----- TOTAL FROM INVESTMENT OPERATIONS 2.79 4.58 2.11 ----- ----- ----- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- Dividends from net realized gains -- (2.06) (0.20) In excess of accumulated net realized gains (0.02) -- -- ----- ----- ----- TOTAL DISTRIBUTIONS (0.02) (2.06) (0.20) ----- ----- ----- Change in net asset value 2.77 2.52 1.91 ----- ----- ----- NET ASSET VALUE, END OF PERIOD $ 23.64 $ 20.87 $ 18.35 ----- ----- ----- ----- ----- ----- Total return(4) 13.39% 25.49%(2) 12.84% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $31,631 $17,298 $1,480 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.53% 2.60%(2) 2.60%(5) Net investment income (loss) (2.14)% (2.10)%(2) (2.20)%(5) Portfolio turnover 147% 313.5% 297.1% 46 See Notes to Financial Statements Phoenix-Engemann Small & Mid-Cap Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ---------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------- 1998 1997 1996 Net asset value, beginning of period $ 20.87 $ 18.35 $ 17.99(6) INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.45)(1)(7) (0.47)(1)(2) (0.29)(1) Net realized and unrealized gain (loss) 3.23 5.05 0.85 ----- ----- ----- TOTAL FROM INVESTMENT OPERATIONS 2.78 4.58 0.56 ----- ----- ----- LESS DISTRIBUTIONS Dividends from net investment income -- -- -- Dividends from net realized gains -- (2.06) (0.20) In excess of accumulated net realized gains (0.02) -- -- ----- ----- ----- TOTAL DISTRIBUTIONS (0.02) (2.06) (0.20) ----- ----- ----- Change in net asset value 2.76 2.52 0.36 ----- ----- ----- NET ASSET VALUE, END OF PERIOD $ 23.63 $ 20.87 $ 18.35 ----- ----- ----- ----- ----- ----- Total return(4) 13.34% 25.49%(2) 3.12% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $15,023 $8,080 $54 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.53% 2.60%(2) 2.60%(5) Net investment income (loss) (2.14)% (2.10)%(2) (2.20)%(5) Portfolio turnover 147% 313.5% 297.1% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Small & Mid-Cap Growth Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $1,128. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would have been $(.31), $(.46) and $(.47), respectively, 26.41%, 25.49% and 25.49%, respectively, and 1.8%, 2.6% and 2.6%, respectively, and (1.4)%, (2.1)% and (2.1)%, respectively. (3) These amounts reflect the impact of a waiver of Manager fees of $18,499, $13,443, and $585 for the periods ended December 31, 1996, 1995 and 1994, respectively, and the Manager's reimbursement for income taxes of $6,654 during 1994. Had the waivers and reimbursement not been made, net investment income (loss) per share, total return (not annualized for the period ended December 31, 1994) and the ratios of expenses and net investment income (loss) to average net assets (annualized for the period ended December 31, 1994) would have been $(.25), 51.35%, 1.9% and (1.4)%, respectively, $(.11), 23.40%, 2.3% and (0.8)%, respectively, and $(.01), 15.10%, 22.1% (2.3% if only normal and recurring expenses are taken into account) and (0.4)%, respectively, for the periods ended December 31, 1996, 1995 and 1994, respectively. (4) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front-end or contingent deferred sales charge. Total return for the periods ended December 31, 1996 (Class B and Class C only) and December 31, 1994 have not been annualized. (5) Annualized. (6) The beginning net asset value per share of Class B and Class C shares equals the net asset value per share of the Class A shares as of the first day Class B and Class C shares were sold, September 18, 1996 and October 8, 1996, respectively. (7) Includes reimbursement of operating expenses by investment adviser of $0.01. See Notes to Financial Statements 47 INVESTMENTS AT DECEMBER 31, 1998 SHARES VALUE ------- ------------ COMMON STOCKS--96.5% AUTO PARTS & EQUIPMENT--3.8% Dana Corp............................... 33,700 $ 1,377,487 AUTOMOBILES--9.0% Ford Motor Co........................... 26,700 1,566,956 General Motors Corp..................... 22,900 1,638,781 ------------ 3,205,737 ------------ BUILDING MATERIALS--4.0% Armstrong World Industries, Inc......... 23,500 1,417,344 CHEMICALS--6.9% Dow Chemical Co. (The).................. 14,700 1,336,781 Eastman Chemical Co..................... 24,900 1,114,275 ------------ 2,451,056 ------------ CHEMICALS (SPECIALTY)--6.9% Hercules, Inc........................... 41,800 1,144,275 Nalco Chemical Co....................... 42,600 1,320,600 ------------ 2,464,875 ------------ CONTAINERS (METAL & GLASS)--4.0% Crown Cork & Seal Co., Inc.............. 47,000 1,448,187 ELECTRONICS (INSTRUMENTATION)--5.9% Tektronix, Inc.......................... 70,300 2,113,394 IRON & STEEL--7.3% Allegheny Teledyne, Inc................. 68,400 1,397,925 SHARES VALUE ------- ------------ IRON & STEEL--CONTINUED USX-U. S. Steel Group................... 52,700 $ 1,212,100 ------------ 2,610,025 ------------ LEISURE TIME (PRODUCTS)--5.4% Brunswick Corp.......................... 77,300 1,913,175 MACHINERY (DIVERSIFIED)--17.2% Cooper Industries, Inc.................. 30,800 1,468,775 Milacron, Inc........................... 71,200 1,370,600 SPX Corp.