VIRTUS OPPORTUNITIES TRUST (Form: 485BPOS, Received: 01/28/2009 17:20:09)

Name, Year of Birth

and Position(s) with Trust

Length of
Time Served

Number of
Portfolios in
Fund Complex
Overseen by
Trustee

Principal Occupation(s)
During Past 5 Years and

Other Directorships Held by Trustee

George R. Aylward*

Trustee and President

YOB: 1964

Served since
2006.

Director, President and Chief Executive Officer (since 2008), Director and President (2006-2008), Chief Operating Officer (2004-2006), Vice President, Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005-2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present).

As filed with the Securities and Exchange Commission on January 28, 2009

File No. 033-65137

File No. 811-07455

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

Under

the SECURITIES ACT OF 1933


Pre-Effective Amendment No.		¨

Post-Effective Amendment No. 32		x

and/or

REGISTRATION STATEMENT

Under the INVESTMENT COMPANY ACT OF 1940		¨

Amendment No. 33		x
(Check appropriate box or boxes)

Virtus Opportunities Trust

(Exact Name of Registrant as Specified in Charter)

Area Code and Telephone Number: (800) 243-1574

101 Munson Street

Greenfield, Massachusetts 01301

(Address of Principal Executive Offices)

Kevin J. Carr, Esq.

Counsel

Virtus Investment Partners, Inc.

100 Pearl St.

Hartford, Connecticut 06103

(Name and Address of Agent for Service)

Copies of All Correspondence to:

Robert N. Hickey, Esq.

Sullivan & Worcester LLP

1666 K Street, N.W.

Washington, D.C. 20006

It is proposed that this filing will become effective (check appropriate box):

¨	immediately upon filing pursuant to paragraph (b)

x	on January 31, 2009 pursuant to paragraph (b) of Rule 485

¨	60 days after filing pursuant to paragraph (a)(1)

¨	on or at such later date as the Commission shall order pursuant to paragraph (a)(2)

¨	75 days after filing pursuant to paragraph (a)(2)

¨	on pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

¨	this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

LOGO

VIRTUS FIXED INCOME FUNDS

Virtus Bond Fund

Virtus CA Tax-Exempt Bond Fund

Virtus Core Bond Fund

Virtus High Yield Fund

Virtus Money Market Fund

Virtus Multi-Sector Fixed Income Fund

Virtus Multi-Sector Short Term Bond Fund

Virtus Senior Floating Rate Fund



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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus contains important information that you should know before investing in Virtus mutual funds. Please read it carefully and retain it for future reference.

Virtus Mutual Funds


Table of Contents

Virtus Bond Fund

Investment Risk and Return Summary		1

Fund Fees and Expenses		4

Management of the Fund		5

Virtus CA Tax-Exempt Bond Fund

Investment Risk and Return Summary		7

Fund Fees and Expenses		10

Management of the Fund		10

Virtus Core Bond Fund

Investment Risk and Return Summary		12

Fund Fees and Expenses		15

Management of the Fund		16

Virtus High Yield Fund

Investment Risk and Return Summary		18

Fund Fees and Expenses		21

Management of the Fund		22

Virtus Money Market Fund

Investment Risk and Return Summary		23

Fund Fees and Expenses		26

Management of the Fund		26

Virtus Multi-Sector Fixed Income Fund

Investment Risk and Return Summary		28

Fund Fees and Expenses		31

Management of the Fund		32

Virtus Multi-Sector Short Term Bond Fund

Investment Risk and Return Summary		33

Fund Fees and Expenses		36

Management of the Fund		37

Virtus Senior Floating Rate Fund

Investment Risk and Return Summary		38

Fund Fees and Expenses		40

Management of the Fund		41

Risks Related to Principal Investment Strategies		43

Additional Investment Techniques		47

Pricing of Fund Shares		50

Sales Charges		51

Your Account		56

How to Buy Shares		57

How to Sell Shares		58

Things You Should Know When Selling Shares		58

Account Policies		59

Investor Services and Other Information		61

Tax Status of Distributions		62

Financial Highlights		64

Virtus Bond Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Bond Fund has an investment objective of high total return from both current income and capital appreciation. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The fund invests in a diversified portfolio of bonds. Under normal circumstances, the fund invests at least 80% of its assets in bonds, at least 65% of which are rated at the time of investment Baa3 or higher by Moody’s Investors Service (“Moody’s”) or BBB- or higher by Standard & Poor’s Corporation (“S&P”). However, the fund may invest in high yield-high risk fixed income securities (junk bonds). As of December 31, 2008, the average rating of the fund’s portfolio was Aa2 or AA. “Bonds” are fixed income debt securities of various types of issuers, including corporate bonds, mortgage-backed and asset-backed securities, U.S. Government securities and other short-term instruments. The fund’s policy of investing 80% of its assets in bonds may be changed only upon 60 days written notice to shareholders.

The subadviser uses a value-driven style that focuses on issue and sector selection, measured interest rate anticipation and trading opportunities.

Securities selected for fund investment may be of any maturity or duration. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of a security’s payment pattern. Normally, the fund’s dollar-weighted average duration will vary between two and eight years. The subadviser may adjust the fund’s dollar-weighted average duration based on changing expectations for the federal funds rate, the shape of the yield curve, swap spreads, mortgage prepayments, credit spreads, and capital market liquidity. For instance, if the federal funds rate is expected to rise, the subadviser may choose to move the fund’s dollar-weighted average duration to the lower end of the band. Within this context, it is expected that the fund’s dollar-weighted average maturity will range between three and fifteen years. On December 31, 2008, the average duration of the fund’s securities was 3.54 years and the average maturity was 5.28 years. Typically, for a fund maintaining an average duration of 3.54 years, a one percent increase in interest rates would cause a 3.54% decrease in the value of the fund’s fixed income assets. Similarly, a one percent decrease in interest rates typically would cause the value of the fund’s fixed income assets to increase by 3.54%.

Securities may be reviewed for sale due to anticipated changes in interest rates, changes in the creditworthiness of issuers, or general financial or market developments.

The subadviser’s investment strategies may result in a higher portfolio turnover rate for the fund. A high portfolio turnover rate increases costs to the fund, negatively affects fund performance, and may increase capital gain distributions, resulting in greater tax liability to you.

Temporary Defensive Strategy: When the subadviser determines that market conditions warrant, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing, without limit, in cash and cash equivalents. In such instances, the fund may not achieve its investment objective.

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

High Yield Securities (Junk Bonds) Risk. The risk that lower rated securities generally have a higher incidence of default and may be less liquid than higher rated securities.


Virtus Bond Fund		1

Long-Term Maturities/Durations Risk. The risk of greater price fluctuations than would be associated with securities having shorter maturities or durations.

Market Volatility Risk. The risk that the value of the securities in which the fund invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods.

Mortgage-Backed and Asset-Backed Securities Risk. The risk that certain factors may negatively affect the value of mortgage-backed and asset-backed securities, causing them to fluctuate to a greater degree than other debt securities.

U.S. Government Securities Risk. The risk that although backed by the U.S. Government, these securities are subject to price fluctuations.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


2		Virtus Bond Fund

Performance Tables

The bar chart and table below provide some indication of the risks of investing in the Virtus Bond Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 3.72% (quarter ending March 31, 2001) and the lowest return for a quarter was -2.36% (quarter ending June 30, 2004).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾
	1 Year	5 Years	10 Years
Class A
Return Before Taxes	-5.28%	1.94%	3.98%
Return After Taxes on Distributions ⁽³⁾	-6.69%	0.44%	2.03%
Return After Taxes on Distributions and Sale of Fund Shares ⁽³⁾	-3.44%	0.79%	2.20%
Class B
Return Before Taxes	-5.09%	2.14%	3.69%
Class C
Return Before Taxes	-1.29%	2.18%	3.70%
Class I
Return Before Taxes	-0.30%	3.21%	4.83%
Barclays Capital U.S. Aggregate Bond Index ⁽⁴⁾	5.24%	4.65%	5.63%

(2) The fund’s average annual returns in the table above reflect the deduction of the maximum sales charge for an investment in the fund’s Class A Shares and a full redemption in the fund’s Class B Shares and Class C Shares.

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class I); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus Bond Fund		3

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None	None
Redemption Fee	None	None	None	None
Exchange Fee	None	None	None	None


	Class A Shares	Class B Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.50%	0.50%	0.50%	0.50%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	1.00%	1.00%	None
Other Expenses	0.42%	0.42%	0.42%	0.42%

Total Annual Fund Operating Expenses ^(e)	1.17%	1.92%	1.92%	0.92%

(a) A contingent deferred sales charge of 1% may apply on certain redemptions made within one year following purchases on which a finder’s fee has been paid. The one-year period begins on the last day of the month preceding the month in which the purchase was made.

(b) The maximum deferred sales charge is imposed on Class B Shares redeemed during the first year; thereafter, it decreases 1% annually to 2% during the fourth and fifth years and to 0% after the fifth year.

(d) Distribution and Shareholder Servicing (12b-1) Fees represent an asset-based sales charge that, for a long-term shareholder, over time may be higher than the maximum front-end sales charge permitted by FINRA.

(e) The fund’s investment adviser has voluntarily agreed to limit total operating expenses (excluding interest, taxes and extraordinary expenses), so that such expenses do not exceed 0.85% for Class A Shares, 1.60% for Class B Shares, 1.60% for Class C Shares and 0.60% for Class I Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Operating Expenses, after expense reimbursement, were 1.12% for Class A Shares, 1.87% for Class B Shares, 1.86% for Class C Shares and 0.76% for Class I Shares. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such reimbursement occurred.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. In the case of Class B Shares, it is assumed that your shares are converted to Class A Shares after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$589	$829	$1,088	$1,828
Class B	$595	$803	$1,037	$2,243
Class C	$295	$603	$1,037	$2,243
Class I	$94	$293	$509	$1,131


4		Virtus Bond Fund

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$195	$603	$1,037	$2,243
Class C	$195	$603	$1,037	$2,243

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser

Virtus Investment Advisers, Inc. (“VIA”) is the investment adviser to the fund and is located at 100 Pearl Street, Hartford, CT 06103. VIA acts as the investment adviser for over 50 mutual funds and as adviser to institutional clients. As of September 30, 2008, VIA had approximately $13.8 billion in assets under management. VIA has acted as an investment adviser for over 70 years.

SCM Advisors LLC (“SCM Advisors”), an affiliate of VIA, is the subadviser to the fund and is located at 909 Montgomery Street, San Francisco, CA 94133. SCM Advisors acts as subadviser to five mutual funds and as investment adviser to institutions and individuals. As of September 30, 2008, SCM Advisors had approximately $3.5 billion in assets under management. SCM Advisors has been an investment adviser since 1989.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. SCM Advisors, as subadviser, is responsible for day-to-day management of the fund’s portfolio. VIA and SCM Advisors manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the annual rate of 0.50%.

The adviser has voluntarily agreed to limit total operating expenses of the fund (excluding interest, taxes and extraordinary expenses) so that such expenses do not exceed the following percentages of the average annual net asset values for the fund.


Class A Shares	Class B Shares	Class C Shares	Class I Shares
0.85%	1.60%	1.60%	0.60%

The adviser may discontinue this voluntary expense cap at any time. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such reimbursement occurred.

VIA pays SCM Advisors a subadvisory fee at the rate of 0.25%.

A discussion regarding the basis for the Board of Trustees approving the investment advisory and subadvisory agreements is available in the fund’s 2008 semiannual report, covering the period October 1, 2007 through March 31, 2008.

The fund and VIA have received an exemptive order from the Securities and Exchange Commission that permits VIA, subject to certain conditions, and without the approval of shareholders, to: (a) employ a new unaffiliated subadviser for a fund pursuant to the terms of a new subadvisory agreement, in each case either as a replacement for an existing subadviser or as an additional subadviser; (b) change the terms of any subadvisory agreement; and (c) continue the employment of an existing subadviser on the same subadvisory agreement terms where an agreement has been assigned because of a change in control of the subadviser. In such circumstances, shareholders would receive notice of such action, including the information concerning the new subadviser that normally is provided in a proxy statement.


Virtus Bond Fund		5

Portfolio Management

A team of investment professionals manages the fund’s portfolio and each team member is jointly and primarily responsible for the day-to-day management of the fund’s portfolio.

Robert L. Bishop, CFA. Mr. Bishop has served on the fund’s portfolio management team since 2004. He is Chief Investment Officer for Fixed Income at SCM Advisors and also has portfolio management responsibility for investment grade corporate bonds and credit derivatives. Mr. Bishop also serves on the portfolio management teams for the Virtus High Yield Fund and Virtus High Yield Income Fund. Prior to joining SCM Advisors in 2002, he was responsible for restructuring corporate pension funds at Saloman Brothers; quantitative portfolio design at Goldman Sachs; and was a director in the credit sales area of Merrill Lynch. He has 29 years of investment experience.

Maxwell E. Bublitz, CFA. Mr. Bublitz has served on the fund’s portfolio management team since December 2008. He also serves on the portfolio management team for the Virtus High Yield Fund and Virtus High Yield Income Fund. Mr. Bublitz is Chief Strategist at SCM Advisors. Prior to joining SCM Advisors in 2005, he was President and Chief Executive Officer of Conseco Capital Management (1987-2005). Mr. Bublitz has 24 years of investment experience.

Kaushik Saha. Mr. Saha has served on the fund’s portfolio management team since July 2008. He is Fixed Income Portfolio Manager at SCM Advisors focused primarily on mortgage and asset-backed securities. Prior to joining SCM Advisors in 2008, Mr. Saha was Portfolio manager and Senior ABS Analyst for Barclays Global Investors (2004-2008). He has 17 years of investment experience.

Please refer to the Statement of Additional Information for additional information about the fund’s portfolio managers, including the structure of and method of computing compensation, other accounts they manage and their ownership of shares of the fund.


6		Virtus Bond Fund

Virtus CA Tax-Exempt Bond Fund

Investment Risk and Return Summary

Investment Objective

The Virtus CA Tax-Exempt Bond Fund has an investment objective to obtain a high level of current income exempt from California state and local income taxes, as well as federal income tax, consistent with the preservation of capital. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The fund invests in municipal securities that are tax exempt in California. California law requires that at least 50% of the fund’s assets be invested in California tax-exempt state and local issues or tax-exempt federal obligations at the end of each quarter of its taxable year in order to be eligible to pay dividends to California residents that are exempt from California income taxes. Under normal circumstances, as a matter of fundamental policy, the fund invests at least 80% of its assets in bonds, the income from which is exempt from California state income tax and federal income tax, and may invest 100% of its assets in such securities. The term “bonds” includes municipal bonds, notes and lease obligations and tax-exempt commercial paper. Issuers include states, territories and possessions of the United States and their political subdivisions, agencies, authorities and instrumentalities, including Puerto Rico, Guam and the U.S. Virgin Islands.

Debt obligations may be of any maturity and will be rated within the four highest rating categories by the nationally recognized statistical rating organizations at the time of investment, or if unrated, those that the adviser determines, pursuant to procedures reviewed and approved by the Board of Trustees, to be of comparable quality.

Securities are selected using an analytical approach that focuses on the relative value of the security considering its credit rating, and the security’s coupon rate, call features, maturity and average life.

Issuers are selected based on sector (utility, healthcare, transportation, etc.), and the geographic opportunity presented by areas and regions that are experiencing economic growth.

The portion of the fund’s assets not invested in tax-exempt securities may be invested in taxable fixed income securities. Income from these investments may be subject to federal, state and local taxes.

Temporary Defensive Strategy: When, in the adviser’s opinion, abnormal market or economic conditions warrant, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by holding taxable securities, retaining cash or investing part or all of its assets in cash equivalents. When this allocation happens, the fund may not achieve its investment objective.

The fund may buy other types of securities or employ other portfolio management techniques. Please refer to the Statement of Additional Information for more detailed information about these and other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

California Bonds Risk. The risk that certain regulatory controls or changes in California will negatively affect the value of securities issued by the State of California.

Concentration Risk. The risk that if the fund concentrates its investments in a single state, its portfolio will be more susceptible to factors adversely affecting issuers located in that state than would a more geographically diverse portfolio of securities.


Virtus CA Tax-Exempt Bond Fund		7

Long-Term Maturities/Durations Risk. The risk of greater price fluctuations than would be associated with securities having shorter maturities or durations.

Municipal Market Risk. The risk that certain factors may negatively affect the value of municipal securities, causing them to fluctuate in value to a greater degree than other debt securities.

Puerto Rico Bonds Risk. The risk that certain regulatory controls or changes in Puerto Rico will negatively affect the value of securities issued by the territory of Puerto Rico.

Tax-Exempt Securities Risk. The risk that tax-exempt securities may not provide a higher after-tax return than taxable securities.

Unrated Securities Risk. The risk that unrated securities may be more difficult to analyze.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


8		Virtus CA Tax-Exempt Bond Fund

Performance Tables

The Virtus CA Tax-Exempt Bond Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix CA Tax-Exempt Bond Fund, a series of a trust by the same name (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus CA Tax-Exempt Bond Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in Virtus CA Tax-Exempt Bond Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare with those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 5.94% (quarter ending September 30, 2002) and the lowest return for a quarter was -3.00% (quarter ending September 30, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾				Since Inception ⁽⁵⁾
	1 Year	5 Years	10 Years	Class I
Class A Shares
Return Before Taxes	-8.62%	0.65%	2.82%	—
Return After Taxes on Distributions ⁽³⁾	-8.64%	0.52%	2.60%	—
Return After Taxes on Distributions and Sale of Fund Shares ⁽³⁾⁽⁴⁾	-4.31%	1.08%	2.90%	—
Class I Shares	-3.82%	—	—	-0.22%
Barclays Capital U.S. Aggregate Bond Index ⁽⁶⁾	5.24%	4.65%	5.63%	5.96%
Barclays Capital California Municipal Bond Index ⁽⁷⁾	-4.15%	2.63%	4.08%	-0.11%

(2) The fund’s average annual returns in the table above reflect the deduction of the maximum sales charge for an investment in the fund’s Class A Shares.

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.

(5) Class I Shares since September 29, 2006.

(6) The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(7) The Barclays Capital California Municipal Bond Index measures long term investment grade, tax-exempt and fixed rate bonds issued in California. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus CA Tax-Exempt Bond Fund		9

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None
Redemption Fee	None	None
Exchange Fee	None	None


	Class A Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.45%	0.45%
Distribution and Shareholder Servicing (12b-1) Fees ^(b)	0.25%	None
Other Expenses	0.31%	0.31%

Total Annual Fund Operating Expenses ^(c)	1.01%	0.76%

(b) Distribution and Shareholder Servicing (12b-1) Fees represent an asset-based sales charge that, for a long-term shareholder, over time may be higher than the maximum front-end sales charge permitted by FINRA.

(c) The fund’s investment adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes and extraordinary expenses) so that such expenses do not exceed 0.85% for Class A Shares and 0.60% for Class I Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Fund Operating Expenses, after expense reimbursement, were 0.85% for Class A Shares and 0.60% for Class I Shares. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such reimbursement occurred.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$573	$781	$1,006	$1,653
Class I	$78	$243	$422	$942

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser


10		Virtus CA Tax-Exempt Bond Fund

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program and for the general operations of the fund. VIA manages the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates.


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.45%	0.40%	0.35%

The adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes and extraordinary expenses) so that such expenses do not exceed the following percentages of the average annual net asset values for the fund.


Class A Shares		Class I Shares
0.85%		0.60%

A discussion regarding the basis for the Board of Trustees approving the investment advisory and subadvisory agreements is available in the fund’s 2008 semiannual report covering the period October 1, 2007 through March 31, 2008.

Portfolio Management

Timothy M. Heaney, CFA. Mr. Heaney is the Portfolio Manager of the fund and as such is primarily responsible for the day-to-day management of the fund’s portfolio. He has managed the fund since September 1997 and previously co-managed the fund from March 1996. Mr. Heaney is Senior Managing Director, Fixed Income of VIA. Previously, he was associated with Goodwin Capital Advisers (2007 to 2008), formerly an affiliate of VIA, and was also Managing Director, Fixed Income (1997-2007), Director, Fixed Income Research (1996 to 1997) and Investment Analyst (1995 to 1996) of VIA. He served as Investment Analyst of Phoenix Life Insurance Company from 1992 until 1994. Mr. Heaney also manages DTF Tax-Free Income Inc., a closed-end fund.

Please refer to the Statement of Additional Information for additional information about the fund’s portfolio manager, including the structure of and method of computing compensation, other accounts he manages and his ownership of shares of the fund.


Virtus CA Tax-Exempt Bond Fund		11

Virtus Core Bond Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Core Bond Fund has an investment objective to seek both current income and capital appreciation. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, the fund invests at least 80% of its assets in investment grade bonds of U.S. issuers. “Bonds” are fixed income debt securities of various types of issuers, including corporate bonds, short-term instruments, U.S. Government securities, mortgage-backed and asset-backed securities, collateralized mortgage obligations (CMOs) and municipal securities. Investment grade bonds are those with credit ratings, at the time of acquisition, within the four highest rating categories of a nationally recognized statistical rating organization, or if unrated, those that the subadviser determines, pursuant to procedures reviewed and approved by the Board of Trustees, are of comparable quality. The fund intends to maintain an average credit quality of “A” or better as rated by Moody’s Investors Services, Inc. or Standard & Poor’s. If after the time of investment a security’s rating declines, the fund is not obligated to sell the security. The fund’s policy of investing 80% of its assets in bonds may be changed only upon 60 days written notice to shareholders.

Securities are selected using a sector rotation approach. The subadviser seeks to adjust the portion of fund investment in various sectors (such as U.S. corporates, foreign corporates, U.S. Governments and foreign governments, as well as asset-backed, mortgage-backed and municipal bonds) and the selections within sectors to obtain higher relative returns. The subadviser selects those sectors that it believes offer attractive values. Securities within sectors are selected based on general economic and financial conditions and the issuer’s business, management, cash, assets, earnings and stability. Securities selected for investment are those that the subadviser believes offer the best potential for total return based on risk-reward tradeoff.

Interest rate risk is managed by a duration neutral strategy. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of the security’s payment pattern. Generally, the longer the maturity the greater the duration and therefore the greater effect interest rate changes have on the price of the security. The subadviser attempts to maintain the duration of the fund at a level similar to that of its benchmark, the Barclays Capital U.S. Aggregate Bond Index. By maintaining the duration of the fund at a level similar to that of the fund’s benchmark, the subadviser believes that the fund’s exposure to interest rate risk is more consistent with its benchmark’s risk profile than that of a fund that attempts to predict future interest rate changes. On December 31, 2008, the modified adjusted duration of the Barclays Capital U.S. Aggregate Bond Index was 3.71 years; the modified adjusted duration of the fund was 4.08 years. Typically, for a fund maintaining a modified adjusted duration of 4.08 years, a one percent increase in interest rates would cause a 4.08% decrease in the value of the fund’s fixed income assets. Similarly, a one percent decrease in interest rates typically would cause the value of the fund’s fixed income assets to increase by 4.08%.

Securities selected for fund investment may be of any maturity. However, the subadviser attempts to maintain a maturity composition similar to that of its benchmark in an effort to maintain an interest rate risk profile consistent with the benchmark. Maturity composition refers to the percentage of securities within specific maturity ranges as well as the aggregate weighted average fund maturity. On December 31, 2008, the average maturity of the Barclays Capital U.S. Aggregate Bond Index was 5.50 years; the average adjusted maturity of the fund was 5.34 years.

Generally, securities are sold when the subadviser believes the issue has realized its value or to take advantage of attractive values in other sectors.

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.


12		Virtus Core Bond Fund

Foreign Securities Risk. The risk that the prices of foreign securities may be more volatile than those of their domestic counterparts.

Municipal Market Risk. The risk that certain factors may negatively affect the value of municipal securities, causing them to fluctuate in value to a greater degree than other debt securities.

U.S. Government Securities Risk. The risk that although backed by the U.S. Government, these securities are subject to price fluctuations.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


Virtus Core Bond Fund		13

Performance Tables

The Virtus Core Bond Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Core Bond Fund, a series of Phoenix Series Fund (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Core Bond Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Core Bond Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the 10-year period shown in the chart above, the highest return for a quarter was 4.16% (quarter ending September 28, 2001) and the lowest return for a quarter was -3.64% (quarter ending September 30, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾				Since Inception ⁽³⁾
	1 Year	5 Years	10 Years	Class C
Class A
Return Before Taxes	-11.61%	0.55%	2.42%	—
Return After Taxes on Distributions ⁽⁴⁾	-13.12%	-1.13%	0.33%	—
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾⁽⁵⁾	-7.50%	-0.48%	0.80%	—
Class B
Return Before Taxes	-11.38%	0.78%	2.14%	—
Class C
Return Before Taxes	-7.92%	0.78%	—	2.71%
Barclays Capital U.S. Aggregate Bond Index ⁽⁶⁾	5.24%	4.65%	5.63%	6.24%

(3) Class C Shares since October 11, 1999.

(4) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(5) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.


14		Virtus Core Bond Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class B Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.45%	0.45%	0.45%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	1.00%	1.00%
Other Expenses ^(f)	0.47%	0.47%	0.47%

Total Annual Fund Operating Expenses ^(e)	1.17%	1.92%	1.92%

(e) The fund’s investment adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes and extraordinary expenses) so that such expenses do not exceed 1.00% for Class A Shares, 1.75% for Class B Shares and 1.75% for Class C Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Fund Operating Expenses, after expense reimbursement, were 1.00% for Class A Shares, 1.75% for Class B Shares and 1.75% for Class C Shares . The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such reimbursement occurred.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

In the case of Class B Shares, it is assumed that your shares are converted to Class A Shares after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$589	$829	$1,088	$1,828
Class B	$595	$803	$1,037	$2,243
Class C	$295	$603	$1,037	$2,243


Virtus Core Bond Fund		15

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$195	$603	$1,032	$2,243
Class C	$195	$603	$1,032	$2,243

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser

Virtus Investment Advisers, Inc. (“VIA”) is investment adviser to the fund and is located at 100 Pearl Street, Hartford, CT 06103. VIA acts as investment adviser for over 50 mutual funds and as adviser to institutional clients. As of September 30, 2008, VIA had approximately $13.8 billion in assets under management. VIA has acted as an investment adviser for over 70 years.

Goodwin Capital Advisers, Inc. (“Goodwin”) is the subadviser to the fund and is located at 56 Prospect Street, Hartford, CT 06115. Goodwin acts as subadviser for 11 mutual funds and manages fixed income assets for individuals and institutions. As of September 30, 2008, Goodwin had approximately $16.7 billion in assets under management.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. Goodwin, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Goodwin manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.45%	0.40%	0.35%

The adviser has voluntarily agreed to limit total operating expenses of the fund (excluding interest, taxes and extraordinary expenses), so that such expenses do not exceed the following percentages of the average annual net asset values for the fund.


Class A Shares	Class B Shares	Class C Shares
1.00%	1.75%	1.75%

VIA pays Goodwin a subadvisory fee of 50% of the gross investment management fee.


16		Virtus Core Bond Fund

Portfolio Management

Cynthia A. Beaulieu and Christopher J. Kelleher, CFA, CPA have served as co-portfolio managers of the fund since 2005 and as such are jointly and primarily responsible for the day-to-day management of the fund’s portfolio. David L. Albrycht, CFA has served as a co-portfolio manager since 2007.

Mr. Albrycht is a Senior Managing Director, Fixed Income, of Goodwin. He also serves as Senior Portfolio Manager for the Virtus Multi-Sector Fixed Income Fund, the Virtus Multi-Sector Short Term Bond Fund and the Virtus Senior Floating Rate Fund. In addition, he manages the fixed income portions of the Virtus Balanced Fund and the Virtus Income & Growth Fund. Previously, he was associated with VIA, formerly an affiliate of Goodwin, and has managed fixed income portfolios since 1992. Mr. Albrycht joined VIA in 1981 and since then has held positions of increasing responsibility.

Ms. Beaulieu is Managing Director of Goodwin. She serves as Portfolio Manager for institutional client portfolios and is responsible for managing the investment activity of several insurance company portfolios. Previously, she was associated with VIA and had been with VIA since 1994. While at VIA, Ms. Beaulieu held a number of positions of increasing responsibility, including trading, credit research and portfolio management. She has 16 years of investment experience.

Mr. Kelleher is Senior Managing Director of Goodwin. Mr. Kelleher also serves as portfolio manager for the Virtus Institutional Bond Fund. He is responsible for institutional fixed income management. Previously, he was associated with VIA and had been with VIA since 1986. He has 23 years of investment experience.


Virtus Core Bond Fund		17

Virtus High Yield Fund

Investment Risk and Return Summary

Investment Objectives

The Virtus High Yield Fund has a primary investment objective to seek high current income and a secondary objective of capital growth. There is no guarantee that the fund will achieve its objectives. The fund’s investment objectives may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, the fund invests at least 80% of its assets in a diversified portfolio of high yield fixed income securities. The fund’s policy of investing 80% of its assets in high yield fixed income securities may be changed only upon 60 days written notice to shareholders.

The subadviser uses an investment process that focuses on adding value through issue selection, sector/industry selection and opportunistic trading.

The subadviser evaluates market conditions in the context of broad macroeconomic trends. The subadviser generally overweights those sector/industries where well-valued companies can be identified and whose business profiles (and credit measures) are viewed to be improving.

The subadviser considers credit research an integral component of its higher quality high yield investment process. The manager invests across the credit rating spectrum with an emphasis on securities that are moving up the credit rating scale of a nationally recognized statistical rating organization and generally those rated Ba/BB and B/B by Moody’s, Standard & Poor’s or Fitch, at the time of investment. If after the time of investment a security’s rating declines, the fund is not obligated to sell the security.

Principally, securities are selected from a broad universe of domestic high yield corporate bonds, although it may invest in other types of high yield securities.

The subadviser attempts to maintain the duration of the fund at a level similar to that of its style benchmark. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of the security’s payment pattern. Generally, the longer the maturity the greater the duration and, therefore, the greater effect interest rate changes have on the price of the security. On December 31, 2008, the modified adjusted duration of the Barclays Capital High Yield 2% Issuer Cap Index was 4.11 years; the modified adjusted duration of the fund was 3.57 years. Typically, for a fund maintaining a modified adjusted duration of 3.57 years, a one percent increase in interest rates would cause a 3.57% decrease in the value of the fund’s assets. Similarly, a one percent decrease in interest rates typically would cause the value of the fund’s assets to increase by 3.57%.

The subadviser’s investment strategies may result in a higher portfolio turnover rate for the fund. A high portfolio turnover rate increases transaction costs to the fund, negatively affects fund performance, and may increase capital gain distributions, resulting in greater tax liability to you.

Temporary Defensive Strategy: If the adviser believes that market conditions are not favorable to the fund’s principal strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by holding cash or investing, without limit, in cash equivalents or other fixed income securities. When this allocation happens, the fund may not achieve its investment objectives.

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.


18		Virtus High Yield Fund

High Yield Securities (Junk Bonds) Risk. The risk that lower rated securities generally have a higher incidence of default and may be less liquid than higher rated securities.

Industry/Sector Concentration Risk. The risk that if a fund invests a significant portion of its portfolio in one or more industries or sectors, its portfolio will be more susceptible to factors adversely affecting issuers in those industries or sectors than would a more diverse portfolio of securities.

Long-Term Maturities/Durations Risk. The risk of greater price fluctuations than would be associated with securities having shorter maturities or durations.

U.S. Government Securities Risk. The risk that although backed by the U.S. Government, these securities are subject to price fluctuations.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


Virtus High Yield Fund		19

Performance Tables

The Virtus High Yield Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix High Yield Fund, a series of Phoenix Series Fund (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus High Yield Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus High Yield Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the 10-year period shown in the chart above, the highest return for a quarter was 7.03% (quarter ending June 30, 2003) and the lowest return for a quarter was -14.67% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾
	1 Year	5 Years	10 Years
Class A
Return Before Taxes	-27.52%	-2.52%	-0.48%
Return After Taxes on Distributions ⁽³⁾	-29.61%	-4.94%	-3.56%
Return After Taxes on Distributions and Sale of Fund Shares ⁽³⁾⁽⁴⁾	-17.64%	-3.28%	-2.04%
Class B
Return Before Taxes	-27.30%	-2.33%	-0.76%
Class C
Return Before Taxes	-24.56%	-2.36%	-0.76%
Barclays Capital U.S. Aggregate Bond Index ⁽⁵⁾	5.24%	4.65%	5.63%
Barclays Capital High Yield 2% Issuer Cap Index ⁽⁶⁾	-25.88%	-0.84%	2.28%

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.

(5) The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(6) The Barclays Capital High Yield 2% Issuer Cap Index is a market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. corporations. No single issuer accounts for more than 2% of market cap. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


20		Virtus High Yield Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class B Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.65%	0.65%	0.65%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	1.00%	1.00%
Other Expenses	0.44%	0.44%	0.44%

Total Annual Fund Operating Expenses	1.34%	2.09%	2.09%

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$605	$879	$1,174	$2,011
Class B	$612	$855	$1,124	$2,421
Class C	$312	$655	$1,124	$2,421

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$212	$655	$1,124	$2,421
Class C	$212	$655	$1,124	$2,421


Virtus High Yield Fund		21

Management of the Fund

The Adviser and Subadviser

SCM Advisors, LLC (“SCM Advisors”), an affiliate of VIA, is the subadviser to the fund and is located at 909 Montgomery Street, San Francisco, CA 94133. SCM Advisors acts as subadviser to five mutual funds and as investment adviser to institutions and individuals. As of September 30, 2008, SCM Advisors had approximately $3.5 billion in assets under management. SCM Advisors has been an investment adviser since 1989.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. SCM Advisors, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and SCM Advisors manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.65%	0.60%	0.55%

Virtus pays SCM Advisors a subadvisory fee of 50% of the gross investment management fee.

Portfolio Management

A team of investment professionals manages the fund’s portfolio and each team member is jointly and primarily responsible for the day-to-day management of the fund’s portfolio.

Robert L. Bishop, CFA. Mr. Bishop has served on the fund’s portfolio management team since December 2008. He is Chief Investment Officer for Fixed Income at SCM Advisors and also has portfolio management responsibility for investment grade corporate bonds and credit derivatives. Mr. Bishop also serves on the portfolio management teams for the Virtus Bond Fund and Virtus High Yield Income Fund. Prior to joining SCM Advisors in 2002, he was responsible for restructuring corporate pension funds at Saloman Brothers; quantitative portfolio design at Goldman Sachs; and was a director in the credit sales area of Merrill Lynch. He has 28 years of investment experience.

Maxwell E. Bublitz, CFA. Mr. Bublitz has served on the fund’s portfolio management team since December 2008. He also serves on the portfolio management team for the Virtus Bond Fund and the Virtus High Yield Income Fund. Mr. Bublitz is Chief Strategist at SCM Advisors. Prior to joining SCM Advisors in 2005, he was President and Chief Executive Officer of Conseco Capital Management (1987-2005). Mr. Bublitz has 24 years of investment experience.

Warren H. Goodrich, CFA. Mr. Goodrich has served on the fund’s portfolio management team since December 2008. He also serves on the portfolio management team for the Virtus High Yield Income Fund. Mr. Goodrich is Director of Research and Fixed Income Analyst at SCM Advisors. Prior to joining SCM Advisors in 2001, he performed asset-backed securities research at Barclays Global Investors and CDO restructuring at Banc of America Securities. Mr. Goodrich has 12 years of investment experience.


22		Virtus High Yield Fund

Virtus Money Market Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Money Market Fund has an investment objective of seeking as high a level of current income as is consistent with the preservation of capital and maintenance of liquidity. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The fund seeks to maintain a stable $1.00 per share price.

The fund invests in a diversified portfolio of high quality money market instruments with maturities of 397 days or less. The average maturity of the fund’s portfolio securities, based on their dollar value, will not exceed 90 days.

The subadviser seeks a high level of return relative to the market by selecting securities for the fund’s portfolio in anticipation of, or in response to, changing economic conditions and money market conditions and trends. The subadviser may not purchase securities with the highest available yield if the subadviser believes that such an investment is inconsistent with the fund objective of preservation of capital and maintenance of liquidity.

The fund invests exclusively in the following instruments:

obligations issued or guaranteed by the U.S. Government, its agencies, authorities and instrumentalities;

obligations issued by banks and savings and loan associations, including dollar-denominated obligations of foreign branches of U.S. banks and U.S. branches of foreign banks;

dollar-denominated obligations guaranteed by banks or savings and loan associations;

federally-insured obligations of other banks or savings and loan associations;

commercial paper, which at the date of investment is rated A-1 by Standard and Poor’s (“S&P”) and/or P-1 by Moody’s Investors Service, Inc. (“Moody’s”), or, if not rated, is issued or guaranteed by a company which at the date of investment has an outstanding debt issue rated AA or higher by S&P or Aa or higher by Moody’s;

short-term corporate obligations, which at the date of investment are rated AA or higher by S&P or Aa or higher by Moody’s; and

repurchase agreements.

At least 95% of the fund’s total assets will be invested in securities in the highest short-term rating category. Generally, investments will be limited to securities in the two highest short-term rating categories.

The fund may invest more than 25% of its assets in the domestic banking industry.

U.S. Treasury Department Temporary Guarantee Program for Money Market Funds

The fund has elected to extend its Guarantee Agreement with the United States Department of the Treasury (the “Treasury”) which permits the fund to participate in the Treasury’s Temporary Guarantee Program for Money Market Funds (the “Program”).

Under the Program, the Treasury will guarantee the share price of shares of the fund held by shareholders as of September 19, 2008 at $1.00 per share if the fund’s net asset value per share falls below $0.995 (a “Guarantee Event”) and the fund liquidates. Recovery under the Program is subject to certain conditions and limitations, including the following:

For shareholders of the fund, the Program provides a guarantee for the lesser of (a) the number of fund shares owned by the shareholder at the close of business on September 19, 2008, or (b) the number of fund shares owned by the shareholder on the date of a Guarantee Event.

The total amount of coverage available for all participants in the Program is limited to the amount of funds available under the Federal Exchange Stabilization Fund at the time of a Guarantee Event (currently approximately $50 billion).

In order to recover, a Guarantee Event must occur during the term of the Program.


Virtus Money Market Fund		23

Fund shares acquired under the following circumstances are not eligible for protection under the Program:

by investors after September 19, 2008 that increase the number of fund shares the investor held at the close of business on September 19, 2008;

by investors who did not hold fund shares at the close of business on September 19, 2008; and

by investors in an account closed and reopened subsequent to September 19, 2008.

Participation in the initial term of the Program required a payment to the Treasury in the amount of .01% to .015% of the fund’s net asset value as of September 19, 2008. This expense is being borne by the fund.

Unless further extended by the Treasury, the Program will expire on April 30, 2009. The Secretary of the Treasury will review the need for, and terms of, the Program at the time of its expiration, and is authorized to extend the Program through the close of business on September 18, 2009. There is no assurance that the Program will be extended beyond April 30, 2009, or that, if it is extended, the fund will be able to participate in the Program beyond April 30, 2009.

Risks Related to Principal Investment Strategies

General

An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

Neither the fund nor the subadviser can assure you that a particular yield, return or level of income will be achieved. Changing market conditions, the relatively short maturities of fund investments and substantial redemptions may all negatively affect the fund.

Credit Risk

Credit risk refers to the issuer’s ability to make scheduled interest or principal payments. A security’s short term investment rating may decline, increasing the chances the issuer may not be able to make principal and interest payments on time. This may reduce the fund’s stream of income and decrease the fund’s yield.

Domestic Banking Industry Risk

If the fund were to concentrate its investments in the domestic banking industry, such strategy may present additional risks. Securities of companies in other industries may provide greater investment return in certain market conditions as compared to obligations issued by companies within the domestic banking industry. Moreover, conditions that negatively impact the domestic banking industry will have a greater impact on this fund as compared to a fund that does not have a policy allowing it to concentrate in this industry.

Foreign Investing Risk

The fund may invest in dollar-denominated instruments issued by foreign branches of U.S. banks and U.S. branches of foreign banks. Since these instruments are dollar-denominated, they are not affected by variations in currency exchange rates. They are influenced primarily by interest rate levels in the United States and by the financial condition of the issuer, or of the issuer’s foreign parent. These instruments may be subject to levels of risk that differ from their fully domestic counterparts.

Interest Rate Risk

The value of your shares will be directly affected by trends in interest rates. If interest rates rise, the value of debt securities generally will fall.

Repurchase Agreements Risk

The fund may invest in repurchase agreements with commercial banks, brokers and dealers considered by the subadviser to be creditworthy. Default or insolvency of the other party presents risk to the fund.

U.S. Government Securities Risk

Obligations issued or guaranteed by the U.S. Government, its agencies, authorities and instrumentalities and backed by the full faith and credit of the United States only guarantee principal and interest will be timely paid to holders of the securities. The entities do not guarantee that the value of fund shares will remain at $1.00 or that the fund will realize a particular yield. In addition, not all U.S. Government securities are backed by the full faith and credit of the United States, but rather are the obligation solely of the entity through which they are issued.


24		Virtus Money Market Fund

Performance Tables

The Virtus Money Market Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Money Market Fund, a series of Phoenix Series Fund (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Money Market Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Money Market Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows the fund’s average annual returns for one, five and ten years. The fund’s past performance is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) During the 10-year period shown in the chart above, the highest return for a quarter was 1.44% (quarter ending December 31, 2000) and the lowest return for a quarter was 0.09% (quarter ending June 30, 2004).


Average Annual Total Returns (for the periods ended 12/31/08)	1 Year	5 Years	10 Years
Class A Shares	2.11%	2.79%	2.99%

The fund’s 7-day yield on December 31, 2008 was 0.50%.


Virtus Money Market Fund		25

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


		Class A Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)		None
Maximum Sales Charge (load) Imposed on Reinvested Dividends		None
Redemption Fee		None
Exchange Fee		None


		Class A Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees		0.40%
Distribution and Shareholder Servicing (12b-1) Fees		None
Other Expenses		0.37%

Total Annual Fund Operating Expenses		0.77%

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$79	$246	$428	$954

Management of the Fund

The Adviser and Subadviser

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. Goodwin, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Goodwin manage the fund’s assets to conform with the investment policies as described in this prospectus.


26		Virtus Money Market Fund

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.40%	0.35%	0.30%

VIA pays Goodwin a subadvisory fee of 50% of the gross investment management fee.


Virtus Money Market Fund		27

Virtus Multi-Sector Fixed Income Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Multi-Sector Fixed Income Fund has an investment objective to maximize current income while preserving capital. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, the fund invests at least 80% of its assets in the following sectors of fixed income securities:

Securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities, including collateralized mortgage obligations (“CMOs”), real estate mortgage investment conduits (“REMICs”) and other pass-through securities;

Debt securities issued by foreign issuers, including foreign governments and their political subdivisions and issuers located in emerging market countries;

Investment grade securities, which are securities with credit ratings within the four highest rating categories of a nationally recognized statistical rating organization, or if unrated, those that the subadviser determines, pursuant to procedures reviewed and approved by the Board of Trustees, are of comparable quality, including short-term securities; and

High yield-high risk fixed income securities of U.S. issuers (so called “junk bonds”).

The fund may invest in all or some of these sectors. If after the time of investment the rating declines, the fund is not obligated to sell the security. The fund’s policy of investing 80% of its assets in fixed income securities may be changed only upon 60 days written notice to shareholders.

Securities are selected using a sector rotation approach. The subadviser seeks to adjust the proportion of fund investments in the sectors described above and the selections within sectors to obtain higher relative returns. Sectors are analyzed by the subadviser for attractive values. Securities within sectors are selected based on general economic and financial conditions, and the issuer’s business, management, cash, assets, earnings and stability. Securities selected for investment are those that the subadviser believes offer the best potential for total return based on risk-reward tradeoff.

Interest rate risk is managed by a duration neutral strategy. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of the security’s payment pattern. Generally, the longer the maturity the greater the duration and; therefore, the greater effect interest rate changes have on the price of the security. By maintaining the duration of the fund at a level similar to that of its benchmark, the Barclays Capital U.S. Aggregate Bond Index, the subadviser believes that the fund’s exposure to interest rate risk is more consistent with its benchmark’s risk profile than that of a fund that attempts to predict future interest rate changes. On December 31, 2008, the modified adjusted duration of the Barclays Capital U.S. Aggregate Bond Index was 3.71 years; the modified adjusted duration of the fund was 3.08 years. Typically, for a fund maintaining a modified adjusted duration of 3.08 years, a one percent increase in interest rates would cause a 3.08% decrease in the value of the fund’s fixed income assets. Similarly, a one percent decrease in interest rates typically would cause the value of the fund’s fixed income assets to increase by 3.08%.

Fixed income securities selected for portfolio investment may be of any maturity. However, the subadviser attempts to maintain a maturity composition similar to that of its benchmark in an effort to maintain an interest rate risk profile consistent with the benchmark. Maturity composition refers to the percentage of securities within specific maturity ranges as well as the aggregate weighted average portfolio maturity. On December 31, 2008, the average maturity of the Barclays Capital U.S. Aggregate Bond Index was 5.50 years; the average adjusted maturity of the fund was 6.27 years.

Temporary Defensive Strategy: During periods of rising interest rates, unstable pricing and currency exchange, or in response to extreme market fluctuations, the subadviser, at its discretion, may take temporary defensive positions that are inconsistent with its


28		Virtus Multi-Sector Fixed Income Fund

principal investment strategies by investing part or all of the fund’s assets in cash or cash equivalents. When this allocation happens, the fund may not achieve its investment objective.

Please refer to “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

CMOs, REMICs and Other Pass-Through Securities Risk. The risk that certain factors may negatively affect the value of pass-though securities, causing them to fluctuate to a greater degree than other debt securities.

Emerging Market Risk. The risk that prices of emerging markets securities may be more volatile than those of their counterparts in more established foreign markets.

Foreign Investing Risk. The risk that the prices of foreign securities may be more volatile than those of their domestic counterparts.

High Yield Securities (Junk Bonds) Risk. The risk that lower rated securities generally have a higher incidence of default and may be less liquid than higher rated securities.

Long-Term Maturities/Durations Risk. The risk of greater price fluctuations than would be associated with securities having shorter maturities or durations.

U.S. Government Securities Risk. The risk that although backed by the U.S. Government, these securities are subject to price fluctuations.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


Virtus Multi-Sector Fixed Income Fund		29

Performance Tables

The Virtus Multi-Sector Fixed Income Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Multi-Sector Fixed Income Fund, a series of Phoenix Multi-Series Trust (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Multi-Sector Fixed Income Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Multi-Sector Fixed Income Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the 10-year period shown in the chart above, the highest return for a quarter was 6.01% (quarter ending June 30, 2003) and the lowest return for a quarter was -14.37% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	5 Years	10 Years
Class A
Return Before Taxes	-26.04%	-2.25%	2.72%
Return After Taxes on Distributions ⁽ ³ ⁾	-27.99%	-4.34%	0.10%
Return After Taxes on Distributions and Sale of Fund Shares ⁽ ³ ⁾⁽ ⁴ ⁾	-16.70%	-2.92%	0.82%
Class B
Return Before Taxes	-25.84%	-2.03%	2.46%
Class C
Return Before Taxes	-22.93%	-2.00%	2.46%
Barclays Capital U.S. Aggregate Bond Index ⁽ ⁵ ⁾	5.24%	4.65%	5.63%

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.


30		Virtus Multi-Sector Fixed Income Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class B Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.55%	0.55%	0.55%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	1.00%	1.00%
Other Expenses	0.35%	0.35%	0.35%

Total Annual Fund Operating Expenses	1.15%	1.90%	1.90%

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$587	$823	$1,078	$1,806
Class B	$593	$797	$1,026	$2,222
Class C	$293	$597	$1,026	$2,222

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$193	$597	$1,026	$2,222
Class C	$193	$597	$1,026	$2,222


Virtus Multi-Sector Fixed Income Fund		31

Management of the Fund

The Adviser and Subadviser

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. Goodwin, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Goodwin manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates.


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.55%	0.50%	0.45%

VIA pays Goodwin a subadvisory fee of 50% of the gross investment management fee.

Portfolio Management

David L. Albrycht, CFA. Mr. Albrycht is Senior Portfolio Manager of the fund, and as such, is primarily responsible for the day-to-day management of the fund’s portfolio. Mr. Albrycht co-managed the fund since March 1994, and assumed full management of the fund in April 1995. He also serves as Senior Portfolio Manager for the Virtus Multi-Sector Short Term Bond Fund and the Virtus Senior Floating Rate Fund. In addition, he manages the fixed income portions of the Virtus Balanced Fund and the Virtus Income & Growth Fund. He is a Senior Managing Director, Fixed Income, of Goodwin. Previously, he was associated with VIA, formerly an affiliate of Goodwin, and has managed fixed income portfolios since 1992. Mr. Albrycht joined VIA in 1981 and since then has held positions of increasing responsibility.


32		Virtus Multi-Sector Fixed Income Fund

Virtus Multi-Sector Short Term Bond Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Multi-Sector Short Term Bond Fund has an investment objective to provide high current income while attempting to limit changes in the fund’s net asset value per share caused by interest rate changes. There is no guarantee that the fund will achieve its objective.

Principal Investment Strategies

Under normal circumstances, the fund invests at least 80% of its assets in bonds. “Bonds” are fixed income debt obligations of various types of issuers. Principally, the fund invests in investment-grade securities which are rated at the time of investment BBB or above by Standard & Poor’s Corporation or Duff & Phelps Credit Rating Company or Baa or above by Moody’s Investor’s Services, Inc., or if unrated, those that the subadviser determines, pursuant to procedures reviewed and approved by the Board of Trustees, to be of comparable quality. The fund may continue to hold securities whose credit quality falls below investment grade.

The fund seeks to achieve its objective by investing in a diversified portfolio of primarily short-term fixed income securities having an expected dollar-weighted average maturity of three years or less and that are in one of the following market sectors:

Debt securities issued by foreign issuers, including foreign governments and their political subdivisions, and issuers located in emerging markets;

Investment-grade securities; and

High yield-high risk fixed income securities (so called “junk bonds”).

The fund may invest in all or some of these sectors. The fund’s policy of investing 80% of its assets in bonds may be changed only upon 60 days written notice to shareholders.

Securities are selected using a sector rotation approach. The subadviser seeks to adjust the proportion of fund investment in the sectors described above and the selections within sectors to obtain higher relative returns. Sectors are analyzed by the subadviser for attractive values. Securities within sectors are selected based on general economic and financial conditions, and the issuer’s business, management, cash, assets, earnings and stability. Securities selected for investment are those that the subadviser believes offer the best potential for total return based on risk-reward tradeoff.

Interest rate risk is managed by a duration neutral strategy. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of the security’s payment pattern. Generally, the longer the maturity the greater the duration and; therefore, the greater effect interest rate changes have on the price of the security. By maintaining the duration of the fund at a level similar to that of its style benchmark, the Merrill Lynch Short Term Medium Quality Corporate Bond Index, the subadviser believes that the fund’s exposure to interest rate risk is more consistent with that benchmark’s risk profile than that of a fund that attempts to predict future interest rate changes. On December 31, 2008, the modified adjusted duration of the Merrill Lynch Short Term Medium Quality Corporate Bond Index was 1.78 years; the modified adjusted duration of the fund was 2.14 years. Typically, for a fund maintaining a modified adjusted duration of 2.14 years, a one percent increase in interest rates would cause a 2.14% decrease in the value of the fund’s fixed income assets. Similarly, a one percent decrease in interest rates typically would cause the value of the fund’s fixed income assets to increase by 2.14%.


Virtus Multi-Sector Short Term Bond Fund		33

principal investment strategies by investing part or all of the fund’s assets in cash or cash equivalents. When this allocation happens, the fund may not achieve its investment objective.

Please refer to “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

Emerging Market Risk. The risk that prices of emerging markets securities may be more volatile than those of their counterparts in more established foreign markets.

Foreign Investing Risk. The risk that the prices of foreign securities may be more volatile than those of their domestic counterparts.

High Yield Securities (Junk Bonds) Risk. The risk that lower rated securities generally have a higher incidence of default and may be less liquid than higher rated securities.

Interest Rate Risk. The risk that bond prices overall will decline because of rising interest rates.

U.S. Government Securities Risk. The risk that although backed by the U.S. Government, these securities are subject to price fluctuations.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


34		Virtus Multi-Sector Short Term Bond Fund

Performance Tables

The Virtus Multi-Sector Short Term Bond Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Multi-Sector Short Term Bond Fund, a series of Phoenix Multi-Series Trust (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Multi-Sector Short Term Bond Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Multi-Sector Short Term Bond Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 3.41% (quarter ending March 31, 2001) and the lowest return for a quarter was -9.05% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾				Since Inception ⁽³⁾
	1 Year	5 Years	10 Years	Class T
Class A
Return Before Taxes	-15.90%	-0.56%	3.24%	—
Return After Taxes on Distributions ⁽⁴⁾	-17.70%	-2.24%	1.12%	—
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾⁽⁵⁾	-10.21%	-1.35%	1.52%	—
Class B
Return Before Taxes	-15.68%	-0.62%	2.95%	—
Class C
Return Before Taxes	-14.28%	-0.36%	3.28%	—
Class T
Return Before Taxes	-14.75%	-0.87%	—	-0.25%
Barclays Capital U.S. Aggregate Bond Index ⁽⁶⁾	5.24%	4.65%	5.63%	4.19%
Merrill Lynch Short Term Medium Quality Corporate Bond Index ⁽⁷⁾	-4.79%	1.77%	4.12%	1.86%

(3) Class T Shares since June 2, 2003.

(7) The Merrill Lynch Short Term Medium Quality Corporate Bond Index measures performance of U.S. investment grade corporate bond issues rated “BBB” and “A” by Standard & Poor’s/Moody’s with maturities between one and three years. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

Class I Shares have been in existence only since June 6, 2008; therefore performance information is not included since Class I Shares have not had a full calendar year of operations.


Virtus Multi-Sector Short Term Bond Fund		35

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares	Class I Shares	Class T Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	2.25%	None	None	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	2.00% ^(b)	None	None	1.00% ^(c)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None	None	None
Redemption Fee	None	None	None	None	None
Exchange Fee	None	None	None	None	None


	Class A Shares	Class B Shares	Class C Shares	Class I Shares	Class T Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.53%	0.53%	0.53%	0.53%	0.53%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	0.75%	0.50%	None	1.00%
Other Expenses	0.30%	0.30%	0.30%	0.30%	0.30%

Total Annual Fund Operating Expenses	1.08%	1.58%	1.33%	0.83%	1.83%

(b) The maximum deferred sales charge is imposed on Class B Shares redeemed during the first year; thereafter, it decreases 0.50% annually to 1% during the third year and to 0% after the third year.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. In the case of Class B Shares, it is assumed that your shares are converted to Class A Shares after six years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$333	$561	$807	$1,513
Class B	$311	$599	$860	$1,878
Class C	$135	$421	$729	$1,601
Class I	$85	$265	$460	$1,025
Class T	$286	$576	$990	$2,148


36		Virtus Multi-Sector Short Term Bond Fund

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$161	$499	$860	$1,878
Class T	$186	$576	$990	$2,148

Management of the Fund

The Adviser and Subadviser

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser, and for the general operations of the fund. Goodwin, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Goodwin manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates.


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.55%	0.50%	0.45%

VIA pays Goodwin a subadvisory fee of 50% of the gross investment management fee.

Portfolio Management

David L. Albrycht, CFA. Mr. Albrycht is Senior Portfolio Manager of the fund, and as such, is primarily responsible for the day-to-day management of the fund’s portfolio. Mr. Albrycht has been Senior Portfolio Manager of the fund since August 1993. He also serves as Senior Portfolio Manager for the Virtus Multi-Sector Fixed Income Fund and the Virtus Senior Floating Rate Fund. In addition, he manages the fixed income portions of the Virtus Balanced Fund and the Virtus Income & Growth Fund. Mr. Albrycht is a Senior Managing Director, Fixed Income, of Goodwin. Previously, he was associated with VIA, formerly an affiliate of Goodwin, and has managed fixed income portfolios since 1992. Mr. Albrycht joined VIA in 1981 and since then held positions of increasing responsibility.


Virtus Multi-Sector Short Term Bond Fund		37

Virtus Senior Floating Rate Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Senior Floating Rate Fund has an investment objective of high total return from both current income and capital appreciation. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The fund will pursue its investment objectives primarily through investment in a portfolio of senior floating rate loans (“Senior Loans”) made to U.S. and foreign borrowers that are corporations, partnerships and other business entities (“Borrower”). Under normal circumstances, the fund will invest at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in a portfolio of Senior Loans. Such loans may be structured to include both term loans, which are generally fully funded at the time of the fund’s investment, and revolving credit facilities or delayed draw term loans, which would require the fund to make additional investments in the loans as required under the terms of the credit facility.

Senior Loans generally hold the most senior position in the capitalization structure of the Borrower. Interest rates on Senior Loans generally float daily or adjust periodically at a margin above a generally recognized base rate, such as the London Inter-Bank Offered Rate (LIBOR), the prime rate offered by one or more major U.S. banks, or the certificate of deposit rate. The fund will purchase Senior Loans primarily through assignments, but may also purchase participation interests in Senior Loans. An assignment represents a portion of a Senior Loan attributable to a lender. With an assignment, the fund becomes a lender for purposes of the underlying loan documentation with the Borrower. Participation interests are issued by a lender or other financial institution and represent a fractional interest in a Senior Loan. With participation interests, the fund does not become a lender under the original loan documentation.

The Fund may invest without limitation and generally intends to invest a substantial portion of its assets in Senior Loans rated below investment grade by established rating agencies (e.g., S&P and Moody’s) (also known as junk bonds) or that are unrated but considered by the subadviser to be of comparable quality. The subadviser relies, to a significant degree, on its own credit analysis and analysis performed by third parties, rather than rating agency determinations.

The fund may purchase derivative instruments, including, but not limited to, options, futures contracts, asset-backed securities, credit linked notes, and swaps.

The fund may invest in subordinated Senior Loans, unsecured Senior Loans, adjustable rate loans, structured notes, fixed-rate obligations and other debt securities.

The fund may invest up to 15% of total assets in US and non-US dollar denominated foreign securities and foreign Senior Loans, including yankee bonds.

The fund may borrow an amount up to 33 ¹ / 3 % of it total assets (including the amount borrowed). The fund may borrow for investment purposes, to meet repurchase requests and for temporary, extraordinary or emergency purposes. To the extent the fund borrows more money than its cash or short-term cash equivalents and invests the proceeds in Senior Loans, the Fund will create financial leverage. It will do so only when it expects to be able to invest the proceeds at a higher rate of return than its cost of borrowing. The use of borrowing for investment purposes increases both investment opportunity and investment risk.

The subadviser’s investment process is fundamentally driven and employs a value approach. The subadviser seeks to identify attractive industries, themes, and risk levels. The subadviser performs extensive credit and company analysis, i.e. management, loan structure, and financials, in its security selection process, which focuses on higher quality companies within each rating tier. The portfolio construction process utilizes both macro economic and fundamental analysis, and emphasizes portfolio diversification.


38		Virtus Senior Floating Rate Fund

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

Asset-Backed Securities Risk. The risk that certain factors may negatively affect the value of asset-backed securities, causing them to fluctuate to a greater degree than other debt securities.

Borrowing Risk. The risk that the costs of borrowing may exceed the income from investments made with such leverage.

Credit Risk. The risk that an issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of the security to decline. Generally, the payment of principal and interest on Senior Loans will take precedence over other payment obligations of the borrower, making Senior Loans less susceptible to Credit Risks than certain other types of fixed income securities.

Derivatives Risk. The risk that derivative contracts are usually less liquid than traditional securities and are subject to counterparty risk (the risk that the other party to the contract will default or otherwise not be able to perform its contractual obligations).

Foreign Investing Risk. The risk that the prices of foreign securities may be more volatile than those of their domestic counterparts.

High Yield-High Risk Securities (Junk Bonds) Risk. The risk that lower rated securities generally have a higher incidence of default and may be less liquid than higher rated securities.

Illiquid and Restricted Securities Risk. The risk that the securities may be difficult to sell or may be sold only pursuant to certain legal restrictions, which may result in a loss to a fund or entail expenses not normally associated with the sale of a security.

Interest Rate Risk. The risk that bond prices overall will decline because of rising interest rates. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities. Since their interest rate adjusts periodically with changes in prevailing interest rates, Senior Loans generally have less interest rate risk than other high yield-high risk securities.

Unrated Fixed Income Securities Risk. The risk that unrated fixed income securities may be more difficult to analyze.

For a more detailed description of the above risks, see “Risks Related to Principal Investment Strategies,” page 43.


Virtus Senior Floating Rate Fund		39

Performance Tables

The fund has been in existence only since January 31, 2008; therefore, performance information is not included for the fund since it has not had a full calendar year of investment operations.

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	4.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.60%	0.60%	0.60%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)	0.25%	1.00%	None
Interest Payments on Borrowed Funds
Other Expenses ^(d)	0.95%	0.95%	0.95%

Total Annual Fund Operating Expenses ^(d)	1.80%	2.55%	1.55%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

(c) Distribution and Shareholder Servicing (12b-1) Fees represent an asset-based sales charge that, for a long-term shareholder, over time may be higher than the maximum front-end sales charge permitted by FINRA.

(d) The fund’s investment adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes, leverage expenses and extraordinary expenses) so that such expenses do not exceed 1.20% for Class A Shares, 1.95% for Class C Shares and 0.95% for Class I Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Operating Expenses, after expense reimbursement, were 1.20% for Class A Shares, 1.95% for Class C Shares and 0.95% for Class I Shares. The adviser may recapture operating expenses reimbursed under this arrangement for a period of three years following the end of the fiscal year in which such reimbursement occurred.


40		Virtus Senior Floating Rate Fund

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 year	10 year
Class A	$649	$1,014	$1,404	$2,490
Class C	$358	$793	$1,355	$2,885
Class I	$158	$490	$845	$1,845

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 year	10 year
Class C	$258	$793	$1,355	$2,885

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. Goodwin, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Goodwin manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates.


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.60%	0.55%	0.50%


Virtus Senior Floating Rate Fund		41

The adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes, leverage expenses and extraordinary expenses) so that such expenses do not exceed the following percentages of the average annual net asset values for the fund.


Class A Shares	Class C Shares	Class I Shares
1.20%	1.95%	0.95%

The adviser may discontinue this voluntary expense cap at any time. The adviser may recapture any operating expenses reimbursed under this arrangement for a period of three years following the end of the fiscal year in which such reimbursement occurred.

VIA pays Goodwin a subadvisory fee of 50% of the gross investment management fee.

Portfolio Management

David L. Albrycht, CFA and Kyle A. Jennings, CFA manage the fund. Mr. Albrycht is primarily responsible for the day-to-day management of the fund’s portfolio and is supported by Mr. Jennings.

Mr. Albrycht is Senior Portfolio Manager of the fund (since inception). He also serves as Senior Portfolio Manager for the Virtus Multi-Sector Fixed Income Fund and the Virtus Multi-Sector Short Term Bond Fund. In addition, he manages the fixed income portions of the Virtus Balanced Fund and the Virtus Income & Growth Fund. He is a Senior Managing Director, Fixed Income, of Goodwin. Previously, he was associated with VIA, formerly an affiliate of Goodwin, and has managed fixed income portfolios since 1992. Mr. Albrycht joined VIA in 1981 and since then held positions of increasing responsibility.

Mr. Jennings is Portfolio Manager of the fund (since inception). He is Managing Director of Goodwin. Previously, he was associated with VIA, formerly an affiliate of Goodwin, and has been a member of the corporate credit research team since 1998. He is the sector manager for the high yield bond and leveraged loan sectors and assists in the formulation of the leveraged finance strategy for the retail and institutional multi-sector funds. Mr. Jennings also covers the gaming, healthcare, banking, homebuilding and lodging industries. Prior to joining VIA, Mr. Jennings was employed in the banking industry as a credit research analyst for Shawmut Bank and Citizens Bank. He has 16 years of investment experience.


42		Virtus Senior Floating Rate Fund

Risks Related to Principal Investment Strategies

The value of your shares and the level of income you receive are subject to risks associated with the types of securities selected for fund investment. Neither a fund, nor its adviser or subadviser, can assure you that a particular level of income will consistently be achieved or that the value of the fund’s investments that supports your share value will increase. If the value of fund investments decreases, your share value will decrease.

Specific risks of investing in the various funds are indicated in the chart below and are described in detail following the chart.

RISKS
For One or More Funds

Bond Fund

CA Tax-Exempt
Bond Fund

Core Bond
Fund

High Yield
Fund

Multi-Sector
Fixed Income
Fund

Multi-Sector
Short Term
Bond Fund

Senior
Floating
Rate Fund

Asset-Backed Securities

Borrowing

California Bonds

CMOs, REMICs and Other
Pass-Through Securities

Credit

Derivatives

Emerging Market

Foreign Investing

Geographic Concentration

High Yield-High Risk Securities

Illiquid and Restricted Securities

Industry/Sector Concentration

Interest Rate

Long-Term
Maturities/Durations

Lower Rated Securities

Market Volatility

Mortgage-Backed and Asset Backed Securities

Municipal Market

Puerto Rico Bonds

Tax-Exempt Securities

Unrated Securities

U.S. Government Securities

Asset-Backed Securities Risk

The risk that certain factors may negatively affect the value of asset-backed securities, causing them to fluctuate to a greater degree than other debt securities. Early payoffs in the underlying loans in asset-backed securities may result in the fund receiving less income than originally anticipated. The variability in prepayments will tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, the fund may be required to invest proceeds at lower interest rates, causing the fund to earn less than if the prepayments had not occurred.

Borrowing Risk

The risk that if the securities purchased with borrowed money decrease in value or do not increase enough to cover interest and other borrowing costs, a fund will suffer greater losses than if no borrowing took place.

California Bonds Risk

The risk that certain California Constitutional amendments, legislative measures, executive orders, administrative regulations and voter initiatives could impair the ability of some California bond issuers to maintain debt service on their obligations or their ability to maintain tax-exempt income. This could negatively affect the fund’s level of income, capital appreciation and liquidity.


Virtus Mutual Funds		43

CMOs, REMICs and Other Pass-Through Securities Risk

The risk that the values of pass-through securities may fluctuate to a greater degree than other debt securities in response to changes in interest rates. Early payoffs on the underlying loans in mortgage-backed and asset-backed pass-through securities and CMOs may result in the fund receiving less income than originally anticipated. The variability in prepayments will tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, the fund may be required to invest the proceeds at lower interest rates, causing the fund to earn less than if prepayments had not occurred.

Credit Risk

The risk that an issuer of a security will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of the security to decline. Debt securities rated below investment-grade are especially susceptible to this risk.

Applicable to the Senior Floating Rate Fund: Generally, the payment of principal and interest on Senior Loans will take precedence over other payment obligations of the borrower, making Senior Loans less susceptible to Credit Risks than certain other types of fixed income securities.

Derivatives Risk

Derivatives typically involve greater risks than traditional investments. It is generally more difficult to ascertain the risk of, and to properly value, derivative contracts. Derivative contracts are usually less liquid than traditional securities and are subject to counterparty risk (the risk that the other party to the contract will default or otherwise not be able to perform its contractual obligations). In addition, some derivatives transactions may involve potentially unlimited losses. Derivatives contracts entered into for hedging purposes may also subject the fund to losses if the contracts do not correlate with the assets, index or rates they were designed to hedge. Gains and losses derived from hedging transactions are, therefore, more dependent upon the subadviser’s ability to correctly predict the movement of the underlying asset prices, indexes or rates.

Emerging Market Investing Risk

The risk that prices of emerging markets securities may be more volatile than those of counterparts in more established foreign markets. Investments in less-developed countries whose markets are still emerging generally present risks in greater degree than those presented by investment in foreign issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval may be required in some developing countries for the release of investment income, capital and sale proceeds to foreign investors and some developing countries may limit the extent of foreign investment in domestic companies.

Emerging market countries often suffer from currency devaluation and higher rates of inflation. Developing countries may be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed by countries with which they trade and may also be affected by economic conditions in such countries. In addition, a negative situation or condition that affects the market in one emerging market region may have a negative impact on all emerging market regions due to the so-called “ripple effect.”

To the extent a fund invests 25% or more of its assets in a particular emerging markets country, the fund is more vulnerable to financial, economic or other political developments in that country. Additionally, to the extent a fund concentrates its investments in a particular country, conditions that negatively impact that country will have a greater impact on this fund as compared to a fund that cannot concentrate holdings in a particular country.

Foreign Investing Risk

The risk that the prices of foreign securities may be more volatile than those of their domestic counterparts owing in part to possible political or economic instability; limits on repatriation of capital; exchange controls or exchange rate fluctuations; less publicly available information as a result of accounting, auditing, and financial reporting standards different from those used in the U.S.; more volatile markets; less securities regulation; less favorable tax provisions; war or expropriation. In addition, certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.


44		Virtus Mutual Funds

Foreign Currency Risk. Some investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rates. Exchange rate fluctuations can cause the value of your shares to decrease or increase. Generally, when the value of the U.S. dollar increases against the foreign currency in which an investment is denominated, the security tends to decrease in value which, in turn, may cause the value of your shares to decrease.

Geographic Concentration Risk

The risk that if a fund concentrates its investments in a single state, its portfolio will be more susceptible to factors adversely affecting issuers located in that state than would a more geographically diverse portfolio of securities.

High Yield-High Risk Securities (Junk Bonds) Risk

The risk that high yield securities generally have a higher risk that the issuer of the security may default and not make the payment of interest or principal. Securities rated “BB” or below by S&P or “Ba” or below by Moody’s are known as “high yield” securities and are commonly referred to as “junk bonds”. These securities involve greater risk of loss due to credit deterioration and are less liquid, especially during periods of economic uncertainty or change, than higher-quality debt securities.

Illiquid and Restricted Securities Risk

The risk that the securities may be difficult to sell or may be sold only pursuant to certain legal restrictions. Difficulty in selling securities may result in a loss to a fund or entail expenses not normally associated with the sale of a security.

Industry/Sector Concentration Risk

To the extent the fund invests a significant portion of its portfolio in one or more industries or market sectors at any time, a fund may be subject to additional risk. Securities in other industries or sectors may provide greater investment return in certain market conditions as compared to the companies in the industries or sector in which the fund has invested. Moreover, conditions that negatively affect the industries or sectors in which the fund has invested will have a greater impact on the fund as compared to a fund that is not significantly invested in such industries or sector.

Interest Rate Risk

The risk that bond prices overall will decline because of rising interest rates. With fixed-rate securities, an increase in prevailing interest rates typically causes the value of those securities to fall, while a decline in prevailing interest rates generally produces an increase in the market value of the securities. As interest rates increase, slower than expected principal payments may extend the average life of fixed income securities. This will have the effect of locking in a below-market interest rate, increasing a fund’s duration and reducing the value of such a security. If a fund invests in asset-backed and mortgage-backed securities, it is more vulnerable to this risk. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities and lower quality securities more than higher quality securities.

Applicable to the Senior Floating Rate Fund: Since their interest rates adjust periodically due to changes in prevailing interest rates, Senior Loans generally have less interest rate risk than other high yield-high risk securities.

Long-Term Maturities/Durations Risk

The risk that fixed income securities with longer maturities or durations may be subject to greater price fluctuations due to interest rate, tax law, and general market changes than securities with shorter maturities or durations.

Lower Rated Securities Risk

The risk that lower-rated debt securities generally have a higher risk that the issuer of the security may default and not make the payment of interest or principal.

Market Volatility Risk

The risk that the value of the securities in which a fund invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods.


Virtus Mutual Funds		45

Instability in the financial markets has led to volatile financial markets that expose a fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments that it holds. In response to financial markets that experienced extreme volatility, and in some cases a lack of liquidity, the US Government has taken a number of unprecedented actions, including acquiring distressed assets from financial institutions and acquiring ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear. Additional legislation or government regulation may also change the way in which funds themselves are regulated, which could limit or preclude a fund’s ability to achieve its investment objective.

Mortgage-Backed and Asset-Backed Risk

The risk that certain factors, such as interest rate changes, may negatively affect the value of mortgage backed and asset backed securities, causing them to fluctuate to a greater degree than other debt securities. Mortgage-backed and asset-backed securities are generally subject to higher prepayment risks than most other types of debt securities. It is difficult to predict cash flows from mortgage-backed and asset-backed securities due to the variability of prepayments. Prepayments also tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, the fund may be required to invest proceeds at lower interest rates, causing the fund to earn less than if such prepayment had not occurred.

Municipal Market Risk

The risk that certain factors may negatively affect the value of municipal securities, and, as a result, the share price of a fund that invests in them. These factors include political or legislative changes, uncertainties related to the tax status of the securities or the rights of investors in the securities. A fund may invest in municipal obligations that are related in such a way (e.g., multiple apparently unrelated issues that depend on the financial rating or support of a single government unit) that an economic, business or political development or change that affects one of these obligations would also affect the others.

Puerto Rico Bonds Risk

The risk that certain regulatory controls or changes in Puerto Rico will negatively affect the value of securities issued by the territory of Puerto Rico. Certain federal tax credits previously offered to qualifying U.S. manufacturing firms operating in Puerto Rico were phased out on January 1, 2006. The overall effect this will have on Puerto Rico’s economy is still unclear.

Tax-Exempt Securities Risk

The risk that tax-exempt securities may not provide a higher after-tax return than taxable securities.

Unrated Fixed Income Securities Risk

The risk that unrated fixed income securities may not be lower in quality than rated securities, but due to their perceived risk, they may not have as broad a market as rated securities making it more difficult to sell unrated securities. Analysis of unrated securities is more complex than for rated securities, making it more difficult for the subadviser to accurately predict risk.

U.S. Government Securities Risk

Obligations issued or guaranteed by the U.S. Government, its agencies, authorities and instrumentalities and backed by the full faith and credit of the United States only guarantee principal and interest will be timely paid to holders of the securities. The entities do not guarantee that the value of fund shares will increase. In addition, not all U.S. Government securities are backed by the full faith and credit of the United States, but rather are the obligation solely of the entity through which they are issued.


46		Virtus Mutual Funds

Additional Investment Techniques

In addition to the Principal Investment Strategies and Risks Related to Principal Investment Strategies, each of the funds may engage in additional investment techniques that present additional risks to a fund as indicated in the chart below. Each risk is described after the chart. Many of the additional investment techniques that a fund may use are more fully described in the Statement of Additional Information.

RISKS

Bond Fund

Core Bond
Fund

High Yield
Fund

Money Market
Fund

Multi-Sector
Fixed Income
Fund

Multi-Sector
Short Term
Bond
Fund

Senior
Floating
Rate Fund

Borrowing

Convertible Securities

Derivatives

Equity Securities

Foreign Investing

Illiquid Securities

Investment Grade Securities

Loan Participations

Municipal Securities

Mutual Fund Investing

Non-Performing Securities

Private Placements

Repurchase Agreements

Securities Lending

Short-Term Investments

Unrated Securities

Variable Rate, Floating Rate and Variable Amount Securities

When-Issued and Delayed Delivery Securities

Yankee Bonds

Zero Coupon, Step Coupon, Deferred Coupon and PIK Bonds

Borrowing

The fund may obtain fixed interest rate loans in amounts up to one third the value of its net assets and invest the loan proceeds in other assets. If the securities purchased with such borrowed money decrease in value or do not increase enough to cover interest and other borrowing costs, a fund will suffer greater losses than if no borrowing took place.

Convertible Securities

The fund may invest in convertible securities. Convertible securities may be subject to redemption at the option of the issuer. If a security is called for redemption, the fund may have to redeem the security, convert it into common stock or sell it to a third party at a price and time that it not beneficial for the fund. In addition, securities convertible into common stocks may have higher yields than common stocks but lower yields than comparable nonconvertible securities.

Derivatives

The fund may enter into derivative transactions (contracts whose value is derived from the value of an underlying asset, index or rate), including futures, options, non-deliverable forwards, forward foreign currency exchange contracts and swap agreements. The fund may use derivatives to hedge against factors that affect the value of their investments such as interest rates and foreign currency exchange rates. The fund may also utilize derivatives as part of their overall investment technique to gain or lessen exposure to various securities, markets and currencies.


Virtus Mutual Funds		47

Equity Securities

The fund may invest in equity securities. Generally, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or industries (such as changes in inflation or consumer demand) and to events that affect particular issuers (such as news about the success or failure of a new product). The High Yield Fund may invest in preferred stocks, warrants, rights and securities convertible into common stocks. Preferred stocks may not fully participate in dividends, and convertible securities may have higher yields than common stocks but lower yields than comparable nonconvertible securities.

Foreign Investing

The fund may invest in securities of foreign (non-U.S.) issuers. The High Yield Fund may invest in emerging market securities. Additionally, the Core Bond Fund may invest in Yankee Bonds.

Investments in non-U.S. companies involve additional risks and conditions, including differences in accounting standards, generally higher commission rates, differences in transaction settlement systems, political instability, and the possibility of confiscatory or expropriation taxes. Political and economic uncertainty in foreign countries, as well as less public information about foreign investments, may negatively impact the fund’s portfolio. Dividends and other income payable on foreign securities may also be subject to foreign taxes. In addition, certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.

Foreign Currency Risk. Some investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rate. Foreign markets and currencies may not function as well as U.S. markets.

Emerging Market Investing Risk. Risks associated with foreign investments may be intensified in emerging market countries. Developing countries and companies doing business in such countries may not have the same range of opportunities and have more obstacles to financial success than their counterparts in developed nations.

Illiquid and Restricted Securities

The fund may invest in illiquid securities, including restricted securities. Illiquid securities may include repurchase agreements with maturities of greater than seven days. Illiquid and restricted securities may be difficult to sell or may be sold only pursuant to certain legal restrictions. Difficulty in selling securities may result in a loss to a fund or entail expenses not normally associated with the sale of a security.

Investment Grade Securities

The fund may invest in all types of long-term or short-term investment-grade debt obligations of U.S. issuers. In addition to the types of securities mentioned in the Principal Investment Strategies sections, the funds may also invest in bonds, debentures, notes, municipal bonds, equipment lease certificates, equipment trust certificates, conditional sales contracts and commercial paper. Debt securities with lower credit ratings have a higher risk of default on payment of principal and interest and securities with longer maturities are subject to greater price fluctuations in response to changes in interest rates. If interest rates rise, the value of debt securities generally will fall.

Loan Participations

The fund may invest in loan participations. A loan participation agreement involves the purchase of a share of a loan made by a bank to a company in return for a corresponding share of borrower’s principal and interest payments. The principal credit risk associated with acquiring loan participation interests is the credit risk associated with the underlying corporate borrower. There is


48		Virtus Mutual Funds

also a risk that there may not be a readily available market for loan participation interests and, in some cases, this could result in the fund disposing of such securities at a substantial discount from face value or holding such securities until maturity.

Municipal Securities

The fund may invest in taxable municipal securities. Principal and interest payments on municipal securities may not be guaranteed by the issuing entity and may be payable only from monies (revenue) derived from a particular source (so called “revenue bonds”). If the source does not perform as expected, principal and income payments may not be made on time or at all. In addition, the market for municipal securities is often thin and can be temporarily affected by large purchases and sales, including those by the funds. General conditions in the financial markets and the size of a particular offering may also negatively affect municipal securities’ returns.

Mutual Fund Investing

The fund may invest in shares of other mutual funds. Assets invested in other mutual funds incur a layering of expenses including operating costs, advisory fees and administrative fees that you, as a shareholder in the funds, indirectly bear.

Non-Performing Securities

The fund may invest in non-performing securities whose quality is comparable to securities rated as low as D by Standard & Poor’s or C by Moody’s.

Private Placements

The fund may purchase securities which have been privately issued to qualified institutional investors under special rules adopted by the Securities and Exchange Commission (“SEC”). Such securities may offer higher yields than comparable publicly traded securities. Privately issued securities ordinarily can be sold by the fund in secondary market transactions to certain qualified investors pursuant to rules established by the SEC or in privately negotiated transactions to a limited number of purchasers. Therefore, sales of such securities by the fund may involve significant delays and expense.

Repurchase Agreements

The fund may invest in repurchase agreements. Default or insolvency of the other party presents a risk to the funds.

Securities Lending

The fund may loan portfolio securities with a value up to one third of its total assets to increase its investment returns. If the borrower is unwilling or unable to return the borrowed securities when due, the fund can suffer losses.

Short-Term Investments

The fund may invest in short-term investments, including bank certificates of deposit, bankers’ acceptances and repurchase agreements.

Unrated Securities

The fund may invest in unrated securities. Unrated securities may not be lower in quality than rated securities, but due to their perceived risk, they may not have as broad a market as rated securities. Analysis of unrated securities is more complex than for rated securities, making it more difficult for the subadviser to accurately predict risk.

Variable Rate, Floating Rate or Variable Amount Securities

The fund may invest in variable rate, floating rate, or variable amount securities which are generally short-term, unsecured, fluctuating, interest-bearing notes of private issuers.

When-Issued and Delayed-Delivery Securities

The fund may purchase securities on a when-issued or delayed-delivery basis. The value of the security on settlement date may be more or less than the price paid as a result of changes in interest rates and market conditions. If the value on settlement date is less, the value of your shares may decline.


Virtus Mutual Funds		49

Yankee Bonds

The fund may invest in Yankee Bonds, which are dollar-denominated bonds issued on the U.S. capital markets by foreign banks and corporations. Yankee Bonds provide an alternative to investing directly in the foreign issuer. However, Yankee Bonds continue to be subject to risks such as the political and economic risks of the issuer’s country.

Zero Coupon, Step Coupon, Deferred Coupon and PIK Bonds

The fund may invest in any combination of zero coupon and step coupon bonds and bonds on which interest is payable in kind (“PIK”). The market prices of these bonds generally are more volatile than the market prices of securities that pay interest on a regular basis. Since the fund will not receive cash payments earned on these securities on a current basis, the fund may be required to make distributions from other sources. This may result in higher portfolio turnover rates and the sale of securities at a time that is less favorable.

The funds may buy other types of securities or employ other portfolio management techniques. Please refer to the Statement of Additional Information for more detailed information about these and other investment techniques of the funds.

Pricing of Fund Shares

How is the Share Price determined?

Each fund calculates a share price for each class of its shares. The share price for each class is based on the net assets of the fund and the number of outstanding shares of that class. In general, each fund calculates a share price for each class by:

adding the values of all securities and other assets of the fund;

subtracting liabilities; and

dividing the result by the total number of outstanding shares of that class.

Assets: 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. Shares of other investment companies are valued at such companies’ net asset values. Debt securities (other than short-term investments) are valued on the basis of broker quotations or valuations provided by a pricing service, which in determining value, utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. As required, some securities and assets are valued at fair value as determined in good faith by, or under the direction of, the Board of Trustees. Other assets, such as accrued interest, accrued dividends and cash are also included in determining a fund’s net asset value.

