N-CSR 1 g33358_pxinvtrust.txt PHOENIX INVESTMENT TRUST AR 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-08343 ---------------- Phoenix Investment Trust 97 -------------------------------------------------------------- (Exact name of registrant as specified in charter) 101 Munson Street Greenfield, MA 01301-9668 -------------------------------------------------------------- (Address of principal executive offices) (Zip code) Kevin J. Carr, Esq. Vice President, Chief Legal Officer, John H. Beers, Esq. Counsel and Secretary for Registrant Vice President and Counsel Phoenix Life Insurance Company Phoenix Life Insurance Company One American Row One American Row Hartford, CT 06103-2899 Hartford, CT 06103-2899 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (800) 243-1574 --------------- Date of fiscal year end: August 31 ---------- Date of reporting period: August 31, 2006 ---------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. -------------------------------------------------------------------------------- AUGUST 31, 2006 -------------------------------------------------------------------------------- ANNUAL REPORT -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PHOENIX QUALITY SMALL-CAP FUND [GRAPHIC OMITTED] PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND [GRAPHIC OMITTED] PHOENIX SMALL-CAP VALUE FUND [GRAPHIC OMITTED] PHOENIX VALUE EQUITY FUND TRUST NAME: PHOENIX INVESTMENT TRUST 97 [GRAPHIC OMITTED] PHOENIXFUNDS(SM) [GRAPHIC OMITTED] WOULDN'T YOU RATHER HAVE THIS DOCUMENT E-MAILED TO YOU? Eligible shareholders can sign up for E-Delivery at PhoenixFunds.com -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- This report is not authorized for distribution to prospective investors in the Phoenix Investment Trust 97 unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. A MESSAGE FROM THE PRESIDENT DEAR PHOENIXFUNDS SHAREHOLDER: [PHOTO OMITTED] The enclosed annual report addresses the performance of your Phoenix mutual fund for the fiscal year ended August 31, 2006. The report also provides a commentary from your fund's management team on how the fund performed, the investment strategies used, and how the fund's results compared to the broader market. At Phoenix, our focus is on investment performance and serving the best interests of our shareholders. We believe that mutual funds are among the most effective vehicles for individual investors to gain access to a variety of financial markets and for building diversified portfolios. I am especially proud of how we have expanded our fund family over the last year to offer access to even more money managers. Today, the PhoenixFunds draw from the vast expertise of 16 different management teams--six Phoenix affiliates and 10 outside subadvisers chosen for their complementary investment capabilities. These fund teams operate independently, conducting their research, identifying opportunities in the markets they know best, and applying their disciplined strategies to the portfolios they manage. We are confident in their ability to navigate their funds through whatever market and economic changes lie ahead. When it comes to financial decisions, we recommend working with an experienced financial advisor. If you haven't reviewed or rebalanced your portfolio lately, this may be a good time to meet with your advisor and make sure that your investments are still aligned with your financial goals. Thank you for choosing PhoenixFunds to be part of your financial plan. Sincerely yours, /s/ Daniel T. Geraci -------------------- Daniel T. Geraci President, PhoenixFunds SEPTEMBER 2006 1 TABLE OF CONTENTS Glossary.................................................................. 3 Phoenix Quality Small-Cap Fund............................................ 4 Phoenix Small-Cap Sustainable Growth Fund................................. 14 Phoenix Small-Cap Value Fund.............................................. 24 Phoenix Value Equity Fund................................................. 37 Notes to Financial Statements............................................. 47 Report of Independent Registered Public Accounting Firm................... 53 Board of Trustees' Consideration of Investment Advisory and Subadvisory Agreements.................................................. 54 Fund Management Tables.................................................... 56 -------------------------------------------------------------------------------- PROXY VOTING INFORMATION (FORM N-PX) The Adviser and subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Funds voted proxies during the most recent 12-month period ended June 30, 2006, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. -------------------------------------------------------------------------------- 2 GLOSSARY FEDERAL RESERVE (THE "FED") The central bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system. INFLATION Rise in the prices of goods and services resulting from increased spending relative to the supply of goods on the market. REITS (REAL ESTATE INVESTMENT TRUSTS) Real estate investment trusts are typically publicly traded companies that own, develop and operate income producing real estate such as apartments, office buildings, hotels, shopping centers and other commercial properties. RUSSELL 2000(R) GROWTH INDEX The Russell 2000(R) Growth Index is a market capitalization-weighted index of growth-oriented stocks of the smallest 2,000 companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. RUSSELL 1000(R) VALUE INDEX The Russell 1000(R) Value Index is a market capitalization-weighted index of value-oriented stocks of the 1,000 largest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. RUSSELL 2000(R) VALUE INDEX The Russell 2000(R) Value Index is a market capitalization-weighted index of value-oriented stocks of the smallest 2,000 companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. S&P 500(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 3 PHOENIX QUALITY SMALL-CAP FUND A DISCUSSION WITH THE FUND'S MANAGEMENT TEAM OF SANDI GLEASON, CFA AND ROBERT SCHWARZKOPF, CFA Q: HOW DID THE PHOENIX QUALITY SMALL-CAP FUND PERFORM FOR ITS FISCAL YEAR ENDED AUGUST 31, 2006? A: From the Phoenix Quality Small-Cap Fund's inception date of June 28, 2006, through August 31, 2006, the Fund's Class A shares returned 0.50%, Class C shares returned 0.40% and Class X shares returned 0.60%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 5.02%, and the Russell 2000(R) Value Index, the Fund's style-specific index appropriate for comparison, returned 6.66%. All performance figures assume reinvestment of distributions and exclude the effect of sales charges. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? A: Throughout the Phoenix Quality Small-Cap Fund's brief fiscal year, the equity markets were quite volatile. The day after the Fund's inception date, the Federal Reserve (the "Fed") signaled an upcoming pause in short-term interest rate hikes after 17 consecutive rate increases. Consequently, stock prices rallied sharply. In July, the stock market produced flat to negative returns, as investors sought high-quality companies to alleviate the effects of inflation risk, soaring energy prices and slowing corporate earnings growth. After two years of interest rate increases, the Fed left rates unchanged in August, spurring positive returns in the equity markets and a recovery for low-quality stocks. For the Fund's fiscal year, the best-performing sectors included health care and utilities. In a slowing economy, health care, which is a classic defensive sector, performed strongly, while record-high temperatures across the country in July stimulated public utility demand to all-time record levels. Conversely, transportation and consumer discretionary were among the worst-performing sectors, as consumers struggled with higher energy prices. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? A: As is typical during short periods of performance, the Phoenix Quality Small-Cap Fund's underperformance was amplified by short-term events in the stock market. First, the Russell 2000 Value Index gained over three percent on the same day we made purchases for the Fund, which increased our cost basis. Secondly, low-quality stocks prevailed during the Fund's fiscal year, negatively impacting our high-quality focus. Namely, our overweight position in stocks ranked by S&P as "A-" and above reduced our relative performance, as the Russell 2000 Value's overweight position in stocks ranked "B" to "D" by S&P outperformed. In addition, our overweight position in companies with high return on equity hampered our relative performance, as companies with little to no return on equity were the clear winners. SEPTEMBER 2006 THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. FOR DEFINITIONS OF THE INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS REPORT, SEE THE GLOSSARY ON PAGE 3. 4 Phoenix Quality Small-Cap Fund -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 1 PERIOD ENDING 8/31/06 -------------------------------------------------------------------------------- INCEPTION INCEPTION TO 8/31/06 DATE ---------- --------- Class X Shares at NAV 0.60% 6/28/06 Class A Shares at NAV 2 0.50 6/28/06 Class A Shares at POP 3 (5.28) 6/28/06 Class C Shares at NAV 2 0.40 6/28/06 Class C Shares with CDSC 4 (0.60) 6/28/06 S&P 500(R) Index 5.02 6/28/06 Russell 2000(R) Value Index 6.66 6/28/06 ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. 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. THE ABOVE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. 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 5.75% SALES CHARGE. 4 CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CLASS C SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. For information regarding the indexes, see the glossary on page 3. 5 PHOENIX QUALITY SMALL-CAP FUND ABOUT YOUR FUND'S EXPENSES We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Quality Small-Cap Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The first two lines of these examples are based on an investment of $1,000 invested on inception date and held to August 31, 2006. The third lines of these examples are based on an investment of $1,000 invested on February 28, 2006 and held for the entire six-month period. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period since inception of the fund. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES (since inception date) The first hypothetical example provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. This example is based on the period from inception of the fund to August 31, 2006. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES (for entire six-month period) The second hypothetical example provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. This example is based on the period from February 28, 2006, to August 31, 2006. You may use the information in this hypothetical examples to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, this hypothetical example of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If you have incurred transactional costs, your costs could have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. Quality Beginning Ending Expenses Paid Small-Cap Fund Account Value Account Value During Class X June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $1,006.00 $2.02 Hypothetical (5% return before expenses, since inception) 1,000.00 1,006.78 2.02 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,019.43 5.87 * EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 1.15% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. 6 Phoenix Quality Small-Cap Fund ABOUT YOUR FUND'S EXPENSES (con't.) Quality Beginning Ending Expenses Paid Small-Cap Fund Account Value Account Value During Class A June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $1,005.00 $2.46 Hypothetical (5% return before expenses, since inception) 1,000.00 1,006.34 2.46 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,018.17 7.13 * EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.40% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. Quality Beginning Ending Expenses Paid Small-Cap Fund Account Value Account Value During Class C June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $1,004.00 $3.78 Hypothetical (5% return before expenses, since inception) 1,000.00 1,005.01 3.79 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,014.32 10.98 * EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.15% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS. 7 Phoenix Quality Small-Cap Fund -------------------------------------------------------------------------------- SECTOR WEIGHTINGS 8/31/06 -------------------------------------------------------------------------------- As a percentage of total investments [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] Financials 25% Industrials 22 Information Technology 14 Consumer Discretionary 13 Energy 9 Health Care 6 Materials 3 Other 8 SCHEDULE OF INVESTMENTS AUGUST 31, 2006 SHARES VALUE ------ ---------- DOMESTIC COMMON STOCKS--87.5% APPAREL, ACCESSORIES & LUXURY GOODS--3.5% Cherokee, Inc. ....................................... 1,250 $ 46,025 APPLICATION SOFTWARE--2.6% Reynolds & Reynolds Co. (The) Class A ................ 880 33,757 ASSET MANAGEMENT & CUSTODY BANKS--8.5% American Capital Strategies Ltd. ..................... 1,500 58,095 MCG Capital Corp. .................................... 3,345 53,654 ---------- 111,749 ---------- COMMUNICATIONS EQUIPMENT--4.4% Inter-Tel, Inc. ...................................... 2,632 58,009 DATA PROCESSING & OUTSOURCED SERVICES--3.9% Syntel, Inc. ......................................... 2,355 51,598 DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES--3.6% McGrath RentCorp ..................................... 2,055 46,854 ENVIRONMENTAL & FACILITIES SERVICES--4.5% ABM Industries, Inc. ................................. 3,265 58,737 HEALTH CARE EQUIPMENT--2.3% Young Innovations, Inc. .............................. 830 30,146 HEALTH CARE SERVICES--3.1% Landauer, Inc. ....................................... 850 40,732 HOME FURNISHINGS--4.3% Tempur-Pedic International, Inc.(b) .................. 3,530 56,657 SHARES VALUE ------ ---------- INDUSTRIAL MACHINERY--8.5% CLARCOR, Inc. ........................................ 1,940 $ 58,103 Lincoln Electric Holdings, Inc. ...................... 960 52,829 ---------- 110,932 ---------- INSURANCE BROKERS--4.0% National Financial Partners Corp. .................... 1,410 51,916 INTERNET SOFTWARE & SERVICES--2.3% Computer Service, Inc. ............................... 985 29,550 OIL & GAS REFINING & MARKETING--4.6% World Fuel Services Corp. ............................ 1,675 60,367 OIL & GAS STORAGE & TRANSPORTATION--4.2% Crosstex Energy, Inc. ................................ 595 54,859 REGIONAL BANKS--4.6% Cathay General Bancorp ............................... 1,615 60,223 SPECIALIZED CONSUMER SERVICES--4.5% Matthews International Corp. Class A ................. 1,650 58,740 SPECIALIZED REIT'S--4.4% Entertainment Properties Trust ....................... 1,140 56,840 SPECIALTY CHEMICALS--2.9% Balchem Corp. ........................................ 1,925 38,327 THRIFTS & MORTGAGE FINANCE--2.3% Washington Federal, Inc. ............................. 1,360 30,219 See Notes to Financial Statements 8 Phoenix Quality Small-Cap Fund SHARES VALUE ------ ---------- TRUCKING--4.5% Landstar System, Inc. ................................ 1,390 $ 59,353 -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $1,135,906) 1,145,590 -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--87.5% (IDENTIFIED COST $1,135,906) 1,145,590 -------------------------------------------------------------------------------- PAR VALUE (000) --------- SHORT-TERM INVESTMENTS--8.3% REPURCHASE AGREEMENTS--8.3% State Street Bank and Trust Co. repurchase agreement 1.50% dated 8/31/06, due 9/1/06 repurchase price $108,005, collateralized by U.S. Treasury Bond 6.25%, 8/15/23 market value $114,616 ................. $108 108,000 -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $108,000) 108,000 -------------------------------------------------------------------------------- TOTAL INVESTMENTS--95.8% (IDENTIFIED COST $1,243,906) 1,253,590(a) Other assets and liabilities, net--4.2% 55,207 ---------- NET ASSETS--100.0% $1,308,797 ========== (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $41,212 and gross depreciation of $31,607 for federal income tax purposes. At August 31, 2006, the aggregate cost of securities for federal income tax purposes was $1,243,985. (b) Non-income producing. See Notes to Financial Statements 9 Phoenix Quality Small-Cap Fund STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2006 ASSETS Investment securities at value (Identified cost $1,243,906) $1,253,590 Cash 603 Receivables Receivable from adviser 14,766 Fund shares sold 10,000 Dividends and interest 5,198 Prepaid expenses 43,127 ---------- Total assets 1,327,284 ---------- LIABILITIES Payables Professional fee 16,501 Custodian fee 1,603 Distribution and service fees 138 Transfer agent fee 81 Administration fee 33 Trustees' fee 5 Other accrued expenses 126 ---------- Total liabilities 18,487 ---------- NET ASSETS $1,308,797 ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $1,295,881 Undistributed net investment income 4,248 Accumulated net realized loss (1,016) Net unrealized appreciation 9,684 ---------- NET ASSETS $1,308,797 ========== CLASS X Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $1,069,924) 106,382 Net asset value and offering price per share $10.06 CLASS A Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $100,524) 10,000 Net asset value per share $10.05 Offering price per share $10.05 /(1-5.75%) $10.66 CLASS C Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $138,349) 13,780 Net asset value and offering price per share $10.04 STATEMENT OF OPERATIONS FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 INVESTMENT INCOME Dividends $ 5,722 Interest 307 -------- Total investment income 6,029 -------- EXPENSES Investment advisory fee 1,196 Service fees, Class A 44 Distribution and service fees, Class C 209 Administration fee 87 Professional 18,351 Transfer agent 4,599 Registration 2,765 Custodian 1,918 Printing 123 Trustees 5 Miscellaneous 1,079 -------- Total expenses 30,376 Less expenses reimbursed by investment adviser (28,418) Custodian fees paid indirectly (177) -------- Net expenses 1,781 -------- NET INVESTMENT INCOME (LOSS) 4,248 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (1,016) Net change in unrealized appreciation (depreciation) on investments 9,684 -------- NET GAIN (LOSS) ON INVESTMENTS 8,668 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,916 ======== See Notes to Financial Statements 10 Phoenix Quality Small-Cap Fund STATEMENT OF CHANGES IN NET ASSETS