(b)............................ 25,814 1,729,538 Timken Co. (The)........................ 83,100 1,568,512 ------------ 6,137,425 ------------ MANUFACTURING (DIVERSIFIED)--7.8% Aeroquip-Vickers, Inc................... 42,900 1,284,319 National Service Industries, Inc........ 39,400 1,497,200 ------------ 2,781,519 ------------ METALS MINING--3.4% Phelps Dodge Corp....................... 24,100 1,226,088 OIL & GAS (REFINING & MARKETING)--4.0% Sunoco, Inc............................. 39,300 1,417,256 OIL (DOMESTIC INTEGRATED)--3.3% Phillips Petroleum Co................... 27,900 1,189,238 TRUCKS & PARTS--7.6% Cummins Engine Co., Inc................. 40,800 1,448,400 50 See Notes to Financial Statements Phoenix-Engemann Value 25 Fund SHARES VALUE ------- ------------ TRUCKS & PARTS--CONTINUED PACCAR, Inc............................. 30,500 $ 1,254,313 ------------ 2,702,713 ------------ - - --------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $34,103,063) 34,455,519 - - --------------------------------------------------------------------------- FOREIGN COMMON STOCKS--2.4% AUTOMOBILES--2.4% DaimlerChrysler AG (Germany)(b)......... 9,100 874,169 - - --------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $450,281) 874,169 - - --------------------------------------------------------------------------- TOTAL INVESTMENTS --98.9% (IDENTIFIED COST $34,553,344) 35,329,688(a) Cash and receivables, less liabilities--1.1% 382,768 ------------- NET ASSETS--100.0% $ 35,712,456 ------------- ------------- (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $4,603,224 and gross depreciation of $3,896,645 for federal income tax purposes. At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $34,623,109. (b) Non-income producing. See Notes to Financial Statements 51 Phoenix-Engemann Value 25 Fund STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Investment securities at value (Identified cost $34,553,344) $ 35,329,688 Cash 394,657 Receivables Dividends and interest 83,602 Fund shares sold 37,869 ------------- Total assets 35,845,816 ------------- LIABILITIES Payables Fund shares repurchased 6,187 Distribution fee 54,643 Investment advisory fee 23,536 Administration fee 18,049 Trustees' fee 7,247 Accrued expenses 23,698 ------------- Total liabilities 133,360 ------------- NET ASSETS $ 35,712,456 ------------- ------------- NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $ 34,541,729 Undistributed net investment income 30,470 Accumulated net realized gain 363,913 Net unrealized appreciation 776,344 ------------- NET ASSETS $ 35,712,456 ------------- ------------- CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $18,089,672) 1,554,189 Net asset value per share $11.64 Offering price per share $11.64/(1-4.75%) $12.22 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $10,980,753) 947,391 Net asset value and offering price per share $11.59 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $6,642,031) 573,565 Net asset value and offering price per share $11.58 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Dividends $ 1,092,130 Interest 11,183 ------------- Total investment income 1,103,313 ------------- EXPENSES Investment advisory fee 329,629 Distribution fee, Class A 48,719 Distribution fee, Class B 105,179 Distribution fee, Class C 65,250 Distribution fee, Class M 500 Administration 219,418 Professional 24,871 Trustees 14,668 ------------- Total expenses 808,234 Less expenses borne by investment adviser (39,539) ------------- Net expenses 768,695 ------------- NET INVESTMENT INCOME 334,618 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on securities 2,097,474 Net change in unrealized appreciation (depreciation) on investments (352,262) ------------- NET GAIN ON INVESTMENTS 1,745,212 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,079,830 ------------- ------------- 52 See Notes to Financial Statements Phoenix-Engemann Value 25 Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended 12/31/97 Year Ended (Rounded to 12/31/98 thousands) ------------ ------------ FROM OPERATIONS Net investment income (loss) $ 334,618 $ 231,000 Net realized gain (loss) 2,097,474 1,504,000 Net change in unrealized appreciation (depreciation) (352,262) 1,133,000 ------------ ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,079,830 2,868,000 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A (211,860) (171,000) Net investment income, Class B (57,698) (37,000) Net investment income, Class C (35,805) (22,000) Net investment income, Class M (335) -- Net realized gains, Class A (869,860) (878,000) Net realized gains, Class B (538,067) (403,000) Net realized gains, Class C (327,380) (221,000) ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (2,041,005) (1,732,000) ------------ ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (447,148 and 1,831,000 shares, respectively) 5,386,173 