Liabilities: Accrued liabilities for class specific expenses (if any), distribution fees, service fees and other liabilities are deducted from the assets of each class. Accrued expenses and liabilities that are not class specific (such as management fees) are allocated to each class in proportion to each class’s net assets except where an alternative allocation can be more appropriately made.

Net Asset Value: The liabilities allocated to a class are deducted from the proportionate interest of such class in the assets of the applicable fund. The resulting amount for each class is then divided by the number of shares outstanding of that class to produce each class’s net asset value per share.

The net asset value per share (“NAV”) of each class of each fund is determined as of the close of regular trading (normally 4:00 PM eastern time) on days when the New York Stock Exchange (“NYSE”) is open for trading. A fund will not calculate its net asset value per share class on days when the NYSE is closed for trading. If a fund holds securities that are traded on foreign exchanges that trade on weekends or other holidays when the funds do not price their shares, the net asset value of the fund’s shares may change on days when shareholders will not be able to purchase or redeem the fund’s shares.

How are securities fair valued?


50		Virtus Mutual Funds

pricing source does not, in the opinion of the adviser/subadviser, reflect the security’s market value; (vii) foreign securities subject to trading collars for which no or limited trading takes place; and (viii) securities where the market quotations are not readily available as a result of “significant” events. This list is not inclusive of all situations that may require a security to be fair valued, nor is it intended to be conclusive in determining whether a specific event requires fair valuation.

The value of any portfolio security held by a fund for which market quotations are not readily available shall be determined in good faith and in a manner that assesses the security’s “fair value” on the valuation date (i.e., the amount that the fund might reasonably expect to receive for the security upon its current sale), based on a consideration of all available facts and all available information, including, but not limited to, the following: (i) the fundamental analytical data relating to the investment; (ii) an evaluation of the forces which influence the market in which these securities are purchased and sold (e.g., the existence of merger proposals or tender offers that might affect the value of the security); (iii) price quotes from dealers and/or pricing services; (iv) an analysis of the company’s financial statements; (v) trading volumes on markets, exchanges or among dealers; (vi) recent news about the security or issuer; (vii) changes in interest rates; (viii) information obtained from the issuer, analysts, other financial institutions and/or the appropriate stock exchange (for exchange traded securities); (ix) whether two or more dealers with whom the adviser/subadviser regularly effects trades are willing to purchase or sell the security at comparable prices; (x) other news events or relevant matters; and (xi) government (domestic or foreign) actions or pronouncements.

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, 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 regular trading on the NYSE) that may impact the value of securities traded in these foreign markets. In such 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.

The value of a security, as determined using the fund’s fair valuation procedures, may not reflect such security’s market value.

At what price are shares purchased?

All investments received by the funds’ authorized agents prior to the close of regular trading on the NYSE (normally 4:00 PM eastern time) will be executed based on that day’s net asset value. Shares credited to your account from the reinvestment of a fund’s distributions will be in full and fractional shares that are purchased at the closing net asset value on the next business day on which the fund’s net asset value is calculated following the dividend record date.

Sales Charges

What are the classes and how do they differ?

Each fund offers from one to five classes of shares. With the exception of Class I Shares, each class of shares has different sales and distribution charges. (See “Fund Fees and Expenses” previously in this prospectus.) For certain classes of shares, the funds have adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940, as amended (“the 1940 Act”), that authorize the funds to pay distribution and service fees for the sale of those shares and for services provided to shareholders.

What arrangement is best for you?

The different classes of shares permit you to choose the method of purchasing shares that is most beneficial to you. In choosing a class of shares, consider the amount of your investment, the length of time you expect to hold the shares, whether you decide to receive distributions in cash or to reinvest them in additional shares, and any other personal circumstances. Depending upon these considerations, the accumulated distribution and service fees and contingent deferred sales charges of one class of shares may be more or less than the initial sales charge and accumulated distribution and service fees of another class of shares bought at the same time. Because distribution and service fees are paid out of a fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.


Virtus Mutual Funds		51

Additional information about the classes of shares offered, sales charges, breakpoints and discounts follows in this section and also may be found in the Statement of Additional Information in the section entitled “How to Buy Shares.” This information is available free of charge, and in a clear and prominent format, at the Individual Investors section of the Virtus Mutual Funds’ Web site at virtus.com. Please be sure that you fully understand these choices before investing. If you or your financial representative require additional assistance, you may also contact Mutual Fund Services by calling toll-free (800) 243-1574.

Class A Shares. If you purchase Class A Shares of the Multi-Sector Short Term Bond Fund, you will pay a sales charge at the time of purchase equal to 2.25% of the offering price (2.30% of the amount invested). If you purchase Class A Shares of the other funds, you will pay a sales charge at the time of purchase equal to 4.75% of the offering price (4.99% of the amount invested). The sales charge may be reduced or waived under certain conditions. (See “Initial Sales Charge Alternative—Class A Shares” below.) Generally, Class A Shares are not subject to any charges by the fund when redeemed; however, a 1% contingent deferred sales charge (“CDSC”) may be imposed on certain redemptions within one year on purchases on which a finder’s fee has been paid. The one-year period begins on the last day of the month preceding the month in which the purchase was made. Class A Shares have lower distribution and service fees (0.25%) and generally pay higher dividends than Class B Shares and Class C Shares.

Class B Shares (Not offered by the CA Tax-Exempt Bond Fund, Money Market Fund and Senior Floating Rate Fund). If you purchase Class B Shares, you will not pay a sales charge at the time of purchase. If you sell your Class B Shares of the Multi-Sector Short Term Bond Fund within the first three years after they are purchased, you will pay a deferred sales charge of up to 2% of your shares’ value. If you sell your Class B Shares of the other funds within the first five years after they are purchased, you will pay a deferred sales charge of up to 5% of your shares’ value. (See “Deferred Sales Charge Alternative—Class B Shares and Class C Shares” below.) This charge declines to 0% over a period of three years for the Multi-Sector Short Term Bond Fund and a period of five years for the other funds, and may be waived under certain conditions. Class B Shares have higher distribution and service fees (1.00%) and pay lower dividends than Class A Shares. Class B Shares automatically convert to Class A Shares eight years after purchase. Purchases of Class B Shares may be inappropriate for any investor who may qualify for reduced sales charges of Class A Shares and anyone who is over 85 years of age. The underwriter may decline purchases in such situations.

Class C Shares (Not offered by the CA Tax-Exempt Bond Fund and Money Market Fund). If you purchase Class C Shares, you will not pay a sales charge at the time of purchase. You will not pay any sales charges on Class C Shares of the Multi-Sector Short Term Bond Fund when you sell them. If you sell your Class C Shares of the other funds within the first year after they are purchased, you will pay a deferred sales charge of 1%. (See “Deferred Sales Charge Alternative—Class B Shares, Class C Shares and Class T Shares” below.) Class C Shares of the Multi-Sector Short Term Bond Fund have lower distribution and service fees (0.50%) and pay higher dividends than Class B Shares. Class C Shares of the other funds have the same distribution and service fees (1.00%) and pay comparable dividends as Class B Shares. Class C Shares do not convert to any other class of shares of the fund, so the higher distribution and service fees paid by Class C Shares continue for the life of the account.

Class T Shares (Multi-Sector Short Term Bond Fund only). If you purchase Class T Shares, you will not pay a sales charge at the time of purchase. If you sell your Class T Shares within the first year after they are purchased, you will pay a sales charge of 1%. (See “Deferred Sales Charge Alternative—Class B Shares, Class C Shares and Class T Shares” below.) Class T Shares have higher distribution and service fees (1.00%) and pay lower dividends than Class B Shares. Class T Shares do not convert to any other class of shares of the fund, so the higher distribution and service fees paid by Class C Shares continue for the life of the account.

Class I Shares (Bond Fund, CA Tax-Exempt Bond Fund, Multi-Sector Short Term Bond Fund and Senior Floating Rate Fund only). Class I Shares are offered primarily to institutional investors, such as pension and profit sharing plans, other employee benefit trusts, endowments, foundations and corporations who purchase at or above the minimum amount; to private clients of, or referred by, the adviser, subadviser and their affiliates; to clients of registered investment advisers who charge an advisory, consulting or other fee for their services; or through certain wrap programs with which the Distributor has an arrangement. If you are eligible to purchase and do purchase Class I Shares, you will pay no sales charge at any time. There are no distribution and


52		Virtus Mutual Funds

services fees applicable to Class I Shares. For additional information about purchasing Class I Shares, please contact Mutual Fund Services by calling (800) 243-1574.

Initial Sales Charge Alternative—Class A Shares

The public offering price of Class A Shares is the net asset value plus a sales charge that varies depending on the size of your purchase. (See “Class A Shares—Reduced Initial Sales Charges” in the Statement of Additional Information.) Shares purchased based on the automatic reinvestment of income dividends or capital gain distributions are not subject to any sales charges. The sales charge is divided between your investment dealer and the funds’ underwriter, VP Distributors, Inc. (“VP Distributors” or “the Distributor”) (until February 4, 2009 named Phoenix Equity Planning Corporation).

Sales Charge you may pay to purchase Class A Shares

Multi-Sector Short Term Bond Fund only


	Sales Charge as a Percentage of
Amount of Transaction at Offering Price	Offering Price		Net Amount Invested
Under $50,000	2.25	%	2.30	%
$50,000 but under $ 100,000	1.25		1.27
$100,000 but under $ 500,000	1.00		1.01
$500,000 but under $ 1,000,000	0.75		0.76
$1,000,000 or more	None		None

All Other Funds


	Sales Charge as a Percentage of
Amount of Transaction at Offering Price	Offering Price		Net Amount Invested
Under $50,000	4.75	%	4.99	%
$50,000 but under $ 100,000	4.50		4.71
$100,000 but under $ 250,000	3.50		3.63
$250,000 but under $ 500,000	2.75		2.83
$500,000 but under $ 1,000,000	2.00		2.04
$1,000,000 or more	None		None

Class A Sales Charge Reductions and Waivers

Investors may reduce or eliminate sales charges applicable to purchases of Class A Shares through utilization of Combination Purchase Privilege, Letter of Intent, Right of Accumulation, Purchase by Associations or the Account Reinstatement Privilege. These programs are summarized below and are described in greater detail in the Statement of Additional Information. Investors buying Class A Shares on which a finder’s fee has been paid may incur a 1% deferred sales charge if they redeem their shares within one year of purchase.

Combination Purchase Privilege . Your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made at the same time by the same person, will be added together with any existing Virtus Mutual Fund account values to determine whether the combined sum entitles you to an immediate reduction in sales charges. A “person” is defined in this and the following sections as: (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account) including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or certain Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to accounts over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order.


Virtus Mutual Funds		53

Letter of Intent . If you sign a Letter of Intent, your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made by the same person within a 13-month period, will be added together to determine whether you are entitled to an immediate reduction in sales charges. Sales charges are reduced based on the overall amount you indicate that you will buy under the Letter of Intent. The Letter of Intent is a mutually non-binding arrangement between you and the Distributor. Shares worth 5% of the amount of each purchase will be held in escrow (while remaining registered in your name) to secure payment of the higher sales charges applicable to the shares actually purchased in the event the full intended amount is not purchased.

Right of Accumulation . The value of your account(s) in any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund) if made over time by the same person, may be added together at the time of each purchase to determine whether the combined sum entitles you to a prospective reduction in sales charges. You must provide certain account information to the Distributor at the time of purchase to exercise this right.

Purchase by Associations . Certain groups or associations may be treated as a “person” and qualify for reduced Class A Share sales charges. The group or association must: (1) have been in existence for at least six months; (2) have a legitimate purpose other than to purchase mutual fund shares at a reduced sales charge; (3) work through an investment dealer; or (4) not be a group whose sole reason for existing is to consist of members who are credit card holders of a particular company, policyholders of an insurance company, customers of a bank or a broker-dealer or clients of an investment adviser.

Account Reinstatement Privilege . Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A, Class B or Class C Shares on which you have previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more.

Sales at Net Asset Value . In addition to the programs summarized above, the funds may sell their Class A Shares at net asset value without an initial sales charge to certain types of accounts or account holders, including, but not limited to: trustees of the Virtus Mutual Funds; directors, officers, employees and sales representatives of the adviser, subadviser (if any) or Distributor or a corporate affiliate of the adviser, subadviser or Distributor; private clients of an adviser or subadviser to any of the Virtus Mutual Funds; registered representatives and employees of dealers with which the Distributor has sales agreements; and certain qualified employee benefit plans, endowment funds or foundations. Please see the Statement of Additional Information for more information about qualifying for purchases of Class A Shares at net asset value.

Deferred Sales Charge Alternative—Class B Shares, Class C Shares and Class T Shares

Class B Shares, Class C Shares and Class T Shares are purchased without an initial sales charge; however, shares sold within a specified time period are subject to a declining CDSC at the rates listed below. Class C Shares of the Short Term Bond Fund are purchased without an initial sales charge and are not subject to a deferred sales charge. The sales charge will be multiplied by the then current market value or the initial cost of the shares being redeemed, whichever is less. No sales charge will be imposed on increases in net asset value or on shares purchased through the reinvestment of income dividends or capital gain distributions. To minimize the sales charge, shares not subject to any charge will be redeemed first, followed by shares held the longest time. To calculate the number of shares owned and time period held, all Class B Shares purchased in any month are considered purchased on the last day of the preceding month, and all Class C Shares and Class T Shares are considered purchased on the trade date.

Deferred Sales Charge you may pay to sell Class B Shares

Multi-Sector Short Term Bond Fund only


Year	1		2		3		4+
CDSC	2	%	1.5	%	1	%	0	%

All Other Funds
Year	1		2		3		4		5		6+
CDSC	5	%	4	%	3	%	2	%	2	%	0	%

Deferred Sales Charge you may pay to sell Class C Shares
Year	1		2+
CDSC	1	%	0	%

You will not pay any deferred sales charge to sell Class C Shares of the Short Term Bond Fund.


54		Virtus Mutual Funds

Deferred Sales charge you may pay to sell Class T Shares

Multi-Sector Short Term Bond Fund only


Year	1		2+
CDSC	1	%	0	%

Compensation to Dealers

Dealers with whom the Distributor has entered into sales agreements receive a discount or commission on Class A Shares as described below.

Multi-Sector Short Term Bond Fund only


Amount of Transaction at Offering Price	Sales Charge as a Percentage of Offering Price		Sales Charge as a Percentage of Amount Invested		Dealer Discount as a Percentage of Offering Price
Under $ 50,000	2.25	%	2.30	%	2.00	%
$50,000 but under $ 100,000	1.25		1.27		1.00
$100,000 but under $ 500,000	1.00		1.01		1.00
$500,000 but under $ 1,000,000	0.75		0.76		0.75
$1,000,000 or more	None		None		None

All Other Funds


Amount of Transaction at Offering Price	Sales Charge as a Percentage of Offering Price		Sales Charge as a Percentage of Amount Invested		Dealer Discount as a Percentage of Offering Price
Under $ 50,000	4.75	%	4.99	%	4.25	%
$50,000 but under $ 100,000	4.50		4.71		4.00
$100,000 but under $ 250,000	3.50		3.63		3.00
$250,000 but under $ 500,000	2.75		2.83		2.25
$500,000 but under $ 1,000,000	2.00		2.04		1.75
$1,000,000 or more	None		None		None

With respect to Class B Shares and Class C Shares, the Distributor intends to pay investment dealers a sales commission of 4% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class C Shares sold by such dealers. (This sales commission will not be paid to dealers for sales of Class B Shares or Class C Shares purchased by 401(k) participants of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these plan participants’ purchases.) Your broker, dealer or financial advisor may also charge you additional commissions or fees for their services in selling shares to you provided they notify the Distributor of their intention to do so.

Dealers and other entities that enter into special arrangements with the Distributor may receive compensation for the sale and promotion of shares of these funds and/or for providing other shareholder services. Such fees are in addition to the sales commissions referenced above and may be based upon the amount of sales of fund shares by a dealer; the provision of assistance in marketing of fund shares; access to sales personnel and information dissemination services; provision of recordkeeping and administrative services to qualified employee benefit plans; and other criteria as established by the Distributor. Depending on the nature of the services, these fees may be paid either from the funds through distribution fees, service fees or transfer agent fees or, in some cases, the Distributor may pay certain fees from its own profits and resources. From its own profits and resources, the Distributor does intend to: (a) from time to time, pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (b) pay broker-dealers a finder’s fee in an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (c) excluding purchases as described in (b) above, pay broker-dealers an amount equal to 1.00% of the amount of Class A Shares sold from $1,000,000 to $3,000,000, 0.50% on amounts of $3,000,001 to $10,000,000 and 0.25% on amounts greater than $10,000,000. If part or all of such investment as described in (b) and (c) above, including investments by qualified employee benefit plans, is subsequently redeemed within one year, a 1% CDSC may apply, except for redemptions of shares purchased on which a finder’s fee would have


Virtus Mutual Funds		55

been paid where such investor’s dealer of record, due to the nature of the investor’s account, notifies the Distributor prior to the time of the investment that the dealer waives the finder’s fee otherwise payable to the dealer, or agrees to receive such finder’s fee ratably over a 12-month period. For purposes of determining the applicability of the CDSC, the one-year CDSC period begins on the last day of the month preceding the month in which the purchase was made. Any dealer who receives more than 90% of a sales charge may be deemed to be an “underwriter” under the Securities Act of 1933. VP Distributors reserves the right to discontinue or alter such fee payment plans at any time.

From its own resources or pursuant to the distribution and shareholder servicing plans, and subject to the dealers’ prior approval, the Distributor may provide additional compensation to registered representatives of dealers in the form of travel expenses, meals, and lodging associated with training and educational meetings sponsored by the Distributor. The Distributor may also provide gifts amounting in value to less than $100, and occasional meals or entertainment, to registered representatives of dealers. Any such travel expenses, meals, lodging, gifts or entertainment paid will not be preconditioned upon the registered representatives’ or dealers’ achievement of a sales target. The Distributor may, from time to time, reallow the entire portion of the sales charge on Class A Shares which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings.

The Distributor has agreed to pay fees to certain distributors for preferred marketing opportunities. These arrangements may be viewed as creating a conflict of interest between these distributors and investors. Investors should make due inquiry of their selling agents to ensure that they are receiving the requisite point of sale disclosures and suitable recommendations free of any influence by reason of these arrangements.

Your Account

Opening an Account

Your financial advisor can assist you with your initial purchase as well as all phases of your investment program. If you are opening an account by yourself, please follow the instructions outlined below. These procedures do not apply to purchases of Class I Shares. For information about purchasing Class I Shares, please contact Mutual Fund Services by calling (800) 243-1574.

The funds have established the following preferred methods of payment for fund shares:

Checks drawn on an account in the name of the investor and made payable to Virtus Mutual Funds;

Checks drawn on an account in the name of the investor’s company or employer and made payable to Virtus Mutual Funds; or

Wire transfers or Automatic Clearing House (ACH) transfers from an account in the name of the investor, or the investor’s company or employer.

Payment in other forms may be accepted at the discretion of the funds. Please specify the name(s) of the fund or funds in which you would like to invest on the check or transfer instructions.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. Accordingly, when you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may check the information you provide against publicly available databases, information obtained from consumer reporting agencies, other financial institutions or other sources. If, after reasonable effort, we cannot verify your identity, we reserve the right to close the account and redeem the shares at net asset value next calculated after the decision is made by us to close the account.

Step 1.

Your first choice will be the initial amount you intend to invest.

Minimum initial investments:

$25 for individual retirement accounts (IRAs), accounts that use the systematic exchange privilege or accounts that use the Systematic Purchase program. (See below for more information on the Systematic Purchase program.)


56		Virtus Mutual Funds

There is no initial dollar requirement for defined contribution plans, asset-based fee programs, profit-sharing plans or employee benefit plans. There is also no minimum for reinvesting dividends and capital gains into another account.

$500 for all other accounts.

Minimum additional investments:

$25 for any account.

There is no minimum additional investment requirement for defined contribution plans, asset-based fee programs, profit-sharing plans or employee benefit plans. There is also no minimum additional investment requirement for reinvesting dividends and capital gains into an existing account.

The funds reserve the right to refuse any purchase order for any reason.

Step 2.

Your second choice will be what class of shares to buy. Each share class, except Class I Shares, has different sales and distribution charges. Because all future investments in your account will be made in the share class you choose when you open your account, you should make your decision carefully. Your financial advisor can help you pick the share class that makes the most sense for your situation.

Step 3.

Your next choice will be how you want to receive any dividends and capital gain distributions. Your options are:

Receive both dividends and capital gain distributions in additional shares;

Receive dividends in additional shares and capital gain distributions in cash;

Receive dividends in cash and capital gain distributions in additional shares; or

Receive both dividends and capital gain distributions in cash.

No interest will be paid on uncashed distribution checks.

How to Buy Shares


		To Open An Account (Class A, Class B, Class C Shares and Class T only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimum investments or limitations on buying shares.
Through the mail		Complete a New Account Application and send it with a check payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
Through express delivery		Complete a New Account Application and send it with a check payable to the fund. Send them to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809.
By Federal Funds wire		Call us at (800) 243-1574 (press 1, then 0).
By Systematic Purchase		Complete the appropriate section on the application and send it with your initial investment payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).

The price at which a purchase is effected is based on the net asset value determined after receipt of a purchase order by the funds’ Transfer Agent.


Virtus Mutual Funds		57

How to Sell Shares

You have the right to have the funds buy back shares at the net asset value next determined after receipt of a redemption order by the funds’ Transfer Agent or an authorized agent. In the case of a Class B Share, Class C Share or Class T Share redemption, and certain Class A Share redemptions, you will be subject to the applicable contingent deferred sales charge, if any, for such shares. Subject to certain restrictions, shares may be redeemed by telephone or in writing. In addition, shares may be sold through securities dealers, brokers or agents who may charge customary commissions or fees for their services. The funds do not charge any redemption fees. Payment for shares redeemed is made within seven days; however, redemption proceeds will not be disbursed until each check used for purchases of shares has been cleared for payment by your bank, which may take up to 15 days after receipt of the check.


		To Sell Shares (Class A, Class B, Class C and Class T Shares only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimums on redemptions of accounts.
Through the mail		Send a letter of instruction and any share certificates (if you hold certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. Be sure to include the registered owner’s name, fund and account number and number of shares or dollar value you wish to sell.
Through express delivery		Send a letter of instruction and any share certificates (if you hold certificate shares) to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809. Be sure to include the registered owner’s name, fund and account number and number of shares or dollar value you wish to sell.
By telephone		For sales up to $50,000, requests can be made by calling (800) 243-1574.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).
By check		If you selected the checkwriting feature, you may write checks for amounts of $

Things You Should Know When Selling Shares

Questions regarding this type of transfer should be directed to your financial advisor. Redemption requests will not be honored until all required documents, in proper form, have been received. To avoid delay in redemption or transfer, shareholders having questions about specific requirements should contact the funds’ Transfer Agent at (800) 243-1574.

Redemptions by Mail

If you are selling shares held individually, jointly, or as custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act:

Send a clear letter of instruction if both of these apply:

The proceeds do not exceed $50,000.

The proceeds are payable to the registered owner at the address on record.

Send a clear letter of instruction with a signature guarantee when any of these apply:

You are selling more than $50,000 worth of shares.

The name or address on the account has changed within the last 30 days.

You want the proceeds to go to a different name or address than on the account.


58		Virtus Mutual Funds

If you are selling shares held in a corporate or fiduciary account, please contact the funds’ Transfer Agent at (800) 243-1574.

If required, the signature guarantee must be a STAMP 2000 Medallion guarantee and be made by an eligible guarantor institution as defined by the funds’ Transfer Agent in accordance with its signature guarantee procedures. Guarantees using previous technology medallions will not be accepted. Currently, the Transfer Agent’s signature guarantee procedures generally permit guarantees by banks, broker-dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations.

Selling Shares by Telephone

The Transfer Agent will use reasonable procedures to confirm that telephone instructions are genuine. Address and bank account information are verified, redemption instructions are taped, and all redemptions are confirmed in writing.

The individual investor bears the risk from instructions given by an unauthorized third party that the Transfer Agent reasonably believed to be genuine.

The Transfer Agent may modify or terminate the telephone redemption privilege at any time with 60 days notice to shareholders, except for instances of disruptive trading or market timing; in such cases, the telephone redemption privilege may be suspended immediately, followed by written notice. (See “Disruptive Trading and Market Timing” in this Prospectus.)

During times of drastic economic or market changes, telephone redemptions may be difficult to make or temporarily suspended.

Account Policies

Account Reinstatement Privilege

Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A Shares, Class B Shares, Class C Shares or Class T Shares on which you have previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more. Send your written request to State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. You can call us at (800) 243-1574 for more information.

Please remember, a redemption and reinvestment are considered to be a sale and purchase for tax-reporting purposes. Class B, Class C and Class T shareholders who have had the contingent deferred sales charge waived because they are in the Systematic Withdrawal Program are not eligible for this reinstatement privilege.

Redemption of Small Accounts

Due to the high cost of maintaining small accounts, if your redemption activity causes your account balance to fall below $200, you may receive a notice requesting you to bring the balance up to $200 within 60 days. If you do not, the shares in the account will be sold at net asset value, and a check will be mailed to the address of record.

Distributions of Small Amounts

Distributions in amounts less than $10 will automatically be reinvested in additional shares of the applicable fund.

Uncashed Checks

If any correspondence sent by the fund is returned by the postal or other delivery service as “undeliverable,” your dividends or any other distribution may be automatically reinvested in the fund.

If your distribution check is not cashed within six months, the distribution may be reinvested in the fund at the current net asset value. You will not receive any interest on uncashed distribution or redemption checks. This provision may not apply to certain retirement or qualified accounts.


Virtus Mutual Funds		59

Exchange Privileges

You should read the prospectus of the Virtus Mutual Fund(s) into which you want to make an exchange before deciding to make an exchange. You can obtain a prospectus from your financial advisor or by calling us at (800) 243-4361, or accessing our Web site at virtus.com.

You may exchange shares of one fund for the same class of shares of another Virtus Mutual Fund; e.g., Class A Shares for Class A Shares. Class C Shares are also exchangeable for Class T Shares of those Virtus Mutual Funds offering them. Exchange privileges may not be available for all Virtus Mutual Funds and may be rejected or suspended.

Exchanges may be made by telephone ((800) 243-1574) or by mail (State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).

The amount of the exchange must be equal to or greater than the minimum initial investment required.

The exchange of shares is treated as a sale and a purchase for federal income tax purposes.

Class A Shares of the Money Market Fund purchased without a sales charge are exchangeable at net asset value plus the applicable sales charge.

Disruptive Trading and Market Timing

These funds are not suitable for market timers and market timers are discouraged from becoming investors. Your ability to make exchanges among Virtus Mutual Funds is subject to modification if we determine, in our sole opinion, that your exercise of the exchange privilege may disadvantage or potentially harm the rights or interests of other shareholders.

Frequent purchases, redemptions and exchanges, programmed exchanges, exchanges into and then out of a fund in a short period of time, and exchanges of large amounts at one time may be indicative of market timing and otherwise disruptive trading (“Disruptive Trading”) which can have risks and harmful effects for other shareholders. These risks and harmful effects include:

dilution of the interests of long-term investors, if market timers or others exchange into a fund at prices that are below the true value or exchange out of a fund at prices that are higher than the true value;

an adverse effect on portfolio management, as determined by portfolio management in its sole discretion, such as causing the fund to maintain a higher level of cash than would otherwise be the case, or causing the fund to liquidate investments prematurely; and

reducing returns to long-term shareholders through increased brokerage and administrative expenses.

In order to attempt to protect our shareholders from the potential harmful effects of Disruptive Trading, the funds’ Board of Trustees has adopted market timing policies and procedures designed to discourage Disruptive Trading. The Board has adopted these policies and procedures as a preventive measure to protect all shareholders from the potential effects of Disruptive Trading, while also abiding by any rights that shareholders may have to make exchanges and provide reasonable and convenient methods of making exchanges that do not have the potential to harm other shareholders.

Excessive trading activity is measured by the number of roundtrip transactions in an account. A roundtrip transaction is one where a shareholder buys and then sells, or sells and then buys, shares of any fund within 30 days. Shareholders of the funds are limited to one roundtrip transaction within any rolling 30-day period. Roundtrip transactions are counted at the shareholder level. In considering a shareholder’s trading activity, the funds may consider, among other factors, the shareholder’s trading history both directly and, if known, through financial intermediaries, in the funds, in other funds within the Virtus Mutual Fund complex, in non-Virtus mutual funds or in accounts under common control or ownership. We do not include exchanges made pursuant to the dollar cost averaging or other similar programs when applying our market timing policies. Systematic withdrawal and/or contribution programs, mandatory retirement distributions, and transactions initiated by a plan sponsor also will not count towards the roundtrip limits. The funds may permit exchanges that they believe, in the exercise of their judgment, are not disruptive. The size of the fund and the size of the requested transaction may be considered when determining whether or not the transaction would be disruptive.


60		Virtus Mutual Funds

Shareholders holding shares for at least 30 days following investment will ordinarily be in compliance with the funds’ policies regarding market timing. The funds may, however, take action if activity is deemed disruptive even if shares are held longer than 30 days, such as a request for a transaction of an unusually large size. The size of the fund and the size of the requested transaction may be considered when determining whether or not the transaction would be disruptive.

Under our market timing policies, we may modify your exchange privileges for some or all of the funds by not accepting an exchange request from you or from any person, asset allocation service, and/or market timing services made on your behalf. We may also limit the amount that may be exchanged into or out of any fund at any one time or could revoke your right to make Internet, telephone or facsimile exchanges. We may reinstate Internet, telephone and facsimile exchange privileges after they are revoked, but we will not reinstate these privileges if we have reason to believe that they might be used thereafter for Disruptive Trading.

The funds currently do not charge exchange or redemption fees, or any other administrative charges on fund exchanges. The funds reserve the right to impose such fees and/or charges in the future.

Orders for the purchase of fund shares are subject to acceptance by the relevant fund. We reserve the right to reject, without prior notice, any exchange request into any fund if the purchase of shares in the corresponding fund is not accepted for any reason.

The funds do not have any arrangements with any person, organization or entity to permit frequent purchases and redemptions of fund shares.

We may, without prior notice, take whatever action we deem appropriate to comply with or take advantage of any state or federal regulatory requirement. The funds reserve the right to reject any purchase or exchange transaction at any time. If we reject a purchase or exchange for any reason, we will notify you of our decision in writing.

The funds cannot guarantee that their policies and procedures regarding market timing will be effective in detecting and deterring all Disruptive Trading.

Retirement Plans

Shares of the funds may be used as investments under the following retirement plans: traditional IRA, rollover IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing, money purchase plans and certain 403(b) plans. For more information, call (800) 243-4361.

Investor Services and Other Information

Systematic Purchase is a systematic investment plan that allows you to have a specified amount automatically deducted from your checking or savings account and then deposited into your mutual fund account. Just complete the Systematic Purchase Section on the application and include a voided check.

Systematic Exchange allows you to automatically move money from one Virtus Mutual Fund to another on a monthly, quarterly, semiannual or annual basis. Shares of one Virtus Mutual Fund will be exchanged for shares of the same class of another Virtus Mutual Fund at the interval you select. To sign up, just complete the Systematic Exchange Section on the application. Exchange privileges may not be available for all Virtus Mutual Funds and may be rejected or suspended.

Telephone Exchange lets you exchange shares of one Virtus Mutual Fund for the same class of shares in another Virtus Mutual Fund, using our customer service telephone service. (See the “Telephone Exchange” section on the application.) Exchange privileges may not be available for all Virtus Mutual Funds, and may be rejected or suspended.

Systematic Withdrawal allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual or annual basis. Sufficient shares from your account will be redeemed at the closing net asset value on the applicable payment date, with proceeds to be mailed to you or sent through ACH to your bank (at your selection). For payments to be mailed, shares will be redeemed on the 15 ^th of the month so that the payment is made about the 20 ^th of the month. For ACH payments, you may select the day of the month for the payments to be made; if no date is specified, the payments will occur on the 15 ^th of the month. The minimum withdrawal is $25, and minimum account balance requirements continue to apply. Shareholders in the program must own Virtus Mutual Fund shares worth at least $5,000.


Virtus Mutual Funds		61

Disclosure of Fund Holdings. The funds make available on the Virtus Mutual Funds’ Web site, virtus.com, information with respect to each fund’s top 10 holdings and summary composition data derived from portfolio holdings information. This information is posted to the Web site at the end of each month with respect to the top 10 holdings, and at the end of each quarter with respect to summary composition information, generally within 10 business days. This information will remain available on the Web site until full portfolio holdings information becomes publicly available. A full listing of the funds’ portfolio holdings becomes publicly available (i) as of the end of its second and fourth fiscal quarters in shareholder reports, which are sent to all shareholders and are filed with the Securities and Exchange Commission (“SEC”) on Form N-CSR, and (ii) at the end of its first and third fiscal quarters by filing with the SEC a Form N-Q. The funds’ shareholder reports are available without charge on Virtus’ Web site at virtus.com. The funds’ Form N-Q filings are available on the SEC’s Internet site at sec.gov. A fund may make its holdings information publicly available prior to these filings under certain circumstances. A more detailed description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is also available in the Statement of Additional Information.

Tax Status of Distributions

The funds plan to make distributions from net investment income at intervals stated in the table below, and to distribute net realized capital gains, if any, annually.


Fund		Dividend Paid
Bond Fund		Monthly
CA Tax-Exempt Bond Fund		Monthly (Declared Daily)
Core Bond Fund		Monthly
High Yield Fund		Monthly
Money Market Fund		Daily
Multi-Sector Fixed Income Fund		Monthly (Declared Daily)
Multi-Sector Short Term Bond Fund		Monthly (Declared Daily)
Senior Floating Rate Fund		Monthly

Distributions of short-term capital gains (gains on securities held for a year or less) and net investment income are taxable to shareholders as ordinary income. Under the Jobs and Growth Tax Reconciliation Act of 2003, certain distributions of long-term capital gains and certain dividends are taxable at a lower rate than ordinary income for a limited number of years. This lower rate terminates for tax years after 2010. Long-term capital gains, if any, distributed to shareholders and which are designated by a fund as capital gain distributions, are taxable to shareholders as long-term capital gain distributions regardless of the length of time you have owned your shares.

Unless you elect to receive distributions in cash, dividends and capital gain distributions are paid in additional shares. All distributions, cash or additional shares, are subject to federal income tax and may be subject to state, local and other taxes.


62		Virtus Mutual Funds

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Financial Highlights

These tables are intended to help you understand the Virtus Bond Fund's financial performance for the past five years. Some of the information reflects financial information for a single fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers, LLP, the fund’s independent registered public accounting firm. Their report, together with the fund's financial statements, is included in the fund's most recent Annual Report, which is available upon request.



	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Total Distributions
Bond Fund
Class A
10/1/07 to 9/30/08	$	10.21	$	0.42	⁽²⁾	$	(0.45	)	$	(0.03	)	$	(0.43	)	$	—		$	(0.43	)
10/1/06 to 9/30/07		10.27		0.44	⁽²⁾		(0.05	)		0.39			(0.45	)		—			(0.45	)
10/1/05 to 9/30/06		10.46		0.43	⁽²⁾		(0.06	)		0.37			(0.41	)		(0.15	)		(0.56	)
10/1/04 to 9/30/05		10.63		0.34	⁽²⁾		(0.11	)		0.23			(0.34	)		(0.06	)		(0.40	)
10/1/03 to 9/30/04		10.68		0.36	⁽²⁾		0.08			0.44			(0.42	)		(0.07	)		(0.49	)
Class B
10/1/07 to 9/30/08	$	10.01	$	0.33	⁽²⁾	$	(0.43	)	$	(0.10	)	$	(0.36	)	$	—		$	(0.36	)
10/1/06 to 9/30/07		10.07		0.35	⁽²⁾		(0.04	)		0.31			(0.37	)		—			(0.37	)
10/1/05 to 9/30/06		10.28		0.34	⁽²⁾		(0.06	)		0.28			(0.34	)		(0.15	)		(0.49	)
10/1/04 to 9/30/05		10.44		0.25	⁽²⁾		(0.09	)		0.16			(0.26	)		(0.06	)		(0.32	)
10/1/03 to 9/30/04		10.50		0.28	⁽²⁾		0.08			0.36			(0.35	)		(0.07	)		(0.42	)
Class C
10/1/07 to 9/30/08	$	10.04	$	0.31	⁽²⁾	$	(0.41	)	$	(0.10	)	$	(0.36	)	$	—		$	(0.36	)
10/1/06 to 9/30/07		10.09		0.35	⁽²⁾		(0.03	)		0.32			(0.37	)		—			(0.37	)
10/1/05 to 9/30/06		10.30		0.34	⁽²⁾		(0.06	)		0.28			(0.34	)		(0.15	)		(0.49	)
10/1/04 to 9/30/05		10.46		0.25	⁽²⁾		(0.09	)		0.16			(0.26	)		(0.06	)		(0.32	)
10/1/03 to 9/30/04		10.52		0.28	⁽²⁾		0.08			0.36			(0.35	)		(0.07	)		(0.42	)
Class I
10/1/07 to 9/30/08	$	10.32	$	0.53	⁽²⁾	$	(0.54	)	$	(0.01	)	$	(0.45	)	$	—		$	(0.45	)
10/1/06 to 9/30/07		10.36		0.46	⁽²⁾		(0.02	)		0.44			(0.48	)		—			(0.48	)
10/1/05 to 9/30/06		10.56		0.47	⁽²⁾		(0.08	)		0.39			(0.44	)		(0.15	)		(0.59	)
10/1/04 to 9/30/05		10.73		0.37	⁽²⁾		(0.11	)		0.26			(0.37	)		(0.06	)		(0.43	)
10/1/03 to 9/30/04		10.78		0.40	⁽²⁾		0.08			0.48			(0.46	)		(0.07	)		(0.53	)

The footnote legend is at the end of the financial highlights.


64		Virtus Mutual Funds


Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (In Thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (Before Waivers and Reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(0.46	)	$	9.75	(0.49	)%	$	23,823	1.12	% ⁽⁷⁾	1.17	%	4.10	%	325	%
	(0.06	)		10.21	4.09			29,077	1.12		1.12		4.25		266
	(0.19	)		10.27	3.51			28,022	1.11		1.15		4.21		275
	(0.17	)		10.46	2.14			29,501	1.15		1.19		3.20		221
	(0.05	)		10.63	4.33			29,864	1.11		1.11		3.37		136

$	(0.46	)	$	9.55	(1.23	)%	$	4,075	1.87	% ⁽⁷⁾	1.92	%	3.35	%	325	%
	(0.06	)		10.01	3.26			4,294	1.87		1.87		3.49		266
	(0.21	)		10.07	2.80			5,459	1.88		2.30		3.43		275
	(0.16	)		10.28	1.36			6,706	1.90		2.30		2.45		221
	(0.06	)		10.44	3.54			7,375	1.90		2.07		2.69		136

$	(0.46	)	$	9.58	(1.14	)%	$	2,839	1.86	% ⁽⁷⁾	1.92	%	3.33	%	325	%
	(0.05	)		10.04	3.25			1,534	1.87		1.87		3.50		266
	(0.21	)		10.09	2.79			1,401	1.88		3.44		3.41		275
	(0.16	)		10.30	1.35			2,038	1.90		2.90		2.44		221
	(0.06	)		10.46	3.53			3,829	1.90		2.37		2.64		136

$	(0.46	)	$	9.86	(0.16	)%	$	141,830	0.76	% ⁽⁷⁾	0.85	%	4.38	%	325	%
	(0.04	)		10.32	4.32			52,044	0.87		0.87		4.49		266
	(0.20	)		10.36	3.84			63,156	0.82		0.82		4.59		275
	(0.17	)		10.56	2.44			30,126	0.89		0.89		3.45		221
	(0.05	)		10.73	4.54			39,476	0.80		0.80		3.72		136


Virtus Mutual Funds		65

Financial Highlights (continued)

For each of the funds below, the tables present performance of the respective Predecessor Fund and for the Successor Fund for its most recent fiscal periods. The information is intended to help you understand the funds’ financial performance for the past five years or since inception. Some of the information reflects financial information for a single fund share. The total returns in the tables represent the rate that a investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers, LLP, the funds’ independent registered public accounting firm for each of the Predecessor Funds. Their report, together with the funds’ financial statements, is included in the funds’ most recent Annual Report, which is available upon request.


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Total Distributions
CA Tax-Exempt Bond Fund
Class A
10/1/07 to 9/30/08	$	12.09	$	0.46	⁽²⁾	$	(0.68	)	$	(0.22	)	$	(0.46	)	$	—		$	(0.46	)
5/1/07 to 9/30/07		12.26		0.19	⁽²⁾		(0.17	)		0.02			(0.18	)		(0.01	)		(0.19	)
5/1/06 to 4/30/07		12.19		0.47	⁽²⁾		0.18			0.65			(0.48	)		(0.10	)		(0.58	)
5/1/05 to 4/30/06		12.71		0.49	⁽²⁾		(0.39	)		0.10			(0.49	)		(0.13	)		(0.62	)
5/1/04 to 4/30/05		12.49		0.48	⁽²⁾		0.30			0.78			(0.47	)		(0.09	)		(0.56	)
5/1/03 to 4/30/04		12.99		0.48			(0.38	)		0.10			(0.47	)		(0.13	)		(0.60	)
Class I
10/1/07 to 9/30/08	$	12.08	$	0.49	⁽²⁾	$	(0.67	)	$	(0.18	)	$	(0.49	)	$	—		$	(0.49	)
5/1/07 to 9/30/07		12.25		0.20	⁽²⁾		(0.17	)		0.03			(0.19	)		(0.01	)		(0.20	)
9/29/06 ⁽⁶⁾ to 4/30/07		12.43		0.28	⁽²⁾		(0.06	)		0.22			(0.30	)		(0.10	)		(0.40	)
Core Bond Fund
Class A
10/1/07 to 9/30/08	$	8.32	$	0.37	⁽²⁾	$	(0.55	)	$	(0.18	)	$	(0.39	)	$	—		$	(0.39	)
11/1/06 to 9/30/07		8.24		0.33	⁽²⁾		0.11			0.44			(0.36	)		—			(0.36	)
11/1/05 to 10/31/06		8.26		0.35	⁽²⁾		0.02			0.37			(0.39	)		—			(0.39	)
11/1/04 to 10/31/05		8.65		0.32	⁽²⁾		(0.29	)		0.03			(0.42	)		—			(0.42	)
11/1/03 to 10/31/04		8.76		0.37	⁽²⁾		(0.03	)		0.34			(0.45	)		—			(0.45	)
11/1/02 to 10/31/03		8.93		0.39	⁽²⁾		(0.04	)		0.35			(0.52	)		—			(0.52	)
Class B
10/1/07 to 9/30/08	$	8.26	$	0.31	⁽²⁾	$	(0.55	)	$	(0.24	)	$	(0.33	)	$	—		$	(0.33	)
11/1/06 to 9/30/07		8.18		0.27	⁽²⁾		0.12			0.39			(0.31	)		—			(0.31	)
11/1/05 to 10/31/06		8.21		0.29	⁽²⁾		0.01			0.30			(0.33	)		—			(0.33	)
11/1/04 to 10/31/05		8.59		0.25	⁽²⁾		(0.27	)		(0.02	)		(0.36	)		—			(0.36	)
11/1/03 to 10/31/04		8.71		0.31	⁽²⁾		(0.05	)		0.26			(0.38	)		—			(0.38	)
11/1/02 to 10/31/03		8.89		0.32	⁽²⁾		(0.05	)		0.27			(0.45	)		—			(0.45	)
Class C
10/1/07 to 9/30/08	$	8.29	$	0.31	⁽²⁾	$	(0.55	)	$	(0.24	)	$	(0.33	)	$	—		$	(0.33	)
11/1/06 to 9/30/07		8.21		0.27	⁽²⁾		0.12			0.39			(0.31	)		—			(0.31	)
11/1/05 to 10/31/06		8.23		0.29	⁽²⁾		0.02			0.31			(0.33	)		—			(0.33	)
11/1/04 to 10/31/05		8.62		0.25	⁽²⁾		(0.28	)		(0.03	)		(0.36	)		—			(0.36	)
11/1/03 to 10/31/04		8.73		0.31	⁽²⁾		(0.04	)		0.27			(0.38	)		—			(0.38	)
11/1/02 to 10/31/03		8.91		0.32	⁽²⁾		(0.05	)		0.27			(0.45	)		—			(0.45	)

The footnote legend is at the end of the financial highlights.


66		Virtus Mutual Funds


Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (In Thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (Before Waivers and Reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(0.68	)	$	11.41	(1.94	)%	$	34,197	0.85	%	1.01	%	3.82	%	10	%
	(0.17	)		12.09	0.18	⁽⁴⁾		39,094	0.88	⁽³⁾	1.05	⁽³⁾	3.74	⁽³⁾	4	⁽⁴⁾
	0.07			12.26	5.40			42,243	0.87		1.10		3.81		19
	(0.52	)		12.19	0.71			46,214	1.02	⁽⁷⁾	1.28		3.89		8
	0.22			12.71	6.48			53,113	1.19		1.19		3.78		11
	(0.50	)		12.49	0.71			57,334	1.19		1.19		3.69		11

$	(0.67	)	$	11.41	(1.61	)%	$	27,893	0.60	%	0.76	%	4.07	%	10	%
	(0.17	)		12.08	0.30	⁽⁴⁾		28,277	0.64	⁽³⁾	0.80	⁽³⁾	3.99	⁽³⁾	4	⁽⁴⁾
	(0.18	)		12.25	1.79	⁽⁴⁾		28,952	0.64	⁽³⁾	0.79	⁽³⁾	3.90	⁽³⁾	19	⁽⁴⁾


$	(0.57	)	$	7.75	(2.39	)%	$	55,351	1.00	%	1.17	%	4.50	%	37	%
	0.08			8.32	5.44	⁽⁴⁾		63,165	1.05	⁽³⁾	1.24	⁽³⁾	4.33	⁽³⁾	46	⁽⁴⁾
	(0.02	)		8.24	4.59			67,393	1.08	⁽⁷⁾	1.24		4.28		48
	(0.39	)		8.26	0.34			77,880	1.25		1.25		3.73		65
	(0.11	)		8.65	3.95			92,278	1.18		1.18		4.29		45
	(0.17	)		8.76	3.96			104,092	1.16		1.16		4.37		101

$	(0.57	)	$	7.69	(3.00	)%	$	1,207	1.75	%	1.92	%	3.74	%	37	%
	0.08			8.26	4.68	⁽⁴⁾		1,604	1.80	⁽³⁾	2.01	⁽³⁾	3.58	⁽³⁾	46	⁽⁴⁾
	(0.03	)		8.18	3.72			1,749	1.84	⁽⁷⁾	1.98		3.54		48
	(0.38	)		8.21	(0.29	)		2,390	2.00		2.00		2.97		65
	(0.12	)		8.59	3.10			3,668	1.93		1.93		3.57		45
	(0.18	)		8.71	3.08			6,628	1.91		1.91		3.62		101

$	(0.57	)	$	7.72	(3.10	)%	$	1,385	1.75	%	1.92	%	3.76	%	37	%
	0.08			8.29	4.76	⁽⁴⁾		1,225	1.80	⁽³⁾	1.99	⁽³⁾	3.58	⁽³⁾	46	⁽⁴⁾
	(0.02	)		8.21	3.84			1,299	1.83	⁽⁷⁾	1.99		3.54		48
	(0.39	)		8.23	(0.40	)		1,273	2.00		2.00		2.99		65
	(0.11	)		8.62	3.21			1,298	1.93		1.93		3.57		45
	(0.18	)		8.73	3.06			1,385	1.91		1.91		3.63		101


Virtus Mutual Funds		67

Financial Highlights (continued)


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss)			Payment by Affiliate		Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains
High Yield Fund
Class A
10/1/07 to 9/30/08	$	4.89	$	0.34	⁽²⁾	$	(0.90	)	$	—	$	(0.56	)	$	(0.35	)	$	—
11/1/06 to 9/30/07		4.91		0.30	⁽²⁾		(0.01	)		—		0.29			(0.31	)		—
11/1/05 to 10/31/06		4.88		0.31	⁽²⁾		0.05			—		0.36			(0.33	)		—
11/1/04 to 10/31/05		5.11		0.31	⁽²⁾		(0.19	)		—		0.12			(0.35	)		—
11/1/03 to 10/31/04		5.02		0.33	⁽²⁾		0.11			—		0.44			(0.35	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		4.51		0.35	⁽²⁾		0.54			—		0.89			(0.38	)		—
Class B
10/1/07 to 9/30/08	$	4.81	$	0.30	⁽²⁾	$	(0.88	)	$	—	$	(0.58	)	$	(0.31	)	$	—
11/1/06 to 9/30/07		4.84		0.26	⁽²⁾		(0.01	)		—		0.25			(0.28	)		—
11/1/05 to 10/31/06		4.81		0.26	⁽²⁾		0.06			—		0.32			(0.29	)		—
11/1/04 to 10/31/05		5.05		0.27	⁽²⁾		(0.20	)		—		0.07			(0.31	)		—
11/1/03 to 10/31/04		4.96		0.29	⁽²⁾		0.11			—		0.40			(0.31	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		4.47		0.31	⁽²⁾		0.52			—		0.83			(0.34	)		—
Class C
10/1/07 to 9/30/08	$	4.84	$	0.30	⁽²⁾	$	(0.89	)	$	—	$	(0.59	)	$	(0.31	)	$	—
11/1/06 to 9/30/07		4.87		0.26	⁽²⁾		(0.01	)		—		0.25			(0.28	)		—
11/1/05 to 10/31/06		4.84		0.27	⁽²⁾		0.05			—		0.32			(0.29	)		—
11/1/04 to 10/31/05		5.07		0.27	⁽²⁾		(0.19	)		—		0.08			(0.31	)		—
11/1/03 to 10/31/04		4.99		0.29	⁽²⁾		0.10			—		0.39			(0.31	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		4.49		0.31	⁽²⁾		0.53			—		0.84			(0.34	)		—
Money Market Fund
Class A
10/1/07 to 9/30/08	$	1.00	$	0.03		$	(0.01	)	$	0.01	$	0.03		$	(0.03	)	$	—	⁽⁵⁾
11/1/06 to 9/30/07		1.00		0.04			—			—		0.04			(0.04	)		—
11/1/05 to 10/31/06		1.00		0.04			—			—		0.04			(0.04	)		—
11/1/04 to 10/31/05		1.00		0.02			—			—		0.02			(0.02	)		—
11/1/03 to 10/31/04		1.00		0.007			—			—		0.007			(0.007	)		—
11/1/02 to 10/31/03		1.00		0.010			—			—		0.010			(0.010	)		—
Multi-Sector Fixed Income Fund
Class A
10/1/07 to 9/30/08	$	10.89	$	0.68	⁽²⁾	$	(1.66	)	$	—	$	(0.98	)	$	(0.68	)	$	—
11/1/06 to 9/30/07		10.88		0.56	⁽²⁾		(0.03	)		—		0.53			(0.52	)		—
11/1/05 to 10/31/06		10.63		0.59	⁽²⁾		0.21			—		0.80			(0.55	)		—
11/1/04 to 10/31/05		11.16		0.59	⁽²⁾		(0.40	)		—		0.19			(0.72	)		—
11/1/03 to 10/31/04		10.85		0.69	⁽²⁾		0.34			—		1.03			(0.72	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		9.82		0.71			0.99			—		1.70			(0.67	)		—
Class B
10/1/07 to 9/30/08	$	10.88	$	0.60		$	(1.66	)	$	—	$	(1.06	)	$	(0.60	)	$	—
11/1/06 to 9/30/07		10.87		0.48	⁽²⁾		(0.02	)		—		0.46			(0.45	)		—
11/1/05 to 10/31/06		10.61		0.51	⁽²⁾		0.22			—		0.73			(0.47	)		—
11/1/04 to 10/31/05		11.13		0.50	⁽²⁾		(0.40	)		—		0.10			(0.62	)		—
11/1/03 to 10/31/04		10.82		0.61	⁽²⁾		0.33			—		0.94			(0.63	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		9.80		0.63			0.98			—		1.61			(0.59	)		—
Class C
10/1/07 to 9/30/08	$	10.94	$	0.61		$	(1.68	)	$	—	$	(1.07	)	$	(0.60	)	$	—
11/1/06 to 9/30/07		10.93		0.48	⁽²⁾		(0.02	)		—		0.46			(0.45	)		—
11/1/05 to 10/31/06		10.67		0.51	⁽²⁾		0.22			—		0.73			(0.47	)		—
11/1/04 to 10/31/05		11.18		0.51	⁽²⁾		(0.40	)		—		0.11			(0.62	)		—
11/1/03 to 10/31/04		10.87		0.61	⁽²⁾		0.33			—		0.94			(0.63	)		—
11/1/02 to 10/31/03 ⁽⁹⁾		9.84		0.64			0.98			—		1.62			(0.59	)		—

The footnote legend is at the end of the financial highlights.


68		Virtus Mutual Funds


Total Distributions			Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (In Thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (Before Waivers and Reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(0.35	)	$	(0.91	)	$	3.98	(12.10	)%	$	92,907	1.34	%	1.34	%	7.41	%	100	%
	(0.31	)		(0.02	)		4.89	6.06	⁽⁴⁾		125,200	1.39	⁽³⁾	1.39	⁽³⁾	6.59	⁽³⁾	102	⁽⁴⁾
	(0.33	)		0.03			4.91	7.52			132,408	1.37		1.37		6.25		161
	(0.35	)		(0.23	)		4.88	2.37			144,060	1.36		1.36		6.23		59
	(0.35	)		0.09			5.11	8.85			174,527	1.32		1.32		6.57		99
	(0.38	)		0.51			5.02	20.54			192,428	1.32		1.32		7.17		176

$	(0.31	)	$	(0.89	)	$	3.92	(12.59	)%	$	1,366	2.08	%	2.08	%	6.63	%	100	%
	(0.28	)		(0.03	)		4.81	5.22	⁽⁴⁾		2,597	2.13	⁽³⁾	2.13	⁽³⁾	5.78	⁽³⁾	102	⁽⁴⁾
	(0.29	)		0.03			4.84	6.83			4,595	2.12		2.12		5.46		161
	(0.31	)		(0.24	)		4.81	1.46			7,791	2.11		2.11		5.47		59
	(0.31	)		0.09			5.05	8.18			14,574	2.07		2.07		5.90		99
	(0.34	)		0.49			4.96	19.39			22,499	2.07		2.07		6.43		176

$	(0.31	)	$	(0.90	)	$	3.94	(12.72	)%	$	1,465	2.09	%	2.09	%	6.66	%	100	%
	(0.28	)		(0.03	)		4.84	5.20	⁽⁴⁾		2,081	2.14	⁽³⁾	2.14	⁽³⁾	5.89	⁽³⁾	102	⁽⁴⁾
	(0.29	)		0.03			4.87	6.80			1,585	2.12		2.12		5.48		161
	(0.31	)		(0.23	)		4.84	1.66			1,758	2.11		2.11		5.48		59
	(0.31	)		0.08			5.07	8.14			1,990	2.07		2.07		5.87		99
	(0.34	)		0.50			4.99	19.30			2,877	2.07		2.07		6.43		176


$	(0.03	)	$	—		$	1.00	2.87	% ⁽¹⁰⁾	$	85,534	0.77	%	0.77	%	2.81	%	N/A
	(0.04	)		—			1.00	4.22	⁽⁴⁾		96,819	0.86	⁽³⁾	0.86	⁽³⁾	4.55	⁽³⁾	N/A
	(0.04	)		—			1.00	4.04			99,779	0.84		0.90		3.95		N/A
	(0.02	)		—			1.00	2.00			111,395	0.85		0.89		1.94		N/A
	(0.007	)		—			1.00	0.66			139,996	0.65		0.92		0.65		N/A
	(0.010	)		—			1.00	1.00			156,098	0.37		0.87		1.00		N/A


$	(0.68	)	$	(1.66	)	$	9.23	(9.46	)%	$	88,744	1.15	%	1.15	%	6.54	%	91	%
	(0.52	)		0.01			10.89	4.95	⁽⁴⁾		113,458	1.19	⁽³⁾	1.19	⁽³⁾	5.55	⁽³⁾	92	⁽⁴⁾
	(0.55	)		0.25			10.88	7.74			113,362	1.17		1.17		5.52		96
	(0.72	)		(0.53	)		10.63	1.73			113,885	1.20		1.20		5.36		136
	(0.72	)		0.31			11.16	9.78			116,079	1.18		1.18		6.30		156
	(0.67	)		1.03			10.85	17.73			113,345	1.24		1.24		6.68		204

$	(0.60	)	$	(1.66	)	$	9.22	(10.16	)%	$	11,969	1.90	%	1.90	%	5.80	%	91	%
	(0.45	)		0.01			10.88	4.25	⁽⁴⁾		14,205	1.94	⁽³⁾	1.94	⁽³⁾	4.80	⁽³⁾	92	⁽⁴⁾
	(0.47	)		0.26			10.87	7.05			14,147	1.92		1.92		4.78		96
	(0.62	)		(0.52	)		10.61	0.91			16,879	1.95		1.95		4.61		136
	(0.63	)		0.31			11.13	8.99			21,554	1.93		1.93		5.56		156
	(0.59	)		1.02			10.82	16.84			26,754	1.99		1.99		5.94		204

$	(0.60	)	$	(1.67	)	$	9.27	(10.20	)%	$	16,828	1.90	%	1.90	%	5.80	%	91	%
	(0.45	)		0.01			10.94	4.22	⁽⁴⁾		20,677	1.94	⁽³⁾	1.94	⁽³⁾	4.81	⁽³⁾	92	⁽⁴⁾
	(0.47	)		0.26			10.93	7.00			17,222	1.91		1.91		4.77		96
	(0.62	)		(0.51	)		10.67	0.99			15,175	1.95		1.95		4.62		136
	(0.63	)		0.31			11.18	8.95			10,941	1.93		1.93		5.56		156
	(0.59	)		1.03			10.87	16.99			8,902	2.00	⁽⁸⁾	2.00		5.93		204


Virtus Mutual Funds		69

Financial Highlights (continued)


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Return of Capital
Multi-Sector Short Term Bond Fund
Class A
10/1/07 to 9/30/08	$	4.70	$	0.25	⁽²⁾	$	(0.48	)	$	(0.23	)	$	(0.26	)	$	—		$	—
11/1/06 to 9/30/07		4.74		0.21	⁽²⁾		(0.03	)		0.18			(0.22	)		—			—
11/1/05 to 10/31/06		4.70		0.22	⁽²⁾		0.03			0.25			(0.21	)		—			—
11/1/04 to 10/31/05		4.83		0.20	⁽²⁾		(0.12	)		0.08			(0.19	)		—	⁽⁵⁾		(0.02	)
11/1/03 to 10/31/04		4.78		0.21			0.06			0.27			(0.22	)		—			—
11/1/02 to 10/31/03 ⁽⁹⁾		4.56		0.22			0.21			0.43			(0.21	)		—			—
Class B
10/1/07 to 9/30/08	$	4.68	$	0.23	⁽²⁾	$	(0.48	)	$	(0.25	)	$	(0.24	)	$	—		$	—
11/1/06 to 9/30/07		4.72		0.19	⁽²⁾		(0.03	)		0.16			(0.20	)		—			—
11/1/05 to 10/31/06		4.68		0.20	⁽²⁾		0.02			0.22			(0.18	)		—			—
11/1/04 to 10/31/05		4.82		0.18	⁽²⁾		(0.14	)		0.04			(0.16	)		—	⁽⁵⁾		(0.02	)
11/1/03 to 10/31/04		4.77		0.19			0.05			0.24			(0.19	)		—			—
11/1/02 to 10/31/03 ⁽⁹⁾		4.55		0.20			0.21			0.41			(0.19	)		—			—
Class C
10/1/07 to 9/30/08	$	4.73	$	0.24	⁽²⁾	$	(0.48	)	$	(0.24	)	$	(0.25	)	$	—		$	—
11/1/06 to 9/30/07		4.77		0.20	⁽²⁾		(0.03	)		0.17			(0.21	)		—			—
11/1/05 to 10/31/06		4.73		0.21	⁽²⁾		0.02			0.23			(0.19	)		—			—
11/1/04 to 10/31/05		4.87		0.19	⁽²⁾		(0.13	)		0.06			(0.18	)		—	⁽⁵⁾		(0.02	)
11/1/03 to 10/31/04		4.81		0.21			0.05			0.26			(0.20	)		—			—
11/1/02 to 10/31/03 ⁽⁹⁾		4.58		0.21			0.22			0.43			(0.20	)		—			—
Class T
10/1/07 to 9/30/08	$	4.72	$	0.22	⁽²⁾	$	(0.48	)	$	(0.26	)	$	(0.23	)	$	—		$	—
11/1/06 to 9/30/07		4.76		0.18	⁽²⁾		(0.03	)		0.15			(0.19	)		—			—
11/1/05 to 10/31/06		4.73		0.19	⁽²⁾		0.01			0.20			(0.17	)		—			—
11/1/04 to 10/31/05		4.86		0.17	⁽²⁾		(0.13	)		0.04			(0.15	)		—	⁽⁵⁾		(0.02	)
11/1/03 to 10/31/04		4.80		0.18			0.06			0.24			(0.18	)		—			—
6/2/03 (inception) to 10/31/03 ⁽⁹⁾		4.82		0.07			(0.02	)		0.05			(0.07	)		—			—
Class I
6/6/08 (inception) to 9/30/08	$	4.53	$	0.08	⁽²⁾	$	(0.31	)	$	(0.23	)	$	(0.09	)	$	—		$	—
Senior Floating Rate Fund
Class A
1/31/08 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.41		$	(0.61	)	$	(0.20	)	$	(0.39	)	$	—		$	—
Class C
1/31/08 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.37		$	(0.61	)	$	(0.24	)	$	(0.35	)	$	—		$	—
Class I
1/31/08 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.43		$	(0.61	)	$	(0.18	)	$	(0.41	)	$	—		$	—

Footnote

Legend

⁽¹⁾	Sales charges, where applicable, are not reflected in the total return calculation.

⁽²⁾	Computed using average shares outstanding.

⁽³⁾	Annualized.

⁽⁴⁾	Not annualized.

⁽⁵⁾	Amount is less than $0.005.

⁽⁶⁾	Inception date.

⁽⁷⁾	Represents blended net expense ratio.

⁽⁸⁾	For the period ended, the ratio of net operating expenses excludes the effect of expense offsets for custodian fees; if expense offsets were included, the ratio would have been 0.01% lower than the ratio shown in the table.


70		Virtus Mutual Funds


Total Distributions			Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (In Thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (Before Waivers and Reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(0.26	)	$	(0.49	)	$	4.21	(5.07	)%	$	1,377,371	1.08	%	—	%	5.54	%	83	%
	(0.22	)		(0.04	)		4.70	3.84	⁽⁴⁾		1,435,415	1.11	⁽³⁾	—		4.93	⁽³⁾	57	⁽⁴⁾
	(0.21	)		0.04			4.74	5.37			1,062,479	1.04		—		4.75		93
	(0.21	)		(0.13	)		4.70	1.64			819,283	1.02		—		4.24		83
	(0.22	)		0.05			4.83	5.69			372,463	1.03		—		4.17		95
	(0.21	)		0.22			4.78	9.68			229,020	1.08		—		4.28		135

$	(0.24	)	$	(0.49	)	$	4.19	(5.57	)%	$	15,919	1.57	%	—	%	5.03	%	83	%
	(0.20	)		(0.04	)		4.68	3.38	⁽⁴⁾		21,487	1.61	⁽³⁾	—		4.40	⁽³⁾	57	⁽⁴⁾
	(0.18	)		0.04			4.72	4.64			27,845	1.54		—		4.24		93
	(0.18	)		(0.14	)		4.68	1.12			33,003	1.51		—		3.72		83
	(0.19	)		0.05			4.82	5.16			33,325	1.52		—		3.68		95
	(0.19	)		0.22			4.77	9.17			30,457	1.58		—		3.88		135

$	(0.25	)	$	(0.49	)	$	4.24	(5.28	)%	$	161,770	1.33	%	—	%	5.28	%	83	%
	(0.21	)		(0.04	)		4.73	3.57	⁽⁴⁾		179,222	1.36	⁽³⁾	—		4.66	⁽³⁾	57	⁽⁴⁾
	(0.19	)		0.04			4.77	5.07			205,385	1.28		—		4.48		93
	(0.20	)		(0.14	)		4.73	1.15			295,926	1.26		—		3.98		83
	(0.20	)		0.06			4.87	5.59			238,854	1.27		—		3.92		95
	(0.20	)		0.23			4.81	9.60			163,436	1.33		—		4.02		135

$	(0.23	)	$	(0.49	)	$	4.23	(5.78	)%	$	141,131	1.83	%	—	%	4.79	%	83	%
	(0.19	)		(0.04	)		4.72	3.11	⁽⁴⁾		155,450	1.86	⁽³⁾	—		4.17	⁽³⁾	57	⁽⁴⁾
	(0.17	)		0.03			4.76	4.34			153,395	1.79		—		3.98		93
	(0.17	)		(0.13	)		4.73	0.84			195,830	1.76		—		3.48		83
	(0.18	)		0.06			4.86	5.05			120,145	1.78		—		3.40		95
	(0.07	)		(0.02	)		4.80	1.10			26,646	1.90		—		3.06		135

$	(0.09	)	$	(0.32	)	$	4.21	(5.11	)% ⁽⁴⁾	$	95	0.89	% ⁽³⁾	—	%	5.85	% ⁽³⁾	83	% ⁽⁴⁾


$	(0.39	)	$	(0.59	)	$	9.41	(2.12	)% ⁽⁴⁾	$	14,349	1.20	% ⁽³⁾	1.80	% ⁽³⁾	6.25	% ⁽³⁾	27	% ⁽⁴⁾

$	(0.35	)	$	(0.59	)	$	9.41	(2.59	)% ⁽⁴⁾	$	359	1.95	% ⁽³⁾	2.57	% ⁽³⁾	5.58	% ⁽³⁾	27	% ⁽⁴⁾

$	(0.41	)	$	(0.59	)	$	9.41	(1.96	)% ⁽⁴⁾	$	232	0.95	% ⁽³⁾	1.56	% ⁽³⁾	6.51	% ⁽³⁾	27	% ⁽⁴⁾


Virtus Mutual Funds		71

Financial Highlights (continued)

⁽⁹⁾

In accordance with changes in generally accepted accounting principles, the Fund reclassified periodic payments made under interest rate swap agreements and high yield debt instruments; previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification for the Fund on the net investment income per share, net realized and unrealized gains (loss) per share and the ratio of net investment income to average net assets is as follows:


Fund	Year Ended	Net Investment Income (Loss) Increase/ (Decrease)			Net Realized and Unrealized Gains (Loss) Increase/ (Decrease)		Net Investment Income Ratio Increase/ (Decrease)
High Yield Fund
Class A	10/31/03	$	(0.01	)	$	0.01	$	(0.30	)
Class B	10/31/03		(0.01	)		0.01		(0.30	)
Class C	10/31/03		(0.02	)		0.02		(0.30	)

Multi-Sector Fixed Income Fund
Class A	10/31/03	$	(0.02	)	$	0.02	$	(0.18	)
Class B	10/31/03		(0.02	)		0.02		(0.16	)
Class C	10/31/03		(0.02	)		0.02		(0.18	)

Multi-Sector Short Term Bond Fund
Class A	10/31/03		—			—		(0.06	)%
Class B	10/31/03		—			—		(0.06	)%
Class C	10/31/03		—			—		(0.01	)%
Class T	10/31/03		—			—		(0.15	)%

⁽¹⁰⁾	Total return includes the effect of a payment by affiliate. Without this effect, the total return would have been 1.87%.


72		Virtus Mutual Funds

c/o State Street Bank and Trust Company

P.O. Box 8301

Boston, MA 02266-8301

ADDITIONAL INFORMATION

You can find more information about the Funds in the following documents:

Annual and Semiannual Reports

Annual and semiannual reports contain more information about the Funds’ investments. The annual report discusses the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year.

Statement of Additional Information (SAI)

The SAI contains more detailed information about the Funds. It is incorporated by reference and is legally part of the prospectus.

To obtain free copies of these documents, you can download copies from the Individual Investors section of our Web site, Virtus.com, or you can request copies by calling us toll-free at 1-800-243-1574.

Information about the Funds (including the SAI) can be reviewed and copied at the Securities and Exchange Commission’s (SEC) Public Reference Room in Washington, DC. For information about the operation of the Public Reference Room, call 1-202-551-8090. This information is also available on the SEC’s Internet site at sec.gov. You may also obtain copies upon payment of a duplicating fee by writing the Public Reference Section of the SEC, Washington, DC 20549-6009 or by electronic request at publicinfo@sec.gov.

Mutual Fund Services: 1-800-243-1574

Text Telephone: 1-800-243-1926

Investment Company Act File No. 811-7445

8020

1-09

LOGO

VIRTUS ALTERNATIVE FUNDS

Virtus Alternatives Diversifier Fund

Virtus Global Infrastructure Fund

Virtus International Real Estate Securities Fund

Virtus Market Neutral Fund

Virtus Real Estate Securities Fund


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VIRTUS OPPORTUNITIES TRUST	January 31, 2009	E-Delivery at Virtus.com

Not FDIC Insured	No Bank Guarantee	May Lose Value

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus contains important information that you should know before investing in Virtus mutual funds. Please read it carefully and retain it for future reference.


Table of Contents

Virtus Alternatives Diversifier Fund

Investment Risk and Return Summary		1

Fund Fees and Expenses		6

Management of the Fund		7

Virtus Global Infrastructure Fund

Investment Risk and Return Summary		9

Fund Fees and Expenses		14

Management of the Fund		15

Virtus International Real Estate Securities Fund

Investment Risk and Return Summary		17

Fund Fees and Expenses		21

Management of the Fund		22

Virtus Market Neutral Fund

Investment Risk and Return Summary		24

Fund Fees and Expenses		28

Management of the Fund		29

Virtus Real Estate Securities Fund

Investment Risk and Return Summary		31

Fund Fees and Expenses		34

Management of the Fund		35

Additional Investment Techniques		36

Pricing of Fund Shares		38

Sales Charges		40

Your Account		44

How to Buy Shares		45

How to Sell Shares		46

Things You Should Know When Selling Shares		46

Account Policies		47

Investor Services and Other Information		49

Tax Status of Distributions		50

Financial Highlights		52

Virtus Alternatives Diversifier Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Alternatives Diversifier Fund (the “Alternatives Diversifier Fund”) is a fund of funds that has an investment objective of long-term capital appreciation. There is no guarantee that the fund will meet its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The fund seeks to achieve its objective by investing its assets in a mix of underlying affiliated mutual funds and exchange-traded funds (ETFs) (collectively, “underlying mutual funds”) that employ diverse investment styles in alternative investment classes such as commodities, REITs, market neutral funds and others. The fund’s emphasis on diversification is intended to moderate volatility by limiting the effect of any one investment style. The purpose of the fund is to provide a packaged investment option with an emphasis on investment styles that have less correlation to traditional equity markets.

Under normal conditions, the fund allocates assets among underlying mutual funds that invest principally in equity securities of issuers of any capitalization, including those of foreign issuers including emerging markets issuers. Although the fund does not concentrate its investments, certain of the underlying mutual funds in which the fund invests may concentrate their investments in a particular industry or market sector, such as real estate, or may engage in short sales.

The adviser determines the combination of and allocation to the underlying mutual funds based on the adviser’s assessment of the appropriate mix of risk and return characteristics to best meet the fund’s investment objective.

The adviser monitors the fund’s allocations to the underlying mutual funds and may periodically rebalance assets in response to changing market or economic conditions, and investment opportunities.

The subadviser to each underlying mutual fund is responsible for deciding which securities to purchase and sell for its respective underlying mutual fund.

The fund may also invest in high-quality, short-term securities.

Temporary Investment Strategy: If the adviser does not believe that market conditions are favorable to the fund’s principal investment strategies, the fund may take temporary defensive positions that are inconsistent with its principal strategies by investing in cash or money market instruments, including, but not limited to, U.S. Government obligations maturing within one year from the date of purchase. When this allocation happens, the fund may not achieve its investment objective.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment because the fund depends on the investment performance of the underlying mutual funds. Therefore, the fund will also be subject to the risks associated with the deployment of principal investment strategies of the underlying mutual funds, which are described below.

General

The value of the fund’s investments that supports your share value may decrease. If between the time you purchase shares and the time you sell shares the value of the fund’s investments decreases, you will lose money.

Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the underlying mutual funds invest can be worse than expected, and investments may fail to perform as the adviser expects. As a result, the value of your shares may decrease.

The adviser seeks to reduce investment risk by diversifying among mutual funds that invest in stocks and bonds. However, there are still the risks of investing in various asset classes, as well as the inherent risks of the underlying mutual funds.


Virtus Alternatives Diversifier Fund		1

Allocation Risk

The fund’s ability to achieve its investment objective will depend largely on the adviser’s ability in determining allocations and in selecting the appropriate mix of underlying mutual funds.

Underlying Mutual Funds Risk

Achieving the fund’s objective will depend on the performance of the underlying mutual funds, which depends on the particular securities in which the underlying mutual funds invest. Indirectly, the fund is subject to all risks associated with the underlying mutual funds. Since the fund’s performance depends on that of each underlying mutual fund, it may be subject to increased volatility.

Affiliated Fund Risk

The adviser has the authority to select and substitute underlying affiliated mutual funds. The fees paid to the adviser by other affiliated mutual funds may be higher than the fees paid by underlying affiliated mutual funds in which the fund currently invests. These conditions may create a conflict of interest when selecting underlying affiliated mutual funds for investment. However, the adviser is a fiduciary to the fund and its shareholders and is legally obligated to act in their best interest when selecting underlying affiliated mutual funds.

Commodity Risk

Commodities or commodity-related equities may be affected by supply and demand characteristics of commodity markets. Prices for individual commodities can fluctuate based on production and demand forecasts, weather, political events, seasonality, tariffs, and many other reasons. Individual commodity prices can fluctuate widely over short time periods. Commodity investments typically do not have dividends or income and are dependent on price movements to generate returns. Commodity price movements can deviate from equity and fixed income price movements.

Emerging Market Investing Risk

Investments in less-developed countries whose markets are still emerging generally present risks in greater degree than those presented by investments in foreign issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval may be required in some developing countries for the release of investment income, capital and sale proceeds to foreign investors, and some developing countries may limit the extent of foreign investment in domestic companies. Emerging market countries often suffer from currency devaluation and higher rates of inflation.

Developing countries may be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed by countries with which they trade and may also be affected by economic conditions in such countries. In addition, a negative situation or condition that affects the market in one emerging market region may have a negative impact on all emerging market regions due to the so-called “ripple effect.”

Exchange-Traded Funds (ETFs) Risk

ETFs invest in a portfolio of securities designed to track a particular market segment or index and whose shares are bought and sold on a securities exchange. The risk of ETFs generally reflects the risk of owning shares of the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. Assets invested in ETFs incur a layering of expenses, including operating costs and advisory fees that fund shareholders indirectly bear.

Equity Securities Risk

Generally, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or industries (such as changes in inflation or consumer demand) and to events that affect particular issuers (such as news about the success or failure of a new product).

Growth Stocks. Because growth stocks typically make little or no dividend payments to shareholders, investment return is based on a stock’s capital appreciation, making return more dependent on market increases and decreases. Growth stocks are therefore more susceptible than non-growth stocks to market changes, tending to drop more sharply when markets fall. Growth-oriented funds typically underperform when value investing is in favor.


2		Virtus Alternatives Diversifier Fund

Large Market Capitalization Companies. Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the fund’s value may not rise as much as the value of funds that emphasize companies with smaller market capitalizations.

Small and Medium Market Capitalization Companies. Companies with smaller market capitalizations are often companies with a limited operating history or companies in industries that have recently emerged due to cultural, economic, regulatory or technological developments. Such developments can have a significant impact or negative effect on small and medium market capitalization companies and their stock performance and can make investment returns highly volatile. Product lines are often less diversified and more susceptible to competitive threats. Smaller market capitalization stocks are subject to varying patterns of trading volume and may, at times, be difficult to sell.

Value Stocks. Value stocks involve the risk that the value of the security will not be recognized for an unexpectedly long period of time and that the security is not undervalued but is appropriately priced due to fundamental problems not yet apparent. Value-oriented funds typically underperform when growth stocks are in favor.

Equity REIT Securities Risk

Equity REITs and REIT-like companies may be affected by changes in value of the underlying properties they own. Further, equity REITs and REIT-like companies are dependent upon management skills and generally are not diversified. Equity REITs are also subject to potential defaults by borrowers, self-liquidation, and the possibility of failing to qualify for tax-free status of income under the Internal Revenue Code and failing to maintain exemption from the Investment Company Act of 1940. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagor or lessor and may incur substantial costs associated with protecting its investments.

Foreign Investing Risk

Foreign markets and currencies may not function as well as U.S. markets. Political and economic uncertainty in foreign countries, as well as less public information about foreign investments, may negatively impact the fund’s investments. Dividends and other income payable on foreign securities may be subject to foreign taxes. Certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.

Foreign Currency Risk. Some investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rate.

Fully Invested in Equity Securities Risk

The net asset value of a fund that is fully invested in equity securities will decrease more quickly if the value of such securities decreases as compared to a fund that holds larger cash positions.

Industry Concentration Risk

To the extent a fund concentrates its investments in a particular industry, the fund is more vulnerable to financial, economic or political developments affecting that industry. Securities of companies in other industries may provide greater investment return in certain market conditions as compared to companies in the industry in which the fund holds a concentrated position. Moreover, conditions that negatively impact the particular industry will have a greater impact on the fund as compared to a fund that does not concentrate in one industry.

Market Volatility Risk

The risk that the value of the securities in which the fund invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods.

Instability in the financial markets has led to volatile financial markets that expose the fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments that it holds. In response to financial markets that experienced extreme volatility, and in some cases a lack of liquidity, the US Government has taken a number of unprecedented actions, including acquiring distressed assets from financial institutions and acquiring ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear. Additional legislation or government regulation may also change the way in which funds themselves are regulated, which could limit or preclude a fund’s ability to achieve its investment objective.


Virtus Alternatives Diversifier Fund		3

Non-Diversification Risk

A non-diversified investment company is not limited in the proportion of assets that it may invest in the securities of any one issuer. Diversifying a fund’s portfolio can reduce the risks of investing. A non-diversified fund may be subject to greater risk since it can invest a greater proportion of its assets in the securities of a small number of issuers. If a fund takes large positions in a small number of issuers, changes in the price of those securities may cause the fund’s return to fluctuate more than that of a diversified investment company.

Short Sales Risk

In order to establish a short position in a security, a fund must first borrow the security from a broker or other institution to complete the sale. The fund may not always be able to borrow a security, or to close out a short position at a particular time or at an acceptable price. If the price of the borrowed security increases between the date of the short sale and the date on which the fund replaces the security, the fund may experience a loss. The fund’s loss on a short sale is limited only by the maximum attainable price of the security (which could be limitless) less the price the fund paid for the security at the time it was borrowed.

Please refer to the Statement of Additional Information of the fund, and the prospectuses and Statements of Additional Information of the underlying affiliated mutual funds identified later in this prospectus (Appendix B), for more detailed information about the principal investment strategies and associated risks of the fund and of each of the underlying mutual funds.


4		Virtus Alternatives Diversifier Fund

Performance Information

The Virtus Alternatives Diversifier Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Diversifier PHOLIO, a series of Phoenix PHOLIOs (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on September 24, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Alternatives Diversifier Fund’s commencement date.

The bar chart and the table below provide some indication of the risks of investing in the Virtus Alternatives Diversifier Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over the life of the fund. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for Class A Shares for a quarter was 6.23% (quarter ending December 31, 2006) and the lowest return for a quarter was -21.63% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	Since Inception ⁽³⁾
Class A
Return Before Taxes	-32.97%	-6.38%
Return After Taxes on Distributions ⁽⁴⁾	-33.19%	-6.68%
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾ ⁽⁵⁾	-21.24%	-5.39%
Class C
Return Before Taxes	-29.39%	-5.30%
S&P 500 ^® Index ⁽⁶⁾	-37.00%	-8.12%

(2) The fund’s average annual return in the table above reflect the deduction of the maximum sales charge for an investment in the fund’s Class A Shares and a full redemption in the fund’s Class C Shares.

(3) Since November 30, 2005.

(5) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.

(6) The S&P 500 ^® Index is a free-float adjusted market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total-return basis with dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus Alternatives Diversifier Fund		5

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None
Redemption Fee	None	None
Exchange Fee	None	None


	Class A Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.10%	0.10%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)(d)	0.10%	0.85%
Other Expenses	0.32%	0.32%
Acquired Fund Fees and Expenses ^(e) (Underlying Mutual Funds)	1.51%	1.51%

Total Annual Fund Operating Expenses ^(f)(g)	2.03%	2.78%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

(c) Class A Shares and Class C Shares are authorized under the fund’s 12b-1 Plan to pay fees up to 0.25% and 1.00%, respectively. In addition, certain of the underlying mutual funds in which the fund invests impose a 12b-1 fee of up to 0.25%. To avoid duplication of 12b-1 fees, each class of shares of the fund has reduced the 12b-1 fee by the amount of underlying mutual funds’ 12b-1 fees. The net amounts are shown in the table; these amounts may vary depending on the level of 12b-1 fees paid by the underlying mutual funds.

(d) Distribution and Shareholder Servicing (12b-1) Fees represent an asset based sales charge that, for a long-term shareholder, over time may be higher than the maximum front-end sales charge permitted by the FINRA.

(e) Because the fund invests in other mutual funds, it is a shareholder of those underlying mutual funds and indirectly bears its proportionate share of the operating expenses, including management fees of the underlying mutual funds. These expenses are deducted from the underlying mutual funds before their share prices are calculated and are in addition to the direct fees and expenses borne by the fund and its shareholders that are also described in the fee tables above. All of the above expenses reflect the expense ratios for the fund’s last fiscal year and for each acquired (underlying) fund’s most recent fiscal period publicly reported. These estimates may vary considerably based on future asset levels of the fund, the amount of fund assets invested in acquired (underlying) funds at any point in time, and the fluctuation of the expense ratios of the acquired (underlying) funds.

(f) The Total Annual Fund Operating Expenses do not correlate to the ratio of expense to average net assets appearing in the Financial Highlights tables, which tables reflect only the operating expenses of the fund and do not include acquired fund fees and expenses.