From Inception June 28, 2006 to August 31, 2006 ---------------- FROM OPERATIONS Net investment income (loss) $ 4,248 Net realized gain (loss) (1,016) Net change in unrealized appreciation (depreciation) 9,684 ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,916 ---------- FROM SHARE TRANSACTIONS CLASS X Proceeds from sales of shares (106,382 shares) 1,057,881 ---------- Total 1,057,881 ---------- CLASS A Proceeds from sales of shares (10,000 shares) 100,000 ---------- Total 100,000 ---------- CLASS C Proceeds from sales of shares (13,780 shares) 138,000 ---------- Total 138,000 ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 1,295,881 ---------- NET INCREASE (DECREASE) IN NET ASSETS 1,308,797 NET ASSETS Beginning of period -- ---------- END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $4,248) $1,308,797 ==========
See Notes to Financial Statements 11 Phoenix Quality Small-Cap Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS X ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.07 Net realized and unrealized gain (loss) (0.01) ------ TOTAL FROM INVESTMENT OPERATIONS 0.06 ------ Change in net asset value 0.06 ------ NET ASSET VALUE, END OF PERIOD $10.06 ====== Total return 0.60%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $1,070 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.15%(3) Gross operating expenses 21.32%(3) Net investment income (loss) 3.85%(3) Portfolio turnover 7%(4) CLASS A ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.03 Net realized and unrealized gain (loss) 0.02 ------ TOTAL FROM INVESTMENT OPERATIONS 0.05 ------ Change in net asset value 0.05 ------ NET ASSET VALUE, END OF PERIOD $10.05 ====== Total return(2) 0.50%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $101 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.40%(3) Gross operating expenses 26,39%(3) Net investment income (loss) 1.82%(3) Portfolio turnover 7%(4) (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Annualized. (4) Not annualized. See Notes to Financial Statements 12 Phoenix Quality Small-Cap Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.02 Net realized and unrealized gain (loss) 0.02 ------ TOTAL FROM INVESTMENT OPERATIONS 0.04 ------ Change in net asset value 0.04 ------ NET ASSET VALUE, END OF PERIOD $10.04 ====== Total return(2) 0.40%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $138 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.15%(3) Gross operating expenses 25.96%(3) Net investment income (loss) 1.38%(3) Portfolio turnover 7%(4) (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Annualized. (4) Not annualized. See Notes to Financial Statements 13 PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND A DISCUSSION WITH THE FUND'S MANAGEMENT TEAM OF SANDI GLEASON, CFA AND ROBERT SCHWARZKOPF, CFA Q: HOW DID THE PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND PERFORM FOR ITS FISCAL YEAR ENDED AUGUST 31, 2006? A: From the Phoenix Small-Cap Sustainable Growth Fund's inception date of June 28, 2006, through August 31, 2006, the Fund's Class A shares returned -2.10%, Class C shares returned -2.20% and Class X shares returned -2.10%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 5.02%, and the Russell 2000(R) Growth Index, the Fund's style-specific index appropriate for comparison, returned 3.10%. All performance figures assume reinvestment of distributions and exclude the effect of sales charges. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? A: Throughout the Phoenix Small-Cap Sustainable Growth Fund's brief fiscal year, the equity markets were extremely volatile. The day after the Fund's inception, the Federal Reserve (the "Fed") signaled an upcoming pause in short-term interest rate hikes after 17 consecutive rate increases, rallying stock prices sharply. In July, the stock market produced flat to negative returns, as investors sought high-quality companies as a refuge from inflation risk, soaring energy prices and slowing corporate earnings growth. After two years of interest rate increases, the Fed left rates unchanged in August, spurring positive returns in the equity markets and a recovery for low-quality stocks. For the Fund's fiscal year, the best-performing sectors were health care and utilities. In a slowing economy, health care -- a classic defensive sector -- performed strongly, while record-high temperatures across the country in July sent public utility demand to all-time record levels. By contrast, transportation and consumer discretionary were among the worst-performing sectors, as consumers contended with higher energy prices. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? A: As is typical during short periods of performance, the Phoenix Small-Cap Sustainable Growth Fund's underperformance was exacerbated by short-term events in the stock market. First, the Russell 2000 Growth Index gained over three percent on the day we made purchases for the Fund, which raised our cost basis. Secondly, low-quality stocks prevailed during the Fund's fiscal year, which detracted from the Fund's performance, due to our high-quality focus. Specifically, our overweight position in stocks ranked by the S&P 500 Index as "A-" and above reduced our relative performance, as the Russell 2000 Growth's overweight position in stocks ranked "B" to "D" by S&P outperformed. Similarly, our overweight positions in companies with little to no debt and high return on equity hurt the Fund's relative performance, as highly indebted and unprofitable companies outperformed. SEPTEMBER 2006 THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. FOR DEFINITIONS OF THE INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS REPORT, SEE THE GLOSSARY ON PAGE 3. 14 Phoenix Small-Cap Sustainable Growth Fund -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 1 PERIOD ENDING 8/31/06 -------------------------------------------------------------------------------- INCEPTION INCEPTION TO 8/31/06 DATE ---------- --------- Class X Shares at NAV (2.10) 6/28/06 Class A Shares at NAV 2 (2.10) 6/28/06 Class A Shares at POP 3 (7.73) 6/28/06 Class C Shares at NAV 2 (2.20) 6/28/06 Class C Shares with CDSC 4 (3.18) 6/28/06 S&P 500(R) Index 5.02 6/28/06 Russell 2000(R) Growth Index 3.10 6/28/06 ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. 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. THE ABOVE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. 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 5.75% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CLASS C SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. For information regarding the indexes, see the glossary on page 3. 15 PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND ABOUT YOUR FUND'S EXPENSES We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Small-Cap Sustainable Growth Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The first two lines of these examples are based on an investment of $1,000 invested on inception date and held to August 31, 2006. The third lines of these examples are based on an investment of $1,000 invested on February 28, 2006 and held for the entire six-month period. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period since inception of the fund. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES (since inception date) The first hypothetical example provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. This example is based on the period from inception of the fund to August 31, 2006. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES (for entire six-month period) The second hypothetical example provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. This example is based on the period from February 28, 2006, to August 31, 2006. You may use the information in this hypothetical examples to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, this hypothetical example of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If you have incurred transactional costs, your costs could have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. Small-Cap Beginning Ending Expenses Paid Sustainable Fund Account Value Account Value During Class X June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $ 979.00 $2.00 Hypothetical (5% return before expenses, since inception) 1,000.00 1,006.78 2.02 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,019.43 5.87 * EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 1.15% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. 16 Phoenix Small-Cap Sustainable Growth Fund ABOUT YOUR FUND'S EXPENSES (con't.) Small-Cap Beginning Ending Expenses Paid Sustainable Fund Account Value Account Value During Class A June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $ 979.00 $ 2.42 Hypothetical (5% return before expenses, since inception) 1,000.00 1,006.34 2.46 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,018.17 7.13 * EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.40% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. Small-Cap Beginning Ending Expenses Paid Sustainable Fund Account Value Account Value During Class C June 28, 2006 August 31, 2006 Period* ------------------------ ------------- --------------- ------------- Actual $1,000.00 $ 978.00 $ 3.72 Hypothetical (5% return before expenses, since inception) 1,000.00 1,005.01 3.79 Beginning Account Value February 28, 2006 ----------------- Hypothetical (5% return before expenses, six-month period) $1,000.00 1,014.32 10.98 * EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.15% WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE. FOR THE ACTUAL AND HYPOTHETICAL EXAMPLE FROM INCEPTION DATE, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (64) EXPENSES WERE ACCRUED SINCE INCEPTION, THEN DIVIDED BY 365 TO REFLECT THE PERIOD SINCE INCEPTION. FOR THE HYPOTHETICAL EXAMPLE FOR THE ENTIRE SIX MONTH PERIOD, THE EXPENSE RATIO IS MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD FROM INCEPTION, MULTIPLIED BY THE NUMBER OF DAYS (184) IN THE MOST RECENT FISCAL HALF YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE HALF YEAR PERIOD. YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS. 17 Phoenix Small-Cap Sustainable Growth Fund -------------------------------------------------------------------------------- SECTOR WEIGHTINGS 8/31/06 -------------------------------------------------------------------------------- As a percentage of total investments [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] Information Technology 33% Consumer Discretionary 20 Health Care 18 Industrials 13 Financials 12 Energy 4 SCHEDULE OF INVESTMENTS AUGUST 31, 2006 SHARES VALUE ------ ---------- DOMESTIC COMMON STOCKS--93.8% AEROSPACE & DEFENSE--1.2% HEICO Corp. Class A .................................. 475 $ 12,863 AIR FREIGHT & LOGISTICS--4.4% Pacer International, Inc. ............................ 1,770 48,728 APPLICATION SOFTWARE--8.1% FactSet Research Systems, Inc. ....................... 1,120 49,392 Kronos, Inc.(b) ...................................... 1,300 39,676 ---------- 89,068 ---------- CASINOS & GAMING--3.9% Shuffle Master, Inc.(b) .............................. 1,525 42,441 CONSUMER FINANCE--4.4% World Acceptance Corp.(b) ............................ 1,215 48,563 EDUCATION SERVICES--6.0% Bright Horizons Family Solutions, Inc.(b) ............ 1,035 41,296 Strayer Education, Inc. .............................. 230 24,242 ---------- 65,538 ---------- ELECTRICAL COMPONENTS & EQUIPMENT--3.6% Franklin Electric Co., Inc. .......................... 820 39,532 ELECTRONIC EQUIPMENT MANUFACTURERS--6.7% Daktronics, Inc. ..................................... 1,380 28,801 Measurement Specialties, Inc.(b) ..................... 2,200 44,308 ---------- 73,109 ---------- SHARES VALUE ------ ---------- HEALTH CARE EQUIPMENT--8.7% ABAXIS, Inc.(b) ...................................... 2,045 $ 49,121 Kensey Nash Corp.(b) ................................. 1,705 46,171 ---------- 95,292 ---------- HEALTH CARE FACILITIES--3.9% Odyssey HealthCare, Inc.(b) .......................... 2,640 42,346 HOMEFURNISHING RETAIL--4.6% Aaron Rents, Inc. .................................... 2,165 50,683 IT CONSULTING & OTHER SERVICES--4.3% SI International, Inc.(b) ............................ 1,645 47,524 LIFE SCIENCES TOOLS & SERVICES--2.9% Techne Corp.(b) ...................................... 615 31,303 OIL & GAS EQUIPMENT & SERVICES--4.2% CARBO Ceramics, Inc. ................................. 1,140 45,532 PHARMACEUTICALS--3.9% KV Pharmaceutical Co. Class A(b) ..................... 1,935 43,209 REGIONAL BANKS--4.1% Wintrust Financial Corp. ............................. 895 45,027 RESTAURANTS--4.3% Cheesecake Factory, Inc. (The)(b) .................... 1,880 46,793 SEMICONDUCTOR EQUIPMENT--3.6% Cabot Microelectronics Corp.(b) ...................... 1,270 39,929 SEMICONDUCTORS--3.9% Power Integrations, Inc.(b) .......................... 2,340 43,056 See Notes to Financial Statements 18 Phoenix Small-Cap Sustainable Growth Fund SHARES VALUE ------ ---------- TECHNOLOGY DISTRIBUTORS--4.2% ScanSource, Inc.(b) .................................. 1,470 $ 45,629 TRADING COMPANIES & DISTRIBUTORS--2.9% NuCo2, Inc.(b) ....................................... 1,160 31,610 -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $1,017,434) 1,027,775 -------------------------------------------------------------------------------- TOTAL INVESTMENTS--93.8% (IDENTIFIED COST $1,017,434) 1,027,775(a) Other assets and liabilities, net--6.2% 68,128 ---------- NET ASSETS--100.0% $1,095,903 ========== (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $41,537 and gross depreciation of $31,196 for federal income tax purposes. At August 31, 2006, the aggregate cost of securities for federal income tax purposes was $1,017,434. (b) Non-income producing. See Notes to Financial Statements 19 Phoenix Small-Cap Sustainable Growth Fund STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2006 ASSETS Investment securities at value (Identified cost $1,017,434) $1,027,775 Cash 28,350 Receivables Receivable from adviser 14,911 Dividends 155 Prepaid expenses 43,127 ---------- Total assets 1,114,318 ---------- LIABILITIES Payables Professional fee 16,501 Custodian fee 1,585 Distribution and service fees 102 Transfer agent fee 80 Administration fee 33 Trustees' fee 5 Other accrued expenses 109 ---------- Total liabilities 18,415 ---------- NET ASSETS $1,095,903 ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $1,088,082 Accumulated net realized loss (2,520) Net unrealized appreciation 10,341 ---------- NET ASSETS $1,095,903 ========== CLASS X Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $898,062) 91,746 Net asset value and offering price per share $ 9.79 CLASS A Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $100,094) 10,227 Net asset value per share $ 9.79 Offering price per share $9.79 /(1-5.75%) $10.39 CLASS C Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $97,747) 10,000 Net asset value and offering price per share $ 9.77 STATEMENT OF OPERATIONS FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 INVESTMENT INCOME Dividends $ 421 Interest 218 -------- Total investment income 639 -------- EXPENSES Investment advisory fee 1,066 Service fees, Class A 43 Distribution and service fees, Class C 169 Administration fee 86 Professional 18,351 Transfer agent 4,598 Registration 2,766 Custodian 1,937 Printing 106 Trustees 5 Miscellaneous 1,079 -------- Total expenses 30,206 Less expenses reimbursed by investment adviser (28,437) Custodian fees paid indirectly (196) -------- Net expenses 1,573 -------- NET INVESTMENT INCOME (LOSS) (934) -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (2,520) Net change in unrealized appreciation (depreciation) on investments 10,341 -------- NET GAIN (LOSS) ON INVESTMENTS 7,821 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,887 ======== See Notes to Financial Statements 20 Phoenix Small-Cap Sustainable Growth Fund STATEMENT OF CHANGES IN NET ASSETS
From Inception June 28, 2006 to August 31, 2006 ---------------- FROM OPERATIONS Net investment income (loss) $ (934) Net realized gain (loss) (2,520) Net change in unrealized appreciation (depreciation) 10,341 ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,887 ---------- FROM SHARE TRANSACTIONS CLASS X Proceeds from sales of shares (91,748 shares) 886,900 Cost of shares repurchased (2 shares) (19) ---------- Total 886,881 ---------- CLASS A Proceeds from sales of shares (10,227 shares) 102,135 ---------- Total 102,135 ---------- CLASS C Proceeds from sales of shares (10,000 shares) 100,000 ---------- Total 100,000 ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 1,089,016 ---------- NET INCREASE (DECREASE) IN NET ASSETS 1,095,903 NET ASSETS Beginning of period -- ---------- END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0) $1,095,903 ==========