20,131,000 Net asset value of shares issued from reinvestment of distributions (92,048 and 86,000 shares, respectively) 1,040,977 977,000 Cost of shares repurchased (673,296 and 277,000 shares, respectively) (7,993,719) (3,121,000) ------------ ------------ Total (1,566,569) 17,987,000 ------------ ------------ CLASS B Proceeds from sales of shares (297,032 and 770,000 shares, respectively) 3,568,146 8,726,000 Net asset value of shares issued from reinvestment of distributions (39,114 and 23,000 shares, respectively) 439,118 260,000 Cost of shares repurchased (151,755 and 30,000 shares, respectively) (1,790,599) (357,000) ------------ ------------ Total 2,216,665 8,629,000 ------------ ------------ CLASS C Proceeds from sales of shares (249,615 and 421,000 shares, respectively) 2,992,809 4,940,000 Net asset value of shares issued from reinvestment of distributions (30,269 and 17,000 shares, respectively) 339,363 197,000 Cost of shares repurchased (130,943 and 13,000 shares, respectively) (1,510,855) (162,000) ------------ ------------ Total 1,821,317 4,975,000 ------------ ------------ CLASS M Proceeds from sales of shares (20,926 and 0 shares, respectively) 256,291 -- Net asset value of shares issued from reinvestment of distributions (28 and 0 shares, respectively) 335 -- Cost of shares repurchased (20,954 and 0 shares, respectively) (263,766) -- ------------ ------------ Total (7,140) -- ------------ ------------ INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 2,464,273 31,591,000 ------------ ------------ NET INCREASE IN NET ASSETS 2,503,098 32,727,000 NET ASSETS Beginning of period 33,209,358 482,000 ------------ ------------ END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $30,470 AND $1,038, RESPECTIVELY] $ 35,712,456 $ 33,209,000 ------------ ------------ ------------ ------------ See Notes to Financial Statements 53 Phoenix-Engemann Value 25 Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS A CLASS B ---------------------------------------------------- -------------------------------- YEAR ENDED DECEMBER 31, INCEPTION YEAR ENDED DECEMBER 31, -------------------------------- 12/17/96 TO -------------------------------- 1998 1997 12/31/96 1998 1997 Net asset value, beginning of period $ 11.56 $ 10.11 $ 10.00 $ 11.53 $ 10.39(5) INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.15(1)(6) 0.17(1)(2) --(1) 0.06(1)(6) 0.08(1)(2) Net realized and unrealized gain (loss) 0.66 1.95 0.11 0.65 1.67 ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.81 2.12 0.11 0.71 1.75 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Dividends from net investment income (0.14) (0.12) -- (0.06) (0.06) Dividends from net realized gains (0.59) (0.55) -- (0.59) (0.55) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.73) (0.67) -- (0.65) (0.61) ------ ------ ------ ------ ------ Change in net asset value 0.08 1.45 0.11 0.06 1.14 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $ 11.64 $ 11.56 $ 10.11 $ 11.59 $ 11.53 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total return(3) 7.23% 21.10%(2) 1.10% 6.41% 16.97%(2) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $18,090 $19,518 $482 $10,981 $8,799 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.75% 1.80%(2) 1.70%(4) 2.50% 2.60%(4) Net investment income (loss) 1.25% 1.40%(2) 1.80%(4) 0.54% 0.70%(4) Portfolio turnover 135% 87.7% --% 135% 87.7% CLASS C -------------------------------- YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 Net asset value, beginning of period $ 11.52 $ 10.39(5) INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.06(1)(6) 0.09(1)(2) Net realized and unrealized gain (loss) 0.65 1.66 ----- ----- TOTAL FROM INVESTMENT OPERATIONS 0.71 1.75 ----- ----- LESS DISTRIBUTIONS Dividends from net investment income (0.06) (0.07) Dividends from net realized gains (0.59) (0.55) ----- ----- TOTAL DISTRIBUTIONS (0.65) (0.62) ----- ----- Change in net asset value 0.06 1.13 ----- ----- NET ASSET VALUE, END OF PERIOD $ 11.58 $ 11.52 ----- ----- ----- ----- Total return(3) 6.42% 17.01%(2) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $6,642 $4,893 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.50% 2.60%(4) Net investment income (loss) 0.52% 0.80%(4) Portfolio turnover 135% 87.7% The table above provides condensed information concerning income and capital changes for one share of the Phoenix-Engemann Value 25 Fund. Such information is based on the Fund's audited financial statements for the years presented. (1) Computed using average shares outstanding. (2) These amounts reflect the impact of a waiver of administration fees of $789. Absent the waiver, net investment loss per share, total return and the ratios of expenses and net investment loss to average net assets for Class A, Class B and Class C shares would have been $.17, $.08 and $.08, respectively, 21.10%, 16.97% and 17.01%, respectively, 1.8%, 2.6% and 2.6%, respectively, and 1.4%, 0.7% and 0.8%, respectively. (3) Total return measures the change in the value of an investment during each of the years presented and does not include the impact of paying any applicable front- end or contingent deferred sales charge. Total return for the period from inception (December 17, 1996) through December 31, 1996 has not been annualized. (4) Annualized. (5) The beginning net asset value per share of Class B and Class C shares equals the net asset value per share of the Class A shares as of the first day Class B and Class C shares were sold, January 9, 1997. (6) Includes reimbursement of operating expenses by investment adviser of $0.01. 