(g) The fund’s investment adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding 12b-1 fees, acquired fund fees and expenses, interest, taxes and extraordinary expenses) so that such expenses do not exceed 0.20% for Class A Shares and Class C Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Fund Operating Expenses, after expense reimbursement, were 0.31% for Class A Shares and 1.06% for Class C Shares. In addition to the Annual Fund Operating Expenses that the fund bears directly, the fund’s shareholders indirectly bear expenses of the underlying mutual funds in which the fund invests. The fund’s indirect expenses from investing in the underlying mutual funds, based on the total annual fund operating expenses, after expense reimbursement and excluding dividends on short sales, were 1.13% for Class A Shares and Class C Shares. The fund’s indirect expenses from investing in the underlying mutual funds, based on the total annual fund operating expenses, after including dividends on short sales, were 1.51% for Class A Shares and Class C Shares. Upon combining the net operating expenses of the fund with the weighted average of the total operating expenses of the underlying mutual funds, after expense reimbursement and excluding dividends on short sales, the total annualized expense ratio was 1.65% for Class A Shares and 2.40% for Class C Shares. With dividends on short sales included, the total annualized expense ratio was 2.03% for Class A Shares and 2.78% for Class C Shares. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such reimbursement occurred.


6		Virtus Alternatives Diversifier Fund

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. The calculations use the combined net operating expenses of the fund and the weighted average of the total operating expenses of the underlying mutual funds. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$769	$1,175	$1,605	$2,798
Class C	$381	$862	$1,469	$3,109

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$281	$862	$1,469	$3,109

Note: The example does not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser

Virtus Investment Advisers, Inc. (“VIA”) is the investment adviser to the fund and is located at 100 Pearl Street, Hartford, CT 06103. VIA acts as the investment adviser for over 50 Mutual funds and as adviser to institutional clients. As of September 30, 2008, VIA had approximately $13.8 billion in assets under management. VIA has acted as an investment adviser for over 70 years.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, the general operations and the day-to-day management of the fund’s portfolio.

As compensation for its services, the adviser is entitled to a fee, payable monthly, at an annual rate of 0.10% of the average daily net assets of the fund. As a fund of funds, however, each underlying affiliated mutual fund’s adviser or subadviser manages the daily investments of the underlying affiliated mutual fund’s portfolio and receives a management fee for this service.

The adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding 12b-1 fees, acquired fund fees and expenses, interest, taxes and extraordinary expenses) so that such expenses do not exceed the amounts shown in the table below.


Class A		Class C
0.20%		0.20%

The adviser may discontinue these voluntary arrangements at any time. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007 for a period of three years following the end of the fiscal year in which such reimbursement occurred.

A discussion regarding the basis of the Board of Trustees approving the advisory agreement is available in the fund’s 2008 semiannual report covering the period October 1, 2007 through March 31, 2008.


Virtus Alternatives Diversifier Fund		7

terms of a new subadvisory agreement, in each case either as a replacement for an existing subadviser or as an additional subadviser; (b) change the terms of any subadvisory agreement; and (c) continue the employment of a existing subadviser on the same subadvisory agreement terms where an agreement has been assigned because of a change in control of the subadviser. In such circumstances, shareholders would receive notice of such action, including the information concerning the subadviser that normally is provided in a proxy statement.

Portfolio Management

The following individuals are members of the team of investment professionals responsible for the day-to-day management of the fund’s portfolio.

Carlton Neel. Mr. Neel has served as a member of the portfolio management team for the fund since June 2008. Mr. Neel is a Senior Vice President of VIA, Euclid and Zweig Advisers, LLC (“Zweig”). He also serves as portfolio manager of the Virtus Small-Cap Value Fund, as well as The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc., two closed-end funds managed by Zweig. For the period from July 2002 until returning to Euclid and Zweig in April 2003, Mr. Neel was a managing director and principal of Shelter Rock Capital Partners, L.P., a market neutral hedge fund. While previously employed by Zweig from 1995 until July 2002, Mr. Neel served as senior portfolio manager for a number of the former Phoenix-Zweig mutual funds.

David Dickerson. Mr. Dickerson has served as a member of the portfolio management team for the fund since June 2008. Mr. Dickerson is a Senior Vice President of VIA, Euclid and Zweig Advisers, LLC (“Zweig”). He also serves as portfolio manager of the Virtus Small-Cap Value Fund, as well as The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc., two closed-end funds managed by Zweig. For the period from July 2002 until returning to Euclid and Zweig in April 2003, Mr. Dickerson was a managing director and principal of Shelter Rock Capital Partners, L.P., a market neutral hedge fund. While previously employed by Zweig from 1993 until July 2002, Mr. Dickerson served as senior portfolio manager for a number of the former Phoenix-Zweig mutual funds.

Joseph M. Terranova. Mr. Terranova has served as a member of the portfolio management team for the fund since June 2008. He joined Virtus Investment Partners, Inc., an affiliate of VIA, in June 2008 as Chief Alternatives Strategist and also serves as Chief Alternatives Strategist of VIA. Previously, Mr. Terranova held the position of Director of Trading at MBF Clearing Corp. (1990 to 2008). Before MBF, he held positions at Swiss Banking Corp and JP Morgan Securities. Mr. Terranova is a CNBC contributor and frequent panelist for the CNBC program “Fast Money.”


8		Virtus Alternatives Diversifier Fund

Virtus Global Infrastructure Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Global Infrastructure Fund has an investment objective of seeking both capital appreciation and current income. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal market conditions, the fund invests at least 80% of its assets in the equity securities of infrastructure companies that are located in three or more countries, one of which will be the United States. Infrastructure companies are issuers involved to a significant extent in providing energy, utility, transportation, communication, and other essential services to society and may include issuers that are structured as master limited partnerships (MLPs). Under normal market conditions, the fund will invest at least 25% of its assets in securities of U.S. issuers. The fund may invest in issuers of any capitalization.

Infrastructure companies provide essential services to society including (i) the generation, transmission, distribution or storage of electricity, oil, gas or water, (ii) the provision of telecommunications services, including telephone, cable television, satellite, and other communications activities; and (iii) the construction, operation, or ownership of airports, toll roads, railroads, ports, pipelines, or educational and healthcare facilities. A company will be deemed an infrastructure company if at least 50% of its assets, gross income or profits are committed to, or derived from, one or more of the activities in the areas described above. At December 31, 2008, the market capitalization of the issuers in which the fund was invested ranged from $1.2 billion to $168 billion. The fund’s policy of investing at least 80% of its assets in infrastructure companies may be changed only upon 60 days written notice to shareholders.

The fund may invest up to 20% of its assets in securities of issuers that are not infrastructure companies, including stocks, debt obligations, money market securities and money market mutual funds, as well as certain derivative instruments. When investing in debt obligations, the fund will invest primarily in investment grade debt obligations, although the fund may invest in high yield-high risk fixed income securities.

Temporary Defensive Strategy: If the subadviser believes that market conditions are not favorable to the fund’s principal strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by holding cash or investing, without limit, in cash equivalents or other fixed income securities. When this allocation happens, the fund may not achieve its investment objective.

Please refer to “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

General

Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the fund invests can be worse than expected, and investments may fail to perform as the adviser or subadviser expects. As a result, the value of your shares may decrease.

Credit Risk

Credit risk refers to the issuer’s ability to make scheduled interest or principal payments. Generally, the lower the credit rating of a security the greater the chance that the issuer will be unable to make such payments when due. Credit risk is determined at the date of investment. If after the date of purchase the rating declines, the fund is not obligated to sell the security.


Virtus Global Infrastructure Fund		9

Debt Securities Risk

In addition to credit and interest rate risk, investing in debt securities carries certain other risks, including:

Redemption Risk—Debt securities sometimes contain provisions that allow for redemption in the event of tax or security law changes, in addition to call features at the option of the issuer. In the event of a redemption, the fund may not be able to reinvest the proceeds at comparable rates of return.

Limited Voting Rights—Debt securities typically do not provide any voting rights, except in cases when interest payments have not been made and the issuer is in default.

Liquidity—Certain debt securities may be substantially less liquid than many other securities, such as U.S. Government securities or common stocks.

Derivatives Risk

Derivatives typically involve greater risks than traditional investments. It is generally more difficult to ascertain the risk of, and to properly value, derivative contracts. Derivative contracts are usually less liquid than traditional securities and are subject to counterparty risk (the risk that the other party to the contract will default or otherwise not be able to perform its contractual obligations). In addition, some derivatives transactions may involve potentially unlimited losses. Derivative contracts entered into for hedging purposes may also subject the fund to losses if the contracts do not correlate with the assets, indexes or rates they were designed to hedge. Gains and losses derived from hedging transactions are, therefore, more dependent upon the subadviser’s ability to correctly predict the movement of the underlying asset prices, indexes or rates.

Equity Securities Risk

Foreign Investing Risk

Investing in securities of non-U.S. companies involves special risks and considerations not typically associated with investing in U.S. companies, such as less publicly available information about foreign countries; political and economic instability within countries; differences in financial reporting standards and transaction settlement systems; the possibility of expropriation or confiscatory taxation; and changes in investment or exchange regulations. In addition, certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.

High Yield-High Risk Fixed Income Securities Risk

High yield-high risk fixed income securities entail greater price volatility and credit and interest rate risk than investment grade securities. Analysis of the creditworthiness of high yield-high risk issuers is more complex than for higher-rated securities, making it more difficult for the subadviser to accurately predict risk. There is a greater risk with high yield-high risk fixed income securities


10		Virtus Global Infrastructure Fund

that an issuer will not be able to make principal and interest payments when due. If the fund pursues missed payments, there is a risk that fund expenses could increase. In addition, lower-rated securities may not trade as often and may be less liquid than higher-rated securities.

Income Fluctuation Risk

The income received from the fund is based primarily on the dividends and interest it earns from its investments, which can vary widely over the short and long-term. If prevailing market interest rates drop, distribution rates of the fund’s preferred stock holdings and any bond holdings could drop as well. The fund’s income also would likely be affected adversely when prevailing short-term interest rates increase.

Infrastructure Concentration Risk

Concentrating its investments in infrastructure companies presents additional risk. Securities of companies in other industries may provide greater investment return in certain market conditions as compared to infrastructure companies. Moreover, conditions that negatively impact the infrastructure companies will have greater impact on the fund as compared with a fund that does not concentrate in this area. Certain segments of the infrastructure universe and individual companies within such segments may not perform as well as the universe as a whole.

Infrastructure-Related Investment Risk

Infrastructure-related entities are subject to a variety of factors that may adversely affect their business or operations including high interest costs in connection with capital construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Additionally, infrastructure-related entities may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to customers, service interruption due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards.

Interest Rate Risk

Interest rate trends can have an effect on the value of your shares. If interest rates rise, the value of preferred stocks paying fixed dividend rates and fixed-rate debt securities generally will fall. Because the fund may hold securities with longer maturities or durations, the net asset value of the fund may experience greater price fluctuations in response to changes in interest rates than funds that hold only securities with short-term maturities or durations. Prices of longer-term securities are affected more by interest rate changes than prices of shorter-term securities.

Market Volatility Risk

Master Limited Partnership Risk

An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation. Holders of MLP units have limited control on matters affecting the partnership. Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for federal income tax purposes.


Virtus Global Infrastructure Fund		11

Mutual Fund Investing Risk

Assets invested in other mutual funds incur a layering of expenses, including operating costs, advisory fees and administrative fees that you, as a shareholder in the fund, indirectly bear.

Preferred Stock Risk

Preferred stocks involve credit risk, which is the risk that a preferred stock will decline in price, or fail to pay dividends when expected, because the issuer experiences a decline in its financial status. In addition to credit risk, investment in preferred stocks involves certain other risks, including skipping or deferring distributions, and redemption in the event of certain legal or tax changes or at the issuer’s call. Preferred stocks are subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt instruments. Preferred stocks may be significantly less liquid than many other securities, such as U.S. Government securities, corporate debt or common stock.


12		Virtus Global Infrastructure Fund

Performance Tables

The Virtus Global Infrastructure Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Global Utilities Fund, a series of Phoenix Investment Series Fund (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Global Infrastructure Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in Virtus Global Infrastructure Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over the life of the fund. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index and with a “composite” benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 11.85% (quarter ending December 31, 2006) and the lowest return for a quarter was -16.55% (quarter ending September 30, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾		Since Inception ⁽³⁾
	1 Year	Since Inception ⁽³⁾
Class A Shares
Return Before Taxes	-34.99%	1.64%
Return After Taxes on Distributions ⁽⁴⁾	-35.08%	1.04%
Return After Taxes on Distributions ⁽⁴⁾ and Sale of Fund Shares	-21.92%	1.62%
Class C Shares
Return Before Taxes	-31.57%	2.36%
S&P 500 ^® Index ⁽⁵⁾	-37.00%	-5.17%
Composite Index ⁽⁶⁾	-31.20%	3.91%

(3) Since December 30, 2004.

(5) The S&P 500 ^® Index is a free-float adjusted market capitalization-weighted index of 500 of the largest U.S. companies and is provided for general comparative purposes. The index is calculated on a total-return basis with dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(6) The Composite Index consists of the MSCI World Infrastructure Sector Capped Index. This is a market capitalization weighted index that measures performance of global infrastructure companies by capturing broad and diversified opportunities across telecommunication, utilities, energy, transportation and social infrastructure sectors. The telecommunication infrastructure and utilities sector each represent one-third of the index weight, while energy, transportation and social infrastructure sectors have a combined weight of the remaining one-third of the index. Performance of the Composite Index prior to September 1, 2008 represents an allocation consisting of 65% MSCI USA/Utilities Index, 20% MSCI World Telecom Services Index, and 15% MSCI World ex USA/Utilities Index. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

Class I Shares have been in existence only since June 6, 2008; therefore performance information is not included since Class I Shares have not had a full calendar year of operations.


Virtus Global Infrastructure Fund		13

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.65%	0.65%	0.65%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)	0.25%	1.00%	None
Other Expenses	0.32%	0.32%	0.32%

Total Annual Fund Operating Expenses	1.22%	1.97%	0.97%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$692	$940	$1,207	$1,967
Class C	$300	$618	$1,062	$2,296
Class I	$99	$309	$536	$1,190

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$200	$618	$1,062	$2,296


14		Virtus Global Infrastructure Fund

Management of the Fund

The Adviser and Subadviser

Duff & Phelps Investment Management Co. (“Duff & Phelps”), an affiliate of VIA, is the subadviser to the fund and is located at 200 South Wacker Drive, Suite 500, Chicago, IL 60606. Duff & Phelps acts as subadviser to four mutual funds and as adviser to three closed-end mutual funds and to institutional clients. Duff & Phelps (together with its predecessor) has been in the investment advisory business for more than 70 years. As of September 30, 2008, Duff & Phelps had approximately $6.7 billion in assets under management on a discretionary basis.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. Duff & Phelps, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Duff & Phelps manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 Billion	$1+ Billion through $2 Billion	$2+ Billion
0.65%	0.60%	0.55%

Portfolio Management

A team of investment professionals co-led by Connie M. Luecke and Randle L. Smith are jointly and primarily responsible for the day-to-day management of the fund’s portfolio. The members of the investment team and their areas of responsibility and experience are as follows:

Connie M. Luecke, CFA. Ms. Luecke has served on the fund’s portfolio management team since its inception in 2004. Ms. Luecke has been a Senior Vice President of Duff & Phelps since 1998. Ms. Luecke concentrates her research on the global telecommunications and transportation infrastructure industries. She joined Duff & Phelps in 1992 and since then has served in positions of increasing responsibility.

Randle L. Smith, CFA. Mr. Smith has served on the fund’s portfolio management team since its inception in 2004. Mr. Smith has been a Senior Vice President of Duff & Phelps since 1998. Mr. Smith concentrates his research on the global electric and natural gas utility and transportation infrastructure industries. He joined Duff & Phelps in 1990 and since then has served in positions of increasing responsibility.

T. Brooks Beittel, CFA. Mr. Beittel has served on the fund’s portfolio management team since its inception in 2004. Mr. Beittel has been a Senior Vice President of Duff & Phelps since 1993. Mr. Beittel concentrates his research on fixed income securities. He joined Duff & Phelps in 1987 and since then has served in positions of increasing responsibility.


Virtus Global Infrastructure Fund		15

Deborah Jansen, CFA. Ms. Jansen has served on the fund’s portfolio management team since its inception in 2004. Ms. Jansen has been a Senior Vice President for Duff & Phelps since 2001. Ms. Jansen was a Senior Vice President, Principal and Equity Portfolio Manager at Stein Roe and Farnham, Incorporated (1996-2000). Ms. Jansen concentrates her research on the global electric and natural gas utility and energy infrastructure industries. She joined Duff & Phelps in 2001 and since then has served in positions of increasing responsibility.


16		Virtus Global Infrastructure Fund

Virtus International Real Estate Securities Fund

Investment Risk and Return Summary

Investment Objectives

The Virtus International Real Estate Securities Fund has a primary investment objective of long-term capital appreciation, with a secondary investment objective of income. There is no guarantee that the fund will achieve its objectives. The fund’s investment objectives may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, the fund invests 80% of its assets in equity securities issued by non-U.S companies of any capitalization that are principally engaged in the real estate industry, including common stock, preferred stock and other equity securities issued by real estate companies, such as real estate investment trusts (REITs) and similar REIT-like entities. An issuer is considered principally engaged in the real estate industry if at least 50% of its gross revenues or net profits come from the ownership, development, construction, financing, management or sale of real estate. Similar to a domestic REIT, a non-U.S. real estate company generally is not subject to corporate income tax in its home country, if the REIT equivalent status is available, elected, and followed, which could include distributing a significant percentage of its net income each year to stockholders, and meets certain other regulatory requirements. The fund is not limited to investing only in REITs or REIT-like entities; however, it invests a significant portion of its assets in these types of issuers. The fund does not make direct investments in real estate. At December 31, 2008, the market capitalization range of the issuers in which the fund was invested was $148.8 million to $17.7 billion. The fund’s policy of investing 80% of its assets in real estate related securities may be changed only upon 60 days written notice to shareholders.

Under normal market conditions, the fund expects to invest in a number of different countries and regions. The fund intends to diversify its investments among countries and regions and normally to have represented in the portfolio business activities of approximately 11 to 18 different countries. The fund may, at times, invest up to 20% of its assets in U.S. REIT securities. Additionally, the fund normally invests in real estate related securities of issuers in developed countries, however it may invest up to 20% of its assets in issuers incorporated in emerging market countries.

The fund concentrates its assets in the real estate industry and is non-diversified under federal securities laws.

In managing the fund’s portfolio, the subadviser utilizes an investment process that is primarily bottom-up in its approach, with an emphasis on superior stock selection over country and property sector allocation. The subadviser identifies superior real estate companies by performing an in-depth fundamental business analysis on securities within the targeted investment universe, which includes a qualitative and quantitative assessment of management and operations, portfolio strategy and financial strength. Using proprietary valuation models, the subadviser seeks to identify undervalued companies or those companies that are selling for a price that is below the subadviser’s estimate of their intrinsic value. The portfolio construction process is guided by the outcomes of the company and valuation analytical work within the confines of a risk management overlay as it pertains to diversification, liquidity and other risk factors.

Securities are evaluated for sale if their market value exceeds the subadviser’s estimated value, if their financial performance is expected to decline or if the subadviser believes the issuer fails to adjust its strategy to the real estate market cycle.

Please refer to “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

General


Virtus International Real Estate Securities Fund		17

Investment values can decrease for a number of reasons. Conditions affecting the overall economy, the real estate industry and specific companies in which the fund invests can be worse than expected, and investments may fail to perform as the adviser or subadviser expects. As a result, the value of your shares may decrease.

Equity Securities Risk

Emerging Market Investing Risk

Investments in less-developed countries whose markets are still emerging generally present risks in greater degree than those presented by investment in issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval may be required in some developing countries for the release of investment income, capital and sale proceeds to foreign investors, and some developing countries may limit the extent of foreign investment in domestic companies. Emerging market countries often suffer from currency devaluation and higher rates of inflation.

Equity REIT Securities Risk

Equity REITs and REIT-like companies may be affected by changes in value of the underlying properties they own. Further, equity and mortgage REITs and REIT-like companies are dependent upon management skills and generally are not diversified. Equity REITs are also subject to potential defaults by borrowers, self-liquidation, and the possibility of failing to qualify for tax-free status of income under the Internal Revenue Code and failing to maintain exemption from the Investment Company Act of 1940. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagor or lessor and may incur substantial costs associated with protecting its investments.

Foreign Investing Risk

Investing in securities of non-U.S. companies involves special risks and considerations not typically associated with investing in U.S. companies, such as less publicly available information about foreign countries; political and economic instability within countries; differences in financial reporting standards and transaction settlement systems; the possibility of confiscatory taxation and expropriation; and changes in investment or exchange regulations. In addition, certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.


18		Virtus International Real Estate Securities Fund

Geographic Concentration Risk

To the extent the fund invests 25% or more of its assets in a particular country, the fund is more vulnerable to financial, economic or other political developments in that country. Additionally, to the extent the fund concentrates its investments in a particular country, conditions that negatively impact that country will have a greater impact on this fund as compared to a fund that cannot concentrate holdings in a particular country.

Market Volatility Risk

Non-Diversification Risk

As a non-diversified investment company, the fund is not limited in the proportion of assets that it may invest in the securities of any one issuer. Diversifying a fund’s portfolio can reduce the risks of investing. As a non-diversified investment company, the fund may be subject to greater risk since it can invest a greater proportion of its assets in the securities of a small number of issuers. If the fund takes concentrated positions in a small number of issuers, changes in the price of those securities may cause the fund’s return to fluctuate more than that of a diversified investment company.

Real Estate Industry Concentration Risk

Concentrating its investments in the real estate industry presents additional risk. Securities of companies in other industries may provide greater investment return in certain market conditions as compared to companies in the real estate industry. Moreover, conditions that negatively impact the real estate industry will have a greater impact on this fund as compared to a fund that does not concentrate in this industry.

The fund will not invest in real estate directly, but only in securities issued by real estate companies. However, the fund may be subject to risks similar to those associated with the direct ownership of real estate because of its policy of concentrating its investments in the securities of companies in the real estate industry. These include declines in the value of real estate, risks related to general and local economic conditions, dependence on management skill, cash flow dependence, possible lack of availability of long-term mortgage funds, over-building, extended vacancies of properties, decreased occupancy rates and increased competition, increases in property taxes and operating expenses, changes in neighborhood values and the appeal of the properties to tenants and changes in interest rates.


Virtus International Real Estate Securities Fund		19

Performance Tables

The bar chart and the table below provide some indication of the risks of investing in the Virtus International Real Estate Securities Fund. The bar chart shows the fund’s Class A Shares performance. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for Class A Shares for a quarter was -1.14% (quarter ending March 31, 2008) and the lowest return for a quarter was -30.74% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	Since Inception ⁽³⁾
Class A
Return Before Taxes	-49.79%	-47.39%
Return After Taxes on Distributions ⁽⁴⁾	-49.93%	-47.72%
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾ ⁽⁵⁾	-32.09%	-39.75%
Class C
Return Before Taxes	-47.21%	-45.35%
Class I
Return Before Taxes	-46.68%	-44.77%
S&P 500 ^® Index ⁽⁶⁾	-37.00%	-33.41%
FTSE EPRA/NAREIT Global Rental ex-U.S. Index ⁽⁷⁾	-50.67%	-48.46%

(3) Since October 1, 2007.

(7) The FTSE EPRA/NAREIT Global Rental ex-U.S. Index is a free-float market capitalization index measuring international real estate securities, which meet minimum size, liquidity and investment focus criteria. The index is a sub-set of the FTSE EPRA NAREIT Investment Focus Index Series, which separates the existing constituents into both Rental and Non-Rental Indices. A company is classified as Rental if the rental revenue from properties is greater that or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the latest published financial statement. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


20		Virtus International Real Estate Securities Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	1.00%	1.00%	1.00%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)	0.25%	1.00%	None
Other Expenses	0.86%	0.86%	0.86%

Total Annual Fund Operating Expenses ^(d)	2.11%	2.86%	1.86%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

(d) The fund’s Investment adviser has voluntarily agreed to limit the fund’s total operating expenses (excluding interest, taxes and extraordinary expenses) so that such expenses do not exceed 1.50% for Class A Shares, 2.25% for Class C Shares and 1.25% for Class I Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Fund Operating Expenses after expense reimbursement, were 1.50% for Class A Shares, 2.23% for Class C Shares and 1.24% for Class I Shares. The adviser may recapture operating expenses reimbursed under this arrangement for a period of three years following the end of the fiscal year in which such reimbursement occurred.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$777	$1,198	$1,644	$2,876
Class C	$389	$886	$1,508	$3,185
Class I	$189	$585	$1,006	$2,180


Virtus International Real Estate Securities Fund		21

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$289	$886	$1,508	$3,185

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program and the general operations of the fund, including oversight of the fund’s subadviser and recommending its hiring, termination and replacement. Duff & Phelps, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Duff & Phelps manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 Billion	$1+ Billion through $2 Billion	$2+ Billion
1.00%	0.95%	0.90%


Class A Shares	Class C Shares	Class I Shares
1.50%	2.25%	1.25%

The adviser may discontinue this voluntary expense cap at any time. The adviser may recapture operating expenses reimbursed under this arrangement for a period of three years following the end of the fiscal year in which such reimbursement occurred.

VIA pays Duff & Phelps a subadvisory fee at a rate of 50% of the gross investment management fee.


22		Virtus International Real Estate Securities Fund

Portfolio Management

Frank J. Haggerty Jr. , CFA serves as primary Portfolio Manager (since inception) and is responsible for the day-to-day management of the fund. Mr. Haggerty is a Portfolio Manager for Duff & Phelps and has served as a senior REIT analyst since joining the firm in 2005, providing support for dedicated REIT products managed by Duff & Phelps, inclusive of the real estate strategies in the Virtus Opportunities Trust. Mr. Haggerty is also a Portfolio Manager for the REIT portfolio within the DNP Select Income Fund Inc., a closed-end mutual fund; two unaffiliated mutual funds; and separate institutional accounts. Prior to joining Duff & Phelps, Mr. Haggerty was a senior analyst and portfolio manager at ABN AMRO Asset Management for seven years.

Geoffrey P. Dybas , CFA serves as Senior Portfolio Manager (since inception) and provides oversight to the management of the fund. Mr. Dybas joined Duff & Phelps in 1995 and serves as Senior Vice President, Global REIT team head and Senior Portfolio Manager. He is Senior Portfolio Manager and co-founder for all dedicated REIT portfolios managed by Duff & Phelps, inclusive of the real estate strategies in the Virtus Opportunities Trust. Mr. Dybas also manages the REIT portfolio within the DNP Select Income Fund Inc., a closed-end mutual fund; two unaffiliated mutual funds; and separate institutional accounts.


Virtus International Real Estate Securities Fund		23

Virtus Market Neutral Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Market Neutral Fund has an investment objective to seek long-term capital appreciation while maintaining minimal portfolio exposure to general equity market risk. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

The goal of market neutral investing is to generate returns that are independent of the direction of the stock market. The fund attempts to maintain minimal exposure to general market risk by always having both long and short positions in stocks. The fund has a long position when it owns the security and has “sold short” a position when it sells a security it does not own. When the fund has “sold short,” it must borrow the security in order to settle the sale and buy the security at a later date to pay back the lender. The fund must maintain collateral at least equal to the current market value of the security sold short. The fund will not make a short sale if the market value of all short positions would exceed 100% of the value of the fund’s net assets giving effect to such sale.

The fund strives to have long positions in stocks that it believes will outperform the market and short positions in stocks that it believes will underperform the market. Under normal circumstances, the fund seeks to maintain a balance between investments that are expected to benefit from a general rise in stock prices and investments that are expected to benefit from a general stock market decline.

The fund utilizes proprietary stock selection models that are designed to predict relative attractiveness of stocks. The models collect fundamental data such as earnings, dividends, cash flow, revenues and book value. The fundamental data is then used to analyze characteristics such as growth prospects, valuation and momentum. Each stock is then given a score. The fund strives to profit by purchasing stocks that have relatively high scores and selling short stocks that have relatively low scores. The investment team exploits the benefits of quantitative analysis, but also employs a fundamental approach in their stock selection process.

In selecting stocks of any capitalization for investment, the fund uses a blended strategy, investing in both growth and value stocks of U.S. and foreign issuers of any capitalization, including those in emerging markets countries. At December 31, 2008, the market capitalization range of the issuers in which the fund held long positions was $43.8 million to $203.9 billion and the market capitalization range of the issuers in which the fund held short positions was $235 million to $96.8 billion.

In addition to purchasing or selling short individual securities, the fund may purchase or sell short any type of future or option related to such securities.

The fund may also invest in exchange-traded funds (ETFs).

The fund seeks a total return greater than the return on three-month U.S. Treasury Bills.

The fund’s turnover rate is expected to be higher than 100%. A high portfolio turnover rate increases brokerage and other transaction costs to the fund, negatively affects fund performance, and may increase capital gain distributions, resulting in greater tax liability to you.

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

General


24		Virtus Market Neutral Fund

Emerging Market Investing Risk

Equity Securities Risk

Although the fund seeks to minimize market risk, it can not be eliminated. Generally, the prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or industries (such as changes in inflation or consumer demand) and to events that affect particular issuers (such as news about the success or failure of a new product). The fund’s long positions may decline in value at the same time that the value of the securities sold short increases, thereby increasing the potential for losses. As a result, the value of your shares may decrease.

Large Market Capitalization Companies . Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the fund’s value may not rise as much as the value of funds that emphasize companies with smaller market capitalizations.

Exchange-Traded Funds (ETFs)

ETFs are investment companies that invest in a portfolio of securities designed to track a particular market segment or index and whose shares are bought and sold on a securities exchange. The risk of ETFs generally reflects the risk of owning shares of the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. Assets invested in ETFs incur a layering of expenses, including operating cost and advisory fees that fund shareholders indirectly bear.

Foreign Investing Risk

Futures and Options Risk

Futures and options involve market risk in excess of their value. The use of futures or options may result in larger losses or smaller gains than otherwise would be the case. The prices of futures and options and the price movements of the securities that the future or option is intended to simulate may not correlate well.


Virtus Market Neutral Fund		25

Liquidity of futures and options markets can be adversely affected by market factors. If the fund cannot close out its futures position, it may be compelled to continue to make daily cash payments to the broker to meet margin requirements, thus increasing transaction costs. Generally, there are more speculators in futures and options markets than general securities markets, which can result in price distortions.

Market Volatility Risk

Short Sales Risk

In order to establish a short position in a security, the fund must first borrow the security from a broker or other institution to complete the sale. The fund may not always be able to borrow a security, or to close out a short position at a particular time or at an acceptable price. If the price of the borrowed security increases between the date of the short sale and the date on which the fund replaces the security, the fund may experience a loss. The fund’s loss on a short sale is limited only by the maximum attainable price of the security (which could be limitless) less the price the fund paid for the security at the time it was borrowed.


26		Virtus Market Neutral Fund

Performance Tables

The Virtus Market Neutral Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Market Neutral Fund, a series of Phoenix Portfolios (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Market Neutral Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Market Neutral Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns for the life of the fund compare to those of a broad-based securities market index and a more narrowly-based benchmark. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 8.66% (quarter ending September 30, 2002) and the lowest return for a quarter was -12.08% (quarter ending December 31, 2002).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	5 Years	10 Years
Class A
Return Before Taxes	-11.49%	-3.12%	-0.79%
Return After Taxes on Distributions ⁽³⁾	-11.49%	-3.27%	-1.15%
Return After Taxes on Distributions and Sale of Fund Shares ⁽³⁾⁽⁴⁾	-7.47%	-2.66%	-0.86%
Class B
Return Before Taxes	-10.59%	-2.88%	-0.93%
Class C
Return Before Taxes	-6.80%	-2.68%	-0.94%
S&P 500 ^® Index ⁽⁵⁾	-37.00%	-2.19%	-1.38%
Citigroup 90-Day Treasury Bill Index ⁽⁶⁾	1.80%	3.10%	3.30%

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.

(5) The S&P 500 ^® 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. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(6) The Citigroup 90-Day Treasury Bill Index measures monthly return equivalents of yield averages that are not marked to market. The 90-Day Treasury Bill Index is an average of the last three-month Treasury bill issues. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus Market Neutral Fund		27

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.

Class A
Shares

Class B
Shares

Class C
Shares

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)

5.75%

None

Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)

None ^(a)

5.00% ^(b)

1.25% ^(c)

Maximum Sales Charge (load) Imposed on Reinvested Dividends

None

Redemption Fee

None

Exchange Fee

None

Class A
Shares

Class B
Shares

Class C
Shares

Annual Fund Operating Expenses (expenses that are deducted from fund assets)

Management Fees ^(d)

1.50%

Distribution and Shareholder Servicing (12b-1) Fees ^(e)

0.25%

1.00%

Other Expenses:

Dividends on Short Sales

1.68%

Remainder of Other Expenses

0.41%

Total Other Expenses

2.09%

Total Annual Fund Operating Expenses ^(f)

3.84

4.59

(b) The maximum deferred sales charge is imposed on Class B Shares redeemed during the first year; thereafter, it decreases 1% annually to 3% during the third and fourth years and to 0% after the sixth year.

(d) The fund’s investment adviser has voluntarily agreed to waive 0.15% of its investment management fee. The adviser may discontinue this fee waiver at any time. The adviser will not seek to recapture any fees waived under this arrangement.

(e) Distribution and Shareholder Servicing (12b-1) Fees represent an asset-based sales charge that, for a long-term shareholder, over time may be higher than the maximum front-end sales charge permitted by FINRA.

(f) The fund’s investment adviser has voluntarily agreed to limit total operating expenses (excluding dividends on short sales, interest, taxes and extraordinary expenses) so that such expenses do not exceed 1.77% for Class A Shares, 2.52% for Class B Shares and 2.52% for Class C Shares. The adviser may discontinue this voluntary expense cap at any time. Actual Total Annual Fund Operating Expenses, after fee waiver and expense reimbursement, were 3.49% for Class A Shares, 4.19% for Class B Shares and 4.19% for Class C Shares. The adviser may recapture operating expenses reimbursed under this arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such waiver or reimbursement occurred.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. In the case of Class B Shares, it is assumed that your shares are converted to Class A Shares after seven years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$939	$1,680	$2,438	$4,411
Class B	$860	$1,585	$2,319	$4,685
Class C	$585	$1,385	$2,319	$4,685


28		Virtus Market Neutral Fund

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$460	$1,385	$2,319	$4,685
Class C	$460	$1,385	$2,319	$4,685

Note: The examples do not include the effects of the expense reimbursement obligations of the adviser; therefore, your actual expenses may be lower than those shown.

Management of the Fund

The Adviser and Subadviser

The Boston Company Asset Management LLC (“TBCAM”), is the subadviser to the fund and is located at Mellon Financial Center, One Boston Place, 201 Washington Street, 14th Floor, Boston, MA 02108. TBCAM is a wholly-owned subsidiary of Bank of New York Mellon Corporation, located at the same address as TBCAM. Founded in 1970, TBCAM provides investment management and subadvisory services to public, corporate defined benefit and defined contribution plans, as well as various institutional and subadvised accounts. As of September 30, 2008, TBCAM had approximately $36 billion of assets under management in active equity investment strategies.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser and recommending its hiring, termination and replacement, and for the general operations of the fund. TBCAM, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and TBCAM manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the annual rate of 1.50%.

The adviser has voluntarily agreed to waive 0.15% of its management fee. Additionally, the adviser has voluntarily agreed to limit total operating expenses (excluding dividends on short sales, interest, taxes and extraordinary expenses) so that such expenses do not exceed the following percentages of the average annual net asset values of the fund:


Class A Shares	Class B Shares	Class C Shares
1.77%	2.52%	2.52%

The adviser may discontinue the voluntary fee waiver and/or expense cap at any time.

The adviser may recapture operating expenses reimbursed under the expense reimbursement arrangement subsequent to August 23, 2007, for a period of three years following the end of the fiscal year in which such waiver or reimbursement occurred.

VIA pays TBCAM a subadvisory fee at the annual rate of 0.75% of the average daily net assets of the fund.


Virtus Market Neutral Fund		29

Portfolio Management

The following individuals are members of the team of equity investment professionals responsible for the day-to-day management of the fund’s portfolio (since January 2008).

Sean P. Fitzgibbon, CFA. Mr. Fitzgibbon is Senior Vice President of TBCAM and is the Lead Portfolio Manager on the firm’s US Large Cap Core Equity, US Large Cap 130/30 Core Equity and Market Neutral investment teams. He is responsible for research on the health care and consumer sectors for both the U.S. Core and Global Core portfolios. Mr. Fitzgibbon joined TBCAM in 1991 and has over 17 years of experience in the industry.

Jeffrey D. McGrew, CFA. Mr. McGrew is Vice President of TBCAM and is a Portfolio Manager for the firm’s US Large Cap Core Equity, US Large Cap 130/30 Core Equity and Market Neutral investment strategies. He is responsible for research on the information technology, financial and telecommunications services sectors. Mr. McGrew joined TBCAM in 2002 and has over 17 years of experience in the industry.

Robert J. Eastman, CFA. Mr. Eastman is a Portfolio Manager on the firm’s US Large Capitalization Core Equity and Market Neutral investment teams. He is responsible for research on the energy, industrials and materials sectors. Mr. Eastman joined TBCAM in 1991 and has over 20 years of experience in the industry.


30		Virtus Market Neutral Fund

Virtus Real Estate Securities Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Real Estate Securities Fund has an investment objective of capital appreciation and income with approximately equal emphasis. There is no guarantee that the fund will achieve its objective.

Principal Investment Strategies

Under normal circumstances, the fund invests 80% of its assets in publicly-traded real estate investment trusts (REITs) and companies that are principally engaged in the real estate industry. An issuer is considered principally engaged in the real estate industry if at least 50% of its gross revenues or net profits come from the ownership, development, construction, financing, management or sale of real estate. The fund, however, does not make direct investments in real estate. The fund’s policy of investing 80% of its assets in real estate related securities may be changed only upon 60 days written notice to shareholders.

The fund will concentrate its assets in the real estate industry. The fund is non-diversified under federal securities laws.

The fund invests principally in equity REITs. Generally, REITs are publicly-traded companies that manage portfolios of real estate to earn profits for shareholders through investments in commercial and residential real estate. Equity REITs own real estate directly. The fund may invest in issuers of any capitalization. At December 31, 2008, the market capitalization range of the issuers in which the fund was invested was $456.6 million to $13.4 billion.

The subadviser uses a blended approach in its security selection process, combining a pursuit of growth and value. Securities are selected using a two-tiered screening process. First the subadviser screens the universe of eligible securities for those that it believes offer the potential for reasonably-priced initial appreciation, continued dividend growth and that show signs the issuer is an efficient user of capital. Securities that survive this screening are further evaluated based on interviews and fundamental research that focus on the issuer’s strength of management and property, financial and performance reviews.

Securities are evaluated for sale if their market value exceeds the subadviser’s estimated value, if its financial performance is expected to decline or if the subadviser believes the security’s issuer fails to adjust its strategy to the real estate market cycle.

Temporary Defensive Strategy: When the subadviser believes there are extraordinary risks associated with investment in real estate related securities, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing up to 100% of its assets in short-term investments such as money market instruments, repurchase agreements, certificates of deposits and bankers’ acceptances. When this allocation happens, the fund may not achieve its investment objective.

Please refer to “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

General

Equity REIT Securities Risk

REIT securities often are not diversified and may only finance a limited number of projects or properties, which may subject REITs to abrupt and large price movements. Equity REITs and REIT-like companies may be affected by changes in the value of the underlying property owned by the REITs. Equity REITs and REIT-like companies are heavily dependent on cash flow from properties and, at times, the market price of a REIT’s securities may be less than the value of the underlying real estate investment which may result in a lower price when the fund sells its shares in the REIT. Equity REITs may trade less frequently and in lower


Virtus Real Estate Securities Fund		31

volume than securities of other larger companies which may also contribute to REIT securities losing value. Equity REITs are dependent on management skills, are not diversified, and are subject to the possibilities of failing to qualify for the federal tax exemption on distributed income and failing to maintain their exemptions under the Investment Company Act of 1940, as amended (“1940 Act”). Assets invested in REITs incur a layering of expenses paid by the REIT that you, as a shareholder in the fund, indirectly bear.

Equity Securities Risk

Small and Medium Market Capitalization Companies . Companies with smaller market capitalizations are often companies with a limited operating history or companies in industries that have recently emerged due to cultural, economic, regulatory or technological developments. Such developments can have a significant impact or negative effect on small and medium market capitalization companies and their stock performance and can make investment returns highly volatile. Product lines are often less diversified and more susceptible to competitive threats. Smaller market capitalization stocks are subject to varying patterns of trading volume and may, at times, be difficult to sell.

Market Volatility Risk

Non-Diversification Risk

Real Estate Industry Concentration Risk

The value of investments in issuers that hold real estate may be affected by changes in the values of real properties owned by the issuers. Likewise, investments in businesses related to the real estate industry may also be affected by the value of real estate generally or in particular geographical areas in which the businesses operated. A decline in real estate value may have a negative impact on the value of your shares.

Interest rates also can be a significant factor for issuers that hold real estate and those in related businesses. Increases in interest rates can cause or contribute to declines in real estate prices and can cause “slowdowns” in such related businesses as real estate sales and constructions.


32		Virtus Real Estate Securities Fund

Performance Tables

The Virtus Real Estate Securities Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Real Estate Securities Fund, a series of Phoenix Multi-Portfolio Fund (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on June 27, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Real Estate Securities Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Real Estate Securities Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 16.41% (quarter ending December 31, 2004) and the lowest return for a quarter was -38.73% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	5 Years	10 Years	Since Inception ⁽³⁾
	1 Year	5 Years	10 Years	Class C	Class I
Class A
Return Before Taxes	-40.87%	0.60%	8.69%	—	—
Return After Taxes on Distributions ⁽⁴⁾	-41.25%	-0.42%	7.20%	—	—
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾⁽⁵⁾	-26.47%	0.43%	6.99%	—	—
Class B
Return Before Taxes	-40.17%	1.05%	8.51%	—	—
Class C
Return Before Taxes	-37.69%	1.07%	—	3.85%	—
Class I
Return Before Taxes	-37.09%	—	—	—	-27.17%
S&P 500 ^® Index ⁽⁶⁾	-37.00%	-2.19%	-1.38%	0.09%	-18.41%
FTSE NAREIT Equity REITs Index ⁽⁷⁾	-37.73%	0.91%	7.42%	3.38%	-27.45%

(3) Class C Shares since July 25, 2003 and Class I since December 28, 2006.

(6) The S&P 500 ^® 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. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(7) The FTSE NAREIT Equity REITs Index measures all tax-qualified real estate investment trusts listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ National Market System. The index is calculated on a total-return basis with dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus Real Estate Securities Fund		33

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None	None
Redemption Fee	None	None	None	None
Exchange Fee	None	None	None	None


	Class A Shares	Class B Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.73%	0.73%	0.73%	0.73%
Distribution and Shareholder Servicing (12b-1) Fees ^(d)	0.25%	1.00%	1.00%	0.00%
Other Expenses	0.47%	0.47%	0.47%	0.47%

Total Annual Fund Operating Expenses	1.45%	2.20%	2.20%	1.20%

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$714	$1,007	$1,322	$2,210
Class B	$623	$888	$1,180	$2,534
Class C	$323	$688	$1,180	$2,534
Class I	$122	$381	$660	$1,455


34		Virtus Real Estate Securities Fund

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$223	$688	$1,180	$2,534
Class C	$223	$688	$1,180	$2,534

Management of the Fund

The Adviser and Subadviser

Duff & Phelps Investment Management Co. (“Duff & Phelps”), an affiliate of VIA, is the subadviser to the fund and is located at 200 South Wacker Drive, Suite 500, Chicago, IL 60606. Duff & Phelps acts as subadviser to four mutual funds and as adviser to four closed-end mutual funds and to institutional clients. Duff & Phelps (together with its predecessor) has been in the investment advisory business for more than 70 years. As of September 30, 2008, Duff & Phelps had approximately $6.7 billion in assets under management on a discretionary basis.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, overseeing the fund’s subadviser, and for the general operations of the fund. Duff & Phelps, as subadviser, is responsible for the day-to-day management of the fund’s portfolio. VIA and Duff & Phelps manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 billion	$1+ billion through $2 billion	$2+ billion
0.75%	0.70%	0.65%

VIA pays Duff & Phelps a subadvisory fee at a rate of 50% of the gross investment management fee.

Portfolio Management

Geoffrey P. Dybas , CFA serves as Senior Portfolio Manager (since May 2007) and is responsible for the day-to-day management of the fund. Mr. Dybas joined Duff & Phelps in 1995 and serves as Senior Vice President, Global REIT team head and Senior Portfolio Manager. He is Senior Portfolio Manager and co-founder for all dedicated REIT portfolios managed by Duff & Phelps, inclusive of the real estate strategies in the Virtus Opportunities Trust. In addition, Mr Dybas manages the REIT portfolio within the DNP Select Income Fund Inc., a closed-end mutual fund; two unaffiliated mutual funds; and separate institutional accounts.

Frank J. Haggerty Jr., CFA serves as Portfolio Manager (since August 2007). Mr. Haggerty is a Portfolio Manager for Duff & Phelps and has served as a senior REIT analyst since joining the firm in 2005, providing support for the dedicated REIT products managed by Duff & Phelps, inclusive of the real estate strategies in the Virtus Opportunities Trust. Mr. Haggerty is also a Portfolio Manager for the REIT portfolio within the DNP Select Income Fund Inc., a closed-end mutual fund; two unaffiliated mutual funds; and separate institutional accounts. Prior to joining Duff & Phelps, Mr. Haggerty was a senior analyst and portfolio manager at ABN AMRO Asset Management for seven years.


Virtus Real Estate Securities Fund		35

Additional Investment Techniques

In addition to the Principal Investment Strategies and Risks Related to Principal Investment Strategies, each of the funds, as indicated, may engage in additional investment techniques that present additional risks to the fund as described below, in Appendix A and in the Statement of Additional Information.

Borrowing

The Market Neutral Fund and Real Estate Securities Fund may obtain fixed interest rate loans from banks. If the securities purchased with such borrowed money decreases in value or does not increase enough to cover interest and other borrowing costs, the respective fund will suffer greater losses than if no borrowing took place.

CMOs, REMICs and Other Pass-Through Securities

The Real Estate Securities Fund may invest in mortgaged-backed securities, such as collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs). The values of pass-through securities may fluctuate to a greater degree than other debt securities in response to changes in interest rates. Early payoffs on the underlying loans in mortgage-backed and asset-backed pass-through securities and CMOs may result in the fund receiving less income than originally anticipated. The variability in prepayments will tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, the fund may be required to invest the proceeds at lower interest rates, causing the fund to earn less than if the prepayments had not occurred.

Convertible Securities

The International Real Estate Securities Fund and the Real Estate Securities Fund may invest in convertible securities. Convertible securities may be subject to redemption at the option of the issuer. If a security is called for redemption, the respective fund may have to redeem the security, convert it into common stock or sell it to a third party at a price and time that is not beneficial for the fund. In addition, securities convertible into common stocks may have higher yields than common stocks but lower yields than comparable nonconvertible securities.

Depositary Receipts

The International Real Estate Securities Fund and Market Neutral Fund may invest in American Depositary Receipts (ADRs), sponsored by U.S. banks, European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), ADRs not sponsored by U.S. banks and other types of depositary receipts (including non-voting depositary receipts). While investment in ADRs, EDRs and GDRs may eliminate some of the risk associated with foreign investments, it does not eliminate all the risks inherent in investing in securities of foreign issuers. EDRs, GDRs and ADRs which are not sponsored by U.S. banks, are subject to the same investment risks as foreign securities.

Derivatives

The International Real Estate Securities Fund may enter into derivative transactions (contracts whose value is derived from the value of an underlying asset, index or rate), including futures, options, non–deliverable forwards, forward foreign currency exchange contracts and swap agreements. The funds may use derivatives to hedge against factors that affect the value of their investments such as interest rates and foreign currency exchange rates. The funds may also utilize derivatives as part of their overall investment technique to gain or lessen exposure to various securities, markets and currencies.

Derivatives typically involve greater risks than traditional investments. It is generally more difficult to ascertain the risk of, and to properly value, derivative contracts. Derivative contracts are usually less liquid than traditional securities and are subject to counter party risk (the risk that the other party to the contract will default or otherwise not be able to perform its contractual obligations). In addition, some derivative transactions may involve potentially unlimited losses. Derivatives contracts entered into for hedging purposes may also subject the fund to losses in the contracts do not correlate with the assets, index or rates they were designated to hedge. Gains and losses derived from hedging transactions are, therefore, more dependent upon the subadviser’s ability to correctly predict the movement of the underlying asset prices, indexes or rates.


36		Virtus Mutual Funds

Exchange-Traded Funds (ETFs)

The International Real Estate Securities Fund may invest in ETFs for short-term cash management purposes. ETFs are investment companies that invest in a portfolio of securities designed to track a particular market segment or index and whose shares are bought and sold on a securities exchange. The risk of ETFs generally reflects the risk of owning shares of the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. Assets invested in ETFs incur a layering of expenses, including operating costs and advisory fees that you, as a shareholder in the fund, indirectly bear.

Foreign Currency Transactions

The International Real Estate Securities Fund and Market Neutral Fund may engage in foreign currency transactions, including foreign currency forward contracts, options, swaps and other similar strategic transactions in connection with its investments in securities of non-U.S. companies. These transactions are designed to hedge the fund’s exposure to foreign currency risks; however, such investments may not prove successful or may have the effect of limiting gains from favorable market movements.

Forward Foreign Currency Exchange Contracts

The Global Infrastructure Fund may invest in forward foreign currency exchange contracts. Such contracts may limit potential exchange rate gains, may incur higher transaction costs and may not protect the fund against future currency exchange fluctuations as anticipated by the investment adviser.

High Yield-High Risk (Junk Bonds) Fixed Income Securities

The International Real Estate Securities Fund may invest in high yield-high risk (junk bonds) fixed income securities. High yield-high risk (junk bonds) fixed income securities entail greater price volatility and credit and interest rate risk than investment-grade securities. Analysis of the creditworthiness of high yield-high risk (junk bonds) issuers is more complex than for higher-rated securities, making it more difficult for the subadviser to accurately predict risk. There is a greater risk with high yield-high risk (junk bonds) fixed income securities that an issuer will not be able to make principal and interest payments when due. If the fund pursues missed payments, there is a risk that fund expenses could increase. In addition, lower-rated securities may not trade as often and may be less liquid than higher-rated securities.

Illiquid and Restricted Securities

The International Real Estate Securities Fund, Market Neutral Fund and Real Estate Securities Fund may invest in illiquid and restricted securities. Illiquid and restricted securities may include repurchase agreements with maturities of greater than seven days. Illiquid and restricted securities may be difficult to sell or may be sold only pursuant to certain legal restrictions. Difficulty in selling securities may result in a loss to a fund or entail expenses not normally associated with the sale of a security.

Money Market Instruments

To meet margin requirements, redemptions or for investment purposes, the Market Neutral Fund will hold money market instruments, including full faith and credit obligations of the United States, high quality short-term notes and commercial paper.

Repurchase Agreements

The Global Infrastructure Fund and Market Neutral Fund may invest in repurchase agreements with commercial banks, brokers and dealers considered by the adviser to be creditworthy. Default or insolvency of the other party presents risk to the respective fund.

Securities Lending

Each fund may loan portfolio securities with a value up to one-third of its total assets to increase its investment returns. If the borrower is unwilling or unable to return the borrowed securities when due, the respective fund can suffer losses.

Short-Term Investments

The International Real Estate Securities Fund and the Real Estate Securities Fund may invest in short-term securities, including money market instruments, repurchase agreements, certificates of deposits and bankers’ acceptances. Default or insolvency of the other party to a repurchase agreement presents a risk to the respective fund.


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Unrated Fixed Income Securities

The International Real Estate Securities Fund and the Real Estate Securities Fund may invest in unrated securities. Unrated securities may not be lower in quality than rated securities, but due to their perceived risk, they may not have as broad a market as rated securities. Analysis of unrated securities is more complex than for rated securities, making it more difficult to accurately predict risk.

U.S. and Foreign Government Obligations

Each fund may invest in obligations of U.S. and foreign governments and their potential subdivisions. Government obligations are not guaranteed to make the value of your shares rise. Foreign obligations are subject to foreign investing risks.

When-Issued and Delayed-Delivery Securities

The Global Infrastructure Fund may purchase securities on a when-issued or delayed-delivery basis. The value of the security on settlement date may be more or less than the price paid as a result of changes in interest rates and market conditions. If the value on settlement date is less, the value of your shares may decline.

Zero Coupon Bonds

The Global Infrastructure Fund may invest in zero coupon bonds. The market prices of such bonds generally are more volatile than the market prices of securities that pay interest on a regular basis and may require the fund to make distributions from other sources because the fund does not receive cash payments earned on these securities on a current basis. This may result in higher portfolio turnover rates and the sale of securities at a time that is less favorable.

Pricing of Fund Shares

How is the Share Price determined?

adding the values of all securities and other assets of the fund;

subtracting liabilities; and

dividing the result by the total number of outstanding shares of that class.

Alternatives Diversifier’s assets consist primarily of shares of the underlying affiliated mutual funds, which are valued at their respective net asset values and exchange-traded funds, which are valued at current market prices. To determine net asset value, the fund and each underlying affiliated mutual fund values its assets at market value. Equity securities held by the underlying affiliated mutual funds, and ETFs held directly by the fund, 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 (other than short-term investments) held by the underlying affiliated mutual funds are valued on the basis of broker quotations or valuations provided by a pricing service, which in determining value utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. As required, some securities and assets held by the underlying affiliated mutual funds are valued at fair value as determined in good faith by, or under the direction of, the Board of Trustees. Other assets, such as accrued interest, accrued dividends and cash are also included in determining the fund’s net asset value.


38		Virtus Mutual Funds

The net asset value per share (“NAV”) of each class of each fund is determined as of the close of regular trading (normally 4:00 PM eastern time) on days when the New York Stock Exchange (“NYSE”) is open for trading. A fund will not calculate its net asset value per share class on days when the NYSE is closed for trading. If a fund holds securities that are traded on foreign exchanges that trade on weekends or other holidays when the funds do not price their shares, the net asset value of the funds’ shares may change on days when shareholders will not be able to purchase or redeem the funds’ shares.

How are securities fair valued?

If market quotations are not readily available or where available prices are not reliable, the funds determine a “fair value” for an investment according to rules and procedures approved by the Board of Trustees. The types of assets for which such pricing might be required include (i) securities whose trading has been suspended; (ii) securities where the trading market is unusually thin or trades have been infrequent; (iii) debt securities that have recently gone into default and for which there is no current market quotation; (iv) a security whose market price is not available from an independent pricing source and for which otherwise reliable quotes are not available; (v) securities of an issuer that has entered into a restructuring; (vi) a security whose price as provided by any pricing source does not, in the opinion of the adviser/subadviser, reflect the security’s market value; (vii) foreign securities subject to trading collars for which no or limited trading takes place; and (viii) securities where the market quotations are not readily available as a result of “significant” events. This list is not inclusive of all situations that may require a security to be fair valued, nor is it intended to be conclusive in determining whether a specific event requires fair valuation.

The value of any portfolio security held by a fund for which market quotations are not readily available shall be determined in good faith and in a manner that assesses the security’s “fair value” on the valuation date (i.e . , the amount that the fund might reasonably expect to receive for the security upon its current sale), based on a consideration of all available facts and all available information, including, but not limited to, the following: (i) the fundamental analytical data relating to the investment; (ii) an evaluation of the forces which influence the market in which these securities are purchased and sold (e.g., the existence of merger proposals or tender offers that might affect the value of the security); (iii) price quotes from dealers and/or pricing services; (iv) an analysis of the company’s financial statements; (v) trading volumes on markets, exchanges or among dealers; (vi) recent news about the security or issuer; (vii) changes in interest rates; (viii) information obtained from the issuer, analysts, other financial institutions and/or the appropriate stock exchange (for exchange traded securities); (ix) whether two or more dealers with whom the adviser/subadviser regularly effects trades are willing to purchase or sell the security at comparable prices; (x) other news events or relevant matters; and (xi) government (domestic or foreign) actions or pronouncements.

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, 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 such 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.

The value of a security, as determined using the fund’s fair valuation procedures, may not reflect such security’s market value.

The Alternatives Diversifier Fund purchases Class A Shares and Class Y Shares, as applicable, of each underlying affiliated mutual fund at net asset value.

At what price are shares purchased?

All investments received by the funds’ authorized agents prior to the close of regular trading on the NYSE (normally 4:00 PM eastern time) will be executed based on that day’s net asset value. Shares credited to your account from the reinvestment of fund distributions will be in full and fractional shares that are purchased at the closing net asset value on the next business day on which the fund’s net asset value is calculated following the dividend record date.


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Sales Charges

What are the classes and how do they differ?

Presently, each fund offers from two to four classes of shares. With the exception of Class I Shares, each class of shares has different sales and distribution charges. (See “Fund Fees and Expenses” previously in this prospectus.) For certain classes of shares, the funds have adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940 as amended (“the 1940 Act”), that authorize the funds to pay distribution and service fees for the sale of their shares and for services provided to shareholders. For the Alternatives Diversifier Fund, the 12b-1 fees applicable to each class of shares will be reduced by the 12b-1 fee of the underlying affiliated mutual funds’ Class A or Class Y Shares.

What arrangement is best for you?

Your financial representative should recommend only those arrangements that are suitable for you based on known information. In certain instances, you may be entitled to a reduction or waiver of sales charges. For instance, you may be entitled to a sales charge discount on Class A Shares if you purchase more than certain breakpoint amounts. You should inform or inquire of your financial representative whether or not you may be entitled to a sales charge discount attributable to your total holdings in a fund or affiliated funds. To determine eligibility for a sales charge discount, you may aggregate all of your accounts (including joint accounts, retirement accounts such as IRAs, non-IRAs, etc.) and those of your spouse and minor children. The financial representative may request you to provide an account statement or other holdings information to determine your eligibility for a breakpoint and to make certain all involved parties have the necessary data. Additional information about the classes of shares offered, sales charges, breakpoints and discounts follows in this section and also may be found in the Statement of Additional Information in the section entitled “How to Buy Shares.” This information is available free of charge, and in a clear and prominent format, at the Individual Investors section of the Virtus Mutual Funds’ Web site at virtus.com. Please be sure that you fully understand these choices before investing. If you or your financial representative require additional assistance, you may also contact Mutual Fund Services by calling toll-free (800) 243-1574.

Class A Shares. If you purchase Class A Shares, you will pay a sales charge at the time of purchase equal to 5.75% of the offering price (6.10% of the amount invested). The sales charge may be reduced or waived under certain conditions. (See “Initial Sales Charge Alternative—Class A Shares” below.) Generally, Class A Shares are not subject to any charges by the fund when redeemed; however, a 1% contingent deferred sales charge (“CDSC”) may be imposed on certain redemptions within one year on purchases on which a finder’s fee has been paid. The one-year period begins on the last day of the month preceding the month in which the purchase was made. Class A Shares have lower distribution and service fees (0.25%) and generally pay higher dividends than Class B Shares and Class C Shares.

Class B Shares (Market Neutral Fund and Real Estate Securities Fund only). If you purchase Class B Shares, you will not pay a sales charge at the time of purchase. If you sell your Class B Shares within the first five years after they are purchased, you will pay a deferred sales charge of up to 5% of your shares’ value. (See “Deferred Sales Charge Alternative—Class B Shares and Class C Shares” below.) This charge declines to 0% over a period of five years and may be waived under certain conditions. Class B shares have higher distribution and service fees (1.00%) and pay lower dividends than Class A Shares. Class B Shares automatically convert to Class A Shares eight years after purchase (seven years after purchase for the Market Neutral Fund). Purchase of Class B Shares may be inappropriate for any investor who may qualify for reduced sales charges of Class A Shares and anyone who is over 85 years of age. The underwriter may decline purchases of Class B Shares in such situations.

Class C Shares. If you purchase Class C Shares, you will not pay a sales charge at the time of purchase. If you sell your Class C Shares within the first year after they are purchased, you will pay a deferred sales charge of 1% (1.25% for Market Neutral Fund). Class C Shares have the same distribution and service fees (1.00%) and pay comparable dividends as Class B Shares. Class C Shares of Alternatives Diversifier bear distribution and service fees of (0.75%) and therefore pay lower dividends than Class A Shares. Class C Shares do not convert to any other class of shares of the fund, so the higher distribution and service fees paid by Class C Shares continue for the life of the account.


40		Virtus Mutual Funds

Class I Shares (Global Infrastructure Fund, International Real Estate Securities Fund and Real Estate Securities Fund only). Class I Shares are offered primarily to institutional investors such as pension and profit sharing plans, other employee benefit trusts, endowments, foundations and corporations who purchase at or above the minimum amount; to private clients of, or referred by, the adviser, subadviser and their affiliates; to clients of registered investment advisers who charge an advisory, consulting or other fee for their services; or through certain wrap programs with which the Distributor has an arrangement. If you are eligible to purchase and do purchase Class I Shares, you will pay no sales charge at any time. There are no distribution and service fees applicable to Class I Shares. For additional information about purchasing Class I Shares, please contact Mutual Fund Services by calling (800) 243-1574.

Initial Sales Charge Alternative—Class A Shares

Sales Charge you may pay to purchase Class A Shares


	Sales Charge as a percentage of
Amount of Transaction at Offering Price	Offering Price		Net Amount Invested
Under $50,000	5.75	%	6.10	%
$50,000 but under $ 100,000	4.75		4.99
$100,000 but under $ 250,000	3.75		3.90
$250,000 but under $ 500,000	2.75		2.83
$500,000 but under $ 1,000,000	2.00		2.04
$1,000,000 or more	None		None

Class A Sales Charge Reductions and Waivers

Combination Purchase Privilege . Your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made at the same time by the same person, will be added together with any existing Virtus Mutual Fund account values to determine whether the combined sum entitles you to an immediate reduction in sales charges. A “person” is defined in this and the following sections as (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account) including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or certain Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to accounts over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order.

Letter of Intent. If you sign a Letter of Intent, your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made by the same person within a 13-month period, will be added together to determine whether you are entitled to an immediate reduction in sales charges. Sales charges are reduced based on the overall amount you indicate that you will buy under the Letter of Intent. The Letter of Intent is a mutually non-binding arrangement between you and the Distributor. Shares worth 5% of the amount of each purchase will be held in escrow (while remaining registered in your name) to secure payment of the higher sales charges applicable to the shares actually purchased in the event the full intended amount is not purchased.


Virtus Mutual Funds		41

Right of Accumulation. The value of your account(s) in any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund) if made over time by the same person, may be added together at the time of each purchase to determine whether the combined sum entitles you to a prospective reduction in sales charges. You must provide certain account information to the Distributor at the time of purchase to exercise this right.

Purchase by Associations. Certain groups or associations may be treated as a “person” and qualify for reduced Class A Share sales charges. The group or association must: (1) have been in existence for at least six months; (2) have a legitimate purpose other than to purchase mutual fund shares at a reduced sales charge; (3) work through an investment dealer; or (4) not be a group whose sole reason for existing is to consist of members who are credit card holders of a particular company, policyholders of an insurance company, customers of a bank or a broker-dealer or clients of an investment adviser.

Account Reinstatement Privilege. Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A, Class B or Class C Shares on which you have previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more.

Sales at Net Asset Value. In addition to the programs summarized above, the Funds may sell their Class A Shares at net asset value without an initial sales charge to certain types of accounts or account holders, including, but not limited to: trustees of the Virtus Mutual Funds; directors, officers, employees and sales representatives of the adviser, subadviser (if any) or Distributor or a corporate affiliate of the adviser, subadviser or Distributor; private clients of an adviser or subadviser to any of the Virtus Mutual Funds; registered representatives and employees of dealers with which the Distributor has sales agreements; and certain qualified employee benefit plans, endowment funds or foundations. Please see the Statement of Additional Information for more information about qualifying for purchases of Class A Shares at net asset value.

Deferred Sales Charge Alternative—Class B Shares and Class C Shares

Class B Shares and Class C Shares are purchased without an initial sales charge; however, shares sold within a specified time period are subject to a declining CDSC at the rates listed below. The sales charge will be multiplied by the then current market value or the initial cost of the shares being redeemed, whichever is less. No sales charge will be imposed on increases in net asset value or on shares purchased through the reinvestment of income dividends or capital gain distributions. To minimize the sales charge, shares not subject to any charge will be redeemed first, followed by shares held the longest time. To calculate the number of shares owned and time period held, all Class B Shares purchased in any month are considered purchased on the last day of the preceding month, and all Class C Shares are considered purchased on the trade date.

Deferred Sales Charge you may pay to sell Class B Shares

Real Estate Securities Fund


Year	1		2		3		4		5		6+
CDSC	5	%	4	%	3	%	2	%	2	%	0	%

Market Neutral Fund

Year	1		2		3		4		5		6		7+
CDSC	5	%	4	%	3	%	3	%	2	%	1	%	0	%

Deferred Sales Charge you may pay to sell Class C Shares

Alternatives Diversifier Fund, Global Infrastructure Fund, International Real Estate Securities Fund and Real Estate Securities Fund


Year	1		2+
CDSC	1	%	0	%

Market Neutral Fund

Year	1		2+
CDSC	1.25	%	0	%


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Compensation to Dealers

Dealers with whom the Distributor has entered into sales agreements receive a discount or commission on Class A Shares as described below.


Amount of Transaction at Offering Price	Sales Charge as a percentage of Offering Price		Sales Charge as a percentage of Amount Invested		Dealer Discount as a Percentage of Offering Price
Under $50,000	5.75	%	6.10	%	5.00	%
$50,000 but under $ 100,000	4.75		4.99		4.25
$100,000 but under $ 250,000	3.75		3.90		3.25
$250,000 but under $ 500,000	2.75		2.83		2.25
$500,000 but under $ 1,000,000	2.00		2.04		1.75
$1,000,000 or more	None		None		None

From its own profits and resources, the Distributor does intend to: (a) from time to time, pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (b) pay broker-dealers a finder’s fee in an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (c) excluding purchases as described in (b) above, pay broker-dealers an amount equal to 1.00% of the amount of Class A Shares sold from $1,000,000 to $3,000,000, 0.50% on amounts of $3,000,001 to $10,000,000 and 0.25% on amounts greater than $10,000,000. If part or all of such investment as described in (b) and (c) above, including investments by qualified employee benefit plans, is subsequently redeemed within one year, a 1% CDSC may apply, except for redemptions of shares purchased on which a finder’s fee would have been paid where such investor’s dealer of record, due to the nature of the investor’s account, notifies the Distributor prior to the time of the investment that the dealer waives the finder’s fee otherwise payable to the dealer, or agrees to receive such finder’s fee ratably over a 12-month period. For purposes of determining the applicability of the CDSC, the one-year CDSC period begins on the last day of the month preceding the month in which the purchase was made. Any dealer who receives more than 90% of a sales charge may be deemed to be an “underwriter” under the Securities Act of 1933. VP Distributors reserves the right to discontinue or alter such fee payment plans at any time.

From its own resources or pursuant to the distribution and shareholder servicing plans, and subject to the dealers’ prior approval, the Distributor may provide additional compensation to registered representatives of dealers in the form of travel expenses, meals, and lodging associated with training and educational meetings sponsored by the Distributor. The Distributor may also provide gifts amounting in value to less than $100, and occasional meals or entertainment, to registered representatives of dealers. Any such travel expenses, meals, lodging, gifts or entertainment paid will not be preconditioned upon the registered representatives’ or dealers’ achievement of a sales target. The Distributor may, from time to time, reallow the entire portion of the sales charge on Class A shares which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings.


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Your Account

Opening an Account

Your financial advisor can assist you with your initial purchase as well as all phases of your investment program. If you are opening an account by yourself, please follow the instructions outlined below. These procedures do not apply to purchases of Class I Shares. For additional information about purchasing Class I Shares, please contact Mutual Fund Services by calling (800) 243-1574.

The funds have established the following preferred methods of payment for fund shares:

Checks drawn on an account in the name of the investor and made payable to Virtus Mutual Funds;

Checks drawn on an account in the name of the investor’s company or employer and made payable to Virtus Mutual Funds; or

Wire transfers or Automated Clearing House (ACH) transfers from an account in the name of the investor, or the investor’s company or employer.

Payment in other forms may be accepted at the discretion of the funds. Please specify the name(s) of the fund or funds in which you would like to invest on the check or transfer instructions.

Step 1.

Your first choice will be the initial amount you intend to invest.

Minimum initial investments:

$500 for all other accounts.

Minimum additional investments:

$25 for any account.

The funds reserve the right to refuse a purchase order for any reason.

Step 2.

Your second choice will be what class of shares to buy. Each share class has different sales and distribution charges. Because all future investments in your account will be made in the share class you choose when you open your account, you should make your decision carefully. Your financial advisor can help you pick the share class that makes the most sense for your situation.


44		Virtus Mutual Funds

Step 3.

Your next choice will be how you want to receive any dividends and capital gain distributions. Your options are:

Receive both dividends and capital gain distributions in additional shares;

Receive dividends in additional shares and capital gain distributions in cash;

Receive dividends in cash and capital gain distributions in additional shares; or

Receive both dividends and capital gain distributions in cash.

No interest will be paid on uncashed distribution checks.

How to Buy Shares


		To Open An Account (Class A, Class B and Class C Shares only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimum investments or limitations on buying shares.
Through the mail		Complete a New Account Application and send it with a check payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
Through express delivery		Complete a New Account Application and send it with a check payable to the fund. Send them to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809.
By Federal Funds wire		Call us at (800) 243-1574 (press 1, then 0).
By Systematic Purchase		Complete the appropriate section on the application and send it with your initial investment payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).

The price at which a purchase is effected is based on the net asset value determined after receipt of a purchase order by the funds’ Transfer Agent.


Virtus Mutual Funds		45

How to Sell Shares

You have the right to have the funds buy back shares at the net asset value next determined after receipt of a redemption order by the funds’ Transfer Agent or an authorized agent. In the case of a Class B Share or Class C Share redemption, and certain Class A Share redemptions, you will be subject to the applicable contingent deferred sales charge, if any, for such shares. Subject to certain restrictions, shares may be redeemed by telephone or in writing. In addition, shares may be sold through securities dealers, brokers or agents who may charge customary commissions or fees for their services. The funds do not charge any redemption fees. Payment for shares redeemed is made within seven days; however, redemption proceeds will not be disbursed until each check used for purchases of shares has been cleared for payment by your bank, which may take up to 15 days after receipt of the check.


		To Sell Shares (Class A, Class B and Class C Shares only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimums on redemptions of accounts.
Through the mail		Send a letter of instruction and any share certificates (if you hold certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
Through express delivery		Send a letter of instruction and any share certificates (if you hold certificate shares) to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
By telephone		For sales up to $50,000, requests can be made by calling (800) 243-1574.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).

Things You Should Know When Selling Shares

Redemptions by Mail

If you are selling shares held individually, jointly, or as custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act:

Send a clear letter of instructions if both of these apply:

The proceeds do not exceed $50,000.

The proceeds are payable to the registered owner at the address on record.

Send a clear letter of instructions with a signature guarantee when any of these apply:

You are selling more than $50,000 worth of shares.


46		Virtus Mutual Funds

The name or address on the account has changed within the last 30 days.

You want the proceeds to go to a different name or address than on the account.

If you are selling shares held in a corporate or fiduciary account, please contact the fund’s Transfer Agent at (800) 243-1574.

Selling Shares by Telephone

The individual investor bears the risk from instructions given by an unauthorized third-party that the Transfer Agent reasonably believed to be genuine.

During times of drastic economic or market changes, telephone redemptions may be difficult to make or temporarily suspended.

Account Policies

Account Reinstatement Privilege

Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A Shares, Class B Shares or Class C Shares on which you have previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more. Send your written request to State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. You can call us at (800) 243-1574 for more information.

Please remember, a redemption and reinvestment are considered to be a sale and purchase for tax-reporting purposes. Class B and Class C shareholders who have had the contingent deferred sales charge waived because they are in the Systematic Withdrawal Program are not eligible for this reinstatement privilege.

Redemption of Small Accounts

Distributions of Small Amounts

Distributions in amounts less than $10 will automatically be reinvested in additional shares of the applicable fund.

Uncashed Checks

If any correspondence sent by the fund is returned by the postal or other delivery service as ‘‘undeliverable,’’ your dividends or any other distribution may be automatically reinvested in the fund.


Virtus Mutual Funds		47

Exchange Privileges

Exchanges may be made by telephone ((800) 243-1574) or by mail (State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).

The amount of the exchange must be equal to or greater than the minimum initial investment required.

The exchange of shares is treated as a sale and a purchase for federal income tax purposes.

Disruptive Trading and Market Timing

reducing returns to long-term shareholders through increased brokerage and administrative expenses.

Additionally, the nature of the portfolio holdings of the Global Infrastructure Fund and International Real Estate Securities Fund, or the underlying affiliated mutual funds in which the Alternatives Diversifier Fund may invest, may expose those funds to investors who engage in the type of market timing trading that seeks to take advantage of possible delays between the change in the value of a mutual fund’s portfolio holdings and the reflection of the change in the net asset value of the fund’s shares, sometimes referred to as “time-zone arbitrage.” Arbitrage market timers seek to exploit possible delays between the change in the value of a mutual fund’s portfolio holdings and the net asset value of the fund’s shares in funds that hold significant investments in foreign securities because certain foreign markets close several hours ahead of the U.S. markets. If an arbitrageur is successful, the value of the fund’s shares may be diluted if redeeming shareholders receive proceeds (and buying shareholders receive shares) based upon net asset values which do not reflect appropriate fair value prices.


48		Virtus Mutual Funds

contribution programs, mandatory retirement distributions, and transactions initiated by a plan sponsor also will not count towards the roundtrip limits. The funds may permit exchanges that they believe, in the exercise of their judgement, are not disruptive. The size of the fund and the size of the requested transaction may be considered when determining whether or not the transaction would be disruptive.

The funds currently do not charge exchange or redemption fees, or any other administrative charges on fund exchanges. The funds reserve the right to impose such fees and/or charges in the future.

The funds do not have any arrangements with any person, organization or entity to permit frequent purchases and redemptions of fund shares.

The funds cannot guarantee that their policies and procedures regarding market timing will be effective in detecting and deterring all Disruptive Trading.

Retirement Plans

Shares of the funds may be used as investments under the following retirement plans: traditional IRA, rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing, money purchase plans, and certain 403(b) plans. For more information, call (800) 243-4361.

Investor Services and Other Information


Virtus Mutual Funds		49

shares will be redeemed on the 15 ^th of the month so that the payment is made about the 20 ^th of the month. For ACH payments, you may select the day of the month for the payments to be made; if no date is specified, the payments will occur on the 15 ^th of the month. The minimum withdrawal is $25, and minimum account balance requirements continue to apply. Shareholders in the program must own Virtus Mutual Fund shares worth at least $5,000.

Disclosure of Fund Holdings. The funds make available on the Virtus Mutual Funds’ Web site, virtus.com, information with respect to each fund’s top 10 holdings and summary composition data derived from portfolio holdings information. This information is posted to the Web site at the end of each month with respect to the top 10 holdings, and at the end of each quarter with respect to summary composition information, generally within 10 business days. With respect to the Virtus International Real Estate Securities Fund and the Virtus Real Estate Securities Fund, the top ten holdings and summary composition information are reported on a one-month lag. This information will remain available on the Web site until full portfolio holdings information becomes publicly available. A full listing of each fund’s portfolio holdings becomes publicly available (i) as of the end of its second and fourth fiscal quarters in shareholder reports, which are sent to all shareholders and are filed with the Securities and Exchange Commission (“SEC”) on Form N-CSR, and (ii) at the end of its first and third fiscal quarters by filing with the SEC a Form N-Q. The funds’ shareholder reports are available without charge on Virtus’ Web site at virtus.com. The funds’ Form N-Q filings are available on the SEC’s Internet site at sec.gov. A fund may make its holdings information publicly available prior to these filings in certain circumstances. A more detailed description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is also available in the Statement of Additional Information.

Tax Status of Distributions

The funds plan to make distributions from net investment income at intervals stated in the table below and to distribute net realized capital gains, if any, at least annually.


Fund		Dividend Paid
Alternatives Diversifier Fund		Semiannually
Global Infrastructure Fund		Quarterly
International Real Estate Securities Fund		Semiannually
Market Neutral Fund		Semiannually
Real Estate Securities Fund		Quarterly


50		Virtus Mutual Funds

THIS PAGE LEFT INTENTIONALLY BLANK.

Financial Highlights

For each of the funds below, the tables present performance of the respective Predecessor Fund and for the Successor Fund for its most recent fiscal periods. The information is intended to help you understand the respective fund’s financial performance for the past five years or since inception. Some of the information reflects financial information for a single fund share. The total returns in the tables represent the rate that a fund shareholder would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers, LLP, the funds’ independent registered public accounting firm for each of the funds. Their report, together with each fund’s financial statements, are included in the fund’s most recent Annual Report, which is available upon request.