See Notes to Financial Statements 21 Phoenix Small-Cap Sustainable Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS X ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.01) Net realized and unrealized gain (loss) (0.20) ------ TOTAL FROM INVESTMENT OPERATIONS (0.21) ------ Change in net asset value (0.21) ------ NET ASSET VALUE, END OF PERIOD $ 9.79 ====== Total return (2.10)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $898 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.15 %(3) Gross operating expenses 23.99 %(3) Net investment income (loss) (0.61)%(3) Portfolio turnover 4 %(4) CLASS A ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.01) Net realized and unrealized gain (loss) (0.20) ------ TOTAL FROM INVESTMENT OPERATIONS (0.21) ------ Change in net asset value (0.21) ------ NET ASSET VALUE, END OF PERIOD $ 9.79 ====== Total return(2) (2.10)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $100 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.40 %(3) Gross operating expenses 28.32 %(3) Net investment income (loss) (0.87)%(3) Portfolio turnover 4 %(4) (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Annualized. (4) Not annualized. See Notes to Financial Statements 22 Phoenix Small-Cap Sustainable Growth Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD) CLASS C ------------------ FROM INCEPTION JUNE 28, 2006 TO AUGUST 31, 2006 Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.03) Net realized and unrealized gain (loss) (0.20) ------- TOTAL FROM INVESTMENT OPERATIONS (0.23) ------- Change in net asset value (0.23) ------- NET ASSET VALUE, END OF PERIOD $ 9.77 ====== Total return(2) (2.20)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $98 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.15 %(3) Gross operating expenses 29.09 %(3) Net investment income (loss) (1.61)%(3) Portfolio turnover 4 %(4) (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Annualized. (4) Not annualized. See Notes to Financial Statements 23 PHOENIX SMALL-CAP VALUE FUND A DISCUSSION WITH THE FUND'S MANAGEMENT TEAM OF CARLTON NEEL AND DAVID DICKERSON Q: HOW DID THE PHOENIX SMALL-CAP VALUE FUND PERFORM FOR ITS FISCAL YEAR ENDED AUGUST 31, 2006? A: For the fiscal year ended August 31, 2006, the Fund's Class A shares returned 5.32%, Class B shares returned 4.57%, and Class C shares returned 4.57%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 8.88% and the Russell 2000(R) Value Index, the Fund's style-specific benchmark, returned 12.72%. All performance figures assume reinvestment of distributions and exclude the effect of sales charges. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? A: Over the course of the last year (September 1, 2005, to August 31, 2006), the equity markets have been generally solid. Returns have ranged from the high single digits for the S&P 500 Index, to nearly 13% for the Russell 2000(R) Small Cap Value Index. Smaller-capitalization stocks outperformed large-cap stocks for most of the period, with the recent summer stretch being the exception, as larger stocks began to catch up. During the mid-October 2005 to mid-May 2006 timeframe, stocks of all sizes enjoyed a very good run. In what seemed like a never-ending stretch, value stocks once again outperformed growth stocks for the 12-month period. The underpinnings of the rally developed from the market perception that the Federal Reserve could be approaching the end of its several-year tightening cycle, which has taken the federal funds rate from 1.00% to 5.25%. However, higher energy costs and concerns about inflation began to creep back into investors' minds in mid-May, and the market, especially in the small-cap space, sold off for most of the summer. Toward the end of the Fund's fiscal year, the market regained its footing, seemingly poised for a rally into the new fiscal year. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? A: The Fund kept pace with the Russell 2000 Value Index for most of the fiscal year ended August 31, 2006. Between early September 2005 and mid-May 2006, the Fund enjoyed very favorable performance results, largely due to its increased exposure to energy stocks and strong stock selection. However, since value stocks have rallied sharply versus their growth counterparts over the course of the last several years, our models have begun to shift into buying stocks with better growth prospects. Since we only select stocks that are in the Russell 2000 Value Index (and a few other names that exhibit value characteristics), we are still solidly a value fund, but the models are finding more opportunity in issuers that have somewhat higher growth prospects. Consequently, this has hurt the Fund's recent performance, as over the summer we gave up nearly 700 basis points (7%) of performance relative to the Russell 2000 Value Index. SEPTEMBER 2006 THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. FOR DEFINITIONS OF THE INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS REPORT, SEE THE GLOSSARY ON PAGE 3. 24 Phoenix Small-Cap Value Fund -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 1 PERIODS ENDING 8/31/06 --------------------------------------------------------------------------------
INCEPTION INCEPTION 1 YEAR 5 YEARS TO 8/31/06 DATE ------ ------- ---------- --------- Class A Shares at NAV 2 5.32% 10.03% 11.66% 11/20/97 Class A Shares at POP 3 (0.73) 8.74 10.91 11/20/97 Class B Shares at NAV 2 4.57 9.21 10.84 11/20/97 Class B Shares with CDSC 4 0.83 9.21 10.84 11/20/97 Class C Shares at NAV 2 4.57 9.21 10.84 11/20/97 Class C Shares with CDSC 4 4.57 9.21 10.84 11/20/97 S&P 500(R) Index 8.88 4.65 5.19 11/20/97 Russell 2000(R) Value Index 12.72 14.03 10.85 11/20/97
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. 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. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. 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 5.75% SALES CHARGE. 4 CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. -------------------------------------------------------------------------------- GROWTH OF $10,000 PERIODS ENDING 8/31 -------------------------------------------------------------------------------- This Growth of $10,000 chart assumes an initial investment of $10,000 made on 11/20/97 (inception of the Fund) in Class A, Class B and Class C shares. The total return for Class A shares reflects the maximum sales charge of 5.75% on the initial investment. The total return for Class B shares reflects the CDSC charges which decline from 5% to 0% over a five year period. The total return for Class C shares reflects the CDSC charges which are 1% in the first year and 0% thereafter. Performance assumes dividends and capital gain distributions are reinvested. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Phoenix Phoenix Phoenix Small Cap Small Cap Small Cap Russell Value Fund Value Fund Value Fund 2000(R) Value S&P 500(R) Class A Class B Class C Index Index ----------- ----------- ---------- ---------- ---------- 11/20/97 $ 9,425 $10,000 $10,000 $10,000 $10,000 8/31/98 7,668 8,093 8,091 8,370 10,097 8/31/99 10,805 11,320 11,316 9,549 14,124 8/31/00 17,951 18,674 18,669 10,856 16,438 8/31/01 15,395 15,894 15,889 12,815 12,429 8/30/02 13,698 14,031 14,027 12,097 10,192 8/29/03 16,268 16,540 16,535 14,962 11,424 8/31/04 18,280 18,454 18,449 17,878 12,732 8/31/05 23,578 23,614 23,607 21,921 14,329 8/31/06 24,833 24,603 24,686 24,709 15,602 For information regarding the indexes, see the glossary on page 3. 25 Phoenix Small-Cap Value Fund ABOUT YOUR FUND'S EXPENSES We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Small-Cap Value Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares, if applicable; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. Beginning Ending Expenses Paid Small-Cap Value Fund Account Value Account Value During Class A February 28, 2006 August 31, 2006 Period* --------------------- ----------------- ---------------- ------------- Actual $1,000.00 $ 978.30 $6.98 Hypothetical (5% return before expenses) 1,000.00 1,018.15 7.15 *EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.40%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS A RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 5.32%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,053.20. Beginning Ending Expenses Paid Small-Cap Value Fund Account Value Account Value During Class B February 28, 2006 August 31, 2006 Period* --------------------- ----------------- ---------------- ------------- Actual $1,000.00 $ 974.30 $10.69 Hypothetical (5% return before expenses) 1,000.00 1,014.33 10.97 *EXPENSES ARE EQUAL TO THE FUND'S CLASS B ANNUALIZED EXPENSE RATIO OF 2.15%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS B RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 4.57%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,045.70. Beginning Ending Expenses Paid Small-Cap Value Fund Account Value Account Value During Class C February 28, 2006 August 31, 2006 Period* --------------------- ----------------- ---------------- ------------- Actual $1,000.00 $ 974.30 $10.69 Hypothetical (5% return before expenses) 1,000.00 1,014.33 10.97 *EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.15%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS C RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 4.57%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,045.70. YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS. 26 Phoenix Small-Cap Value Fund -------------------------------------------------------------------------------- SECTOR WEIGHTINGS 8/31/06 -------------------------------------------------------------------------------- As a percentage of total investments [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] Financials 27% Information Technology 16 Industrials 16 Consumer Discretionary 11 Materials 8 Energy 8 Health Care 3 Other 11 SCHEDULE OF INVESTMENTS AUGUST 31, 2006 SHARES VALUE -------- ------------ DOMESTIC COMMON STOCKS--97.4% AEROSPACE & DEFENSE--1.9% Armor Holdings, Inc.(b) ........................... 39,600 $ 2,093,652 DRS Technologies, Inc. ............................ 24,100 997,017 Triumph Group, Inc. ............................... 27,200 1,195,712 ------------ 4,286,381 ------------ AIRLINES--1.0% ExpressJet Holdings, Inc.(b)(e) ................... 152,100 1,063,179 Republic Airways Holdings, Inc.(b) ................ 42,000 669,480 SkyWest, Inc.(e) .................................. 20,700 500,319 ------------ 2,232,978 ------------ APPAREL RETAIL--2.3% Charming Shoppes, Inc.(b) ......................... 22,700 298,732 Men's Wearhouse, Inc. (The) ....................... 71,000 2,516,950 Payless ShoeSource, Inc.(b) ....................... 50,000 1,173,000 Shoe Carnival, Inc.(b) ............................ 38,300 875,538 Stein Mart, Inc. .................................. 14,800 175,972 United Retail Group, Inc.(b) ...................... 9,500 145,540 ------------ 5,185,732 ------------ APPAREL, ACCESSORIES & LUXURY GOODS--1.3% Kellwood Co. ...................................... 49,600 1,359,536 Perry Ellis International, Inc.(b) ................ 22,700 611,992 Phillips-Van Heusen Corp. ......................... 28,900 1,116,696 ------------ 3,088,224 ------------ SHARES VALUE -------- ------------ ASSET MANAGEMENT & CUSTODY BANKS--0.1% MCG Capital Corp.(e) .............................. 21,400 $ 343,256 AUTO PARTS & EQUIPMENT--0.9% Aftermarket Technology Corp.(b) ................... 37,300 752,714 ArvinMeritor, Inc.(e) ............................. 89,800 1,333,530 ------------ 2,086,244 ------------ AUTOMOTIVE RETAIL--0.8% Asbury Automotive Group, Inc. ..................... 23,600 483,564 CSK Auto Corp.(b) ................................. 10,000 114,700 Group 1 Automotive, Inc. .......................... 26,600 1,204,980 ------------ 1,803,244 ------------ BUILDING PRODUCTS--1.4% American Woodmark Corp.(e) ........................ 37,300 1,176,069 PW Eagle, Inc.(e) ................................. 34,100 1,189,067 Universal Forest Products, Inc.(e) ................ 16,800 819,168 ------------ 3,184,304 ------------ COMMERCIAL PRINTING--1.0% Consolidated Graphics, Inc.(b) .................... 18,600 1,156,548 Ennis, Inc. ....................................... 50,200 1,036,630 ------------ 2,193,178 ------------ COMMODITY CHEMICALS--1.6% Georgia Gulf Corp. ................................ 56,300 1,494,202 Spartech Corp. .................................... 54,000 1,216,620 Westlake Chemical Corp. ........................... 34,300 1,027,628 ------------ 3,738,450 ------------ See Notes to Financial Statements 27 Phoenix Small-Cap Value Fund SHARES VALUE -------- ------------ COMMUNICATIONS EQUIPMENT--4.0% Avocent Corp.(b) .................................. 24,500 $ 740,635 CommScope, Inc.(b) ................................ 63,100 1,843,151 Comtech Telecommunications Corp.(b)(e) ............ 44,850 1,467,940 Harris Corp. ...................................... 51,900 2,279,448 Polycom, Inc.(b) .................................. 58,100 1,382,199 UTStarcom, Inc.(b) ................................ 172,600 1,417,046 Waestell Technologies, Inc. Class A(b) ............ 8,300 22,742 ------------ 9,153,161 ------------ COMPUTER STORAGE & PERIPHERALS--1.2% Komag, Inc.(b)(e) ................................. 68,300 2,456,068 SimpleTech, Inc.(b) ............................... 25,400 178,562 ------------ 2,634,630 ------------ CONSTRUCTION & ENGINEERING--0.8% EMCOR Group, Inc.(b) .............................. 31,000 1,718,640 Michael Baker Corp.(b) ............................ 2,900 63,800 ------------ 1,782,440 ------------ CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--0.4% Commercial Vehicle Group, Inc.(b)(e) .............. 41,700 818,154 CONSUMER FINANCE--1.8% Cash America International, Inc. .................. 68,600 2,529,282 EZCORP, Inc. Class A(b) ........................... 40,100 1,574,727 ------------ 4,104,009 ------------ DEPARTMENT STORES--0.6% Dillard's, Inc. Class A ........................... 40,800 1,272,144 DIVERSIFIED BANKS--0.2% Intervest Bancshares Corp.(b) ..................... 12,900 542,058 DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES--1.4% CBIZ, Inc.(b) ..................................... 129,700 1,011,660 Cornell Cos., Inc.(b) ............................. 16,200 285,768 CRA International, Inc.(b)(e) ..................... 8,200 368,918 Geo Group, Inc. (The)(b) .......................... 33,500 1,496,445 ------------ 3,162,791 ------------ DIVERSIFIED REIT'S--0.8% Spirit Finance Corp. .............................. 115,200 1,307,520 Winthrop Realty Trust ............................. 80,200 503,656 ------------ 1,811,176 ------------ DRUG RETAIL--0.7% Longs Drug Stores Corp. ........................... 34,000 1,544,620 SHARES VALUE -------- ------------ ELECTRIC UTILITIES--0.8% Cleco Corp. ....................................... 60,000 $ 1,497,600 Otter Tail Corp. .................................. 12,000 361,800 ------------ 1,859,400 ------------ ELECTRICAL COMPONENTS & EQUIPMENT--3.2% Genlyte Group, Inc. (The)(b) ...................... 32,800 2,149,384 LSI Industries, Inc. .............................. 18,000 329,940 Regal-Beloit Corp. ................................ 36,400 1,571,024 Smith (A.O.) Corp. ................................ 46,100 1,849,071 Superior Essex, Inc.(b) ........................... 37,300 1,331,983 ------------ 7,231,402 ------------ ELECTRONIC EQUIPMENT MANUFACTURERS--1.2% Aeroflex, Inc.(b)(e) .............................. 28,300 294,886 Newport Corp.(b) .................................. 22,800 401,964 Planar Systems, Inc.(b) ........................... 46,900 461,027 Technitrol, Inc. .................................. 55,400 1,568,374 ------------ 2,726,251 ------------ ELECTRONIC MANUFACTURING SERVICES--2.4% Benchmark Electronics, Inc.(b) .................... 39,000 972,660 CTS Corp. ......................................... 48,100 707,070 Merix Corp.(b)(e) ................................. 81,400 987,382 Plexus Corp.(b)(e) ................................ 47,900 949,378 TTM Technologies, Inc.(b) ......................... 81,600 1,049,376 Zygo Corp.(b) ..................................... 68,700 914,397 ------------ 5,580,263 ------------ ENVIRONMENTAL & FACILITIES SERVICES--0.3% Central Parking Corp. ............................. 38,200 635,648 FOOD DISTRIBUTORS--0.2% Spartan Stores, Inc.(e) ........................... 25,700 463,371 FOOD RETAIL--0.4% Casey's General Stores, Inc. ...................... 43,700 1,033,068 FOOTWEAR--0.8% Brown Shoe Co., Inc. .............................. 10,450 333,878 Skechers U.S.A., Inc. Class A(b)(e) ............... 70,600 1,598,384 ------------ 1,932,262 ------------ GAS UTILITIES--0.7% Laclede Group, Inc. (The) ......................... 2,600 84,734 Nicor, Inc.(e) .................................... 34,000 1,484,440 ------------ 1,569,174 ------------ See Notes to Financial Statements 28 Phoenix Small-Cap Value Fund SHARES VALUE -------- ------------ HEALTH CARE EQUIPMENT--0.6% Cantel Medical Corp.(b)(e) ........................ 50,000 $ 706,500 Greatbatch, Inc.(b)(e) ............................ 30,400 743,584 ------------ 1,450,084 ------------ HEALTH CARE FACILITIES--0.1% LifePoint Hospitals, Inc.(b) ...................... 4,400 149,820 HEALTH CARE SERVICES--0.5% Res-Care, Inc.(b) ................................. 53,100 1,064,655 HOME FURNISHINGS--0.7% Furniture Brands International, Inc.(e) ........... 64,400 1,233,260 Hooker Furniture Corp.(e) ......................... 20,200 298,556 ------------ 1,531,816 ------------ HOMEBUILDING--0.1% Orleans Homebuilders, Inc.(e) ..................... 19,100 233,402 HOMEFURNISHING RETAIL--0.5% Rent-A-Center, Inc.(b) ............................ 41,300 1,119,230 HOTELS, RESORTS & CRUISE LINES--0.9% Bluegreen Corp.(b)(e) ............................. 28,200 322,890 Interstate Hotels & Resorts, Inc.(b) .............. 107,500 1,116,925 Sunterra Corp.(b) ................................. 42,600 526,110 ------------ 1,965,925 ------------ HOUSEWARES & SPECIALTIES--0.2% Lifetime Brands, Inc.(e) .......................... 20,800 415,168 HUMAN RESOURCES & EMPLOYMENT SERVICES--1.0% Kforce, Inc.(b) ................................... 69,600 856,776 Volt Information Sciences, Inc.(b) ................ 32,900 1,402,856 ------------ 2,259,632 ------------ INDUSTRIAL MACHINERY--1.7% Columbus McKinnon Corp.(b) ........................ 13,600 251,464 EnPro Industries, Inc.(b) ......................... 19,300 606,792 Gardner Denver, Inc.(b) ........................... 50,000 1,798,500 Tennant Co. ....................................... 46,700 1,263,702 ------------ 3,920,458 ------------ INTEGRATED TELECOMMUNICATION SERVICES--0.4% CT Communications, Inc. ........................... 43,500 1,002,240 INTERNET RETAIL--0.3% FTD Group, Inc.(b) ................................ 47,200 748,120 INTERNET SOFTWARE & SERVICES--2.0% EarthLink, Inc.(b) ................................ 156,200 1,148,070 RealNetworks, Inc.(b)(e) .......................... 147,600 1,628,028 SHARES VALUE -------- ------------ INTERNET SOFTWARE & SERVICES--CONTINUED SonicWALL, Inc.(b) ................................ 111,700 $ 1,146,042 United Online, Inc. ............................... 48,800 559,736 ------------ 4,481,876 ------------ INVESTMENT BANKING & BROKERAGE--0.5% Knight Capital Group, Inc. Class A(b) ............ 70,900 1,237,914 IT CONSULTING & OTHER SERVICES--2.0% Keane, Inc.(b) .................................... 87,400 1,352,952 MPS Group, Inc.(b) ................................ 108,300 1,522,698 Perot Systems Corp. Class A(b) .................... 70,400 1,010,944 SYKES Enterprises, Inc.(b) ........................ 29,000 583,190 ------------ 4,469,784 ------------ LEISURE PRODUCTS--0.3% JAKKS Pacific, Inc.(b)(e) ......................... 47,800 781,052 LIFE & HEALTH INSURANCE--0.5% FBL Financial Group Inc., Class A ................. 31,300 1,037,908 MANAGED HEALTH CARE--1.2% HealthSpring, Inc.(b) ............................. 77,300 1,539,043 Molina Healthcare, Inc.(b) ........................ 34,200 1,266,768 ------------ 2,805,811 ------------ MARINE--0.1% Genco Shipping & Trading Ltd. ..................... 9,600 210,528 METAL & GLASS CONTAINERS--0.7% Greif, Inc. Class A ............................... 17,300 1,225,705 Myers Industries, Inc. ............................ 25,800 423,894 ------------ 1,649,599 ------------ MORTGAGE REIT'S--1.8% American Home Mortgage Investment Corp. ........... 41,900 1,328,230 Anthracite Capital, Inc. .......................... 87,600 1,125,660 Arbor Realty Trust, Inc. .......................... 7,400 186,110 Capital Trust, Inc. Class A(e) .................... 28,300 1,110,775 NorthStar Realty Finance Corp. .................... 