54 See Notes to Financial Statements PHOENIX-ENGEMANN FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES The Phoenix-Engemann Funds (the "Trust") 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. To date, six Funds are offered for sale: Phoenix-Engemann Growth Fund, Phoenix-Engemann Nifty Fifty Fund, Phoenix-Engemann Balanced Return Fund, Phoenix-Engemann Global Growth Fund, Phoenix-Engemann Small & Mid-Cap Growth Fund and Phoenix-Engemann Value 25 Fund, collectively referred to as the "Funds," are series of The Phoenix-Engemann Funds. Each Fund represents an investment in a separate diversified fund with its own investment objectives. GROWTH FUND seeks to achieve long-term capital appreciation. NIFTY FIFTY FUND seeks to achieve long-term capital appreciation by investing in approximately 50 different securities. BALANCED RETURN FUND seeks to maximize a total investment return consistent with reasonable risk through a balanced approach. GLOBAL GROWTH FUND seeks to achieve long-term growth of capital by investing in a globally diversified portfolio of equity securities. SMALL & MID-CAP GROWTH FUND seeks to achieve long-term growth of capital by investing primarily in a diversified portfolio of equity securities of companies with market capitalizations below $1.5 billion. VALUE 25 FUND seeks to achieve dividend income and long-term growth of capital by investing in equity securities which the Adviser believes offer the best potential for current dividend yield and long-term capital appreciation. Each Fund offers Class A, Class B and Class C shares. 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 Funds 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 Trust 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. 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 Trust is notified. Realized gains and losses are determined on the identified cost basis. The Trust does not amortize premiums but does amortize discounts. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. In addition, each 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 are recorded by each Fund on the ex-dividend date. 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, operating losses 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 55 PHOENIX-ENGEMANN FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 (CONTINUED) 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 Trust does not separate that portion of the results of operations arising from changes in the exchange rates and that portion arising from changes in the market prices of securities. F. FORWARD CURRENCY CONTRACTS: The Global Growth Fund, the Small & Mid-Cap Growth Fund and the Value 25 Fund 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 each Fund as an unrealized gain (or loss). When the contract is closed or offset with the same counterparty, the Fund 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. The Global Growth Fund, the Small & Mid-Cap Growth Fund and the Value 25 Fund 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 Fund 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 Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as daily variation margin and are recorded by the Fund as unrealized gains and losses. When the contract is closed, the Fund 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 Fund 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 Global Growth Fund and the Small & Mid-Cap Growth Fund may write covered options or purchase options contracts for purpose of hedging against changes in the market value of the underlying securities or foreign currencies. To a limited extent, the Value 25 Fund may buy and sell options on domestic and foreign securities indices for hedging purposes. Each 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 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 from the contracts. Each Fund may purchase options which are included in the Fund's 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 Trust with respect to any two or more Funds are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more fairly made. J. LOAN AGREEMENTS: The Funds may invest in direct debt instruments which are invested in amounts owed by a corporation, governmental, or other borrower to lenders or lending syndicates. The Funds' 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 Funds have 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 Funds generally have no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Funds may be subject to the credit risk of both the borrower and lender that is selling the loan agreement. For loans which the Funds 56 PHOENIX-ENGEMANN FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 (CONTINUED) are a participant, the Funds may not sell their participation in the loan without the lender's prior consent. When the Funds purchase 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. 