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Capital Gain Distributions Received from Affiliated Funds			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Total Distributions
Alternatives Diversifier Fund
Class A
10/1/07 to 9/30/08	$	11.80	$	0.10	⁽²⁾	$	0.11	⁽²⁾	$	(1.25	)	$	(1.04	)	$	(0.14	)	$	—		$	(0.14	)
8/1/07 to 9/30/07		11.15		0.03	⁽²⁾		—			0.69			0.72			(0.01	)		(0.06	)		(0.07	)
8/1/06 to 7/31/07		10.63		0.18	⁽²⁾		0.13	⁽²⁾		0.41	⁽⁹⁾		0.72			(0.20	)		—	⁽⁵⁾		(0.20	)
11/30/05 ⁽⁶⁾ to 7/31/06		10.00		0.08	⁽²⁾		0.02	⁽²⁾		0.57			0.67			(0.04	)		—			(0.04	)
Class C
10/1/07 to 9/30/08	$	11.70		0.02	⁽²⁾		0.12	⁽²⁾	$	(1.27	)	$	(1.13	)	$	(0.07	)	$	—		$	(0.07	)
8/1/07 to 9/30/07		11.07		0.02	⁽²⁾		—			0.68			0.70			(0.01	)		(0.06	)		(0.07	)
8/1/06 to 7/31/07		10.58		0.11	⁽²⁾		0.14	⁽²⁾		0.38	⁽⁹⁾		0.63			(0.14	)		—	⁽⁵⁾		(0.14	)
11/30/05 ⁽⁶⁾ to 7/31/06		10.00		0.03	⁽²⁾		0.04	⁽²⁾		0.54			0.61			(0.03	)		—			(0.03	)
Global Infrastructure Fund
Class A
10/1/07 to 9/30/08	$	13.70	$	0.31					$	(2.31	)	$	(2.00	)	$	(0.28	)	$	(0.51	)	$	(0.79	)
5/1/07 to 9/30/07		13.66		0.18						0.23			0.41			(0.23	)		(0.14	)		(0.37	)
5/1/06 to 4/30/07		10.60		0.44						3.03			3.47			(0.41	)		—			(0.41	)
5/1/05 to 4/30/06		10.13		0.42						0.44			0.86			(0.39	)		—			(0.39	)
12/30/04 ⁽⁶⁾ to 4/30/05		10.00		0.13						0.08			0.21			(0.08	)		—			(0.08	)
Class C
10/1/07 to 9/30/08	$	13.66	$	0.23					$	(2.31	)	$	(2.08	)	$	(0.18	)	$	(0.51	)	$	(0.69	)
5/1/07 to 9/30/07		13.62		0.14						0.22			0.36			(0.18	)		(0.14	)		(0.32	)
5/1/06 to 4/30/07		10.57		0.37						3.01			3.38			(0.33	)		—			(0.33	)
5/1/05 to 4/30/06		10.12		0.35						0.43			0.78			(0.33	)		—			(0.33	)
12/30/04 ⁽⁶⁾ to 4/30/05		10.00		0.12						0.07			0.19			(0.07	)		—			(0.07	)
Class I
6/6/08 ⁽⁶⁾ to 9/30/08	$	13.41	$	0.07					$	(2.40	)	$	(2.33	)	$	(0.18	)	$	—		$	(0.18	)
International Real Estate Securities Fund
Class A
10/1/07 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.21					$	(3.32	)	$	(3.11	)	$	(0.17	)	$	—		$	(0.17	)
Class C
10/1/07 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.20					$	(3.38	)	$	(3.18	)	$	(0.12	)	$	—		$	(0.12	)
Class I
10/1/07 ⁽⁶⁾ to 9/30/08	$	10.00	$	0.25					$	(3.35	)	$	(3.10	)	$	(0.18	)	$	—		$	(0.18	)


52		Virtus Mutual Funds


Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (in thousands)		Ratio of Net Operating Expenses to Average Net Assets ⁽⁸⁾		Ratio of Gross Expenses to Average Net Assets (before waivers and reimbursements) ⁽⁸⁾		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(1.18	)	$	10.62	(8.94	)%	$	267,294	0.31	%	0.52	%	0.89	%	32	%
	0.65			11.80	6.45	⁽⁴⁾		109,620	0.34	⁽³⁾	0.54	⁽³⁾	1.74	⁽³⁾	18	⁽⁴⁾
	0.52			11.15	6.76			95,230	0.26		0.51		1.61		11
	0.63			10.63	6.72	⁽⁴⁾		1,231	0.20	⁽³⁾	31.52	⁽³⁾	1.11	⁽³⁾	81	⁽⁴⁾

$	(1.20	)	$	10.50	(9.71	)%	$	137,964	1.06	%	1.27	%	0.14	%	32	%
	0.63			11.70	6.32	⁽⁴⁾		68,343	1.09	⁽³⁾	1.29	⁽³⁾	0.99	⁽³⁾	18	⁽⁴⁾
	0.49			11.07	6.01			60,669	1.01		1.26		0.93		11
	0.58			10.58	6.16	⁽⁴⁾		581	0.95	⁽³⁾	46.88	⁽³⁾	0.38	⁽³⁾	81	⁽⁴⁾


$	(2.79	)	$	10.91	(15.63	)%	$	75,664	1.15	%	1.22	%	2.39	%	60	%
	0.04			13.70	3.02	⁽⁴⁾		57,938	1.19	⁽³⁾	1.25	⁽³⁾	3.23	⁽³⁾	29	⁽⁴⁾
	3.06			13.66	33.74			51,190	1.17		1.40		3.64		21
	0.47			10.60	8.66			14,298	1.15		2.72		4.06		40
	0.13			10.13	2.09	⁽⁴⁾		6,163	1.15	⁽³⁾	5.59	⁽³⁾	3.81	⁽³⁾	17	⁽⁴⁾

$	(2.77	)	$	10.89	(16.18	)%	$	1,856	1.90	%	1.97	%	1.72	%	60	%
	0.04			13.66	2.72	⁽⁴⁾		1,964	1.95	⁽³⁾	2.00	⁽³⁾	2.47	⁽³⁾	29	⁽⁴⁾
	3.05			13.62	32.55			1,769	1.91		2.19		3.11		21
	0.45			10.57	7.87			1,108	1.90		3.54		3.38		40
	0.12			10.12	1.88	⁽⁴⁾		330	1.90	⁽³⁾	8.16	⁽³⁾	3.58	⁽³⁾	17	⁽⁴⁾

$	(2.51	)	$	10.90	(17.51	)% ⁽⁴⁾	$	82	0.90	% ⁽³⁾	1.01	% ⁽³⁾	1.83	% ⁽³⁾	60	% ⁽⁴⁾


$	(3.28	)	$	6.72	(31.46	)%	$	60,907	1.50	%	2.11	%	2.74	%	8	%

$	(3.30	)	$	6.70	(32.09	)%	$	141	2.23	%	3.00	%	2.52	%	8	%

$	(3.28	)	$	6.72	(31.32	)%	$	69	1.24	%	2.16	%	3.00	%	8	%


Virtus Mutual Funds		53

Financial Highlights (continued)


	Net Asset Value, Beginning of Period		Net Investment Income (Loss) ⁽²⁾			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Total Distributions			Change in Net Asset Value
Market Neutral Fund
Class A
10/1/07 to 9/30/08	$	10.53	$	(0.09	)	$	(0.47	)	$	(0.56	)	$	(0.16	)	$	(0.16	)	$	(0.72	)
11/1/06 to 9/30/07		11.19		0.14			(0.58	)		(0.44	)		(0.22	)		(0.22	)		(0.66	)
11/1/05 to 10/31/06		11.87		0.12			(0.80	)		(0.68	)		—			—			(0.68	)
11/1/04 to 10/31/05		11.51		(0.03	)		0.39			0.36			—			—			0.36
11/1/03 to 10/31/04		11.39		(0.16	)		0.28			0.12			—			—			0.12
11/1/02 to 10/31/03		12.09		(0.23	)		(0.47	)		(0.70	)		—			—			(0.70	)
Class B
10/1/07 to 9/30/08	$	10.17	$	(0.12	)	$	(0.49	)	$	(0.61	)	$	(0.09	)	$	(0.09	)	$	(0.70	)
11/1/06 to 9/30/07		10.80		0.08			(0.57	)		(0.49	)		(0.14	)		(0.14	)		(0.63	)
11/1/05 to 10/31/06		11.55		0.02			(0.77	)		(0.75	)		—			—			(0.75	)
11/1/04 to 10/31/05		11.28		(0.13	)		0.40			0.27			—			—			0.27
11/1/03 to 10/31/04		11.24		(0.24	)		0.28			0.04			—			—			0.04
11/1/02 to 10/31/03		12.02		(0.31	)		(0.47	)		(0.78	)		—			—			(0.78	)
Class C
10/1/07 to 9/30/08	$	10.12	$	(0.12	)	$	(0.49	)	$	(0.61	)	$	(0.08	)	$	(0.08	)	$	(0.69	)
11/1/06 to 9/30/07		10.75		0.07			(0.56	)		(0.49	)		(0.14	)		(0.14	)		(0.63	)
11/1/05 to 10/31/06		11.49		0.02			(0.76	)		(0.74	)		—			—			(0.74	)
11/1/04 to 10/31/05		11.22		(0.11	)		0.38			0.27			—			—			0.27
11/1/03 to 10/31/04		11.18		(0.24	)		0.28			0.04			—			—			0.04
11/1/02 to 10/31/03		11.96		(0.31	)		(0.47	)		(0.78	)		—			—			(0.78	)


54		Virtus Mutual Funds


Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (000s)		Ratio of Net Expenses (including dividends on short sales, after expense reimbursement) to Average Net Assets		Ratio of Net Expenses (including dividends on short sales, before expense reimbursement) to Average Net Assets		Ratio of Gross Expenses (excluding dividends on short sales, after expense reimbursement) to Average Net Assets		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	9.81	(5.36	)%	$	119,387	3.49	%	3.84	%	1.81	%	(0.85	)%	285	%
	10.53	(3.86	) ⁽⁴⁾		54,630	3.56	⁽³⁾	3.95	⁽³⁾	1.91	⁽³⁾	1.45	⁽³⁾	394	⁽⁴⁾
	11.19	(5.81	)		89,054	3.63		3.63		2.19		1.04		285
	11.87	3.13			111,133	3.65		3.65		2.20		(0.26	)	177
	11.51	1.05			70,892	3.42		3.42		2.21		(1.45	)	175
	11.39	(5.79	)		72,428	3.85		3.85		2.29		(2.08	)	329

$	9.47	(6.04	)%	$	1,678	4.19	%	4.55	%	2.55	%	(1.19	)%	285	%
	10.17	(4.64	) ⁽⁴⁾		2,651	4.22	⁽³⁾	4.63	⁽³⁾	2.67	⁽³⁾	0.82	⁽³⁾	394	⁽⁴⁾
	10.80	(6.41	)		4,338	4.39		4.39		2.91		0.22		285
	11.55	2.39			7,859	4.36		4.36		2.90		(1.14	)	177
	11.28	0.36			12,290	4.11		4.11		2.91		(2.15	)	175
	11.24	(6.49	)		16,359	4.50		4.50		2.99		(2.74	)	329

$	9.43	(6.04	)%	$	4,983	4.19	%	4.55	%	2.55	%	(1.21	)%	285	%
	10.12	(4.57	) ⁽⁴⁾		7,187	4.27	⁽³⁾	4.68	⁽³⁾	2.68	⁽³⁾	0.76	⁽³⁾	394	⁽⁴⁾
	10.75	(6.44	)		18,377	4.41		4.41		2.92		0.19		285
	11.49	2.41			40,584	4.35		4.35		2.90		(0.97	)	177
	11.22	0.36			25,779	4.12		4.12		2.91		(2.15	)	175
	11.18	(6.44	)		31,102	4.54		4.54		2.99		(2.77	)	329


Virtus Mutual Funds		55

Financial Highlights (continued)


	Net Asset Value, Beginning of Period		Net Investment Income (Loss) ⁽²⁾		Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains
Real Estate Securities Fund
Class A
10/1/07 to 9/30/08	$	34.10	$	0.45	$	(3.88	)	$	(3.43	)	$	(0.47	)	$	(1.01	)
12/1/06 to 9/30/07		38.18		0.32		(2.59	)		(2.27	)		(0.32	)		(1.49	)
12/1/05 to 11/30/06		28.15		0.30		10.73			11.03			(0.37	)		(0.63	)
12/1/04 to 11/30/05		25.46		0.43		4.08			4.51			(0.42	)		(1.40	)
12/1/03 to 11/30/04		20.09		0.44		5.60			6.04			(0.50	)		(0.17	)
12/1/02 to 11/30/03		15.59		0.62		4.62			5.24			(0.62	)		(0.12	)
Class B
10/1/07 to 9/30/08	$	33.72	$	0.22	$	(3.83	)	$	(3.61	)	$	(0.25	)	$	(1.01	)
12/1/06 to 9/30/07		37.74		0.10		(2.56	)		(2.46	)		(0.07	)		(1.49	)
12/1/05 to 11/30/06		27.86		0.07		10.59			10.66			(0.15	)		(0.63	)
12/1/04 to 11/30/05		25.21		0.23		4.05			4.28			(0.23	)		(1.40	)
12/1/03 to 11/30/04		19.91		0.27		5.54			5.81			(0.34	)		(0.17	)
12/1/02 to 11/30/03		15.46		0.48		4.59			5.07			(0.50	)		(0.12	)
Class C
10/1/07 to 9/30/08	$	34.07	$	0.23	$	(3.88	)	$	(3.65	)	$	(0.24	)	$	(1.01	)
12/1/06 to 9/30/07		38.11		0.10		(2.59	)		(2.49	)		(0.06	)		(1.49	)
12/1/05 to 11/30/06		28.12		0.06		10.71			10.77			(0.15	)		(0.63	)
12/1/04 to 11/30/05		25.43		0.25		4.07			4.32			(0.23	)		(1.40	)
12/1/03 to 11/30/04		20.07		0.26		5.61			5.87			(0.34	)		(0.17	)
7/25/03 (inception) to 11/30/03		17.90		0.19		2.13			2.32			(0.15	)		—
Class I
10/1/07 to 9/30/08	$	34.08	$	0.62	$	(3.98	)	$	(3.36	)	$	(0.54	)	$	(1.01	)
12/29/06 (inception) to 9/30/07		35.99		0.28		(1.87	)		(1.59	)		(0.31	)		(0.01	)

Footnote Legend

⁽¹⁾	Sales charges, where applicable, are not reflected in the total return calculation.

⁽²⁾	Computed using average shares outstanding.

⁽³⁾	Annualized.

⁽⁴⁾	Not annualized.

⁽⁵⁾	Amount is less than $0.005.

⁽⁶⁾	Inception date.

⁽⁷⁾	Represents blended net expense ratio.

⁽⁸⁾	The Fund of Funds will also indirectly bear its prorated share of expenses of the underlying funds. Such expenses are not included in the calculation of this ratio.

⁽⁹⁾	The amount shown for a share outstanding throughout the period does not accord with the aggregate net loss on investments for the period because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund.


56		Virtus Mutual Funds


Total Distributions			Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (in thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (before waivers and reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(1.48	)	$	(4.91	)	$	29.19	(9.94	)%	$	862,062	1.37	% ⁽⁷⁾	1.45	%	1.51	%	32	%
	(1.81	)		(4.08	)		34.10	(6.14	) ⁽⁴⁾		1,136,923	1.32	⁽³⁾	1.39	⁽³⁾	1.06	⁽³⁾	25	⁽⁴⁾
	(1.00	)		10.03			38.18	40.37			1,289,007	1.30		1.30		0.94		24
	(1.82	)		2.69			28.15	18.67			737,744	1.30		1.30		1.68		22
	(0.67	)		5.37			25.46	30.68			511,107	1.28		1.28		1.98		28
	(0.74	)		4.50			20.09	34.81			260,615	1.30		1.34		3.52		16

$	(1.26	)	$	(4.87	)	$	28.85	(10.65	)%	$	35,376	2.12	% ⁽⁷⁾	2.20	%	0.76	%	32	%
	(1.56	)		(4.02	)		33.72	(6.72	) ⁽⁴⁾		49,964	2.07	⁽³⁾	2.13	⁽³⁾	0.32	⁽³⁾	25	⁽⁴⁾
	(0.78	)		9.88			37.74	39.29			71,240	2.05		2.05		0.24		24
	(1.63	)		2.65			27.86	17.81			59,042	2.05		2.05		0.93		22
	(0.51	)		5.30			25.21	29.74			57,797	2.03		2.03		1.25		28
	(0.62	)		4.45			19.91	33.76			39,299	2.05		2.09		2.79		16

$	(1.25	)	$	(4.90	)	$	29.17	(10.63	)%	$	71,278	2.12	% ⁽⁷⁾	2.20	%	0.76	%	32	%
	(1.55	)		(4.04	)		34.07	(6.71	) ⁽⁴⁾		100,321	2.07	⁽³⁾	2.14	⁽³⁾	0.32	⁽³⁾	25	⁽⁴⁾
	(0.78	)		9.99			38.11	39.32			112,794	2.05		2.05		0.19		24
	(1.63	)		2.69			28.12	17.80			67,764	2.05		2.05		0.97		22
	(0.51	)		5.36			25.43	29.78			38,399	2.03		2.03		1.17		28
	(0.15	)		2.17			20.07	13.03	⁽⁴⁾		4,785	2.05	⁽³⁾	2.07	⁽³⁾	2.88	⁽³⁾	16	⁽⁴⁾

$	(1.55	)	$	(4.91	)	$	29.17	(9.71	)%	$	106,159	1.12	% ⁽⁷⁾	1.20	%	2.11	%	32	%
	(0.32	)		(1.91	)		34.08	(4.44	) ⁽⁴⁾		32,887	1.11	⁽³⁾	1.23	⁽³⁾	1.09	⁽³⁾	25	⁽⁴⁾


Virtus Mutual Funds		57

Alternatives Diversifier Fund

Appendix A

Investment Techniques and Practices of Underlying Affiliated Mutual Funds and Exchange-Traded Funds (ETFs)

In pursuing its investment objectives, each underlying affiliated mutual fund and ETF may engage in the following investment techniques and practices to the extent such techniques and practices are consistent with the underlying affiliated mutual fund’s or ETF’s investment objective. These investment techniques and practices are described, together with their associated risks, in the Statement of Additional Information.

Debt Securities

Corporate Debt Securities

Convertible Securities

Derivatives

Forward Foreign Currency Exchange Contracts

Financial Futures Contracts and Related Options

Options

Swap Agreements

Emerging Markets

Foreign Securities

High Yield-High Risk Securities

Illiquid and Restricted Securities

Interest Rate Transactions

Money Market Instruments

Mortgage-Related and Other Asset-Backed Securities

Mortgage Pass-Through Securities

Collateralized Mortgage Obligations (CMOs)

CMO Residuals

Stripped Mortgage-Backed Securities

Other Asset-Backed Securities

Mutual Fund Investing

Loan and Debt Participations and Assignments

Private Placements and Rule 144A Securities

Ratings

Real Estate Investment Trusts

Repurchase Agreements

Securities Lending

Short Sales

Small Companies

Warrants to Purchase Securities

When-Issued and Delayed-Delivery Transactions


58		Virtus Mutual Funds

Alternatives Diversifier Fund

Appendix B

Underlying Affiliated Mutual Funds and Exchange-Traded Funds (ETFs)

Following is a list of underlying affiliated mutual funds and ETFs (collectively, “underlying mutual funds”) in which the fund is currently invested or anticipated to be invested and their associated target weightings, as of the date of this prospectus. Not all of these underlying mutual funds will be purchased by the fund. The underlying mutual funds and their target weightings (if applicable) have been selected for use over long time periods, but may be changed in the future without shareholder approval or notice. Target weightings will deviate over the short term due to market movements and capital flows. Virtus periodically rebalances the fund’s investments in the underlying mutual funds to bring them back within their target weightings. Some portion of the fund’s portfolio will be held in cash due to purchase and redemption activity and short-term cash needs. The fund’s cash position is not reflected in the asset allocations or target weightings. Additional information about each underlying affiliated mutual fund, including a copy of an underlying affiliated mutual fund’s prospectus, Statement of Additional Information, and Annual and Semiannual reports is available on the Virtus Mutual Funds Web site, virtus.com, or you can request copies by calling Mutual Fund Services toll-free at (800)-243-1574.


Fund Name/Asset Class	Virtus Alternatives Diversifier Fund
ALTERNATIVES
Virtus Global Infrastructure Fund	15	%
Virtus International Real Estate Securities Fund	12.5	%
Virtus Market Neutral Fund	25	%
Virtus Real Estate Securities Fund	15	%
EXCHANGE-TRADED FUNDS (ETFs)
IShares S&P GSSI Natural Resources Index Fund	10	%
PowerShares DB Commodity Index Tracking Fund	15	%
PowerShares DB G10 Currency Harvest Fund	7.5	%


Virtus Mutual Funds		59

c/o State Street Bank and Trust Company

P.O. Box 8301

Boston, MA 02266-8301

ADDITIONAL INFORMATION

You can find more information about the Funds in the following documents:

Annual and Semiannual Reports

Statement of Additional Information (SAI)

The SAI contains more detailed information about the Funds. It is incorporated by reference and is legally part of the prospectus.

Mutual Fund Services: 1-800-243-1574

Text Telephone: 1-800-243-1926


Investment Company Act File No. 811-7455		1-09
8021

LOGO

VIRTUS ASSET ALLOCATION FUNDS

Virtus Wealth Builder Fund

Virtus Wealth Guardian Fund


		Wouldn’t you rather have this
		document e-mailed to you?
TRUST NAME:		Eligible shareholders can sign up for
VIRTUS OPPORTUNITIES TRUST	January 31, 2009	E-Delivery at Virtus.com

Not FDIC Insured	No Bank Guarantee	May Lose Value

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus contains important information that you should know before investing in Virtus mutual funds. Please read it carefully and retain it for future reference.


Table of Contents

Virtus Wealth Builder Fund

Investment Risk and Return Summary		2

Fund Fees and Expenses		7

Virtus Wealth Guardian Fund

Investment Risk and Return Summary		9

Fund Fees and Expenses		14

Management of the Funds		16

Pricing of Fund Shares		16

Sales Charges		18

Your Account		21

How to Buy Shares		23

How to Sell Shares		23

Things You Should Know When Selling Shares		24

Account Policies		25

Investor Services and Other Information		27

Tax Status of Distributions		28

Financial Highlights		30

Appendix A—Investment Techniques and Practices of Underlying Affiliated Mutual Funds and Exchange-Traded Funds (ETFs)		32

Appendix B—Underlying Affiliated Mutual Funds and Exchange-Traded Funds (ETFs)		33

Virtus Asset Allocation Funds

This prospectus describes two asset allocation funds that are packaged investment options all-in-one asset allocation funds.

Each of the funds is a “fund of funds,” meaning that each fund seeks to achieve its investment objective by investing its assets in other Virtus mutual funds, referred to as underlying affiliated mutual funds. Assets invested in other mutual funds incur a layering of expenses, including operating costs, advisory fees and administrative fees that shareholders in each of the funds indirectly bear.

Virtus Wealth Builder Fund seeks long-term capital appreciation consistent with a fairly aggressive level of risk relative to other of the funds.

Virtus Wealth Guardian Fund seeks long-term capital appreciation and current income consistent with a moderate level of risk relative to other of the funds.

The Asset Allocation Funds have a target allocation for the percentage of each fund’s assets to be invested in the general asset classes of equity and fixed income.

The following table indicates each Asset Allocation Fund’s target allocation between asset classes:


Fund	Equity Allocation		Fixed Income Allocation
Virtus Wealth Builder Fund	80	%	20	%
Virtus Wealth Guardian Fund	60	%	40	%


Virtus Mutual Funds		1

Virtus Wealth Builder Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Wealth Builder Fund (the “Wealth Builder Fund”) is a fund of funds that has an investment objective of seeking long-term capital appreciation. There is no guarantee that the fund will meet its objective.

Principal Investment Strategies of the Wealth Builder Fund

The fund seeks to achieve its objective by investing its assets in a mix of underlying affiliated mutual funds that employ diverse investment styles, such as value and/or growth investing. The fund’s emphasis on diversification is intended to moderate volatility by limiting the effect of any one investment style.

Under normal conditions, the fund allocates assets among underlying affiliated mutual funds to achieve a target allocation mix of approximately 80% of assets in equity mutual funds, and approximately 20% of assets in bond mutual funds. The underlying affiliated mutual funds in which the fund invests in turn invest principally (i) in equity securities of issuers of any capitalization, (ii) in debt securities of any maturity of various types of issuers and credit qualities, including those below investment grade, and (iii) in foreign issuers, including those in emerging markets. Although the fund does not concentrate its investments, certain of the underlying affiliated mutual funds in which the fund invests may concentrate their investments in a particular industry or market sector, such as real estate, or may engage in short sales.

The adviser determines the combination of affiliated mutual funds that it believes best represents the selected asset allocation. The allocations to the underlying affiliated mutual funds are based on the adviser’s assessment of the appropriate mix of risk and return characteristics to best meet the fund’s investment objective.

The adviser monitors the fund’s allocations to the underlying affiliated mutual funds and will gradually rebalance assets to maintain the targeted allocations. The adviser will review the selection of, and the target ranges within, the underlying affiliated mutual funds and may make adjustments as market changes warrant.

The subadviser to each underlying affiliated mutual fund is responsible for deciding which securities to purchase and sell for its respective underlying affiliated mutual fund.

The fund may also invest in high-quality, short-term securities.

Temporary Investment Strategy: If the adviser does not believe that market conditions are favorable to the fund’s principal investment strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing in cash or money market instruments, including, but not limited to, U.S. Government obligations maturing within one year from the date of purchase. When this allocation happens, the fund may not achieve its investment objective.

Principal Risks of an Investment

If you invest in this fund, you risk losing your investment because the fund depends on the investment performance of the underlying affiliated mutual funds. Therefore, the fund will also be subject to the risks associated with the deployment of principal investment strategies of the underlying affiliated mutual funds, which are described below.

General

Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the underlying affiliated mutual funds invest can be worse than expected, and investments may fail to perform as the adviser expects. As a result, the value of your shares may decrease.


2		Virtus Wealth Builder Fund

Allocation Risk

The fund’s ability to achieve its investment objective will depend largely on the adviser’s ability in determining asset class allocations and in selecting the appropriate mix of underlying affiliated mutual funds.

Underlying Mutual Funds Risk

Achieving the fund’s objective will depend on the performance of the underlying affiliated mutual funds, which depends on the particular securities in which the underlying affiliated mutual funds invest. Indirectly, the fund is subject to all risks associated with the underlying affiliated mutual funds. Since the fund’s performance depends on that of each underlying affiliated mutual fund, it may be subject to increased volatility.

Affiliated Fund Risk

Credit Risk

Credit risk refers to the issuer’s ability to make scheduled interest or principal payments. Generally, the lower the credit rating of a security the greater the chance that the issuer will be unable to make such payments when due. High yield-high risk securities (junk bonds) typically entail greater price volatility and principal and interest rate risk.

Equity Securities Risk

Generally, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or issuers (such as changes in inflation or consumer demand) and to events that affect particular industries (such as news about the success or failure of a new product).


Virtus Wealth Builder Fund		3

Equity REIT Securities Risk

Foreign Investing Risk

Foreign Currency Risk. Some investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rate. Investments in less developed countries whose markets are still emerging generally present risks in greater degree than those presented by investment in foreign issuers based in countries with more developed securities markets and more advanced regulatory systems.

Fully Invested in Equity Securities Risk

The net asset value of a fund that is fully invested in equity securities will decrease more quickly if the value of such securities decreases as compared to a fund that holds larger cash positions.

Industry Concentration Risk

Interest Rate Risk

Interest rate trends can have an effect on the value of the shares of the funds. If interest rates rise, the value of debt securities generally will fall. A fund that holds securities with longer maturities or durations may experience greater price fluctuations in response to changes in interest rates than a fund that holds only securities with short-term maturities or durations. Prices of longer-term securities are affected more by interest rate changes than prices of shorter-term securities.

Limited Number of Investments Risk

Conditions that negatively affect securities in the portfolios will have greater impact on funds that invest in a limited number of securities as compared with a fund that holds a greater number of security positions. In addition, such a fund may be more sensitive to changes in the market value of a single issuer in its portfolio.

Market Volatility Risk


4		Virtus Wealth Builder Fund

Mortgage-Backed and Other Pass-Through Securities Risk

The values of pass-through securities, such as collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs), may fluctuate to a greater degree than other debt securities in response to changes in interest rates. Early payoffs on the underlying loans in mortgage-backed and asset-backed pass-through securities and CMOs may result in a fund receiving less income than originally anticipated.

Non-Diversification Risk

Short-Term Investments Risk

Short-term instruments include money market instruments, repurchase agreements, certificates of deposits and bankers’ acceptances and instruments that are not U.S. Government securities. Short-term instruments are high grade short-term securities such as commercial paper, drafts, municipal notes, bankers’ acceptances and certificates of deposit. Default or insolvency of the other party to a repurchase agreement presents a risk to the investing fund.

Short Sales Risk

U.S. Government Securities Risk

Obligations issued or guaranteed by the U.S. Government, its agencies, authorities and instrumentalities, and backed by the full faith and credit of the United States, only guarantee principal and interest will be timely paid to holders of the securities. The entities do not guarantee that the value of fund shares will increase. In addition, not all U.S. Government securities are backed by the full faith and credit of the United States, but rather are the obligation solely of the entity through which they are issued.


Virtus Wealth Builder Fund		5

Performance Information

The Virtus Wealth Builder Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Wealth Builder PHOLIO, a series of Phoenix PHOLIOs (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on September 24, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Wealth Builder Fund’s commencement date.

The bar chart and the table below provide some indication of the risks of investing in the Virtus Wealth Builder Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over the life of the fund. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of two broad-based securities market indexes and a composite benchmark that reflects the target asset allocation of the fund. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for Class A Shares for a quarter was 7.88% (quarter ending December 31, 2004) and the lowest return for a quarter was -17.03% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	5 Years	Since Inception ⁽³⁾
Class A
Return Before Taxes	-36.17%	-2.34%	-0.54%
Return After Taxes on Distributions ⁽⁴⁾	-36.51%	-3.29%	-1.47%
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾ ⁽⁵⁾	-23.14%	-2.05%	-0.55%
Class C
Return Before Taxes	-32.76%	-1.89%	-0.18%
S&P 500 ^® Index ⁽⁶⁾	-37.00%	-2.19%	0.43%
Barclays Capital U.S. Aggregate Bond Index ⁽⁷⁾	5.24%	4.65%	4.98%
Composite: 80% S&P 500 ^® /20% Barclays Capital U.S. Aggregate Bond Index ⁽⁸⁾	-29.83%	-0.71%	1.47%

(3) Since August 1, 2003.

(7) The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total-return basis. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(8) A composite index consisting of 80% S&P 500 ^® Index and 20% Barclays Capital U.S. Aggregate Bond Index. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


6		Virtus Wealth Builder Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None
Redemption Fee	None	None
Exchange Fee	None	None


	Class A Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.10%	0.10%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)(d)	None	0.75%
Other Expenses	0.35%	0.35%
Acquired Fund Fees and Expenses ^(e) (Underlying Mutual Funds)	1.40%	1.40%

Total Annual Fund Operating Expenses ^(f)	1.85%	2.60%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

(c) Class A Shares and Class C Shares are authorized under the fund’s 12b-1 plan to pay fees up to 0.25% and 1.00%, respectively. In addition, the underlying affiliated mutual funds’ Class A Shares and Class Y Shares in which the fund invests impose a 0.25% 12b-1 fee. To avoid duplication of 12b-1 fees, each class of shares of the fund has reduced the 12b-1 fee by the amount of underlying affiliated mutual funds’ Class A Share and Class Y Share 12b-1 fees. The net amounts are shown in the table.

(e) Because the fund invests in other mutual funds, it is a shareholder of those underlying mutual funds and indirectly bears its proportionate share of the operating expenses, including management fees of the underlying mutual funds. These expenses are deducted from the underlying mutual funds before their share prices are calculated and are in addition to the direct fees and expenses borne by the fund and its shareholders that are also described in the fee tables above. All of the above expenses reflect the expense ratio for the fund’s last fiscal year and for each acquired (underlying) fund’s most recent fiscal period publicly reported. These estimates may vary considerably based on future asset levels of the fund, the availability of acquired (underlying) funds, the amount of fund assets invested in acquired (underlying) funds at any point in time, and the fluctuation of the expense ratios of the acquired (underlying) funds.


Virtus Wealth Builder Fund		7

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. The calculations use the combined net operating expenses of the fund and the weighted average of the total operating expenses of the underlying affiliated mutual funds. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$752	$1,123	$1,518	$2,619
Class C	$363	$808	$1,380	$2,934

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$263	$808	$1,380	$2,934


8		Virtus Wealth Builder Fund

Virtus Wealth Guardian Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Wealth Guardian Fund (the “Wealth Guardian Fund”) is a fund of funds that has an investment objective of long-term capital appreciation and current income. There is no guarantee that the fund will meet its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal conditions, the fund allocates assets among underlying affiliated mutual funds to achieve a target allocation mix of approximately 60% of assets in equity mutual funds, and approximately 40% of assets in bond mutual funds. The underlying affiliated mutual funds in which the fund invests in turn invest principally (i) in equity securities of issuers of any capitalization, (ii) in debt securities of any maturity of various types of issuers and credit qualities, including those below investment grade, and (iii) in foreign issuers, including those in emerging markets. Although the fund does not concentrate its investments, certain of the underlying affiliated mutual funds in which the fund invests may concentrate their investments in a particular industry or market sector, such as real estate, or may engage in short sales.

The subadviser to each underlying affiliated mutual fund is responsible for deciding which securities to purchase and sell for its respective underlying affiliated mutual fund.

The fund may also invest in high-quality, short-term securities.

Temporary Investment Strategy: If the adviser does not believe that market conditions are favorable to the fund’s principal investment strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing in cash or money market instruments, including but not limited to, U.S. Government obligations maturing within one year from the date of purchase. When this allocation happens, the fund may not achieve its investment objective.

Principal Risks of an Investment

General


Virtus Wealth Guardian Fund		9

Allocation Risk

Underlying Mutual Funds Risk

Affiliated Fund Risk

Credit Risk

Credit risk refers to the issuer’s ability to make scheduled interest or principal payments. Generally, the lower the credit rating of a security the greater the chance that the issuer will be unable to make such payments when due. High yield-high risk securities (junk bonds) typically entail greater price volatility and principal and interest rate risk.

Equity Securities Risk

Generally, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, equity securities will respond to events that affect entire financial markets or issuers (such as changes in inflation or consumer demand) and to events that affect particular industries (such as news about the success or failure of a new product).


10		Virtus Wealth Guardian Fund

Equity REIT Securities Risk

Foreign Investing Risk

Fully Invested in Equity Securities Risk

The net asset value of a fund that is fully invested in equity securities will decrease more quickly if the value of such securities decreases as compared to a fund that holds larger cash positions.

Industry Concentration Risk

Interest Rate Risk

Limited Number of Investments Risk

Market Volatility Risk


Virtus Wealth Guardian Fund		11

Mortgage-Backed and Other Pass-Through Securities Risk

Non-Diversification Risk

Short-Term Investments Risk

Short Sales Risk

U.S. Government Securities Risk


12		Virtus Wealth Guardian Fund

Performance Information

The Virtus Wealth Guardian Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Wealth Guardian PHOLIO, a series of Phoenix PHOLIOs (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on September 24, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Wealth Guardian Fund’s commencement date.

The bar chart and the table below provide some indication of the risks of investing in the Virtus Wealth Guardian Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over the life of the fund. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of two broad-based securities market indexes and a composite benchmark that reflects the target asset allocation of the fund. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for Class A Shares for a quarter was 5.79% (quarter ending December 31, 2004) and the lowest return for a quarter was -13.35% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾	1 Year	5 Years	Since Inception ⁽³⁾
Class A
Return Before Taxes	-30.75%	-1.66%	-0.12%
Return After Taxes on Distributions ⁽⁴⁾	-31.36%	-2.79%	-1.23%
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾⁽⁵⁾	-19.81%	-1.73%	-0.44%
Class C
Return Before Taxes	-27.19%	-1.25%	0.21%
S&P 500 ^® Index ⁽⁶⁾	-37.00%	-2.19%	0.43%
Barclays Capital U.S. Aggregate Bond Index ⁽⁷⁾	5.24%	4.65%	4.98%
Composite: 60% S&P 500 ^® /40% Barclays Capital U.S. Aggregate Bond Index ⁽⁸⁾	-22.06%	0.71%	2.45%

(3) Since August 1, 2003.

(8) A composite index consisting of 60% S&P 500 ^® Index and 40% Barclays Capital U.S. Aggregate Bond Index. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


Virtus Wealth Guardian Fund		13

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None
Redemption Fee	None	None
Exchange Fee	None	None


	Class A Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.10%	0.10%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)(d)	None	0.75%
Other Expenses	0.37%	0.37%
Acquired Fund Fees and Expenses ^(e) (Underlying Mutual Funds)	1.34%	1.34%

Total Annual Fund Operating Expenses ^(f)	1.81%	2.56%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.


14		Virtus Wealth Guardian Fund

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. The calculations use the combined net operating expenses of the fund and the weighted average of the total operating expenses of the underlying affiliated mutual funds. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$748	$1,112	$1,499	$2,579
Class C	$359	$796	$1,360	$2,895

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$259	$796	$1,360	$2,895


Virtus Wealth Guardian Fund		15

Management of the Funds

The Adviser

Virtus Investment Advisers, Inc. (“VIA”) is the investment adviser to the funds and is located at 100 Pearl Street, Hartford, CT 06103. VIA acts as the investment adviser for over 50 Mutual funds and as adviser to institutional clients. As of September 30, 2008, VIA had approximately $13.8 billion in assets under management. VIA has acted as an investment adviser for over 70 years.

Subject to the direction of the funds’ Board of Trustees, VIA is responsible for managing each fund’s investment program, the general operations and the day-to-day management of the funds’ portfolios. As compensation for its services, the adviser is entitled to a fee, payable monthly, at an annual rate of 0.10% of the average daily net assets of each fund. As a fund of funds, however, each underlying affiliated mutual fund’s adviser or subadviser manages the daily investments of the underlying affiliated mutual fund’s portfolio and receives a management fee for this service.

A discussion regarding the basis of the Board of Trustees approving the advisory agreement is available in the funds’ 2008 semiannual report covering the period October 1, 2007 through March 31, 2008.

The Wealth Guardian Fund and VIA have received an exemptive order from the Securities and Exchange Commission that permits VIA, subject to certain conditions, and without the approval of shareholders, to: (a) employ a new unaffiliated subadviser for a fund pursuant to the terms of a new subadvisory agreement, in each case either as a replacement for an existing subadviser or as an additional subadviser; (b) change the terms of any subadvisory agreement; and (c) continue the employment of a existing subadviser on the same subadvisory agreement terms where an agreement has been assigned because of a change in control of the subadviser. In such circumstances, shareholders would receive notice of such action, including the information concerning the subadviser that normally is provided in a proxy statement.

Portfolio Management

The following individuals are members of the team of investment professionals responsible for the day-to-day management of the funds’ portfolios.

Carlton Neel. Mr. Neel has served as a member of the portfolio management team for each of the funds since June 2008. Mr. Neel is a Senior Vice President of VIA, Euclid and Zweig Advisers, LLC (“Zweig”). He also serves as portfolio manager of the Virtus Small-Cap Value Fund, as well as The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc., two closed-end funds managed by Zweig. For the period from July 2002 until returning to Euclid and Zweig in April 2003, Mr. Neel was a managing director and principal of Shelter Rock Capital Partners, L.P., a market neutral hedge fund. While previously employed by Zweig from 1995 until July 2002, Mr. Neel served as senior portfolio manager for a number of the former Phoenix-Zweig mutual funds.

David Dickerson. Mr. Dickerson has served as a member of the portfolio management team for each of the funds since June 2008. Mr. Dickerson is a Senior Vice President of VIA, Euclid and Zweig Advisers, LLC (“Zweig”). He also serves as portfolio manager of the Virtus Small-Cap Value Fund, as well as The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc., two closed-end funds managed by Zweig. For the period from July 2002 until returning to Euclid and Zweig in April 2003, Mr. Dickerson was a managing director and principal of Shelter Rock Capital Partners, L.P., a market neutral hedge fund. While previously employed by Zweig from 1993 until July 2002, Mr. Dickerson served as senior portfolio manager for a number of the former Phoenix-Zweig mutual funds.

Please refer to the Statement of Additional Information for additional information about the funds’ portfolio managers, including the structure of and method of computing compensation, other accounts managed and ownership of shares of the funds.

Pricing of Fund Shares

How is the Share Price determined?

adding the values of all securities and other assets of the fund;

subtracting liabilities; and

dividing the result by the total number of outstanding shares of that class.


16		Virtus Mutual Funds

Assets: Each fund’s assets consist primarily of shares of the underlying affiliated mutual funds, which are valued at their respective net asset values and exchange-traded funds, which are valued at current market prices. To determine net asset value, each fund and each underlying affiliated mutual fund values its assets at market value. Equity securities held by the underlying affiliated mutual funds, and ETFs held directly by the funds, 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 (other than short-term investments) held by the underlying affiliated mutual funds are valued on the basis of broker quotations or valuations provided by a pricing service, which in determining value utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. As required, some securities and assets held by the underlying affiliated mutual funds are valued at fair value as determined in good faith by, or under the direction of, the Board of Trustees. Other assets, such as accrued interest, accrued dividends and cash are also included in determining a fund’s net asset value.

The net asset value per share (“NAV”) of each class of each fund is determined as of the close of regular trading (normally 4:00 PM eastern time) on days when the New York Stock Exchange (“NYSE”) is open for trading. A fund will not calculate its net asset values per share class on days when the NYSE is closed for trading. Since the underlying affiliated mutual funds may hold securities that are traded on foreign exchanges that trade on weekends or other holidays when the funds and the underlying affiliated mutual funds do not price their shares, the net asset value of the funds’ shares may change on days when shareholders will not be able to purchase or redeem the funds’ shares.

How are securities of the underlying mutual funds fair valued?

If market quotations are not readily available or where available prices are not reliable, the fund determines a “fair value” for an investment according to policies and procedures approved by the Trustees. The types of assets for which such pricing might be required include: (i) securities whose trading has been suspended; (ii) securities where the trading market is unusually thin or trades have been infrequent; (iii) debt securities that have recently gone into default and for which there is no current market quotation; (iv) a security whose market price is not available from an independent pricing source and for which otherwise reliable quotes are not available; (v) securities of an issuer that has entered into a restructuring; (vi) a security whose price as provided by any pricing source, does not, in the opinion of the adviser or subadviser, reflect the security’s market value; (vii) foreign securities subject to trading collars for which no or limited trading takes place; and (viii) securities where the market quotations are not readily available as a result of “significant” events. This list is not inclusive of all situations that may require a security to be fair valued, nor is it intended to be conclusive in determining whether a specific event requires fair valuation.

The value of any portfolio security held by the fund for which market quotations are not readily available shall be determined in good faith and in a manner that assesses the security’s “fair value” on the valuation date (i.e., the amount that the fund might reasonably expect to receive for the security upon its current sale), based on a consideration of all available facts and all available information, including, but not limited to, the following: (i) the fundamental analytical data relating to the investment; (ii) an evaluation of the forces which influence the market in which these securities are purchased and sold (e.g., the existence of merger proposals or tender offers that might affect the value of the security); (iii) price quotes from dealers and/or pricing services; (iv) an analysis of the issuer’s financial statements; (v) trading volumes on markets, exchanges or among dealers; (vi) recent news about the security or issuer; (vii) changes in interest rates; (viii) information obtained from the issuer, analysts, other financial institutions and/or the appropriate stock exchange (for exchange traded securities); (ix) whether two or more dealers with whom the adviser/subadviser regularly effects trades are willing to purchase or sell the security at comparable prices; (x) other news events or relevant matters; and (xi) government (domestic or foreign) actions or pronouncements.


Virtus Mutual Funds		17

traded in these foreign markets. In such 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.

The value of a security, as determined using a fund’s fair valuation procedures, may not reflect such security’s market value.

The funds purchase Class A Shares and Class Y Shares, as applicable, of each underlying affiliated mutual fund at net asset value.

At what price are shares purchased?

All investments received by the funds’ authorized agents prior to the close of regular trading on the NYSE (normally 4:00 PM eastern time) will be executed based on that day’s net asset value. Shares credited to your account from the reinvestment of fund distributions will be in full and fractional shares that are purchased at the closing net asset value on the next business day on which the fund’s net asset value is calculated following the dividend record date.

Sales Charges

What are the classes and how do they differ?

Each fund presently offers two classes of shares. Each class of shares has different sales and distribution charges. (See “Fund Fees and Expenses” previously in this prospectus.) The funds have adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940 as amended (the “1940 Act”), that authorize the funds to pay distribution and service fees for the sale of their shares and for services provided to shareholders. The 12b-1 fees applicable to each class of shares will be reduced by the 12b-1 fee of the underlying affiliated mutual funds’ Class A Shares or Class Y Shares.

What arrangement is best for you?

Your financial representative should recommend only those arrangements that are suitable for you based on known information. In certain instances, you may be entitled to a reduction or waiver of sales charges. For instance, you may be entitled to a sales charge discount on Class A Shares if you purchase more than certain breakpoint amounts. You should inform or inquire of your financial representative whether or not you may be entitled to a sales charge discount attributable to your total holdings in a fund or related funds. To determine eligibility for a sales charge discount, you may aggregate all of your accounts (including joint accounts, retirement accounts such as IRAs, non-IRAs, etc.) and those of your spouse and minor children. The financial representative may request you to provide an account statement or other holdings information to determine your eligibility for a breakpoint and to make certain all involved parties have the necessary data. Additional information about the classes of shares offered, sales charges, breakpoints and discounts follows in this section and also may be found in the Statement of Additional Information in the section entitled “How to Buy Shares.” This information is available free of charge, and in a clear and prominent format, at the Individual Investors section of the Virtus Mutual Funds’ Web site at virtus.com. Please be sure that you fully understand these choices before investing. If you or your financial representative require additional assistance, you may also contact Mutual Fund Services by calling toll-free (800) 243-1574.

Class A Shares. If you purchase Class A Shares, you will pay a sales charge at the time of purchase equal to 5.75% of the offering price (6.10% of the amount invested). The sales charge may be reduced or waived under certain conditions. (See “Initial Sales Charge Alternative—Class A Shares” below.) Generally, Class A Shares are not subject to any charges by the fund when redeemed; however, a 1% contingent deferred sales charge (“CDSC”) may be imposed on certain redemptions within one year on purchases on which a finder’s fee has been paid. The one-year period begins on the last day of the month preceding the month in which the purchase was made. Class A Shares have no distribution or service fees and therefore pay higher dividends than Class C Shares.


18		Virtus Mutual Funds

Class C Shares. If you purchase Class C Shares, you will not pay a sales charge at the time of purchase. If you sell your Class C Shares within the first year after they are purchased, you will pay a deferred sales charge of 1%. (See “Deferred Sales Charge Alternative—Class C Shares” below.) Class C Shares bear distribution and service fees (0.75%) and therefore pay lower dividends than Class A Shares. Class C Shares do not convert to any other class of shares of the funds, so the higher distribution and service fees paid by Class C Shares continue for the life of the account.

Initial Sales Charge Alternative—Class A Shares

The public offering price of Class A Shares is the net asset value plus a sales charge that varies depending on the size of your purchase. (See “Class A Shares—Reduced Initial Sales Charges” in the Statement of Additional Information.) Shares purchased based on the automatic reinvestment of income dividends or capital gain distributions are not subject to any sales charges. The sales charge is divided between your investment dealer and the fund’s underwriter, VP Distributors, Inc. (“VP Distributors” or “the Distributor”) (until February 4, 2009 named Phoenix Equity Planning Corporation).

Sales Charge you may pay to purchase Class A Shares


	Sales Charge as a percentage of
Amount of Transaction at Offering Price	Offering Price		Net Amount Invested
Under $50,000	5.75	%	6.10	%
$50,000 but under $100,000	4.75		4.99
$100,000 but under $250,000	3.75		3.90
$250,000 but under $500,000	2.75		2.83
$500,000 but under $1,000,000	2.00		2.04
$1,000,000 or more	None		None

Sales Charge Reductions and Waivers

Combination Purchase Privilege. Your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made at the same time by the same person, will be added together with any existing Virtus Mutual Fund account values to determine whether the combined sum entitles you to an immediate reduction in sales charges. A “person” is defined in this and the following sections as: (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account), including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or certain Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to accounts over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order.


Virtus Mutual Funds		19

Account Reinstatement Privilege. Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A or Class C Shares on which you have previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more.

Sales at Net Asset Value. In addition to the programs summarized above, the funds may sell their Class A Shares at net asset value without an initial sales charge to certain types of accounts or account holders, including, but not limited to: trustees of the Virtus Mutual Funds; directors, officers, employees and sales representatives of the adviser, subadviser (if any) or Distributor or a corporate affiliate of the adviser, subadviser or Distributor; private clients of an adviser or subadviser to any of the Virtus Mutual Funds; registered representatives and employees of dealers with which the Distributor has sales agreements; and certain qualified employee benefit plans, endowment funds or foundations. Please see the Statement of Additional Information for more information about qualifying for purchases of Class A Shares at net asset value.

Deferred Sales Charge Alternative—Class C Shares

Class C Shares are purchased without an initial sales charge; however, shares sold within a specified time period are subject to a declining contingent deferred sales charge (“CDSC”) at the rates listed below. The sales charge will be multiplied by the then current market value or the initial cost of the shares being redeemed, whichever is less. No sales charge will be imposed on increases in net asset value or on shares purchased through the reinvestment of income dividends or capital gain distributions. To minimize the sales charge, shares not subject to any charge will be redeemed first, followed by shares held the longest time. To calculate the number of shares owned and time period held, all Class C Shares are considered purchased on the trade date.

Deferred Sales Charge you may pay to sell Class C Shares


Year	1		2+
CDSC	1	%	0%

Compensation to Dealers

Dealers with whom the Distributor has entered into sales agreements receive a discount or commission on Class A Shares as described below.


Amount of Transaction at Offering Price	Sales Charge as a Percentage of Offering Price		Sales Charge as a Percentage of Amount Invested		Dealer Discount as a Percentage of Offering Price
Under $50,000	5.75	%	6.10	%	5.00	%
$50,000 but under $100,000	4.75		4.99		4.25
$100,000 but under $250,000	3.75		3.90		3.25
$250,000 but under $500,000	2.75		2.83		2.25
$500,000 but under $1,000,000	2.00		2.04		1.75
$1,000,000 or more	None		None		None

With respect to Class C Shares, the Distributor intends to pay investment dealers a sales commission of 1% of the sale price of Class C Shares sold by such dealers. (This sales commission will not be paid to dealers for sales of Class C Shares purchased by 401(k) participants of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these plan participants’ purchases.) Your broker, dealer or financial advisor may also charge you additional commissions or fees for their services in selling shares to you provided they notify the Distributor of their intention to do so.


20		Virtus Mutual Funds

Your Account

Opening an Account

The funds have established the following preferred methods of payment for fund shares:

Checks drawn on an account in the name of the investor and made payable to Virtus Mutual Funds;

Checks drawn on an account in the name of the investor’s company or employer and made payable to Virtus Mutual Funds; or

Wire transfers or Automated Clearing House (ACH) transfers from an account in the name of the investor, or the investor’s company or employer.

Payment in other forms may be accepted at the discretion of the funds. Please specify the name(s) of the fund or funds on the check or transfer instructions.


Virtus Mutual Funds		21

financial institutions or other sources. If, after reasonable effort, we cannot verify your identity, we reserve the right to close the account and redeem the shares at net asset value next calculated after the decision is made by us to close the account.

Step 1.

Your first choice will be the initial amount you intend to invest.

Minimum initial investments:

$25 for individual retirement accounts (IRAs), accounts that use the systematic exchange privilege, or accounts that use the Systematic Purchase program. (See below for more information on the Systematic Purchase program.)

There is no initial dollar requirement for defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans. There is also no minimum for reinvesting dividends and capital gains into another account.

$500 for all other accounts.

Minimum additional investments:

$25 for any account.

There is no minimum additional investment requirement for defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans. There is also no minimum additional investment requirement for reinvesting dividends and capital gains into an existing account.

The funds reserve the right to refuse a purchase order for any reason.

Step 2.

Your second choice will be what class of shares to buy. The funds offer two classes of shares for individual investors. Each share class has different sales and distribution charges. Because all future investments in your account will be made in the share class you choose when you open your account, you should make your decision carefully. Your financial advisor can help you pick the share class that makes the most sense for your situation.

Step 3.

Your next choice will be how you want to receive any dividends and capital gain distributions. Your options are:

Receive both dividends and capital gain distributions in additional shares;

Receive dividends in additional shares and capital gain distributions in cash;

Receive dividends in cash and capital gain distributions in additional shares; or

Receive both dividends and capital gain distributions in cash.

No interest will be paid on uncashed distribution checks.


22		Virtus Mutual Funds

How to Buy Shares


		To Open An Account
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimum investments or limitations on buying shares.
Through the mail		Complete a New Account Application and send it with a check payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
By Federal Funds wire		Call us at (800) 243-1574 (press 1, then 0).
Through express delivery		Complete a New Account Application and send it with a check payable to the fund. Send them to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809.
By Systematic Purchase		Complete the appropriate section on the application and send it with your initial investment payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).

The price at which a purchase is effected is based on the net asset value determined after the receipt of a purchase order by the funds’ Transfer Agent.

How to Sell Shares

You have the right to have the funds buy back shares at the net asset value next determined after receipt of a redemption order by the funds’ Transfer Agent or an authorized agent. In the case of a Class C Share redemption, and certain Class A Share redemptions, you will be subject to the applicable contingent deferred sales charge, if any, for such shares. Subject to certain restrictions, shares may be redeemed by telephone or in writing. In addition, shares may be sold through securities dealers, brokers or agents who may charge customary commissions or fees for their services. The funds do not charge any redemption fees. Payment for shares redeemed is made within seven days; however, redemption proceeds will not be disbursed until each check used for purchases of shares has been cleared for payment by your bank, which may take up to 15 days after receipt of the check.


		To Sell Shares
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimums on redemptions of accounts.
Through the mail		Send a letter of instruction and any share certificates (if you hold certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
Through express delivery		Send a letter of instruction and any share certificates (if you hold certificate shares) to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
By telephone		For sales up to $50,000, requests can be made by calling (800) 243-1574.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).


Virtus Mutual Funds		23

Things You Should Know When Selling Shares

You may realize a taxable gain or loss (for federal income tax purposes) if you redeem shares of the funds. Each fund reserves the right to pay large redemptions “in kind” (i.e., in securities owned by the fund) rather than in cash. Large redemptions are those that exceed $250,000 or 1% of the fund’s net assets, whichever is less, over any 90-day period. Additional documentation will be required for redemptions by organizations, fiduciaries, or retirement plans, or if a redemption is requested by anyone but the shareholder(s) of record. Transfers between broker-dealer “street” accounts are governed by the accepting broker-dealer. Questions regarding this type of transfer should be directed to your financial advisor. Redemption requests will not be honored until all required documents, in proper form, have been received. To avoid delay in redemption or transfer, shareholders having questions about specific requirements should contact the funds’ Transfer Agent at (800) 243-1574.

Redemptions by Mail

If you are selling shares held individually, jointly, or as custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act:

Send a clear letter of instructions if both of these apply:

The proceeds do not exceed $50,000.

The proceeds are payable to the registered owner at the address on record.

Send a clear letter of instructions with a signature guarantee when any of these apply:

You are selling more than $50,000 worth of shares.

The name or address on the account has changed within the last 30 days.

You want the proceeds to go to a different name or address than on the account.

If you are selling shares held in a corporate or fiduciary account, please contact the funds’ Transfer Agent at (800) 243-1574.

Selling Shares by Telephone

The individual investor bears the risk from instructions given by an unauthorized third party that the Transfer Agent reasonably believed to be genuine.

During times of drastic economic or market changes, telephone redemptions may be difficult to make or temporarily suspended.


24		Virtus Mutual Funds

Account Policies

Account Reinstatement Privilege

Subject to the funds’ policies and procedures regarding market timing, for 180 days after you sell your Class A Shares or Class C Shares on which you previously paid a sales charge, you may purchase Class A Shares of any Virtus Mutual Fund at net asset value, with no sales charge, by reinvesting all or part of your proceeds, but not more. Send your written request to State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. You can call us at (800) 243-1574 for more information.

Please remember, a redemption and reinvestment are considered to be a sale and purchase for tax-reporting purposes. Class C shareholders who have had the contingent deferred sales charge waived because they are in the Systematic Withdrawal Program are not eligible for this reinstatement privilege.

Redemption of Small Accounts

Distributions of Small Amounts

Distributions in amounts less than $10 will automatically be reinvested in additional shares of the applicable fund.

Uncashed Checks

If any correspondence sent by the fund is returned or other delivery service as “undeliverable,” your dividends or any other distribution may be automatically reinvested in the fund.

Exchange Privileges

Exchanges may be made by telephone ((800) 243-1574) or by mail (State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).

The amount of the exchange must be equal to or greater than the minimum initial investment required.

The exchange of shares is treated as a sale and a purchase for federal income tax purposes.

Disruptive Trading and Market Timing


Virtus Mutual Funds		25

reducing returns to long-term shareholders through increased brokerage and administrative expenses.

Additionally, the nature of the portfolio holdings of certain of the funds and of the underlying affiliated mutual funds in which the funds may invest (collectively, throughout this section, the “funds”) may expose the funds to investors who engage in the type of market timing trading that seeks to take advantage of possible delays between the change in the value of a mutual fund’s portfolio holdings and the reflection of the change in the net asset value of the fund’s shares, sometimes referred to as “time-zone arbitrage.” Arbitrage market timers seek to exploit possible delays between the change in the value of a mutual fund’s portfolio holdings and the net asset value of the fund’s shares in funds that hold significant investments in foreign securities because certain foreign markets close several hours ahead of the U.S. markets. If an arbitrageur is successful, the value of the fund’s shares may be diluted if redeeming shareholders receive proceeds (and buying shareholders receive shares) based upon net asset values which do not reflect appropriate fair value prices.

Excessive trading activity is measured by the number of roundtrip transactions in an account. A roundtrip transaction is one where a shareholder buys and then sells, or sells and then buys, shares of any fund within 30 days. Shareholders of the funds are limited to one roundtrip transaction within any rolling 30-day period. Roundtrip transactions are counted at the shareholder level. In considering a shareholder’s trading activity, the funds may consider, among other factors, the shareholder’s trading history both directly and, if known, through financial intermediaries, in the funds, in other funds within the Virtus Mutual Fund complex, in non-Virtus mutual funds or in accounts under common control or ownership. We do not include exchanges made pursuant to the dollar cost averaging or other similar programs when applying our market timing policies. Systematic withdrawal and/or contribution programs, mandatory retirement distributions, and transactions initiated by a plan sponsor also will not count towards the roundtrip limits. The funds may permit exchanges that they believe, in the exercise of their judgement, are not disruptive. The size of the fund and the size of the requested transaction may be considered when determining whether or not the transaction would be disruptive.

The funds currently do not charge exchange or redemption fees, or any other administrative charges on fund exchanges. The funds reserve the right to impose such fees and/or charges in the future.

The funds do not have any arrangements with any person, organization or entity to permit frequent purchases and redemptions of fund shares.


26		Virtus Mutual Funds

The funds cannot guarantee that their policies and procedures regarding market timing will be effective in detecting and deterring all Disruptive Trading.

Retirement Plans

Investor Services and Other Information

Telephone Exchange lets you exchange shares of one Virtus Mutual Fund for the same class of shares in another Virtus Mutual Fund using our customer service telephone service. (See the “Telephone Exchange” section on the application.) Exchange privileges may not be available for all Virtus Mutual Funds and may be rejected or suspended.

Systematic Withdrawal allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual or annual basis. Sufficient shares from your account will be redeemed at the closing net asset value on the applicable payment date, with proceeds to be mailed to you or sent through ACH to your bank (at your selection). For payments to be mailed, shares will be redeemed on the 15 ^th of the month so that the payment is made about the 20 ^th of the month. For ACH payments, you may select the day of the month for the payments to be made; if no date is specified, the payments will occur on the 15 ^th of the month. The minimum withdrawal is $25 and minimum account balance requirements continue to apply. Shareholders in the program must own fund shares worth at least $5,000.

Disclosure of Fund Holdings. The underlying affiliated mutual funds make available on the Virtus Mutual Funds’ Web site, virtus.com, information with respect to each such fund’s top 10 holdings and summary composition data derived from portfolio holdings information. This information is posted to the Web site at the end of each month with respect to the top 10 holdings and at the end of each quarter with respect to summary composition information, generally within 10 business days. This information will remain available on the Web site until full portfolio holdings information becomes publicly available. A full listing of each fund’s portfolio holdings becomes publicly available (i) as of the end of its second and fourth fiscal quarters in shareholder reports, which are sent to all shareholders and are filed with the Securities and Exchange Commission (“SEC”) on Form N-CSR, and (ii) at the end of its first and third fiscal quarters by filing with the SEC a Form N-Q. The funds’ shareholder reports are available without charge on the Virtus Mutual Funds’ Web site at virtus.com. The funds’ Form N-Q filings are available on the SEC’s Internet site at sec.gov. A fund may make its holdings information publicly available prior to these filings under certain circumstances. A more detailed description of the funds’ and the underlying affiliated mutual funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is also available in the Statement of Additional Information.


Virtus Mutual Funds		27

Tax Status of Distributions

The funds plan to make distributions from net investment income at intervals stated in the table below and to distribute net realized capital gains, if any, annually.


Fund		Dividend Paid
Wealth Builder Fund		Semiannually
Wealth Guardian Fund		Semiannually

Distributions of short-term capital gains (gains on securities held for a year or less) and net investment income are taxable to shareholders as ordinary income. Under the Jobs and Growth Tax Reconciliation Act of 2003, certain distributions of long-term capital gains and certain dividends are taxable at a lower rate than ordinary income for a limited number of years. This lower rate terminates for tax years after 2010. Long-term capital gains, if any, distributed to shareholders and which are designated by a fund as capital gain distributions are taxable to shareholders as long-term capital gain distributions regardless of the length of time you have owned your shares. The use of a fund of funds structure may affect the amount, timing and character of distributions to shareholders.


28		Virtus Mutual Funds

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Financial Highlights

For each of the funds below, the tables present performance of the respective Predecessor Fund and for the Successor Fund for the fiscal periods indicated. The information is intended to help you understand the respective fund’s financial performance since inception. Some of the information reflects financial information for a single fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, the funds’ independent registered public accounting firm. Their report, together with the funds’ financial statements, is included in the funds’ most recent Annual Report, which is available upon request.


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Capital Gain Distributions Received from Affiliated Funds			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Total Distributions
Wealth Builder Fund
Class A
10/1/07 to 9/30/08	$	12.81	$	0.18	⁽²⁾	$	0.29	⁽²⁾	$	(2.92	)	$	(2.45	)	$	(0.24	)	$	(0.17	)	$	(0.41	)
8/1/07 to 9/30/07		12.91		0.02	⁽²⁾		—			0.53			0.55			(0.03	)		(0.62	)		(0.65	)
8/1/06 to 7/31/07		11.89		0.20	⁽²⁾		0.60	⁽²⁾		0.86			1.66			(0.42	)		(0.22	)		(0.64	)
8/4/05 to 7/31/06		12.07		0.15	⁽²⁾		0.12	⁽²⁾		0.40			0.67			(0.16	)		(0.69	)		(0.85	)
8/1/04 to 7/31/05		10.89		0.11	⁽²⁾		0.07	⁽²⁾		1.10			1.28			(0.10	)		—	⁽⁵⁾		(0.10	)
8/1/03 ⁽⁶⁾ to 7/31/04		10.00		0.12	⁽²⁾		0.01	⁽²⁾		0.86			0.99			(0.10	)		—			(0.10	)
Class C
10/1/07 to 9/30/08	$	12.74	$	0.09	⁽²⁾	$	0.30	⁽²⁾	$	(2.92	)	$	(2.53	)	$	(0.16	)	$	(0.17	)	$	(0.33	)
8/1/07 to 9/30/07		12.85		—	⁽²⁾⁽⁵⁾		—			0.54			0.54			(0.03	)		(0.62	)		(0.65	)
8/1/06 to 7/31/07		11.84		0.10	⁽²⁾		0.60	⁽²⁾		0.86			1.56			(0.33	)		(0.22	)		(0.55	)
8/4/05 to 7/31/06		12.02		0.06	⁽²⁾		0.12	⁽²⁾		0.40			0.58			(0.07	)		(0.69	)		(0.76	)
8/1/04 to 7/31/05		10.86		0.02	⁽²⁾		0.07	⁽²⁾		1.10			1.19			(0.03	)		—	⁽⁵⁾		(0.03	)
8/1/03 ⁽⁶⁾ to 7/31/04		10.00		0.04	⁽²⁾		0.01	⁽²⁾		0.85			0.90			(0.04	)		—			(0.04	)
Wealth Guardian Fund
Class A
10/1/07 to 9/30/08	$	12.01	$	0.26	⁽²⁾	$	0.19	⁽²⁾	$	(2.32	)	$	(1.87	)	$	(0.26	)	$	(0.10	)	$	(0.36	)
8/1/07 to 9/30/07		12.02		0.02	⁽²⁾		—			0.40			0.42			(0.05	)		(0.38	)		(0.43	)
8/1/06 to 7/31/07		11.31		0.27	⁽²⁾		0.46	⁽²⁾		0.59			1.32			(0.43	)		(0.18	)		(0.61	)
8/4/05 to 7/31/06		11.61		0.22	⁽²⁾		0.10	⁽²⁾		0.18			0.50			(0.23	)		(0.57	)		(0.80	)
8/1/04 to 7/31/05		10.74		0.17			0.06			0.81			1.04			(0.17	)		—	⁽⁵⁾		(0.17	)
8/1/03 ⁽⁶⁾ to 7/31/04		10.00		0.17			—	⁽⁵⁾		0.74			0.91			(0.17	)		—			(0.17	)
Class C
10/1/07 to 9/30/08	$	11.98	$	0.18	⁽²⁾	$	0.20	⁽²⁾	$	(2.33	)	$	(1.95	)	$	(0.18	)	$	(0.10	)	$	(0.28	)
8/1/07 to 9/30/07		12.00		0.01	⁽²⁾		—			0.40			0.41			(0.05	)		(0.38	)		(0.43	)
8/1/06 to 7/31/07		11.30		0.18	⁽²⁾		0.46	⁽²⁾		0.58			1.22			(0.34	)		(0.18	)		(0.52	)
8/4/05 to 7/31/06		11.60		0.12	⁽²⁾		0.10	⁽²⁾		0.19			0.41			(0.14	)		(0.57	)		(0.71	)
8/1/04 to 7/31/05		10.72		0.09			0.06			0.81			0.96			(0.08	)		—	⁽⁵⁾		(0.08	)
8/1/03 ⁽⁶⁾ to 7/31/04		10.00		0.12			0.01			0.70			0.83			(0.11	)		—			(0.11	)


30		Virtus Mutual Funds


Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (in thousands)		Ratio of Net Operating Expenses to Average Net Assets ⁽⁸⁾		Ratio of Gross Expenses to Average Net Assets (before waivers and reimbursements) ⁽⁸⁾		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(2.86	)	$	9.95	(19.66	)%	$	41,396	0.21	% ⁽⁷⁾	0.45	%	1.57	%	23	%
	(0.10	)		12.81	4.23	⁽⁴⁾		58,663	0.26	⁽³⁾	0.49	⁽³⁾	0.72	⁽³⁾	2	⁽⁴⁾
	1.02			12.91	14.16			56,857	0.06		0.45		1.54		43
	(0.18	)		11.89	5.76			51,755	0.20	⁽⁷⁾	0.45		1.25		74
	1.18			12.07	11.76			47,934	0.40		0.45		0.93		4
	0.89			10.89	9.89			29,566	0.40		0.77		1.11		0

$	(2.86	)	$	9.88	(20.35	)%	$	50,007	0.96	% ⁽⁷⁾	1.20	%	0.81	%	23	%
	(0.11	)		12.74	4.17	⁽⁴⁾		77,181	1.01	⁽³⁾	1.24	⁽³⁾	(0.03	) ⁽³⁾	2	⁽⁴⁾
	1.01			12.85	13.29			76,049	0.80		1.20		0.79		43
	(0.18	)		11.84	4.99			75,168	0.96	⁽⁷⁾	1.19		0.48		74
	1.16			12.02	11.01			84,281	1.15		1.20		0.19		4
	0.86			10.86	9.03			58,012	1.15		1.47		0.34		0


$	(2.23	)	$	9.78	(15.94	)%	$	23,358	0.22	% ⁽⁷⁾	0.47	%	2.36	%	24	%
	(0.01	)		12.01	3.48	⁽⁴⁾		29,742	0.27	⁽³⁾	0.48	⁽³⁾	1.15	⁽³⁾	2	⁽⁴⁾
	0.71			12.02	11.82			29,304	0.05		0.46		2.28		41
	(0.30	)		11.31	4.43			24,768	0.26	⁽⁷⁾	0.56		1.92		67
	0.87			11.61	9.74			20,696	0.52		0.65		1.56		5
	0.74			10.74	9.15			10,182	0.52		1.35		1.92		1

$	(2.23	)	$	9.75	(16.59	)%	$	21,937	0.97	% ⁽⁷⁾	1.22	%	1.64	%	24	%
	(0.02	)		11.98	3.40	⁽⁴⁾		32,320	1.01	⁽³⁾	1.23	⁽³⁾	0.39	⁽³⁾	2	⁽⁴⁾
	0.70			12.00	10.90			32,286	0.80		1.21		1.53		41
	(0.30	)		11.30	3.63			33,776	1.03	⁽⁷⁾	1.31		1.08		67
	0.88			11.60	9.03			40,252	1.27		1.40		0.80		5
	0.72			10.72	8.29			28,355	1.27		1.98		1.19		1

Footnote

Legend

⁽¹⁾	Sales charges, where applicable, are not reflected in the total return calculation.

⁽²⁾	Computed using average shares outstanding.

⁽³⁾	Annualized.

⁽⁴⁾	Not annualized.

⁽⁵⁾	Amount is less than $0.005.

⁽⁶⁾	Inception date.

⁽⁷⁾	Represents blended net expense ratio.

⁽⁸⁾	The Fund of Funds will also indirectly bear its prorated share of expenses of the underlying funds. Such expenses are not included in the calculation of this ratio.


Virtus Mutual Funds		31

Appendix A

Investment Techniques and Practices of Underlying Affiliated Mutual Funds and Exchange-Traded Funds (ETFs)

Debt Securities

Corporate Debt Securities

Convertible Securities

Derivatives

Forward Foreign Currency Exchange Contracts

Financial Futures Contracts and Related Options

Options

Swap Agreements

Emerging Markets

Foreign Securities

High Yield-High Risk Securities

Illiquid and Restricted Securities

Interest Rate Transactions

Money Market Instruments

Mortgage-Related and Other Asset-Backed Securities

Mortgage Pass-Through Securities

Collateralized Mortgage Obligations (CMOs)

CMO Residuals

Stripped Mortgage-Backed Securities

Other Asset-Backed Securities

Mutual Fund Investing

Loan and Debt Participations and Assignments

Private Placements and Rule 144A Securities

Ratings

Real Estate Investment Trusts

Repurchase Agreements

Securities Lending

Short Sales

Small Companies

Warrants to Purchase Securities

When-Issued and Delayed-Delivery Transactions


32		Virtus Mutual Funds

Appendix B

Underlying Affiliated Mutual Funds

Following is a list of underlying affiliated mutual funds (collectively, “underlying mutual funds”) in which the funds are currently invested or anticipated to be invested and their associated target weightings, as of the date of this prospectus. Not all of these underlying mutual funds will be purchased by each fund. The underlying mutual funds and their target weightings (if applicable) have been selected for use over long time periods, but may be changed in the future without shareholder approval or notice. Target weightings will deviate over the short term due to market movements and capital flows. Virtus periodically rebalances the funds’ investments in the underlying mutual funds to bring them back within their target weightings. Some portion of each fund’s portfolio will be held in cash due to purchase and redemption activity and short-term cash needs. Each fund’s cash position is not reflected in the asset allocations or target weightings. Additional information about each underlying affiliated mutual fund, including a copy of an underlying affiliated mutual fund’s prospectus, Statement of Additional Information, and Annual and Semiannual reports is available on the Virtus Mutual Funds Web site, virtus.com, or you can request copies by calling Mutual Fund Services toll-free at (800)-243-1574.


Fund Name/Asset Class	Virtus Wealth Builder Fund		Virtus Wealth Guardian Fund
EQUITY
Virtus Capital Growth Fund	5.5	%	4.5	%
Virtus Growth & Income Fund	11	%	8	%
Virtus Growth Opportunities Fund	5.5	%	4.5	%
Virtus Mid-Cap Value Fund	4	%	3	%
Virtus Quality Small-Cap Fund	2	%	1.5	%
Virtus Small-Cap Growth Fund	2	%	1.5	%
Virtus Small-Cap Sustainable Growth Fund	2	%	1.5	%
Virtus Small-Cap Value Fund	2	%	1.5	%
Virtus Value Opportunities fund	11	%	9	%
FIXED INCOME
Virtus Bond Fund	8	%	16	%
Virtus High Yield Income Fund	2	%	4	%
Virtus Institutional Bond Fund	8	%	16	%
Virtus Multi-Sector Short Term Bond Fund	2	%	4	%
INTERNATIONAL/GLOBAL
Virtus Foreign Opportunities Fund	16	%	12	%
ALTERNATIVES
Virtus Global Infrastructure Fund	4	%	2	%
Virtus International Real Estate Securities Fund	4	%	2.5	%
Virtus Market Neutral Fund	7	%	6	%
Virtus Real Estate Securities Fund	4	%	2.5	%


Virtus Mutual Funds		33

c/o State Street Bank and Trust Company

P.O. Box 8301

Boston, MA 02266-8301

ADDITIONAL INFORMATION

You can find more information about the Funds in the following documents:

Annual and Semiannual Reports

Statement of Additional Information (SAI)

The SAI contains more detailed information about the Funds. It is incorporated by reference and is legally part of the prospectus.

Mutual Fund Services: 1-800-243-1574

Text Telephone: 1-800-243-1926


Investment Company Act File No. 811-7455		1-09
8007

LOGO

VIRTUS INTERNATIONAL FUNDS

Virtus Foreign Opportunities Fund

Virtus Global Opportunities Fund



		Wouldn’t you rather have this document e-mailed to you?
TRUST NAME:		Eligible shareholders can sign up for
VIRTUS OPPORTUNITIES TRUST	January 31, 2009	E-Delivery at Virtus.com

Not FDIC Insured	No Bank Guarantee	May Lose Value

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus contains important information that you should know before investing in Virtus mutual funds. Please read it carefully and retain it for future reference.


Table of Contents

Virtus Foreign Opportunities Fund

Investment Risk and Return Summary		1

Fund Fees and Expenses		5

Management of the Fund		6

Virtus Global Opportunities Fund (formerly Virtus Worldwide Strategies Fund)

Investment Risk and Return Summary		7

Fund Fees and Expenses		11

Management of the Fund		12

Additional Investment Techniques		13

Pricing of Fund Shares		15

Sales Charges		16

Your Account		20

How to Buy Shares		22

How to Sell Shares		22

Things You Should Know When Selling Shares		23

Account Policies		24

Investor Services and Other Information		26

Tax Status of Distributions		26

Financial Highlights		28

Virtus Foreign Opportunities Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Foreign Opportunities Fund seeks long-term capital appreciation. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, at least 80% of the fund’s assets are invested in equity securities of issuers located outside the United States, including issuers in emerging markets countries. The fund intends to diversify its investments among countries and normally to have represented in the portfolio business activities of a number of different countries. At September 30, 2008, the fund was invested in issuers representing approximately 22 different countries. The fund’s policy of investing 80% of its assets in foreign equity securities may be changed only upon 60 days written notice to shareholders.

The fund will primarily hold securities of companies listed on a foreign securities exchange or quoted on an established foreign over-the-counter market, or American Depositary Receipts (“ADRs”). The fund typically invests in the securities of medium to large capitalization companies, but it is not limited to investing in the securities of companies of any particular size.

Generally, the subadviser uses a bottom-up stock and business analysis approach. The subadviser makes its assessments by examining companies one at a time, regardless of size, country of organization, place of principal business activity, or other similar selection criteria. The fund may invest substantially all of its assets in common stocks if the subadviser believes that common stocks will appreciate in value. The subadviser seeks to identify attractively valued companies whose businesses are highly profitable, have consistent operating histories and financial performance and enjoy generally favorable long-term economic prospects.

A company may be undervalued when, in the opinion of the subadviser, the company is selling for a price that is below its intrinsic worth. A company may be undervalued due to market or economic conditions, temporary earnings declines, unfavorable developments affecting the company or other factors. Such factors may include buying opportunities at attractive prices compared to the subadviser’s calculation of future earnings power. The subadviser believes that buying these securities at a price that is below their intrinsic worth may generate greater returns for the fund than those obtained by paying a premium price for companies currently in favor in the market.

Most of the fund’s assets are invested in equity securities of issuers in countries that are generally considered to have developed securities markets. The subadviser employs diversification by country and industry in an attempt to reduce risk.

The subadviser seeks to achieve attractive absolute returns that exceed the “normalized risk-free” rate, defined as the rate of return available on long-term government securities or their equivalent in each country in which the fund invests. Utilization of an “absolute” rather than a “relative” valuation yardstick is designed not only to achieve a satisfactory return over the risk-free rate over a full market cycle, but at the same time to seek safety of principal. The subadviser considers the riskiness of an investment to be a function of the issuer’s business rather than the volatility of its stock price.

In determining which portfolio securities to sell, the subadviser focuses on the operating results of the portfolio companies, not price quotations, to measure the success of an investment. In making sell decisions, the subadviser considers, among other things, whether a security’s price target has been met, whether there has been an overvaluation of the issuer by the market, whether there has been a clear deterioration of future earnings power and whether, in the subadviser’s opinion, there has been a loss of a long-term competitive advantage.

Temporary Defensive Strategy: If the subadviser does not believe that market conditions are favorable to the fund’s principal investment strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing all of its assets in domestic and foreign short-term money market instruments, including government obligations, certificates of deposit, bankers’ acceptances, time deposits, commercial paper, short-term corporate debt securities and repurchase agreements. When this allocation happens, the fund may not achieve its investment objective.

Please see “Additional Investment Techniques” for other investment techniques of the fund.


Virtus Foreign Opportunities Fund		1

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.

General

Emerging Market Investing Risk

Investments in less-developed countries whose markets are still emerging generally present risks in greater degree than those presented by investments in issuers based in countries with developed securities markets and more advanced regulatory systems. Prior governmental approval may be required in some developing countries for the release of investment income, capital and sale proceeds to foreign investors, and some developing countries may limit the extent of foreign investment in domestic companies. Emerging market countries often suffer from currency devaluation and higher rates of inflation.

Equity Securities Risk

Foreign Investing Risk


2		Virtus Foreign Opportunities Fund

Market Volatility Risk


Virtus Foreign Opportunities Fund		3

Performance Tables

The Virtus Foreign Opportunities Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Foreign Opportunities Fund, a series of Phoenix Adviser Trust (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on September 24, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. The performance tables also include the performance history of a prior fund that was reorganized into the Predecessor Fund on October 13, 2003 (the “Prior Fund”). From October 13, 2003 to June 20, 2005, the Prior Fund’s investment program and general operations were managed by a different investment adviser. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund and the Prior Fund prior to the Virtus Foreign Opportunities Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Foreign Opportunities Fund. The bar chart shows changes in the fund’s Class A Shares performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare to those of a broad-based securities market index and to a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the 10-year period shown in the chart above, the highest return for a quarter was 34.02% (quarter ended December 31, 1999) and the lowest return for a quarter was -19.26% (quarter ended September 30, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾				Since Inception ⁽³⁾
	1 Year	5 Years	10 Years	Class C	Class I
Class A
Return Before Taxes	-45.26%	4.67%	2.42%	—	—
Return After Taxes on Distributions ⁽⁴⁾	-45.15%	4.16%	1.54%	—	—
Return After Taxes on Distributions and Sale of Fund Shares ⁽⁴⁾	-29.09%	4.12%	1.89%	—	—
Class C
Return Before Taxes	-42.35%	5.13%	—	6.94%	—
Class I
Return Before Taxes	-41.68%	—	—	—	-8.18%
S&P 500 ^® Index ⁽⁵⁾	-37.00%	-2.19%	-1.38%	-0.30%	-10.94%
Morgan Stanley Capital International EAFE ^® Index (Net) ⁽⁶⁾	-43.38%	1.66%	0.80%	3.46%	-13.06%

(3) Class C Shares since October 10, 2003 and Class I Shares since May 15, 2006.

(4) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for Class A Shares; after-tax returns for Class C Shares will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(5) The S&P 500 ^® 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 net dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(6) The MSCI EAFE ^® Index (Net) is a free float-adjusted market capitalization index that measures developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total-return basis with net dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes as associated with the active management of an actual portfolio.


4		Virtus Foreign Opportunities Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class C Shares	Class I Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	1.00% ^(b)	None
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class C Shares	Class I Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.85%	0.85%	0.85%
Distribution and Shareholder Servicing (12b-1) Fees ^(c)	0.25%	1.00%	None
Other Expenses	0.29%	0.29%	0.29%

Total Annual Fund Operating Expenses	1.39%	2.14%	1.14%

(b) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Class	1 year	3 years	5 years	10 years
Class A	$708	$990	$1,292	$2,148
Class C	$317	$670	$1,149	$2,472
Class I	$116	$362	$628	$1,386

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class C	$217	$670	$1,149	$2,472


Virtus Foreign Opportunities Fund		5

Management of the Fund

The Adviser and Subadviser

Vontobel Asset Management, Inc. (formerly named Vontobel USA Inc.) (“Vontobel”), 1540 Broadway, 38 ^th Floor, New York, NY 10036, serves as subadviser to the fund. Vontobel is a wholly-owned and controlled subsidiary of Vontobel Holding AG, a Swiss bank holding company, having its registered offices in Zurich, Switzerland. In addition to U.S. registered investment companies, Vontobel also acts as subadviser to six series of a Luxembourg investment fund that accepts investments from non-U.S. investors only and that was organized by an affiliate of Vontobel. Vontobel has provided investment advisory services to mutual fund clients since 1990. As of September 30, 2008, Vontobel managed in excess of $6.6 billion.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program and the general operations of the fund, including oversight of the fund’s subadviser and recommending its hiring, termination and replacement. Vontobel, as subadviser, is responsible for day-to-day management of the fund’s portfolio. VIA and Vontobel manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $2 Billion	$2+ Billion through $4 Billion	Over $4 Billion
0.85%	0.80%	0.75%

VIA pays Vontobel a subadvisory fee at the rate of 50% of the gross investment management fee.

The fund and VIA have received an exemptive order from the Securities and Exchange Commission that permits VIA, subject to certain conditions, and without the approval of shareholders, to: (a) employ a new unaffiliated investment adviser for a fund pursuant to the terms of a new subadvisory agreement, in each case either as a replacement for an existing subadviser or as an additional subadviser; (b) change the terms of any subadvisory agreement; and (c) continue the employment of an existing subadviser on the same subadvisory contract terms where a contract has been assigned because of a change in control of the subadviser. In such circumstances, shareholders would receive notice of such action, including the information concerning the new subadviser that normally is provided in a proxy statement.

Portfolio Management

Rajiv Jain is a Senior Vice President and Managing Director of Vontobel and Portfolio Manager of the fund. Mr. Jain joined Vontobel in 1994 as an equity analyst and associate manager of its international equity portfolios. Mr. Jain has been the portfolio manager of the fund (or its predecessor) since February 2002.


6		Virtus Foreign Opportunities Fund

Virtus Global Opportunities Fund

Investment Risk and Return Summary

Investment Objective

The Virtus Global Opportunities Fund has an investment objective of capital appreciation. There is no guarantee that the fund will achieve its objective. The fund’s investment objective may be changed without shareholder approval.

Principal Investment Strategies

Under normal circumstances, the fund invests in equity securities of issuers located throughout the world, including issuers in emerging markets countries and issuers in the United States. The fund intends to diversify its investments among countries and normally to have represented in the portfolio business activities of a number of different countries. At December 31, 2008, the fund was invested in issuers representing approximately 32 different countries.

The fund will primarily hold securities of companies listed on established securities exchanges or quoted on an established over-the-counter market. The fund typically invests in the securities of medium to large capitalization companies, but it is not limited to investing in the securities of companies of any particular size.

Generally, the subadviser uses a bottom-up stock and business analysis approach. The subadviser makes its assessments by examining companies one at a time, regardless of size, country of organization, place of principal business activity, or other similar investment criteria. The fund may invest substantially all of its assets in common stocks if the subadviser believes that common stocks will appreciate in value. The subadviser seeks to identify attractively valued companies whose businesses are highly profitable, have consistent operating histories and financial performance and enjoy generally favorable long-term economic prospects.

Temporary defensive strategy: If the subadviser does not believe that market conditions are favorable to the fund’s principal investment strategies, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies by investing all of its assets in domestic and foreign short-term money market instruments, including government obligations, certificates of deposit, bankers’ acceptances, time deposits, commercial paper, short-term corporate debt securities and repurchase agreements. When this allocation happens, the fund may not achieve its investment objective.

Please see “Additional Investment Techniques” for other investment techniques of the fund.

Risks Related to Principal Investment Strategies

If you invest in this fund, you risk losing your investment.


Virtus Global Opportunities Fund		7

General

Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the fund invests can be worse than expected, and investments may fail to perform as the adviser or subadvisers expect. As a result, the value of your shares may decrease.

Emerging Market Investing Risk

Equity Securities Risk

Growth Stocks. Because growth stocks typically make little or no dividend payments to shareholders, investment return is based on a stock’s capital appreciation, making return more dependent on market increases and decreases. Growth stocks are, therefore, more volatile than non-growth stocks, tending to drop more sharply when markets fall. Growth-oriented funds typically underperform when value investing is in favor.

Foreign Investing Risk

Investing in securities of non-U.S. companies involves special risks and considerations not typically associated with investing in U.S. companies such as less publicly available information about foreign countries; political and economic instability within countries; differences in financial reporting standards and transaction settlement systems; the possibility of expropriation or confiscatory taxation; and changes in investment or exchange regulations. In addition, certain foreign issuers classified as passive foreign investment companies may be subject to additional taxation risk.


8		Virtus Global Opportunities Fund

Market Volatility Risk


Virtus Global Opportunities Fund		9

Performance Tables

The Virtus Global Opportunities Fund, a series of Virtus Opportunities Trust (“Successor Fund”), is the successor of the Phoenix Worldwide Strategies Fund, a series of Phoenix Equity Trust (“Predecessor Fund”), resulting from a reorganization of the Predecessor Fund with and into the Successor Fund on September 24, 2007. The Predecessor Fund and the Successor Fund have identical investment objectives and strategies. The Successor Fund has adopted the past performance of the Predecessor Fund as its own. Therefore, the performance tables below include the performance of the shares of the Predecessor Fund prior to the Virtus Global Opportunities Fund’s commencement date.

The bar chart and table below provide some indication of the risks of investing in the Virtus Global Opportunities Fund. The bar chart shows changes in the fund’s Class A Share performance from year to year over a 10-year period. ⁽¹⁾ The table shows how the fund’s average annual returns compare with those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund’s past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.

LOGO

Calendar Year

(1) The fund’s annual returns in the chart above do not reflect the deduction of any sales charges. The returns would have been less than those shown if sales charges were deducted. During the period shown in the chart above, the highest return for a quarter was 19.07% (quarter ending June 30, 2003) and the lowest return for a quarter was -20.92% (quarter ending December 31, 2008).


Average Annual Total Returns (for the periods ended 12/31/08) ⁽²⁾
	1 Year		5 Years		10 Years
Class A
Return Before Taxes	-46.32	%	-2.33	%	-1.60	%
Return After Taxes on Distributions ⁽³⁾	-46.14	%	-2.61	%	-2.59	%
Return After Taxes on Distributions and Sale of Fund Shares ⁽³⁾ ⁽⁴⁾	-29.46	%	-1.62	%	-1.55	%
Class B
Return Before Taxes	-45.66	%	-1.88	%	-1.75	%
Class C
Return Before Taxes	-43.51	%	-1.92	%	-1.80	%
S&P 500 ^® Index ⁽⁵⁾	-37.00	%	-2.19	%	-1.38	%
MSCI World ^SM Index (Net) ⁽⁶⁾	-40.71	%	-0.51	%	-0.64	%

(2) The fund’s average annual returns reflect the deduction of the maximum sales charge for an investment in the fund’s Class A Shares and a full redemption in the fund’s Class B Shares and Class C Shares.