21,300 255,387 ------------ 4,006,162 ------------ MULTI-LINE INSURANCE--0.5% Horace Mann Educators Corp. ....................... 64,200 1,178,712 MULTI-SECTOR HOLDINGS--0.1% Compass Diversified Trust ......................... 9,400 138,274 MULTI-UTILITIES--0.6% Avista Corp.(e) ................................... 59,000 1,430,160 See Notes to Financial Statements 29 Phoenix Small-Cap Value Fund SHARES VALUE -------- ------------ OFFICE SERVICES & SUPPLIES--0.4% United Stationers, Inc.(b) ........................ 20,100 $ 921,183 OIL & GAS DRILLING--0.6% Parker Drilling Co.(b) ............................ 200,100 1,420,710 OIL & GAS EQUIPMENT & SERVICES--2.6% Hornbeck Offshore Services, Inc.(b) ............... 40,300 1,354,483 Maverick Tube Corp.(b)(e) ......................... 19,700 1,266,119 Newpark Resources, Inc.(b)(e) ..................... 35,000 193,900 Oil States International, Inc.(b)(e) .............. 45,000 1,438,200 SEACOR Holdings, Inc.(b)(e) ....................... 19,900 1,731,897 ------------ 5,984,599 ------------ OIL & GAS EXPLORATION & PRODUCTION--1.6% Chesapeake Energy Corp.(e) ........................ 71,900 2,269,883 Swift Energy Co.(b) ............................... 29,800 1,304,048 ------------ 3,573,931 ------------ OIL & GAS REFINING & MARKETING--1.6% Giant Industries, Inc.(b) ......................... 13,700 1,119,290 Tesoro Corp. ...................................... 39,000 2,519,790 ------------ 3,639,080 ------------ OIL & GAS STORAGE & TRANSPORTATION--1.6% General Maritime Corp. ............................ 34,000 1,277,040 OMI Corp.(e) ...................................... 63,400 1,427,768 Overseas Shipholding Group, Inc. .................. 16,000 1,067,200 ------------ 3,772,008 ------------ PACKAGED FOODS & MEATS--0.0% Premium Standard Farms, Inc. ...................... 3,800 64,296 PAPER PACKAGING--0.6% Rock-Tenn Co. Class A ............................. 70,000 1,352,400 PHARMACEUTICALS--0.7% Bradley Pharmaceuticals, Inc.(b) .................. 30,100 445,781 Sciele Pharma, Inc.(b) ............................ 66,100 1,156,750 ------------ 1,602,531 ------------ PROPERTY & CASUALTY INSURANCE--8.4% 21st Century Insurance Group(e) ................... 72,300 1,086,669 Affirmative Insurance Holdings, Inc. .............. 14,900 220,073 Argonaut Group, Inc.(b) ........................... 33,300 1,023,975 CNA Surety Corp.(b) ............................... 21,700 431,830 Commerce Group, Inc. (The) ........................ 28,800 857,952 EMC Insurance Group, Inc.(e) ...................... 33,500 981,885 FPIC Insurance Group, Inc.(b)(e) .................. 25,800 1,063,992 Harleysville Group, Inc. .......................... 30,900 1,112,091 SHARES VALUE -------- ------------ PROPERTY & CASUALTY INSURANCE--CONTINUED LandAmerica Financial Group, Inc.(e) .............. 21,000 $ 1,328,040 Meadowbrook Insurance Group, Inc.(b) .............. 151,400 1,565,476 Navigators Group, Inc. (The)(b) ................... 21,700 999,936 ProAssurance Corp.(b)(e) .......................... 31,600 1,589,480 Safety Insurance Group, Inc. ...................... 23,600 1,213,512 SeaBright Insurance Holdings, Inc.(b) ............ 53,200 673,512 Selective Insurance Group, Inc.(e) ................ 52,700 2,741,454 State Auto Financial Corp. ........................ 14,900 466,966 Zenith National Insurance Corp. ................... 49,049 1,854,052 ------------ 19,210,895 ------------ REAL ESTATE MANAGEMENT & DEVELOPMENT--0.9% Jones Lang LaSalle, Inc.(e) ....................... 23,800 1,981,588 REGIONAL BANKS--3.0% 1st Source Corp. .................................. 5,940 177,903 Ameris Bancorp .................................... 2,300 60,444 Bank of Granite Corp. ............................. 9,800 213,248 City Holding Co. .................................. 3,400 133,892 Community Trust Bancorp, Inc. ..................... 17,200 660,824 Financial Institutions, Inc. ...................... 3,300 82,434 First BanCorp(e) .................................. 80,700 741,633 Greater Bay Bancorp ............................... 44,200 1,258,374 Integra Bank Corp. ................................ 4,000 103,280 R-G Financial Corp. Class B ....................... 80,700 581,040 Southwest Bancorp, Inc.(e) ........................ 36,600 971,730 Sterling Financial Corp. .......................... 15,100 338,089 TCF Financial Corp.(e) ............................ 56,500 1,472,955 ------------ 6,795,846 ------------ RESTAURANTS--0.9% Jack in the Box, Inc.(b) .......................... 36,700 1,760,866 Steak n Shake Co. (The)(b) ........................ 13,000 208,910 ------------ 1,969,776 ------------ RETAIL REIT'S--0.2% Kite Realty Group Trust ........................... 35,000 570,150 SEMICONDUCTOR EQUIPMENT--1.1% Advanced Energy Industries, Inc.(b) ............... 82,800 1,189,836 MKS Instruments, Inc.(b) .......................... 58,500 1,222,065 ------------ 2,411,901 ------------ SEMICONDUCTORS--1.7% IXYS Corp.(b)(e) .................................. 49,800 437,244 OmniVision Technologies, Inc.(b) .................. 86,200 1,430,920 Pericom Semiconductor Corp.(b) .................... 8,900 82,770 Semtech Corp.(b) .................................. 18,800 245,716 See Notes to Financial Statements 30 Phoenix Small-Cap Value Fund SHARES VALUE -------- ------------ SEMICONDUCTORS--CONTINUED Standard Microsystems Corp.(b) .................... 42,100 $ 1,181,747 Zoran Corp.(b) .................................... 34,600 616,572 ------------ 3,994,969 ------------ SPECIALIZED CONSUMER SERVICES--0.4% Escala Group, Inc.(b)(e) .......................... 137,200 916,496 SPECIALIZED REIT'S--3.4% Ashford Hospitality Trust, Inc. ................... 105,400 1,261,638 Entertainment Properties Trust .................... 25,700 1,281,402 FelCor Lodging Trust, Inc. ........................ 70,000 1,501,500 Highland Hospitality Corp. ........................ 103,100 1,419,687 Sunstone Hotel Investors, Inc. .................... 46,900 1,402,310 Winston Hotels, Inc. .............................. 74,100 882,531 ------------ 7,749,068 ------------ SPECIALTY CHEMICALS--2.4% Albemarle Corp.(e) ................................ 35,400 1,943,460 Fuller (H.B.) Co. ................................. 96,200 1,849,926 OM Group, Inc.(b) ................................. 32,500 1,300,000 PolyOne Corp.(b) .................................. 39,200 339,864 ------------ 5,433,250 ------------ SPECIALTY STORES--0.3% Books-A-Million, Inc.(e) .......................... 38,700 617,265 STEEL--3.3% Commercial Metals Co. ............................. 75,000 1,619,250 Gibraltar Industries, Inc. ........................ 29,600 716,320 Olympic Steel, Inc. ............................... 44,600 1,233,190 Reliance Steel & Aluminum Co. ..................... 56,000 1,835,120 Ryerson, Inc.(e) .................................. 35,000 741,300 Steel Dynamics, Inc.(e) ........................... 22,200 1,171,938 Worthington Industries, Inc. ...................... 17,000 324,870 ------------ 7,641,988 ------------ SYSTEMS SOFTWARE--0.7% Sybase, Inc.(b)(e) ................................ 70,000 1,614,900 TECHNOLOGY DISTRIBUTORS--1.2% Anixter International, Inc.(e) .................... 24,800 1,351,352 Global Imaging Systems, Inc.(b)(e) ................ 5,000 109,650 Nu Horizons Electronics Corp.(b) .................. 13,800 193,200 SYNNEX Corp.(b) ................................... 50,000 1,111,500 ------------ 2,765,702 ------------ THRIFTS & MORTGAGE FINANCE--5.2% BankUnited Financial Corp. Class A ................ 44,500 1,146,765 Corus Bankshares, Inc.(e) ......................... 70,300 1,533,243 SHARES VALUE -------- ------------ THRIFTS & MORTGAGE FINANCE--CONTINUED Delta Financial Corp. ............................. 42,400 $ 381,176 Downey Financial Corp.(e) ......................... 22,700 1,393,553 Federal Agricultural Mortgage Corp. Class C ....... 14,900 417,945 First Financial Holdings, Inc. .................... 17,600 607,904 First Place Financial Corp. ....................... 4,300 101,179 FirstFed Financial Corp.(b)(e) .................... 29,700 1,510,542 ITLA Capital Corp.(e) ............................. 8,400 440,580 Ocwen Financial Corp.(b)(e) ....................... 109,000 1,607,750 TierOne Corp. ..................................... 37,500 1,279,125 Triad Guaranty, Inc.(b) ........................... 23,700 1,191,399 United Community Financial Corp. .................. 13,600 172,856 ------------ 11,784,017 ------------ TRADING COMPANIES & DISTRIBUTORS--1.1% BlueLinx Holdings, Inc.(e) ........................ 8,800 93,016 Rush Enterprises, Inc. Class A(b)(e) .............. 55,200 966,000 United Rentals, Inc.(b) ........................... 63,600 1,377,576 ------------ 2,436,592 ------------ TRUCKING--2.0% Arkansas Best Corp. ............................... 32,600 1,439,290 Saia, Inc.(b) ..................................... 35,500 1,091,625 Swift Transportation Co., Inc.(b) ................. 44,900 1,041,231 U.S. Xpress Enterprises, Inc. Class A(b) .......... 46,500 968,595 ------------ 4,540,741 ------------ -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $187,303,211) 222,052,225 -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS(c)--1.4% PROPERTY & CASUALTY INSURANCE--0.2% United America Indemnity Ltd. Class A (United States)(b) ................................ 23,000 494,040 REINSURANCE--1.2% Arch Capital Group Ltd. (United States)(b) ........ 46,100 2,747,560 -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $2,343,408) 3,241,600 -------------------------------------------------------------------------------- WARRANTS--0.0% OTHER DIVERSIFIED FINANCIAL SERVICES--0.0% Imperial Credit Industries, Inc. Strike Price $2.15, Exp. 1/31/08(b)(d) ................... 2,429 0 -------------------------------------------------------------------------------- TOTAL WARRANTS (IDENTIFIED COST $0) 0 -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--98.8% (IDENTIFIED COST $189,646,619) 225,293,825 -------------------------------------------------------------------------------- See Notes to Financial Statements 31 Phoenix Small-Cap Value Fund SHARES VALUE ----------- ------------ SHORT-TERM INVESTMENTS--8.3% MONEY MARKET MUTUAL FUNDS--6.9% State Street Navigator Prime Plus (5.28% seven day effective yield)(f) ............ 15,592,656 $ 15,592,656 PAR VALUE (000) ----------- COMMERCIAL PAPER(g)--1.4% CAFCO LLC 5.26%, 9/1/06 ......................... $3,200 3,200,000 -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $18,792,656) 18,792,656 -------------------------------------------------------------------------------- TOTAL INVESTMENTS--107.1% (IDENTIFIED COST $208,439,275) 244,086,481(a) Other assets and liabilities, net--(7.1)% (16,205,413) ------------ NET ASSETS--100.0% $227,881,068 ============ (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $40,492,096 and gross depreciation of $5,232,133 for federal income tax purposes. At August 31, 2006, the aggregate cost of securities for federal income tax purposes was $208,826,518. (b) Non-income producing. (c) A common stock is considered to be foreign if the security is issued in a foreign country. The country of risk, noted parenthetically, is determined based on criteria described in Note 2G "Foreign security country determination" in the Notes to Financial Statements. (d) Illiquid. Security valued at fair value as determined in good faith by or under the direction of the Trustees. At August 31, 2006, these securities amounted to a value of $0 or 0% of net assets. (e) All or a portion of security is on loan. (f) Represents security purchased with cash collateral received for securities on loan. (g) The rate shown is the discount rate. See Notes to Financial Statements 32 Phoenix Small-Cap Value Fund STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2006 ASSETS Investment securities at value, including $15,198,510 of securities on loan (Identified cost $208,439,275) $244,086,481 Cash 89,332 Receivables Dividends 119,067 Fund shares sold 39,829 Prepaid expenses 27,708 ------------ Total assets 244,362,417 ------------ LIABILITIES Payables Fund shares repurchased 381,766 Investment securities purchased 85,026 Upon return of securities loaned 15,592,656 Investment advisory fee 150,104 Distribution and service fees 107,208 Transfer agent fee 77,677 Administration fee 16,731 Trustees' fee 534 Other accrued expenses 69,647 ------------ Total liabilities 16,481,349 ------------ NET ASSETS $227,881,068 ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $159,448,973 Accumulated net realized gain 32,784,889 Net unrealized appreciation 35,647,206 ------------ NET ASSETS $227,881,068 ============ CLASS A Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $135,435,581) 7,339,977 Net asset value per share $18.45 Offering price per share $18.45 /(1-5.75%) $19.58 CLASS B Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $30,567,448) 1,790,213 Net asset value and offering price per share $17.07 CLASS C Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $61,878,039) 3,624,116 Net asset value and offering price per share $17.07 STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 2006 INVESTMENT INCOME Dividends $ 2,527,949 Interest 145,873 Security lending 119,069 Foreign taxes withheld (4,981) ------------ Total investment income 2,787,910 ------------ EXPENSES Investment advisory fee 2,245,943 Service fees, Class A 362,745 Distribution and service fees, Class B 373,281 Distribution and service fees, Class C 671,232 Financial agent fee 144,616 Administration fee 33,462 Transfer agent 431,048 Printing 75,825 Registration 42,292 Custodian 41,763 Professional 41,450 Trustees 28,255 Miscellaneous 31,861 ------------ Total expenses 4,523,773 Less expenses reimbursed by investment adviser (241,554) Custodian fees paid indirectly (5,146) ------------ Net expenses 4,277,073 ------------ NET INVESTMENT INCOME (LOSS) (1,489,163) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 41,254,936 Net change in unrealized appreciation (depreciation) on investments (27,051,697) ------------ NET GAIN (LOSS) ON INVESTMENTS 14,203,239 ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,714,076 ============ See Notes to Financial Statements 33 Phoenix Small-Cap Value Fund STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended August 31, 2006 August 31, 2005 --------------- --------------- FROM OPERATIONS Net investment income (loss) $ (1,489,163) $ (1,308,333) Net realized gain (loss) 41,254,936 23,665,069 Net change in unrealized appreciation (depreciation) (27,051,697) 40,989,811 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,714,076 63,346,547 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized short-term gains, Class A (359,993) -- Net realized short-term gains, Class B (104,808) -- Net realized short-term gains, Class C (179,271) -- Net realized long-term gains, Class A (13,870,660) -- Net realized long-term gains, Class B (4,044,831) -- Net realized long-term gains, Class C (6,913,765) -- ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (25,473,328) -- ------------ ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (729,714 and 1,517,141 shares, respectively) 13,949,274 26,966,994 Net asset value of shares issued from reinvestment of distributions (729,358 and 0 shares, respectively) 12,953,387 -- Cost of shares repurchased (1,685,103 and 2,183,066 shares, respectively) (31,925,844) (38,281,398) ------------ ------------ Total (5,023,183) (11,314,404) ------------ ------------ CLASS B Proceeds from sales of shares (102,263 and 113,665 shares, respectively) 1,787,328 1,904,955 Net asset value of shares issued from reinvestment of distributions (201,216 and 0 shares, respectively) 3,323,848 -- Cost of shares repurchased (817,203 and 878,516 shares, respectively) (14,486,211) (14,704,416) ------------ ------------ Total (9,375,035) (12,799,461) ------------ ------------ CLASS C Proceeds from sales of shares (125,986 and 88,988 shares, respectively) 2,183,523 1,485,601 Net asset value of shares issued from reinvestment of distributions (357,395 and 0 shares, respectively) 5,904,168 -- Cost of shares repurchased (689,686 and 1,254,224 shares, respectively) (12,219,361) (20,810,655) ------------ ------------ Total (4,131,670) (19,325,054) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (18,529,888) (43,438,919) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS (31,289,140) 19,907,628 NET ASSETS Beginning of period 259,170,208 239,262,580 ------------ ------------ END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY) $227,881,068 $259,170,208 ============ ============
See Notes to Financial Statements 34 Phoenix Small-Cap Value Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS A ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $19.45 $15.08 $13.42 $11.30 $12.72 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.05) (0.03) (0.06) --(3) (0.01) Net realized and unrealized gain (loss) 1.01 4.40 1.72 2.12 (1.39) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.96 4.37 1.66 2.12 (1.40) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Distributions from net realized gains (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ Change in net asset value (1.00) 4.37 1.66 2.12 (1.42) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $18.45 $19.45 $15.08 $13.42 $11.30 ====== ====== ====== ====== ====== Total return(2) 5.32 % 28.98 % 12.37 % 18.76% (11.02)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $135,436 $147,132 $124,165 $76,783 $83,005 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.40 % 1.40 % 1.40 % 1.40% 1.40 % Gross operating expenses 1.50 % 1.56 % 1.57 % 1.71% 1.64 % Net investment income (loss) (0.28)% (0.17)% (0.38)% 0.04% (0.11)% Portfolio turnover 121 % 102 % 150 % 241% 123 % CLASS B ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $18.26 $14.27 $12.79 $10.85 $12.31 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.18) (0.15) (0.16) (0.08) (0.10) Net realized and unrealized gain (loss) 0.95 4.14 1.64 2.02 (1.34) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.77 3.99 1.48 1.94 (1.44) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Distributions from net realized gains (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ Change in net asset value (1.19) 3.99 1.48 1.94 (1.46) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $17.07 $18.26 $14.27 $12.79 $10.85 ====== ====== ====== ====== ====== Total return(2) 4.57 % 27.96 % 11.57 % 17.88 % (11.72)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $30,567 $42,081 $43,801 $40,696 $40,382 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.15 % 2.15 % 2.15 % 2.15 % 2.15 % Gross operating expenses 2.25 % 2.31 % 2.33 % 2.46 % 2.39 % Net investment income (loss) (1.04)% (0.91)% (1.15)% (0.71)% (0.86)% Portfolio turnover 121 % 102 % 150 % 241 % 123 % (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Amount is less than $0.01.