2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS As compensation for its services to the Trust, the Adviser, Roger Engemann & Associates, Inc. ("REA", or the "Adviser"), a wholly owned subsidiary of Pasadena Capital Corporation, which in turn is a wholly owned subsidiary of Phoenix Investment Partners, Ltd. a publicly-traded company 60% owned by Phoenix Home Life Mutual Insurance Company, is entitled to a fee, based upon the following annual rates as a percentage of the average daily net assets of each Fund: First $50 Next $450 Over $500 Million Million Million --------- ---------- ---------- Growth Fund.................. 0.90% 0.80% 0.70% Nifty Fifty Fund............. 0.90% 0.80% 0.70% Balanced Return Fund......... 0.80% 0.70% 0.60% Global Growth Fund........... 1.10% 1.00% 0.90% Small & Mid-Cap Growth Fund......................... 1.00% 0.90% 0.80% Value 25 Fund................ 0.90% 0.80% 0.70% The Adviser furnishes advice and recommendations with respect to the Funds' securities portfolios, supervises the Funds' investments, provides Fund accounting and pricing, and provides the Trust's Board of Trustees with periodic and special reports on investment securities, economic conditions and other pertinent subjects. The Manager also performs various administrative and shareholder services for each Fund under separate administration agreements. All normal operating expenses of the Funds, except for fees and expenses associated with investment management services, service fees, distribution fees, Trustees' fees, audit fees and certain legal fees are paid by the Manager pursuant to the administration agreements. Phoenix Equity Planning Corporation ("PEPCO") an indirect majority-owned subsidiary of PHL, which serves as the national distributor of the Trust's shares has advised the Trust that it retained net selling commissions of $101,674 for Class A shares and deferred sales charges of $501,234 for Class B shares and $104,875 for Class C shares for the year ended December 31, 1998. In addition, each Fund pays PEPCO a distribution fee at an annual rate of 0.25% for Class A shares, 1.00% for Class B shares, 1.00% for Class C shares and 0.50% for Class M shares applied to the average daily net assets of each Fund. The distributor has advised the Trust that of the total amount expensed for the year ended December 31, 1998 $2,016,392 was retained by the Distributor, $2,629,819 was paid out to unaffiliated Participants and $16,306 was paid to W.S. Griffith, an indirect subsidiary of PHL. As Administrator of the Funds, PEPCO received a fee for bookkeeping, administration, and pricing services at an annual rate of 0.60% of average daily net assets up to $50 million, 0.50% of average daily net assets of $50 million to $500 million, 0.40% of average daily net assets of $500 million through $625 million, and 0.30% of average daily net assets greater than $625 million: a minimum fee may apply. PEPCO has voluntarily agreed to waive, when necessary, a portion of its administration fee so that Other Operating Expenses (operating expenses excluding management fees and 12b-1 fees) do not exceed the following limits: 1st $50 next $450 next $125 over $625 million million million million --------- ----------- ----------- ----------- Growth Fund.............. 0.99% 0.50% 0.30% 0.30% Nifty Fifty Fund......... 0.99% 0.50% 0.30% 0.30% Balanced Return Fund..... 1.09% 0.60% 0.40% 0.40% Global Growth Fund....... 0.60% 0.50% 0.40% 0.40% Small & Mid-Cap Growth Fund................... 0.60% 0.50% 0.40% 0.40% Value 25 Fund............ 0.60% 0.50% 0.40% 0.40% PEPCO serves as the Fund's Transfer Agent with State Street Bank and Trust Company as sub-transfer agent. 3. PURCHASE AND SALE OF SECURITIES Purchases and sales of securities during the year ended December 31, 1998 (excluding U.S. Government and agency securities, short-term securities, futures contracts and forward currency contracts) aggregated the following: Purchases Sales ------------ ------------ Growth Fund.......................... $555,311,417 $614,413,792 Nifty Fifty Fund..................... 305,753,217 290,307,238 Balanced Return Fund................. 60,122,526 53,879,018 Global Growth Fund................... 21,996,573 20,166,638 Small & Mid Cap Growth Fund.......... 145,983,951 108,128,563 Value 25 Fund........................ 49,499,799 48,785,988 Purchases and sales of U.S. Government and agency securities during the year ended December 31, 1998, aggregated $35,971,164 and $39,843,599 respectively, for the Balanced Return Fund. 4. CREDIT RISK