(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown are only for Class A Shares; after-tax returns for other classes will vary. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

(4) The Return After Taxes on Distributions and Sale Fund Shares for a period may be greater than the Return After Taxes on Distributions for the same period if there was a tax loss realized on sale of fund shares. The benefit of the tax loss (to the extent it can be used to offset other gains) may result in a higher return.

(5) The S&P 500 ^® Index is a free-float adjusted market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total-return basis with dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.

(6) The MSCI World ^SM Index (Net) is a free float-adjusted market capitalization index that measures developed global market equity performance. The index is calculated on a total-return basis with net dividends reinvested. The index is unmanaged and not available for direct investment; therefore, its performance does not reflect the fees, expenses or taxes associated with the active management of an actual portfolio.


10		Virtus Global Opportunities Fund

Fund Fees and Expenses

This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.


	Class A Shares	Class B Shares	Class C Shares
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)	5.75%	None	None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of the value redeemed or the amount invested)	None ^(a)	5.00% ^(b)	1.00% ^(c)
Maximum Sales Charge (load) Imposed on Reinvested Dividends	None	None	None
Redemption Fee	None	None	None
Exchange Fee	None	None	None


	Class A Shares	Class B Shares	Class C Shares
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees	0.85%	0.85%	0.85%
Distribution and Shareholder Servicing (12b-1) Fees ^(d ⁾	0.25%	1.00%	1.00%
Other Expenses	0.55%	0.55%	0.55%

Total Annual Fund Operating Expenses	1.65%	2.40%	2.40%

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds.


Class	1 year	3 years	5 years	10 years
Class A	$733	$1,065	$1,420	$2,471
Class B	$643	$948	$1,280	$2,736
Class C	$343	$748	$1,280	$2,736

You would pay the following expenses if you did not redeem your shares:


Class	1 year	3 years	5 years	10 years
Class B	$243	$748	$1,280	$2,736
Class C	$243	$748	$1,280	$2,736


Virtus Global Opportunities Fund		11

Management of the Fund

The Adviser and Subadvisers

Vontobel Asset Management, Inc. (formerly Vontobel USA, Inc.) (“Vontobel”), 1540 Broadway, 38 ^th Floor, New York, NY 10036, serves as subadviser to the fund. Vontobel is a wholly-owned and controlled subsidiary of Vontobel Holding AG, a Swiss bank holding company, having its registered offices in Zurich, Switzerland. In addition to U.S. registered investment companies, Vontobel also acts as subadviser to six series of a Luxembourg investment fund that accepts investments from non-U.S. investors only and that was organized by an affiliate of Vontobel. Vontobel has provided investment advisory services to mutual fund clients since 1990. As of September 30, 2008, Vontobel managed in excess of $6.6 billion.

Subject to the direction of the fund’s Board of Trustees, VIA is responsible for managing the fund’s investment program, for the general operations of the fund, including oversight of the fund’s subadviser, and recommending its hiring, termination and replacement. Vontobel as subadviser, is responsible for day-to-day management of the fund’s portfolio. VIA and Vontobel manage the fund’s assets to conform with the investment policies as described in this prospectus.

The fund pays VIA an investment management fee that is accrued daily against the value of the fund’s net assets at the following annual rates:


First $1 Billion	$1+ Billion through $2 Billion	$2+ Billion
0.85%	0.80%	0.75%

VIA pays Vontobel a subadvisory fee at the rate of 50% of the gross investment management fee.

A discussion regarding the basis for the Board of Trustees approving the investment advisory and subadvisory agreements is expected to be available in the fund’s 2009 semiannual report covering the period October 1, 2008 through March 31, 2009.

Portfolio Management

Matthew Benkendorf and Rajiv Jain serve as Co-Portfolio Managers of the fund (since January 2009).

Mr. Jain is a Senior Vice President and Managing Director of Vontobel. Mr. Jain is also the Portfolio Manager of the Virtus Foreign Opportunities Fund. Mr. Jain joined Vontobel in 1994 as an equity analyst and associate manager of its international equity portfolios. He has been a portfolio manager of Vontobel’s global equity products since February 2002.

Mr. Benkendorf is a Senior Research Analyst of Vontobel. Mr. Benkendorf joined Vontobel in 1999 as a Portfolio Administrator. He has been working on the European Equity Strategy since 2001.


12		Virtus Global Opportunities Fund

Additional Investment Techniques

Borrowing

Each fund may obtain fixed interest rate loans from banks. If the securities purchased with such borrowed money decreases in value or does not increase enough to cover interest and other borrowing costs, the fund respective will suffer greater losses than if no borrowing took place.

Brady Bonds

Each fund may invest in Brady Bonds. Brady Bonds have an uncollateralized component, and countries issuing such bonds have a history of defaults, making the bonds speculative in nature.

Convertible Securities

Each fund may invest in convertible securities. Convertible securities may be subject to redemption at the option of the issuer. If a security is called for redemption, the respective fund may have to redeem the security, convert it into common stock or sell it to a third party at a price and time that is not beneficial for the fund. In addition, securities convertible into common stocks may have higher yields than common stocks but lower yields than comparable nonconvertible securities.

Debt Securities

In addition to common stocks, each fund may invest in any other type of securities, including preferred stocks, convertible securities, bonds, notes and debt securities of any maturity and credit quality subject to such limitations as are included in the fund’s prospectus and statement of additional information.

Each fund may invest in debt obligations of any maturity, such as debt securities and money market instruments issued by corporations and governments based in developing and developed economies.

Typically, debt obligations will decrease in value when interest rates rise. Credit risk for debt obligations generally increases as the rating declines. Securities with lower credit ratings have a greater chance of principal and interest payment default. Debt obligations with longer maturities may be subject to price fluctuations due to interest rates, tax laws and other general market factors. Credit risk is determined at the date of investment. If the rating declines after the date of purchase, the fund is not obligated to sell the security.

Depositary Receipts

Each fund may invest in American Depositary Receipts (ADRs), sponsored by U.S. banks, European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), ADRs not sponsored by U.S. banks and other types of depositary receipts (including non-voting depositary receipts). While investment in ADRs, EDRs and GDRs may eliminate some of the risk associated with foreign investments, it does not eliminate all the risks inherent in investing in securities of foreign issuers. EDRs, GDRs and ADRs which are not sponsored by U.S. banks, are subject to the same investment risks as foreign securities.

Derivatives

Each fund may enter into derivative transactions (contracts whose value is derived from the value of an underlying asset, index or rate), including futures, options, non-deliverable forwards, forward foreign currency exchange contracts and swap agreements. The funds may use derivatives to hedge against factors that affect the value of their investments such as interest rates and foreign currency exchange rates. The funds may also utilize derivatives as part of their overall investment technique to gain or lessen exposure to various securities, markets and currencies.


Virtus Mutual Funds		13

party risk (the risk that the other party to the contract will default or otherwise not be able to perform its contractual obligations). In addition, some derivatives transactions may involve potentially unlimited losses. Derivatives contracts entered into for hedging purposes may also subject the respective fund to losses if the contracts do not correlate with the assets, index or rates they were designated to hedge. Gains and losses derived from hedging transactions are, therefore, more dependent upon the subadviser’s ability to correctly predict the movement of the underlying asset prices, indexes or rates.

High Yield-High Risk (Junk Bonds) Fixed Income Securities

Each fund may invest in high yield-high risk (junk bonds) fixed income securities. High yield-high risk (junk bonds) fixed income securities entail greater price volatility and credit and interest rate risk than investment-grade securities. Analysis of the creditworthiness of high yield-high risk (junk bonds) issuers is more complex than for higher-rated securities, making it more difficult for the subadviser to accurately predict risk. There is a greater risk with high yield-high risk (junk bonds) fixed income securities that an issuer will not be able to make principal and interest payments when due. If the respective fund pursues missed payments, there is a risk that fund expenses could increase. In addition, lower-rated securities may not trade as often and may be less liquid than higher-rated securities.

Illiquid and Restricted Securities

Each fund may invest in illiquid and restricted securities. Illiquid and restricted securities may include repurchase agreements with maturities of greater than seven days. Illiquid and restricted securities may be difficult to sell or may be sold only pursuant to certain legal restrictions. Difficulty in selling securities may result in a loss to the respective fund or entail expenses not normally associated with the sale of a security.

Mutual Fund Investing

Each fund may invest in shares of closed-end investment companies. Assets invested in other mutual funds incur a layering of expenses, including operating costs, advisory fees and administrative fees that you, as a shareholder in the funds, indirectly bear.

Securities Lending

Each fund may loan portfolio securities to increase its investment returns. If the borrower is unwilling or unable to return the borrowed securities when due, the respective fund can suffer losses.

Short-Term Instruments

Each fund may invest in short-term securities, including money market instruments, repurchase agreements, certificates of deposits and bankers’ acceptances. Default or insolvency of the other party to a repurchase agreement presents a risk to the respective fund.

Unrated Fixed Income Securities

Each fund may invest in unrated securities. Unrated securities may not be lower in quality than rated securities, but due to their perceived risk, they may not have as broad a market as rated securities. Analysis of unrated securities is more complex than for rated securities, making it more difficult to accurately predict risk.

U.S. and Foreign Government Obligations

Each fund may invest in obligations of U.S. and foreign governments and their political subdivisions. Government obligations are not guaranteed to make the value of your shares rise. Foreign obligations are subject to foreign investing risks.

Variable and Floating Rate Securities

Each fund may invest in securities with variable and floating rates. Securities with variable and floating rates are more susceptible to interest rate fluctuations, and it is more difficult for the subadviser to assess their potential return.

When-Issued and Delayed-Delivery Securities

Each fund may purchase securities on a when-issued or delayed-delivery basis. The value of the security on settlement date may be more or less than the price paid as a result of changes in interest rates and market conditions. If the value on settlement date is less, the value of your shares may decline.


14		Virtus Mutual Fund

Zero Coupon Bonds

Each fund may invest in debt obligations that do not make any interest or principal payments for a specified time. The market prices of such bonds generally are more volatile than the market prices of securities that pay interest on a regular basis and may require the respective fund to make distributions from other sources since the fund does not receive cash payments earned on these securities on a current basis. This may result in a higher portfolio turnover rate and the sale of securities at a time that is less favorable.

Pricing of Fund Shares

How is the Share Price determined?

adding the values of all securities and other assets of the fund;

subtracting liabilities; and

dividing the result by the total number of outstanding shares of that class.

Assets: 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. Shares of other investment companies are valued at such companies’ net asset values. Debt securities (other than short-term investments) are valued on the basis of broker quotations or valuations provided by a pricing service, which in determining value utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. As required, some securities and assets are valued at fair value as determined in good faith by, or under the direction of, the Board of Trustees. Other assets, such as accrued interest, accrued dividends and cash are also included in determining a fund’s net asset value.

How are securities fair valued?


Virtus Mutual Funds		15

The value of any portfolio security held by a fund for which market quotations are not readily available shall be determined in good faith and in a manner that assesses the security’s “fair value” on the valuation date (i.e . , the amount that the fund might reasonably expect to receive for the security upon its current sale), based on a consideration of all available facts and all available information, including, but not limited to, the following: (i) the fundamental analytical data relating to the investment; (ii) an evaluation of the forces which influence the market in which these securities are purchased and sold (e.g., the existence of merger proposals or tender offers that might affect the value of the security); (iii) price quotes from dealers and/or pricing services; (iv) an analysis of the company’s financial statements; (v) trading volumes on markets, exchanges or among dealers; (vi) recent news about the security or issuer; (vii) changes in interest rates; (viii) information obtained from the issuer, analysts, other financial institutions and/or the appropriate stock exchange (for exchange traded securities); (ix) whether two or more dealers with whom the adviser/subadviser regularly effects trades are willing to purchase or sell the security at comparable prices; (x) other news events or relevant matters; and (xi) government (domestic or foreign) actions or pronouncements.

The value of a security, as determined using the fund’s fair valuation procedures, may not reflect such security’s market value.

At what price are shares purchased?

All investments received by the funds’ authorized agents prior to the close of regular trading on the NYSE (normally 4:00 PM eastern time) will be executed based on that day’s net asset value. Shares credited to your account from the reinvestment of fund distributions will be in full and fractional shares that are purchased at the closing net asset value on the next business day on which the fund’s net asset value is calculated following the dividend record date.

Sales Charges

What are the classes and how do they differ?

Presently, three classes of shares are offered by each fund. With the exception of Class I Shares, each class of shares have different sales and distribution charges. (See “Fund Fees and Expenses” previously in this prospectus.) For certain classes of shares, the funds have adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940, as amended (“the 1940 Act”), that authorize the funds to pay distribution and service fees for the sale of their shares and for services provided to shareholders.

What arrangement is best for you?


16		Virtus Mutual Funds

request you to provide an account statement or other holdings information to determine your eligibility for a breakpoint and to make certain all involved parties have the necessary data. Additional information about the classes of shares offered, sales charges, breakpoints and discounts follows in this section and also may be found in the Statement of Additional Information in the section entitled “How to Buy Shares.” This information is available free of charge, and in a clear and prominent format, at the Individual Investors section of the Virtus Mutual Funds’ Web site at virtus.com. Please be sure that you fully understand these choices before investing. If you or your financial representative require additional assistance, you may also contact Mutual Fund Services by calling toll-free (800) 243-1574.

Class B Shares (Global Opportunities Fund only). If you purchase Class B Shares, you will not pay a sales charge at the time of purchase. If you sell your Class B Shares within the first five years after they are purchased, you will pay a deferred sales charge of up to 5% of your shares’ value. (See “Deferred Sales Charge Alternative—Class B Shares and Class C Shares” below.) This charge declines to 0% over a period of five years and may be waived under certain conditions. Class B shares have higher distribution and service fees (1.00%) and pay lower dividends than Class A Shares. Class B Shares automatically convert to Class A Shares eight years after purchase. Purchase of Class B Shares may be inappropriate for any investor who may qualify for reduced sales charges of Class A Shares and anyone who is over 85 years of age. The underwriter may decline purchases of Class B Shares in such situations.

Class C Shares. If you purchase Class C Shares, you will not pay a sales charge at the time of purchase. If you sell your Class C Shares within the first year after they are purchased, you will pay a deferred sales charge of 1%. Class C Shares have the same distribution and service fees (1.00%) and pay comparable dividends as Class B Shares. Class C Shares do not convert to any other class of shares of the funds, so the higher distribution and service fees paid by Class C Shares continue for the life of the account.

Class I Shares (Foreign Opportunities Fund only). Class I Shares are offered primarily to institutional investors such as pension and profit sharing plans, other employee benefit trusts, endowments, foundations and corporations who purchase at or above the minimum amounts; to private clients of, or referred by, the adviser, subadviser and their affiliates; to clients of registered investment advisers who charge an advisory, consulting or other fee for their services; or through certain wrap programs with which the Distributor has an arrangement. If you are eligible to purchase and do purchase Class I Shares, you will pay no sales charge at any time. There are no distribution and service fees applicable to Class I Shares. For additional information about purchasing Class I Shares, please contact Mutual Fund Services by calling (800) 243-1574.

Initial Sales Charge Alternative—Class A Shares


Virtus Mutual Funds		17

Sales Charge you may pay to purchase Class A Shares


	Sales Charge as a percentage of
Amount of Transaction at Offering Price	Offering Price		Net Amount Invested
Under $50,000	5.75	%	6.10	%
$50,000 but under $100,000	4.75		4.99
$100,000 but under $250,000	3.75		3.90
$250,000 but under $500,000	2.75		2.83
$500,000 but under $1,000,000	2.00		2.04
$1,000,000 or more	None		None

Class A Sales Charge Reductions and Waivers

Combination Purchase Privilege . Your purchase of any class of shares of these funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made at the same time by the same person, will be added together with any existing Virtus Mutual Fund account values to determine whether the combined sum entitles you to an immediate reduction in sales charges. A “person” is defined in this and the following sections as (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account), including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or certain Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to accounts over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order.


18		Virtus Mutual Funds

Deferred Sales Charge Alternative—Class B Shares and Class C Shares

Deferred Sales Charge you may pay to sell Class B Shares


Year	1		2		3		4		5		6+
CDSC	5	%	4	%	3	%	2	%	2	%	0	%

Deferred Sales Charge you may pay to sell Class C Shares

Year	1		2+
CDSC	1	%	0	%

Compensation to Dealers

Dealers with whom the Distributor has entered into sales agreements receive a discount or commission on Class A Shares as described below.


Amount of Transaction at Offering Price	Sales Charge as a Percentage of Offering Price		Sales Charge as a Percentage of Amount Invested		Dealer Discount as a Percentage of Offering Price
Under $50,000	5.75	%	6.10	%	5.00	%
$50,000 but under $100,000	4.75		4.99		4.25
$100,000 but under $250,000	3.75		3.90		3.25
$250,000 but under $500,000	2.75		2.83		2.25
$500,000 but under $1,000,000	2.00		2.04		1.75
$1,000,000 or more	None		None		None


Virtus Mutual Funds		19

some cases, the Distributor may pay certain fees from its own profits and resources. From its own profits and resources, the Distributor does intend to: (a) from time to time, pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (b) pay broker-dealers a finder’s fee in an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (c) excluding purchases as described in (b) above, pay broker-dealers an amount equal to 1.00% of the amount of Class A Shares sold from $1,000,000 to $3,000,000, 0.50% on amounts of $3,000,001 to $10,000,000 and 0.25% on amounts greater than $10,000,000. If part or all of such investment as described in (b) and (c) above, including investments by qualified employee benefit plans, is subsequently redeemed within one year, a 1% CDSC may apply, except for redemptions of shares purchased on which a finder’s fee would have been paid where such investor’s dealer of record, due to the nature of the investor’s account, notifies the Distributor prior to the time of the investment that the dealer waives the finder’s fee otherwise payable to the dealer, or agrees to receive such finder’s fee ratably over a 12-month period. For purposes of determining the applicability of the CDSC, the one-year CDSC period begins on the last day of the month preceding the month in which the purchase was made. Any dealer who receives more than 90% of a sales charge may be deemed to be an “underwriter” under the Securities Act of 1933. VP Distributors reserves the right to discontinue or alter such fee payment plans at any time.

From its own resources or pursuant to the distribution and shareholder servicing plans, and subject to the dealers’ prior approval, the Distributor may provide additional compensation to registered representatives of dealers in the form of travel expenses, meals, and lodging associated with training and educational meetings sponsored by the Distributor. The Distributor may also provide gifts amounting in value to less than $100, and occasional meals or entertainment, to registered representatives of dealers. Any such travel expenses, meals, lodging, gifts or entertainment paid will not be preconditioned upon the registered representatives’ or dealers’ achievement of a sales target. The Distributor may, from time to time, reallow the entire portion of the sales charge on Class A shares which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings.

Your Account

Opening an Account

The funds have established the following preferred methods of payment for fund shares:

Checks drawn on an account in the name of the investor and made payable to Virtus Mutual Funds;

Checks drawn on an account in the name of the investor’s company or employer and made payable to Virtus Mutual Funds; or

Wire transfers or Automated Clearing House (ACH) transfers from an account in the name of the investor, or the investor’s company or employer.

Payment in other forms may be accepted at the discretion of the funds. Please specify the name(s) of the fund or funds in which you would like to invest on the check or transfer instructions.


20		Virtus Mutual Funds

Step 1.

Your first choice will be the initial amount you intend to invest.

Minimum initial investments:

$500 for all other accounts.

Minimum additional investments:

$25 for any account.

The funds reserve the right to refuse a purchase order for any reason.

Step 2.

Your second choice will be what class of shares to buy. Each share class, except Class I, has different sales and distribution charges. Because all future investments in your account will be made in the share class you choose when you open your account, you should make your decision carefully. Your financial advisor can help you pick the share class that makes the most sense for your situation.

Step 3.

Your next choice will be how you want to receive any dividends and capital gain distributions. Your options are:

Receive both dividends and capital gain distributions in additional shares;

Receive dividends in additional shares and capital gain distributions in cash;

Receive dividends in cash and capital gain distributions in additional shares; or

Receive both dividends and capital gain distributions in cash.

No interest will be paid on uncashed distribution checks.


Virtus Mutual Funds		21

How to Buy Shares


		To Open An Account (Class A, Class B and Class C Shares only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimum investments or limitations on buying shares.
Through the mail		Complete a New Account Application and send it with a check payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
Through express delivery		Complete a New Account Application and send it with a check payable to the fund. Send them to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809.
By Federal Funds wire		Call us at (800) 243-1574 (press 1, then 0).
By Systematic Purchase		Complete the appropriate section on the application and send it with your initial investment payable to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA 02266- 8301.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).

The price at which a purchase is effected is based on the net asset value determined after receipt of a purchase order by the funds’ Transfer Agent.

How to Sell Shares

You have the right to have the funds buy back shares at the net asset value next determined after receipt of a redemption order by the funds’ Transfer Agent or an authorized agent. In the case of a Class B Share or Class C Share redemption, and certain Class A Share redemptions, you will be subject to the applicable contingent deferred sales charge, if any, for such shares. Subject to certain restrictions, shares may be redeemed by telephone or in writing. In addition, shares may be sold through securities dealers, brokers or agents who may charge customary commissions or fees for their services. The funds do not charge any redemption fees. Payment for shares redeemed is made within seven days; however, redemption proceeds will not be disbursed until each check used for purchases of shares has been cleared for payment by your bank, which may take up to 15 days after receipt of the check.


		To Sell Shares (Class A, Class B and Class C Shares only)
Through a financial advisor		Contact your advisor. Some advisors may charge a fee and may set different minimums on redemptions of accounts.
Through the mail		Send a letter of instruction and any share certificates (if you hold certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
Through express delivery		Send a letter of instruction and any share certificates (if you hold certificate shares) to: Boston Financial Data Services, Attn: Virtus Mutual Funds, 30 Dan Road, Canton, MA 02021-2809. Be sure to include the registered owner’s name, fund and account number, and number of shares or dollar value you wish to sell.
By telephone		For sales up to $50,000, requests can be made by calling (800) 243-1574.
By telephone exchange		Call us at (800) 243-1574 (press 1, then 0).


22		Virtus Mutual Funds

Things You Should Know When Selling Shares

Redemptions by Mail

If you are selling shares held individually, jointly, or as custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act:

Send a clear letter of instructions if both of these apply:

The proceeds do not exceed $50,000.

The proceeds are payable to the registered owner at the address on record.

Send a clear letter of instructions with a signature guarantee when any of these apply:

You are selling more than $50,000 worth of shares.

The name or address on the account has changed within the last 30 days.

You want the proceeds to go to a different name or address than on the account.

If you are selling shares held in a corporate or fiduciary account, please contact the fund’s Transfer Agent at (800) 243-1574.

Selling Shares by Telephone

The individual investor bears the risk from instructions given by an unauthorized third-party that the Transfer Agent reasonably believed to be genuine.

During times of drastic economic or market changes, telephone redemptions may be difficult to make or temporarily suspended.


Virtus Mutual Funds		23

Account Policies

Account Reinstatement Privilege

Redemption of Small Accounts

Distributions of Small Amounts

Distributions in amounts less than $10 will automatically be reinvested in additional shares of the applicable fund.

Uncashed Checks

If any correspondence sent by a fund is returned by the postal or other delivery service as “undeliverable,” your dividends or any other distribution may be automatically reinvested in the respective fund.

Exchange Privileges

Exchanges may be made by telephone ((800) 243-1574) or by mail (State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).

The amount of the exchange must be equal to or greater than the minimum initial investment required.

The exchange of shares is treated as a sale and a purchase for federal income tax purposes.

Disruptive Trading and Market Timing

These funds are not suitable for market timers, and market timers are discouraged from becoming investors. Your ability to make exchanges among Virtus Mutual Funds is subject to modification if we determine, in our sole opinion, that your exercise of the exchange privilege may disadvantage or potentially harm the rights or interests of other shareholders.


24		Virtus Mutual Funds

reducing returns to long-term shareholders through increased brokerage and administrative expenses.

Additionally, the nature of the portfolio holdings of the funds may expose the funds to investors who engage in the type of market timing trading that seeks to take advantage of possible delays between the change in the value of a mutual fund’s portfolio holdings and the reflection of the change in the net asset value of the fund’s shares, sometimes referred to as “time-zone arbitrage.” Arbitrage market timers seek to exploit possible delays between the change in the value of a mutual fund’s portfolio holdings and the net asset value of the fund’s shares in funds that hold significant investments in foreign securities because certain foreign markets close several hours ahead of the U.S. markets. If an arbitrageur is successful, the value of the fund’s shares may be diluted if redeeming shareholders receive proceeds (and buying shareholders receive shares) based upon net asset values which do not reflect appropriate fair value prices.

Excessive trading activity is measured by the number of roundtrip transactions in an account. A roundtrip transaction is one where a shareholder buys and then sells, or sells and then buys, shares of any fund within 30 days. Shareholders of the funds are limited to one roundtrip transaction within any rolling 30-day period. Roundtrip transactions are counted at the shareholder level. In considering a shareholder’s trading activity, the funds may consider, among other factors, the shareholder’s trading history both directly and, if known, through financial intermediaries, in the funds, in other funds within the Virtus Mutual Fund complex, in non-Virtus mutual funds or in accounts under common control or ownership. We do not include exchanges made pursuant to the dollar cost averaging or other similar programs when applying our market timing policies. Systematic withdrawal and/or contribution programs, mandatory retirement distributions, and transactions initiated by a plan sponsor also will not count towards the roundtrip limits. The funds may permit exchanges that they believe, in the exercise of their judgement, are not disruptive. The size of the fund and the size of the requested transaction may be considered when determining whether or not the transaction would be disruptive.

The funds currently do not charge exchange or redemption fees, or any other administrative charges on fund exchanges. The funds reserve the right to impose such fees and/or charges in the future.

The funds do not have any arrangements with any person, organization or entity to permit frequent purchases and redemptions of fund shares.

The funds cannot guarantee that their policies and procedures regarding market timing will be effective in detecting and deterring all Disruptive Trading.

Retirement Plans

Shares of the funds may be used as investments under the following retirement plans: traditional Individual Retirement Account (IRA), rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing, money purchase plans, and certain 403(b) plans. For more information, call (800) 243-4361.


Virtus Mutual Funds		25

Investor Services and Other Information

Systematic Withdrawal allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual, or annual basis. Sufficient shares from your account will be redeemed at the closing net asset value on the applicable payment date, with proceeds to be mailed to you or sent through ACH to your bank (at your selection). For payments to be mailed, shares will be redeemed on the 15 ^th of the month so that the payment is made about the 20 ^th of the month. For ACH payments, you may select the day of the month for the payments to be made; if no date is specified, the payments will occur on the 15 ^th of the month. The minimum withdrawal is $25, and minimum account balance requirements continue to apply. Shareholders in the program must own Virtus Mutual Fund shares worth at least $5,000.

Disclosure of Fund Holdings. The funds make available on the Virtus Mutual Funds’ Web site, virtus.com, information with respect to each fund’s top 10 holdings and summary composition data derived from portfolio holdings information. This information is posted to the Web site at the end of each month with respect to the top 10 holdings, and at the end of each quarter with respect to summary composition information, generally within 10 business days. This information will remain available on the Web site until full portfolio holdings information becomes publicly available. A full listing of each fund’s portfolio holdings becomes publicly available (i) as of the end of its second and fourth fiscal quarters in shareholder reports, which are sent to all shareholders and are filed with the Securities and Exchange Commission (“SEC”) on Form N-CSR, and (ii) at the end of its first and third fiscal quarters by filing with the SEC a Form N-Q. The funds’ shareholder reports are available without charge on Virtus’ Web site at virtus.com. The funds’ Form N-Q filings are available on the SEC’s Internet site at sec.gov. A fund may make its holdings information publicly available prior to these filings under certain circumstances. A more detailed description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is also available in the Statement of Additional Information.

Tax Status of Distributions

The funds plan to make distributions from net investment income at intervals stated in the table below and to distribute net realized capital gains, if any, at least annually.


Fund		Dividend Paid
Foreign Opportunities Fund		Semiannually
Global Opportunities Fund		Semiannually


26		Virtus Mutual Funds

THIS PAGE LEFT INTENTIONALLY BLANK.

Financial Highlights

For each of the funds below, the tables present performance of the respective Predecessor Fund and for the Successor Fund for its most recent fiscal period. The information is intended to help you understand the respective fund’s financial performance for the past five years or since inception. Some of the information reflects financial information for a single fund share. The total returns in the tables represent the rate that a fund shareholder would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, the funds’ independent registered public accounting firm. Their report, together with each fund’s financial statements, is included in the funds’ most recent Annual Report, which is available upon request.

Please note that for the Virtus Foreign Opportunities Fund, information for periods prior to October 13, 2003 has been derived from the financial statements of the Class A Shares of the former Vontobel International Equity Fund. The Vontobel International Equity Fund previously had a fiscal year end of December 31; in 2004, the fund changed its fiscal year end to the last day of February.


	Net Asset Value, Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Return of Capital			Total Distributions
Foreign Opportunities Fund
Class A
10/1/07-9/30/08	$	28.58	$	0.20		$	(7.59	) ⁽⁴⁾	$	(7.39	)	$	(0.17	)	$	(0.48	)	$	—		$	(0.65	)
3/1/07-9/30/07		25.00		0.22	⁽⁴⁾		3.46			3.68			(0.06	)		(0.04	)		—			(0.10	)
3/1/06-2/28/07		21.47		0.21	⁽⁴⁾		4.08			4.29			(0.17	)		(0.59	)		—			(0.76	)
3/1/05-2/28/06		19.02		0.17	⁽⁴⁾		3.85			4.02			(0.22	)		(1.35	)		—			(1.57	)
3/1/04-2/28/05		15.47		0.16			3.81			3.97			(0.16	)		(0.26	)		—			(0.42	)
1/1/04-2/29/04		14.84		(0.03	)		0.66			0.63			—			—			—			—
1/1/03-12/31/03		11.86		0.12			3.39			3.51			(0.06	)		(0.43	)		(0.06	)		(0.55	)
Class C
10/1/07-9/30/08	$	28.31	$	0.01		$	(7.52	) ⁽⁴⁾	$	(7.51	)	$	(0.05	)	$	(0.48	)	$	—		$	(0.53	)
3/1/07-9/30/07		24.85		0.10	⁽⁴⁾		3.44			3.54			(0.04	)		(0.04	)		—			(0.08	)
3/1/06-2/28/07		21.41		(0.01	) ⁽⁴⁾		4.11			4.10			(0.07	)		(0.59	)		—			(0.66	)
3/1/05-2/28/06		19.11		(0.06	) ⁽⁴⁾		3.92			3.86			(0.21	)		(1.35	)		—			(1.56	)
3/1/04-2/28/05		15.55		0.01			3.84			3.85			(0.03	)		(0.26	)		—			(0.29	)
1/1/04-2/29/04		14.95		(0.06	)		0.66			0.60			—			—			—			—
10/10/03 (inception)-12/31/03		13.91		0.11			1.34			1.45			—			(0.43	)		—			(0.43	)
Class I
10/1/07-9/30/08	$	28.61	$	0.27		$	(7.61	) ⁽⁴⁾	$	(7.34	)	$	(0.21	)	$	(0.48	)	$	—		$	(0.69	)
3/1/07-9/30/07		25.00		0.25	⁽⁴⁾		3.47			3.72			(0.07	)		(0.04	)		—			(0.11	)
5/15/06 (inception)-2/28/07		22.54		0.13	⁽⁴⁾		3.14			3.27			(0.22	)		(0.59	)		—			(0.81	)


28		Virtus Mutual Funds


Payment by Affiliate/ Non-Affiliate			Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (in thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (before waivers and reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate

$	—		$	(8.04	)	$	20.54	(26.48	)%	$	620,952	1.37	% ⁽⁸⁾	1.39	%	0.78	%	129	%
	—	⁽⁵⁾⁽⁷⁾		3.58			28.58	14.72	⁽³⁾		667,719	1.36	⁽²⁾	1.40	⁽²⁾	1.44	⁽²⁾	49	⁽³⁾
	—			3.53			25.00	20.39			360,822	1.37		1.43		0.88		57
	—			2.45			21.47	21.82			128,991	1.25		1.62		0.85		52
	—	⁽⁵⁾⁽⁶⁾		3.55			19.02	26.15	⁽⁶⁾		2,714	1.25		2.10		1.50		32
	—			0.63			15.47	4.25	⁽³⁾		1,482	1.25	⁽²⁾	2.63	⁽²⁾	0.18	⁽²⁾	41	⁽³⁾
	0.02			2.98			14.84	30.07			1,473	2.87		3.21		0.11		65

$	—		$	(8.04	)	$	20.27	(27.04	)%	$	95,523	2.12	% ⁽⁸⁾	2.15	%	0.03	%	129	%
	—	⁽⁵⁾⁽⁷⁾		3.46			28.31	14.24	⁽³⁾		106,847	2.11	⁽²⁾	2.16	⁽²⁾	0.64	⁽²⁾	49	⁽³⁾
	—			3.44			24.85	19.46			45,154	2.13		2.17		(0.06	)	57
	—			2.30			21.41	20.96			6,019	2.00		2.35		(0.29	)	52
	—	⁽⁵⁾⁽⁶⁾		3.56			19.11	25.21			39	2.00		2.86		0.76		32
	—			0.60			15.55	4.01	⁽³⁾		12	2.00	⁽²⁾	3.38	⁽²⁾	(1.05	) ⁽²⁾	41	⁽³⁾
	0.02			1.04			14.95	10.71	⁽³⁾		11	1.92	⁽²⁾	5.85	⁽²⁾	(0.14	) ⁽²⁾	65	⁽³⁾

$	—		$	(8.03	)	$	20.58	(26.31	)%	$	399,898	1.12	% ⁽⁸⁾	1.15	%	1.01	%	129	%
	—	⁽⁵⁾⁽⁷⁾		3.61			28.61	14.88	⁽³⁾		431,985	1.11	⁽²⁾	1.15	⁽²⁾	1.59	⁽²⁾	49	⁽³⁾
	—			2.46			25.00	14.84	⁽³⁾		83,938	1.13	⁽²⁾	1.17	⁽²⁾	0.71	⁽²⁾	57	⁽³⁾


Virtus Mutual Funds		29

Financial Highlights (continued)


	Net Asset Value, Beginning of Period		Net Investment Income (Loss) ⁽⁴⁾			Net Realized and Unrealized Gain (Loss)			Total from Investment Operations			Dividends from Net Investment Income			Distributions from Net Realized Gains			Total Distributions
Global Opportunities Fund
Class A
10/1/07 to 9/30/08	$	11.59	$	0.13		$	(3.59	)	$	(3.46	)	$	(0.09	)	$	(0.22	)	$	(0.31	)
7/1/07 to 9/30/07		12.15		0.02			0.20			0.22			(0.08	)		(0.70	)		(0.78	)
7/1/06 to 6/30/07		9.86		0.11			2.30			2.41			(0.12	)		—			(0.12	)
7/1/05 to 6/30/06		8.38		0.07			1.51			1.58			(0.10	)		—			(0.10	)
7/1/04 to 6/30/05		7.72		0.08			0.68			0.76			(0.10	)		—			(0.10	)
7/1/03 to 6/30/04		6.37		0.03			1.41			1.44			(0.09	)		—			(0.09	)
Class B
10/1/07 to 9/30/08	$	10.48	$	0.04		$	(3.22	)	$	(3.18	)	$	(0.02	)	$	(0.22	)	$	(0.24	)
7/1/07 to 9/30/07		11.04		—	⁽⁵⁾		0.18			0.18			(0.04	)		(0.70	)		(0.74	)
7/1/06 to 6/30/07		8.98		0.02			2.10			2.12			(0.06	)		—			(0.06	)
7/1/05 to 6/30/06		7.65		—	⁽⁵⁾		1.37			1.37			(0.04	)		—			(0.04	)
7/1/04 to 6/30/05		7.05		0.02			0.63			0.65			(0.05	)		—			(0.05	)
7/1/03 to 6/30/04		5.81		(0.02	)		1.28			1.26			(0.02	)		—			(0.02	)
Class C
10/1/07 to 9/30/08	$	10.44	$	0.05		$	(3.22	)	$	(3.17	)	$	(0.02	)	$	(0.22	)	$	(0.24	)
7/1/07 to 9/30/07		11.01		—	⁽⁵⁾		0.17			0.17			(0.04	)		(0.70	)		(0.74	)
7/1/06 to 6/30/07		8.95		0.02			2.10			2.12			(0.06	)		—			(0.06	)
7/1/05 to 6/30/06		7.62		—	⁽⁵⁾		1.37			1.37			(0.04	)		—			(0.04	)
7/1/04 to 6/30/05		7.03		0.02			0.62			0.64			(0.05	)		—			(0.05	)
7/1/03 to 6/30/04		5.80		(0.01	)		1.27			1.26			(0.03	)		—			(0.03	)


30		Virtus Mutual Funds


Change in Net Asset Value			Net Asset Value, End of Period		Total Return ⁽¹⁾		Net Assets, End of Period (in thousands)		Ratio of Net Expenses to Average Net Assets		Ratio of Gross Expenses to Average Net Assets (before waivers and reimbursements)		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate


$	(3.77	)	$	7.82	(30.50	)%	$	73,003	1.65	%	1.65	%	1.31	%	62	%
	(0.56	)		11.59	1.93	⁽³⁾		116,983	1.60	⁽²⁾	1.60	⁽²⁾	0.59	⁽²⁾	15	⁽³⁾
	2.29			12.15	24.61			117,709	1.61		1.64		1.01		74
	1.48			9.86	18.90			102,783	1.60		1.70		0.76		124
	0.66			8.38	9.80			100,469	1.57		1.57		0.97		49
	1.35			7.72	22.65			107,520	1.62		1.62		0.46		122

$	(3.42	)	$	7.06	(30.93	)%	$	2,379	2.39	%	2.39	%	0.49	%	62	%
	(0.56	)		10.48	1.65	⁽³⁾		4,945	2.35	⁽²⁾	2.35	⁽²⁾	(0.15	) ⁽²⁾	15	⁽³⁾
	2.06			11.04	23.76			5,074	2.36		2.39		0.22		74
	1.33			8.98	17.92			5,395	2.35		2.45		0.01		124
	0.60			7.65	9.14			5,096	2.32		2.32		0.23		49
	1.24			7.05	21.78			5,987	2.37		2.37		(0.34	)	122

$	(3.41	)	$	7.03	(30.95	)%	$	1,149	2.40	%	2.40	%	0.55	%	62	%
	(0.57	)		10.44	1.67	⁽³⁾		1,857	2.35	⁽²⁾	2.35	⁽²⁾	(0.15	) ⁽²⁾	15	⁽³⁾
	2.06			11.01	23.74			1,838	2.36		2.38		0.23		74
	1.33			8.95	17.99			2,826	2.35		2.45		(0.03	)	124
	0.59			7.62	9.03			2,876	2.32		2.32		0.22		49
	1.23			7.03	21.66			3,306	2.37		2.37		(0.18	)	122

Footnote

Legend

⁽¹⁾	Sales charges, where applicable, are not reflected in the total return calculation.

⁽²⁾	Annualized.

⁽³⁾	Not annualized.

⁽⁴⁾	Computed using average shares outstanding.

⁽⁵⁾	Amount is less than $0.005.

⁽⁶⁾	Payment by affiliate.

⁽⁷⁾	Payment by non-affiliate.

⁽⁸⁾	Blended net expense ratio.


Virtus Mutual Funds		31

c/o State Street Bank and Trust Company

P.O. Box 8301

Boston, MA 02266-8301

ADDITIONAL INFORMATION

You can find more information about the Funds in the following documents:

Annual and Semiannual Reports

Statement of Additional Information (SAI)

The SAI contains more detailed information about the Funds. It is incorporated by reference and is legally part of the prospectus.

Mutual Fund Services: 1-800-243-1574

Text Telephone: 1-800-243-1926


Investment Company Act File No. 811-7455		1-09
8006

VIRTUS OPPORTUNITIES TRUST

Virtus Alternatives Diversifier Fund

Virtus Bond Fund

Virtus CA Tax-Exempt Bond Fund

Virtus Core Bond Fund

Virtus Foreign Opportunities Fund

Virtus Global Infrastructure Fund

Virtus Global Opportunities Fund

Virtus High Yield Fund

Virtus International Real Estate Securities Fund

Virtus Market Neutral Fund

Virtus Money Market Fund

Virtus Multi-Sector Fixed Income Fund

Virtus Multi-Sector Short Term Bond Fund

Virtus Real Estate Securities Fund

Virtus Senior Floating Rate Fund

Virtus Wealth Builder Fund

Virtus Wealth Guardian Fund

101 Munson Street

Greenfield, MA 01301

Statement of Additional Information

January 31, 2009

This Statement of Additional Information (“SAI”) is not a prospectus, but expands upon and supplements the information contained in the current Prospectuses for the Virtus Opportunities Trust (the “Trust”), dated January 31, 2009, and should be read in conjunction with them. The SAI incorporates by reference certain information that appears in the Trust’s annual and semiannual reports, which are delivered to all investors. You may obtain a free copy of the Trust’s Prospectuses, annual or semiannual reports by visiting the Virtus Mutual Funds’ Web site at virtus.com, by calling VP Distributors, Inc. (“VP Distributors” or “Distributor”) (until February 4, 2009 named Phoenix Equity Planning Corporation) at (800) 243-4361 or by writing VP Distributors at 100 Pearl Street, Hartford, CT 06103.

Mutual Fund Services: (800) 243-1574

Adviser Consulting Group: (800) 243-4361

Telephone Orders: (800) 367-5877

Text Telephone: (800) 243-1926

8020B (1/09)

TABLE OF CONTENTS


		PAGE
The Trust		3
Investment Restrictions		3
Investment Techniques and Risks		5
Performance Information		38
Portfolio Turnover		39
Portfolio Transactions and Brokerage		40
Disclosure of Fund Holdings		41
Services of the Adviser and Subadvisers		43
Portfolio Managers		48
Net Asset Value		52
How To Buy Shares		53
Alternative Purchase Arrangements		53
Investor Account Services		57
How To Redeem Shares		59
Dividends, Distributions and Taxes		60
Tax Sheltered Retirement Plans		64
The Distributor		65
Distribution Plans		67
Management of the Trust		69
Additional Information		76
Appendix		79
Glossary		80

THE TRUST

The Trust is an open-end investment management company which was organized under Delaware law in 1995 as a statutory trust. Prior to January 27, 2006, the Trust was named “Phoenix-Seneca Funds.” Currently the Trust is named Virtus Opportunities Trust. From January 27, 2006 to October 20, 2008, the Trust was named “Phoenix Opportunities Trust.” Prior to October 1, 2008, all the funds listed below had “Phoenix” in their names instead of “Virtus.” The Trust consists of 17 separate Funds: the Virtus Alternatives Diversifier Fund (“Alternatives Diversifier Fund”), the Virtus Bond Fund (“Bond Fund”), the Virtus CA Tax-Exempt Bond Fund (“CA Bond Fund”), the Virtus Core Bond Fund (“Core Bond Fund”), the Virtus Foreign Opportunities Fund (“Foreign Opportunities Fund”), the Virtus Global Infrastructure Fund (“Global Infrastructure Fund”), the Virtus Global Opportunities Fund (“Global opportunities Fund”) the Virtus High Yield Fund (“High Yield Fund”), the Virtus International Real Estate Securities Fund (“International Real Estate Fund”), the Virtus Market Neutral Fund (“Market Neutral Fund”), the Virtus Money Market Fund (“Money Market Fund”), the Virtus Multi-Sector Fixed Income Fund (“Multi-Sector Fixed Income Fund”), the Virtus Multi-Sector Short Term Bond Fund (“Multi-Sector Short Term Bond Fund”), the Virtus Real Estate Securities Fund (“Real Estate Fund”), the Virtus Senior Floating Rate Fund (“Senior Floating Rate Fund”), the Virtus Wealth Builder Fund (“Wealth Builder Fund”), and the Virtus Wealth Guardian Fund (“Wealth Guardian Fund”) (each a “Fund” and collectively, the “Funds”). In addition, Alternatives Diversifier Fund, Wealth Builder Fund and Wealth Guardian Fund are referred to herein as the “Asset Allocation Funds” (formerly named the “Phoenix PHOLIOs”). The Trust’s Prospectuses describe the investment objectives of the Funds and the strategies that each Fund will employ in seeking to achieve its investment objective. The respective investment objective(s) for the CA Tax-Exempt Bond Fund, Multi-Sector Short Term Bond Fund, Real Estate Securities Fund and Wealth Builder Fund is a fundamental policy and may not be changed without the vote of a majority of the outstanding voting securities of that Fund. The respective investment objective(s) for each of the other Funds is a non-fundamental policy of that Fund and may be changed without shareholder approval upon 60 days notice. The following discussion supplements the disclosure in the Prospectuses.

INVESTMENT RESTRICTIONS

The following investment restrictions have been adopted by the Trust with respect to each of the Funds. Except as otherwise stated, these investment restrictions are “fundamental” policies. A “fundamental” policy is defined in the Investment Company Act of 1940, as amended, (the “1940 Act”) to mean that the restriction cannot be changed without the vote of a “majority of the outstanding voting securities” of the Fund. A “majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of (a) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or (b) more than 50% of the outstanding voting securities.

With respect to all of the Funds, each Fund may not:

(1) With respect to 75% of its total assets, purchase securities of an issuer (other than the U.S. Government, its agencies, instrumentalities or authorities or repurchase agreements collateralized by U.S. Government securities and other investment companies), if: (a) such purchase would, at the time, cause more than 5% of the Fund’s total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would, at the time, result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. This restriction does not apply to the International Real Estate Fund and Real Estate Fund.

(2) Purchase securities if, after giving effect to the purchase, more than 25% of its total assets would be invested in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. Government or its agencies or instrumentalities), except: (a) the Global Infrastructure Fund will concentrate its assets in the public infrastructure industry which includes, but is not limited to, companies engaged in the production, transmission or distribution of electric energy or gas, or in telephone services; (b) the Money Market Fund may invest more than 25% of its assets in instruments issued by domestic banks; and (c) the International Real Estate Fund and Real Estate Fund will each concentrate its assets in the real estate industry. Additionally, this prohibition shall not apply to the purchase of investment company shares by any of the Asset Allocation Funds. For purposes of determining the amount of each Fund’s total assets invested in the securities of one or more issuers conducting their principal business activities in the same industry, each Fund will look through to the securities held by the underlying affiliated mutual funds in which the Fund invests.

(3) Borrow money, except (i) in amounts not to exceed one third of the value of the Fund’s total assets (including the amount borrowed) from banks, and (ii) up to an additional 5% of its total assets from banks or other lenders for temporary purposes. For purposes of this restriction, (a) investment techniques such as margin purchases, short sales, forward commitments, and roll transactions, (b) investments in instruments such as futures contracts, swaps, and options and (c) short-term credits extended in connection with trade clearance and settlement, shall not constitute borrowing.

(4) Issue “senior securities” in contravention of the 1940 Act. Activities permitted by Securities and Exchange Commission (“SEC”) exemptive orders or staff interpretations shall not be deemed to be prohibited by this restriction.

(5) Underwrite the securities issued by other persons, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter under applicable law.

(6) Purchase or sell real estate, except that the Fund may (i) acquire or lease office space for its own use, (ii) invest in securities of issuers that invest in real estate or interests therein, (iii) invest in mortgage-related securities and other securities that are secured by real estate or interests therein, (iv) hold and sell real estate acquired by the Fund as a result of the ownership of securities.

(7) Purchase or sell commodities or commodity contracts, except the Fund may purchase and sell derivatives (including, but not limited to, options, futures contracts and options on futures contracts) whose value is tied to the value of a financial index or a financial instrument or other asset (including, but not limited to, securities indexes, interest rates, securities, currencies and physical commodities).

(8)(a) Make loans, except that the Fund may (i) lend portfolio securities, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of debt securities, bank loan participation interests, bank certificates of deposit, bankers’ acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities and (iv) participate in an interfund lending program with other registered investment companies. (Applicable to: Foreign Opportunities Fund, Market Neutral Fund, Multi-Sector Short Term Bond Fund, Real Estate Fund and Wealth Builder Fund.)

(8)(b) Lend securities or make any other loans if, as a result, more than 33 ¹ / 3 % of its total assets would be lent to other parties, except that the funds may purchase debt securities, may enter into repurchase agreements, may lend portfolio securities and may acquire loans, loan participations and assignments (both funded and unfunded) and other forms of debt instruments. (Applicable to: Alternatives Diversifier Fund, Bond Fund, CA Tax-Exempt Bond Fund, Core Bond Fund, Global Infrastructure Fund, Global Opportunities Fund, High Yield Fund, International Real Estate Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Senior Floating Rate Fund, Wealth Guardian Fund.)

Except with respect to investment restriction (3) above, if any percentage restriction described above for the Funds is adhered to at the time of investment, a subsequent increase or decrease in the percentage resulting from a change in the value of the Funds’ assets will not constitute a violation of the restriction. With respect to investment restriction (3), in the event that asset coverage for all borrowings shall at any time fall below 300 per centum, the Fund shall, within three days thereafter (not including Sundays and holidays) or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least 300 per centum.

Section 12 of the 1940 Act limits the percentage of shares of other mutual funds that a fund may purchase. Each of the Funds is exempt from this limitation so long as, among other things, the Fund and the underlying mutual fund are affiliates, and the underlying mutual fund is itself not a fund of funds.

Non-Fundamental Investment Restrictions

The Trustees have adopted additional investment restrictions for the Funds. These restrictions are operating policies of the Funds and may be changed by the Trustees without shareholder approval. The additional investment restrictions adopted by the Trustees to date include the following for the Foreign Opportunities Fund:

(a) The Fund may sell securities short if it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration therefore (“short sales against the box”). In addition, the Fund may engage in “naked” short sales, which involve selling a security that a Fund borrows and does not own. The total market value of all of a Fund’s naked short sale positions will not exceed 8% of its assets. Transactions in futures, options, swaps and forward contracts are not deemed to constitute selling securities short.

(b) The Fund does not currently intend to purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing securities on margin.

(c) The Fund may not mortgage or pledge any securities owned or held by it in amounts that exceed, in the aggregate, 15% of the Fund’s net asset value, provided that this limitation does not apply to reverse repurchase agreements, deposits of assets to margin, options, swaps or forward contracts, or the segregation of assets in connection with such contracts.

(d) The Fund does not currently intend to purchase any security or enter into a repurchase agreement if, as a result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the

absence of a readily available market. The Trustees, or the Fund’s investment adviser or subadviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A Securities”), or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. The factors that may be considered when determining liquidity are described under “Illiquid Securities” in the “Investment Techniques and Risks” section below.

(e) The Fund may not invest in companies for the purpose of exercising control of management.

INVESTMENT TECHNIQUES AND RISKS

The following pages contain more detailed information about types of instruments in which a Fund may invest, strategies the Adviser and/or Subadvisers may employ in pursuit of a Fund’s investment objective, and a summary of related risks. The Funds may not buy all of these instruments or use all of these techniques.

NOTE WITH RESPECT TO THE ASSET ALLOCATION FUNDS: The following descriptions pertain to the underlying mutual funds in which the Asset Allocation Funds invest. The Asset Allocation Funds will not use these techniques directly. Each of the Asset Allocation Funds pursues its investment objective(s) by investing its assets in a mix of underlying mutual funds that employ diverse investment techniques. Each underlying mutual fund will engage in certain investment techniques and practices to the extent permitted and consistent with the underlying mutual fund’s investment objective. With respect to the Asset Allocation Funds, the following is a description of key investment techniques, and their associated risks, of the underlying mutual funds in which the Asset Allocation Funds currently invest. Please refer to the prospectus and statement of additional information for each underlying affiliated mutual fund for specific details.

Throughout this section, the term adviser may be used to refer to a subadviser, if any.

Borrowing, Reverse Repurchase Agreements and Mortgage Dollar Rolls

The Fund may borrow money and invest the loan proceeds in other assets. This borrowing may be unsecured. The 1940 Act requires the Funds to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, the Fund may be required to sell some of its portfolio holdings within three days to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. Borrowing may exaggerate the effect on net asset value of any increase or decrease in the market value of the portfolio. Money borrowed will be subject to interest costs which may or may not be recovered by appreciation of the securities purchased. The Fund also may be required to maintain minimum average balances in connection with such borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.

Among the forms of investments in which the Fund may engage, and which may be deemed to constitute borrowings, is the entry into reverse repurchase agreements. A reverse repurchase agreement involves the sale of a portfolio-eligible security by a Fund, coupled with its agreement to repurchase the instrument at a specified time and price. The Fund will maintain a pledged account with its Custodian consisting of any asset, including equity securities and non-investment grade debt so long as the asset is liquid, unencumbered and marked to market daily, equal to its obligations under reverse repurchase agreements with broker-dealers and banks. However, reverse repurchase agreements involve the risk that the market value of securities retained by the Fund may decline below the repurchase price of the securities sold by the Fund which it is obligated to repurchase.

The Fund also may enter into “mortgage dollar rolls,” which are similar to reverse repurchase agreements in certain respects. In a “dollar roll” transaction, the Fund sells a mortgage-related security (such as a Government National Mortgage Association (“GNMA”) security) to a dealer and simultaneously agrees to purchase a similar security (but not the same security) in the future at a pre-determined price. A “dollar roll” can be viewed, like a reverse repurchase agreement, as a collateralized borrowing in which the Fund pledges a mortgage-related security to a dealer to obtain cash. Unlike in the case of reverse repurchase agreements, the dealer with which the Fund enters into a dollar roll transaction is not obligated to return the same securities as those originally sold by the Fund, but only securities which are “substantially identical.” To be considered “substantially identical,” the securities returned to the Fund generally must: (1) be collateralized by the same types of underlying mortgages; (2) be issued by the same agency and be part of the same program; (3) have a similar original stated maturity; (4) have identical net coupon rates; (5) have similar market yields (and therefore price); and (6) satisfy “good delivery” requirements, meaning that the aggregate principal amount of the securities received back must be within 2.5% of the initial amount delivered.

The Fund’s obligation under a dollar roll agreement must be covered by cash or high quality debt securities equal in value to the securities subject to repurchase by the Fund, maintained in a pledged account. Dollar roll transactions are treated as

borrowings by the Fund, and therefore the Fund’s entry into dollar roll transactions is subject to the Fund’s overall limitations on borrowing. Furthermore, because dollar roll transactions may be for terms ranging between one and six months, dollar roll transactions may be deemed “illiquid” and subject to the Fund’s overall limitations on investment in illiquid securities.

Debt Securities

The Fund may invest in debt securities. Generally, the Fund will invest in debt securities rated BBB or better by Standard & Poor’s Corporation (“S&P”) or Baa or better by Moody’s Investor Service, Inc. (“Moody’s”) or, if not rated, are judged to be of comparable quality as determined by the adviser.

The value of a Fund’s investments in debt securities will change as interest rates fluctuate. When interest rates decline, the values of such securities generally can be expected to increase and when interest rates rise, the values of such securities can generally be expected to decrease. The lower-rated and comparable unrated debt securities described above are subject to greater risks of loss of income and principal than are higher-rated fixed income securities. The market value of lower- rated securities generally tends to reflect the market’s perception of the creditworthiness of the issuer and short-term market developments to a greater extent than is the case with more highly rated securities, which reflect primarily functions in general levels of interest rates.

Corporate Debt Securities. A Fund’s investments in debt securities of domestic or foreign corporate issuers are limited to bonds, debentures, notes and other similar corporate debt instruments, including convertible securities that meet the Fund’s minimum ratings criteria or if unrated are, in the adviser’s opinion, comparable in quality to corporate debt securities that meet those criteria. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of exchange rates between the U.S. dollar and a foreign currency or currencies or to the value of commodities, such as gold.

Convertible Securities. A convertible security is a bond, debenture, note, or other security that entitles the holder to acquire common stock or other equity securities of the same or a different issuer. It generally entitles the holder to receive interest paid or accrued until the security matures or is redeemed, converted, or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible debt securities. Convertible securities rank senior to common stock in a corporation’s capital structure and, therefore, generally entail less risk than the corporation’s common stock, although the extent to which this is true depends in large measure on the degree to which the convertible security sells above its value as a fixed-income security.

A convertible security may be subject to redemption or conversion at the option of the issuer at a predetermined price. If a convertible security held by a Fund is called for redemption, the Fund could be required to permit the issuer to redeem the security and convert it to the underlying common stock. The Fund generally would invest in convertible securities for their favorable price characteristics and total return potential and would normally not exercise an option to convert. The Fund might be more willing to convert such securities to common stock.

Convertible Low-Rated Securities (Junk Bonds). The Fund may also invest in convertible securities (debt securities or preferred stocks of corporations which are convertible into or exchangeable for common stocks). A Fund’s adviser or subadviser, as the case may be, will select only those convertible securities for which it believes (a) the underlying common stock is a suitable investment for the Fund and (b) a greater potential for total return exists by purchasing the convertible security because of its higher yield and/or favorable market valuation. Each of the Funds may invest in convertible debt securities rated less than investment grade. Debt securities rated less than investment grade are commonly referred to as “junk bonds.” See High Yield-High Risk (Junk Bonds) Securities.

Inverse Floaters. Inverse floaters are debt instruments whose interest bears an inverse relationship to the interest rate on another security. No Fund will invest more than 5% of its assets in inverse floaters. Similar to variable and floating rate obligations, effective use of inverse floaters requires skills different from those needed to select most portfolio securities. If movements in interest rates are incorrectly anticipated, a Fund could lose money or its NAV could decline by the use of inverse floaters.

Payable in Kind (“PIK”) Bonds. PIK bonds are obligations which provide that the issuer thereof may, at its option, pay interest on such bonds in cash or in the form of additional debt securities. Such securities benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract investors who are willing to defer receipt of such cash. The Fund will accrue income on such investments for tax and accounting purposes, which is distributable to shareholders from available cash or liquidated assets as described above during the time interest payments are not made.

Standby Commitments. These instruments, which are similar to a put, give a Fund the option to obligate a broker-dealer or bank to repurchase a security held by that Fund at a specified price.

Step Coupon Bonds. Step coupon bonds are bonds that frequently do not entitle the holder to any periodic payments of interest for some initial period after the issuance of the obligation; thereafter, step coupon bonds pay interest for fixed periods

of time at particular interest rates. The Fund will accrue income on such investments for tax and accounting purposes, which is distributable to shareholders from available cash or liquidated assets as described above during the time interest payments are not made.

Strip Bonds. Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity.

Tender Option Bonds. Tender option bonds are relatively long-term bonds that are coupled with the option to tender the securities to a bank, broker-dealer or other financial institution at periodic intervals and receive the face value of the bond. This investment structure is commonly used as a means of enhancing a security’s liquidity.

Variable and Floating Rate Obligations. These types of securities have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. Variable and floating rate securities pay interest at rates that are adjusted periodically according to a specific formula, usually with reference to some interest rate index or market interest rate (the “underlying index”). The floating rate tends to decrease the security’s price sensitivity to changes in interest rates. These types of securities are relatively long-term instruments that often carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less than for fixed-rate obligations.

In order to most effectively use these investments, a portfolio manager must correctly assess probable movements in interest rates. This involves different skills than those used to select most portfolio securities. If the subadviser incorrectly forecasts such movements, a Fund could be adversely affected by the use of variable or floating rate obligations.

Variable Rate Demand Securities are Variable Rate Securities which have demand features entitling the purchaser to resell the securities to the issuer at an amount approximately equal to amortized cost or the principal amount thereof plus accrued interest, which may be more or less than the price that the Fund paid for them. The interest rate on Variable Rate Demand Securities also varies either according to some objective standard, such as an index of short-term, tax-exempt rates, or according to rates set by or on behalf of the issuer.

Yankee Bonds. Yankee bonds are dollar-denominated obligations issued in the U.S. capital markets by foreign banks. Yankee bonds are subject to the same risks that pertain to domestic issues, notably credit risk, market risk and liquidity risk. Additionally, to a limited extent, Yankee bonds are subject to certain sovereign risks an other risks associated with foreign investments. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across their borders. Other risks include: adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes, and the expropriation or nationalization of foreign issues.

Zero Coupon Bonds. A zero coupon bond is a debt obligation that does not make any interest payments for a specified period of time prior to maturity or until maturity. The nonpayment of interest on a current basis may result from the bond’s having no stated interest rate, in which case the bond pays only principal at maturity and is initially issued at a discount from face value. Alternatively, a zero coupon obligation may provide for a stated rate of interest, but provide that such interest is not payable until maturity, in which case the bond may initially be issued at par. Even though zero coupon bonds may not pay current interest in cash, the Fund is required to accrue interest income on such investments and to distribute such amounts to shareholders. Thus, the Fund would not be able to purchase income-producing securities to the extent cash is used to pay such distributions, and, therefore, the Fund’s current income could be less than it otherwise would have been. Instead of using cash, the Fund might liquidate investments in order to satisfy these distribution requirements. The value of zero coupon bonds fluctuates more in response to interest rate changes, if they are of the same maturity, than does the value of debt obligations that make current interest payments.

The value to the investor of a these types of bonds is represented by the economic accretion either of the difference between the purchase price and the nominal principal amount (if no interest is stated to accrue) or of accrued, unpaid interest during the bond’s life or payment deferral period.

Depositary Receipts

The Fund may invest in sponsored and unsponsored American Despositary Receipts (“ADRs”), which are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs, in registered form, are designed for use in U. S. securities markets. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. The Fund may also invest in European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) and in other similar instruments representing securities of foreign

companies. EDRs and GDRs are securities that are typically issued by foreign banks or foreign trust companies, although U.S. banks or U. S. trust companies may issue them. EDRs and GDRs are structured similarly to the arrangements of ADRs. EDRs, in bearer form, are designed for use in European securities markets.

Depositary receipts are generally subject to the same sort of risks as direct investments in a foreign country, such as currency risk, political and economic risk, and market risk, because their values depend on the performance of a foreign security denominated in its home currency. The risks of foreign investing are addressed under the heading “Foreign Securities.”

Derivative Investments

In order to seek to hedge various portfolio positions, including to hedge against price movements in markets in which a Fund anticipates increasing its exposure, the Fund may invest in certain instruments which may be characterized as derivative investments. A Fund may also utilize these instruments as part of its overall investment technique to gain or lessen exposure to various securities, markets or currencies. These investments include various types of interest rate transactions, options and futures, as describe below. Such investments also may consist of indexed securities, including inverse securities. The Fund may have express limitations on the percentage of its assets that may be committed to these investments. Some of these investments have no express quantitative limitations, and may in some cases require limitations as to the type of permissible counter-party to the transaction. Interest rate transactions involve the risk of an imperfect correlation between the index used in the hedging transactions and that pertaining to the securities which are the subject of such transactions. Similarly, utilization of options and futures transactions involves the risk of imperfect correlation in movements in the price of options and futures and movements in the price of the securities or interest rates which are the subject of the hedge. Investments in indexed securities, including inverse securities, subject a Fund to the risks associated with changes in the particular indices, which may include reduced or eliminated interest payments and losses of invested principal.

Credit Linked Notes. Credit linked notes are a derivative transaction used to transfer credit risk. The performance of the notes is linked to the performance of the underlying reference obligation or reference portfolio (“reference entities”). The notes are usually issued by a special purpose vehicle (“SPV”) that sells credit protection through a credit default swap (“CDS”) transaction in return for a premium and an obligation to pay the transaction sponsor should a reference entity experience a credit event, such as bankruptcy. The SPV invests the proceeds from the notes to cover its contingent obligation. Revenue from the investments and the money received as premium are used to pay interest to note holders. The main risk of credit linked notes is the risk of default to the reference obligation of the CDS. Should a default occur, the SPV would have to pay the transaction sponsor, subordinating payments to the note holders. Credit linked notes also may not be liquid and may be subject to currency and interest rate risks as well.

Foreign Currency Transactions.

Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (“term”) from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders (usually large commercial banks) and their customers.

A Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily in an amount not less than the value of a Fund’s total assets committed to forward foreign currency exchange contracts entered into for the purchase of a foreign currency. If the value of the securities specifically designated declines, additional cash or securities will be added so that the specifically designated amount is not less than the amount of the Fund’s commitments with respect to such contracts.

Foreign Currency Options. A foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise price at a specified date or during the option period. A call option gives its owner the right, but not the obligation, to buy the currency, while a put option gives its owner the right, but not the obligation, to sell the currency. The option seller (writer) is obligated to fulfill the terms of the option sold if it is exercised. However, either seller or buyer may close its position during the option period for such options any time prior to expiration.

A call rises in value if the underlying currency appreciates. Conversely, a put rises in value if the underlying currency depreciates. While purchasing a foreign currency option can protect a Fund against an adverse movement in the value of a foreign currency, it does not limit the gain which might result from a favorable movement in the value of such currency. For example, if a Fund were holding securities denominated in an appreciating foreign currency and had purchased a foreign currency put to hedge against a decline in the value of the currency, it would not have to exercise its put. Similarly, if a Fund had entered into a contract to purchase a security denominated in a foreign currency and had purchased a foreign currency call to hedge against a rise in the value of the currency but instead the currency had depreciated in value between the date of purchase and the settlement date, the Fund would not have to exercise its call but could acquire in the spot market the amount of foreign currency needed for settlement.

Foreign Currency Futures Transactions. The Fund may use foreign currency futures contracts and options on such futures contracts. Through the purchase or sale of such contracts, a Fund may be able to achieve many of the same objectives attainable through the use of foreign currency forward contracts, but more effectively and possibly at a lower cost.

Unlike forward foreign currency exchange contracts, foreign currency futures contracts and options on foreign currency futures contracts are standardized as to amount and delivery period and are traded on boards of trade and commodities exchanges. It is anticipated that such contracts may provide greater liquidity and lower cost than forward foreign currency exchange contracts.

Regulatory Restrictions. To the extent required to comply with SEC Release No. IC-10666, when purchasing a futures contract or writing a put option, the Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily equal to the value of such contracts.

Futures contracts are designed by boards of trade which are designated “contracts markets” by the Commodities Futures Trading Commission (“CFTC”). Futures contracts trade on contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee performance of the contracts. As a series of a registered investment company, the Fund is eligible for exclusion from the CFTC’s definition of “commodity pool operator,” meaning that the Fund may invest in futures contracts under specified conditions without registering with the CFTC.

Foreign currency warrants. Foreign currency warrants such as currency exchange warrants (“CEWs”) are warrants that entitle the holder to receive from the issuer an amount of cash (generally, for warrants issued in the United States, in U.S. dollars) that is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk that, from the point of view of prospective purchases of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may be used to reduce the foreign exchange risk assumed by purchasers of a security by, for example, providing for a supplemental payment in the event the U.S. dollar depreciates against the value of a major foreign currency such as the Japanese Yen or Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (e.g., unless the U.S. dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. Upon exercise of warrants, there may be a delay between the time the holder gives instructions to exercise and the time the exchange rate relating to exercise is determined, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining “time value” of the warrants (i.e., the difference between the current market value and the exercise value of the warrants), and, if the warrants were “out-of-the-money,” in a total loss of the purchase price of the warrants. Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation (“OCC”). Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.

Principal exchange rate linked securities. Principal exchange rate linked securities (or “PERLS”) are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. dollar and a particular foreign currency at or about that time. The return on “standard” principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. dollar, and is adversely affected by increases in the foreign exchange value of the U.S. dollar, “reverse” PERLS are like the “standard” securities, except that their return is enhanced by increases in the value of the U.S. dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (i.e., at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign

exchange risk, based on the expectations of the current market). PERLS may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.

Performance indexed paper. Performance indexed paper (or “PIP”) is U.S. dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. dollar and a designated currency as of or about the time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.

Foreign Exchange-Traded Options, Futures and Forward Currency Exchange Contracts—Additional Risks. Options on securities, futures contracts, options on futures contracts, currencies and options on currencies may be traded on foreign exchanges. Such transactions may not be regulated as effectively as similar transactions in the United States; may not involve a clearing mechanism and related guarantees; and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political, legal and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii) delays in the Fund’s ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) lesser trading volume.

Futures Contracts and Options on Futures Contracts. The Fund may use interest rate, foreign currency or index futures contracts. An interest rate, foreign currency (see “Foreign Currency Transactions” above) or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, foreign currency or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of these securities is made. A public market exists in futures contracts covering several indexes as well as a number of financial instruments and foreign currencies, including: the S&P 500; the S&P 100; the New York Stock Exchange (“NYSE”) composite; U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; Eurodollar certificates of deposit; the Australian dollar; the Canadian dollar; the British pound; the German mark; the Japanese yen; the French franc; the Swiss franc; the Mexican peso; and certain multinational currencies, such as the European Currency Unit (“ECU”). It is expected that other futures contracts will be developed and traded in the future. Interest rate futures contracts currently are traded in the United States primarily on the floors of the Chicago Board of Trade (“CBT”) and the International Monetary Market of the Chicago Mercantile Exchange (“CME”). Interest rate futures also are traded on foreign exchanges such as the London International Financial Futures Exchange (“LIFFE”) and the Singapore International Monetary Exchange (“SIMEX”).

The Fund may purchase and write call and put options on futures. Futures options possess many of the same characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.

The Fund will limit its use of futures contracts and futures options to hedging transactions and in an attempt to increase total return, in accordance with federal regulations. The adviser believes it is possible to reduce the effect of interest or exchange rate fluctuations on the value of the Fund’s portfolio, or sectors thereof, through the use of such strategies. For example, the Fund might use futures contracts to hedge against anticipated changes in interest rates that might adversely affect either the value of the Fund’s securities or the price of the securities which the Fund intends to purchase. The Fund’s hedging activities may include sales of futures contracts as an offset against the effect of expected increases in interest rates, and purchases of futures contracts as an offset against the effect of expected declines in interest rates. Although other techniques could be used to reduce the Fund’s exposure to interest rate fluctuations, the Fund may be able to hedge its exposure more effectively and perhaps at a lower cost by using futures contracts and futures options. The costs of and possible losses incurred from futures contracts and options thereon may reduce the Fund’s current income and involve a loss of principal. Any incremental return earned by the Fund resulting from these transactions would be expected to offset anticipated losses or a portion thereof.

The Fund will only enter into futures contracts and futures options which are standardized and traded on a U.S. or foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by the Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. The Fund expects to earn interest income on its initial margin deposits. A futures contract held by the Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, the Fund will mark to market its open futures positions.

The Fund is also required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the Fund.

Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sales price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs must also be included in these calculations.

Limitations on Use of Futures and Futures Options. When entering into a futures contract, the Fund will specifically designate on its accounting records (and mark-to-market on a daily basis) cash, U.S. Government securities, or other highly liquid debt securities that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value of the futures contract. Alternatively, the Fund may “cover” its position by purchasing a put option on the same futures contract with a strike price as high or higher than the price of the contract held by the Fund.

When selling a futures contract, the Fund will specifically designate on its accounting records (and mark-to-market on a daily basis) liquid assets that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value of the instruments underlying the contract. Alternatively, the Fund may “cover” its position by owning the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or by holding a call option permitting the Fund to purchase the same futures contract at a price no higher than the price of the contract written by the Fund (or at a higher price if the difference is maintained in liquid assets with the Fund’s custodian).

When selling a call option on a futures contract, the Fund will specifically designate on its accounting records any asset, including equity securities and non-investment grade debt so long as the asset is liquid, unencumbered and marked to market daily that, when added to the amounts deposited with a futures commission merchant as margin, equal the total market value of the futures contract underlying the call option. Alternatively, the Fund may cover its position by entering into a long position in the same futures contract at a price no higher than the strike price of the call option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the Fund to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Fund.

When selling a put option on a futures contract, the Fund will specifically designate on its accounting records any asset, including equity securities and non-investment grade debt so long as the asset is liquid, unencumbered and marked to market daily that equal the purchase price of the futures contract, less any margin on deposit. Alternatively, the Fund may cover the position either by entering into a short position in the same futures contract, or by owning a separate put option permitting it to sell the same futures contract so long as the strike price of the put option is the same or higher than the strike price of the put option sold by the Fund.

The requirements of the Internal Revenue Code of 1986 (the “Code”) for qualification as a regulated investment company (“RIC”) also may limit the extent to which the Fund may enter into futures, futures options or forward contracts. (See “Dividends, Distributions and Taxes.”)

Risks Relating to Futures Contracts and Related Options. Positions in futures contracts and related options may be closed out only on an exchange which provides a secondary market for such contracts or options. A Fund will enter into an option or futures position only if there appears to be a liquid secondary market. However, there can be no assurance that a liquid secondary market will exist for any particular option or futures contract at any specific time. Thus, it may not be possible to close out a futures or related option position. In the case of a futures position, in the event of adverse price movements a Fund would continue to be required to make daily margin payments. In this situation, if a Fund has insufficient cash to meet daily margin requirements it may have to sell portfolio securities to meet its margin obligations at a time when it may be disadvantageous to do so. In addition, a Fund may be required to take or make delivery of the securities underlying the futures contracts it holds. The inability to close out futures positions also could have an adverse impact on a Fund’s ability to hedge its portfolio effectively.

There are several risks in connection with the use of futures contracts as a hedging device. While hedging can provide protection against an adverse movement in market prices, it can also limit a hedger’s opportunity to benefit fully from a favorable market movement. In addition, investing in futures contracts and options on futures contracts will cause a Fund to incur additional brokerage commissions and may cause an increase in a Fund’s portfolio turnover rate.

The successful use of futures contracts and related options also depends on the ability of the adviser or subadviser to forecast correctly the direction and extent of market movements, interest rates and other market factors within a given time frame. To the extent market prices remain stable during the period a futures contract or option is held by a Fund or such prices move in a direction opposite to that anticipated, a Fund may realize a loss on the transaction which is not offset by an increase in the value of its portfolio securities. Options and futures may also fail as a hedging technique in cases where the movements of the securities underlying the options and futures do not follow the price movements of the hedged portfolio securities. As a result, a Fund’s total return for the period may be less than if it had not engaged in the hedging transaction. The loss from investing in futures transactions is potentially unlimited.

Utilization of futures contracts by a Fund involves the risk of imperfect correlation in movements in the price of futures contracts and movements in the price of the securities which are being hedged. If the price of the futures contract moves more or less than the price of the securities being hedged, a Fund will experience a gain or loss which will not be completely offset by movements in the price of the securities. It is possible that, where a Fund has sold futures contracts to hedge its portfolio against a decline in the market, the market may advance and the value of securities held in the Fund’s portfolio may decline. If this occurred, a Fund would lose money on the futures contract and would also experience a decline in value in its portfolio securities. Where futures are purchased to hedge against a possible increase in the prices of securities before a Fund is able to invest its cash (or cash equivalents) in securities (or options) in an orderly fashion, it is possible that the market may decline; if a Fund then determines not to invest in securities (or options) at that time because of concern as to possible further market decline or for other reasons, a Fund will realize a loss on the futures that would not be offset by a reduction in the price of the securities purchased.

The market prices of futures contracts may be affected if participants in the futures market elect to close out their contracts through off-setting transactions rather than to meet margin deposit requirements. In such case, distortions in the normal relationship between the cash and futures markets could result. Price distortions could also result if investors in futures contracts opt to make or take delivery of the underlying securities rather than to engage in closing transactions because such action would reduce the liquidity of the futures market. In addition, from the point of view of speculators, because the deposit requirements in the futures markets are less onerous than margin requirements in the cash market, increased participation by speculators in the futures market could cause temporary price distortions. Due to the possibility of price distortions in the futures market and because of the imperfect correlation between movements in the prices of securities and movements in the prices of futures contracts, a correct forecast of market trends may still not result in a successful hedging transaction.

Compared to the purchase or sale of futures contracts, the purchase of put or call options on futures contracts involves less potential risk for a Fund because the maximum amount at risk is the premium paid for the options plus transaction costs. However, there may be circumstances when the purchase of an option on a futures contract would result in a loss to a Fund while the purchase or sale of the futures contract would not have resulted in a loss, such as when there is no movement in the price of the underlying securities.

Interest Rate Transactions. The Fund may enter into interest rate swaps, and the purchase and sale of interest rate collars, caps and floors.

Interest rate swaps involve the exchange with another party of commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The purchase of an interest rate cap entitles the purchaser, to the extent that a

specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. An interest rate collar combines the elements of purchasing a cap and selling a floor. The collar protects against an interest rate rise above the maximum amount but gives up the benefit of an interest rate decline below the minimum amount. The net amount of the excess, if any, of the Fund’s obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis and any asset, including equity securities and non-investment grade debt so long as the asset is liquid, unencumbered and marked to market daily having an aggregate net asset value at least equal to the accrued excess will be specifically designated on the accounting records of the Fund. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction.

Options. The Fund may purchase and sell (write) both put options and call options on securities, securities indexes, and foreign currencies. The purpose of writing covered put and call options generally is to hedge against fluctuations in the market value of a Fund’s portfolio securities and in an attempt to increase total return. The Fund may purchase or sell call and put options on securities indices for a similar purpose. A hedge is limited to the degree that the extent of the price change of the underlying security is less than the difference between the option premium received by the Fund and the option strike price. To the extent the underlying security’s price change exceeds this amount, written put and call options will not provide an effective hedge.

Writing Call Options. Each Fund may write (sell) covered call options on securities (“calls”) when the subadviser considers such sales appropriate. When a Fund writes a call, it receives a premium and grants the purchaser the right to buy the underlying security at any time during the call period (usually between three and nine months) at a fixed exercise price regardless of market price changes during the call period. If the call is exercised, the Fund forgoes any gain but is not subject to any loss on any change in the market price of the underlying security relative to the exercise price. A Fund will write such options subject to any applicable limitations or restrictions imposed by law.

A written call option is covered if the Fund owns the security underlying the option. A written call option may also be covered by purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the Fund’s net exposure on its written option position. In addition, the Fund may cover such options by specifically designating on its accounting records any assets, including equity securities and non-investment grade debt so long as the assets are liquid, unencumbered and marked to market daily (“liquid assets”), in amounts sufficient to ensure that it is able to meet its obligations under the written call should it be exercised. This method does not reduce the potential loss to the Fund should the value of the underlying security increase and the option be exercised.

Purchasing Call Options. The Fund may purchase a call option when the adviser believes the value of the underlying security will rise or to effect a “closing purchase transaction” as to a call option the Fund has written (sold). A Fund will realize a profit (or loss) from a closing purchase transaction if the amount paid to purchase a call is less (or more) than the amount received from the sale thereof.

Writing Put Options. A put option written by a Fund obligates the Fund to purchase the specified security at a specified price if the option is exercised at any time before the expiration date. A written put option may be covered by specifically designating on the accounting records of the Fund liquid assets with a value at least equal to the exercise price of the put option. While this may help ensure that a Fund will have sufficient assets to meet its obligations under the option contract should it be exercised, it will not reduce the potential loss to the Fund should the value of the underlying security decrease and the option be exercised.

Purchasing Put Options. A Fund may purchase a put option when the subadviser believes the value of the underlying security will decline. A Fund may purchase put options on securities in its portfolio in order to hedge against a decline in the value of such securities (“protective puts”) or to effect closing purchase transactions as to puts it has written. A Fund will realize a profit (or loss) from a closing purchase transaction if the amount paid to purchase a put is less (or more) than the amount received from the sale thereof.

Combined Option Positions. The Fund may purchase and write options in combination with each other to adjust the risk and return characteristics of the overall position. For example, a Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

The purchase and writing of options involves certain risks. During the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying securities above the

exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying securities at the exercise price. If a call option purchased by a fund is not sold when it has remaining value, and if the market price of the underlying security remains less than or equal to the exercise price, the fund will lose its entire investment in the option. Also, where an option on a particular security is purchased to hedge against price movements in a related security, the price of the option may move more or less than the price of the related security. There can be no assurance that a liquid market will exist when the funds seek to close out an option position. Furthermore, if trading restrictions or suspensions are imposed on the options market, the funds may be unable to close out an option position.

Correlation of Price Changes. Because there are a limited number of types of exchange-traded options and futures contracts, it is likely that the standardized contracts available will not match the applicable Fund’s current or anticipated investments. The Fund may invest in options based on securities which differ from the securities in which it typically invests. This involves a risk that the options will not track the performance of the Fund’s investments.

Options and futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match the applicable Fund’s investments well. Options and future prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation may also result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, or from imposition of daily price fluctuation limits or trading halts. The Fund may purchase or sell options with a greater or less value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in historical volatility between the contract and the securities, although this may not be successful in all cases. If price changes in the applicable Fund’s options are poorly correlated with its other investments, the positions may fail to produce anticipated gains or result in losses that are not offset by gains in other investments. Successful use of these techniques requires skills different from those needed to select portfolio securities.

Liquidity of Options. There is no assurance a liquid secondary market will exist for any particular option at any particular time. Options may have relatively low trading volume and liquidity if their strike prices are not close to the underlying instruments’ current price. In addition, exchanges may establish daily price fluctuation limits for options, and may halt trading if an option’s price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached or a trading halt is imposed, it may be impossible for a Fund to enter into new positions or close out existing positions. If the secondary market for an option is not liquid because of price fluctuation limits or otherwise, it could prevent prompt liquidation of unfavorable positions, and potentially could require the applicable Fund to continue to hold a position until delivery or expiration regardless of changes in its value. As a result, such Fund’s access to other assets held to cover its options could also be impaired.

Options on Securities Indices. Unlike a stock option, which gives the holder the right to purchase or sell a specified stock at a specified price, an option on a securities index gives the holder the right to receive a cash “exercise settlement amount” equal to (i) the difference between the exercise price of the option and the value of the underlying securities index on the exercise date multiplied by (ii) a fixed “index multiplier.” Like an option on a specific security, when a Fund purchases a put or a call option on an index, it places the entire amount of the premium paid at risk, for if, at the expiration date, the value of the index has decreased below the exercise price (in the case of a call) or increased above the exercise price (in the case of a put), the option will expire worthless.

A securities index fluctuates with changes in the market values of the stocks included in the index. For example, some securities index options are based on a broad market index such as the S&P 500 Index. Others are based on a narrower market index such as the Standard & Poor’s 100 Stock Index. Indices may also be based on an industry or market segment such as the AMEX Oil and Gas Index or the Computer and Business Equipment Index. Options on securities indices are currently traded on the Chicago Board Options Exchange, the NYSE and the American Stock Exchange (AMEX”).

The Fund may purchase put options on securities indices to hedge against an anticipated decline in stock market prices that might adversely affect the value of a Fund’s portfolio securities. If a Fund purchases such a put option, the amount of the payment it would receive upon exercising the option would depend on the extent of any decline in the level of the securities index below the exercise price. Such payments would tend to offset a decline in the value of the Fund’s portfolio securities. However, if the level of the securities index increases and remains above the exercise price while the put option is outstanding, a Fund will not be able to profitably exercise the option and will lose the amount of the premium and any transaction costs. Such loss may be partially or wholly offset by an increase in the value of a Fund’s portfolio securities.