See Notes to Financial Statements 35 Phoenix Small-Cap Value Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS C ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $18.26 $14.27 $12.79 $10.85 $12.31 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) (0.18) (0.15) (0.16) (0.08) (0.10) Net realized and unrealized gain (loss) 0.95 4.14 1.64 2.02 (1.34) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.77 3.99 1.48 1.94 (1.44) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Distributions from net realized gains (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (1.96) -- -- -- (0.02) ------ ------ ------ ------ ------ Change in net asset value (1.19) 3.99 1.48 1.94 (1.46) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $17.07 $18.26 $14.27 $12.79 $10.85 ====== ====== ====== ====== ====== Total return(2) 4.57 % 27.96 % 11.57 % 17.88 % (11.72)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $61,878 $69,957 $71,296 $51,559 $49,201 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.15 % 2.15 % 2.15 % 2.15 % 2.15 % Gross operating expenses 2.25 % 2.31 % 2.32 % 2.46 % 2.39 % Net investment income (loss) (1.03)% (0.91)% (1.14)% (0.72)% (0.86)% Portfolio turnover 121 % 102 % 150 % 241 % 123 % (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation.
See Notes to Financial Statements 36 PHOENIX VALUE EQUITY FUND A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM Q: HOW DID THE PHOENIX VALUE EQUITY FUND PERFORM FOR ITS FISCAL ENDED AUGUST 31, 2006? A: For the fiscal year ended August 31, 2006, the Fund's Class A shares returned 13.79%, Class B shares returned 12.91%, and Class C shares returned 12.90%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 8.88% and the Russell 1000(R) Value Index, the Fund's style-specific benchmark, returned 13.96%. All performance figures assume reinvestment of distributions and exclude the effect of sales charges. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? A: Value stocks in the U.S. equity market, as measured by the Russell 1000 Value Index, delivered solid absolute returns over the period, rising approximately 14.0%. This compares with a return of only 8.9% for the broad, large cap U.S. market as measured by the S&P 500. Value stocks and smaller stocks generally performed better than the broad market as the United States continued to experience positive economic growth. This continues a value rally that has dominated many equity markets since the collapse of the growth stock tech bubble at the beginning of this decade. In the year ending August 31, 2006, telecommunications and technology, along with materials and consumer staples, were among the stronger sectors of the U.S. market. Banking stocks also performed well over the period as consumer lending activity remained robust. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? A: Acadian began managing the Fund on September 30, 2005, and from that time to the end of the reporting period, it trailed the benchmark index by a small margin. Overall, stock selection was slightly positive, however, sector allocations were negative on average, particularly an overweighting in consumer durables. The Fund lost value from its positioning in finance, energy, technology and healthcare stocks. This was mainly because the portfolio had underweighted positions in some strong companies that helped drive the benchmark index return, such as Merck, Proctor and Gamble, Exxon, J.P. Morgan and Citigroup. The Fund saw significant value added from its positions in materials stocks, which were overweighted. Steel and mining company holdings such as Phelps Dodge and Nucor were helped by strong commodities prices, while construction materials companies like USG gained support from a still-solid U.S. housing market. The Fund's holdings in telecommunications, service and banking also outperformed the benchmark index in these sectors. SEPTEMBER 2006 THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. FOR DEFINITIONS OF THE INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS REPORT, SEE THE GLOSSARY ON PAGE 3. 37 Phoenix Value Equity Fund -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 1 PERIODS ENDING 8/31/06 --------------------------------------------------------------------------------
INCEPTION INCEPTION 1 YEAR 5 YEARS TO 8/31/06 DATE ------ ------- ----------- --------- Class A Shares at NAV 2 13.79% 4.56% 6.64% 11/5/97 Class A Shares at POP 3 7.24 3.33 5.93 11/5/97 Class B Shares at NAV 2 12.91 3.78 5.84 11/5/97 Class B Shares with CDSC 4 8.91 3.78 5.84 11/5/97 Class C Shares at NAV 2 12.90 3.78 5.85 11/5/97 Class C Shares with CDSC 4 12.90 3.78 5.85 11/5/97 S&P 500(R) Index 8.88 4.65 5.39 11/5/97 Russell 1000(R) Value Index 13.96 8.70 8.16 11/5/97
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. 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. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. 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 5.75% SALES CHARGE. 4 CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. -------------------------------------------------------------------------------- GROWTH OF $10,000 PERIODS ENDING 8/31 -------------------------------------------------------------------------------- This Growth of $10,000 chart assumes an initial investment of $10,000 made on 11/5/97 (inception of the Fund) in Class A, Class B and Class C shares. The total return for Class A shares reflects the maximum sales charge of 5.75% on the initial investment. The total return for Class B shares reflects the CDSC charges which decline from 5% to 0% over a five year period. The total return for Class C shares reflects the CDSC charges which are 1% in the first year and 0% thereafter. Performance assumes dividends and capital gain distributions are reinvested. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Phoenix Phoenix Phoenix Value Equity Value Equity Value Equity Fund Fund Fund Russell 1000(R) S&P 500(R) Class A Class B Class C Value Index Index ------------ ------------ ------------ ------------ -------- 11/5/97 $ 9,425 $10,000 $10,000 $10,000 $10,000 8/31/98 8,456 8,908 8,914 9,831 10,286 8/31/99 11,491 12,031 12,027 12,788 14,388 8/31/00 14,261 14,808 14,813 13,320 16,746 8/31/01 13,305 13,709 13,715 13,171 12,662 8/30/02 11,312 11,575 11,581 11,441 10,383 8/29/03 12,140 12,320 12,330 12,771 11,638 8/31/04 12,955 13,053 13,063 15,008 12,971 8/31/05 14,610 14,615 14,624 17,538 14,598 8/31/06 16,624 16,501 16,511 19,986 15,895 For information regarding the indexes, see the glossary on page 3. 38 Phoenix Value Equity Fund ABOUT YOUR FUND'S EXPENSES We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Value Equity Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares, if applicable; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. Beginning Ending Expenses Paid Value Equity Fund Account Value Account Value During Class A February 28, 2006 August 31, 2006 Period* ------------------ ----------------- --------------- ------------- Actual $1,000.00 $1,054.30 $6.99 Hypothetical (5% return before expenses) 1,000.00 1,018.41 6.89 *EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.35%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS A RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 13.79%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,137,93. Beginning Ending Expenses Paid Value Equity Fund Account Value Account Value During Class B February 28, 2006 August 31, 2006 Period* ------------------ ----------------- --------------- ------------- Actual $1,000.00 $1,050.10 $10.85 Hypothetical (5% return before expenses) 1,000.00 1,014.58 10.72 *EXPENSES ARE EQUAL TO THE FUND'S CLASS B ANNUALIZED EXPENSE RATIO OF 2.10%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS B RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 12.91%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,129.10. Beginning Ending Expenses Paid Value Equity Fund Account Value Account Value During Class C February 28, 2006 August 31, 2006 Period* ------------------ ----------------- --------------- ------------- Actual $1,000.00 $1,050.10 $10.85 Hypothetical (5% return before expenses) 1,000.00 1,014.58 10.72 *EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.10%, WHICH IS NET OF WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE ONE-HALF YEAR PERIOD. ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS C RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT, IT IS NOT THE CLASS' ACTUAL CLASS RETURN FOR THE YEAR ENDED AUGUST 31, 2006. THE CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR ENDED WAS 12.90%. AN INVESTMENT OF $1,000.00 AT AUGUST 31, 2005 WOULD HAVE YIELDED AN ACCOUNT VALUE AT AUGUST 31, 2006 OF $1,129.00. YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS. 39 Phoenix Value Equity Fund -------------------------------------------------------------------------------- SECTOR WEIGHTINGS 8/31/06 -------------------------------------------------------------------------------- As a percentage of total investments [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] Financials 33% Energy 17 Telecommunication Services 10 Industrials 9 Health Care 8 Materials 8 Information Technology 4 Other 11 SCHEDULE OF INVESTMENTS AUGUST 31, 2006 SHARES VALUE -------- ----------- DOMESTIC COMMON STOCKS--98.4% AEROSPACE & DEFENSE--0.6% Northrop Grumman Corp. ............................ 3,900 $ 260,559 AIRLINES--0.5% Alaska Air Group, Inc.(b) ......................... 3,900 147,693 Continental Airlines, Inc. Class B(b) ............ 4,400 110,396 ----------- 258,089 ----------- BIOTECHNOLOGY--3.0% Amgen, Inc.(b) .................................... 20,400 1,385,772 Biogen Idec, Inc.(b) .............................. 200 8,828 ----------- 1,394,600 ----------- BROADCASTING & CABLE TV--2.0% DIRECTV Group, Inc. (The)(b) ...................... 50,800 954,532 BUILDING PRODUCTS--0.0% American Woodmark Corp. ........................... 400 12,612 COMPUTER STORAGE & PERIPHERALS--2.0% Lexmark International, Inc. Class A(b) ............ 16,400 919,548 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--6.1% Caterpillar, Inc. ................................. 14,600 968,710 Cummins, Inc. ..................................... 7,400 849,668 FreightCar America, Inc. .......................... 1,700 98,940 PACCAR, Inc. ...................................... 16,800 918,456 ----------- 2,835,774 ----------- SHARES VALUE -------- ----------- DEPARTMENT STORES--0.1% Dillard's, Inc. Class A ........................... 1,900 $ 59,242 DIVERSIFIED CHEMICALS--1.0% Ashland, Inc. ..................................... 7,300 460,922 DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES--0.2% PHH Corp.(b) ...................................... 4,100 102,951 DIVERSIFIED METALS & MINING--4.1% Freeport-McMoRan Copper & Gold, Inc. Class B (Indonesia) ............................... 2,800 162,988 Phelps Dodge Corp. ................................ 19,400 1,736,300 ----------- 1,899,288 ----------- ELECTRIC UTILITIES--3.3% FirstEnergy Corp. ................................. 27,100 1,546,326 FOOTWEAR--0.9% Nike, Inc. Class B ................................ 5,200 419,952 HEALTH CARE DISTRIBUTORS--3.0% AmerisourceBergen Corp. ........................... 31,300 1,382,208 INDUSTRIAL MACHINERY--0.1% Timken Co. (The) .................................. 1,100 35,244 INTEGRATED OIL & GAS--16.0% Chevron Corp. ..................................... 11,200 721,280 ConocoPhillips .................................... 34,400 2,181,992 Exxon Mobil Corp. ................................. 28,200 1,908,294 Hess Corp. ........................................ 24,400 1,117,032 Marathon Oil Corp. ................................ 18,700 1,561,450 ----------- 7,490,048 ----------- See Notes to Financial Statements 40 Phoenix Value Equity Fund SHARES VALUE -------- ----------- INTEGRATED TELECOMMUNICATION SERVICES--10.1% AT&T, Inc. ........................................ 81,700 $ 2,543,321 Embarq Corp.(b) ................................... 22,000 1,037,300 Qwest Communications International, Inc.(b) ....... 130,300 1,147,943 ----------- 4,728,564 ----------- INVESTMENT BANKING & BROKERAGE--4.6% Bear Stearns Cos., Inc. (The) ..................... 1,800 234,630 Morgan Stanley .................................... 29,000 1,907,910 ----------- 2,142,540 ----------- LEISURE PRODUCTS--0.1% JAKKS Pacific, Inc.(b) ............................ 2,600 42,484 LIFE & HEALTH INSURANCE--4.0% MetLife, Inc. ..................................... 31,900 1,755,457 Nationwide Financial Services, Inc. Class A ....... 2,000 96,820 ----------- 1,852,277 ----------- MANAGED HEALTH CARE--0.2% CIGNA Corp. ....................................... 700 79,149 MULTI-LINE INSURANCE--6.3% American International Group, Inc. ................ 1,100 70,202 Assurant, Inc. .................................... 8,000 411,600 Genworth Financial, Inc. Class A .................. 43,900 1,511,477 Hartford Financial Services Group, Inc. (The) ..... 11,100 953,046 ----------- 2,946,325 ----------- MULTI-UTILITIES--0.1% OGE Energy Corp. .................................. 700 26,068 OIL & GAS REFINING & MARKETING--1.1% Valero Energy Corp. ............................... 8,600 493,640 OTHER DIVERSIFIED FINANCIAL SERVICES--2.5% Bank of America Corp. ............................. 2,000 102,940 JPMorgan Chase & Co. .............................. 23,800 1,086,708 ----------- 1,189,648 ----------- PHARMACEUTICALS--1.9% Abbott Laboratories ............................... 10,000 487,000 Alpharma, Inc. Class A ............................ 6,200 129,828 King Pharmaceuticals, Inc.(b) ..................... 16,600 269,252 ----------- 886,080 ----------- PROPERTY & CASUALTY INSURANCE--7.4% Allstate Corp. (The) .............................. 10,100 585,194 Berkley (W.R.) Corp. .............................. 9,000 315,000 SHARES VALUE -------- ----------- PROPERTY & CASUALTY INSURANCE--CONTINUED Chubb Corp. (The) ................................. 33,600 $ 1,685,376 CNA Financial Corp.(b) ............................ 3,500 121,345 St. Paul Travelers Cos., Inc. (The) ............... 16,792 737,169 ----------- 3,444,084 ----------- RAILROADS--1.4% Burlington Northern Santa Fe Corp. ................ 3,900 261,105 CSX Corp. ......................................... 7,800 235,716 Union Pacific Corp. ............................... 1,700 136,595 ----------- 633,416 ----------- REGIONAL BANKS--5.0% KeyCorp ........................................... 21,600 794,664 SunTrust Banks, Inc. .............................. 20,200 1,543,280 ----------- 2,337,944 ----------- SEMICONDUCTOR EQUIPMENT--0.2% Lam Research Corp.(b) ............................. 2,700 115,533 SEMICONDUCTORS--2.0% Texas Instruments, Inc. ........................... 29,400 958,146 SOFT DRINKS--1.1% PepsiCo, Inc. ..................................... 7,900 515,712 SPECIALIZED CONSUMER SERVICES--0.1% Jackson Hewitt Tax Service, Inc. .................. 1,200 37,920 STEEL--2.8% Nucor Corp. ....................................... 20,000 977,400 Reliance Steel & Aluminum Co. ..................... 3,800 124,526 United States Steel Corp. ......................... 3,500 203,595 ----------- 1,305,521 ----------- THRIFTS & MORTGAGE FINANCE--2.4% Corus Bankshares, Inc. ............................ 2,200 47,982 MGIC Investment Corp. ............................. 3,400 196,758 Radian Group, Inc. ................................ 14,800 886,224 ----------- 1,130,964 ----------- TOBACCO--2.2% Loews Corp. - Carolina Group ...................... 1,900 108,794 Reynolds American, Inc. ........................... 14,000 910,980 ----------- 1,019,774 ----------- -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $42,459,022) 45,917,684 -------------------------------------------------------------------------------- See Notes to Financial Statements 41 Phoenix Value Equity Fund SHARES VALUE -------- ----------- FOREIGN COMMON STOCKS(c)--0.6% REINSURANCE--0.6% Arch Capital Group Ltd. (United States)(b) ........ 2,608 $ 155,437 PartnerRe Ltd. (United States) .................... 