In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices 57 PHOENIX-ENGEMANN FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 (CONTINUED) 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. CAPITAL LOSS CARRYOVERS For the fiscal year ended December 31, 1998, the following Funds had capital loss carryovers, expiring in 2006, which may be used to offset future capital gains. Global Growth Fund................. $ 1,742,859 Small & Mid-Cap Growth Fund........ 10,519,829 Under current tax law, capital 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 Global Growth Fund and the Small & Mid-Cap Growth Fund elected to defer losses occurring between November 1, 1998 and December 31, 1998 in the amount of $7,217 and $17,567, respectively. In addition, the Small & Mid-Cap Fund, Value 25 Fund, and Balanced Return Fund were able to utilize losses deferred in the prior year in the amount of $189,050, $7,087, and $247,437, respectively. 6. RECLASS OF CAPITAL ACCOUNTS In accordance with accounting pronouncements, the Funds have recorded several reclassifications in the capital accounts. These reclassifications have no impact on the net asset value of the Funds 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 Funds recorded the following reclassifications to increase (decrease) the accounts listed below: Undistributed Capital paid net in investment Accumulated on shares of income net realized beneficial (loss) gain (loss) interest ------------ ------------ -------------- Growth Fund........................ $ 4,059,521 $ 10,516 $ (4,070,037) Nifty Fifty Fund................... 2,852,205 (2,852,429) 224 Balanced Return Fund............... 358 172 (530) Global Growth Fund................. 246,044 (13,986) (232,058) Small & Mid Cap Growth Fund........ 1,330,768 10,751 (1,341,519) Value 25 Fund...................... 512 (299) (213) TAX INFORMATION NOTICE (UNAUDITED) For the fiscal year ended December 31, 1998, the following Funds distributed long-term capital gain dividends as follows: Total Long-Term Distributions ------------ Growth Fund........................................ $23,765,415 Nifty Fifty Fund................................... 6,472,127 Balanced Return Fund............................... 5,623,989 Value 25 Fund...................................... 520,008 For federal income tax purposes, a percentage of the ordinary income dividends paid by the following Funds qualify for the dividends received deduction (DRD) for corporate shareholders: % of Ordinary Income Dividend Qualified for DRD ----------------- Balanced Return Fund........................... 65.68% Value 25 Fund.................................. 59.50% This report is not authorized for distribution to prospective investors in the Phoenix-Engemann Funds unless preceded or accompanied by an effective Prospectus which includes information concerning the sales charge, the Fund's record and other pertinent information. 58 REPORT OF INDEPENDENT ACCOUNTANTS [LOGO] To the Trustees and Shareholders of The Phoenix-Engemann Funds: 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 Phoenix-Engemann Growth Fund, the Phoenix-Engemann Nifty Fifty Fund, the Phoenix-Engemann Balanced Return Fund, the Phoenix-Engemann Small & Mid-Cap Growth Fund, the Phoenix-Engemann Value 25 Fund and the Phoenix-Engemann Global Growth Fund (the "Funds") 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 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 Funds' 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. The financial statements of The Phoenix-Engemann Funds (except for the Phoenix-Engemann Value 25 Fund) for the year ended December 31, 1996, and prior periods were audited by other independent accountants whose report dated February 14, 1997, expressed an unqualified opinion on those statements. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 11, 1999 59 PHOENIX-ENGEMANN FUNDS 600 North Rosemead Boulevard Pasadena, California 91107-2133 TRUSTEES Roger Engemann Barry E. McKinley Robert L. Peterson Richard C. Taylor Angela Wong OFFICERS Roger Engemann, President Malcolm Axon, Chief Financial Officer Tina L. Mitchell, Secretary John S. Tilson, Vice President Thomas N. Steenburg, General Counsel and Vice President INVESTMENT ADVISERS Roger Engemann & Associates ("REA") 600 North Rosemead Boulevard Pasadena, California 91107-2101 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation 100 Bright Meadow Boulevard P.O. Box 2200 Enfield, Connecticut 06083-2200 CUSTODIANS Union Bank of California 475 Sansome Street San Francisco, California 94111 State Street Bank and Trust Company (Global Growth Fund) 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 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 PHOENIX EQUITY PLANNING CORPORATION PRSRT STD PO Box 2200 U.S. Postage Enfield CT 06083-2200 PAID Springfield, MA [LOGO] PHOENIX Permit No. 444 INVESTMENT PARTNERS PXP 2115 (299) SEMI-ANNUAL REPORT OF THE PHOENIX-ENGEMANN FUNDS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT] PRO