A Fund may purchase call options on securities indices in order to participate in an anticipated increase in stock market prices or to offset anticipated price increases on securities that it intends to buy in the future. If a Fund purchases a call option

on a securities index, the amount of the payment it would receive upon exercising the option would depend on the extent of any increase in the level of the securities index above the exercise price. Such payments would in effect allow the Fund to benefit from stock market appreciation even though it may not have had sufficient cash to purchase the underlying stocks. Such payments may also offset increases in the prices of stocks that the Fund intends to purchase. If, however, the level of the securities index declines and remains below the exercise price while the call option is outstanding, a Fund will not be able to exercise the option profitably and will lose the amount of the premium and transaction costs. Such loss may be partially or wholly offset by a reduction in the price a Fund pays to buy additional securities for its portfolio.

The Fund may write (sell) covered call or put options on a securities index. Such options may be covered by purchasing an offsetting option which, by virtue of its exercise price or otherwise, reduces the Fund’s net exposure on its written option position or by owning securities whose price changes are expected to be similar to those of the underlying index or by having an absolute and immediate right to acquire such securities without additional cash consideration or for additional cash consideration (held in a segregated account by its custodian) upon conversion or exchange of other securities in their respective portfolios. In addition, the Fund may cover such options by specifically designating on its accounting records liquid assets with a value equal to the exercise price or by using the other methods described above.

The extent to which options on securities indices will provide a Fund with an effective hedge against interest rate or stock market risk will depend on the extent to which the stocks comprising the indices correlate with the composition of the Fund’s portfolio. Moreover, the ability to hedge effectively depends upon the ability to predict movements in interest rates or the stock market. Some options on securities indices may not have a broad and liquid secondary market, in which case options purchased by the Fund may not be closed out and the Fund could lose more than its option premium when the option expires.

The purchase and sale of option contracts is a highly specialized activity that involves investment techniques and risks different from those ordinarily associated with investment companies. Transaction costs relating to options transactions may tend to be higher than the costs of transactions in securities. In addition, if a Fund were to write a substantial number of option contracts that are exercised, the portfolio turnover rate of that Fund could increase.

Limitations on Options on Securities and Securities Indices. The Fund may write call options only if they are covered and remain covered for as long as the Fund is obligated as a writer. Thus, if a Fund utilizing this investment technique writes a call option on an individual security, the Fund must own the underlying security or other securities that are acceptable for a pledged account at all times during the option period. The Fund will write call options on indices only to hedge in an economically appropriate way portfolio securities which are not otherwise hedged with options or financial futures contracts. Call options on securities indices written by a Fund will be “covered” by identifying the specific portfolio securities being hedged.

To secure the obligation to deliver the underlying security, the writer of a covered call option on an individual security is required to deposit the underlying security or other assets in a pledged account in accordance with clearing corporation and exchange rules. In the case of an index call option written by a Fund, the Fund will be required to deposit qualified securities. A “qualified security” is a security against which the Fund has not written a call option and which has not been hedged by the Fund by the sale of a financial futures contract. If at the close of business on any day the market value of the qualified securities falls below 100% of the current index value times the multiplier times the number of contracts, the Fund will deposit an amount of cash, U.S. Government Securities or other liquid high quality debt obligations equal in value to the difference. In addition, when the Fund writes a call on an index which is “in-the-money” at the time the call is written, the Fund will specifically designate on its accounting records cash, U.S. Government securities or other liquid high quality debt obligations equal in value to the amount by which the call is “in-the-money” times the multiplier times the number of contracts. Any amount otherwise specifically designated may be applied to the Fund’s other obligations to specifically designate assets in the event that the market value of the qualified securities falls below 100% of the current index value times the multiplier times the number of contracts.

A Fund may sell a call option or a put option which it has previously purchased prior to the purchase (in the case of a call) or the sale (in the case of a put) of the underlying security. Any such sale of a call option or a put option would result in a net gain or loss, depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid.

Risks Relating to Options on Securities. During the option period, the writer of a call option has, in return for the premium received on the option, given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. The writer has no control over the time within the option period when it may be required to fulfill its obligation as a writer of the option.

The risk of purchasing a call option or a put option is that the Fund utilizing this investment technique may lose the premium it paid plus transaction costs, if the Fund does not exercise the option and is unable to close out the position prior to expiration of the option.

An option position may be closed out on an exchange only if the exchange provides a secondary market for an option of the same series. Although the Funds utilizing this investment technique will write and purchase options only when the investment adviser believes that a liquid secondary market will exist for options of the same series, there can be no assurance that a liquid secondary market will exist for a particular option at a particular time and that any Fund, if it so desires, can close out its position by effecting a closing transaction. If the writer of a covered call option is unable to effect a closing purchase transaction, it cannot sell the underlying security until the option expires or the option is exercised. Accordingly, a covered call writer may not be able to sell the underlying security at a time when it might otherwise be advantageous to do so.

Possible reasons for the absence of a liquid secondary market on an exchange include the following: (i) insufficient trading interest in certain options; (ii) restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities; (iv) inadequacy of the facilities of an exchange or the clearing corporation to handle trading volume; and (v) a decision by one or more exchanges to discontinue the trading of options in general or of particular options or impose restrictions on orders.

Each exchange has established limitations governing the maximum number of call options, whether or not covered, which may be written by a single investor acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The investment adviser believes that the position limits established by the exchanges will not have any adverse impact upon the Funds.

Risks of Options on Securities Indices. Because the value of an index option depends upon movements in the level of the index rather than movements in the price of a particular security, whether a Fund utilizing this investment technique will realize a gain or loss on the purchase or sale of an option on an index depends upon movements in the level of prices in the market generally or in an industry or market segment (depending on the index option in question). Accordingly, successful use by a Fund of options on indices will be subject to the investment adviser’s ability to predict correctly movements in the direction of the market generally or in the direction of a particular industry. This requires different skills and techniques than predicting changes in the prices of individual securities.

Index prices may be distorted if trading of certain securities included in the index is interrupted. Trading in index options also may be interrupted in certain circumstances, such as if trading were halted in a substantial number of securities included in the index. If this occurred, a Fund utilizing this investment technique would not be able to close out options which it had written or purchased and, if restrictions on exercise were imposed, might be unable to exercise an option it purchased, which would result in substantial losses to the Fund. However, it is the Trust’s policy to write or purchase options only on indices which include a sufficient number of securities so that the likelihood of a trading halt in the index is minimized.

Because the exercise of an index option is settled in cash, an index call writer cannot determine the amount of its settlement obligation in advance and, unlike call writing on portfolio securities, cannot provide in advance for its potential settlement obligation by holding the underlying securities. Consequently, the Funds will write call options only on indices which meet the interim described above.

Price movements in securities held by a Fund utilizing this investment technique will not correlate perfectly with movements in the level of the index and, therefore, the Fund bears the risk that the price of the securities held by the Fund might not increase as much as the level of the index. In this event, the Fund would bear a loss on the call which would not be completely offset by movements in the prices of the securities held by the Fund. It is also possible that the index might rise when the value of the securities held by the Fund does not. If this occurred, the Fund would experience a loss on the call which would not be offset by an increase in the value of its portfolio and might also experience a loss in the market value of its portfolio securities.

Unless a Fund utilizing this investment technique has other liquid assets which are sufficient to satisfy the exercise of a call on an index, the Fund will be required to liquidate securities in order to satisfy the exercise. Because an exercise must be settled within hours after receiving the notice of exercise, if the Fund fails to anticipate an exercise, it may have to borrow from a bank (in an amount not exceeding 10% of the Fund’s total assets) pending settlement of the sale of securities in its portfolio and pay interest on such borrowing.

When a Fund has written a call on an index, there is also a risk that the market may decline between the time the Fund has the call exercised against it, at a price which is fixed as of the closing level of the index on the date of exercise, and the time the Fund is able to sell its securities. As with options on its securities, the Fund will not learn that a call has been exercised

until the day following the exercise date but, unlike a call on a security where the Fund would be able to deliver the underlying security in settlement, the Fund may have to sell some of its securities in order to make settlement in cash, and the price of such securities may decline before they can be sold.

If a Fund exercises a put option on an index which it has purchased before final determination of the closing index value for that day, it runs the risk that the level of the underlying index may change before closing. If this change causes the exercised option to fall “out-of-the-money” the Fund will be required to pay the difference between the closing index value and the exercise price of the option (multiplied by the applicable multiplier) to the assigned writer. Although the Fund may be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather than exercising an option when the index level is close to the exercise price, it may not be possible to eliminate this risk entirely because the cutoff times for index options may be earlier than those fixed for other types of options and may occur before definitive closing index values are announced.

Special Considerations and Risks Related to Options and Futures Transactions. Exchange markets in options on certain securities are a relatively new and untested concept. It is impossible to predict the amount of trading interest that may exist in such options, and there can be no assurance that viable exchange markets will develop or continue.

The exchanges will not continue indefinitely to introduce new expirations to replace expiring options on particular issues because trading interest in many issues of longer duration tends to center on the most recently auctioned issues. The expirations introduced at the commencement of options trading on a particular issue will be allowed to run out, with the possible addition of a limited number of new expirations as the original expirations expire. Options trading on each issue of securities with longer durations will thus be phased out as new options are listed on more recent issues, and a full range of expirations will not ordinarily be available for every issue on which options are traded.

In the event of a shortage of the underlying securities deliverable on exercise of an option, the OCC has the authority to permit other, generally comparable, securities to be delivered in fulfillment of option exercise obligations. It may also adjust the exercise prices of the affected options by setting different prices at which otherwise ineligible securities may be delivered. As an alternative to permitting such substitute deliveries, the OCC may impose special exercise settlement procedures.

The hours of trading for options on securities may not conform to the hours during which the underlying securities are traded. To the extent the markets for underlying securities close before the options markets, significant price and rate movements can take place in the options markets that cannot be reflected in the underlying markets. In addition, to the extent that the options markets close before the markets for the underlying securities, price and rate movements can take place in the underlying markets that cannot be reflected in the options markets.

Prior to exercise or expiration, an option position can be terminated only by entering into a closing purchase or sale transaction. This requires a secondary market on an exchange for call or put options of the same series. Similarly, positions in futures may be closed out only on an exchange which provides a secondary market for such futures. There can be no assurance that a liquid secondary market will exist for any particular call or put option or futures contract at any specific time. Thus, it may not be possible to close an option or futures position. In the event of adverse price movements, a Fund would continue to be required to make daily payments of maintenance margin for futures contracts or options on futures contracts positions written by that Fund. A Fund may have to sell portfolio securities at a time when it may be disadvantageous to do so if it has insufficient cash to meet the daily maintenance margin requirements. In addition, a Fund may be required to take or make delivery of the instruments underlying futures contracts it holds. The inability to close options and futures positions also could have an adverse impact on a Fund’s ability to effectively hedge its portfolios.

Each of the exchanges has established limitations governing the maximum number of call or put options on the same underlying security (whether or not covered) that may be written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). An exchange may order the liquidation of positions found to be in violation of applicable trading limits and it may impose other sanctions or restrictions. The Trust and other clients advised by the subadviser and its affiliates may be deemed to constitute a group for these purposes. In light of these limits, the Trustees may determine, at any time, to restrict or terminate the Funds’ transactions in options. The subadviser does not believe that these trading and position limits will have any adverse effect on investment techniques for hedging the Trust’s portfolios.

Over-the-counter (“OTC”) options are purchased from or sold to securities dealers, financial institutions or other parties (“Counterparties”) through direct agreement with the counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance mechanics, all the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guarantees and security, are set by negotiation of the parties.

Unless the parties provide for it, there is no central clearing or guaranty function in the OTC option market. As a result, if the counterparty fails to make delivery of the security or other instrument underlying an OTC option it has entered into with

a Fund or fails to make a cash settlement payment due in accordance with the terms of that option, the Fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Accordingly, the subadviser must assess the creditworthiness of each such counterparty or any guarantor or credit enhancement of the counterparty’s credit to determine the likelihood that the terms of the OTC option will be satisfied. The staff of the SEC currently takes the position that OTC options purchased by a Fund, and portfolio securities “covering” the amount of a Fund’s obligation pursuant to an OTC option sold by it (the cost of the sell-back plus the in-the-money amount, if any) are illiquid, and are subject to each Fund’s limitation on investing no more than 15% of its assets in illiquid securities. However, for options written with “primary dealers” in U.S. Government securities pursuant to an agreement requiring a closing transaction at the formula price, the amount considered to be illiquid may be calculated by reference to a formula price.

The loss from investing in futures transactions is potentially unlimited. Gains and losses on investments in options and futures depend on the subadviser’s ability to predict correctly the direction of stock prices, interest rates and other economic factors. In addition, utilization of futures in hedging transactions may fail where there is an imperfect correlation in movements in the price of futures contracts and movements in the price of the securities which are the subject of a hedge. If the price of the futures contract moves more or less than the price of the security, a Fund will experience a gain or loss that will not be completely offset by movements in the price of the securities which are the subject of a hedge. There is also a risk of imperfect correlation where the securities underlying futures contracts have different maturities than the portfolio securities being hedged. Transactions in options on futures contracts involve similar risks.

Swap Agreements. The Fund may enter into interest rate, index and currency exchange rate swap agreements in attempts to obtain a particular desired return at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index. The “notional amount” of the swap agreement is only a fictive basis on which to calculate the obligations the parties to a swap agreement have agreed to exchange. The Fund’s obligations (or rights) under a swap agreement will generally be equal only to the amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). The Fund’s obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counter-party will be covered by specifically designating on the accounting records of the Fund liquid assets to avoid leveraging of the Fund’s portfolio.

Because swap agreements are two-party contracts and may have terms of greater than seven days, they may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counter-party. The Subadviser will cause a Fund to enter into swap agreements only with counter-parties that would be eligible for consideration as repurchase agreement counter-parties under the Funds’ repurchase agreement guidelines. Certain restrictions imposed on the Funds by the Code may limit the Funds’ ability to use swap agreements. The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the Commodity Exchange Act (“CEA”) and, therefore, are not regulated as futures or commodity option transactions under the CEA, pursuant to regulations of the CFTC. To qualify for this exemption, a swap agreement must be entered into by “eligible participants,” which include the following, provided the participants’ total assets exceed established levels: a bank or trust company, savings association or credit union, insurance company, investment company subject to regulation under the 1940 Act, commodity pool, corporation, partnership, proprietorship, organization, trust or other entity, employee benefit plan, governmental entity, broker-dealer, futures commission merchant, natural person, or regulated foreign person. To be eligible, natural persons and most other entities must have total assets exceeding $10 million; commodity pools and employees benefit plans must have assets exceeding $5 million. In addition, an eligible swap transaction must meet three conditions. First, the swap agreement may not be part of a fungible class of agreements that are standardized as to their material economic terms. Second, the creditworthiness of parties with actual or potential obligations under the swap agreement must be a material consideration in entering into or determining the terms of the swap agreement, including pricing, cost or credit enhancement terms. Third, swap agreements may not be entered into and traded on or through a multilateral transaction execution facility.

Credit Default Swap Agreements. The “buyer” in a credit default contract is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided no event of default has occurred. In the event of default, the seller must pay the buyer the “par value” (full notional value) of the reference obligation in exchange for the reference obligation (typically emerging market debt). The Fund may be either the buyer or seller in the transaction. If the fund is a buyer and no event of

default occurs, the fund loses its investment and recovers nothing. However, if an event of default occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, the fund receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation.

Emerging Market Securities

The Fund may invest in countries or regions with relatively low gross national product per capita compared to the world’s major economies, and in countries or regions with the potential for rapid economic growth (emerging markets). Emerging markets will include any country: (i) having an “emerging stock market” as defined by the International Finance Corporation; (ii) with low-to-middle-income economies according to the International Bank for Reconstruction and Development (the “World Bank”); (iii) listed in World Bank publications as developing; or (iv) determined by the Adviser to be an emerging market as defined above.

The risks of investing in foreign securities may be intensified in the case of investments in emerging markets. Securities of many issuers in emerging markets may be less liquid and more volatile than securities of comparable domestic issuers. Emerging markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets of the Funds are uninvested and no return is earned thereon. The inability of the Funds to make intended security purchases due to settlement problems could cause the Funds to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to the Funds due to subsequent declines in value of portfolio securities or, if the Funds have entered into a contract to sell the security, in possible liability to the purchaser. Securities prices in emerging markets can be significantly more volatile than in the more developed nations of the world, reflecting the greater uncertainties of investing in less established markets and economies. In particular, countries with emerging markets may have relatively unstable governments, present the risk of nationalization of businesses, restrictions on foreign ownership, or prohibitions of repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be predominantly based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of substantial holdings difficult or impossible at times. Securities of issuers located in countries with emerging markets may have limited marketability and may be subject to more abrupt or erratic price movements.

Certain emerging markets may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in an emerging market’s balance of payments or for other reasons, a country could impose temporary restrictions on foreign capital remittances. The Funds could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Funds of any restrictions on investments.

Investments in certain foreign emerging market debt obligations may be restricted or controlled to varying degrees. These restrictions or controls may at times preclude investment in certain foreign emerging market debt obligations and increase the expenses of the Funds.

Additional Risk Factors. As a result of its investments in foreign securities, the Funds may receive interest or dividend payments, or the proceeds of the sale or redemption of such securities, in the foreign currencies in which such securities are denominated. In that event, the Fund may convert such currencies into dollars at the then current exchange rate. Under certain circumstances, however, such as where the Adviser believes that the applicable rate is unfavorable at the time the currencies are received or the Adviser anticipates, for any other reason, that the exchange rate will improve, the Fund may hold such currencies for an indefinite period of time.

In addition, the Fund may be required to receive delivery of the foreign currency underlying forward foreign currency contracts it has entered into. This could occur, for example, if an option written by the Fund is exercised or the Fund is unable to close out a forward contract. The Fund may hold foreign currency in anticipation of purchasing foreign securities. The Fund may also elect to take delivery of the currencies’ underlying options or forward contracts if, in the judgment of the Adviser, it is in the best interest of the Fund to do so. In such instances as well, the Fund may convert the foreign currencies to dollars at the then current exchange rate, or may hold such currencies for an indefinite period of time.

While the holding of currencies will permit the Fund to take advantage of favorable movements in the applicable exchange rate, it also exposes the Fund to risk of loss if such rates move in a direction adverse to the Fund’s position. Such losses could reduce any profits or increase any losses sustained by the Fund from the sale or redemption of securities, and could reduce the dollar value of interest or dividend payments received. In addition, the holding of currencies could adversely affect the Fund’s profit or loss on currency options or forward contracts, as well as its hedging strategies.

Eurodollar Instruments

The Fund may make investments in Eurodollar instruments. Eurodollar instruments are U.S. dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offering Rate (“LIBOR”), although foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income instruments are linked.

Foreign Securities

The Fund may invest in the securities of foreign issuers. The Fund may invest in a broad range of foreign securities including equity, debt and convertible securities and foreign government securities. The Fund may purchase the securities of issuers from various countries, including countries commonly referred to as “emerging markets.” The Fund may also invest in domestic securities denominated in foreign currencies.

Investing in the securities of foreign companies involves special risks and considerations not typically associated with investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, generally higher commission rates on foreign portfolio transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions on the flow of international capital. Additionally, dividends payable on foreign securities may be subject to foreign taxes withheld prior to distribution. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Changes in foreign exchange rates will affect the value of those securities which are denominated or quoted in currencies other than the U.S. dollar. Many of the foreign securities held by the Fund will not be registered with, nor the issuers thereof be subject to the reporting requirements of, the SEC. Accordingly, there may be less publicly available information about the securities and about the foreign company or government issuing them than is available about a domestic company or government entity. Moreover, individual foreign economies may differ favorably or unfavorably from the United States economy in such respects as growth of Gross National Product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions.

Certain foreign countries are less stable politically than the United States. The possibility exists that certain foreign governments may adopt policies providing for expropriation or nationalization of assets, confiscatory taxation, currency blockage or limitations on the use or removal of monies or other assets of an investment company. Finally, the Funds may encounter difficulty in obtaining and enforcing judgments against issuers of foreign securities. The economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade.

Certain emerging market countries are either comparatively underdeveloped or are in the process of becoming developed and may consequently be economically based on a relatively few or closely interdependent industries. A high proportion of the securities of many emerging market issuers may also be held by a limited number of large investors trading significant blocks of securities. While the adviser will strive to be sensitive to publicize reversals of economic conditions, political unrest and adverse changes in trading status, unanticipated political and social developments may affect the values of the Fund’s investments in such countries and the availability of additional investments in such countries.

When investing in securities denominated in foreign currencies, the Funds will be subject to the additional risk of currency fluctuations. An adverse change in the value of a particular foreign currency as against the U.S. dollar, to the extent that such change is not offset by a gain in other foreign currencies, will result in a decrease in the Fund’s assets. Any such change may also have the effect of decreasing or limiting the income available for distribution. Foreign currencies may be affected by revaluation, adverse political and economic developments, and governmental restrictions. Although the Funds will invest only in securities denominated in foreign currencies that are fully convertible into U.S. dollars without legal restriction at the time of investment, no assurance can be given that currency exchange controls will not be imposed on any particular currency at a later date.

Securities of U.S. issuers denominated in foreign currencies may be less liquid and their prices more volatile than securities issued by domestic issuers and denominated in U.S. dollars. In addition, investing in securities denominated in foreign currencies often entails costs not associated with investment in U.S. dollar-denominated securities of U.S. issuers, such as the cost of converting foreign currency to U.S. dollars, higher brokerage commissions, custodial expenses and other fees. Non-U.S. dollar denominated securities may be subject to certain withholding and other taxes of the relevant jurisdiction, which may reduce the yield on the securities to the Fund and which may not be recoverable by the Fund or its investors.

The Fund will calculate its net asset value and complete orders to purchase, exchange or redeem shares only on a Monday-Friday basis (excluding holidays on which the NYSE is closed). Foreign securities in which the Funds may invest may be

primarily listed on foreign stock exchanges which may trade on other days (such as Saturdays). As a result, the net asset value of each Fund’s portfolio may be affected by such trading on days when a shareholder has no access to the Fund.

The Trust may use a foreign custodian in connection with its purchases of foreign securities and may maintain cash and cash equivalents in the care of a foreign custodian. The amount of cash or cash equivalents maintained in the care of eligible foreign custodians will be limited to an amount reasonably necessary to effect the Trust’s foreign securities transactions. The use of a foreign custodian invokes considerations which are not ordinarily associated with domestic custodians. These considerations include the possibility of expropriations, restricted access to books and records of the foreign custodian, inability to recover assets that are lost while under the control of the foreign custodian, and the impact of political, social or diplomatic developments.

The Fund may invest in Yankee Bonds. Yankee Bonds are issued in the United States by foreign governments or companies. Since they are dollar-denominated, they are not affected by variations in currency exchange rates. Yankee Bonds are influenced primarily by interest rate levels in the United States, and by the financial condition of the issuer. Because the issuers are foreign, the issuers may be subject to levels of risk that differ from the domestic bond market.

The Fund may invest in dollar-denominated instruments issued by foreign branches of U.S. banks and U.S. branches of foreign banks. Since these instruments are dollar-denominated, they are not affected by variations in currency exchange rates. They are influenced primarily by interest rate levels in the United States and by the financial condition of the issuer, or of the issuer’s foreign parent. These instruments may be subject to levels of risk that differ from their fully domestic counterparts.

High Yield High Risk Securities (Junk Bonds)

Investments in below-investment grade securities (see Appendix for an explanation of the various ratings) generally provide greater income (leading to the name “high-yield” securities) and opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility, liquidity, and principal and income risk. These securities are regarded as predominantly speculative as to the issuer’s continuing ability to meet principal and interest payment obligations. Analysis of the creditworthiness of issuers of lower-quality debt securities may be more complex than for issuers of higher-quality debt securities.

Effect of Interest Rates and Economic Changes. Interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of low-rated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Low-rated securities also tend to be more sensitive to economic conditions than higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of low-rated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer’s ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer’s inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of low-rated securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a low-rated security defaulted, the applicable Fund might incur additional expenses in seeking recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of low-rated securities and thus in the applicable Fund’s net asset value.

As previously stated, the value of a low-rated security generally will decrease in a rising interest rate market, and accordingly, so normally will the applicable Fund’s net asset value. If the Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of low-rated securities (discussed below), the Fund may be forced to liquidate these securities at a substantial discount. Any such liquidation would reduce the Fund’s asset base over which expenses could be allocated and could result in a reduced rate of return for the Fund.

Payment Expectations. Low-rated securities typically contain redemption, call or prepayment provisions which permit the issuer of such securities containing such provisions to, at their discretion, redeem the securities. During periods of falling interest rates, issuers of low-rated securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities or otherwise redeem them, the applicable Fund may have to replace the securities with a lower yielding security which would result in lower returns for the Fund.

Liquidity and Valuation. A Fund may have difficulty disposing of certain low-rated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all low-rated securities, there is no established retail secondary market for many of these securities. The Funds anticipate that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the

market price of the security, and accordingly, the net asset value of a particular Fund and its ability to dispose of particular securities when necessary to meet its liquidity needs, or in response to a specific economic event, or an event such as a deterioration in the creditworthiness of the issuer. The lack of a liquid secondary market for certain securities may also make it more difficult for a Fund to obtain accurate market quotations for purposes of valuing its respective portfolio. Market quotations are generally available on many low-rated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of low-rated securities, especially in a thinly-traded market.

Illiquid and Restricted Securities

The Fund may invest in securities for which there is no readily available market (“illiquid securities”), including certain securities whose disposition would be subject to legal restrictions (“restricted securities”). However, certain restricted securities that may be resold pursuant to Rule 144A under the Securities Act of 1933 may be considered liquid. The Board of Trustees of the Trust has delegated to the adviser the day-to-day determination of the liquidity of a security although it has retained oversight and ultimate responsibility for such determinations. Although no definite quality criteria are used, the Board of Trustees has directed the adviser to consider such factors as (i) the nature of the market for a security (including the institutional private resale markets); (ii) the terms of these securities or other instruments allowing for the disposition to a third party or the issuer thereof (e.g. certain repurchase obligations and demand instruments); (iii) and availability of market quotations; and (iv) other permissible factors.

If illiquid securities exceed 15% of a Fund’s net assets after the time of purchase, the Fund will take steps to reduce in an orderly fashion its holdings of illiquid securities. Because illiquid securities may not be readily marketable, the subadviser may not be able to dispose of them in a timely manner. As a result, the Fund may be forced to hold illiquid securities while their price depreciates. Depreciation in the price of illiquid securities may cause the net asset value of the Fund to decline. A security that is determined by the subadviser to be liquid may subsequently revert to being illiquid if not enough buyer interest exists.

Restricted securities may be sold in privately negotiated or other exempt transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act. When registration is required, a Fund may be obligated to pay all or part of the registration expenses and a considerable time may elapse between the decision to sell and the sale date. If, during such period, adverse market conditions were to develop, the Fund might obtain a less favorable price than the price which prevailed when it decided to sell. Restricted securities will be priced at fair value as determined in good faith by the Board of Trustees. (See “Private Placements and Rule 144A Securities” below.)

Loan and Debt Participations and Assignments

A loan participation agreement involves the purchase of a share of a loan made by a bank to a company in return for a corresponding share of the borrower’s principal and interest payments. Loan participations of the type in which the Fund may invest include interests in both secured and unsecured corporate loans. When the Fund purchases loan assignments from lenders, it will acquire direct rights against the borrower, but these rights and the Fund’s obligations may differ from, and be more limited than, those held by the assignment lender. The principal credit risk associated with acquiring loan participation and assignment interests is the credit risk associated with the underlying corporate borrower. There is also a risk that there may not be a readily available market for participation loan interests and, in some cases, this could result in the Fund disposing of such securities at a substantial discount from face value or holding such securities until maturity.

In the event that a corporate borrower failed to pay its scheduled interest or principal payments on participations held by the Fund, the market value of the affected participation would decline, resulting in a loss of value of such investment to the Fund. Accordingly, such participations are speculative and may result in the income level and net assets of the Fund being reduced. Moreover, loan participation agreements generally limit the right of a participant to resell its interest in the loan to a third party and, as a result, loan participations and assignments will be deemed by the Fund to be illiquid investments. The Fund will invest only in participations with respect to borrowers whose creditworthiness is, or is determined by the subadviser to be, substantially equivalent to that of issuers whose senior unsubordinated debt securities are rated B or higher by Moody’s or S&P.

The Fund may purchase from banks participation interests in all or part of specific holdings of debt obligations. Each participation interest is backed by an irrevocable letter of credit or guarantee of the selling bank that the adviser has determined meets the prescribed quality standards of the Fund. Thus, even if the credit of the issuer of the debt obligation does not meet the quality standards of the Fund, the credit of the selling bank will. Loan participations and assignments may be illiquid. For the purposes of diversification and/or concentration calculations, both the borrower and issuer will be considered an “issuer.”

Market Volatility

The value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods.

Recent instability in the financial markets has led the US Government to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of liquidity. Federal, state, and other governments, their regulatory agencies, or self regulatory organizations may take actions that affect the regulation of the instruments in which the Funds invest, or the issuers of such instruments, in ways that are unforeseeable. Legislation or regulation may also change the way in which the Funds themselves are regulated. Such legislation or regulation could limit or preclude a Fund’s ability to achieve its investment objective.

Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or negative effects on the liquidity, valuation and performance of the Funds’ portfolio holdings. Furthermore, volatile financial markets can expose the Funds to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the Funds. The Funds have established procedures to assess the liquidity of portfolio holdings and to value instruments for which market prices may not be readily available. The Advisor will monitor developments and seek to manage the Funds in a manner consistent with achieving each Fund’s investment objective, but there can be no assurance that it will be successful in doing so.

Money Market Instruments

Certificates of Deposit. Certificates of deposit are generally short-term, interest-bearing negotiable certificates issued by banks or savings and loan associations against funds deposited in the issuing institution.

Time Deposits. Time deposits are deposits in a bank or other financial institution for a specified period of time at a fixed interest rate for which a negotiable certificate is not received.

Bankers’ Acceptances. A bankers’ acceptance is a time draft drawn on a commercial bank by a borrower usually in connection with an international commercial transaction (to finance the import, export, transfer or storage of goods). The borrower, as well as the bank, is liable for payment, and the bank unconditionally guarantees to pay the draft at its face amount on the maturity date. Most acceptances have maturities of six months or less and are traded in secondary markets prior to maturity.

Commercial Paper. Commercial paper refers to short-term, unsecured promissory notes issued by corporations to finance short-term credit needs. Commercial paper is usually sold on a discount basis and has a maturity at the time of issuance not exceeding nine months.

Corporate Debt Securities. Corporate debt securities with a remaining maturity of less than one year tend to become extremely liquid and are traded as money market securities.

U.S. Government Obligations. Securities issued or guaranteed as to principal and interest by the United States Government include a variety of Treasury securities, which differ only in their interest rates, maturities, and times of issuance. Treasury bills have maturities of one year or less. Treasury notes have maturities of one to ten years, and Treasury bonds generally have maturities of greater than ten years.

Agencies of the United States Government which issue or guarantee obligations include, among others, Export-Import Banks of the United States, Farmers Home Administration, Federal Housing Administration, Government National Mortgage Association, Maritime Administration, Small Business Administration and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued or guaranteed by, among others, the Federal National Mortgage Association, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Banks for Cooperatives, and the U.S. Postal Service. Some of these securities are supported by the full faith and credit of the U.S. Government; others are supported by the right of the issuer to borrow from the Treasury, while still others are supported only by the credit of the instrumentality. There is no guarantee that the U.S. Government will provide financial support to its agencies or instrumentalities, now or in the future, if it is not obligated to do so by law.

Mortgage-Related and Other Asset-Backed Securities

Mortgage Pass-through Securities. These are interests in pools of mortgage loans, assembled and issued by various governmental, government-related, and private organizations. Unlike other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates, these securities provide a monthly payment consisting of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from

the sale of the underlying property, refinancing or foreclosure, net of fees or costs. “Modified pass-through” securities (such as securities issued by the GNMA) entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.

The principal governmental guarantor of mortgage-related securities is GNMA. GNMA is a wholly-owned United States Government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration insured or Veterans Administration guaranteed mortgages.

Government-related guarantors whose obligations are not backed by the full faith and credit of the United States Government include the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. FHLMC is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders. FHLMC issues Participation Certificates (“PCs”) that represent interests in conventional mortgages from FHLMC’s national portfolio. FNMA and FHLMC guarantee the timely payment of interest and ultimate collection of principal on securities they issue, but their guarantees are not backed by the full faith and credit of the United States Government.

Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments for such securities. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Fund’s investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. Funds may buy mortgage-related securities without insurance or guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, the subadviser determines that the securities meet the Funds’ quality standards. Securities issued by certain private organizations may not be readily marketable.

Mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are not subject to the Funds’ industry concentration restrictions, set above below under “Investment Restrictions,” by virtue of the exclusion from the test available to all U.S. Government securities. The Funds will take the position that privately-issued, mortgage-related securities do not represent interests in any particular “industry” or group of industries. The assets underlying such securities may be represented by a portfolio of first lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in turn be insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs. In the case of private issue mortgage-related securities whose underlying assets are neither U.S. Government securities nor U.S. Government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of principal and interest on the underlying mortgages.

It is possible that the availability and the marketability (that is, liquidity) of the securities discussed in this section could be adversely affected by actions of the U.S. government to tighten the availability of its credit. On September 7, 2008, the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. government, placed FNMA and FHLMC into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate FNMA and FHLMC until they are stabilized. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by FNMA or FHLMC.

Collateralized Mortgage Obligations (“CMOs”). A CMO is similar to a bond in that interest and prepaid principal is paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans or by portfolios of mortgage pass-through securities guaranteed by entities such as GNMA, FHLMC, or FNMA, and their income streams.

CMOs are typically structured in multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes typically receive principal only after the first class has been retired. An investor may be partially guarded against a sooner than desired return of principal because of the sequential payments.

FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates and are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made semiannually rather than monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC’s mandatory sinking fund schedule. Sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payments of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC’s minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking-fund payments. Because of the “pass-through” nature of all principal payments received on the collateral pool in excess of FHLMC’s minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date. If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC’s minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.

CMO Residuals. CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans. As described above, the cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The “residual” in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and, in particular, the prepayment experience on the mortgage assets. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances a Fund may fail to recoup fully its initial investment in a CMO residual.

CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market currently may not have the liquidity of other more established securities trading in other markets. CMO residuals may be subject to certain restrictions on transferability, may be deemed “illiquid,” and may be subject to a Fund’s limitations on investment in illiquid securities.

Stripped Mortgage-backed Securities. Stripped mortgage-backed securities (“SMBS”) are derivative multi-class mortgage securities. They may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on an IO class security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to recoup fully its initial investment in these securities even if the security is in one of the highest rating categories.

Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed “illiquid” and subject to a Fund’s limitations on investment in illiquid securities.

A Fund may invest in other mortgage-related securities with features similar to those described above, to the extent consistent with the Fund’s investment objectives and policies.

Adjustable Rate Mortgages—Interest Rate Indices. The One Year Treasury Index is the figure derived from the average weekly quoted yield on U.S. Treasury Securities adjusted to a constant maturity of one year. The Cost of Funds Index reflects

the monthly weighted average cost of funds of savings and loan associations and savings banks whose home offices are located in Arizona, California and Nevada (the “FHLB Eleventh District”) that are member institutions of the Federal Home Loan Bank of San Francisco (the “FHLB of San Francisco”), as computed from statistics tabulated and published by the FHLB of San Francisco. The FHLB of San Francisco normally announces the Cost of Funds Index on the last working day of the month following the month in which the cost of funds was incurred.

A number of factors affect the performance of the Cost of Funds Index and may cause the Cost of Funds Index to move in a manner different from indices based upon specific interest rates, such as the One Year Treasury Index. Because of the various origination dates and maturities of the liabilities of member institutions of the FHLB Eleventh District upon which the Cost of Funds Index is based, among other things, at any time the Cost of Funds Index may not reflect the average prevailing market interest rates on new liabilities of similar maturities. There can be no assurance that the Cost of Funds Index will necessarily move in the same direction or at the same rate as prevailing interest rates since as longer term deposits or borrowings mature and are renewed at market interest rates, the Cost of Funds Index will rise or fall depending upon the differential between the prior and the new rates on such deposits and borrowings. In addition, dislocations in the thrift industry in recent years have caused and may continue to cause the cost of funds of thrift institutions to change for reasons unrelated to changes in general interest rate levels. Furthermore, any movement in the Cost of Funds Index as compared to other indices based upon specific interest rates may be affected by changes instituted by the FHLB of San Francisco in the method used to calculate the Cost of Funds Index. To the extent that the Cost of Funds Index may reflect interest changes more slowly than other indices, mortgage loans which adjust in accordance with the Cost of Funds Index may produce a higher yield later than would be produced by such other indices, and in a period of declining interest rates, the Cost of Funds Index may remain higher than other market interest rates which may result in a higher level of principal prepayments on mortgage loans which adjust in accordance with the Cost of Funds Index than mortgage loans which adjust in accordance with other indices.

LIBOR, the London Interbank Offered Rate, is the interest rate that the most creditworthy international banks dealing in U.S. dollar-denominated deposits and loans charge each other for large dollar-denominated loans. LIBOR is also usually the base rate for large dollar-denominated loans in the international market. LIBOR is generally quoted for loans having rate adjustments at one, three, six or twelve month intervals.

Other Asset-backed Securities. Through trusts and other special purpose entities, various types of securities based on financial assets other than mortgage loans are increasingly available, in both pass-through structures similar to mortgage pass-through securities described above and in other structures more like CMOs. As with mortgage-related securities, these asset-backed securities are often backed by a pool of financial assets representing the obligations of a number of different parties. They often include credit-enhancement features similar to mortgage-related securities.

Financial assets on which these securities are based include automobile receivables; credit card receivables; loans to finance boats, recreational vehicles, and mobile homes; computer, copier, railcar, and medical equipment leases; and trade, healthcare, and franchise receivables. In general, the obligations supporting these asset-backed securities are of shorter maturities than mortgage loans and are less likely to experience substantial prepayments. However, obligations such as credit card receivables are generally unsecured and the obligors are often entitled to protection under a number of state and federal consumer credit laws granting, among other things, rights to set off certain amounts owed on the credit cards, thus reducing the balance due. Other obligations that are secured, such as automobile receivables, may present issuers with difficulties in perfecting and executing on the security interests, particularly where the issuer allows the servicers of the receivables to retain possession of the underlying obligations, thus increasing the risk that recoveries on defaulted obligations may not be adequate to support payments on the securities.

The subadviser expects additional assets will be “securitized” in the future. A Fund may invest in any such instruments or variations on them to the extent consistent with the Fund’s investment objectives and policies.

Interest Rate Considerations. The market value of debt securities that are interest rate sensitive is inversely related to changes in interest rates. That is, an interest rate decline produces an increase in a security’s market value and an interest rate increase produces a decrease in value. The longer the remaining maturity of a security, the greater the effect of interest rate changes. Changes in the ability of an issuer to make payments of interest and principal and in the market’s perception of its creditworthiness also affect the market value of that issuer’s debt securities.

Prepayments of principal of mortgage-related securities by mortgagors or mortgage foreclosures affect the average life of the mortgage-related securities in a fund’s portfolio. Mortgage prepayments are affected by the level of interest rates and other factors, including general economic conditions and the underlying location and age of the mortgage. In periods of rising interest rates, the prepayment rate tends to decrease, lengthening the average life of a pool of mortgage-related securities. In periods of falling interest rates, the prepayment rate tends to increase, shortening the average life of a pool. Because prepayments of principal generally occur when interest rates are declining, it is likely that a fund, to the extent that it retains the same percentage of debt securities, may have to reinvest the proceeds of prepayments at lower interest rates than those of

its previous investments. If this occurs, that fund’s yield will correspondingly decline. Thus, mortgage-related securities may have less potential for capital appreciation in periods of falling interest rates than other fixed-income securities of comparable duration, although they may have a comparable risk of decline in market value in periods of rising interest rates. To the extent that a fund purchases mortgage-related securities at a premium, unscheduled prepayments, which are made at par, result in a loss equal to any unamortized premium.

Duration is one of the fundamental tools used by the adviser in managing interest rate risks including prepayment risks. Traditionally, a debt security’s “term to maturity” characterizes a security’s sensitivity to changes in interest rates. “Term to maturity,” however, measures only the time until a debt security provides its final payment, taking no account of prematurity payments. Most debt securities provide interest (“coupon”) payments in addition to a final (“par”) payment at maturity, and some securities have call provisions allowing the issuer to repay the instrument in full before maturity date, each of which affect the security’s response to interest rate changes. “Duration” is considered a more precise measure of interest rate risk than “term to maturity.” Determining duration may involve the adviser’s estimates of future economic parameters, which may vary from actual future values. Fixed-income securities with effective durations of three years are more responsive to interest rate fluctuations than those with effective durations of one year. For example, if interest rates rise by 1%, the value of securities having an effective duration of three years will generally decrease by approximately 3%.

Mutual Fund Investing

The Fund is authorized to invest in the securities of other investment companies subject to the limitations contained in the 1940 Act. In certain countries, investments by the Fund may only be made through investments in other investment companies that, in turn, are authorized to invest in the securities that are issued in such countries. Investors should recognize that the Fund’s purchase of the securities of such other investment companies results in the layering of expenses such that investors indirectly bear a proportionate part of the expenses for such investment companies including operating costs and investment advisory and administrative fees.

Investment companies in which the Fund may invest may include index-based investments such as exchange-traded funds (“ETFs”), which hold substantially all of their assets in securities representing their specific index. Accordingly, the main risk of investing in index-based investments is the same as investing in a portfolio of equity securities comprising the index. As a shareholder of another investment company, a Fund would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses a Fund bears directly in connection with its own operations. The market prices of index-based investments will fluctuate in accordance with both changes in the market value of their underlying portfolio securities and due to supply and demand for the instruments on the exchanges on which they are traded (Which may result in their trading at a discount or premium to their NAVs). Index-based investments may not replicate exactly the performance of their specific index because of transaction costs and because of the temporary unavailability of certain component securities of the index.

Participation on Creditors’ Committees

The Fund may participate on committees formed by creditors to negotiate with the management of financially troubled issuers of securities held by the Fund. Such participation may subject the Fund to expenses such as legal fees and may make the fund an “insider” of the issuer for purposes of the federal securities laws, and therefore may restrict the Fund’s ability to purchase or sell a particular security when it might otherwise desire to do so. Participation by the Fund on such committees also may expose the Fund to potential liabilities under the federal bankruptcy laws or other laws governing the rights of creditors and debtors. The Fund will participate on such committees only when the subadviser believes that such participation is necessary or desirable to enforce the Fund’s rights as a creditor or to protect the value of securities held by the Fund.

Preferred Stocks

The Fund may invest in preferred stocks. Preferred stocks have a preference over common stocks in liquidation (and generally dividends as well) but are subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stocks with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risks while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similarly stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Private Placements and Rule 144A Securities

The Fund may purchase securities which have been privately issued and are subject to legal restrictions on resale or which are issued to qualified institutional investors under special rules adopted by the SEC. Such securities may offer higher yields than comparable publicly traded securities. Such securities ordinarily can be sold by the Fund in secondary market transactions to certain qualified investors pursuant to rules established by the SEC, in privately negotiated transactions to a

limited number of purchasers or in a public offering made pursuant to an effective registration statement under the Securities Act of 1933 (The “1933 Act”). Public sales of such securities by the Fund may involve significant delays and expense. Private sales often require negotiation with one or more purchasers and may produce less favorable prices than the sale of similar unrestricted securities. Public sales generally involve the time and expense of the preparation and processing of a registration statement under the 1933 Act (the possible decline in value of the securities during such period) and may involve the payment of underwriting commissions. In some instances, the Fund may have to bear certain costs of registration in order to sell such shares publicly. Except in the case of securities sold to qualifying institutional investors under special rules adopted by the SEC for which the Trustees of the Fund determine the secondary market is liquid, Rule 144A securities will be considered illiquid. Trustees of the Fund may determine the secondary market is liquid based upon the following factors which will be reviewed periodically as required pursuant to procedures adopted by the Fund; the number of dealers willing to purchase or sell the security; the frequency of trades; dealer undertakings to make a market in the security, and the nature of the security and its market. Investing in Rule 144A Securities could have the effect of increasing the level of the Fund’s illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. (See “Illiquid and Restricted Securities” above.)

Ratings

If the rating of a security purchased by a Fund is subsequently reduced below the minimum rating required for purchase or a security purchased by the Fund ceases to be rated, neither event will require the sale of the security. However, the Adviser, as applicable, will consider any such event in determining whether the Fund should continue to hold the security. To the extent that ratings established by Moody’s or S&P may change as a result of changes in such organizations or their rating systems, the Funds will invest in securities which are deemed by the Fund’s adviser to be of comparable quality to securities whose current ratings render them eligible for purchase by the Fund.

Credit ratings issued by credit rating agencies evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of low-rated securities and therefore may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.

Real Estate Investment Trusts (REITs)

REITs pool investors’ funds for investment primarily in income producing commercial real estate or real estate related loans. A REIT is not taxed on income distributed to shareholders if it complies with several requirements relating to its organization, ownership, assets, and income and a requirement that it distribute to its shareholders at least 90% of its taxable income (other than net capital gains) for each taxable year.

REITs can generally be classified as follows:

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Equity REITs, which invest the majority of their assets directly in real property and derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value.

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Mortgage REITs, which invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments.

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Hybrid REITs, which combine the characteristics of both equity REITs and mortgage REITs.

Risks of Investment in Real Estate Securities. Selecting REITs requires an evaluation of the merits of each type of asset a particular REIT owns, as well as regional and local economics. The Real Estate Fund will not invest in real estate directly, but only in securities issued by real estate companies. However, the Fund may be subject to risks similar to those associated with the direct ownership of real estate because of its policy of concentrating in the securities of companies in the real estate industry. These include declines in the value of real estate, risks related to general and local economic conditions, dependence on management skill, cash flow dependence, possible lack of availability of long-term mortgage funds, over-building, extended vacancies of properties, decreased occupancy rates and increased competition, increases in property taxes and operating expenses, changes in neighborhood values and the appeal of the properties to tenants and changes in interest rates.

In addition to these risks, equity REITs may be affected by changes in the value of the underlying properties they own, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally are not diversified. Equity and mortgage REITs are also subject to potential defaults by borrowers, self-liquidation, and the possibility of failing to qualify as a REIT under the Code and failing to maintain exemption from the Investment Company Act of 1940. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, investment in REITs could cause the Fund to possibly fail to qualify as a regulated investment company.

Repurchase Agreements

The Fund may enter into repurchase agreements with banks, broker-dealers or other financial institutions in order to generate additional current income. Under a repurchase agreement, a Fund acquires a security from a seller subject to resale to the seller at an agreed upon price and date. The resale price reflects an agreed upon interest rate effective for the time period the security is held by the Fund. The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase price may be the same, with interest payable to the Fund at a stated rate together with the repurchase price on repurchase. In either case, the income to the Fund is unrelated to the interest rate on the security. Typically, repurchase agreements are in effect for one week or less, but may be in effect for longer periods of time. Repurchase agreements of more than one week’s duration are subject to each Fund’s limitation on investments in illiquid securities.

Repurchase agreements are considered by the SEC to be loans by the purchaser collateralized by the underlying securities. In an attempt to reduce the risk of incurring a loss on a repurchase agreement, the Funds will generally enter into repurchase agreements only with domestic banks with total assets in excess of one billion dollars, primary dealers in U.S. Government securities reporting to the Federal Reserve Bank of New York or broker-dealers approved by the Trustees of the Trust. The subadviser will monitor the value of the underlying securities throughout the term of the agreement to attempt to ensure that their market value always equals or exceeds the agreed-upon repurchase price to be paid to a Fund. Each Fund will maintain a segregated account with its custodian, or a subcustodian for the securities and other collateral, if any, acquired under a repurchase agreement for the term of the agreement.

In addition to the risk of the seller’s default or a decline in value of the underlying security, a Fund also might incur disposition costs in connection with liquidating the underlying securities. If the seller becomes insolvent and subject to liquidation or reorganization under the Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by a Fund not within the control of that Fund and therefore subject to sale by the seller’s trustee in bankruptcy. Finally, it is possible that a Fund may not be able to perfect its interest in the underlying security and may be deemed an unsecured creditor of the seller. While the Trustees of the Trust acknowledge these risks, it is expected that they can be controlled through careful structuring of repurchase agreement transactions to meet requirements for treatment as a purchase and sale under the bankruptcy laws and through monitoring procedures designed to assure the creditworthiness of counter-parties to such transactions.

Securities Lending

A Fund may lend portfolio securities to broker-dealers and other financial institutions, provided that such loans are callable at any time by the Fund utilizing this investment technique and are at all times secured by collateral held by the Fund at least equal to the market value, determined daily, of the loaned securities. The Fund utilizing this investment technique will continue to receive any income on the loaned securities, and at the same time will earn interest on cash collateral or a securities lending fee in the case of collateral in the form of U.S. Government securities. A loan may be terminated at any time by either the Fund or the borrower. Upon termination of a loan, the borrower will be required to return the securities to the Fund, and any gain or loss in the market price during the period of the loan would accrue to the Fund. If the borrower fails to maintain the requisite amount of collateral, the loan will automatically terminate, and the Fund may use the collateral to replace the loaned securities while holding the borrower liable for any excess of the replacement cost over the amount of the collateral.

When voting or consent rights which accompany loaned securities pass to the borrower, the Fund will follow the policy of calling the loan, in whole or in part as may be appropriate, in order to exercise such rights if the matters involved would have a material effect on the Fund’s investment in the securities which are the subject of the loan. The Fund may pay reasonable finders, administrative and custodial fees in connection with loans of its portfolio securities.

As with any extension of credit, there are risks of delay in recovery of the loaned securities and in some cases loss of rights in the collateral should the borrower of the securities fail financially. However, loans of portfolio securities will be made only to firms considered by the Trust to be creditworthy and when the Adviser believes the consideration to be earned justifies the attendant risks.

Short Sales

The Fund may sell securities short as part of its overall portfolio management strategies involving the use of derivative instruments and to offset potential declines in long positions in similar securities. A short sale is a transaction in which a Fund sells a security it does not own or have the right to acquire (or that it owns but does not wish to deliver) in anticipation that the market price of that security will decline.

When a Fund makes a short sale, the broker-dealer through which the short sale is made must borrow the security sold short and deliver it to the party purchasing the security. The Fund is required to make a margin deposit in connection with such short sales; the Fund may have to pay a fee to borrow particular securities and will often be obligated to pay over any dividends and accrued interest on borrowed securities.

If the price of the security sold short increases between the time of the short sale and the time the Fund covers its short position, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

To the extent a Fund sells securities short, it will provide collateral to the broker-dealer and (except in the case of short sales “against the box”) will maintain additional asset coverage in the form of liquid assets with its custodian in a segregated account in an amount at least equal to the difference between the current market value of the securities sold short and any amounts required to be deposited as collateral with the selling broker (not including the proceeds of the short sale). A short sale is “against the box” to the extent the Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short.

Small Companies

Investors in funds that invest in smaller companies should consider carefully the special risks involved. Such smaller companies may present greater opportunities for capital appreciation but may involve greater risk than larger, more mature issuers. Such smaller companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than those of larger, more mature companies. As a result, the prices of their securities may fluctuate more than those of larger issuers.

Taxable Bonds

The Fund may from time to time invest a portion of its assets on a temporary basis in “temporary investments”; the income from which, may be subject to federal and California income tax. Specifically, the Fund may invest in “private activity bonds,” the income from which is not exempt from federal income taxation (the interest on which is also treated as an item of tax preference for purposes of the Alternative Minimum Tax (“AMT Bonds”)). Such temporary investments may consist of notes of issuers having, at the time of purchase, an issue of outstanding municipal bonds rated within the three highest grades by S&P, Moody’s or Fitch (taxable or tax exempt); commercial paper rated at least A-1 by Moody’s, P-1 by S&P or F-1 by Fitch; and U.S. Treasury and agency securities. The Fund may invest in California bonds with any maturity and may purchase short-term municipal notes such as tax anticipation notes, revenue anticipation notes and bond anticipation notes.

Tax-Exempt Bonds

Tax-exempt bonds are debt obligations issued by the various states and their subdivisions (e.g., cities, counties, towns, and school districts) to raise funds, generally for various public improvements requiring long-term capital investment. Purposes for which tax-exempt bonds are issued include flood control, airports, bridges and highways, housing, medical facilities, schools, mass transportation and power, water or sewage plants, as well as others. Tax-exempt bonds also are occasionally issued to retire outstanding obligations, to obtain funds for operating expenses or to loan to other public or, in some cases, private sector organizations or to individuals.

The two principal classifications of tax-exempt bonds are “general obligation” and “revenue.” General obligations or “G.O.s” are secured by the issuer’s general pledge of its faith, credit, and taxing power for the payment of principal and interest. Revenue bonds are payable only from monies derived from a specified source such as operating a particular facility or from a guarantee, lease, specific tax or pool of assets, e.g., a portfolio of mortgages.

Pollution control or other bonds backed by private corporations do not generally have the pledge of the credit of the issuing public body but are secured only by the credit of the corporation benefiting from the facilities being financed. There are, of course, variations in the security of municipal bonds, both within a particular classification and between classifications depending on numerous factors.

The yields on tax-exempt bonds are dependent on a variety of factors, including general money market conditions, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligations and the rating of the issue. The ratings of S&P, Moody’s and Fitch represent their opinions as to the quality of the tax-exempt bonds which they undertake to rate. It should be emphasized however, that ratings are general and not absolute standards of quality. Consequently, tax-exempt bonds with the same maturity and coupon with different ratings may have the same yield.

The ability of issuers engaged in the generation, distribution and/or sale of electrical power and/or natural gas to make payments of principal or interest on such obligations is dependent upon, among other things, the continuing ability of such issuers to derive sufficient revenues from their operations to meet debt service requirements. General problems confronting such issuers include the difficulty in financing construction projects during inflationary periods, restrictions on operations and increased costs and delays attributable to applicable environmental laws, the difficulty in obtaining fuel for energy generation at reasonable prices, the difficulty in obtaining natural gas for resale, and the effects of present or proposed energy or natural resource conservation programs.

There are several federal housing subsidy programs used by state housing agencies which do not result in unconditional protection of the bondholder. Changes enacted by Congress in these programs or administrative difficulties may result in decreases in the present actual or future estimated debt service coverage. A reduction in coverage may also result from economic fluctuations leading to changes in interest rates or operating costs. Most state housing authority bonds are also “moral obligations” of the issuing states; however, a few programs specifically reject the “moral obligation.” In many but not all cases, this “moral obligation” is explicitly reflected in the bond contract by means of an option permitting the state legislature to provide debt service support if the legislature so chooses; thus, this option provides the bondholder with an additional source of potential support not directly related to the specific housing program.

Subsequent to its purchase by the Fund, an issue of tax-exempt bonds or a temporary investment may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the elimination of such obligation from the Fund’s portfolio but the adviser will consider such an event in its determination of whether the Fund should continue to hold such obligation in its portfolio. To the extent that the ratings assigned by S&P, Moody’s or Fitch for tax- exempt bonds or temporary investments may change as a result of changes in such organizations, or changes in their rating systems, the Fund will attempt to use comparable ratings as standards for its investments in tax-exempt bonds or temporary investments in accordance with the investment policies contained herein.

The Fund may purchase municipal obligations on a when-issued basis; i.e., delivery and payment for the securities will take place after the transaction date, normally within 15 to 45 days, though the payment obligation and the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. The Fund will only make commitments to purchase such securities with the intention of actually acquiring the securities, but the Fund may sell these securities before the settlement date if it is deemed advisable as a matter of investment strategy. When the Fund purchases securities on a when-issued or forward-commitment basis, the Fund will specifically designate on its accounting records securities having a value (determined daily) at least equal to the amount of the Fund’s purchase commitments. These procedures are designed to ensure that the Fund will maintain sufficient assets at all times to cover its obligations under when-issued purchases and forward commitments.

Securities purchased on a when-issued basis and the securities held in the Fund’s portfolio are subject to changes in value based upon the public’s perception of the creditworthiness of the issuer and changes in the level of interest rates. Generally, the value of such securities will fluctuate inversely to changes in interest rates, i.e., they will appreciate in value when interest rates decline and decrease in value when interest rates rise. Therefore, in order to achieve higher interest income, if the Fund remains substantially invested at the same time that it has purchased securities on a when-issued basis, there will be a greater possibility of fluctuation in the Fund’s net asset value.

Variable and Floating Rate Securities

A Fund may invest in securities with variable and floating rates. Some municipal securities bear rates of interest that are adjusted periodically according to formulae intended to minimize fluctuation in values of floating rate instruments. Variable rate instruments are those whose terms provide for automatic establishment of a new interest rate on set dates. Floating rate instruments are those whose terms provide for automatic adjustment of their interest rates whenever some specified interest rate changes. Variable rate and floating rate instruments will be referred to collectively as “Variable Rate Securities.” The interest rate on Variable Rate Securities is ordinarily determined by reference to, or is a percentage of, a bank’s prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank certificates of deposit, an index of short-term, tax-exempt rates, or some objective standard. Generally, the changes in the interest rate on Variable Rate Securities reduce the fluctuation in the market value of such securities. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less than for fixed-rate obligations.

Warrants or Rights to Purchase Securities

The Fund may invest in or acquire warrants or rights, valued at the lower of cost or market, to purchase equity or fixed income securities, during a specific period of time. Included are warrants and rights whose underlying securities are not traded on principal domestic or foreign exchanges. Bonds with warrants attached to purchase equity securities have many characteristics of convertible bonds and their prices may, to some degree, reflect the performance of the underlying stock. Bonds also may be issued with warrants attached to purchase additional fixed income securities at the same coupon rate. A decline in interest rates would permit a Fund to buy additional bonds at the favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants would generally expire with no value.

When-Issued and Delayed-Delivery Transactions

Each Fund may purchase securities on a when-issued or forward commitment basis. These transactions are also know as delayed-delivery transactions. (The phrase “delayed delivery” is not intended to include purchases where a delay in delivery involves only a brief period required by the selling party solely to locate appropriate certificates and prepare them for submission for clearance and settlement in the customary way.) Delayed-delivery transactions involve a commitment by a

Fund to purchase or sell securities at a future date (ordinarily up to 90 days later). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitments are negotiated directly with the selling party.

When-issued purchases and forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. For example, in periods of rising interest rates and falling bond prices, a Fund might sell debt securities it owns on a forward commitment basis to limit its exposure to falling prices. In periods of falling interest rates and rising prices, a Fund might sell securities it owns and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher yields. A Fund will not enter into such transactions for the purpose of leverage.

The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value will be reflected in the Fund’s net asset value starting on the date of the agreement to purchase the securities, and the Fund will be subject to the rights and risks of ownership of the securities on that date. A Fund will not earn interest on securities it has committed to purchase until they are paid for and received.

When a Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement will be included in the Fund’s assets. Fluctuations in the market value of the underlying securities will not be reflected in the Fund’s net asset value as long as the commitment to sell remains in effect. Settlement of when-issued purchases and forward commitment transactions generally takes place up to 90 days after the date of the transaction, but a Fund may agree to a longer settlement period.

A Fund will make commitments to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or renegotiate a commitment after it is entered into. A Fund also may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Fund may realize a capital gain or loss in connection with these transactions.

When a Fund purchases securities on a when-issued or forward-commitment basis, the Fund will specifically designate on its accounting records securities having a value (determined daily) at least equal to the amount of the Fund’s purchase commitments. These procedures are designed to ensure that each Fund will maintain sufficient assets at all times to cover its obligations under when-issued purchases and forward commitments.

CA TAX-EXEMPT BOND FUND ONLY

Special California Risk Factors

The California Constitution and various state statutes that limit the taxing and spending authority of the state of California (the “State”) government entities may impair the ability of California issuers to maintain debt service on their obligations, as described more fully below. The following information as to certain California risk factors is provided to investors in view of the policy of the Fund to concentrate its investments in State and municipal issues. Such information constitutes only a brief discussion, does not purport to be a complete description and is based on information from sources believed by the Fund to be reliable, including official statements relating to securities offerings of State and municipal issuers and periodic publications by national rating organizations. Such information, however, has not been independently verified by the Fund.

Certain of the California municipal securities in which the Fund may invest may be obligations of issuers that rely in whole or in part on State revenues for payment of these obligations. Property tax revenues and a portion of California’s General Fund surplus are distributed to counties, cities and their various taxing entities and the State assumes certain obligations previously paid out of local funds. Whether and to what extent a portion of California’s General Fund will be distributed in the future to counties, cities and various entities is unclear.

Certain legislation enacted in the State over many years could significantly limit State agencies’, local governments’ and districts’ ability to collect sufficient funds to meet debt service on bonds and other obligations. Article XIIIA of the California Constitution, as amended, now places restrictions and limits on California taxing entities in their ability to increase real property taxes. Article XIIIB of the California Constitution, added by Proposition 4, imposes on State and municipal entities an annual appropriations limit with respect to certain expenditures and requires the allocation of excess revenues to State education funds. Annual appropriations limits are adjusted annually to reflect changes in consumer prices, population, and certain services provided by these entities. The California Constitution, through amendments made by Propositions 98 and 111, also requires minimum levels of funding for public school and community college districts. Proposition 218, known as the “Right to Vote on Taxes Act” and approved by voters of the State on November 5, 1996, added Articles XIIIC and XIIID to the California Constitution. These Articles provide for limitations on the ability of local government agencies to

impose or raise various taxes, fees, charges, and assessments without voter approval. Certain “general taxes” imposed after January 1, 1995 by local government must be approved by voters in order to remain in effect, and local voters may have the right to present initiatives to reduce taxes, fees, assessments, or charges imposed by the local government.

In March 2004, California voters approved two more ballot measures, collectively known as the Economic Recovery Bond Measures, Propositions 57 and 58. The “Balanced Budget Act” was implemented as a result of these measures. The Balanced Budget Act includes a provision for a “Rainy Day” fund requiring that beginning in fiscal 2006-07, depending on the strength of the economy, from 1% to 3% of annual General Fund revenues must be set aside in a reserve fund, the Budget Stabilization Account (“BSA”). Additionally, the Balanced Budget Act mandates that projected expenditures cannot exceed projected revenues.

Certain California municipal securities that the Fund may own may be secured in whole or in part by mortgages or real property deeds of trust, and the rights of the Fund to obtain payment from such security may be constrained by State laws addressing non-judicial foreclosure rights and transfers of title by sale by private owner, antideficiency provisions, and limits on the ability to receive pre-payment charges on mortgage loans. These types of State statutes, among other limits imposed by State law, could affect the flow of revenues to an issuer for debt service on outstanding debt obligations.

Finally, litigation may play a role in the future of California’s economy, as the State is a party to numerous legal proceedings, many of which normally recur in governmental operations. In addition, the State is involved in certain other legal proceedings which, if decided against the State, may require the State to make significant future expenditures or may impair future revenue sources.

California Economic History and Outlook

Since the beginning of 2007, California has experienced a number of shocks that have taken a significant toll on the economy—a deepening housing slump, a breakdown in mortgage markets, tight credit conditions, volatile financial markets and soaring energy prices, all of which, except for soaring energy prices, continue to be significant challenges today. Though personal income, one of the most broad and timely measures of state economies, has held up surprisingly well in California despite the housing slump, housing conditions and higher energy prices in California weakened taxable sales—yet another broad measure of state economic performance—in 2006 and 2007, a trend that has likely continued in 2008. Taxable sales increased by only 4% in 2006 and 0.8% in the first three quarters of 2007. New vehicle registrations fell 2.3% in 2006 and 7.3% from a year ago in the first nine months of 2007, likely playing a role in the slowdown of taxable sales. With the continuing decline in housing prices, the jumps in subprime mortgage rates, which have led to record mortgage delinquencies and home foreclosures in the State, and the rise in unemployment, it is expected that California’s economy will remain bleak in 2009. It is projected that the present and expected future condition of the State’s economy will adversely affect the ability of California issuers to maintain debt service on their obligations.

Upon taking office in November 2003, Governor Arnold Schwarzenegger conducted an independent audit of California’s financial condition. This audit revealed that while state expenditures grew 43% over the previous five years, revenues increased by only 25%, resulting in a three year carry-over deficit of $22 billion. To address this issue, California voters approved the Economic Recovery Bond Measures in the 2004 election.

California’s economy performed strongly in 2005, with increases in personal income, state exports, and professional and business services. Taxable sales growth increased in 2005; however, this increase was not as strong as the percentage increase from the figure in 2003 to the figure in 2004. California’s economy continued to perform strongly into 2006, with an increase in tax revenues tied to corporate tax, capital gains taxes, and the exercise of stock options. Additionally, the State’s unemployment rate fell to 4.8% in January and March of 2006, which was a five-year low.

Although California’s economy improved during this period, budget analysts continued to warn that while state revenues had improved, California’s fiscal condition remained uncertain because of continued reliance on deficit spending. The three major bond rating agencies observed that despite the strength in revenue, a structural imbalance of expenditures over revenues remained in fiscal 2006-07, leaving a deficit of at least $3.5 billion.

Various ballot measures addressing structural budget reforms were rejected in the November 2005 Special Election, including Proposition 76, also known as “The California Live Within Our Means Act.” These measures would have placed a constitutional limit on state spending by limiting year over year budget growth to the average revenue growth over the last three years. It also would have given the Governor the power to enforce spending reductions during budget emergencies if the legislature failed to act.

The 2008-2009 Budget

California’s 2008-2009 fiscal year budget was signed into law on September 23, 2008. The State’s budget situation, already troubling, worsened this year due to slower rates of economic growth, softening State revenues and increased costs. At the time of the 2007-2008 budget’s passage, it was expected that the State’s persistent gap between revenues and expenditures

would reemerge for 2008-2009 in an amount of at least $5 billion. By the time Governor Schwarzenegger proposed his 2008-2009 budget in January, that projected shortfall had grown to $14.5 billion due to continued softness in the State’s economy, delays in implementing several measures designed to reduce the gap between expenditures and revenues in the 2007-2008 budget, and rising costs in some programs. The Governor’s January budget proposed $17 billion in 2007-2008 and 2008-2009 actions designed to balance the budget, and projected a reserve of $2.8 billion. Some of the major proposals from January included raising $3.3 billion from issuing additional Economic Recovery Bonds; suspending the $1.5 billion 2008-2009 BSA transfer; suspending the Proposition 98 minimum level of funding guarantee for K-12 education, community colleges, and related child development, mental health, and developmental service programs for 2008-2009; and reducing most programs’ spending by 10% in an across-the-board manner.

Between January and May of 2008, the budget deficit outlook worsened by around $8 billion as a result of further deterioration of the economic and revenue outlook for 2008-2009—a figure reaching $6 billion—and rising state expenditures in a number of state programs totaling $1.7 billion. In addition to the worsening budget deficit, many of the Governor’s January proposals were not accepted by the State legislature. Instead of cutting Proposition 98 spending, as proposed in January, in May the administration proposed $1.1 billion in higher Proposition 98 spending and $196 million in higher university spending. The administration proposed more than $8 billion in new actions designed to balance the budget and revenue raising proposals, including raising $5 billion by selling bonds based on anticipated lottery revenue—a proposal which administration officials referred to as “securitizing” the lottery. With the new proposals, the May Revision provided a projected reserve of $2 billion.

Following the May Revision, the Senate and Assembly took actions on the administration’s revised proposals, and the budget was sent to the Conference Committee to reconcile the differences between the houses. The adopted Conference Committee version of the budget on July 8 had a projected reserve of $1.4 billion and included significant changes from the May Revision. For example, it did not include accrual, lottery or budget reform proposals and it proposed spending totaling more than $3 billion higher than the May Revision, including $2.2 billion more for Proposition 98 K-14 education (providing a 2.12% cost of living adjustment (“COLA”)).

After the budget was sent to the Conference Committee, the Governor and the State legislature continued budget negotiations through July and August. On July 31, the Governor issued an executive order aimed at reducing State spending by paying State workers only minimum wage during the budget impasse and restricting the use of retired annuitant, temporary, and permanent intermittent employees. On August 20, the Governor released an “August Compromise” document which proposed a budget package that started with the Conference Committee version of the budget and made some significant changes. The August Compromise proposed, among other things, a lottery securitization proposal that would not yield a General Fund benefit until 2009-2010, a budget reform package that focused on increasing transfers into the BSA and provided no COLA for Proposition 98 programs. The August Compromise projected a reserve of $1.1 billion.

By the time the 2008-2009 budget was signed into law on September 23rd, which was a record 85 days late, the budget deficit had increased from $14.5 billion to $24.3 billion. The most substantial factor resulting in this increase in the budget deficit was a $6 billion decrease in estimated General Fund revenues. Other factors included increased program costs, higher estimates of growth and costs of living adjustments, and erosion of savings due to delays in the adoption of reduction proposals. Some of the key revenue-related solutions in the budget package included:

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accelerating the timing of two types of tax payments—estimated payments and limited liability company fee payments—a combination which expected to increase 2008-2009 revenues by $2.7 billion,

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changing the State’s accounting practices to accrue about $1.9 billion earlier than otherwise would be the case,

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implementing new penalties on corporations for underpayment of taxes, resulting in an expected $1.5 billion in increased revenues,

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suspending the use of net operating loss deductions for two years for larger companies while providing more benefits to businesses in future years, and

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restricting larger companies from using specified business-related tax credits in 2008 and 2009, resulting in an estimated increase of $690 million in 2008-2009.

The 2008-2009 budget as adopted projected a reserve of $1.7 billion. The erosion of the California budget from January until its signing in September primarily reflected problems that confronted both the California and national economies in 2007 and 2008. The national economy experienced volatility in financial markets; a decline in home building, home sales and related retail sales; an increase in energy prices, with the average price for regular-grade gasoline about 8% higher than the previous year; and a 4.7% unemployment rate in September 2007 rising to 6.7% in November 2008. Like the national economy, California experienced economic decline as the State’s unemployment rate increased, rising from 4.8% in March 2007 to 8.2% in October 2008. Additionally, home building and residential real estate markets continued to slow. As a result of these and other factors, there is now a shortfall in the 2008-2009 budget as adopted.

As of mid-December, California’s combined shortfall for the remainder of its current fiscal year and for its next fiscal year budget was estimated at $41.8 billion, reflecting the continuing slump in housing, rise in unemployment and sagging consumer spending as slowdowns continued to grip both the State and national economies. As a result of the steadily increasing budget deficit, several emergency hearings were called in November as part of the Governor’s Special Session on the Budget in an effort to put together an economic stimulus plan designed to encourage new employment, lower the costs of doing business in California, expedite large state-funded infrastructure projects, and increase investment in the State.

The budget deficit for the current fiscal year has widened to $14.8 billion as of mid-December from $11.2 million, which was reported at the beginning of December. Governor Schwarzenegger has proposed closing the deficit through the fiscal year that ends June 30 by implementing a combination of tax increases and spending cuts, including:

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a one and a half cent increase in the State sales tax,

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a raise by five cents per drink on an excise tax collected on all beer, wine and liquor,

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the imposition of an oil severance tax of 9.9% on each barrel of oil extracted from California,

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reduction in K-12 education funding by $2.5 billion and funding for the University of California and California State University systems by $132 million, and

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a requirement that State employees take a one-day-a-month unpaid furlough and forego two of 13 paid holidays, Columbus Day and Lincoln’s Birthday.

California’s Democratic and Republican leaders, as of mid-December, have been unable to reach a consensus on how to close the shortfall. However the Senate and Assembly Democrats moved on December 17 to approve a plan to raise $18 billion in new tax revenue, a plan that has been steadfastly rejected by Republicans. Democrats projected that the plan would nearly halve the State’s budget shortfall by, among other things, increasing sales taxes by three-fourths of a cent and gas taxes by 13 cents a gallon, starting in February, and by cutting $7.3 billion from schools, healthcare and other programs. Additionally, the plan would add a surcharge of 2.5% to everyone’s 2009 State income tax bill. Typically, a plan like this would need support of Republican legislators in order to pass as a result of California being one of three states mandating a two-thirds vote for both budget and tax increases. Achieving that threshold requires some Republican votes. However, through a series of legal maneuvers, California’s Democratic leaders are hoping to bypass the legislature’s minority Republicans. The plan aims to avoid California’s steep budget hurdles by lowering some taxes and raising others; new taxes aren’t subject to the two-thirds supermajority if they’re offset by lowered taxes, Democrats say. Additionally, the plan enacts “fees” to replace the reduced taxes. The distinction between taxes and fees is critical because fees can be enacted with a simple majority vote, while taxes cannot. As of December 17, Democratic lawmakers were negotiating with the Governor over items he wanted included in the proposal before he would support it. According to reports, the Governor would not be willing to sign the measure unless it included, among other things, cuts to the State’s workforce, which public employee unions are resisting; measures for mortgage relief; and provisions allowing private contractors to perform more State construction, even taking over some government facilities, such as roads.

According to the administration, it is urgent that an agreement be reached and actions become implemented as immediately as possible, as the State is expected to run out of cash as early as February 2009. Additionally, the State is at risk of losing its ability to issue debt to fund $13 billion in public works, including upgrading highways, improving levees and building more schools, prisons, jails, courthouses and reservoirs.

Bond Ratings

Another lingering question with implications for California’s economic outlook is its bond rating. After the California electorate passed the $15 billion Economic Recovery Bond measures, in March 2004, investor confidence in California improved. In May 2004, Moody’s upgraded its rating of California general obligation bonds from “Baa1” to “A3”. Standard and Poor’s raised California’s general obligation bonds rating to “A” from “BBB” in August 2004. Additionally, in September 2004, Fitch Ratings raised California’s general obligation bonds rating to “A-” from “BBB.”

California’s bond ratings continued to improve in 2005. In May 2005, Moody’s again upgraded California’s rating to “A2” from “A3.” Fitch Ratings upgraded its California rating from “A-” to “A.” The ratings improvements resulted from California’s improved economic performance, increased revenues, budget reforms, and a moderately improved future financial outlook. Ratings improved again in 2006. In May 2006, Moody’s upgraded California’s rating to “A1” from “A2,” and Standard and Poor’s rating for California went to “A+” from “A.” In June 2006, Fitch Ratings upgraded its California rating to “A+” from “A.” Despite these improvements in its general obligation bonds ratings in recent years, California had the lowest credit rating of any state except for Louisiana as of June 2008. Each of the three major bond rating agencies gave ratings for the State which are two grades above junk status, with Fitch Ratings giving a rating of “A+” as of June 2008, Moody’s giving a rating of “A1” as of October 20, 2008 and Standard and Poor’s giving a rating of “A+” as of December 8, 2008.

Puerto Rico

Puerto Rico’s business cycles have generally tracked those of the United States as a whole, although with somewhat greater volatility. Private sector employment growth in Puerto Rico fell sharply in each of the last three recessions, and bottomed out roughly at the end of the downturn on the mainland. From 1983 to 1992, the Commonwealth of Puerto Rico (the “Commonwealth”) generally experienced a wide-ranging economic expansion with growth in almost every sector of its economy and record levels of employment. The increase in real gross national income (“GNI”), formerly gross national product, slowed to 0.8% in fiscal 1992, reflecting the effects of a recession in the United States economy. A growth pattern began thereafter with real GNI increases of 3.1% and 1.6% for fiscal 2000 and 2001, respectively. However, another slowdown in the United States economy contributed to the 0.3% decline in real GNI in 2002. In 2003, the real GNI rebounded to post a positive growth rate of 1.9%. In 2004 and 2005, generally consistent with the course of the United States economy, the real GNI growth rates were 2.8%, and 2.0%, respectively. Overall, the GNI grew only 1.7% between 2000 and 2005. Contributing to Puerto Rico’s meager growth were factors such as high oil prices and problems in the banking sector. In 2005, the price of gasoline in Puerto Rico increased more than 18%, which was two times the increase experienced in 2004. In addition, Puerto Rico banks continued to rely heavily on brokered funds, financing consumption with foreign savings. In real terms, personal consumption grew by 2.8% in 2005 while personal income increased by only 2.0%.

Beginning in 2006 and continuing through 2007, Puerto Rico’s economy showed signs of slowing. While gross domestic income (“GDI”), formerly gross domestic product, at current dollar prices increased by 4.6% from $82.6 billion in 2005 to $86.5 billion in 2006, in constant dollar terms the increase was only 0.7%. In 2007, the estimated GDI was only $77.5 billion, a decline of 1.27%. Private sector employment also showed a decline of 1.1% from the beginning of 2007 to the beginning of 2008 and a decline of 3.5% from its peak at the end of 2005. Some commentators have said that Puerto Rico entered a recession beginning in early 2006 and current economic conditions are likely to result in continued decline into 2009, in line with the results in the United States as a whole. The apparent contraction of the Puerto Rico economy is likely the result of declines in the United States economy as a whole, but the early onset of the decline in Puerto Rico is probably attributable to local factors, including the phase out of Section 936 of the United States Internal Revenue Code, as amended (the “Code”), which was completed on January 1, 2006, and shrinkage in employment in the government sector, as the government cut public sector employment by 5% from 2004 to 2006.

Puerto Rico has a diversified economy with the manufacturing and services sectors comprising the principal sectors of its economy. Manufacturing is the largest sector in terms of GDI. In fiscal 2005, manufacturing generated $33.13 billion, or 40.4%, of GDI as compared with fiscal 2004, when it generated $34.1 billion, or 43.2%, of GDI. In fiscal 2007, manufacturing generated 41% of GDI or $36.7 billion in value added. In the last two decades, industrial development has tended to be more capital intensive and more dependent on skilled labor. This gradual shift in emphasis is best exemplified by the heavy investment in the pharmaceutical, scientific instruments, computer, microprocessor, medical product and electrical product industries over the last decade. The pharmaceutical industry has invested $1.7 billion in the local economy since 1997 and generates 30,000 direct jobs and 96,000 related jobs. As a result of this investment, Puerto Rico exported over $2 billion in scientific and medical devices in 2003. Notwithstanding the shift toward the scientific sectors, manufacturing areas such as apparel and food products remain important elements of the economy.

One of the factors that assisted the development of the manufacturing sector was the tax incentives offered by the federal and Commonwealth governments, most notably Section 936 of the Internal Revenue Code. Under Section 936 of the Code, certain qualifying United States corporations were entitled to United States corporate income tax credits for operations in Puerto Rico. However, in 1996, President Clinton signed into law a bill that phased out these tax credits over a nine-year period. Since the phase out was just completed on January 1, 2006, the overall effect on Puerto Rico’s economy from the elimination of tax credits is still unclear. However, to alleviate the loss of the tax credits, some former Section 936 businesses have restructured their companies which do not pay United States federal corporate income tax unless the income generated in Puerto Rico is repatriated to the United States mainland.

The service sector, which has experienced significant growth, partly in response to the expansion of the manufacturing sector, grew in 2005 to comprise $8.2 billion of GDI compared to $7.9 billion in 2004. In 2007 the private service sector generated 28% of total employment, while service jobs in government accounted for an additional 23%.

The 1990’s brought a construction boom to the Commonwealth, and over the years the construction industry has been one of the leading sectors in the economy, generating on average close to 70,000 jobs annually. However, it is a sector which is strongly affected by economic cycles. The completion of major projects resulted in a shrinking of construction expenditures beginning in 2000. In 2003, the construction industry began to recover and growth continued through 2004. In 2003, significant Commonwealth and federal public works programs were initiated, including the development of the “Ciudad Red” Train Corridor. Although the first phase of the train corridor project has been completed, the project includes some commercial and residential development that has not been completed. In 2005, construction growth fell 0.1% in real terms. Construction in general was slowed both by increased construction costs caused by the significant demand for construction materials and supplies from China and high energy prices. Private construction projects were also slowed by the lengthy permitting process and the

uncertainty surrounding a proposed land use plan. Public construction has similarly been negatively impacted by the downgrade in Commonwealth bond ratings and rising energy costs. As a result of the recessionary environment and substantial increases in the cost of building materials, investment in construction has continued to fall and is not expected to grow materially in fiscal 2009. A major component of private sector construction is housing, which has shown signs of weakness in 2008. The total number of new housing units in the first quarter of 2008 fell by 16% when compared to sales in the same quarter of 2007. Since housing is 64% of construction activity, this has had a major impact on the industry.

The tourism sector has remained a key player in Puerto Rico’s economic development, although it has not reached its true potential. San Juan is the largest homeport for cruise ships in the Caribbean and a major United States airline uses San Juan as a hub for its intra-Caribbean operations. This reflects the importance of Puerto Rico as a tourist destination and as a transportation hub in the Caribbean. During fiscal year 2007 cruise ship visits increased by 8%, while expenditures from cruise ship visitors increased by 7%. Visits increased from 1.3 million to 1.4 million, while expenditures increased from $160.9 million to $172.2 million. This increase is an effect of the incentive package that Governor Aníbal Acevedo-Vilá approved in 2006 for the cruise ship industry, in response to which various lines committed to making San Juan their port of call. San Juan continues to be the major home port and port of call for cruise ships, but an effort to develop both Ponce and Mayagüez as ports of call has begun. Progress has been slow due to the absence of the required infrastructure in both of these smaller ports. The local tourism industry has been affected recently by the downturn in the mainland economy and by the increased cost of energy. Locally a more vocal environmental movement has questioned a number of Planning Board decisions in the courts and has been able to stop a number of tourism related developments. The uncertainty generated has had a very negative impact on the industry, particularly when the present administration had set a goal of building 5,000 new rooms in the 2005-2009 period.

Notwithstanding the above, indicators of the industry such as registrations, visitors and their expenditures and room inventory have been increasing at a reasonable pace during the last 7 years. Registrations in the Commonwealth have increased at a rate of 3.0% during the last 7 years. The number of visitors has increased by 11% during the last 7 years, while expenditures have more than doubled during this period. Nonetheless, visitors during the last fiscal year decreased slightly, while expenditures increased.

Gross public debt continued to rise from $33.9 billion in 2004, to $36 billion in fiscal 2005. The increase in public debt was largely attributable to the continuing budget deficit, which was financed by loans in both 2004 and 2005. In light of the deficit, the government chose to raise taxes again in 2005 instead of trimming the budget. Historically, the Commonwealth has maintained a fiscal policy which provides for a prudent relationship between the growth of public sector debt and the growth of the economic base required to service that debt. On May 1, 2006, as a result of a political deadlock with the opposition party that controlled Puerto Rico’s legislature, Governor Acevedo-Vilá shut down the government for two weeks due to a budget crisis based on a $740 million deficit. The shut-down affected 1,600 state schools and 45 government agencies and led to a furloughing of nearly 100,000 public employees. The crises ended with a $500 million emergency loan that will be repaid from revenues generated by Puerto Rico’s first ever consumer sales tax, which was set at 5.5%, with each municipality having the option to impose an additional sales tax of up to 1.5%.