1,825 117,347 -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $270,835) 272,784 -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.0% (IDENTIFIED COST $42,729,857) 46,190,468 -------------------------------------------------------------------------------- PAR VALUE (000) --------- SHORT-TERM INVESTMENTS--1.1% COMMERCIAL PAPER(d)--1.1% CAFCO LLC 5.26%, 9/1/06 .......................... $ 515 515,000 -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $515,000) 515,000 -------------------------------------------------------------------------------- TOTAL INVESTMENTS--100.1% (IDENTIFIED COST $43,244,857) 46,705,468(a) Other assets and liabilities, net--(0.1)% (31,693) ----------- NET ASSETS--100.0% $46,673,775 =========== (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $3,892,875 and gross depreciation of $477,837 for federal income tax purposes. At August 31, 2006, the aggregate cost of securities for federal income tax purposes was $43,290,430. (b) Non-income producing. (c) A common stock is considered to be foreign if the security is issued in a foreign country. The country of risk, noted parenthetically, is determined based on criteria described in Note 2G "Foreign security country determination" in the Notes to Financial Statements. (d) The rate shown is the discount rate. See Notes to Financial Statements 42 Phoenix Value Equity Fund STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2006 ASSETS Investment securities at value (Identified cost $43,244,857) $46,705,468 Cash 556 Receivables Dividends 96,339 Fund shares sold 37,641 Trustee retainer 27 Prepaid expenses 10,501 ----------- Total assets 46,850,532 ----------- LIABILITIES Payables Fund shares repurchased 63,199 Professional fee 27,843 Transfer agent fee 21,751 Distribution and service fees 21,307 Investment advisory fee 22,761 Printing fee 14,533 Administration fee 3,246 Other accrued expenses 2,117 ----------- Total liabilities 176,757 ----------- NET ASSETS $46,673,775 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $48,095,334 Undistributed net investment income 390,970 Accumulated net realized loss (5,273,140) Net unrealized appreciation 3,460,611 ----------- NET ASSETS $46,673,775 =========== CLASS A Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $28,822,628) 1,880,638 Net asset value per share $15.33 Offering price per share $15.33 /(1-5.75%) $16.27 CLASS B Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $8,818,118) 601,583 Net asset value and offering price per share $14.66 CLASS C Shares of beneficial interest outstanding, no par value, unlimited authorization (Net Assets $9,033,029) 615,817 Net asset value and offering price per share $14.67 STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 2006 INVESTMENT INCOME Dividends $ 1,148,472 Interest 21,174 ---------- Total investment income 1,169,646 ---------- EXPENSES Investment advisory fee 356,646 Service fees, Class A 70,362 Distribution and service fees, Class B 102,073 Distribution and service fees, Class C 92,008 Financial agent fee 46,926 Administration fee 6,492 Transfer agent 113,169 Registration 34,620 Professional 34,532 Printing 25,687 Trustees 20,842 Custodian 14,582 Miscellaneous 11,621 ---------- Total expenses 929,560 Less expenses reimbursed by investment adviser (155,121) Custodian fees paid indirectly (3,105) ---------- Net expenses 771,334 ---------- NET INVESTMENT INCOME (LOSS) 398,312 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments 9,248,277 Net change in unrealized appreciation (depreciation) on investments (3,719,010) ---------- NET GAIN (LOSS) ON INVESTMENTS 5,529,267 ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,927,579 =========== See Notes to Financial Statements 43 Phoenix Value Equity Fund STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended August 31, 2006 August 31, 2005 --------------- --------------- FROM OPERATIONS Net investment income (loss) $ 398,312 $ 291,463 Net realized gain (loss) 9,248,277 4,401,246 Net change in unrealized appreciation (depreciation) (3,719,010) 2,141,924 ----------- ------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,927,579 6,834,633 ----------- ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A (239,885) -- Net investment income, Class B (21,604) -- Net investment income, Class C (19,055) -- ----------- ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (280,544) -- ----------- ------------ FROM SHARE TRANSACTIONS CLASS A Proceeds from sales of shares (425,199 and 274,618 shares, respectively) 6,198,379 3,623,573 Net asset value of shares issued from reinvestment of distributions (16,173 and 0 shares, respectively) 224,475 -- Cost of shares repurchased (650,431 and 911,003 shares, respectively) (9,344,863) (12,004,860) ----------- ------------ Total (2,922,009) (8,381,287) ----------- ------------ CLASS B Proceeds from sales of shares (65,334 and 97,568 shares, respectively) 904,211 1,235,635 Net asset value of shares issued from reinvestment of distributions (1,292 and 0 shares, respectively) 17,247 -- Cost of shares repurchased (396,306 and 305,879 shares, respectively) (5,432,355) (3,883,593) ----------- ------------ Total (4,510,897) (2,647,958) ----------- ------------ CLASS C Proceeds from sales of shares (40,114 and 49,854 shares, respectively) 570,512 637,616 Net asset value of shares issued from reinvestment of distributions (1,150 and 0 shares, respectively) 15,351 -- Cost of shares repurchased (157,960 and 457,829 shares, respectively) (2,189,002) (5,752,878) ----------- ------------ Total (1,603,139) (5,115,262) ----------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (9,036,045) (16,144,507) ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS (3,389,010) (9,309,874) NET ASSETS Beginning of period 50,062,785 59,372,659 ----------- ------------ END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $390,970 AND $273,202, RESPECTIVELY) $46,673,775 $ 50,062,785 =========== ============
See Notes to Financial Statements 44 Phoenix Value Equity Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS A ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $13.59 $12.05 $11.33 $10.64 $12.76 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.16 0.11 0.04 0.11 0.08 Net realized and unrealized gain (loss) 1.70 1.43 0.72 0.66 (1.97) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 1.86 1.54 0.76 0.77 (1.89) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Dividends from net investment income (0.12) -- (0.04) (0.08) (0.08) Distributions from net realized gains -- -- -- -- (0.15) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.12) -- (0.04) (0.08) (0.23) ------ ------ ------ ------ ------ Change in net asset value 1.74 1.54 0.72 0.69 (2.12) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $15.33 $13.59 $12.05 $11.33 $10.64 ====== ====== ====== ====== ====== Total return(2) 13.79% 12.78% 6.71% 7.31% (14.97)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $28,823 $28,407 $32,859 $37,310 $43,993 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 1.32%(3) 1.25% 1.25% 1.25% 1.25 % Gross operating expenses 1.64% 1.71% 1.59% 1.63% 1.49 % Net investment income (loss) 1.13% 0.84% 0.35% 1.06% 0.64 % Portfolio turnover 214% 69% 200% 349% 166 % CLASS B ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $13.01 $11.62 $10.99 $10.35 $12.42 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.06 0.01 (0.05) 0.04 (0.01) Net realized and unrealized gain (loss) 1.62 1.38 0.70 0.63 (1.91) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 1.68 1.39 0.65 0.67 (1.92) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Dividends from net investment income (0.03) -- (0.02) (0.03) -- Distributions from net realized gains -- -- -- -- (0.15) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.03) -- (0.02) (0.03) (0.15) ------ ------ ------ ------ ------ Change in net asset value 1.65 1.39 0.63 0.64 (2.07) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $14.66 $13.01 $11.62 $10.99 $10.35 ====== ====== ====== ====== ====== Total return(2) 12.91% 11.96% 5.95 % 6.44% (15.57)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $8,818 $12,118 $13,247 $16,363 $28,873 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.06%(3) 2.00% 2.00 % 2.00% 2.00 % Gross operating expenses 2.39% 2.46% 2.34 % 2.38% 2.24 % Net investment income (loss) 0.42% 0.09% (0.40)% 0.37% (0.11)% Portfolio turnover 214% 69% 200 % 349% 166 % (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Represents blended net expense ratio. See Note 3 in the Notes to Financial Statements.
See Notes to Financial Statements 45 Phoenix Value Equity Fund FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS C ---------------------------------------------------------- YEAR ENDED AUGUST 31 ---------------------------------------------------------- 2006 2005 2004 2003 2002 Net asset value, beginning of period $13.02 $11.63 $11.00 $10.35 $12.43 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss)(1) 0.05 0.01 (0.05) 0.03 (0.01) Net realized and unrealized gain (loss) 1.63 1.38 0.70 0.65 (1.92) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 1.68 1.39 0.65 0.68 (1.93) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS Dividends from net investment income (0.03) -- (0.02) (0.03) -- Distributions from net realized gains -- -- -- -- (0.15) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.03) -- (0.02) (0.03) (0.15) ------ ------ ------ ------ ------ Change in net asset value 1.65 1.39 0.63 0.65 (2.08) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $14.67 $13.02 $11.63 $11.00 $10.35 ====== ====== ====== ====== ====== Total return(2) 12.90% 11.95% 5.94 % 6.47% (15.56)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $9,033 $9,538 $13,266 $15,408 $19,231 RATIO TO AVERAGE NET ASSETS OF: Net operating expenses 2.07%(3) 2.00% 2.00 % 2.00% 2.00 % Gross operating expenses 2.39% 2.46% 2.34 % 2.38% 2.24 % Net investment income (loss) 0.39% 0.09% (0.40)% 0.31% (0.11)% Portfolio turnover 214% 69% 200 % 349% 166 % (1) Computed using average shares outstanding. (2) Sales charges are not reflected in total return calculation. (3) Represents blended net expense ratio. See Note 3 in the Notes to Financial Statements.
See Notes to Financial Statements 46 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 1. ORGANIZATION Phoenix Investment Trust 97 (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Currently, four Funds are offered for sale (each a "Fund"). The Phoenix Quality Small-Cap Fund ("Quality Small-Cap Fund") is diversified and seeks long term capital appreciation. The Phoenix Small-Cap Sustainable Growth Fund ("Small-Cap Sustainable Growth Fund") is diversified and seeks long-term capital appreciation. The Phoenix Small-Cap Value Fund ("Small-Cap Value Fund") is diversified and seeks long-term capital appreciation. The Phoenix Value Equity Fund ("Value Equity Fund") is diversified and its primary investment objective is to seek long-term capital appreciation and its secondary objective is to seek current income. The Funds offer the following classes of shares for sale: Class X Class A Class B Class C ------- ------- ------- ------- Quality Small-Cap Fund ............. X X -- X Small-Cap Sustainable Growth Fund .. X X -- X Small-Cap Value Fund ............... -- X X X Value Equity Fund .................. -- X X X Class A shares are sold with a front-end sales charge of up to 5.75%. Generally, Class A shares are not subject to any charges by the funds when redeemed; however, a 1% contingent deferred sales charge may be imposed on certain redemptions within one year on purchases on which a finder's fee has been paid. 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. Class X shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Income and expenses and realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, 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. As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. Certain foreign common stocks may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In these cases, information from an external vendor may be utilized to adjust closing market prices of certain foreign common stocks to reflect their fair value. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund in the Trust to comply with the requirements of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Trust may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Each Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which they invest. 47 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 (CONTINUED) In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes." This standard defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. FIN 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006 (January 1, 2007 for calendar-year companies), with early application permitted if no interim financial statements have been issued. At adoption, companies must adjust their financial statements to reflect only those tax positions that are more likely-than-not to be sustained as of the adoption date. As of August 31, 2006, the Funds have not completed their evaluation of the impact that will result from adopting FIN 48. 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 accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund 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 appropriately made. F. 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 date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from either changes in exchange rates or in the market prices of securities. G. FOREIGN SECURITY COUNTRY DETERMINATION: A combination of the following criteria is used to assign the countries of risk listed in the schedules of investments: country of incorporation, actual building address, primary exchange on which the security is traded and country in which the greatest percentage of company revenue is generated. H. SECURITIES LENDING: Certain Funds may loan securities to qualified brokers through an agreement with State Street Bank and Trust (the "Custodian"). Under the terms of the agreement, the Funds receives collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash, securities issued or guaranteed by the U.S. Government or its agencies and the sovereign debt of foreign countries. Cash collateral has been invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the borrower are recorded as income by the Fund net of fees charged by the Custodian for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. I. REIT INVESTMENTS: Dividend income is recorded using management's estimate of the income included in distributions received from the REIT investments. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS As compensation for its services to the Trust, the Adviser, Phoenix Investment Counsel, Inc. ("PIC") (the "Adviser"), an indirect wholly-owned subsidiary of The Phoenix Companies, Inc. ("PNX") is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund: First $400 Million - $1 + $400 Million $1 Billion Billion ------------ --------------- ------- Quality Small-Cap Fund ...... 0.90% 0.85% 0.80% Small-Cap Sustainable Growth Fund ............... 0.90% 0.85% 0.80% 48 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 (CONTINUED) First $1-2 $2 + $1 Billion Billion Billion ---------- ------- ------- Small-Cap Value Fund ........ 0.90% 0.85% 0.80% Value Equity Fund ........... 0.75% 0.70% 0.65% The Adviser has contractually agreed to limit total fund operating expenses, (excluding interest, taxes, and extraordinary expenses), through December 31, 2007 for the Quality Small-Cap and Small-Cap Sustainable Growth Funds and through August 31, 2007 for the Small-Cap Value and Value Equity Funds, so that such expenses do not exceed the following percentages of the average annual net asset values for the Funds: Class A Class C Class X ------- ------- ------- Quality Small-Cap Fund ...... 1.40% 2.15% 1.15% Small-Cap Sustainable Growth Fund .............. 1.40% 2.15% 1.15% Class A Class B Class C ------- ------- ------- Small-Cap Value Fund ........ 1.40% 2.15% 2.15% Value Equity Fund ........... 1.35% 2.10% 2.10% For the period of January 1, 2005 through December 31, 2005, the Value Equity Fund's expense limits were 1.25% for Class A, 2.00% for Class B and Class C. The Adviser will not seek to recapture any reimbursed expenses under these agreements. Kayne Anderson Rudnick Investment Management, LLC ("Kayne") an indirect wholly-owned subsidiary of PNX is the subadviser to the Quality Small-Cap and Small-Cap Sustainable Growth Funds. For its services PIC pays Kayne a fee based upon the following annual rates as a percentage of the daily net assets of each Fund. First $400 Million - $1 + $400 Million $1 Billion Billion ------------ --------------- ------- Quality Small-Cap Fund ...... 0.45% 0.425% 0.40% Small-Cap Sustainable Growth Fund ............... 0.45% 0.425% 0.40% Phoenix/Zweig Advisers LLC ("PZA"), an indirect wholly-owned subsidiary of PNX, is the subadviser to the Small-Cap Value Fund. For its services, PIC pays PZA a fee based on the daily net assets of this Fund as follows: First Excess of $166 Million $166 Million ------------ ------------ Small-Cap Value Fund ........ 0.10% 0.40% Effective September 30, 2005, Acadian Asset Management, Inc. ("Acadian") became the subadviser to the Value Equity Fund. For its services, PIC pays Acadian a fee based on the average daily net assets of this Fund as follows: First $1-2 $2 + $1 Billion Billion Billion ---------- ------- ------- Value Equity Fund ........... 0.375% 0.350% 0.325% As distributor of each Fund's shares, Phoenix Equity Planning Corporation ("PEPCO") an indirect wholly-owned subsidiary of PNX, has advised the Funds that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended August 31, 2006, as follows: Class A Class B Class C Net Selling Deferred Deferred Commissions Sales Charges Sales Charges ----------- ------------- ------------- Quality Small-Cap Fund $ -- $ -- $ -- Small-Cap Sustainable Growth Fund -- -- -- Small-Cap Value Fund 8,575 40,201 619 Value Equity Fund 3,661 30,218 388 In addition, each Fund pays PEPCO distribution and/or service fees at an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and 1.00% for Class C shares applied to the average daily net assets of each respective Class. Class X shares do not pay distribution and/or service fees. Under certain circumstances, shares of certain Phoenix Funds may be exchanged for shares of the same class of certain other Phoenix Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. Effective July 1, 2006, PEPCO serves as the Administrator to the Trust. For its services, PEPCO receives an administration fee at an annual rate of 0.09% of the first $5 billion, 0.08% on the next $10 billion and 0.07% over $15 billion of the average net assets across all non-money market Phoenix Funds within the Phoenix Funds Family. For the money market Funds, the fee is 0.035% of the average net assets across all Phoenix money market Funds within the Phoenix Funds Family. Until June 30, 2006, PEPCO served as Financial Agent to the Trust. PEPCO received a financial agent fee equal to the sum of (1) the documented cost to PEPCO to provide oversight of the performance of PFPC Inc. (subagent to PEPCO), plus (2) the documented cost of fund accounting, tax services and related services provided by PFPC Inc. For the period ended August 31, 2006, the Trust incurred administration and/or financial agent fees totaling $231,669. PEPCO serves as the Trust's transfer agent with Boston Financial Data Services, Inc. serving as sub transfer agent. For the period ended August 31, 2006, transfer agent fees were $553,414 as reported in the Statements of Operations, of which PEPCO retained the following: 49 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 (CONTINUED) Transfer Agent Retained -------- Quality Small-Cap Fund......................... $ 33 Small-Cap Sustainable Growth Fund.............. 32 Small-Cap Value Fund........................... 171,686 Value Equity Fund.............................. 20,601 At August 31, 2006, PNX and its affiliates, the retirement plans of PNX and its affiliates, and Phoenix affiliated Funds held shares which aggregated the following: Aggregate Net Asset Shares Value ------- --------- Quality Small-Cap Fund --Class X............................ 10,000 $ 100,600 --Class A............................ 10,000 100,524 --Class C............................ 10,000 100,398 Small-Cap Sustainable Growth Fund --Class X............................ 10,000 97,886 --Class A............................ 10,000 97,872 --Class C............................ 10,000 97,747 Small-Cap Value Fund --Class A............................ 379,254 6,997,236 4. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (excluding U.S. Government and agency securities and short-term securities) during the period ended August 31, 2006, were as follows: Purchases Sales ------------ ------------ Quality Small-Cap Fund............ $ 1,183,731 $ 46,809 Small-Cap Sustainable Growth Fund. 1,040,414 20,461 Small-Cap Value Fund.............. 299,712,733 339,937,168 Value Equity Fund................. 101,079,770 105,837,037 There were no purchases or sales of long-term U.S. Government and agency securities. 5. CREDIT RISK AND ASSET CONCENTRATIONS The Funds may invest a high percentage of their assets in specific sectors of the market in their pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on a Fund, positive or negative, than if a Fund did not concentrate its investments in such sectors. In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. At August 31, 2006, the Quality Small-Cap Fund, Small-Cap Value Fund and the Value Equity Fund held investments issued by various companies in the Financial sector comprising 24%, 29% and 33%, respectively, of the total net assets of the Funds. The Small-Cap Sustainable Growth Fund held investments issued by various companies in the Information Technology sector, comprising 31% of the total net assets of the Fund. 6. ILLIQUID SECURITIES Investments shall be considered illiquid if they cannot be disposed of within seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining liquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are noted as such at the end of each Fund's Schedule of Investments where applicable. 7. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by The Phoenix Companies, Inc. and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. During 2004 and 2005, the Boston District Office of the Securities and Exchange Commission ("SEC") conducted an examination of the Company's investment company and investment adviser affiliates. Following the examination, the staff of the Boston District Office issued a deficiency letter noting perceived weaknesses in procedures for monitoring trading to prevent market timing activity prior to 2004. The staff requested the Company to conduct an analysis as to whether shareholders, policyholders and contract holders who invested in the funds that may have been affected by undetected market timing activity had suffered harm and to advise the staff whether the Company believes reimbursement is necessary or appropriate under the circumstances. Market timing is an investment technique involving frequent short-term trading of mutual fund shares that is designed to exploit market movements or inefficiencies in the way mutual fund companies price their shares. A third party was retained to assist the Company in preparing the analysis. In 2005, based on the third party analysis the Company notified the staff at the SEC Boston 50 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 (CONTINUED) District Office that reimbursements were not appropriate under the circumstances. The Company does not believe that the outcome of this matter will be material to these financial statements. 8. INDEMNIFICATIONS Under the Funds' organizational documents, their trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, the Funds enter into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote. 9. 10% SHAREHOLDERS As of August 31, 2006, certain Funds had individual shareholder accounts and/or omnibus shareholder accounts (which are comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below. % of Shares Number of Outstanding Accounts ----------- -------- Quality Small-Cap Fund ........ 40% 3 Small-Cap Sustainable Growth Fund ................. 29 2 The shareholders are not affiliated with PNX. 10. FEDERAL INCOME TAX INFORMATION The Funds have capital loss carryovers, which may be used to offset future capital gains, as follows: Expiration Year ----------------------------------------- 2011 2014 Total ---------- ------ ---------- Quality Small-Cap Fund ...... $ -- $ 937 $ 937 Small-Cap Sustainable Growth Fund ................ -- 2,520 2,520 Small-Cap Value Fund ......... -- -- -- Value Equity Fund ............ 5,227,567 -- 5,227,567 The Funds may not realize the benefit of these losses to the extent each Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. For the period ended August 31, 2006, the Funds utilized losses deferred in prior years against current year capital gains as follows: Quality Small-Cap Fund ....... $ -- Small-Cap Sustainable Growth Fund ................ -- Small-Cap Value Fund ......... -- Value Equity Fund ............ 9,065,713 The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments), consist of undistributed ordinary income and undistributed long-term capital gains as follows: Undistributed Undistributed Ordinary Long-Term Income Capital Gains ------------- ------------- Quality Small-Cap Fund $ 4,248 $ -- Small-Cap Sustainable Growth Fund -- -- Small-Cap Value Fund 3,995,368 29,176,764 Value Equity Fund 390,970 -- The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 11. RECLASSIFICATION OF CAPITAL ACCOUNTS For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. For the year ended August 31, 2006, the following Funds recorded reclassifications to increase (decrease) the accounts as listed below: Capital Paid in on Shares of Accumulated Undistributed Beneficial Net Realized Net Investment Interest Gain (Loss) Income (Loss) ------------ ------------ -------------- Quality Small-Cap Fund .... $ -- $ -- $ -- Small-Cap Sustainable Growth Fund ............. (934) -- 934 Small-Cap Value Fund ...... -- (1,489,163) 1,489,163 Value Equity Fund ......... -- -- -- 51 PHOENIX INVESTMENT TRUST 97 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2006 (CONTINUED) 12. SUBSEQUENT EVENT Effective September 1, 2006, Euclid Advisors LLC is the subadviser to the Small-Cap Value Fund, replacing PZA. The Fund's investment objectives, principal investment strategies, portfolio managers, subadvisory fees and principal risks will remain the same, unless otherwise noted. -------------------------------------------------------------------------------- TAX INFORMATION NOTICE (UNAUDITED) For the fiscal year ended August 31, 2006, for federal income tax purposes, 100%, 54%, and 100% of the ordinary income dividends earned by the Quality Small-Cap Fund, Small-Cap Value Fund and Value Equity Fund, respectively, qualify for the dividends received deduction for corporate shareholders. For the fiscal year ended August 31, 2006, the Quality Small-Cap Fund, Small-Cap Value Fund and Value Equity Fund, respectively, hereby designate 100%, 52%, and 100%, or the maximum amount allowable, of its ordinary income dividends to qualify for the lower tax rates applicable to individual shareholders. The actual percentage for the calendar year will be designated in the year-end tax statements. For the fiscal year ended August 31, 2006, the Small-Cap Value Fund designated $35,460,734 as long-term capital gain dividends. -------------------------------------------------------------------------------- 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PRICEWATERHOUSECOOPERS [GRAPHIC OMITTED] To the Board of Trustees of Phoenix Investment Trust 97 and Shareholders of Phoenix Quality Small-Cap Fund Phoenix Small-Cap Sustainable Growth Fund Phoenix Small-Cap Value Fund and Phoenix Value Equity Fund In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Phoenix Quality Small-Cap Fund, Phoenix Small-Cap Sustainable Growth Fund, Phoenix Small-Cap Value Fund and Phoenix Value Equity Fund (constituting Phoenix Investment Trust 97, hereafter referred to as the "Trust") at August 31, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 August 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts October 17, 2006 53 BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS FOR PHOENIX QUALITY SMALL-CAP FUND AND PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND (EACH, THE "FUND") AUGUST 31, 2006 (UNAUDITED) The Board of Trustees is responsible for determining whether to approve the Fund's investment advisory and subadvisory agreements. At a meeting held on May 17-18, 2006, the Board, including a majority of the independent Trustees, approved the investment advisory agreement (the "Advisory Agreement") between Phoenix Investment Counsel, Inc. ("PIC") and the Fund and the investment subadvisory agreement (the "Subadvisory Agreement") between PIC and Kayne Anderson Rudnick Investment Management, LLC (the "Subadvisor"). During the review process, the Board received assistance and advice from, and met separately with, independent legal counsel. In approving each agreement, the Board, including a majority of the independent Trustees, determined that the fee structure was fair and reasonable and that approval of each agreement was in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses the primary factors relevant to the Board's decision. ADVISORY AGREEMENT Pursuant to the Advisory Agreement between PIC and the Fund, PIC provides advisory services to the Fund. PIC is an indirect wholly-owned subsidiary of Phoenix Investment Partners, Ltd. In evaluating the Advisory Agreement, the Board considered a variety of information relating to the Fund and PIC. PIC personnel provided details focusing on the nature, extent and quality of services provided by PIC, cost of services and profitability to PIC, comparative fees and expenses, the possible economies of scale that might be realized due to the Fund's growth and whether fee levels were likely to reflect such economies of scale for the benefit of investors, among other things. NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the nature, extent and quality of the overall services that would be provided by PIC and its affiliates to the Fund and its shareholders was reasonable. The Board's conclusion was based, in part, upon services provided to funds currently advised by PIC such as quarterly reports provided by PIC comparing the performance of each fund advised by it with a peer group and benchmark, reports provided by PIC showing that the investment policies and restrictions for each fund were followed and reports provided by PIC covering matters such as the compliance of investment personnel and other access persons with PIC's and each fund's code of ethics, the adherence to fair value pricing procedures established by the Board, the monitoring of portfolio compliance, information on illiquid securities and derivatives, brokerage commissions and presentations regarding the economic environment and general investment outlook. The Board noted that PIC would be responsible for the general oversight of the investment programs of the Fund and the monitoring of the Fund's Subadvisor's investment performance and its compliance with applicable laws, regulations, policies and procedures. In this regard, the Board considered the past experience of PIC and its representatives in supervising other subadvisers. With respect to performance monitoring, the Board noted that PIC will utilize the same investment committee review process that it used for other PIC managed funds. With respect to compliance monitoring, the Board noted that PIC intended to utilize a similar process that it used to monitor other PIC managed funds by requiring quarterly compliance certifications from the Subadvisor and by conducting compliance due diligence visits at the Subadvisor. The Board also considered the experience of PIC having acted as an investment adviser to mutual funds for over 70 years and its current experience in acting as an investment adviser to approximately 70 mutual funds and several institutional clients. The Board also noted the extent of benefits that would be provided Fund shareholders from being part of the Phoenix family of funds, including the right to exchange investments between the same class of funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. The Board also considered the transfer agent and shareholder services that would be provided to Fund shareholders by an affiliate of PIC, noting continuing improvements by management in the scope and quality of services and favorable reports on such service conducted by third parties. INVESTMENT PERFORMANCE. Because the Fund had not commenced operations, the Board could not evaluate prior investment performance for the Fund. However the Board did review prior performance of similarly managed accounts managed by the Fund's Subadviser as described below under the "Subadvisory Agreement". PROFITABILITY. The Board also considered the level of profits to be realized by PIC and its affiliates in connection with the operation of the Fund. With respect to the cost of services and profits to be realized by PIC, the Board noted that, although Fund total expenses were expected to be above competitive levels during the Fund's startup period, management had voluntarily agreed to waive fees or reimburse expenses so that Class A share expenses would not exceed 1.40%, Class C share expenses would not exceed 2.15% and Class X shares expenses would not exceed 1.15%. The Board noted that, due to the reimbursements proposed and the cost to PIC of paying the Subadvisor a fee equal to 50% of the management fee at each breakpoint, the cost to PIC would be greater than management fee revenues received during the startup phase of the Fund. The Board therefore concluded that the profitability to PIC from the Fund was not excessive. MANAGEMENT FEE AND TOTAL EXPENSES. The Board also considered the management fee for the Fund as well as the Fund's projected total expenses. With respect to the proposed management fee, the Board noted that the fee would be 0.90% for the first $400 Million of assets under management, 0.85% between the range of $400 Million through $1 Billion and 0.80% for assets over $1 Billion. After being provided 54 BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS FOR PHOENIX QUALITY SMALL-CAP FUND AND PHOENIX SMALL-CAP SUSTAINABLE GROWTH FUND (EACH, THE "FUND") AUGUST 31, 2006 (UNAUDITED) (CONTINUED) with information from management which compared the Fund's proposed fee with a group of competing funds with similar investment strategies, the Board noted that, the management fee was at the category median and that, after fee waivers provided by PIC the projected total expenses of the Fund would be 1.40% for Class A shares, 2.15% for Class C shares and 1.15% for Class X shares. The Board then concluded that the management fee and the projected total expenses for the Fund were reasonable. ECONOMIES OF SCALE. The Board noted that it was likely that PIC and the Fund would achieve certain economies of scale as the assets grew due to breakpoints in the fee. The Board concluded that shareholders would have an opportunity to benefit from these economies of scale. SUBADVISORY AGREEMENT Pursuant to the Subadvisory Agreement between PIC and the Subadvisor, the Subadvisor will provide the day to day investment management for the Fund. In evaluating the Subadvisory Agreement, the Board considered a variety of information relating to the Fund and the Subadvisor. In this regard, the Board considered the nature, extent and quality of services provided by the Subadvisor, subadvisory fees and the investment performance of similarly managed funds or accounts, among other things. NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the nature, extent and quality of the overall services that would be provided by the Subadvisor to the Fund and its shareholders was reasonable. The Board's opinion was based, in part, upon the extensive experience of the Subadvisor. In this regard, the Board noted that the Subadvisor had over 20 years of experience as an investment adviser. In this regard, the Board considered the significant experience of the co-portfolio managers noting that one portfolio manager was also the Managing Director of small cap equity investments for the Subadvisor and had over 25 years of investment experience while the other manager had over 11 years of experience in the investment management business. The Board also noted that the senior management team of the firm had an average of 16 years experience. The Board also noted the extensive experience of analysts, traders and other support personnel that worked with the portfolio managers. The Board was also satisfied with the quality of the investment process discussed by a member of the Subadvisor at the Board meeting. The Board also considered the adequacy of the Subadvisor's compliance program. INVESTMENT PERFORMANCE. Because the Fund had not commenced operations, the Board could not evaluate prior investment performance for the Fund. However the Board did review prior performance of a composite of accounts managed by the Subadvisor in a similar strategy to the Fund. PROFITABILITY. The Board noted and was satisfied with the Subadvisor's representation that no Subadvisor profitability information was available due to the fact that the relationship had not yet commenced. SUBADVISORY FEE. The Board also considered the subadvisory fee paid to the Subadvisor. The Board noted that the subadvisory fee would be 50% of the management fee or 0.45% for the first $400 Million of assets under management, 0.425% for assets between $400 Million through $1 Billion and 0.40% for over $1 Billion. After being provided with information from management which compared the Fund's proposed subadvisory fee with a group of competing funds with similar investment strategies, the Board noted that the subadvisory fee was below the group average of 52% of advisory fees and below the group median of 51% of advisory fees. The Board also noted that the subadvisory fee would be paid by PIC and not by the Fund so that Fund shareholders would not be directly impacted. ECONOMIES OF SCALE. The Board also considered the existence of any economies of scale and whether those economies would be passed along to the Fund's shareholders but noted that any economies would most likely be generated at the fund level and not necessarily at the subadvisor level. 55 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of August 31, 2006, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 56 Prospect Street, Hartford, CT 06115-0480. There is no stated term of office for Trustees of the Trust.
INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, ADDRESS LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND AND DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ E. Virgil Conway Served since 71 Chairman, Rittenhouse Advisors, LLC (consulting firm) Rittenhouse Advisors, LLC 1997. (2001-present); Trustee/Director, Phoenix Funds Complex 101 Park Avenue (1983-present); Trustee/Director, Realty Foundation of New York New York, NY 10178 (1972-present); Josiah Macy, Jr. Foundation (Honorary) DOB: 8/2/29 (2004-present); Pace University (Director/Trustee Emeritus) (2003-present), Greater New York Councils, Boy Scouts of America (1985-present); The Academy of Political Science (Vice Chairman) (1985-present), Urstadt Biddle Property Corp. (1989-present), Colgate University (Trustee Emeritus) (2004-present), Director/Trustee, The Harlem Youth Development Foundation (Chairman) (1998-2002); Metropolitan Transportation Authority (Chairman) (1992-2001), Trism, Inc. (1994-2001); Consolidated Edison Company of New York, Inc. (1970-2002), Atlantic Mutual Insurance Company (1974-2002), Centennial Insurance Company (1974-2002), Union Pacific Corp. (1978-2002), BlackRock Freddie Mac Mortgage Securities Fund (Advisory Director) (1990-2000), Accuhealth (1994-2002), Pace University (1978-2003), New York Housing Partnership Development Corp. (Chairman) (1981-2003), Josiah Macy, Jr. Foundation (1975-2004). ------------------------------------------------------------------------------------------------------------------------------------ Harry Dalzell-Payne Served since 71 Retired. Trustee/Director, Phoenix Funds Complex The Flat, Elmore Court 1997. (1983-present). Elmore, GLOS, GL2 3NT U.K. DOB: 9/8/29 ------------------------------------------------------------------------------------------------------------------------------------ Francis E. Jeffries Served since 72 Director, The Empire District Electric Company (1984-2004); 8477 Bay Colony Dr. #902 1997. Trustee/Director, Phoenix Funds Complex (1987-present). Naples, FL 34108 DOB: 9/23/30 ------------------------------------------------------------------------------------------------------------------------------------ Leroy Keith, Jr. Served since 69 Partner, Stonington Partners, Inc. (private equity fund) Stonington Partners, Inc. 1997. (2001-present); Director/Trustee; Evergreen Funds (six 736 Market Street, Ste. 1430 portfolios)(1989-present). Trustee, Phoenix Funds Family Chattanooga, TN 37402 (1980-present); Director, Diversapak (2002-present); Obaji DOB: 2/14/39 Medical Products Company (2002-present); Director, Lincoln Educational Services (2002-2004); Chairman, Carson Products Company (cosmetics) (1998-2000). ------------------------------------------------------------------------------------------------------------------------------------
56 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, ADDRESS LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND AND DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara Served since 71 Retired. Trustee/Director, Phoenix Funds Complex 40 East 88th Street 2001. (2001-present). Managing Director, U.S. Trust Company of New New York, NY 10128 York (private bank) (1982-2006). DOB: 4/17/51 ------------------------------------------------------------------------------------------------------------------------------------ James M. Oates(1) Served since 69 Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital c/o Northeast Partners 1997. Markets, Inc.) (financial services) (1997-present); 150 Federal Street, Trustee/Director, Phoenix Funds Family (1987-present); Managing Suite 1000 Director, Wydown Group (consulting firm) (1994-present); Boston, MA 02110 Director, Investors Financial Service Corporation DOB: 5/31/46 (1995-present); Investors Bank & Trust Corporation (1995-present), Stifel Financial (1996-present), Connecticut River Bancorp (1998-present), Connecticut River Bank (1999-present), Trust Company of New Hampshire (2002-present); Chairman, Emerson Investment Management, Inc. (2000-present); Independent Chairman, John Hancock Trust (since 2005); Trustee, John Hancock Funds II and John Hancock Funds III (since 2005); Trustee, John Hancock Trust (2004-2005); Director/Trustee, AIB Govett Funds (six portfolios) (1991-2000); Command Systems, Inc. (1998-2000); Phoenix Investment Partners, Ltd. (1995-2001); 1Mind, Inc. (formerly 1Mind.com) (2000-2002); Plymouth Rubber Co. (1995-2003); Director and Treasurer, Endowment for Health, Inc. (2000-2004). ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Segerson Served since 69 Managing Director, Northway Management Company (1998-present). 73 Briggs Way 1997. Trustee/Director, Phoenix Funds Family (1983-present). Chatham, MA 02633 DOB: 2/16/46 ------------------------------------------------------------------------------------------------------------------------------------ (1) Mr. Oates is a Director and Chairman of the Board and a shareholder of Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) ("Hudson"), a privately owned financial services firm. Phoenix Investment Partners, Ltd., an affiliate of the adviser, owns approximately 1% of the common stock of Hudson and Phoenix Life Insurance Company also an affiliate, owns approximately 8% of Hudson's common stock.
57 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, ADDRESS LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND AND DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ Marilyn E. LaMarche(2) Served since 69 Limited Managing Director, Lazard Freres & Co. LLC Lazard Freres & Co. LLC 2002. (1997-present). Trustee/Director, Phoenix Funds Family 30 Rockefeller Plaza, (2002-present). Director, The Phoenix Companies, Inc. 59th Floor (2001-2005) and Phoenix Life Insurance Company (1989-2005). New York, NY 10020 DOB: 5/11/34 ------------------------------------------------------------------------------------------------------------------------------------ Philip R. McLoughlin(3) Served since 97 Director, PXRE Corporation (Reinsurance) (1985-present); World 200 Bridge Street 1997. Trust Fund (1991-present), Director/Trustee, Phoenix Funds Chatham, MA 02633 Complex (1989-present); Management Consultant (2002-2004), DOB: 10/23/46 Chairman Chairman (1997-2002), Chief Executive Officer (1995-2002) and Director (1995-2002), Phoenix Investment Partners, Ltd.; Director and Executive Vice President, The Phoenix Companies, Inc. (2000-2002); Director (1994-2002) and Executive Vice President, Investments (1987-2002), Phoenix Life Insurance Company; Director (1983-2002) and Chairman (1995-2002), Phoenix Investment Counsel, Inc.; Director (1982-2002), Chairman (2000-2002) and President (1990-2000), Phoenix Equity Planning Corporation; Chairman and President, Phoenix/Zweig Advisers LLC (2001-2002); Director (2001-2002) and President (April 2002-September 2002), Phoenix Investment Management Company; Director and Executive Vice President, Phoenix Life and Annuity Company (1996-2002); Director (1995-2000), Executive Vice President (1994-2002), and Chief Investment Counsel (1994-2002), PHL Variable Insurance Company; Director, Phoenix National Trust Holding Company (2001-2002); Director (1985-2002), Vice President (1986-2002) and Executive Vice President (April 2002-September 2002), PM Holdings, Inc.; Director, WS Griffith Associates, Inc. (1995-2002); Director, WS Griffith Securities, Inc. (1992-2002). ------------------------------------------------------------------------------------------------------------------------------------ (2) Ms. LaMarche is an "interested person," as defined in the Investment Company Act of 1940, by reason of her former position as Director of The Phoenix Companies, Inc. and Phoenix Life Insurance Company. (3) Mr. McLoughlin is an "interested person," as defined in the Investment Company Act of 1940, by reason of his former relationship with Phoenix Investment Partners, Ltd. and its affiliates.
58 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
OFFICERS OF THE FUND WHO ARE NOT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) DATE OF BIRTH TIME SERVED DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ Daniel T. Geraci President since 2004. Executive Vice President, Asset Management, The Phoenix DOB: 6/12/57 Companies, Inc. (2003-present); Director, Chairman, President and Chief Executive Officer, Phoenix Investment Partners, Ltd. (2003-present); President, Phoenix Equity Planning Corporation (2005-present); President, DPCM Holding, Inc. (2005-present); President, Capital West Asset Management, LLC (2005-present); Director and President, Phoenix Investment Counsel, Inc. (2003-present); Director, Pasadena Capital Corporation (2003-present); President, Euclid Advisers, LLC (2003-present); Director and Chairman, PXP Institutional Markets Group, Ltd. (2003-present); Director and President, Rutherford Financial Corporation (2003-present); Director, DPCM Holding, Inc. (2003-present); President, Phoenix/Zweig Advisers, LLC (2003-present); Director and Chairman, Phoenix Equity Planning Corporation (2003-present); Director and Chairman, Duff & Phelps Investment Management Company (2003-present); Director, Capital West Asset Management, LLC (2003-present); Chief Executive Officer and President, The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc. (2004-present); President, the Phoenix Funds Family (2004-present); Chief Sales and Marketing Officer, Phoenix Equity Planning Corporation (2003-2005); President and Chief Executive Officer of North American investment operations, Pioneer Investment Management USA, Inc. (2001-2003); President of Private Wealth Management Group & Fidelity Brokerage Company, Fidelity Investments (1996-2001). ------------------------------------------------------------------------------------------------------------------------------------ George R. Aylward Executive Vice President Senior Vice President and Chief Operating Officer, Asset DOB: 8/17/64 since 2004. Management, The Phoenix Companies, Inc. (2004-present). Executive Vice President and Chief Operating Officer, Phoenix Investment Partners, Ltd. (2004-present). Vice President, Phoenix Life Insurance Company (2002-2004). Vice President, The Phoenix Companies, Inc. (2001-2004). Vice President, Finance, Phoenix Investment Partners, Ltd. (2001-2002). Assistant Controller, Phoenix Investment Partners, Ltd. (1996-2001). Executive Vice President, certain funds within the Phoenix Funds Family (2004-present). ------------------------------------------------------------------------------------------------------------------------------------ Nancy G. Curtiss Senior Vice President Assistant Treasurer (2001-present), Vice President, Fund DOB: 11/24/52 since 2006. Accounting (1994-2000), Phoenix Equity Planning Corporation. Vice President, Phoenix Investment Partners, Ltd. (2003-present). Senior Vice President, the Phoenix Funds Family (since 2006). Vice President, The Phoenix Edge Series Fund (1994-present), Treasurer, The Zweig Fund Inc. and the Zweig Total Return Fund Inc. (2003-present). Chief Financial Officer (2005-2006) and Treasurer (1994-2006), or Assistant Treasurer (2005-2006), certain funds within the Phoenix Fund Complex. ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Senior Vice President, Asset Management Product Development, DOB: 7/27/62 since 2004. The Phoenix Companies, Inc. (since 2006); Senior Vice President, Asset Management Product Development, Phoenix Investment Partners, Ltd. (2005-present), Senior Vice President and Chief Administrative Officer, Phoenix Investment Partners, Ltd., (2003-2004). Senior Vice President and Chief Administrative Officer, Phoenix Equity Planning Corporation (1999-2003), Senior Vice President, certain funds within the Phoenix Fund Family (2004-present). ------------------------------------------------------------------------------------------------------------------------------------
59 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
OFFICERS OF THE FUND WHO ARE NOT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) DATE OF BIRTH TIME SERVED DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC c/o Zweig-DiMenna Associates, LLC Chief Compliance Officer (1989-present); Vice President and Chief Compliance Officer, 900 Third Avenue since 2004. certain Funds within the Phoenix Fund Complex (2004-present); New York, NY 10022 Vice President, The Zweig Total Return Fund, Inc. DOB: 9/23/45 (2004-present); Vice President, The Zweig Fund, Inc. (2004-present); President and Director of Watermark Securities, Inc. (1991-present); Assistant Secretary of Gotham Advisors Inc. (1990-present); Secretary, Phoenix-Zweig Trust (1989-2003); Secretary, Phoenix-Euclid Market Neutral Fund (1999-2002). ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer and Second Vice President, Fund Administration, Phoenix Equity DOB: 3/2/72 Treasurer since 2006. Planning Corporation (2004-present). Chief Financial Officer and Treasurer (2006-present) or Chief Financial Officer and Treasurer (2005-present), certain funds within the Phoenix Fund Family. Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer, The Phoenix Edge Series Fund (since 2006). Assistant Treasurer, certain funds within the Phoenix Fund Complex (2004-2006). Senior Manager (2002-2004), Manager (2000-2002), Audit, Deloitte & Touche, LLP. ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Vice President and Counsel, Phoenix Life Insurance Company One American Row Officer, Counsel and (2005-present). Vice President, Counsel, Chief Legal Officer Hartford, CT 06102 Secretary since 2005. and Secretary of certain funds within the Phoenix Fund Complex DOB: 8/30/54 (2005-present). Compliance Officer of Investments and Counsel, Travelers Life & Annuity Company (January 2005-May 2005). Assistant General Counsel, The Hartford Financial Services Group (1999-2005). ------------------------------------------------------------------------------------------------------------------------------------
60 PHOENIX INVESTMENT TRUST 97 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES E. Virgil Conway Harry Dalzell-Payne Francis E. Jeffries Leroy Keith, Jr. Marilyn E. LaMarche Philip R. McLoughlin, Chairman Geraldine M. McNamara James M. Oates Richard E. Segerson OFFICERS Daniel T. Geraci, President George R. Aylward, Executive Vice President Nancy G. Curtiss, Senior Vice President Francis G. Waltman, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Phoenix Investment Counsel, Inc. 56 Prospect Street Hartford, CT 06115-0480 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 TRANSFER AGENT Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110-1707 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site PHOENIXFUNDS.COM -------------------------------------------------------------------------------- IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. -------------------------------------------------------------------------------- (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) --------------- PRESORTED STANDARD U.S. POSTAGE PAID Louisville, KY Permit No. 1051 --------------- [GRAPHIC OMITTED] PHOENIXFUNDS(SM) PHOENIX EQUITY PLANNING CORPORATION P.O. Box 150480 Hartford, CT 06115-0480 For more information about Phoenix mutual funds, please call your financial representative, contact us at 1-800-243-1574 or visit PHOENIXFUNDS.COM. NOT INSURED BY FDIC/NCUSIF OR ANY FEDERAL GOVERNMENT AGENCY. NO BANK GUARANTEE. NOT A DEPOSIT. MAY LOSE VALUE. PXP215 10-06 BPD27502 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics described in Item 2(b) of the instructions for completion of Form N-CSR. (d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of the instructions for completion of this Item. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has determined that the Registrant has an "audit committee financial expert" serving on its Audit Committee. (a)(2) E. Virgil Conway has been determined by the Registrant to possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert." Mr. Conway is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. (a)(3) Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees ---------- (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $75,000 for 2006 and $50,000 for 2005. Audit-Related Fees ------------------ (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 for 2006 and $0 for 2005. Tax Fees -------- (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $17,200 for 2006 and $9,500 for 2005. "Tax Fees" are those primarily associated with review of the Trust's tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust's financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund's federal income and excise tax returns. All Other Fees -------------- (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2006 and $0 for 2005. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Phoenix Investment Trust 97 (the "Fund") Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. Audit, audit-related and tax compliance services provided to the Fund on an annual basis require specific pre-approval by the Board. As noted above, the Board must also approve other non-audit services provided to the Fund and those non-audit services provided to the Fund's Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund. Certain of these non-audit services that the Board believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent auditors may be approved by the Board without consideration on a specific case-by-case basis ("general pre-approval"). The Audit Committee has determined that Mr. E. Virgil Conway, Chair of the Audit Committee, may provide pre-approval for such services that meet the above requirements in the event such approval is sought between regularly scheduled meetings. In the event that Mr. Conway determines that the full board should review the request, he has the opportunity to convene a meeting of the Funds Board. In any event, the Board is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) Not applicable for 2006 and not applicable for 2005 (c) 100% for 2006 and 100% for 2005 (d) Not applicable for 2006 and not applicable for 2005. (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $944,027 for 2006 and $1,780,924 for 2005. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Phoenix Investment Trust 97 ---------------------------------------------------------------- By (Signature and Title)* /s/ George R. Aylward --------------------------------------------------- George R. Aylward, Executive Vice President (principal executive officer) Date November 7, 2006 ------------------------------------------------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ George R. Aylward --------------------------------------------------- George R. Aylward, Executive Vice President (principal executive officer) Date November 7, 2006 ------------------------------------------------------------------------ By (Signature and Title)* /s/ W. Patrick Bradley --------------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date November 7, 2006 ------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.