FORMA FINANCIAL STATEMENTS [TO BE FILED BY PRE-EFFECTIVE AMENDMENT] PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND PART C OTHER INFORMATION Item 15. Indemnification The response to this item is incorporated by reference to Part A of the Prospectus/Proxy Statement in this Registration Statement under the caption "Comparative Information on Shareholder Rights--Liability of Trustees." Item 16. Exhibit (1)(a) Declaration of Trust of the Registrant, previously filed and filed as Exhibit 1.1 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and herein incorporated by reference. (1)(b) Amendment to Declaration of Trust designating Classes of Shares, filed as Exhibit 1.2 via EDGAR with Post-Effective Amendment No. 61 on October 30, 1995, incorporated herein by reference. (1)(c) Amendment to Declaration of Trust establishing Class C Shares, filed as Exhibit (1)(c) via EDGAR with Post-Effective Amendment No. 66 on December 15, 1998, and incorporated herein by reference. (1)(d) Amendment to Declaration of Trust changing name of Trust to "Phoenix-Aberdeen Worldwide Opportunities Fund", filed as Exhibit (1)(d) via EDGAR with Post-Effective Amendment No. 66 on December 15, 1998, and incorporated herein by reference. (2) By-laws of the Registrant, previously filed and filed as Exhibit 2.1 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and herein incorporated by reference. (3) [Not Applicable.] (4) Agreement and Plan of Reorganization (included as Exhibit A to the Prospectus/Proxy Statement contained in Part A of this Registration Statement). (5) Reference is hereby made to Article V of Registrant's Declaration of Trust referenced in Exhibit 1 above. (6)(a) Management Agreement between Registrant and National Securities & Research Corporation dated May 14, 1993 and assigned to Phoenix Investment Counsel, Inc. effective June 1, 1998, filed with Post- Effective Amendment No. 58 on August 30, 1993 and filed as Exhibit 5.1 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and herein incorporated by reference. (6)(b) Amendment to Management Agreement between Registrant and National Securities & Research Corporation, dated January 1, 1994 and assigned to Phoenix Investment Counsel, Inc. Effective June 1, 1998, filed as Exhibit 5.2 via EDGAR with Post-Effective Amendment No. 61 on October 30, 1995, incorporated herein by reference. (6)(c) Subadvisory Agreement between Phoenix Investment Counsel, Inc. And Aberdeen Fund Managers, Inc. dated October 27, 1998, filed via EDGAR with Post-Effective Amendment No. 66 on December 15, 1998, incorporated herein by reference. (7)(a) Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation dated November 19, 1997 and filed as Exhibit 6.1 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (7)(b) Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers filed as Exhibit 6.2 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (7)(c) Form of Supplement to Phoenix Family of Funds Sales Agreement filed as Exhibit 6.3 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (7)(d) Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed as Exhibit 6.4 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (8) Not Applicable. (9) Custody Agreement between Registrant and Brown Brothers Harriman & Co. dated August 11, 1994, filed with Post-Effective Amendment No. 60 on October 26, 1994 and filed as Exhibit 8 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and incorporated herein by reference. (10)(a) Amended and Restated Distribution Plan Pursuant to Rule 12b-1 for Class A Shares filed as Exhibit 15.1 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and incorporated herein by reference. (10)(b) Amended and Restated Distribution Plan Pursuant to Rule 12b-1 for Class B Shares filed as Exhibit 15.2 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and incorporated herein by reference. (11) Opinion and consent of Goodwin, Procter & Hoar LLP with respect to legality of the shares being issued (to be filed by Pre-Effective Amendment ). (12) Opinion and Consent of Goodwin, Procter & Hoar LLP with respect to tax matters relating to acquisition of the Phoenix-Engemann Global Growth Fund (to be filed by Post-Effective Amendment). (13)(a) Transfer Agency and Service Agreement between Registrant and Phoenix Equity Planning Corporation dated June 1, 1994, filed with Post-Effective Amendment No. 60 on October 26, 1994 and filed as Exhibit 9.1 via EDGAR with Post-Effective Amendment No. 63 on October 24, 1997 and incorporated herein by reference. (13)(b) Sub-transfer Agent Agreement between Equity Planning and State Street Bank and Trust Company dated June 1, 1994 filed as Exhibit 9.2 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (13)(c) Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporated dated November 19, 1997 and filed as Exhibit 9.3 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (13)(d) First Amendment to Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation dated March 23, 1998 and filed as