In light of the budget deficit and the rise in public debt in 2006, Moody’s reduced Puerto Rico’s bond rating that year to the agency’s lowest investment grade above junk status. Standard and Poor’s, on the other hand spared Puerto Rico from a ratings cut. As a result of Puerto Rico approving a $9.5 billion budget and adopting the new sales tax to help close future budget gaps, Standard and Poor’s affirmed the Commonwealth’s credit rating at BBB, its second lowest investment grade, and removed the debt from a watch list. Fitch Ratings does not rate Puerto Rico.

In addition to the ratings for the Commonwealth, both bond services had poor ratings for Doral Financial Corp., Puerto Rico’s largest mortgage lender. In January 2007, Standard and Poor’s cut Doral’s rating to B from B+. Moody’s dropped its rating to B2 from B1, citing Doral’s need to repay $625 million in debt due in July and legal and regulatory issues. Fitch Ratings maintained a Ratings Watch Negative for Doral at least since 2006. As a result of the two ratings cuts, shares of Doral dropped 9.8%, and as of January 2007, had dropped 80% in the past year. In July 2007, Doral sold a 90% stake in the company, resulting in capital allowing the company to service its debt, settle a class action lawsuit and ease any immediate liquidity pressure. As a result of this transaction Fitch Ratings removed all Doral ratings from Ratings Watch Negative to a Positive Ratings Outlook. In 2008, Doral had a Positive Ratings Outlook from Fitch Ratings; a B+, stable rating from Standard and Poor’s; and a B1 rating from Moody’s.

Two years after the budget crisis, Puerto Rican business and fiscal leaders are continuing to work to restore economic order, retool the banking sector and bring investors back to the Commonwealth. To implement those efforts, investor opportunities continue to be offered in Puerto Rico in terms of medical devices, biotechnology, electronics, textiles, real estate and tourism. In late May 2008, the legislative bodies in Puerto Rico approved a new Industrial Incentives Law. The government hopes that the new Incentives Law will attract new investment and stimulate the economy. Some key components of the Incentives Law are:

_•

the creation of a Special Development Fund,

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additional incentives for local purchases,

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increased incentives for R&D,

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inclusion of services as eligible activities when exported or complete value chains,

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creation of an Energy Administration as part of the Economic Development and Commerce Department,

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various measures related to energy production and lowering of energy costs,

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recognition of regional economic development initiatives as key in economic development, and

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stimulus for technology transfer.

Despite these efforts to restore economic order, however, as of April 2008, Puerto Rico maintained bond ratings just above junk status, with a rating of BBB-minus from Standard and Poor’s and a rating of Baa3 from Moody’s.

While the longer term outlook for Puerto Rico is uncertain, the Commonwealth possesses certain fundamental advantages over its Caribbean neighbors that create the potential for sustained growth: an increasingly skilled and educated workforce, a significant association with the mainland United States, and the benefits of United States legal, contractual and financial structures.

PERFORMANCE INFORMATION

Performance information for the Funds (and any class of the Funds) may be included in advertisements, sales literature or reports to shareholders or prospective investors. Performance information in advertisements and sales literature may be expressed as a yield of a class of shares and as a total return of a class of shares.

The Funds may from time to time include in advertisements containing total return the ranking of those performance figures relative to such figures for groups of mutual funds having similar investment objectives as categorized by ranking services such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc. Additionally, each Fund may compare its performance results to other investment or savings vehicles (such as certificates of deposit) and may refer to results published in various publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business Week and Investor’s Daily, Stanger’s Mutual Fund Monitor, The Stanger Register, Stanger’s Investment Adviser, The Wall Street Journal, The New York Times, Consumer Reports, Registered Representative, Financial Planning, Financial Services Weekly, Financial World, U.S. News and World Report, Standard & Poor’s The Outlook, and Personal Investor . The Funds may from time to time illustrate the benefits of tax deferral by comparing taxable investments to investments made through tax-deferred retirement plans. The total return may also be used to compare the performance of each Fund against certain widely acknowledged outside standards or indices for stock and bond market performance, such as the Standard & Poor’s 500 ^® Index (the “S&P 500 ^® Index”), Dow Jones Industrial Average, Barclay’s Capital U.S. Aggregate Bond Index, Russell Midcap Growth Index, Europe Australia Far East Index (“EAFE”), Consumer Price Index, Barclay’s Capital California Municipal Bond Index, Barclay’s Capital High Yield 2% Issuer Cap Index, Merrill Lynch Short Term Medium Quality Corporate Bond Index, Morgan Stanley Capital EAFE Index, MSCI World Index, FTSE EPRA/NAREIT Global Rental Index ex-U.S. Index, Citigroup 90-Day Treasury Bill Index and FTSE NAREIT Equity REITs Index.

Advertisements, sales literature and other communications may contain information about the Funds and advisers’ current investment strategies and management style. Current strategies and style may change to allow the Funds to respond quickly to changing market and economic conditions. From time to time the Funds may include specific portfolio holdings or industries in such communications. To illustrate components of overall performance, each Fund may separate its cumulative and average annual returns into income and capital gains components.

Performance information reflects only the performance of a hypothetical investment in each class during the particular time period on which the calculations are based. Performance information should be considered in light of a Fund’s investment objectives and policies, characteristics and quality of the portfolio, and the market condition during the given time period, and should not be considered as a representation of what may be achieved in the future.

Yield

The 30-day yield quotation as to a class of shares may be computed by dividing the net investment income for the period as to shares of that class by the maximum offering price of each share of that class on the last day of the period, according to the following formula:

YIELD = 2[( a-b + 1) ⁶ - 1]

Where:

a = dividends and interest earned during the period.

b = net expenses accrued for the period.

c = the average daily number of shares of the class outstanding during the period that were entitled to receive dividends.

d = the maximum offering price per share of the class on the last day of the period.

7-Day Yield—Money Market Fund

The current yield for the Money Market Fund will be based on the change in the value of a hypothetical investment (exclusive of capital changes) over a particular 7-day period, less a hypothetical charge reflecting deductions for expenses during the period (the “base period”), and stated as a percentage of the investment at the start of the base period (the “base period return”). The base period return is then annualized by multiplying by 365/7, with the resulting yield figure carried to at least the nearest hundredth of one percent. “Effective yield” for the Money Market Fund assumes that all dividends received during an annual period have been reinvested. Calculation of “effective yield” begins with the same “base period return” used in the calculation of yield, which is then annualized to reflect weekly compounding pursuant to the following formula:

Effective Yield = [(Base Period Return) + 1) ^365/7 ] - 1

Total Return

Standardized quotations of average annual total return for each class of shares will be expressed in terms of the average annual compounded rate of return for a hypothetical investment in such class of shares over periods of 1, 5 and 10 years or up to the life of the class of shares, calculated for each class separately pursuant to the following formula: P((1+T)(n)) = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of each class’s expenses (on an annual basis), deduction of the maximum initial sales load in the case of Class A Shares and the maximum contingent deferred sales charge applicable to a complete redemption of the investment in the case of Class B Shares, Class C Shares and Class T Shares, and assume that all dividends and distributions on each class of shares are reinvested when paid.

For average “after-tax” total return, the SEC rules mandate several assumptions, including that the calculations use the historical highest individual federal marginal income tax rates at the time of reinvestment, and that the calculations do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. These returns, for instance, assume that an investor has sufficient capital gains of the same character from other investments to offset any capital losses from the redemption. As a result, returns after taxes on distributions and sale of Fund shares may exceed returns after taxes on distributions (but before sale of Fund shares). These returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements.

The Funds may also compute cumulative total return for specified periods based on a hypothetical account with an assumed initial investment of $10,000. The cumulative total return is determined by dividing the net asset value of this account at the end of the specified period by the value of the initial investment and is expressed as a percentage. Calculation of cumulative total return reflects payment of the Class A Share’s maximum sales charge of 4.75% for the fixed income funds (2.25% for the Short Term Bond Fund) and 5.75% for the equity funds and assumes reinvestment of all income dividends and capital gain distributions during the period.

The Funds also may quote annual, average annual and annualized total return and cumulative total return performance data, for any class of shares of the Funds, both as a percentage and as a dollar amount based on a hypothetical $10,000 investment for various periods other than those noted above. Such data will be computed as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or cumulative rates of return and (2) the maximum applicable sales charge will not be included with respect to annual, annualized or cumulative rate of return calculations.

PORTFOLIO TURNOVER

The Funds pay brokerage commissions for purchases and sales of portfolio securities. Each Fund has a different expected annual rate of portfolio turnover, which is calculated by dividing the lesser of purchases or sales of portfolio securities during the fiscal year by the monthly average of the value of the Fund’s securities (excluding from the computation all securities, including options, with maturities at the time of acquisition of one year or less). A high rate of portfolio turnover generally involves correspondingly greater brokerage commission expenses and other costs, which must be borne directly by a Fund and thus indirectly by its shareholders. Turnover rates may vary greatly from year to year as well as within a particular year and may also be affected by cash requirements for redemptions of each Fund’s shares and by requirements which enable the Trust to receive certain favorable tax treatment (see “Dividends, Distributions and Taxes”). If such rate of turnover exceeds 100%, the Fund will pay more in brokerage commissions than would be the case if they had lower portfolio turnover rates. Historical portfolio turnover rates for all Funds except the Money Market Fund (which for this purpose does not calculate a portfolio turnover rate) can be found under the heading “Financial Highlights” in each Fund’s prospectus.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Asset Allocation Funds do not invest directly in securities, but rather invest solely in shares of underlying mutual funds. The shares of the underlying affiliated mutual funds are purchased at net asset value of the shares of that fund without payment of a brokerage commission or a sales charge. The shares of ETFs are purchased through broker-dealers in transactions on a securities exchange, and the funds will pay customary brokerage commissions for each purchase and sale.

The investment advisers and/or subadvisers (throughout this section the “adviser”) to the underlying affiliated mutual funds execute the portfolio transactions for their respective fund. In allocating portfolio transactions, the adviser must comply with the brokerage and allocation procedures adopted by the boards of trustees of the underlying affiliated mutual funds. The following is a discussion of the portfolio transactions and brokerage procedures of the underlying affiliated mutual funds and the Funds, with the exception of the Asset Allocation Funds.

In effecting portfolio transactions for the Trust, the adviser and/or subadviser (throughout this section, the “adviser”) adheres to the Trust’s policy of seeking best execution and price, determined as described below, except to the extent it is permitted to pay higher brokerage commissions for “brokerage and research services” as defined herein. The adviser may cause the Trust to pay a broker an amount of commission for effecting a securities transaction in excess of the amount of commission which another broker or dealer would have charged for effecting the transaction if the adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or that any offset of direct expenses of a Fund yields the best net price. As provided in Section 28(e) of the Securities Exchange Act of 1934, “brokerage and research services” include giving advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities; furnishing analyses and reports concerning issuers, industries, economic factors and trends, portfolio strategy and the performance of accounts; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). Brokerage and research services provided by brokers to the Trust or to the adviser are considered to be in addition to and not in lieu of services required to be performed by the adviser under its contract with the Trust and may benefit both the Trust and other clients of the adviser. Conversely, brokerage and research services provided by brokers to other clients of the adviser may benefit the Trust.

If the securities in which a particular Fund of the Trust invests are traded primarily in the over-the-counter market, where possible the Fund will deal directly with the dealers who make a market in the securities involved unless better prices and execution are available elsewhere. Such dealers usually act as principals for their own account. On occasion, securities may be purchased directly from the issuer. Bonds and money market instruments are generally traded on a net basis and do not normally involve either brokerage commission or transfer taxes. In addition, transactions effected on foreign securities exchanges which do not permit the negotiation of brokerage commissions and where the adviser would, under the circumstances, seek to obtain best price and execution on orders for the Trust.

The determination of what may constitute best execution and price in the execution of a securities transaction by a broker involves a number of considerations including, without limitation, the overall direct net economic result to the Trust (involving both price paid or received and any net commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all where a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future and the financial strength and stability of the broker. Such considerations are judgmental and are weighed by the adviser in determining the overall reasonableness of brokerage commissions paid by the Trust. Some portfolio transactions are, subject to the Conduct Rules of the FINRA and subject to obtaining best prices and executions, effected through dealers (excluding VP Distributors) who sell shares of the Trust.

The Trust has adopted a policy and procedures governing the execution of aggregated advisory client orders (“bunching procedures”) in an attempt to lower commission costs on a per-share and per-dollar basis. According to the bunching procedures, the adviser shall aggregate transactions unless it believes in its sole discretion that such aggregation is inconsistent with its duty to seek best execution (which shall include the duty to seek best price) for the Trust. No advisory account of the adviser is to be favored over any other account and each account that participates in an aggregated order is expected to participate at the average share price for all transactions of the adviser in that security on a given business day, with all transaction costs shared pro rata based on the Trust’s participation in the transaction. If the aggregated order is filled in its entirety, it shall be allocated among the adviser’s accounts in accordance with the allocation order, and if the order is partially filled, it shall be allocated pro rata based on the allocation order. Notwithstanding the foregoing, the order may be allocated on a basis different from that specified in the allocation order if all accounts of the adviser whose orders are allocated receive fair and equitable treatment and the reason for such different allocation is explained in writing and is approved in writing by the adviser’s compliance officer as soon as practicable after the opening of the markets on the trading day following the day on which the order is executed. If an aggregated order is partially filled and allocated on a basis different from that specified in the allocation order, no account that is benefited by such different allocation may intentionally and knowingly effect any purchase or sale for a reasonable period following the execution of the aggregated order that would result in it receiving or selling more shares than the amount of shares it would have received or sold had the aggregated order been completely filled. The Trustees review these procedures at least annually, or more frequently if deemed appropriate.

In certain instances there may be securities that are suitable for a Fund’s portfolio as well as for that of another Fund or one or more of the other clients of the subadviser. Investment decisions for a Fund and for the subadviser’s other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security in a particular transaction as far as a Fund is concerned. The Trust believes that over time its ability to participate in volume transactions will produce better executions for the Funds. When appropriate, orders for the account of the Funds are combined with orders for other investment companies or other clients advised by the subadviser, including accounts (such as investment limited partnerships) in which the investment adviser or affiliated or associated persons of the subadviser are investors or have a financial interest, in order to obtain a more favorable commission rate. When the same security is purchased for a Fund and one or more other funds or other clients on the same day, each party pays the average price and commissions paid are allocated in direct proportion to the number of shares purchased.

The Trust has implemented, and the Board of Trustees has approved, policies and procedures reasonably designed to prevent (i) the adviser’s and/or subadviser’s personnel responsible for the selection of broker-dealers to effect fund portfolio securities transactions from taking into account, in making those decisions, broker-dealer’s promotion or sales efforts, and (ii) the Trust, its adviser and distributor from entering into any agreement or other understanding under which the Funds’ direct brokerage transactions or revenue generated by those transactions to a broker-dealer to pay for distribution of fund shares. These policies and procedures are designed to prevent the Trust from entering into informal arrangements to direct portfolio securities transactions to a particular broker.

For the fiscal years ended September 30, 2006, 2007 and 2008, brokerage commissions paid by the Trust on portfolio transactions totaled $145,084, $2,946,715 and $6,710,780 respectively. Brokerage commissions of $1,394,427 paid during the fiscal year ended September 30, 2008, were paid on portfolio transactions aggregating $1,949,625,425 executed by brokers who provided research and other statistical information.

DISCLOSURE OF FUND HOLDINGS

The Asset Allocation Funds do not invest directly in securities, but rather invest solely in shares of other affiliated mutual funds and ETFs. The following description pertains to the underlying affiliated mutual funds referred to in this section as the (“funds”) in which the Asset Allocation Funds invest and it applies to the Funds, with the exception of the Asset Allocation Funds.

The Trustees of the Trust have adopted policies with respect to the disclosure of the Funds’ portfolio holdings by the Funds, the Funds’ investment adviser, or their affiliates. These policies provide that the Funds’ portfolio holdings information generally may not be disclosed to any party prior to the information becoming public. Certain limited exceptions are described below. Additionally, the Funds’ policies prohibit Virtus and the Funds’ other service providers from entering into any agreement to disclose Fund portfolio holdings in exchange for any form of compensation or consideration. These policies apply to disclosures to all categories of persons, including individual investors, institutional investors, intermediaries who sell shares of the Fund, third parties providing services to the Funds (accounting agent, print vendors, etc.), rating and ranking organizations (Lipper, Morningstar, etc.) and affiliated persons of the Funds.

The Board of Trustees has delegated to the Holdings Disclosure Committee (the “HDC”) the authority to make decisions regarding requests for information on portfolio holdings prior to public disclosure. The HDC will authorize the disclosure of portfolio holdings only if it determines such disclosure to be in the best interests of Fund shareholders. The HDC is composed of the Funds’ Compliance Officer, and officers of the Funds’ advisers and principal underwriter representing the areas of portfolio management, fund administration, institutional marketing, retail marketing, and distribution.

The Funds’ Compliance Officer is responsible for monitoring the use of portfolio holdings information, for the Funds’ compliance with these policies and for providing regular reports (at least quarterly) to the Board of Trustees regarding their compliance, including information with respect to any potential conflicts of interest between the interests of Fund shareholders and those of Virtus and its affiliates identified during the reporting period and how such conflicts were resolved.

Public Disclosures

In accordance with rules established by the SEC, each Fund sends semiannual and annual reports to shareholders that contain a full listing of portfolio holdings as of the second and fourth fiscal quarters, respectively, within 60 days of quarter end. The Funds also disclose complete portfolio holdings as of the end of the first and third fiscal quarters on Form N-Q,

which is filed with the SEC within 60 days of quarter end. The Funds’ shareholder reports are available on Virtus’ Web site at www.virtus.com. The Funds may make their holdings publicly available prior to these filings in certain circumstances. Additionally, each Fund provides its top 10 holdings and summary composition data derived from portfolio holdings information on Virtus’ Web site. This information is posted to the Web site at the end of each month with respect to the top 10 holdings, and at the end of each quarter with respect to summary composition information, generally within 10 business days. With respect to the International Real Estate Fund and the Real Estate Fund, the top ten holdings and summary composition information are reported on a one-month lag. This information will be available on the Web site until full portfolio holdings information becomes publicly available as described above. The Funds also provide publicly-available portfolio holdings information directly to ratings agencies, the frequency and timing of which is determined under the terms of the contractual arrangements with such agencies, and may provide to financial intermediaries, upon request, monthly portfolio holdings for periods included in publicly-available quarterly portfolio holdings disclosures.

Other Disclosures

The HDC may authorize the disclosure of non-public portfolio holdings information under certain limited circumstances. The Funds’ policies provide that non-public disclosures of a Fund’s portfolio holdings may only be made if (i) the Fund has a legitimate business purpose for making such disclosure, and (ii) the party receiving the non-public information enters into a confidentiality agreement, which includes a duty not to trade on the non-public information. The HDC will consider any actual or potential conflicts of interest between Virtus and its mutual fund shareholders and will act in the best interest of the Funds’ shareholders with respect to any such disclosure of portfolio holdings information. If a potential conflict can be resolved in a manner that does not present detrimental effects to Fund shareholders, the HDC may authorize release of portfolio holdings information. Conversely, if the potential conflict cannot be resolved in a manner that does not present detrimental effects to Fund shareholders, the HDC will not authorize such release.

Ongoing Arrangements to Disclose Portfolio Holdings

As previously authorized by the Funds’ Board of Trustees and/or the Funds’ executive officers, the Funds periodically disclose non-public portfolio holdings on a confidential basis to various service providers that require such information in order to assist the Funds in their day-to-day operations, as well as public information to certain ratings organizations. In addition to Virtus and its affiliates, these entities are described in the following table. The table also includes information as to the timing of these entities receiving the portfolio holdings information from the Funds.

Non-Public Portfolio Holdings Information


Type of Service Provider	Name of Service Provider	Timing of Release of Portfolio Holdings Information
Adviser	Virtus Investment Advisers, Inc.	Daily
Subadviser (Market Neutral Fund)	The Boston Company Asset Management	Daily
Subadviser (Global Infrastructure Fund, International Real Estate Fund and Real Estate Fund)	Duff & Phelps Investment Management Co.	Daily
Subadviser (Core Bond Fund, High Yield Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Senior Floating Rate Fund)	Goodwin Capital Advisers, Inc.	Daily
Subadviser (Bond Fund and High Yield Fund)	SCM Advisors LLC	Daily
Subadviser (Foreign Opportunities Fund and Global Opportunities Fund)	Vontobel Asset Management, Inc.	Daily
Distributor	VP Distributors, Inc.	Daily
Custodian	State Street Bank and Trust Company	Daily
Sub-Financial Agent	PNC Global Investment Servicing (U.S.) Inc. (“PNC”)	Daily


Type of Service Provider	Name of Service Provider	Timing of Release of Portfolio Holdings Information
Independent Registered Public Accounting Firm	PricewaterhouseCoopers LLP	Annual Reporting Period: within 15 business days of end of reporting period Semiannual Reporting Period: within 31 business days of end of reporting period
Typesetting Firm for Financial Reports and Forms N-Q	Bowne/GCom Solutions	Monthly on first business day following month end
Printer for Financial Reports	R.R. Donnelley & Sons Co.	Annual and Semiannual Reporting Period: within 45 days after end of reporting period
Proxy Voting Service	Risk Metrics Group	Twice weekly on an ongoing basis
Intermediary Selling Shares of the Fund	Merrill Lynch	Quarterly within 10 days of quarter end
Third-Party Class B Share Financer	SG Constellation LLC	Weekly based on prior week end
TV Financial Markets Talk Shows	CNBC	For Alternatives Diversifier Fund: coincident to periodic appearance; for all other funds: monthly for holdings over 1% of issuer equity, in aggregate.*

Public Portfolio Holdings Information
Portfolio Redistribution Firms	Bloomberg, Standard & Poor’s and Thompson Reuters	Quarterly, 60 days after fiscal quarter end
Rating Agencies	Lipper Inc. and Morningstar	Quarterly, 60 days after quarter end

*	A portfolio manager may, from time to time, appear as host or guest of various programming. CNBC requires certain holdings disclosure in order to monitor potential conflicts of interest.

These service providers are required to keep all non-public information confidential and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the Funds.

There is no guarantee that the Funds’ policies on use and dissemination of holdings information will protect the Funds from the potential misuse of holdings by individuals or firms in possession of such information.

SERVICES OF THE ADVISER AND SUBADVISERS

The Adviser

The investment adviser to each of the Funds is Virtus Investment Advisers, Inc. (formerly Phoenix Investment Counsel, Inc.), (“VIA” or “Adviser”), which is located at 100 Pearl Street, Hartford, Connecticut 06103. VIA was originally organized in 1932 as John P. Chase, Inc. VIA acts as the investment adviser for over 50 mutual funds and as adviser to institutional clients. As of September 30, 2008, VIA had approximately $13.8 billion in assets under management.

All of the outstanding stock of VIA is owned by VP Distributors, which acts as Distributor and Administrator for the Trust and is a subsidiary of Virtus Investment Partners, Inc. (“Virtus”). The principal offices of VP Distributors are located at 100 Pearl Street, Hartford, Connecticut 06103.

Virtus has served investors for over 70 years. As of September 30, 2008, Virtus had approximately $41.2 billion in assets under management. Virtus’ money management is provided by affiliated investment advisers, as well as through subadvisory arrangements with outside managers, each specializing in particular investment styles and asset classes.

The Adviser provides certain services and facilities required to carry on the day-to-day operations of each of the Funds (for which it receives a management fee) other than the costs of printing and mailing proxy materials, reports and notices to shareholders; outside legal and auditing services; regulatory filing fees and expenses of printing the Trust’s registration statements (but the Distributor purchases such copies of the Trust’s prospectuses and reports and communications to shareholders as it may require for sales purposes); insurance expense; association membership dues; brokerage fees; and taxes.

Each Fund will pay expenses incurred in its own operation and will also pay a portion of the Trust’s general administration expenses allocated on the basis of the asset values of the respective Funds.

As compensation for its services to the below Funds, the Adviser receives a fee, which is accrued daily against the value of each Fund’s net assets and paid monthly at the following annual rates:


Alternatives Diversifier Fund						0.10%
Bond Fund						0.50%
Market Neutral Fund
Wealth						1.50%
Builder Fund						0.10%
Wealth Guardian Fund						0.10%


	First $1 billion	$1+ billion through $2 billion	$2+ billion
CA Tax-Exempt Bond Fund	0.45%	0.40%	0.35%
Core Bond Fund	0.45%	0.40%	0.35%
Global Infrastructure Fund	0.65%	0.60%	0.55%
Global Opportunities Fund	0.85%	0.80%	0.75%
High Yield Fund	0.65%	0.60%	0.55%
International Real Estate Fund	1.00%	0.95%	0.90%
Money Market Fund	0.40%	0.35%	0.30%
Multi-Sector Fixed Income Fund	0.55%	0.50%	0.45%
Multi-Sector Short Term Bond Fund	0.55%	0.50%	0.45%
Real Estate Fund	0.75%	0.70%	0.65%
Senior Floating Rate Fund	0.60%	0.55%	0.50%

	First $2 billion	$2+ billion through $4 billion	$4+ billion
Foreign Opportunities Fund	0.85%	0.80%	0.75%

The Adviser has voluntarily agreed to limit certain of the Funds’ total operating expenses (excluding interest, taxes and extraordinary expenses) so that expenses do not exceed, on an annualized basis, the amounts indicated in the following table.


	Class A		Class B		Class C		Class I
Alternatives Diversifier Fund*	0.20	%	N/A		0.20	%	N/A
Bond Fund	0.85	%	1.60	%	1.60	%	0.60	%
CA Tax-Exempt Bond Fund	0.85	%	N/A		N/A		0.60	%
Core Bond Fund	1.00	%	1.75	%	1.75	%	N/A
Foreign Opportunities Fund	1.35	%	N/A		2.10	%	1.10	%
International Real Estate Fund	1.50	%	N/A		2.25	%	1.25	%
Market Neutral Fund**	1.77	%	2.52	%	2.52	%	N/A
Senior Floating Rate Fund***	1.20	%	N/A		1.95	%	0.95	%
Wealth Builder Fund*	0.20	%	N/A		0.20	%	N/A
Wealth Guardian Fund*	0.20	%	N/A		0.20	%	N/A

*	Excludes 12b-1 fees and acquired fund fees and expenses.

**	Excludes dividends on short sales.

***	Excludes leverage expenses.

The adviser may discontinue these expense limitation arrangements at any time. The adviser may recapture operating expenses waived or reimbursed under these arrangements subsequent to August 23, 2007, for a period of three years following the end of the fiscal period in which such waiver or reimbursement occurred.

With respect to the Market Neutral Fund, the Adviser has voluntarily agreed to waive 0.15% of its management fee. The Adviser may discontinue this fee waiver at any time.

For services to the Funds during the fiscal years ended September 30, 2006, 2007 and 2008, the Adviser received fees of $24,165,654, $33,750,400 and $35,187,819 respectively, under the investment advisory agreements in effect. Of these totals, the Adviser received fees from each Fund (including its Predecessor Fund) as follows:


Fund Name	2006		2007		2008
Alternatives Diversifier Fund	$	1,273	$	97,382	$	271,414
Bond Fund		385,866		460,520		333,832
CA Tax-Exempt Bond Fund		211,722		322,807		301,070
Core Bond Fund		343,936		308,188		286,578
Foreign Opportunities Fund		1,377,062		7,260,125		11,013,030
Global Infrastructure Fund		100,802		294,531		449,485
Global Opportunities Fund		943,860		1,015,014		888,029
High Yield Fund		965,982		888,951		744,840
International Real Estate Fund		N/A		N/A		205,357
Market Neutral Fund		2,162,337		1,125,341		1,292,809
Money Market Fund		414,078		376,496		382,785
Multi-Sector Fixed Income Fund		806,091		824,403		757,351
Multi-Sector Short Term Bond Fund		7,683,275		8,488,708		9,600,080
Real Estate Fund		7,498,378		10,811,024		8,017,283
Senior Floating Rate Fund		N/A		N/A		60,718
Wealth Builder Fund		129,938		134,360		115,978
Wealth Guardian Fund		60,120		60,933		55,404

The Subadvisers

The Boston Company Asset Management, LLC (“TBCAM”)

TBCAM is the subadviser to the Market Neutral Fund and is located at Mellon Financial Center, One Boston Place, 201 Washington Street, 14 ^th floor, Boston, MA 02108. TBCAM is a wholly-owned subsidiary of Bank of New York Mellon Corporation, located at the same address as TBCAM. Founded in 1970, TBCAM provides investment management and subadvisory services to public, corporate, defined benefit and defined contribution plans, as well as various institutional and sub-advised accounts. As of September 30, 2008, TBCAM had approximately $36 billion of assets under management in active equity investment strategies.

The Subadvisory Agreement provides that the Adviser, VIA, will delegate to TBCAM the performance of certain of its investment management services under the Investment Advisory Agreement with the Market Neutral Fund. TBCAM will furnish at is own expense the office facilities and personnel necessary to perform such services.

For its services as subadviser, VIA pays TBCAM an annual fee of 0.75% of the average daily net assets of the fund.

Duff & Phelps Investment Management Co. (“Duff & Phelps”)

Duff & Phelps, an affiliate of VIA, is the subadviser to the Global Infrastructure Fund, the International Real Estate Fund and the Real Estate Fund and is located at 200 South Wacker Drive, Suite 500, Chicago, Illinois 60606. Duff & Phelps acts as subadviser to five mutual funds and as adviser to three closed-end mutual funds and to institutional clients. As of September 30, 2008, Duff & Phelps had approximately $6.7 billion in assets under management on a discretionary basis.

The Subadvisory Agreement provides that the adviser, VIA, will delegate to Duff & Phelps the performance of certain of its investment management services with respect to the each of the funds. Duff & Phelps will furnish at its own expense the office facilities and personnel necessary to perform such services.

For its services as subadviser, VIA pays Duff & Phelps compensation at the following annual rates:

First
$1 billion

$1+ billion

through $2 billion

$2+ billion

Global Infrastructure Fund

0.325%

0.30%

0.275%

For its services as subadviser to the International Real Estate Fund and Real Estate Fund, VIA pays Duff & Phelps compensation at a rate of 50% of the gross investment management fee.

Goodwin Capital Advisers, Inc. (“Goodwin”)

Goodwin is the subadviser to the Core Bond Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Senior Floating Rate Fund, and is located at 56 Prospect Street, Hartford, Connecticut 06115. Goodwin acts as subadviser for 10 mutual funds and manages fixed income assets for individuals and institutions. As of September 30, 2008, Goodwin had approximately $16.7 billion in assets under management.

The Subadvisory Agreement provides that the adviser, VIA, will delegate to Goodwin the performance of certain of its investment management services with respect to each of the Funds. Goodwin will furnish at its own expense the office facilities and personnel necessary to perform such services.

For its services as subadviser, VIA pays Goodwin a fee of 50% of the gross investment management fee paid by each Fund.

SCM Advisors LLC (“SCM Advisors”)

SCM Advisors LLC, an affiliate of VIA, is the subadviser to the Bond and High Yield Funds and is located at 909 Montgomery Street, San Francisco, California 94133. SCM Advisors acts as subadviser to five mutual funds and as investment adviser to institutions and individuals. As of September 30, 2008, SCM Advisors had approximately $3.5 billion in assets under management.

The Subadvisory Agreement provides that the adviser, VIA, will delegate to SCM Advisors the performance of certain of its investment management services under the Investment Advisory Agreement with the Bond Fund. SCM Advisors will furnish at is own expense the office facilities and personnel necessary to perform such services.

For its services as subadviser of the Bond Fund, VIA pays SCM Advisors compensation at the annual rate of 0.25%.

For its services as subadviser of the High Yield Fund, VIA pays SCM Advisors a fee of 50% of the gross investment management fee.

Vontobel Asset Management, Inc. (“Vontobel”)

Vontobel Asset Management, Inc., formerly named Vontobel USA Inc. (“Vontobel”), 1540 Broadway, 38 ^th Floor, New York, New York 10036, is the subadviser for the Foreign Opportunities Fund and the Global Opportunities Fund. Vontobel is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Vontobel is a wholly-owned subsidiary of Vontobel Holding AG, a Swiss bank holding company which is traded on the Swiss Stock Exchange. As of September 30, 2008, Vontobel had in excess of $6.6 billion in assets under management.

The Subadvisory Agreement provides that the adviser, VIA, will delegate to Vontobel the performance of certain of its investment management services under the Investment Advisory Agreement with the Foreign Opportunities Fund and the Global Opportunities Fund. Vontobel will furnish at its own expense the office facilities and personnel necessary to perform such services.

For its services as subadviser, VIA pays Vontobel a subadvisory fee at the rate of 50% of the gross investment management fee paid by each fund.

Total subadvisory fees paid by VIA to the respective subadvisers for managing the Funds (including the Predecessor Funds) for the fiscal years ended September 30, 2006, 2007 and 2008 were:


Fund Name	2006		2007		2008
Bond Fund	$	192,296	$	230,260	$	301,352
Core Bond Fund		N/A		75,587		143,289
Foreign Opportunities Fund		1,304,614		3,642,904		5,492,950
Global Infrastructure Fund		4,954		147,265		225,028
Global Opportunities Fund*		573,013		373,762		358,002
High Yield Fund		439,894		444,477		372,423
International Real Estate Fund		N/A		N/A		102,679
Market Neutral Fund		78,698		562,672		713,323
Money Market Fund		N/A		93,185		191,392
Multi-Sector Fixed Income Fund		N/A		207,971		378,676
Multi-Sector Short Term Bond Fund		N/A		2,259,627		4,800,040
Real Estate Securities Fund		376,716		5,405,510		4,008,642
Senior Floating Rate Fund		N/A		N/A		30,359

*	Paid to previous subadvisers.

Investment Advisory and Subadvisory Agreements

Under the Investment Advisory Agreement, VIA is not liable to the Trust or any shareholder for any error of judgment or mistake of law or any loss suffered by the Trust or any shareholder in connection with the Investment Advisory Agreement, except a loss resulting from VIA’s willful misfeasance, bad faith, gross negligence or reckless disregard of duty. Under the Subadvisory Agreements, each of the subadvisers is not liable for actions taken in its best professional judgment, in good faith and believed by it to be authorized, provided such actions are not in breach of the Funds’ investment objectives, policies and restrictions or the result of willful misfeasance, bad faith, gross negligence or breach of duty or obligations.

The Investment Advisory Agreement may be modified or amended only with the approval of the holders of a majority of the applicable Fund’s outstanding shares and by a vote of the majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) (the “Independent Trustees”). The Subadvisory Agreements may be amended at any time by written agreement among the Subadviser, the Adviser and the Trust, except that any changes to the duties of and fees payable to the Subadviser will also be subject to the approval of the Trustees and a majority of the applicable Fund’s outstanding shares. Unless terminated, the Investment Advisory Agreement and the Subadvisory Agreements continue in full force and effect as long as each is approved annually by a majority vote of the Trustees or by a vote of the holders of a majority of the outstanding shares of the applicable Fund, but in either event it also must be approved by a vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement may be terminated without penalty by any party upon 60 days written notice and automatically terminates in the event of its assignment. The Subadvisory Agreement may be terminated without penalty by any party upon 30 days written notice and automatically terminates in the event of its assignment. In the event of termination of the Investment Advisory Agreement, or at the request of VIA, the Trust and the Funds will eliminate all reference to “Virtus” from their names. Upon such request, VIA has agreed to submit the question of continuing the Investment Advisory Agreement to a vote of the shareholders of the Trust.

Each Fund’s Investment Advisory and Subadvisory Agreements provide that the Adviser and Subadviser may render similar services to others so long as the services provided thereunder are not impaired thereby.

The Trust, its Adviser, Subadvisers and Distributor have each adopted a Code of Ethics pursuant to Rule 17-j1 under the 1940 Act. Personnel subject to the Codes of Ethics may purchase and sell securities for their personal accounts, including securities that may be purchased, sold or held by the Funds, subject to certain restrictions and conditions. Generally, personal securities transactions are subject to preclearance procedures, reporting requirements and holding period rules. The Codes also restrict personal securities transactions in private placements, initial public offerings and securities in which the Funds have a pending order. The Trust has also adopted a Senior Management Code of Ethics as required by Section 406 of the Sarbanes-Oxley Act of 2002.

Board of Trustees’ Consideration of Investment Advisory Agreement and Subadvisory Agreement

A discussion regarding the basis for the Board of Trustees approving the Funds’ investment advisory and subadvisory agreements is available in the Funds’ 2008 semiannual report, covering the period October 1, 2007 through March 31, 2008.

Description of Proxy Voting Policy

The Trust has adopted on behalf of the Funds a Statement of Policy with Respect to Proxy Voting (the “Policy”) stating the Trust’s intention to exercise stock ownership rights with respect to portfolio securities in a manner that is reasonably anticipated to further the best economic interests of shareholders of the Funds. The Funds have committed to analyze and vote all proxies that are likely to have financial implications, and where appropriate, to participate in corporate governance, shareholder proposals, management communications and legal proceedings. The Funds must also identify potential or actual conflicts of interest in voting proxies and must address any such conflict of interest in accordance with the Policy.

The Policy stipulates that the Funds’ Adviser will vote proxies or delegate such responsibility to a Subadviser. The Adviser or Subadvisers will vote proxies in accordance with this Policy, or its own policies and procedures, which in no event will conflict with the Trust’s Policy. Any Adviser or Subadviser may engage a qualified, independent organization to vote proxies on its behalf (a “delegate”). Matters that may affect substantially the rights and privileges of the holders of securities to be voted will be analyzed and voted on a case-by-case basis taking into consideration such relevant factors as enumerated in the Policy. The views of management of a portfolio company will be considered.

The Policy specifies certain factors that will be considered when analyzing and voting proxies on certain issues, including, but not limited to:

_•

Corporate Governance Matters—tax and economic benefits of changes in the state of incorporation; dilution or improved accountability associated with anti-takeover provisions such as staggered boards, poison pills and supermajority provisions.

_•

Changes to Capital Structure—dilution or improved accountability associated with such changes.

_•

Stock Option and Other Management Compensation Issues—executive pay and spending on perquisites, particularly in conjunction with sub-par performance and employee layoffs.

_•

Social and Corporate Responsibility Issues—the Adviser or Subadvisers will generally vote against shareholder social and environmental issue proposals.

The Funds and their delegates seek to avoid actual or perceived conflicts of interest of Fund shareholders, on the one hand, and those of the Adviser, Subadvisers, delegate, principal underwriter, or any affiliated person of the Funds, on the other hand. Depending on the type and materiality, any conflicts of interest will be handled by (i) relying on the recommendations

of an established, independent third party proxy voting vendor; (ii) voting pursuant to the recommendation of the delegate; (iii) abstaining; or (iv) where two or more delegates provide conflicting requests, voting shares in proportion to the assets under management of each delegate. The Policy requires each Adviser, Subadviser or delegate to notify the President of the Trust of any actual or potential conflict of interest. No Adviser, Subadviser or delegate may waive any conflict of interest or vote any conflicted proxies without the prior written approval of the Board of Trustees or the President of the Trust.

The Policy further imposes certain record keeping and reporting requirements on each Adviser, Subadviser or delegate. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ending June 30, is available free of charge by calling, toll-free, (800) 243-1574, or on the SEC’s Internet site at http://www.sec.gov.

PORTFOLIO MANAGERS

Compensation of Portfolio Managers of Virtus Investment Advisers, Inc., Duff & Phelps and SCM Advisers

Virtus and certain of its affiliated investment management firms, including VIA, Duff & Phelps and SCM Advisors (collectively, “Virtus”), believe that the firm’s compensation program is adequate and competitive to attract and retain high-caliber investment professionals. Investment professionals at Virtus receive a competitive base salary, an incentive bonus opportunity and a benefits package. Managing Directors and portfolio investment professionals who supervise and manage others also participate in a management incentive program reflecting their personal contribution and team performance. Senior and highly-compensated individuals also have the opportunity to take advantage of a Long-Term Incentive Compensation program, including potential awards of Virtus restricted stock units with multi-year vesting, subject to Virtus board approval.

Following is a more detailed description of Virtus’ compensation structure.

Base Salary. Each portfolio manager is paid a fixed base salary, which is determined by Virtus and designed to be competitive in light of the individual’s experience and responsibilities. Virtus management uses compensation survey results of investment industry compensation conducted by an independent third party in evaluating competitive market compensation for its investment management professionals.

Incentive Bonus. Incentive bonus pools are based upon individual firm profits and in some instances overall Virtus EBITDA. A portion of the short-term incentive payment may be made in Virtus restricted stock units. Individual payments are assessed using comparisons of actual investment performance compared with specific peer group or index measures established at the beginning of each calendar year. (Current benchmarks and/or peer groups are indicated in the table below.) Performance of the funds managed is measured over one, three and five year periods. Generally, an individual manager’s participation is based on the performance of each fund/account managed as weighted roughly by total assets in each of these funds/accounts. In certain instances comparison of portfolio risk factors to peer or index risk factors, as well as achievement of qualitative goals, may also be components of the individual payment potential.


Fund		Benchmark (s) and/or Peer Group
CA Tax-Exempt Bond Fund		Lipper California Municipal Debt Universe

The Performance Incentive Plan applicable to some portfolio managers varies from the description above. For instance, plans applicable to certain portfolio managers (i) may have an override based upon revenues generated, (ii) may contain a component that is based on the profitability of the management division with which the portfolio manager is associated, or (iii) may contain a guarantee payout .

Other Benefits. Portfolio managers are also eligible to participate in broad-based plans offered generally to the firm’s employees, including 401(k), health and other employee benefit plans.

Compensation of Portfolio Managers of TBCAM (Subadviser to the Market Neutral Fund)

The portfolio managers’ cash compensation is comprised primarily of a market-based salary and incentive compensation (annual and long term retention incentive awards). Funding for the TBCAM Annual Incentive Plan and Long Term Retention Incentive Plan is through a pre-determined fixed percentage of overall TBCAM profitability. In general, bonus awards are based initially on TBCAM’s financial performance. However, awards for select senior portfolio managers are based initially on their individual investment performance (one, three, and five-year weighted). In addition, awards for portfolio managers that manage alternative strategies are partially based on a portion of the fund’s realized performance fee. The portfolio managers are eligible to receive annual cash bonus awards from the Annual Incentive Plan. Annual incentive opportunities are pre-established for each individual based upon competitive industry compensation benchmarks. A significant portion of the opportunity awarded is based upon the one, three, and five-year (three and five-year weighted more heavily) pre-tax performance of the portfolio manager’s accounts relative to the performance of the appropriate Lipper and Callan peer groups. Other factors considered in determining the award are individual qualitative performance and the asset

size and revenue growth or retention of the products managed. Awards are generally subject to management discretion and pool funding availability. Awards are paid in cash on an annual basis. However, some portfolio managers may receive a portion of their annual incentive award in deferred vehicles.

For research analysts and other investment professionals, incentive pools are distributed to the respective product teams (in the aggregate) based upon product performance relative to TBCAM-wide performance measured on the same basis as described above. Further allocations are made to specific team members by the product portfolio manager based upon sector contribution and other qualitative factors.

All portfolio managers and analysts are also eligible to participate in the TBCAM Long Term Retention Incentive Plan. This plan provides for an annual award, payable in cash and/or BNY Mellon restricted stock (three-year cliff vesting period for both). The value of the cash portion of the award earns interest during the vesting period based upon the growth in TBCAM’s net income (capped at 20% and with a minimum payout of the BNY Mellon 3 year CD rate).

Compensation of Portfolio Managers of Goodwin (Subadviser to the Core Bond Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Senior Floating Rate Fund)

Goodwin believes that the firm’s compensation program is adequate and competitive to attract and retain high-caliber investment professionals. Investment professionals at Goodwin receive a competitive base salary, an incentive bonus opportunity and a benefits package. Managing Directors and portfolio investment professionals who supervise and manage others also participate in a management incentive program reflecting their personal contribution and team performance. Highly compensated individuals can also take advantage of a long-term Incentive Compensation program to defer their compensation and potentially reduce their taxes.

The bonus package for portfolio managers is based upon how well the individual manager meets or exceeds assigned goals and a subjective assessment of contribution to the team effort. Their incentive bonus also reflects a performance component for achieving and/or exceeding performance competitive with peers managing similar strategies. Such component is further adjusted to reward investment personnel for managing within the stated framework and for not taking unnecessary risks. This ensures that investment personnel will remain focused on managing and acquiring securities that correspond to a fund’s mandate and risk profile. It also avoids the temptation for portfolio managers to take on more risk and unnecessary exposure to chase performance for personal gain.

Finally, portfolio managers and investment professionals may also receive The Phoenix Companies, Inc. (“PNX”) stock options and/or be granted PNX restricted stock at the direction of the parent’s Board of Directors.

Following is a more detailed description of the compensation structure of the funds’ portfolio managers identified in the funds’ prospectus.

Base Salary . Each portfolio manager is paid a fixed base salary, which is determined by Goodwin and is designed to be competitive in light of the individual’s experience and responsibilities. Goodwin management uses compensation survey results of investment industry compensation conducted by an independent third party in evaluating competitive market compensation for its investment management professionals.

Incentive Bonus. Generally, the current Performance Incentive Plan for portfolio managers at Goodwin is made up of three components:

(1)

Seventy percent of the target incentive is based on achieving investment area investment goals and individual performance. The Investment Incentive pool will be established based on actual pre-tax investment performance compared with specific peer group or index measures established at the beginning of each calendar year. Performance of the funds managed is measured over one, three and five-year periods against specified benchmarks and/or peer groups (as indicated in the table below) for each fund managed. Performance of the PNX general account and growth of revenue, if applicable to a particular portfolio manager, is measured on a one-year basis. Generally, individual manager’s participation is based on the performance of each fund/account managed as weighted roughly by total assets in each of those funds/accounts.


Fund		Benchmark(s) and/or Peer Groups
Core Bond Fund		Barclay’s Capital U.S. Aggregate Bond Index
Fixed Income Fund		Lipper Multi-Sector Income Funds
Short Term Bond Fund		Lipper Short Investment Grade Debt Funds

(2)	Fifteen percent of the target incentive is based on the profitability of the investment management division with which the portfolio manager is associated. This component of the plan is paid in restricted stock units of PNX which vest over three years.

(3)	Fifteen percent of the target incentive is based on the manager’s investment area’s competencies and on individual performance. This pool is funded based on PNX’s return on equity.

The Performance Incentive Plan applicable to some portfolio managers may vary from the description above. For instance, plans applicable to certain portfolio managers (i) may specify different percentages of target incentive that is based on investment goals and individual performance and on PNX’s return on equity, (ii) may not contain the component that is based on the profitability of the management division with which the portfolio manager is associated, or (iii) may contain a guarantee payout percentage of certain portions of the Performance Incentive Plan.

Long-Term Incentive Bonus. Certain portfolio managers are eligible for a long-term incentive plan that is paid in restricted stock units of PNX which vest over three years. Awards under this plan are contingent upon PNX achieving its cash return on equity objective, generally over a three-year period. Target award opportunities for eligible participants are determined by PNX’s Compensation Committee.

Other Benefits. Portfolio managers are also eligible to participate in broad-based plans offered generally to the firm’s employees, including broad-based retirement, 401(k), health and other employee benefit plans.

Compensation of Portfolio Managers of Vontobel (Subadviser to the Foreign Opportunities Fund and Global Opportunities Fund)

The portfolio manager for the Foreign Opportunities Fund is compensated by Vontobel. The portfolio manager’s compensation consists of two components. The first component is base salary, which is fixed. The second component of compensation is a small percentage of the gross revenues received by Vontobel which are generated by the products that the portfolio manager manages. Payment of a portion of the revenue share is deferred for a three-year period.

The portfolio managers do not receive any compensation directly from the Fund or the Adviser.

Other Accounts Managed by Portfolio Managers and Potential Conflicts of Interest

There may be certain inherent conflicts of interest that arise in connection with the portfolio managers’ management of the Fund’s investments and the investments of any other accounts they manage. Such conflicts could arise from the aggregation of orders for all accounts managed by a particular portfolio manager, the allocation of purchases across all such accounts, the allocation of IPOs and any soft dollar arrangements that the Adviser may have in place that could benefit the Fund and/or such other accounts. The Board of Trustees has adopted on behalf of the Fund policies and procedures designed to address any such conflicts of interest to ensure that all transactions are executed in the best interest of the Fund’s shareholders. The Adviser is required to certify its compliance with these procedures to the Board of Trustees on a quarterly basis. There have been no material compliance issues with respect to any of these policies and procedures during the Fund’s most recent fiscal year. Additionally, there are no material conflicts of interest between the investment strategy of the Fund and the investment strategy of other accounts managed by portfolio managers since portfolio managers generally manage funds and other accounts having similar investment strategies.

The following table provides information as of September 30, 2008, or as of footnoted date, regarding any other accounts managed by the portfolio managers and portfolio management team members for the Funds as named in the prospectuses. As noted in the table, the portfolio managers managing the Fund may also manage or be members of management teams for other mutual funds within the Virtus Mutual Fund complex or other similar accounts.


Portfolio Manager	Number of and Total Assets of Registered Investment Companies	Number of and Total Assets of Other Pooled Investment Vehicles (PIVs)	Number of and Total Assets of Other Accounts
Al Alaimo	4/$407.6 million	1/$50.4 million	117/$1.0 billion
David L. Albrycht	9/$2.66 billion	None	None
Cynthia A. Beaulieu	1/$66.5 million	None	10/$944 million
T. Brooks Beittel	2/$3.0 billion	None	None
Matthew Benkendorf	None	6/$524.0 million	2/$18.0 million
Robert Bishop	2/$267.2 million	None	93/$1.4 billion
Geoffrey Dybas ⁽ ⁵ ⁾	3/$2.9 billion	1/$45.5 million	9/$262.1 million
Robert J. Eastman	8/$3.94 billion	4/$153.4 million ⁽ ² ⁾	21/$1.06 billion
Sean P. Fitzgibbon	8/$3.94 billion	4/$153.4 million ⁽ ³ ⁾	21/$1.06 billion
Frank J. Haggerty, Jr. ⁽ ⁵ ⁾	3/$2.9 billion	1/$45.5 million	9/$262.1 million
Timothy M. Heaney	2/$268.1 million	None	15/$1.1 billion
Rajiv Jain	4/$578 million	19/$3.5 billion	6/$919.3 million ⁽ ¹ ⁾
Deborah Jansen	1/$2.8 billion	None	None
Kyle A. Jennings	None	None	None
Christopher J. Kelleher	2/$173 million	None	10/$944 million
Connie M. Luecke	1/$2.8 billion	None	None
Jeffrey D. McGrew	8/$3.94 billion	4/$153.4 million ⁽ ⁴ ⁾	21/$1.06 billion
Kaushik Saha	2/$267.2 million	None	93/$1.4 billion
Randle L. Smith	1/$2.8 billion	None	None

Note:

Registered Investment Companies include all open and closed-end mutual funds. Pooled Investment Vehicles (PIVs) include, but are not limited to, securities of issuers exempt from registration under Section 3(c) of the Investment Company Act of 1940, such as private placements and hedge funds. Other accounts would include, but are not limited to, individual managed accounts, separate accounts, institutional accounts, pension funds, collateralized bond obligations, and collateralized debt obligations.

(1)	Mr. Rajiv Jain is Portfolio Manager for one account which has a performance based fee. The value of the account as of September 30, 2008 was $241 million.

(2)	Mr. Eastman is Portfolio Manager for two accounts which have a performance based fee. The value of the accounts as of September 30, 2008 was $180.6 million.

(3)	Mr. Fitzgibbon is Portfolio Manager for two accounts which have a performance based fee. The value of the accounts as of September 30, 2008 was $180.6 million.

(4)	Mr. McGrew is Portfolio Manager for two accounts which as have a performance based fee. The value of the accounts as of September 30, 2008 was $180.6 million.

(5)	Mr. Dybas and Mr. Haggerty are Portfolio Managers for 2 registered investment companies which included $2.8 billion from a closed-end fund of which $110.2 million are REIT securities.

Ownership of Fund Securities by Portfolio Managers

The following chart sets forth the dollar range of equity securities beneficially owned by each portfolio manager in the Fund(s) described in the prospectus that he or she manages as of September 30, 2008, or as of footnoted date:


Portfolio Manager		Dollar Range of Equity Securities Beneficially Owned in Fund Managed
Al Alaimo		Bond Fund – None High Yield Fund – None

David L. Albrycht		Core Bond Fund – None Multi-Sector Fixed Income Fund – $50,001-$100,000 Multi-Sector Short Term Bond Fund – $100,001-$500,000
		Senior Floating Rate Fund – None

Cynthia A. Beaulieu		Core Bond Fund – None

T. Brooks Beittel		Global Infrastructure Fund – None

Matthew Benkendorf		Foreign Opportunities Fund – $100,001-$500,000

Robert Bishop		Bond Fund – None

Geoffrey Dybas		International Real Estate Fund – None Real Estate Fund – $10,001-$50,000

Robert J. Eastman		Market Neutral Fund – None

Sean P. Fitzgibbon		Market Neutral Fund – None

Frank J. Haggerty, Jr.		International Real Estate Fund – $0-$10,000 Real Estate Fund – None

Timothy M. Heaney		CA Tax-Exempt Bond Fund – None

Rajiv Jain		Foreign Opportunities Fund – Over $1,000,000

Deborah Jansen		Global Infrastructure Fund – None

Kyle A. Jennings		Senior Floating Rate Fund – None

Christopher J. Kelleher		Core Bond Fund – None

Connie M. Luecke		Global Infrastructure Fund – $100,001-$500,000

Jeffery D. McGrew		Market Neutral Fund – None

Kaushik Saha		Bond Fund – None

Randle L. Smith		Global Infrastructure Fund – $50,001-$100,000

NET ASSET VALUE

The net asset value per share of each class of each Fund and each underlying affiliated mutual fund, as applicable, is determined as of the close of trading of the New York Stock Exchange (the “NYSE”) on days when the NYSE is open for trading. The NYSE will be closed on the following observed national holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Since the Trust does not price securities on weekends or United States national holidays, the net asset value of a Fund’s foreign assets may be significantly affected on days when the investor may not be able to purchase or sell shares of the Funds. The net asset value per share of a Fund is determined by adding the values of all securities and other assets of the Fund, subtracting liabilities, and dividing by the total number of outstanding shares of the Fund. Assets and liabilities are determined in accordance with generally accepted accounting principles and applicable rules and regulations of the SEC. The total liability allocated to a class, plus that class’s distribution fee and any other expenses allocated solely to that class, are deducted from the proportionate interest of such class in the assets of the Fund, and the resulting amount of each is divided by the number of shares of that class outstanding to produce the net asset value per share.

A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary exchange for such security by the Trustees or their delegates. Because of the need to obtain prices as of the close of trading on various exchanges throughout the world, the calculation of net asset value may not take place for any Fund which invests in foreign securities contemporaneously with the determination of the prices of the majority of the portfolio

securities of such Fund. All assets and liabilities initially expressed in foreign currency values will be converted into United States dollar values at the mean between the bid and ask quotations of such currencies against United States dollars as last quoted by any recognized dealer. If an event were to occur after the value of an investment was so established but before the net asset value per share was determined, which was likely to materially change the net asset value, then the instrument would be valued using fair value considerations by the Trustees or their delegates. If at any time a Fund has investments where market quotations are not readily available, such investments are valued at the fair value thereof as determined in good faith by the Trustees although the actual calculations may be made by persons acting according to policies and procedures approved by the Trustees.

Money Market Fund

The assets of the Money Market Fund are valued on the basis of amortized cost absent extraordinary or unusual market conditions. Under the amortized cost method of valuation, securities are valued at cost on the date of purchase. Thereafter the value of a security is increased or decreased incrementally each day so that at maturity any purchase discount or premium is fully amortized and the value of the security is equal to its principal amount. Due to fluctuations in interest rates, the amortized cost value of the Money Market Fund securities may at times be more or less than their market value. By using amortized cost valuation, the Money Market Fund seeks to maintain a constant net asset value of $1.00 per share despite minor shifts in the market value of its portfolio securities.

The yield on a shareholder’s investment may be more or less than that which would be recognized if the Fund’s net asset value per share was not constant and was permitted to fluctuate with the market value of the Fund’s portfolio securities. However, as a result of the following procedures, it is believed that any difference will normally be minimal. The deviation is monitored periodically by comparing the Fund’s net asset value per share as determined by using available market quotations with its net asset value per share as determined through the use of the amortized cost method of valuation. The Adviser makes such comparisons at least weekly and will advise the Trustees promptly in the event of any significant deviation. If the deviation exceeds 1/2 of 1%, the Trustees will consider what action, if any, should be initiated to provide fair valuation of the Fund’s portfolio securities and prevent material dilution or other unfair results to shareholders. Such action may include redemption of shares in kind, selling portfolio securities prior to maturity, withholding dividends or utilizing a net asset value per share as determined by using available market quotations. Furthermore, the assets of the Fund will not be invested in any security with a maturity of greater than 397 days, and the average weighted maturity of its portfolio will not exceed 90 days. Portfolio investments will be limited to U.S. dollar-denominated securities which present minimal credit risks and are of high quality as determined either by a major rating service or, if not rated, by the Trustees.

HOW TO BUY SHARES

For Class A Shares, Class B Shares, Class C Shares and Class T Shares, the minimum initial investment is $500 and the minimum subsequent investment is $25. For Class I Shares, the minimum initial investment is $100,000 and there is no subsequent minimum investment. However, both the minimum initial and subsequent investment amounts are $25 for investments pursuant to the “Systematic Purchase” plan, a bank draft investing program administered by the Distributor, or pursuant to the Systematic Exchange privilege or for an individual retirement account (IRA). In addition, there are no subsequent minimum investment amounts in connection with the reinvestment of dividend or capital gain distributions. For purchases of Class I Shares by private clients of the Adviser, subadviser and their affiliates, or through certain wrap programs with which the Distributor has an arrangement, the minimum initial investment is waived. Completed applications for the purchase of shares should be mailed to: Virtus Mutual Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.

The Trust has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Trust’s behalf. The Trust will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker’s authorized designee, accepts the order. Customer orders will be priced at the Funds’ net asset values next computed after they are received by an authorized broker or the broker’s authorized designee.

ALTERNATIVE PURCHASE ARRANGEMENTS

Shares may be purchased from investment dealers at a price equal to their net asset value per share, plus a sales charge which, at the election of the purchaser, may be imposed either (i) at the time of the purchase (the “initial sales charge alternative”) or (ii) on a contingent deferred basis (the “deferred sales charge alternative”). Certain Funds also offers Class I Shares that may be purchased by certain institutional investors at a price equal to their net asset value per share. Orders received by dealers prior to the close of trading on the NYSE are confirmed at the offering price effective at that time, provided the order is received by an authorized broker or broker’s authorized designee prior to its close of business.

The alternative purchase arrangements permit an investor to choose the method of purchasing shares that is more beneficial given the amount of the purchase, the length of time the investor expects to hold the shares, whether the investor wishes to receive distributions in cash or to reinvest them in additional shares of the Funds, and other circumstances. Investors should consider whether, during the anticipated life of their investment in the Fund, the accumulated continuing distribution and services fees and contingent deferred sales charges (“CDSC”) on Class B Shares, Class C Shares or Class T Shares would be less than the initial sales charge and accumulated distribution services fee on Class A Shares purchased at the same time. Investors should understand that the purpose and function of the CDSC and ongoing distribution and services fee with respect to the Class B Shares, Class C Shares and Class T Shares are the same as those of the initial sales charge and ongoing distribution and services fees with respect to the Class A Shares.

The distribution expenses incurred by the Distributor in connection with the sale of the shares will be paid, in the case of Class A Shares, from the proceeds of the initial sales charge and the ongoing distribution and services fee. In the case of Class B Shares, distribution expenses incurred by the Distributor in connection with the sale of the shares will be paid from the proceeds of the ongoing distribution and services fee and the CDSC incurred upon redemption within five years of purchase for the Fixed Income Fund and within three years of purchase for the Short Term Bond Fund. For Class C Shares, the ongoing distribution and services fee will be used to pay for the distribution expenses incurred by the Distributor. In the case of Class T Shares, distribution expenses incurred by the Distributor in connection with the sale of the shares will be paid from the proceeds of the ongoing distribution and services fee and the CDSC incurred upon redemption within one year of purchase. Sales personnel of broker-dealers distributing the Funds’ shares may receive differing compensation for selling Class A Shares, Class B Shares, Class C Shares or Class T Shares.

Dividends paid by the Funds, if any, with respect to each class of shares will be calculated in the same manner at the same time on the same day, except that fees such as higher distribution and service fees relating to each class of shares will be borne exclusively by that class. (See “Dividends, Distributions and Taxes” in this SAI.)

Class A Shares

Class A Shares incur a sales charge when they are purchased and enjoy the benefit of not being subject to any sales charge when they are redeemed, except that a 1% deferred sales charge may apply to shares purchased on which a finder’s fee has been paid if redeemed within one year of purchase. The one-year period begins on the last day of the month preceding the month in which the purchase was made. Such deferred sales charge may be waived under certain conditions as determined by the Distributor. Class A Shares are subject to ongoing service fees at an annual rate of 0.25% of the Trust’s aggregate average daily net assets attributable to the Class A Shares. In addition, certain purchases of Class A Shares qualify for reduced initial sales charges.

Class B Shares

Class B Shares do not incur a sales charge when they are purchased, but they are subject to a sales charge if they are redeemed within five years of purchase. Class B Shares of the Market Neutral Fund do not incur a sales charge when they are purchased, but they are subject to a sales charge if they are redeemed within six years of purchase. Class B Shares of the Short Term Bond Fund do not incur a sales charge when they are purchased, but they are subject to a sales charge if they are redeemed within three years of purchase. The deferred sales charge may be waived in connection with certain qualifying redemptions. (See the “Class A Shares, Class B Shares, Class C Shares and Class T Shares—Waiver of Deferred Sales Charges” section of this SAI.)

Class B Shares are subject to ongoing distribution and service fees at an annual rate of up to 1.00% of the Fund’s aggregate average daily net assets attributable to the Class B Shares. Class B Shares enjoy the benefit of permitting all of the investor’s dollars to work from the time the investment is made. The higher ongoing distribution and service fees paid by Class B Shares will cause such shares to have a higher expense ratio and to pay lower dividends, to the extent any dividends are paid, than those related to Class A Shares. Class B Shares will automatically convert to Class A Shares eight years after the end of the calendar month in which the shareholder’s order to purchase was accepted. Class B Shares of the Short Term Bond Fund convert to Class A Shares six years after the end of the calendar month in which the shareholder’s order to purchase was accepted. Class B Shares of the Market Neutral Fund convert to Class A Shares seven years after the end of the calendar month in which the shareholder’s order to purchase was accepted. The purpose of the conversion feature is to relieve the holders of the Class B Shares that have been outstanding for a period of time sufficient for the Distributor to have been compensated for distribution expenses related to the Class B Shares from most of the burden of such distribution related expenses.

Class B Shares include all shares purchased pursuant to the deferred sales charge alternative which have been outstanding for less than the period ending eight years after the end of the month in which the shares were issued. Class B Shares of the Market Neutral Fund include all shares purchased pursuant to the deferred sales charge alternative which have been outstanding for less than the period ending seven years after the end of the month in which the shares were issued. Class B Shares of the Short Term Bond Fund include all shares purchased pursuant to the deferred sales charge alternative which

have been outstanding for less than the period ending six years after the end of the month in which the shares were issued. At the end of this period, Class B Shares will automatically convert to Class A Shares and will no longer be subject to the higher distribution and service fees. Such conversion will be on the basis of the relative net asset value of the two classes without the imposition of any sales load, fee or other charge.

For purposes of conversion to Class A Shares, shares purchased through the reinvestment of dividends and distributions paid in respect of Class B Shares in a shareholder’s account will be considered to be held in a separate subaccount. Each time any Class B Shares in the shareholder’s account (other than those in the subaccount) convert to Class A Shares, a pro rata portion of the Class B Shares in the subaccount will also convert to Class A Shares.

Class C Shares

Class C Shares are purchased without an initial sales charge but are subject to a deferred sales charge if redeemed within one year of purchase. Class C Shares of the Multi-Sector Short Term Bond Fund are not subject to a sales charge when redeemed. The deferred sales charge may be waived in connection with certain qualifying redemptions. Shares issued in conjunction with the automatic reinvestment of income distributions and capital gain distributions are not subject to any sales charges. Class C Shares are subject to ongoing distribution and service fees of up to 1.00% of the Funds’ aggregate average daily net assets attributable to Class C Shares. Class C Shares of the Multi-Sector Short Term Bond Fund are subject to ongoing distribution and service fees of up to 0.50% of the Funds’ aggregate average daily net assets attributable to Class C Shares. Class C Shares enjoy the benefit of permitting all of the investor’s dollars to work from the time the investment is made. The higher ongoing distribution and services fee paid by Class C Shares will cause such shares to have a higher expense ratio and to pay lower dividends, to the extent any dividends are paid, than those related to Class A Shares. Class C Shares do not convert to another class of shares and long term investors may therefore pay more through accumulated distribution fees than the economic equivalent of any applicable sales charge and accumulated distribution fees in the other classes.

Class T Shares (Short Term Bond Fund Only)

Class T Shares do not incur a sales charge when they are purchased, but they are subject to a sales charge if they are redeemed within the first year of purchase. The deferred sales charge may be waived in connection with certain qualifying redemptions. (See the “Class A Shares, Class B Shares, Class C Shares and Class T Shares—Waiver of Deferred Sales Charges” section of this SAI.) Class T Shares are subject to an ongoing distribution and services fee at an annual rate of 1.00% of the Short Term Bond Fund’s aggregate average daily net assets attributable to the Class T Shares. Class T Shares enjoy the benefit of permitting all of the investor’s dollars to work from the time the investment is made. The higher ongoing distribution and services fee paid by Class T Shares will cause such shares to have a higher expense ratio and to pay lower dividends, to the extent any dividends are paid, than those related to Class A Shares. Class T Shares of the Short Term Bond Fund do not convert to another class of shares and long term investors may therefore pay more through accumulated distribution fees than the economic equivalent of any applicable sales charge and accumulated distribution fees in the other classes. Class T shares can be exchanged for Class C Shares of any Virtus Mutual Fund.

Class I Shares

Class I Shares are offered without any sales charges to institutional investors, such as pension and profit sharing plans, other employee benefit trusts, endowments, foundations and corporations who purchase at or above the minimum amount; to private clients of, or clients referred by, the Adviser, subadviser and their affiliates; to clients of registered investment advisers who charge an advisory, consulting or other fee for their services; or through certain wrap programs with which the Distributor has an arrangement.

Class A Shares—Reduced Initial Sales Charges

Investors choosing Class A Shares may be entitled to reduced sales charges. The ways in which sales charges may be avoided or reduced are described below. Investors buying Class A Shares on which a finder’s fee has been paid may incur a 1% deferred sales charge if they redeem their shares within one year of purchase. The one-year period begins on the last day of the month preceding the month in which the purchase was made. Such deferred sales charge may be waived under certain conditions as determined by the Distributor.

Qualified Purchasers. If you fall within any one of the following categories, you will not have to pay a sales charge on your purchase of Class A Shares: (1) trustee, director or officer of the Virtus Mutual Funds, or any other mutual fund advised, subadvised or distributed by the Adviser, Distributor or any of their corporate affiliates; (2) any director or officer, or any full-time employee or sales representative (for at least 90 days), of the Adviser, Subadviser (if any) or Distributor; (3) any private client of an Adviser or Subadviser to any Virtus Mutual Fund; (4) registered representatives and employees of securities dealers with whom the Distributor has sales agreements; (5) any qualified retirement plan exclusively for persons described above; (6) any officer, director or employee of a corporate affiliate of the Adviser, Subadviser or Distributor; (7) any spouse, child, parent, grandparent, brother or sister of any person named in (1), (2), (4) or (6) above; (8) employee benefit

plans for employees of the Adviser, Distributor and/or their corporate affiliates; (9) any employee or agent who retires from the Distributor and/or their corporate affiliates, or from Phoenix Life Insurance Company and its corporate affiliates (“PNX”) as long as, with respect to PNX employees or agents, such individual was employed by PNX prior to December 31, 2008; (10) any account held in the name of a qualified employee benefit plan, endowment fund or foundation if, on the date of the initial investment, the plan, fund or foundation has assets of $10,000,000 or more or at least 100 eligible employees; (11) any person with a direct rollover transfer of shares from an established Virtus Mutual Fund or Virtus qualified plan; (12) any state, county, city, department, authority or similar agency prohibited by law from paying a sales charge; (13) any unallocated account held by a third party administrator, registered investment adviser, trust company, or bank trust department which exercises discretionary authority and holds the account in a fiduciary, agency, custodial or similar capacity, if in the aggregate of such accounts held by such entity equal or exceed $1,000,000; (14) any deferred compensation plan established for the benefit of any Virtus Mutual Fund, or Virtus trustee or director; provided that sales to persons listed in (1) through (14) above are made upon the written assurance of the purchaser that the purchase is made for investment purposes and that the shares so acquired will not be resold except to the Fund; (15) individual purchasing through an account with an unaffiliated brokerage firm having an agreement with the Distributor to waive sales charges for its clients; (16) purchasers of Class A Shares bought through investment advisers and financial planners who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients; (17) retirement plans and deferred compensation plans and trusts used to fund those plans (including, for example, certain plans qualified or created under Sections 401(a), 403(b) or 457 of the Internal Revenue Code), and “rabbi trusts” that buy shares for their own accounts, in each case if those purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for such purchases; (18) 401(k) participants in the Merrill Lynch Daily K Plan (the “Plan”) if the Plan has at least $3 million in assets or 500 or more eligible employees; or (19) clients of investment advisors or financial planners who buy shares for their own accounts but only if their accounts are linked to a master account of their investment advisor or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements. Each of the investors described in (15) through (19) may be charged a fee by the broker, agent or financial intermediary for purchasing shares.

Combination Purchase Privilege. Your purchase of any class of shares of these Funds or any other Virtus Mutual Fund, (other than any Virtus money market fund), if made at the same time by the same “person,” will be added together with any existing Virtus Mutual Fund account values to determine whether the combined sum entitles you to an immediate reduction in sales charges. A “person” is defined in this and the following sections as (a) any individual, their spouse and minor children purchasing shares for his or their own account (including an IRA account) including his or their own trust; (b) a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (even though more than one beneficiary may exist); (c) multiple employer trusts or certain Section 403(b) plans for the same employer; (d) multiple accounts (up to 200) under a qualified employee benefit plan or administered by a third party administrator; or (e) trust companies, bank trust departments, registered investment advisers, and similar entities placing orders or providing administrative services with respect to accounts over which they exercise discretionary investment authority and which are held in a fiduciary, agency, custodial or similar capacity, provided all shares are held of record in the name, or nominee name, of the entity placing the order.

Letter of Intent. If you sign a Letter of Intent, your purchase of any class of shares of these Funds or any other Virtus Mutual Fund (other than any Virtus money market fund), if made by the same person within a thirteen month period, will be added together to determine whether you are entitled to an immediate reduction in sales charges. Sales charges are reduced based on the overall amount you indicate that you will buy under the Letter of Intent. The Letter of Intent is a mutually non-binding arrangement between you and the Distributor. Since the Distributor doesn’t know whether you will ultimately fulfill the Letter of Intent, shares worth 5% of the amount of each purchase will be set aside until you fulfill the Letter of Intent. When you buy enough shares to fulfill the Letter of Intent, these shares will no longer be restricted. If, on the other hand, you do not satisfy the Letter of Intent, or otherwise wish to sell any restricted shares, you will be given the choice of either buying enough shares to fulfill the Letter of Intent or paying the difference between any sales charge you previously paid and the otherwise applicable sales charge based on the intended aggregate purchases described in the Letter of Intent. You will be given 20 days to make this decision. If you do not exercise either election, the Distributor will automatically redeem the number of your restricted shares needed to make up the deficiency in sales charges received. The Distributor will redeem restricted Class A Shares before Class C Shares, Class T Shares or Class B Shares, respectively. Oldest shares will be redeemed before selling newer shares. Any remaining shares will then be deposited to your account.

Right of Accumulation. The value of your account(s) in any class of shares of these Funds or any other Virtus Mutual Fund (other than any Virtus money market fund), may be added together at the time of each purchase to determine whether the combined sum entitles you to a prospective reduction in sales charges. You must provide certain account information to the Distributor at the time of purchase to exercise this right.

Associations. Certain groups or associations may be treated as a “person” and qualify for reduced Class A Share sales charges. The group or association must: (1) have been in existence for at least six months; (2) have a legitimate purpose other

than to purchase mutual fund shares at a reduced sales charge; (3) work through an investment dealer; or (4) not be a group whose sole reason for existing is to consist of members who are credit card holders of a particular company, policyholders of an insurance company, customers of a bank or a broker-dealer or clients of an investment adviser.

Class A Shares, Class B Shares, Class C Shares and Class T Shares—Waiver of Deferred Sales Charges

The CDSC is waived on the redemption (sale) of Class A Shares, Class B Shares, Class C Shares and Class T Shares if the redemption is made (a) within one year of death (i) of the sole shareholder on an individual account, (ii) of a joint tenant where the surviving joint tenant is the deceased’s spouse, (iii) of the beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial account, or (iv) of the “grantor” on a trust account; (b) within one year of disability, as defined in Code Section 72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any retirement plans qualified under Code Sections 401, 408 or 403(b) or resulting from the tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using an approved participant tracking system for participant hardships, death, disability or normal retirement, and loans which are subsequently repaid; (e) from the Merrill Lynch Daily K Plan (“Plan”) invested in Class B Shares, on which such shares the Distributor has not paid the dealer the Class B sales commission; (f) based on the exercise of exchange privileges among Class A Shares, Class B Shares, Class C Shares and Class T Shares of these Funds or any of the Virtus Mutual Funds; (g) based on any direct rollover transfer of shares from an established Virtus Fund qualified plan into a Virtus Fund IRA by participants terminating from the qualified plan; and (h) based on the systematic withdrawal program. If, as described in condition (a) above, an account is transferred to an account registered in the name of a deceased’s estate, the CDSC will be waived on any redemption from the estate account occurring within one year of the death. If the Class B Shares are not redeemed within one year of the death, they will remain subject to the applicable CDSC.

Conversion Feature—Class B Shares

Class B Shares will automatically convert to Class A Shares of the same Fund eight years after they are purchased. For Short Term Bond Fund, Class B Shares will automatically convert to Class A Shares of the same Fund six years after they are purchased. For Market Neutral Fund, Class B Shares will automatically convert to Class A Shares of the same Fund seven years after they are purchased. Conversion will be on the basis of the then prevailing net asset value of Class A Shares and Class B Shares. There is no sales load, fee or other charge for this feature. Class B Shares acquired through dividend or distribution reinvestments will be converted into Class A Shares at the same time that other Class B Shares are converted based on the proportion that the reinvested shares bear to purchased Class B Shares. The conversion feature is subject to the continuing availability of an opinion of counsel or a ruling of the Internal Revenue Service (“IRS”) that the assessment of the higher distribution and service fees and associated costs with respect to Class B Shares does not result in any dividends or distributions constituting “preferential dividends” under the Code, and that the conversion of shares does not constitute a taxable event under federal income tax law. If the conversion feature is suspended, Class B Shares would continue to be subject to the higher distribution and service fees for an indefinite period. Even if the Funds were unable to obtain such assurances, it might continue to make distributions if doing so would assist in complying with its general practice of distributing sufficient income to reduce or eliminate federal taxes otherwise payable by the Funds.

INVESTOR ACCOUNT SERVICES

The Funds offer accumulation plans, withdrawal plans and reinvestment and exchange privileges. Certain privileges may not be available in connection with all classes. In most cases, changes to account services may be accomplished over the phone. Inquiries regarding policies and procedures relating to shareholder account services should be directed to Mutual Fund Services at (800) 243-1574. Broker-dealers may impose their own restrictions and limits on accounts held through the broker-dealer. Please consult with your broker-dealer for account restrictions and limit information. The Funds and the Distributor reserve the right to modify or terminate these services upon reasonable notice.

Exchanges

Under certain circumstances, shares of any Virtus Mutual Fund (except any of the Virtus money market funds) may be exchanged for shares of the same class of another Virtus Mutual Fund on the basis of the relative net asset values per share at the time of the exchange. Class C Shares are also exchangeable for Class T Shares of those Virtus Mutual Funds offering them. Exchanges are subject to the minimum initial investment requirement of the designated Fund, except if made in connection with the Systematic Exchange privilege described below. Shareholders may exchange shares held in book-entry form for an equivalent number (value) of the same class of shares of any other Virtus Mutual Fund, if currently offered. Exchanges will be based upon each Fund’s net asset value per share next computed following receipt of a properly executed exchange request without sales charge. On exchanges into Class A Shares of a money market fund from Class A Shares of a non-money market fund made within one year of a finder’s fee being paid on such non-money market fund shares, a 1% CDSC may be assessed on exchange proceeds. The CDSC may be waived upon return of the finder’s fee by the dealer. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. The exchange of shares is treated as a sale and purchase for federal income tax purposes. (See “Dividends, Distributions and Taxes” section of this SAI.) Exchange privileges may not be available for all Virtus Mutual Funds and may be rejected or suspended.

Systematic Exchanges. If the conditions above have been met, you or your broker may, by telephone or written notice, elect to have shares exchanged for the same class of shares of another Virtus Mutual Fund automatically on a monthly, quarterly, semiannual or annual basis or may cancel this privilege at any time. If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that shares be automatically exchanged at predetermined intervals for shares of the same class of another Virtus Mutual Fund. This requirement does not apply to Virtus “Self Security” program participants. Systematic exchanges will be executed upon the close of business on the 10th day of each month or the next succeeding business day. Exchanges will be based upon each Fund’s net asset value per share next computed after the close of business on the 10th day of each month (or next succeeding business day), without sales charge. Systematic exchange forms are available from the Distributor.

Dividend Reinvestment Across Accounts

If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that any dividends and distributions paid with respect to shares in that account be automatically reinvested in a single account of one of the other Virtus Mutual Funds at net asset value. You should obtain a current prospectus and consider the objectives and policies of each Virtus Mutual Fund carefully before directing dividends and distributions to another Virtus Mutual Fund. Reinvestment election forms and prospectuses are available from VP Distributors. Distributions may also be mailed to a second payee and/or address. Requests for directing distributions to an alternate payee must be made in writing with a signature guarantee of the registered owner(s). To be effective with respect to a particular dividend or distribution, notification of the new distribution option must be received by the Transfer Agent at least three days prior to the record date of such dividend or distribution. If all shares in your account are repurchased or redeemed or transferred between the record date and the payment date of a dividend or distribution, you will receive cash for the dividend or distribution regardless of the distribution option selected.

Invest-by-Phone

This expedited investment service allows a shareholder to make an investment in an account by requesting a transfer of funds from the balance of their bank account. Once a request is phoned in, VP Distributors will initiate the transaction by wiring a request for monies to the shareholder’s commercial bank, savings bank or credit union via Automated Clearing House (“ACH”). The shareholder’s bank, which must be an ACH member, will in turn forward the monies to VP Distributors for credit to the shareholder’s account. ACH is a computer based clearing and settlement operation established for the exchange of electronic transactions among participating depository institutions.

To establish this service, please complete an Invest-by-Phone Application and attach a voided check if applicable. Upon VP Distributor’s acceptance of the authorization form (usually within two weeks) shareholders may call toll free (800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase request. Instructions as to the account number and amount to be invested must be communicated to VP Distributors. VP Distributors will then contact the shareholder’s bank via ACH with appropriate instructions. The purchase is normally credited to the shareholder’s account the day following receipt of the verbal instructions. The Fund may delay the mailing of a check for redemption proceeds of Fund shares purchased with a check or via Invest-by-Phone service until the Fund has assured itself that good payment has been collected for the purchase of the shares, which may take up to 15 days. The Trust and VP Distributors reserve the right to modify or terminate the Invest-by-Phone service for any reason or to institute charges for maintaining an Invest-by-Phone account.

Systematic Withdrawal Program

The Systematic Withdrawal Program (the “Program”) allows you to periodically redeem a portion of your account on a predetermined monthly, quarterly, semiannual or annual basis. A sufficient number of full and fractional shares will be redeemed so that the designated payment is made on or about the 20th day of the month. Shares are tendered for redemption by the Transfer Agent, as agent for the shareowner, on or about the 15th of the month at the closing net asset value on the date of redemption. The Program also provides for redemptions with proceeds to be directed through ACH to your bank account. For ACH payments, you may select the day of the month for the payments to be made; if no date is specified, the payments will occur on the 15th of the month. In addition to the limitations stated below, withdrawals may not be less than $25 and minimum account balance requirements shall continue to apply.

Shareholders participating in the Program must own shares of a Fund worth $5,000 or more, as determined by the then current net asset value per share, and elect to have all dividends reinvested. The purchase of shares while participating in the Program will ordinarily be disadvantageous to the Class A Shares investor since a sales charge will be paid by the investor on the purchase of Class A Shares at the same time as other shares are being redeemed. For this reason, investors in Class A Shares may not participate in an automatic investment program while participating in the Program.

Through the Program, Class B, Class C and Class T shareholders may withdraw up to 1% of their aggregate net investments (purchases, at initial value, to date net of non-Program redemptions) each month or up to 3% of their aggregate net investments each quarter without incurring otherwise applicable contingent deferred sales charges. Class B, Class C and Class T shareholders redeeming more shares than the percentage permitted by the Program will be subject to any applicable contingent deferred sales charge on all shares redeemed. Accordingly, the purchase of Class B Shares, Class C Shares or Class T Shares will generally not be suitable for an investor who anticipates withdrawing sums in excess of the above limits shortly after purchase.

HOW TO REDEEM SHARES

Under the 1940 Act, payment for shares redeemed must ordinarily be made within seven days after tender. The right to redeem shares may be suspended and payment therefor postponed during periods when the NYSE is closed, other than customary weekend and holiday closings, or if permitted by rules of the SEC, during periods when trading on the NYSE is restricted or during any emergency which makes it impracticable for a Fund to dispose of its securities or to determine fairly the value of its net assets or during any other period permitted by order of the SEC for the protection of investors. Furthermore, the Transfer Agent will not mail redemption proceeds until checks received for shares purchased have cleared, which may take up to 15 days or more.

The Trust has authorized one or more brokers to receive on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Trust’s behalf. The Trust will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker’s authorized designee, accepts the order. Customer orders will be priced at the Funds’ net asset values next computed after they are received by an authorized broker or the broker’s authorized designee.

Redemptions by Class B and Class C shareholders will be subject to the applicable deferred sales charge, if any.

A shareholder should contact his/her broker-dealer if he/she wishes to transfer shares from an existing broker-dealer street name account to a street name account with another broker-dealer. The Funds have no specific procedures governing such account transfers.

Redemption of Small Accounts

Each shareholder account in the Funds which has been in existence for at least one year and which has a value of less than $200, due to redemption activity, may be redeemed upon the giving of not less than 60 days written notice to the shareholder mailed to the address of record. During the 60-day period following such notice, the shareholder has the right to add to the account to bring its value to $200 or more. (See the Funds’ current Prospectus for more information.)