Exhibit 9.4 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (13)(e) Second Amendment to Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation dated July 31, 1998 and filed as Exhibit 9.5 via EDGAR with Post-Effective Amendment No. 64 on October 6, 1998, herein incorporated by reference. (14) Consent of Independent Accountants (to be filed by Pre-Effective Amendment). (15) Not Applicable. (16)* Powers of Attorney. C-2 (17)* Form of Proxy Card for Phoenix-Engemann Global Growth Fund. *Filed herewith. Item 17. Undertakings (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees to file, by post-effective amendment, an Opinion of Counsel or a copy of an IRS ruling supporting the tax consequences of the Reorganization within a reasonable time after receipt of such opinion or ruling. C-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant in the City of Hartford and State of Connecticut on the 4th day of August 1999. PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND By:/s/ Philip R. McLoughlin -------------------------------------- Name: Philip R. McLoughlin Title: President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title --------- ----- - --------------------------------- Robert Chesek* Trustee - --------------------------------- E. Virgil Conway* Trustee /s/ Jacqueline M. Porter - --------------------------------- Assistant Treasurer Jacqueline M. Porter - --------------------------------- Harry Dalzell-Payne* Trustee - --------------------------------- Francis E. Jeffries* Trustee - --------------------------------- Leroy Keith, Jr.* Trustee /s/ Philip R. McLoughlin - --------------------------------- Philip R. McLoughlin Trustee and President - --------------------------------- Everett L. Morris* Trustee - --------------------------------- James M. Oates* Trustee - --------------------------------- Calvin J. Pedersen* Trustee - --------------------------------- Herbert Roth, Jr.* Trustee - --------------------------------- Richard E. Segerson* Trustee - --------------------------------- Lowell P. Weicker, Jr.* Trustee *By:/s/ Philip R. McLoughlin ----------------------------- *Philip R. McLoughlin pursuant to powers of attorney filed previously. C-5 Index To Exhibits (14) Consent of Independent Accountants (to be filed by Pre-Effective Amendment) (17) Form of Proxy Card for the Phoenix-Engemann Global Growth Fund C-6 Exhibit (14) CONSENT OF INDEPENDENT ACCOUNTANTS (TO BE FILED BY PRE-EFFECTIVE AMENDMENT) C-7 Exhibit (17) PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS September __, 1999 The undersigned shareholder of the Phoenix-Engemann Global Growth Fund (the "Global Growth Fund"), revoking any and all previous proxies heretofore given for shares of the Global Growth Fund held by the undersigned, does hereby appoint Philip R. McLoughlin, and Tina L. Mitchell, each and any of them, with full power of substitution each, to be the attorneys and proxies of the undersigned, to attend the special meeting of the shareholders of the Global Growth Fund to be held on the 20th day of October, 1999, at a.m., local time, at the offices of the Global Growth Fund at 600 North Rosemead Boulevard, Pasadena, California 91107-2133, and any adjournments thereof and to represent and direct shares of each class of the Global Growth Fund held by the undersigned as of the record date for the meeting for the proposal specified below. This proxy, if properly executed, will be voted in the manner as directed herein by the undersigned shareholder. Unless otherwise specified below in the boxes provided, the undersigned's vote will be cast "FOR" the proposal. If no direction is made for the proposal, this proxy will be voted "FOR" the proposal. In their discretion, the proxies are authorized to transact and vote upon such other matters and business as may come before the meeting or any adjournments thereof. To approve the Agreement and Plan of Reorganization, dated August 4, 1999, and the transactions it contemplates, including (a) the transfer of all or substantially all of the assets of the Global Growth Fund to Phoenix-Aberdeen Worldwide Opportunities Fund (the "Worldwide Opportunities Fund") in exchange solely for shares of the corresponding class of the Worldwide Opportunities Fund and the assumption by the Worldwide Opportunities Fund of all the liabilities of the Global Growth Fund and (b) the distribution of the shares of the Worldwide Opportunities Fund so received to shareholders of the Global Growth Fund. FOR [ ] AGAINST [ ] ABSTAIN [ ] To consider and act upon any other business as may properly come before the meeting and any adjournment thereof. To avoid the expense of adjourning the meeting to a subsequent date, please return this proxy in the enclosed self-addressed, postage-paid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE PHOENIX-ENGEMANN FUNDS, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL. Dated: _____________________, 1999 Name ----------------------------------------- Signature of Shareholder C-8