By Mail

Shareholders may redeem shares by making written request, executed in the full name of the account, directly to Virtus Mutual Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates for shares are in the possession of the shareholder, they must be mailed or presented, duly endorsed in the full name of the account, with a written request to VP Distributors that the Fund redeem the shares. (See the Funds’ current Prospectus for more information.)

Telephone Redemptions

Shareholders who do not have certificated shares may redeem by telephone up to $50,000 worth of their shares held in book-entry form. (See the Funds’ current Prospectus for more information.)

By Check (Fixed Income Funds only)

Any shareholder of these Funds may elect to redeem shares held in his account by check. Checks will be sent to an investor upon receipt by the Transfer Agent of a completed application and signature card (attached to the application). If the signature card accompanies an individual’s initial account application, the signature guarantee section of the form may be disregarded. However, the Trust reserves the right to require that all signatures be guaranteed prior to the establishment of a check writing service account. When an authorization form is submitted after receipt of the initial account application, all signatures must be guaranteed regardless of account value.

Checks may be drawn payable to any person in an amount of not less than $500, provided that immediately after the payment of the redemption proceeds the balance in the shareholder’s account is $500 or more.

When a check is presented to the Transfer Agent for payment, a sufficient number of full and fractional shares in the shareholder’s account will be redeemed to cover the amount of the check. The number of shares to be redeemed will be determined on the date the check is received by the Transfer Agent. Presently there is no charge to the shareholder for the check writing service, but this may be changed or modified in the future upon two weeks written notice to shareholders. Checks drawn from Class B and Class C accounts are subject to the applicable deferred sales charge, if any.

The checkwriting procedure for redemption enables a shareholder to receive income accruing on the shares to be redeemed until such time as the check is presented to the Transfer Agent for payment. Inasmuch as canceled checks are returned to shareholders monthly, no confirmation statement is issued at the time of redemption.

Shareholders utilizing withdrawal checks will be subject to the Transfer Agent’s rules governing checking accounts. A shareholder should make sure that there are sufficient shares in his account to cover the amount of any check drawn. If insufficient shares are in the account and the check is presented to the Transfer Agent on a banking day on which the Trust does not redeem shares (for example, a day on which the NYSE is closed), or if the check is presented against redemption proceeds of an investment made by check which has not been in the account for at least fifteen calendar days, the check may be returned marked “Non-sufficient Funds” and no shares will be redeemed. A shareholder may not close his account by a withdrawal check because the exact value of the account will not be known until after the check is received by the Transfer Agent.

Redemption in Kind

To the extent consistent with state and federal law, the Funds may make payment of the redemption price either in cash or in kind. However, the Funds have elected to pay in cash all requests for redemption by any shareholder of record, limited in respect to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of such period. This election has been made pursuant to Rule 18f-1 under the 1940 Act and is irrevocable while the Rule is in effect unless the SEC, by order, permits the withdrawal thereof. In case of a redemption in kind, securities delivered in payment for shares would be readily marketable and valued at the same value assigned to them in computing the net asset value per share of the Fund. A shareholder receiving such securities would incur brokerage costs when selling the securities.

Account Reinstatement Privilege

Shareholders who may have overlooked features of their investment at the time they redeemed have a privilege of reinvestment of their investment at net asset value. (See the Funds’ current prospectus for more information.)

DIVIDENDS, DISTRIBUTIONS AND TAXES

Qualification as a Regulated Investment Company

Each Fund within the Trust is separate for investment and accounting purposes and is treated as a separate entity for United States federal income tax purposes. Each Fund has elected to qualify and intends to qualify as a RIC under Subchapter M of the Code. In each taxable year that a Fund qualifies as a RIC, it (but not its shareholders) will be relieved of United States federal income tax on that portion of its net investment income and net capital gains that are currently distributed (or deemed distributed) to its shareholders. To the extent that a Fund fails to distribute all of its taxable income, it will be subject to corporate income tax (currently at a maximum rate of 35%) on any retained ordinary investment income or short-term capital gains, and corporate income tax (currently at a maximum rate of 35%) on any undistributed long-term capital gains.

Each Fund intends to make timely distributions, if necessary, sufficient in amount to avoid the non-deductible 4% excise tax that is imposed on a RIC to the extent that it fails to distribute, with respect to each calendar year, at least 98% of its ordinary income (not including tax-exempt interest) for such calendar year and 98% of its net capital gain income as determined for a one-year period ending on October 31 of such calendar year (or as determined on a fiscal year basis if the Fund’s fiscal year ends on November 30 or December 31, if the Fund so elects). In addition, an amount equal to any undistributed investment company taxable income or capital gain net income from the previous calendar year must also be distributed to avoid the excise tax. The excise tax is imposed on the amount by which the RIC does not meet the foregoing distribution requirements. If each Fund has taxable income that would be subject to the excise tax, each Fund intends to distribute such income so as to avoid payment of the excise tax. Notwithstanding the foregoing, there may be certain circumstances under which it would be appropriate for a Fund to pay the excise tax.

The Code sets forth numerous requirements that must be satisfied in order for each Fund to qualify as a RIC. If in any taxable year a Fund does not qualify as a RIC, all of its taxable income will be taxed at corporate rates and any capital gain dividend would not retain its character in the hands of the shareholder for tax purposes.

Each Fund must satisfy the following tests each year: (a) derive in each taxable year at least 90% of its gross income from dividends, interest and gains from the sale or other disposition of securities and certain other investment income; (b) meet specified diversification requirements at the end of each quarter of each taxable year, and (c) distribute annually to its shareholders as dividends (not including “capital gains dividends,” discussed below) at least 90% of its ordinary investment income and short-term capital gains, with certain modifications. Each Fund intends to satisfy these requirements. With respect to the diversification requirement, each Fund must also diversify its holdings so that, at the close of each quarter of its taxable year, (i) at least 50% of the value of its total assets consists of cash, cash items, United States government securities,

and other securities limited generally with respect to any one issuer to not more than 5% of the total assets of that Fund and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any issuer (other than United States government securities or the securities of other RICs). Each Fund intends to comply with all of the foregoing criteria for qualification as a RIC; however, there can be no assurance that each Fund will so qualify and continue to maintain its status as a RIC. If a Fund were unable for any reason to maintain its status as a RIC for any taxable year, adverse tax consequences would ensue.

Taxation of Shareholders

Pursuant to the Jobs and Growth Tax Reconciliation Act of 2003, certain qualified dividend income (“QDI”) and long-term capital gains are taxed at a lower tax rate (generally 15%) for individual shareholders. The reduced rate for QDI applies to dividends from domestic corporations and certain qualified foreign corporations subject to various requirements and a minimum holding period applicable to both a Fund and its shareholders. Ordinary distributions made by a Fund to its shareholders are eligible for the reduced rate to the extent the underlying income in the Fund is QDI. Under current law, the tax rate on these amounts is scheduled to increase for tax years beginning after December 31, 2010.

Distributions made by a Fund from ordinary investment income and net short-term capital gains will be taxed to its shareholders as ordinary dividend income to the extent of the earnings and profits of the Fund. Ordinary income dividends received by corporate shareholders of a Fund will qualify for the 70% dividends-received deduction to the extent the Fund designates such amounts as qualifying dividend distributions; however, the portion that may be so designated is subject to certain limitations. Distributions by a Fund that are designated as capital gain distributions by written notice mailed to shareholders within 60 days after the close of the year will be taxed to the shareholders as capital gains, and will not be eligible for the corporate dividends-received deduction.

Dividends declared by a Fund to shareholders of record in October, November or December will be taxable to such shareholders in the year that the dividend is declared, even if it is not paid until the following year (so long as it is actually paid by the Fund prior to February 1 of such following year). Also, shareholders will be taxable on the amount of long-term capital gains designated by each Fund by written notice mailed to shareholders within 60 days after the close of the year, even if such amounts are not actually distributed to them. Shareholders will be entitled to claim a credit against their own United States federal income tax liability for taxes paid by each Fund on such undistributed gains, if any.

Dividends and capital gain distributions will be taxable to shareholders as described above whether received in cash or in shares under a Fund’s distribution reinvestment plan. With respect to distributions received in cash or reinvested in shares purchased on the open market, the amount of the distribution for tax purposes will be the amount of cash distributed or allocated to the shareholder.

Shareholders should be aware that the price of shares of a Fund that are purchased prior to a dividend or distribution by the Fund may reflect the amount of the forthcoming dividend or distribution. Such dividend or distribution, when made, would be taxable to shareholders under the principles discussed above even though the dividend or distribution may reduce the net asset value of shares below a shareholder’s cost and thus represent a return of a shareholder’s investment in an economic sense.

A high portfolio turnover rate may result in the realization of larger amounts of short-term gains, which are taxable to shareholders as ordinary income.

Each Fund intends to accrue dividend income for United States federal income tax purposes in accordance with the rules applicable to RICs. In some cases, these rules may have the effect of accelerating (in comparison to other recipients of the dividend) the time at which the dividend is taken into account by the Fund as taxable income.

Shareholders should consult their own tax advisor about their tax situation.

Income and capital gain distributions are determined in accordance with rules set forth in the Code and the Treasury Regulations promulgated thereunder (the “Regulations”) that may differ from Generally Accepted Accounting Principles (“GAAP”).

Taxation of Debt Securities

Certain debt securities can be originally issued or acquired at a discount. Special rules apply under the Code to the recognition of income with respect to such debt securities. Under the special rules, a Fund may recognize income for tax purposes without a corresponding current receipt of cash. In addition, gain on a disposition of a debt security subject to the special rules may be treated wholly or partially as ordinary income, not capital gain.

A Fund may invest in certain investments that may cause it to realize income prior to the receipt of cash distributions, including securities bearing original issue discount. The level of such investments is not expected to affect a Fund’s ability to distribute adequate income to qualify as RIC.

Taxation of Derivatives and Foreign Currency Transactions

Certain futures contracts and foreign currency contracts entered into by a Fund and all listed non-equity options written or purchased by a Fund (including options on debt securities, options on futures contracts, options on securities indices and options on broad-based stock indices) are governed by Section 1256 of the Code. Absent a tax election to the contrary, gain or loss attributable to the lapse, exercise or closing out of any such position are treated as 60% long-term and 40% short-term capital gain or loss, and on the last trading day of a Fund’s taxable year, (and, generally on October 31 for purposes of the 4% excise tax), all outstanding Section 1256 positions are marked-to-market (i.e., treated as if such positions were closed out at their closing price on such day), and any resulting gain or loss is treated as 60% long-term and 40% short-term capital gain or loss. Under certain circumstances, entry into a futures contract to sell a security may constitute a short sale for United States federal income tax purposes, causing an adjustment in the holding period of the underlying security or a substantially identical security in a Fund’s portfolio.

Equity options written by a Fund (covered call options on portfolio stock) will be subject to the provisions under Section 1234 of the Code. If a Fund writes a call option, no gain is recognized upon its receipt of a premium. If such an option lapses or is closed out, any gain or loss is treated as a short-term capital gain or loss. If such an option is exercised, any resulting gain or loss is a short-term or long-term capital gain or loss depending on the holding period of the underlying stock.

Positions of a Fund which consist of at least one stock and at least one stock option or other position with respect to a related security which substantially diminishes the Fund’s risk of loss with respect to such stock could be treated as a “straddle” that is governed by Section 1092 of the Code, the operation of which may cause deferral of losses, adjustments in the holding periods of stock or securities and conversion of short-term capital losses into long-term capital losses. An exception to these straddle rules exists for any “qualified covered call options” on stock options written by a Fund.

Positions of a Fund which consist of at least one debt security not governed by Section 1256 of the Code and at least one futures or currency contract or listed non-equity option governed by Section 1256 of the Code which substantially diminishes the Fund’s risk of loss with respect to such debt security are treated as a “mixed straddle.” Although mixed straddles are subject to the straddle rules of Section 1092 of the Code, certain tax elections exist for them that reduce or eliminate the operation of these rules. Each Fund will monitor these transactions and may make certain tax elections in order to mitigate the operation of these rules and prevent disqualification of the Fund as a RIC for United States federal income tax purposes.

Under the Code, gains or losses attributable to fluctuations in exchange rates which occur between the time a Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time it actually collects such receivables or pays such liabilities generally are treated as ordinary gain or loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain futures contracts, forward contracts and options, gains or losses attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. Generally, these gains and losses, referred to under the Code as Section 988 gains or losses, may increase or decrease the amount of each Fund’s investment company taxable income to be distributed to its shareholders as ordinary income.

These special tax rules applicable to options, futures and currency transactions could affect the amount, timing and character of a Fund’s income or loss and hence of its distributions to shareholders by causing holding period adjustments, converting short-term capital losses into long-term capital losses, and accelerating a Fund’s income or deferring its losses.

The United States Internal Revenue Service (“IRS”) has not provided guidance on the tax consequences of certain investments and other activities that the Funds may make or undertake. While the Funds will endeavor to treat the tax items arising from these transactions in a manner which it believes to be appropriate, guarantees cannot be given that the IRS or a court will concur with the Funds’ treatment and that adverse tax consequences will not ensue.

Taxation of Foreign Investments

If a Fund invests in stock of certain passive foreign investment companies, the Fund may be subject to United States federal income taxation on a portion of any “excess distribution” with respect to, or gain from the disposition of, such stock. The tax would be determined by allocating such distribution or gain ratably to each day of the Fund’s holding period for the stock. The distributions or gain so allocated to any taxable year of the Fund, other than the taxable year of the excess distribution or disposition, would be taxed to the Fund at the highest ordinary income rate in effect for such year, and the tax would be further increased by an interest charge to reflect the value of the tax deferral deemed to have resulted from the ownership of the foreign company’s stock. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the Fund’s investment company taxable income and, accordingly, would not be taxable to the Fund to the extent distributed by the Fund as a dividend to its shareholders. The Fund may elect to mark-to-market (i.e., treat as if sold at their closing market price on same day) its investments in certain passive foreign investment companies and avoid any tax and or interest charge on excess distributions.

The Funds may be subject to tax on dividend or interest income received from securities of non-United States issuers withheld by a foreign country at the source. The United States has entered into tax treaties with many foreign countries that entitle a Fund to a reduced rate of tax or exemption from tax on income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund’s assets to be invested within various countries is not known. Each Fund intends to operate so as to qualify for treaty tax benefits where applicable. If more than 50% of the value of a Fund’s total assets at the close of its taxable year is comprised of stock or securities issued by foreign corporations, the Fund may elect with the IRS to “pass through” to the Fund’s shareholders the amount of foreign income taxes paid by the Fund. If a Fund does elect to “pass through”, each shareholder will be notified within 60 days after the close of each taxable year of the Fund if the foreign taxes paid by the Fund will “pass through” for that year, and, if so, the amount of each shareholder’s pro rata share (by country) or (i) the foreign taxes paid and (ii) the Fund’s gross income from foreign sources.

California Taxation of Distributions—Virtus CA Tax Exempt Bond Fund

Distributions or parts thereof derived from interest received on State and local issues and United States government obligations held by Virtus California Tax Exempt Bond Fund will be exempt from California personal income taxes in ratable proportion of the California investments and United States government obligations of the Virtus California Tax Exempt Bond Fund, provided that the Fund has complied with the requirement that at least 50% of its assets be invested in State and local issues and United States government issues at the end of each fiscal quarter. The Virtus CA Tax Exempt Bond Fund intends to comply with this standard since at least 80% of the assets of the Fund will normally be invested in California municipal securities. Distributions derived from other earnings will be subject to California personal income tax for California residents and other persons subject to California income tax.

Sale or Exchange of Fund Shares

Gain or loss will be recognized by a shareholder upon the sale of shares in a Fund or upon an exchange of shares in a Fund for shares in another Fund. Provided that the shareholder is not a dealer in such shares, such gain or loss will generally be treated as capital gain or loss, measured by the difference between the adjusted basis of the shares and the amount realized therefrom. Under current law, capital gains (whether long-term or short-term) of individuals and corporations are fully includable in taxable income. Capital losses (whether long-term or short-term) may offset capital gains plus (for non-corporate taxpayers only) up to $3,000 per year of ordinary income.

Redemptions, including exchanges, of shares may give rise to recognized gains or losses, except as to those investors subject to tax provisions that do not require them to recognize such gains or losses. All or a portion of a loss realized upon the redemption, including exchanges, of shares may be disallowed under “wash sale” rules in Section 1091 of the Code to the extent shares are purchased (including shares acquired by means of reinvested dividends) within a 61-day period beginning 30 days before and ending 30 days after such redemption. Any loss realized upon a shareholder’s sale, redemption or other disposition of shares with a tax holding period of six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gains with respect to such shares.

Under certain circumstances, the sales charge incurred in acquiring shares of a Fund may not be taken into account in determining the gain or loss on the disposition of those shares. This rule applies where shares of a Fund are disposed of within 90 days after the date on which they were acquired and new shares of a RIC are acquired without a sales charge or at a reduced sales charge. In that case, the gain or loss realized on the disposition will be determined by excluding from the tax basis of the shares disposed of all or a portion of the sales charge incurred in acquiring those shares. This exclusion applies to the extent that the otherwise applicable sales charge with respect to the newly acquired shares is reduced as a result of the shareholder having incurred a sales charge initially. The portion of the sales charge affected by this rule will be treated as a sales charge paid for the new shares.

Tax Information

Written notices will be sent by United States Mail to shareholders regarding the intended United States federal income tax status of all distributions made (or deemed to have been made) during each taxable year, including the amount of QDI for individuals, the amount qualifying for the corporate dividends-received deduction (if applicable) and the amount designated as capital gain dividends, undistributed capital gains (if any), tax credits (if applicable), and cumulative return of capital (if any).

Important Notice Regarding Taxpayer IRS Certification and Backup Withholding (“backup withholding”)

Pursuant to IRS Regulations, the Funds may be required to withhold a percentage of payments, including any taxable dividends, capital gains distributions or share redemption proceeds, at the specified rate in effect when such payments are made, for an account which does not have a taxpayer identification number or certain required certifications. The Funds reserve the right to refuse to open an account for any person failing to provide a taxpayer identification number along with the required certifications. The Funds will furnish shareholders, within 31 days after the end of the calendar year, with the information that is required by the IRS for filing income tax returns. The Fund will also provide this same information to the IRS in the manner required by the IRS. Depending on your state of residence, the information may also be filed with your state taxing authority.

Some shareholders may be subject to withholding of United States federal income tax on dividends and redemption payments from the Funds at the specified rate in effect when such payments are made. Corporate shareholders and certain other shareholders specified in the Code generally are exempt from such backup withholding. Generally, shareholders subject to backup withholding will be (i) those for whom a certified taxpayer identification number is not on file with the Fund, (ii) those about whom notification has been received (either by the shareholder or the Fund) from the IRS that they are subject to backup withholding or (iii) those who, to the Fund’s knowledge, have furnished an incorrect taxpayer identification number. Generally, to avoid backup withholding, a shareholder must, at the time an account is opened, certify under penalties of perjury that the social security number or taxpayer identification number (“TIN”) furnished is correct and that he or she is not subject to backup withholding. The shareholder may also, from time to time, be requested to provide certification of the validity of their TIN.

Foreign Shareholders

Dividends paid by any of the Funds from net investment income and net realized short-term capital gains to a shareholder who is a nonresident alien individual, a foreign trust or estate, a foreign corporation or a foreign partnership (a “foreign shareholder”) will be subject to United States withholding tax at a rate of 30% unless a reduced rate of withholding or a withholding exemption is provided under an applicable tax treaty. Foreign shareholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax and any foreign taxes.

Other Tax Consequences

In addition to the certain United States federal and California income tax consequences described above, there may be other foreign, United States federal, state or local tax considerations and estate tax considerations applicable to the circumstances of a particular investor. The foregoing discussion is based upon the Code, judicial decisions and administrative regulations, rulings and practices in effect as of December 2008, all of which are subject to change and which, if changed, may be applied retroactively to a Fund, its shareholders and/or its assets. No rulings have been sought from the IRS or any other tax authority with respect to any of the tax matters discussed above.

From time to time, proposals have been introduced before the United States Congress for the purpose of restricting or eliminating the United States federal income tax exemption for interest on municipal bonds and similar proposals may be introduced in the future. If such a proposal were enacted, the availability of tax-exempt bonds for investment by a Fund and the value of a Fund’s portfolio would be affected. The Trustees would then re-evaluate such Fund’s investment objective and policies. As of December 2008, no such proposal was before the United States Congress.

The information included in the Prospectus with respect to taxes, including this section entitled Dividends Distributions and Taxes, is a general and abbreviated summary of applicable provisions of the Code and Regulations now in effect as currently interpreted by the courts and the IRS and is not intended as tax advice to any person. The Code and Regulations, as well as the current interpretations thereof, may be changed at any time by legislative, judicial, or administrative action. Accordingly, prospective purchasers are urged to consult their own tax advisors with specific reference to their own tax situation, including the potential application of United States federal, state, local and foreign tax laws.

Except as expressly set forth above, the foregoing discussion of United States federal income tax law relates solely to the application of that law to United States taxpayers. Each shareholder who is not a United States taxpayer should consider the United States and foreign tax consequences of ownership of shares of a Fund, including the possibility that such a shareholder may be subject to a United States withholding tax on amounts constituting ordinary income received by him or her, where such amounts are treated as income from United States sources under the Code. It does not address the special tax rules applicable to certain classes of investors, such as dealers in securities or currencies, traders in securities, banks, tax-exempt entities, life insurance companies, persons holding an interest in a Fund as a hedge or as part of a straddle or conversion transaction, or holders whose functional currency is not the United States dollar.

TAX SHELTERED RETIREMENT PLANS

Shares of the Funds are offered in connection with the following retirement plans: Individual Retirement Account (IRA), Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, 401(k), Profit-Sharing, Money Purchase Pension Plans and certain 403(b) Retirement Plans. Write or call VP Distributors at (800) 243-4361 for further information about the plans.

Merrill Lynch Daily K Plan

Class A Shares of a Fund are made available to Merrill Lynch Daily K Plan (the “Plan”) participants at NAV without an initial sales charge if:

(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more in assets invested in broker-dealer funds not

advised or managed by Merrill Lynch Asset Management L.P. (“MLAM”) that are made available pursuant to a Service Agreement between Merrill Lynch and the fund’s principal underwriter or distributor and in funds advised or managed by MLAM (collectively, the “Applicable Investments”);

(ii) the Plan is recordkept on a daily valuation basis by an independent recordkeeper whose services are provided through a contract or alliance arrangement with Merrill Lynch, and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more in assets, excluding money market funds, invested in Applicable Investments; or

(iii) the Plan has 500 or more eligible employees, as determined by a Merrill Lynch plan conversion manager, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement.

Alternatively, Class B Shares of a Fund are made available to Plan participants at NAV without a CDSC if the Plan conforms with the requirements for eligibility set forth in (i) through (iii) above but either does not meet the $3 million asset threshold or does not have 500 or more eligible employees.

Plans recordkept on a daily basis by Merrill Lynch or an independent recordkeeper under a contract with Merrill Lynch that are currently investing in Class B Shares of a Fund convert to Class A Shares once the Plan has reached $5 million invested in Applicable Investments, or after the normal holding period of seven years from the initial date of purchase.

THE DISTRIBUTOR

Pursuant to an Underwriting Agreement with the Funds, VP Distributors, a wholly-owned subsidiary of Virtus, and an affiliate of the Adviser and certain of the Subadvisers, VP Distributors serves as distributor for the Funds. As such, the Distributor conducts a continuous offering pursuant to a “best efforts” arrangement requiring it to take and pay for only such securities as may be sold to the public. The address of the Distributor is 100 Pearl Street, Hartford, Connecticut 06103. Shares of the Funds may be purchased through investment dealers who have sales agreements with the Distributor.

For its services under the Underwriting Agreement, VP Distributors receives sales charges on transactions in Trust shares and retains such charges less the portion thereof allowed to its registered representatives and to securities dealers and securities brokers with whom it has sales agreements. In addition, VP Distributors may receive payments from the Trust pursuant to the Distribution Plan described below. During the fiscal years ended September 30, 2006, 2007 and 2008, purchasers of shares of the Funds paid aggregate sales charges of $70,128, $3,064,642 and $3,708,636 respectively, of which the Distributor received net commissions of $55,383, $717,412 and $859,691 respectively, for its services, the balance being paid to dealers. For the fiscal year ended September 30, 2008, the Distributor received net commissions of $456,350 for Class A Shares and $48,497 for Class T Shares and deferred sales charges of $62,428 for Class A Shares, $198,512 for Class B Shares and $92,904 for Class C Shares.

The Underwriting Agreement may be terminated at any time on not more than 60 days written notice, without payment of a penalty, by the Distributor, by vote of a majority of the appropriate Class of outstanding voting securities of the Funds, or by vote of a majority of the Trust’s Trustees who are not parties to the Underwriting Agreement or “interested persons” of any party and who have no direct or indirect financial interest in the operation of the Distribution Plan or in any related agreements. The Underwriting Agreement will terminate automatically in the event of its “assignment,” as defined in Section 2(a)(4) of the 1940 Act.

Dealers Concessions

Dealers with whom the Distributor has entered into sales agreements receive a discount or commission on purchases of Class A Shares as set forth below.

Short Term Bond Fund


Amount of Transaction at Offering Price	Sales Charge as Percentage of Offering Price		Sales Charge as Percentage of Net Amount Invested		Dealer Discount or Agency Fee as Percentage of Offering Price
Under $50,000	2.25	%	2.30	%	2.00	%

$50,000 but under $100,000	1.25		1.27		1.00

$100,000 but under $500,000	1.00		1.01		1.00

$500,000 but under $1,000,000	0.75		0.76		0.75

$1,000,000 or more	None		None		None

Other Fixed Income Funds


Amount of Transaction at Offering Price	Sales Charge as Percentage of Offering Price		Sales Charge as Percentage of Amount Invested		Dealer Discount or Agency Fee as Percentage of Offering Price
Less than $50,000	4.75	%	4.99	%	4.25	%

$50,000 but under $100,000	4.50		4.71		4.00

$100,000 but under $250,000	3.50		3.63		3.00

$250,000 but under $500,000	2.75		2.83		2.25

$500,000 but under $1,000,000	2.00		2.04		1.75

$1,000,000 or more	None		None		None

Equity Funds and Asset Allocation Funds


Amount of Transaction at Offering Price	Sales Charge as Percentage of Offering Price		Sales Charge as Percentage of Amount Invested		Dealer Discount or Agency Fee as Percentage of Offering Price
Under $50,000	5.75	%	6.10	%	5.00	%

$50,000 but under $100,000	4.75		4.99		4.25

$100,000 but under $250,000	3.75		3.90		3.25

$250,000 but under $500,000	2.75		2.83		2.25

$500,000 but under $1,000,000	2.00		2.04		1.75

$1,000,000 or more	None		None		None

With respect to Class B Shares and Class C Shares, the Distributor intends to pay investment dealers a sales commission of 4% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class C Shares sold by such dealers. In addition to the dealer discount on purchases for Short Term Bond Fund of Class A Shares, the Distributor intends to pay investment dealers a sales commission of 2% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class T Shares sold by such dealers. This sales commission will not be paid to dealers for sales of Class B Shares purchased by 401(k) participants of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these Plan participants’ purchases. Your broker, dealer or financial advisor may also charge you additional commissions or fees for their services in selling shares to you provided they notify the Distributor of their intention to do so.

Dealers and other entities who enter into special arrangements with the Distributor may receive compensation for the sale and promotion of shares of the Funds and/or for providing other shareholder services. Such fees are in addition to the sales commissions referenced above and may be based upon the amount of sales of fund shares by a dealer; the provision of assistance in marketing of fund shares; access to sales personnel and information dissemination services, provision of recordkeeping and administrative services to qualified employee benefit plans; and other criteria as established by the Distributor. Depending on the nature of the services, these fees may be paid either from the Funds through distribution fees, service fees or transfer agent fees or in some cases, the Distributor may pay certain fees from its own profits and resources. From its own profits and resources, the Distributor does intend to: (a) from time to time pay special incentive and retention fees to qualified wholesalers, registered financial institutions and third party marketers; (b) pay broker-dealers an amount equal to 1% of the first $3 million of Class A Share purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million; and (c) excluding purchases as described in (b) above, pay broker-dealers an amount equal to 1.00% of the amount of Class A Shares sold from $1,000,000 to $3,000,000, 0.50% on amounts of $3,000,001 to $10,000,000 and 0.25% on amounts greater than $10,000,000. If part or all of such investment as described in (b) and (c) above, including investments by qualified employee benefit plans, is subsequently redeemed within one year, a 1% CDSC may apply, except for redemptions of shares purchased on which a finder’s fee has been paid where such investor’s dealer of record, due to the nature of the investor’s account, notifies the Distributor prior to the time of the investment that the dealer waives the finder’s fee otherwise payable to the dealer, or agrees to receive such finder’s fee ratably over a 12-month period. For purposes of determining the applicability of the CDSC, the one-year CDSC period begins on the last day of the month preceding the month in which the purchase was made. In addition, the Distributor may pay the entire applicable sales charge on purchases of Class A Shares to selected dealers and agents. Any dealer who receives more than 90% of a sales charge may be deemed to be an “underwriter” under the Securities Act of 1933. VP Distributors reserves the right to discontinue or alter such fee payment plans at any time.

From its own resources or pursuant to the Trust’s Distribution Plan, and subject to the dealers’ prior approval, the Distributor may provide additional compensation to registered representatives of dealers in the form of travel expenses, meals, and lodging associated with training and educational meetings sponsored by the Distributor. The Distributor may also provide gifts amounting in value to less than $100, and occasional meals or entertainment, to registered representatives of dealers. Any such travel expenses, meals, lodging, gifts or entertainment paid will not be preconditioned upon the registered representatives’ or dealers’ achievement of a sales target. The Distributor may, from time to time, reallow the entire portion of the sales charge on Class A Shares which it normally retains to individual selling dealers. However, such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings.

Administrative Services

VP Distributors also acts as administrative agent (“Administrator”) of the Trust. For its services as Administrator, VP Distributors receives an administration fee based upon the average net assets across all non-money market funds within the Virtus Mutual Funds at the following incremental annual rates.


First 5 billion	0.09	%
$5 billion to $15 billion	0.08	%
Greater than $15 billion	0.07	%

For the money market Funds, the fee is 0.035% of the average net assets across all Virtus money market funds within the Virtus Mutual Funds. For purposes of applying the fee breakpoints, the Virtus Mutual Fund average net assets may be aggregated with average net assets of a non-affiliated fund complex for which VP Distributors acts as administrator.

Until June 30, 2006, VP Distributors served as Financial Agent to the Trust. VP Distributors received a fee equal to the sum of (1) the documented cost to VP Distributors to provide oversight of PNC (subagent to VP Distributors), plus (2) the documented costs of fund accounting, tax services and related services provided by PNC.

For services to the Trust during the fiscal years ended September 30, 2006, 2007 and 2008, VP Distributors received $140,427, $3,432,236 and $4,601,265, respectively.

DISTRIBUTION PLANS

The Trust has adopted a distribution plan for each class of shares (except Class I Shares) (i.e., a plan for the Class A Shares, a plan for the Class B Shares, a plan for the Class C Shares and a plan for the Class T Shares; collectively, the “Plans”) in accordance with Rule 12b-1 under the 1940 Act, to compensate the Distributor for the services it provides and for the expenses it bears under the Underwriting Agreement. Each class of shares pays a service fee at a rate of 0.25% per annum of the average daily net assets of such class of the Fund and a distribution fee based on average daily net assets at a rate of 0.75% per annum for Class B Shares (0.55% for the Multi-Sector Short Term Bond Fund), at a rate of 0.75% per annum for Class C Shares (0.25% for the Multi-Sector Short Term Bond Fund), and at a rate of 0.75% per annum for Class T Shares. In addition, with respect to the Asset Allocation Funds, the underlying affiliated mutual funds’ Class A Shares and Class Y Shares in which the Asset Allocation Funds invest impose a 0.25% 12b-1 fee. To avoid duplication of 12b-1 fees, each class of shares of the Asset Allocation Funds has reduced the 12b-1 fee by the amount of underlying affiliated mutual funds’ Class A and Class Y 12b-1 fees.

Expenditures under the Plans may consist of: (i) commissions to sales personnel for selling shares of the Fund (including underwriting fees and financing expenses incurred in connection with the payment of commissions); (ii) compensation, sales incentives and payments to sales, marketing and service personnel; (iii) payments to broker-dealers and other financial institutions which have entered into agreements with the Distributor in the form of the Dealer Agreement for Virtus Mutual Funds for services rendered in connection with the sale and distribution of shares of the Fund; (iv) payment of expenses incurred in sales and promotional activities, including advertising expenditures related to the Fund; (v) the costs of preparing and distributing promotional materials; (vi) the cost of printing the Fund’s Prospectuses and SAI for distribution to potential investors; (vii) expenses related to the cost of financing or providing such financing from the Distributor’s or an affiliate’s resources in connection with the Distributor’s payment of such distribution expenses; and (viii) such other similar services that the Trustees determine are reasonably calculated to result in the sale of shares of the Fund. From the Service Fee, the Distributor expects to pay a quarterly fee to qualifying broker-dealer firms, as compensation for providing personal services and/or the maintenance of shareholder accounts, with respect to shares sold by such firms. In the case of shares of the Funds being sold to an affiliated fund of funds, fees payable under the Plans shall be paid to the distributor of the fund of funds. This fee will not exceed on an annual basis 0.25% of the average annual net asset value of such shares, and will be in addition to sales charges on Fund shares which are re-allowed to such firms. To the extent that the entire amount of the Service Fee is not paid to such firms, the balance will serve as compensation for personal and account maintenance services furnished by the Distributor. The Distributor also pays to dealers an additional compensation with respect to Class C Shares at the rate of 0.75% of the average annual net asset value of that class.

In order to receive payments under the Plans, participants must meet such qualifications to be established in the sole discretion of the Distributor, such as services to the Funds’ shareholders; or services providing the Funds with more efficient methods of offering shares to coherent groups of clients, members or prospects of a participant; or services permitting bulking of purchases or sales, or transmission of such purchases or sales by computerized tape or other electronic equipment; or other processing.

On a quarterly basis, the Funds’ Trustees review a report on expenditures under the Plans and the purposes for which expenditures were made. The Trustees conduct an additional, more extensive review annually in determining whether the Plans will be continued. By its terms, continuation of the Plans from year to year is contingent on annual approval by a majority of the Funds’ Trustees and by a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plans or any related agreements (the “Plan Trustees”). The Plans provide that they may not be amended to increase materially the costs which the Funds may bear pursuant to the Plans without approval of the shareholders of that class of the Funds and that other material amendments to the Plans must be approved by a majority of the Plan Trustees by vote cast in person at a meeting called for the purpose of considering such amendments. The Plans further provide that while they are in effect, the selection and nomination of Trustees who are not “interested persons” shall be committed to the discretion of the Trustees who are not “interested persons.” The Plans may be terminated at any time by vote of the Plan Trustees or a majority of the outstanding shares of the relevant class of the Funds.

For the fiscal year ended September 30, 2008, the Funds paid Rule 12b-1 Fees in the amount of $16,904,261, of which the Distributor received $2,934,775, and unaffiliated broker-dealers received $13,969,486. The Rule 12b-1 payments were used for (1) compensation to dealers, $16,633,124; (2) compensation to sales personnel, $5,052,483; (3) advertising, $1,213,343; (4) service costs, $466,546; (5) printing and mailing of prospectuses to other than current shareholders, $160,234; and (6) other, $210,190.

No interested person of the Funds and no Trustee who is not an interested person of the Funds, as that term is defined in the 1940 Act, had any direct or indirect financial interest in the operation of the Plans.

The Board of Trustees has also adopted a Plan pursuant to Rule 18f-3 under the 1940 Act permitting the issuance of shares in multiple classes.

The FINRA regards certain distribution fees as asset-based sales charges subject to FINRA sales load limits. The FINRA’s maximum sales charge rule may require the Trustees to suspend distribution fees or amend the Plans.

MANAGEMENT OF THE TRUST

The Trust is an open-end management investment company known as a mutual fund. The Trustees of the Trust (“Trustees”) are responsible for the overall supervision of the Trust and perform the various duties imposed on Trustees by the 1940 Act and Delaware statutory trust law.

Trustees and Officers

The Trustees are responsible for the overall supervision of the Funds, including establishing the Funds’ policies, general supervision and review of their investment activities. The officers who administer the Funds’ daily operations, are appointed by the Board of Trustees. The current Trustees and officers of the Trust performing a policy-making function and their affiliations and principal occupations for the past five years are set forth below. Unless otherwise noted, the address of each individual is 100 Pearl Street, Hartford, Connecticut 06103. There is no stated term of office for Trustees of the Trust.

Independent Trustees


Name and Year of Birth	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Trustee	Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee

Leroy Keith, Jr. YOB: 1939	Served since 1993.	49	Managing Director, Almanac Capital Management (commodities business) (2007-Present). Partner, Stonington Partners, Inc. (private equity firm) (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios).

Philip R. McLoughlin Chairman YOB: 1946	Served since 1993.	51	Partner, Cross Pond Partners, LLC (2006-Present). Director, Argo Group International Holding Ltd. (Insurance), World Trust Fund and KBC Asset Management, Ltd.

Geraldine M. McNamara YOB: 1951	Served since 2001.	49	Retired. Managing Director, U.S. Trust Company of New York (private bank) (1982-2006).

James M. Oates YOB: 1946	Served since 1993.	49	Managing Director, Wydown Group (consulting firm) (1994-present). Chairman, Hudson Castle Group, Inc. (Formerly IBEX Capital Markets, Inc.) (financial services) (1997-2006). Director, Stifel Financial, Chairman and Trustee John Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc.

Richard E. Segerson YOB: 1946	Served since 1998.	49	Managing Director, Northway Management Company (1998-present).

Ferdinand L.J. Verdonck YOB: 1942	Served since 2004.	49	Retired. Director, Galapagos N.V. (biotechnology). Mr. Verdonck is also a director of several non-U.S. companies.

Interested Trustees

The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.

*	Mr. Aylward is an “interested person” as defined in the Investment Company Act of 1940, by reason of his relationship with Virtus Investment Partners, Inc. and/or its affiliates.

Officers of the Trust Who Are Not Trustees


Name, Address and Year of Birth	Position(s) Held with Trust and Length of Time Served	Principal Occupation(s) During Past 5 Years

Nancy G. Curtiss YOB: 1952	Senior Vice President since 2006.	Senior Vice President, Operations (since 2008), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Assistant Treasurer (2001-present), VP Distributors, Inc. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present).

Francis G. Waltman YOB: 1962	Senior Vice President since 2008.	Senior Vice President, Asset Management Product Development (since 2008), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (since 2008), Director and President (2006-2007), VP Distributors, Inc. Director and Senior Vice President, Virtus Investment Advisers (since 2008), Senior Vice President (2006-2007).

Marc Baltuch c/o Zweig DiMenna Associates, LLC 900 Third Avenue New York, NY 10022 YOB: 1945	Vice President and Chief Compliance Officer since 2004.	Chief Compliance Officer, Zweig-DiMenna Associates LLC (1989-present). Vice President, The Zweig Total Return Fund, Inc. (2004-present). Vice President, The Zweig Fund, Inc. (2004-present). President and Director of Watermark Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005).

Kevin J. Carr YOB: 1954	Vice President, Chief Legal Officer, Counsel and Secretary since 2005.	Vice President, Counsel and Secretary, Virtus Investment Partners, Inc. and/or certain of its subsidiaries (since 2008). Vice President and Counsel, Phoenix Life Insurance Company (2005-2008). Compliance Officer of Investments and Counsel, Travelers Life & Annuity Company (January 2005-May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995-2005).


Name, Address and Year of Birth	Position(s) Held with Trust and Length of Time Served	Principal Occupation(s) During Past 5 Years

W. Patrick Bradley YOB: 1972	Chief Financial Officer and Treasurer since 2005.	Vice President, Fund Administration (2007-present), Second Vice President, Fund Control & Tax (2004-2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer (2006-present), Assistant Treasurer (2004-2006), The Phoenix Edge Series Fund. Chief Financial Officer and Treasurer (2005-present), Assistant Treasurer (2004-2006), certain funds within the Virtus Mutual Funds Family.

Committees of the Board

The Board of Trustees has established several standing committees to oversee particular aspects of the Funds’ management. They are:

The Audit Committee. The Audit Committee is responsible for overseeing the Funds’ accounting and auditing policies and practices. The Audit Committee reviews the Funds’ financial reporting procedures, their system of internal control, the independent audit process, and the Funds’ procedures for monitoring compliance with investment restrictions and applicable laws and regulations and with the Code of Ethics. The Audit Committee is composed entirely of Independent Trustees; its members are James M. Oates, Chairperson, Dr. Leroy Keith, Jr., Geraldine M. McNamara, Richard E. Segerson, and Ferdinand L.J. Verdonck. The Committee met four times during the Trust’s last fiscal year.

The Executive and Compliance Committee. The function of the Executive and Compliance Committee is to serve as a contract review, compliance review and performance review delegate of the full Board of Trustees as well as act to on behalf of the Board when it is not in session, subject to limitations as set by the Board. Its members are Philip R. McLoughlin, Chairperson, Dr. Leroy Keith, Jr., and James M. Oates. Each of the members is an Independent Trustee, except Mr. McLoughlin, who is an Interested Trustee. The Committee met eight times during the Trust’s last fiscal year.

The Governance and Nominating Committee. The Governance and Nominating Committee is responsible for developing and maintaining governance principles applicable to the Funds, for nominating individuals to serve as Trustees, including as Independent Trustees, and annually evaluating the Board and Committees. The Governance and Nominating Committee is composed entirely of Independent Trustees; its members are Dr. Leroy Keith, Jr., Chairperson, Geraldine M. McNamara, James M. Oates, Richard E. Segerson, and Ferdinand L.J. Verdonck. The Committee met four times during the Trust’s last fiscal year.

The Board has adopted a policy for consideration of Trustee nominees recommended by shareholders. With regards to such policy, an individual shareholder submitting a nomination must hold for at least one full year 5% of the shares of a series of the Trust. Shareholder nominees for Trustee will be given the same consideration as any candidate provided the nominee meets certain minimum requirements.

Compensation

Trustees who are not employed by the Adviser or its affiliates receive an annual retainer and fees and expenses for attendance at Board and Committee meetings. Officers and employees of the Adviser of the Funds who are interested persons are compensated for their services by the Adviser of the Funds, or an affiliate of the Adviser of the Funds, and receive no compensation from the Funds. The Trust does not have any retirement plan for its Trustees.

For the Trust’s fiscal year ended September 30, 2008, the Trustees received the following compensation:


Name of Trustee	Aggregate Compensation from Trust		Total Compensation From Trust and Fund Complex (54 Funds) Paid to Trustees

Independent Trustees
E. Virgil Conway*	$	30,340.05	$	92,958.79
Harry Dalzell-Payne*	$	28,748.56	$	90,887.36
Francis E. Jeffries*	$	22,915.61	$	122,325.59
Leroy Keith, Jr.	$	58,008.00	$	208,000.00
Geraldine M. McNamara**	$	55,312.56	$	248,750.00
James M. Oates	$	60,560.88	$	216,178.57
Richard E. Segerson	$	49,542.72	$	160,500.00
Ferdinand L.J. Verdonck	$	49,020.37	$	148,750.00

Interested Trustees
George R. Aylward	$	0	$	0
Marilyn E. LaMarche***	$	7,452.95	$	25,000.00
Philip R. McLoughlin	$	90,262.72	$	398,000.00

*	Mr. Conway, Mr. Dalzell-Payne and Mr. Jeffries retired from the Board of Trustees in May 2008.

**	As of September 30, 2008, Ms. McNamara previously deferred compensation (and the earnings thereon) in the amount of $315,791.

***	Ms. LaMarche retired from the Board on December 31, 2007.

Trustee Ownership of Securities

Set forth in the table below is the dollar range of equity securities owned by each Trustee as of December 31, 2008:


Name of Trustee	Dollar Range of Equity Securities in the Funds in the Trust	Aggregate Dollar Range of Trustee Ownership of all Funds Overseen by Trustee In Family of Investment Companies

Independent Trustees
Leroy Keith, Jr.	Multi-Sector Short Term Bond Fund -$1-$10,000	$1 - $10,000
Philip R. McLoughlin	Foreign Opportunities Fund - $50,001-$100,000 Market Neutral Fund - $1-$10,000	Over $100,000
Geraldine M. McNamara	Foreign Opportunities Fund - $10,001-$50,000 Global Infrastructure Fund - $10,001-$50,000	$50,000 - 100,000
James M. Oates	None	Over $100,000
Richard E. Segerson	None	Over $100,000
Ferdinand L.J. Verdonck	None	None

Interested Trustee
George R. Aylward*	Alternatives Diversifier Fund - $1-$10,000 Foreign Opportunities Fund - $1-$10,000 Global Opportunities Fund - $10,001-$50,000 Multi-Sector Fixed Income Fund - $1-$10,000 Multi-Sector Short Term Bond Fund -$10,001-$50,000 Real Estate Fund - $1-$10,000	$50,001 - $100,000

*	As of December 31, 2007; Information as of December 31, 2008 is not yet available.

At December 31, 2008, the Trustees and officers as a group owned less than 1% of the then outstanding shares of any of the Funds.

Principal Shareholders

The following table sets forth information as of January 5, 2009 with respect to each person who owns of record or is known by the Trust to own of record or beneficially 5% or more of any class of the Trust’s outstanding equity securities.


Name of Shareholder	Fund and Class	Percentage of Class		Number of Shares
Victoria Blank Ttee Fairfield, CT 06825-1703	Global Opportunities Fund—Class C	5.10	%	7,909.509

Winifred A Cargill Norfolk, MA 02056	Core Bond Fund—Class C	5.39	%	12,097.222

Charles Schwab & Co. Inc. ⁽¹⁾ FBO Customers Attn: Mutual Funds 101 Montgomery St. San Francisco, CA 94104-4151	Bond Fund—Class C Foreign Opportunities Fund—Class A High Yield Fund—Class B Real Estate Fund—Class A	51.07 25.13 6.84 18.20	% % % %	237,302.674 7,173,999.491 20,516.324 5,334,629.248

Citigroup Global Markets Inc. ⁽¹⁾ 333 W. 34 ^th St. New York, NY 10001-2402	Alternatives Diversifier—Class A Alternatives Diversifier—Class C CA Tax-Exempt Bond Fund—Class A Core Bond Fund—Class B Core Bond Fund—Class C Foreign Opportunities Fund—Class A Foreign Opportunities Fund—Class C Global Opportunities Fund—Class B High Yield Fund—Class B International Real Estate Fund—Class C Market Neutral Fund—Class B Market Neutral Fund—Class C Multi-Sector Fixed Income Fund—Class C Multi-Sector Short Term Bond Fund—Class B Multi-Sector Short Term Bond Fund—Class C Multi-Sector Short Term Bond Fund—Class T Real Estate Fund—Class B Real Estate Fund—Class C	11.67 20.67 5.50 6.32 29.07 10.50 18.07 5.01 8.67 6.16 6.38 5.64 6.59 7.18 5.30 13.24 8.84 16.79	% % % % % % % % % % % % % % % % % %	2,549,265.609 2,561,445.571 162,193.920 8,080.671 65,206.015 2,998,051.653 782,491.277 13,639.489 26,014.144 4,963.409 10,817.994 25,229.505 130,998.350 243,971.345 1,752,285.437 3,969,223.985 98,694.615 375,375.191

D. A. Davidson & Co. Delbert Hofferth Great Falls, MT 59403-5015	International Real Estate Fund—Class C	10.31	%	8,310.432

Edward D Jones & Co. ⁽¹⁾ Attn: Mutual Funds 201 Progress Pkwy Maryland Hts, MO 63043-3009	Foreign Opportunities Fund—Class I Real Estate Fund—Class I	27.33 44.17	% %	5,519,736.196 2,193,774.537

First Clearing, LLC Carolann C. Catalogne Newtown, PA 18940-3912	Wealth Guardian Fund—Class A	5.38	%	124,317.819

Elizabeth A Hall Newport, OR 97365	Core Bond Fund—Class C	5.33	%	11,957.799

LPL Financial Services ⁽¹⁾ 9785 Towne Center Dr. San Diego, CA 92191-1968	Alternatives Diversifier—Class A Foreign Opportunities Fund—Class I Senior Floating Rate Fund—Class C Senior Floating Rate Fund—Class I	10.97 15.13 16.32 15.62	% % % %	2,395,625.437 3,056,649.494 5,906.013 3,931.524

MAC & Co. ⁽¹⁾ Mutual Fund Operations 525 William Penn Place Pittsburgh, PA 15230-3198	Bond Fund—Class I Foreign Opportunities Fund—Class I	50.61 15.86	% %	6,665,350.756 3,202,676.925


Name of Shareholder	Fund and Class	Percentage of Class		Number of Shares
MAC & Co. ⁽¹⁾ Mutual Fund Operations 525 William Penn Place Pittsburgh, PA 15230-3198	Bond Fund—Class I Foreign Opportunities Fund—Class I	12.86 7.56	% %	1,693,219.361 1,526,046.002

Richard W Miller William Miller Berlin, CT 06037-3321	Global Infrastructure Fund—Class C	7.07	%	13,654.332

MLPF&S for the Sole Benefit of its Customers ⁽¹⁾ Attn: Fund Administration 4800 Deer Lake Dr. E 3 ^rd FL Jacksonville, FL 32246-6484	Alternatives Diversifier—Class A Alternatives Diversifier—Class C Bond Fund—Class B Bond Fund—Class C Core Bond Fund—Class B Core Bond Fund—Class C Foreign Opportunities Fund—Class C Global Infrastructure Fund—Class C Global Opportunities Fund—Class C High Yield Fund—Class B High Yield Fund—Class C Market Neutral Fund—Class B Market Neutral Fund—Class C Multi-Sector Fixed Income Fund—Class A Multi-Sector Fixed Income Fund—Class B Multi-Sector Fixed Income Fund—Class C Multi-Sector Short Term Bond Fund—Class A Multi-Sector Short Term Bond Fund—Class B Multi-Sector Short Term Bond Fund—Class C Multi-Sector Short Term Bond Fund—Class T Real Estate Fund—Class A Real Estate Fund—Class B Real Estate Fund—Class C Wealth Builder Fund—Class A Wealth Builder Fund—Class C Wealth Guardian Fund—Class A Wealth Guardian Fund—Class C	22.34 39.15 35.71 14.32 16.99 18.13 24.52 8.54 22.21 8.49 12.09 25.30 16.11 7.76 9.68 28.99 8.56 17.50 6.69 46.81 6.68 14.13 13.66 12.30 51.75 9.62 50.70	% % % % % % % % % % % % % % % % % % % % % % % % % % %	4,879,667.027 4,851,841.364 155,302.002 66,527.694 21,738.056 40,680.043 1,061,927.245 16,495.224 34,455.451 25,481.310 37,935.258 42,921.025 72,036.801 674,763.386 124,650.433 576,450.008 24,392,074.997 594,742.949 2,212,456.835 14,032,680.425 1,957,259.510 157,709.451 305,518.952 558,500.709 2,607,548.143 222,444.997 1,051,640.567

MS & Co. FBO Ronald Whitfield Family Trust Concord, MA 01742-5413	Core Bond Fund—Class B	5.40	%	6,910.902

MS & Co. FBO Alejandro Camacho & Pamela Rollins New York, NY 10028-0130	International Real Estate Fund—Class C	8.58	%	6,917.898

MS & Co. FBO Ira Levy Plymouth Mtng, PA 19462-1437	International Real Estate Fund—Class C	36.12	%	29,121.521

MS & Co. FBO George and Trudy Mazin South Orange, NJ 10001-2402	International Real Estate Fund—Class C	5.86	%	4,725.443

NBC Securities Inc. FBO Frank Celmer Birmingham, AL 35203-4024	High Yield Fund—Class B	5.70	%	17,091.000

NBC Securities Inc. FBO Birmingham, AL 35203-4024	High Yield Fund—Class B	5.26	%	15,786.064


Name of Shareholder	Fund and Class	Percentage of Class		Number of Shares
NFS LLC FEBO Steven J Baum Amherst, NY 14228-1894	Core Bond Fund—Class B	5.80	%	7,418.409

NFS LLC FEBO Bernadine Braun Chicago, IL 60647-4207	High Yield Fund—Class C	9.32	%	29,227.267

NFS LLC FEBO Bridget Madden Chicago, IL 60655-3721	High Yield Fund—Class C	6.27	%	19,663.521

NFS LLC FEBO William Madden Chicago, IL 60655-3721	High Yield Fund—Class C	5.30	%	16,625.467

NFS LLC FEBO ⁽¹⁾ FIIOC as Agent for Qualified Employee Benefit Plans Covington, KY 41015-1987	Global Infrastructure Fund—Class I Multi-Sector Fixed Income Fund—Class A Multi-Sector Short Term Bond Fund—Class I Real Estate Fund—Class I	95.62 5.66 79.35 16.94	% % % %	12,733.796 491,693.212 88,277.310 841,432.120

NFS LLC FEBO ⁽¹⁾ Trust Company of Oxford Indianapolis, IN 46240-0856	Real Estate Fund—Class I	13.01	%	646,276.872

NFS LLC FEBO Donna Sefton San Diego, CA 92103-6624	CA Tax-Exempt Bond Fund—Class I	31.93	%	678,095.471

NFS LLC FEBO Harley Sefton TTEE San Diego, CA 92103-6624	CA Tax-Exempt Bond Fund—Class I	31.34	%	665,712.601

Phoenix Life Insurance Company c/o Tina Di Buono One American Row Hartford, CT 06115-2521	Senior Floating Rate Fund—Class A Senior Floating Rate Fund—Class C Senior Floating Rate Fund—Class I	99.63 58.18 84.38	% % %	1,547,083.853 21,052.398 21,242.615

Monique C. Raevens Pittsburgh, PA 15216-3002	High Yield Fund—Class B	5.63	%	16,902.859

SEI Private Trust Company ⁽¹⁾ Attn: Mutual Funds One Freedom Valley Drive Oaks, PA 19456	Foreign Opportunities Fund—Class I	6.08	%	1,227,521.512

State Street Bank & Trust Co. Custody of IRA Rollover Mesa, AZ 85202-2039	High Yield Fund—Class B	6.62	%	19,858.547

State Street Bank & Trust Co. FBO Louis J. Pear Portland, CT 06480-1661	Core Bond Fund—Class B	7.77	%	9,941.752

State Street Bank & Trust Co. FBO James C. Proctor Woodlawn, WA 98674-2813	Core Bond Fund—Class B	5.80	%	7,415.529


Name of Shareholder	Fund and Class	Percentage of Class		Number of Shares
Gerald C. or Sandra I. Strong Ttees Pentwater, MI 49449-9560	Senior Floating Rate Fund—Class C	5.80	%	2,098.639

UBS Financial Services Inc. FBO Paul S. Bennett Weehawken, NJ 07086-8154	Global Infrastructure Fund—Class C	5.14	%	9,925.807

US Bank FBO ⁽¹⁾ The Phoenix Co Inc. Milwaukee, WI 53201-1787	Money Market Fund—Class A	9.98	%	8,224,048.160

Virtus Alternatives Diversifier Fund Shareholder Services Dept c/o VP Distributors, Inc. 101 Munson St Greenfield, MA 01301-9684	Global Infrastructure Fund—Class A International Real Estate Fund—Class A Market Neutral Fund—Class A Real Estate Fund—Class A	78.16 85.68 81.38 7.80	% % % %	4,665,480.512 8,344,780.487 6,976,391.844 2,285,261.466

Virtus Wealth Builder Fund Shareholder Services Dept c/o VP Distributors, Inc. 101 Munson St. Greenfield, MA 01301-9684	Bond Fund—Class A Global Infrastructure Fund—Class A International Real Estate Fund—Class A Market Neutral Fund—Class A	27.83 5.66 6.66 6.01	% % % %	614,493.658 337,656.342 648,310.460 515,350.366

Virtus Wealth Guardian Fund Shareholder Services Dept c/o VP Distributors, Inc. 101 Munson St. Greenfield, MA 01301-9684	Bond Fund—Class A	25.33	%	559,343.754

VP Distributors, Inc. Attn: Corp Accounting 100 Pearl Street Hartford, CT 06103-2818	International Real Estate Fund—Class A International Real Estate Fund—Class C International Real Estate Fund—Class I Multi-Sector Short Term Bond Fund—Class I	5.12 12.74 100.00 20.65	% % % %	498,601.792 10,268.162 10,427.795 22,968.542

(1)	These entities are omnibus accounts for many individual shareholder accounts. The Funds are not aware of the size or identity of the underlying individual accounts thereof.

ADDITIONAL INFORMATION

Capital Stock and Organization

As a Delaware statutory trust, the Trust’s operations are governed by its Amended and Restated Agreement and Declaration of Trust dated March 1, 2001. A copy of the Trust’s Certificate of Trust, as amended, is on file with the Office of the Secretary of State of the State of Delaware. Upon the initial purchase of shares, the shareholder agrees to be bound by the Trust’s Agreement and Declaration of Trust, as amended. Generally, Delaware statutory trust shareholders are not personally liable for obligations of the Delaware statutory trust under Delaware law. The Delaware Statutory Trust Act (the “Delaware Act”) provides that a shareholder of a Delaware statutory trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit corporations. The Trust’s Amended and Restated Agreement and Declaration of Trust expressly provides that the Trust has been organized under the Delaware Act and that the Declaration of Trust is to be governed by Delaware law. It is nevertheless possible that a Delaware statutory trust, such as the Trust, might become a party to an action in another state whose courts refused to apply Delaware law, in which case the Trust’s shareholders could be subject to personal liability.

To guard against this risk, the Amended and Restated Agreement and Declaration of Trust (i) contains an express disclaimer of shareholder liability for acts or obligations of the Trust and provides that notice of such disclaimer may be given in each agreement, obligation and instrument entered into or executed by the Trust or its Trustees, (ii) provides for the indemnification out of Trust property of any shareholders held personally liable for any obligations of the Trust or any series of the Trust and (iii) provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Thus, the risk of a Trust shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which all of the following factors are present: (1) a court refused to apply Delaware law; (2) the liability arose under tort law or, if not, no contractual limitation of liability was in effect; and (3) the Trust itself would be unable to meet its obligations. In the light of Delaware law, the nature of the Trust’s business and the nature of its assets, the risk of personal liability to a Fund shareholder is remote.

The Amended and Restated Agreement and Declaration of Trust further provides that the Trust shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them, in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of the Trust. The Amended and Restated Agreement and Declaration of Trust does not authorize the Trust to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person’s duties.

Under the Amended and Restated Agreement and Declaration of Trust, the Trust is not required to hold annual meetings to elect Trustees or for other purposes. It is not anticipated that the Trust will hold shareholders’ meetings unless required by law or the Declaration of Trust. The Trust will be required to hold a meeting to elect Trustees to fill any existing vacancies on the Board if, at any time, fewer than a majority of the Trustees have been elected by the shareholders of the Trust. The Board is required to call a meeting for the purpose of considering the removal of persons serving as Trustee if requested in writing to do so by the holders of not less than 10% of the outstanding shares of the Trust.

Shares of the Trust do not entitle their holders to cumulative voting rights, so that the holders of more than 50% of the outstanding shares of the Trust may elect all of the Trustees, in which case the holders of the remaining shares would not be able to elect any Trustees. As determined by the Trustees, shareholders are entitled to one vote for each dollar of net asset value (number of shares held times the net asset value of the applicable class of the applicable Fund).

Pursuant to the Amended and Restated Agreement and Declaration of Trust, the Trustees may create additional funds by establishing additional series of shares in the Trust. The establishment of additional series would not affect the interests of current shareholders in the existing Funds. Pursuant to the Amended and Restated Agreement and Declaration of Trust, the Trustees may establish and issue multiple classes of shares for each Fund.

Each share of each class of a Fund is entitled to such dividends and distributions out of the income earned on the assets belonging to that Fund which are attributable to such class as are declared in the discretion of the Trustees. In the event of the liquidation or dissolution of the Trust, shares of each class of each Fund are entitled to receive their proportionate share of the assets which are attributable to such class of such Fund and which are available for distribution as the Trustees in their sole discretion may determine. Shareholders are not entitled to any preemptive, conversion or subscription rights. All shares, when issued, will be fully paid and non-assessable by the Trust.

Subject to shareholder approval (if then required), the Trustees may authorize each Fund to invest all or part of its investable assets in a single open-end investment company that has substantially the same investment objectives, policies and restrictions as the Fund. As of the date of this SAI, the Trustees do not have any plan to authorize any Fund to so invest its assets.

Under Delaware law, shareholders of a Delaware statutory trust are entitled to the same limitation of personal liability extended to stockholders of Delaware corporations. As a result, to the extent that the Trust or a shareholder is subject to the jurisdiction of a court that does not apply Delaware law, there is a possibility that the shareholders of a statutory trust such as the Trust may be personally liable for debts or claims against the Trust. The Amended and Restated Agreement and Declaration of Trust provides that shareholders shall not be subject to any personal liability for the acts or obligations of the Trust. The Amended and Restated Agreement and Declaration of Trust provides for indemnification out of the Trust property for all losses and expenses of any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability, which is considered remote, is limited to circumstances in which a court refuses to apply Delaware law and the Trust itself would be unable to meet its obligations.

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP is the independent registered public accounting firm for the Trust. PricewaterhouseCoopers LLP audits the Trust’s annual financial statements and expresses an opinion thereon.

Custodian and Transfer Agent

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110, serves as the Funds’ custodian. The Trust has authorized the Custodian to appoint one or more subcustodians for the assets of the Funds held outside the United States. The securities and other assets of the Funds are held by the Custodian or any subcustodian separate from the securities and assets of each other Fund.

VP Distributors, 100 Pearl Street, Hartford, CT 06103, acts as Transfer Agent for the Trust (the “Transfer Agent”). Pursuant to a Transfer Agent and Service Agreement, VP Distributors receives a fee, which is a combination of a base fee allocated among each Virtus Mutual Fund class and a per account fee of between $6.45 and $17.30, depending on whether the account information is held directly by VP Distributors or through an intermediary, plus out-of-pocket expenses. The Transfer Agent is authorized to engage subagents to perform certain shareholder servicing functions from time to time for which such agents shall be paid a fee by the Transfer Agent. Fees paid by the Funds, in addition to the fee paid to VP Distributors, will be reviewed and approved by the Board of Trustees.

Reports to Shareholders

The fiscal year of the Trust ends on September 30. The Trust will send financial statements to its shareholders at least semiannually. An annual report containing financial statements audited by the Trust’s independent registered public accounting firm, Pricewaterhouse Coopers LLP will be sent to shareholders each year and is available without charge upon request.

Financial Statements

The Funds’ financial statements for the Trust’s fiscal year ended September 30, 2008, included in the Trust’s 2008 Annual Report to Shareholders, are incorporated herein by reference.

APPENDIX

A-1 and P-1 Commercial Paper Ratings

The Money Market Fund will only invest in commercial paper which at the date of investment is rated A-1 by Standard & Poor’s Corporation or P-1 by Moody’s Investors Services, Inc., or, if not rated, is issued or guaranteed by companies which at the date of investment have an outstanding debt issue rated AA or higher by Standard & Poor’s or Aa or higher by Moody’s.

Commercial paper rated A-1 by Standard & Poor’s Corporation (“S&P”) has the following characteristics: Liquidity ratios are adequate to meet cash requirements. Long-term senior debt is rated “A” or better. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer’s industry is well established and the issuer has a strong position within the industry. The reliability and quality of management are unquestioned.

The rating P-1 is the highest commercial paper rating assigned by Moody’s Investors Services, Inc. (“Moody’s”). Among the factors considered by Moody’s in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer’s industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer’s products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationship which exists with the issuer; and (8) recognition by the management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations.

Description of Certain Bond Ratings

Moody’s Investors Service, Inc.

Aaa— Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa— Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group the comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.

A— Bonds that are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.

Baa— Bonds that are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Moody’s also provides credit ratings for preferred stocks. Preferred stock occupies a junior position to bonds within a particular capital structure and that these securities are rated within the universe of preferred stocks.

aaa— An issue that is rated “aaa” is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks.

aa— An issue that is rated “aa” is considered a high-grade preferred stock. This rating indicates that there is a reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future.

a— An issue that is rated “a” is considered to be an upper-medium grade preferred stock. While risks are judged to be somewhat greater than in the “aaa” and “aa” classifications, earnings and asset protections are, nevertheless, expected to be maintained at adequate levels.

baa— An issue that is rated “baa” is considered to be a medium grade preferred stock, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time.

Moody’s ratings for municipal notes and other short-term loans are designated Moody’s Investment Grade (MIG). This distinction is in recognition of the differences between short-term and long-term credit risk. Loans bearing the designation MIG 1 are of the best quality, enjoying strong protection by establishing cash flows of funds for their servicing or by established and broad-based access to the market for refinancing, or both. Loans bearing the designation MIG 2 are of high quality, with margins of protection ample although not so large as in the preceding group. A short term issue having a demand feature (i.e., payment relying on external liquidity and usually payable on demand rather than fixed maturity dates) is differentiated by Moody’s with the use of the Symbol VMIG, instead of MIG.

Moody’s also provides credit ratings for tax-exempt commercial paper. These are promissory obligations (1) not having an original maturity in excess of nine months, and (2) backed by commercial banks. Notes bearing the designation P-1 have a superior capacity for repayment. Notes bearing the designation P-2 have a strong capacity for repayment.

Standard & Poor’s Corporation

AAA— Bonds rated AAA have the higher rating assigned by Standard & Poor’s Corporation. Capacity to pay interest and repay principal is extremely strong.

AA— Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree.

A— Bonds rated A have a very strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.

BBB— Bonds rated BBB are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.

S&P’s top ratings for municipal notes issued after July 29, 1984 are SP-1 and SP-2. The designation SP-1 indicates a very strong capacity to pay principal and interest. A “+” is added for those issues determined to possess overwhelming safety characteristics. An “SP-2” designation indicates a satisfactory capacity to pay principal and interest.

Commercial paper rated A-2 or better by S&P is described as having a very strong degree of safety regarding timeliness and capacity to repay. Additionally, as a precondition for receiving an S&P commercial paper rating, a bank credit line and/or liquid assets must be present to cover the amount of commercial paper outstanding at all times.

The Moody’s Prime-2 rating and above indicates a strong capacity for repayment of short-term promissory obligations.

GLOSSARY

Commercial Paper: Short-term promissory notes of large corporations with excellent credit ratings issued to finance their current operations.

Certificates of Deposit: Negotiable certificates representing a commercial bank’s obligations to repay funds deposited with it, earning specified rates of interest over given periods.

Bankers’ Acceptances: Negotiable obligations of a bank to pay a draft which has been drawn on it by a customer. These obligations are backed by large banks and usually are backed by goods in international trade.

Time Deposits: Non-negotiable deposits in a banking institution earning a specified interest rate over a given period of time.

Corporate Obligations: Bonds and notes issued by corporations and other business organizations in order to finance their long-term credit needs.

VIRTUS OPPORTUNITIES TRUST

PART C—OTHER INFORMATION

Item 23.

Exhibits



a.1.		Amended and Restated Agreement and Declaration of Trust dated March 1, 2001, filed via EDGAR with Post-Effective Amendment No. 12 (File No. 033-65137) on January 25, 2002 and incorporated herein by reference.

a.2.		Amendment to the Declaration of Trust of the Registrant, dated November 16, 2006, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.

b.1.		By-Laws dated November 16, 2005, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.

b.2.		Amendment No. 1 to the Amended and Restated By-Laws of the Registrant, dated August 23, 2006, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.

c.		Reference is made to Registrant’s Agreement and Declaration of Trust. See Exhibit a.

d.1.		Amended and Restated Investment Advisory Agreement between the Registrant, on behalf of Virtus Bond Fund and Virtus Investment Advisers, Inc. (“VIA”) effective November 20, 2002, filed via EDGAR with Post-Effective Amendment No. 14 (File No. 033-65137) on January 29, 2004 and incorporated herein by reference.

d.2.		Subadvisory Agreement between VIA and SCM Advisors LLC (“SCM”) dated July 1, 1998, filed via EDGAR with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference.

d.3.		Investment Subadvisory Agreement Amendment between VIA and SCM effective July 1, 1998 for the purpose of amending the Subadvisory Agreement of the same date in order to correct a typographical error in such Subadvisory Agreement, filed via EDGAR with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference.

d.4.		Amendment to Subadvisory Agreement between VIA and SCM dated November 20, 2002, filed via EDGAR with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference.

d.5.		Third Amendment to Subadvisory Agreement between VIA and SCM dated September 1, 2006, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.

d.6.		Amended and Restated Investment Advisory Agreement between Registrant and VIA dated June 8, 2006, filed via EDGAR with Post-Effective Amendment No. 22 (File No. 033-65137) on June 9, 2006 and incorporated herein by reference.

d.7.		Second Amendment to Amended and Restated Investment Advisory Agreement, dated June 27, 2007, on behalf of CA-Tax Exempt Bond Fund, Core Bond Fund, Global Infrastructure Fund, High Yield Fund, Market Neutral Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Real Estate Securities Fund, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

d.8.		Subadvisory Agreement between VIA and Duff & Phelps Investment Management Co. (“Duff & Phelps”), dated June 27, 2007 on behalf of Global Infrastructure Fund and Real Estate Securities Fund, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

d.9.		Subadvisory Agreement between VIA and Goodwin Capital Advisers, Inc. (“Goodwin”), dated June 27, 2007 on behalf of CA Tax-Exempt Bond Fund, Core Bond Fund, Money Market Fund, Multi-Sector Fixed Income Fund and Multi-Sector Short Term Bond Fund, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

d.10.		Fourth Amendment to Subadvisory Agreement between VIA and SCM, on behalf of High Yield Fund, dated June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.



d.11.		Third Amendment to Amended and Restated Investment Advisory Agreement dated September 24, 2007, on behalf of Virtus Alternatives Diversifier Fund, Virtus Foreign Opportunities Fund, Virtus Global Opportunities Fund, Virtus International Real Estate Securities Fund, Virtus Wealth Builder Fund and Virtus Wealth Guardian Fund, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

d.12.		First Amendment to Subadvisory Agreement between VIA and Goodwin effective as of September 24, 2007, on behalf of Alternatives Diversifier Fund, Wealth Builder Fund and Wealth Guardian Fund, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

d.13.		First Amendment to Subadvisory Agreement between VIA and Duff & Phelps dated September 24, 2007, on behalf of Virtus International Real Estate Securities Fund, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

d.14.		Subadvisory Agreement between VIA and Vontobel Asset Management, Inc. (“Vontobel”) dated September 24, 2007, on behalf of Virtus Foreign Opportunities Fund, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

d.15.		Subadvisory Agreement between VIA and The Boston Company Asset Management, LLC (“TBCAM”) dated January 10, 2008, on behalf of Virtus Market Neutral Fund, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

d.16.		Second Amendment to Subadvisory Agreement between VIA and Goodwin dated January 31, 2008 on behalf of Virtus Senior Floating Rate Fund, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

d.17.		Fourth Amendment to Amended and Restated Investment Advisory Agreement, between the Registrant and VIA on behalf of Virtus Senior Floating Rate Fund effective as of January 31, 2008, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

d.18.*		Fifth Amendment to Amended and Restated Investment Advisory Agreement, by and between the Registrant and VIA effective as of October 1, 2008, filed via EDGAR herewith.

e.1.		Underwriting Agreement between VP Distributors, Inc. (“VP Distributors”) (until February 4, 2009 named Phoenix Equity Planning Corporation) and Registrant dated July 1, 1998 and filed via EDGAR with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference. A Form of Underwriting Agreement between VP Distributors and Registrant was previously filed via EDGAR with Post-Effective Amendment No. 5 (File No. 033-65137) on May 20, 1998 and incorporated herein by reference.

e.2.*		Form of Sales Agreement between VP Distributors and dealers (October 2008), filed via EDGAR herewith.

f.		None.

g.1.		Master Custodian Contract between Registrant and State Street Bank and Trust Company (“State Street”) dated May 1, 1997, filed via EDGAR with Post-Effective Amendment No. 8 (File No. 033-65137) on January 24, 2000 and incorporated herein by reference.

g.2.		Amendment dated February 10, 2000 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street, filed via EDGAR with Post-Effective Amendment No. 14 (File No. 033-65137) on January 29, 2004 and incorporated herein by reference.

g.3.		Amendment dated July 2, 2001 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street, filed via EDGAR with Post-Effective Amendment No. 14 (File No. 033-65137) on January 29, 2004 and incorporated herein by reference.

g.4.		Amendment dated May 10, 2002 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street, filed via EDGAR with Post-Effective Amendment No. 14 (File No. 033-65137) on January 29, 2004 and incorporated herein by reference.

h.1.		Amended and Restated Transfer Agency and Service Agreement between the Virtus Mutual Funds and VP Distributors dated July 1, 2006, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.

h.2.		Administration Agreement between Registrant and VP DISTRIBUTORS dated July 1, 2006, filed via EDGAR with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference.



h.3.		Amendment to Schedule A of Administration Agreement between Registrant and VP Distributors effective June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

h.4.		Fee Waiver Agreement between Registrant and VIA effective as of June 27, 2007, on behalf of Virtus Market Neutral Fund, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

h.5.		Second Amendment to Schedule A of Administration Agreement between Registrant and VP Distributors effective September 24, 2007, filed via EDGAR with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference.

h.6.		Fifth Amended and Restated Expense Limitation Agreement between Registrant and VIA on behalf of Virtus Alternatives Diversifier Fund, Virtus Bond Fund, Virtus Foreign Opportunities Fund, Virtus Global Infrastructure Fund, Virtus International Real Estate Securities Fund, Virtus Market Neutral Fund, Virtus Real Estate Securities Fund, Virtus Wealth Builder Fund and Virtus Wealth Guardian Fund, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

h.7.		First Amendment to Administration Agreement between Registrant and VP Distributors effective November 15, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

h.8.		Third Amendment to Schedule A of Administration Agreement between Registrant and VP Distributors effective October 1, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

h.9.		Fourth Amendment to Schedule A of Administration Agreement between Registrant and VP Distributors effective January 31, 2008, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

h.10.		Fifth Amendment to Schedule A of Administration Agreement between Registrant and VP Distributors effective March 10, 2008, filed via EDGAR with Registration Statement on Form N-14 (File No. 333-152677) on July 31, 2008 and incorporated herein by reference.

h.11.*		Sub-Transfer Agency and Service Agreement between VP Distributors and Boston Financial Data Services, Inc. (“BFDS”), dated as of January 1, 2005, filed via EDGAR herewith.

h.12.*		Amendment to Sub-Transfer Agency and Service Agreement between VP Distributors and BFDS, dated as of July 1, 2006, filed via EDGAR herewith.

h.13.*		Amendment to Sub-Transfer Agency and Service Agreement between VP Distributors and BFDS, dated as of July 1, 2008, filed via EDGAR herewith.

i.1.		Opinion and consent of Morris, Nichols, Arsht & Tunnell, filed via EDGAR with Pre-Effective Amendment No. 2 (File No. 033-65137) on February 29, 1996 and incorporated herein by reference.

j.*		Consent of Independent Registered Public Accounting Firm, filed via EDGAR herewith.

k.		None.

l.		Share Purchase Agreement (the “Share Purchase Agreement”) between Registrant and GMG/Seneca Capital Management, L.P., filed via EDGAR with Pre-Effective Amendment No. 2 (File No. 033-65137) on February 29, 1996 and incorporated herein by reference.

m.1.		Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective March 1, 2007, filed via EDGAR with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference.



m.2.		Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective March 1, 2007, filed via EDGAR with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference.

m.3.		Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective March 1, 2007, filed via EDGAR with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference.

m.4.		Amendment to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940, effective June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

m.5.		Amendment to Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940, effective June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

m.6.		Amendment to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940, effective June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

m.7.		Class T Shares Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940, effective June 27, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

m.8.		Amendment No. 2 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective September 24, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.9.		Amendment No. 2 to Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective September 24, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.10.		Amendment No. 2 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective September 24, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.11.		Amendment No. 3 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective October 1, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.12.		Amendment No. 3 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective October 1, 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.13.		Amendment No. 4 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective January 31, 2008, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

m.14.		Amendment No. 4 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940 effective January 31, 2008, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

n.		2007 Amended and Restated Plan Pursuant to Rule 18f-3 under the Investment Company Act of 1940, effective as of July 13, 2007, filed via EDGAR with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference.

o.		Reserved.

p.1.*		Amended and Restated Codes of Ethics of the Virtus Funds and the Distributor (VP Distributors) dated August 2008, filed via EDGAR herewith.



p.2.*		Amended and Restated Code of Ethics of the Adviser (VIA) dated November 2008, filed via EDGAR herewith.

p.3.		Amended and Restated Code of Ethics of the Subadviser (SCM Advisors) dated June 1, 2007, filed via EDGAR with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference.

p.4.*		Amended and Restated Code of Ethics of Subadviser (Duff & Phelps), dated December 31, 2007, filed via EDGAR herewith.

p.5.		Code of Conduct of Subadviser (TBCAM), dated July 2007, filed via EDGAR with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference.

p.6.		Code of Ethics of Subadviser (Goodwin), dated January 22, 2007, filed via EDGAR with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference.

p.7.*		Code of Ethics of Subadviser (Vontobel) dated April 23, 2008, filed via EDGAR herewith.

q.*		Power of Attorney for all Trustees, dated February 28, 2008, filed via EDGAR herewith.

*	Filed herewith

Item 24.

Persons Controlled by or Under Common Control with the Fund

None.

Item 25.

Indemnification

The Amended and Restated Agreement and Declaration of Trust dated March 1, 2001 and the Bylaws dated November 16, 2005 of the Registrant provide that no trustee or officer will be indemnified against any liability to which the Registrant would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person’s duties. The Amended and Restated Investment Advisory Agreement, Underwriting Agreement, Master Custodian Contract and Transfer Agency and Service Agreement each provides that the Trust will indemnify the other party (or parties, as the case may be) to the agreement for certain losses.

Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the “Act”), may be available to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Item 26.

Business and Other Connections of the Investment Adviser

See “Management of the Fund” in the Prospectus and “Services of the Adviser and Subadviser” and “Management of the Trust” in the Statement of Additional Information which is included in this Post-Effective Amendment. For information as to the business, profession, vocation or employment of a substantial nature of directors and officers of the Adviser and Subadvisers, reference is made to the Adviser’s and Subadviser’s current Form ADV (VIA: SEC File No. 801-5995; TBCAM, SEC File No. 801-6829; Duff & Phelps: SEC File No. 801-14813; Goodwin: SEC File No. 801-8177; SCM Advisors: SEC File No. 801-51559; and Vontobel: SEC File No. 801-21953 ) filed under the Investment Advisers Act of 1940, and incorporated herein by reference.

Item 27.

Principal Underwriter

(a)	Until February 4, 2009, PEPCO serves as the principal underwriter for the following registrants:

Virtus Equity Trust, Virtus Insight Trust, Virtus Institutional Trust, Virtus Opportunities Trust, Phoenix Life Variable Universal Life Account, Phoenix Life Variable Accumulation Account, PHL Variable Accumulation Account, Phoenix Life & Annuity Variable Universal Life Account, PHLVIC Variable Universal Life Account, PHL Variable Separate Account MVA1 and The Phoenix Edge Series Fund.

After February 4, 2009, VP Distributors serves as the principal underwriter for the following registrants:

Virtus Equity Trust, Virtus Insight Trust, Virtus Institutional Trust and Virtus Opportunities Trust.

(b)	Directors and executive officers of VP Distributors are as follows:


Name and Principal Business Address	Positions and Offices with Distributor	Positions and Offices with Registrant

George R. Aylward 100 Pearl Street Hartford, CT 06103	Director and Executive Vice President	President

Kevin J. Carr 100 Pearl Street Hartford, CT 06103	Vice President, Counsel and Secretary	Vice President, Counsel, Chief Legal Officer and Secretary

Nancy J. Engberg 100 Pearl Street Hartford, CT 06103	Vice President and Assistant Secretary	Anti-Money Laundering Officer and Assistant Secretary

Nancy G. Curtiss 100 Pearl Street Hartford, CT 06103	Director and Assistant Treasurer	Senior Vice President

David Hanley 100 Pearl Street Hartford, CT 06103	Vice President and Treasurer	None

David C. Martin 100 Pearl Street Hartford, CT 06103	Vice President and Chief Compliance Officer	None

Francis G. Waltman 100 Pearl Street Hartford, CT 06103	Director	Senior Vice President

(c)

To the best of the Registrant’s knowledge, no commissions or other compensation was received by any principal underwriter who is not an affiliated person of the Registrant or an affiliated person of such affiliated person, directly or indirectly, from the Registrant during the Registrant’s last fiscal year.

Item 28.

Location of Accounts and Records

Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder include:

Secretary of the Fund:

Kevin J. Carr, Esq.

100 Pearl Street

Hartford, CT 06103

Investment Adviser:

Virtus Investment Adviser, Inc.

100 Pearl Street

Hartford, CT 06103

Subadviser for Bond Fund and High Yield Fund:

SCM Advisors LLC

909 Montgomery Street, Fifth Floor

San Francisco, CA 94133

Subadviser for Market Neutral Fund

The Boston Company Asset Management, LLC

One Boston Place

201 Washington Street, 14 ^th floor

Boston, MA 02108

Subadviser for Core Bond Fund, Money Market Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and, Senior Floating Rate Fund:

Goodwin Capital Advisers, Inc.

One American Row

Hartford, CT 06102

Principal Underwriter, Administrator and Transfer Agent:

VP Distributors (Phoenix Equity Planning Corporation until February 4, 2009)

100 Pearl Street

Hartford, CT 06103

Custodian and Dividend Dispersing Agent

State Street Bank and Trust Company

225 Franklin Street

Boston, MA 02110

Subadviser for Global Infrastructure Fund, International Real Estate Securities Fund and Real Estate Securities Fund:

Duff & Phelps Investment Management Co

200 South Wacker Drive, Suite 500

Chicago, IL 60606

Subadviser to Foreign Opportunities Fund and Global Opportunities Fund:

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, NY 10036

Fund Accountant and Subadministrator:

PNC Global Investment Servicing (U.S.) Inc.

301 Bellevue Parkway

Wilmington, DE 19809

Item 29.

Management Services

None.

Item 30.

Undertakings

None.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness for this registration statement under Rule 485(b) of the Securities Act and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Hartford and the State of Connecticut on the 28 ^th day of January, 2009.


VIRTUS OPPORTUNITIES TRUST

By:		/s/ George R. Aylward
		George R. Aylward
		President

Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the registration statement has been signed below by the following persons in the capacities indicated on the 28 ^th day of January, 2009.


Signature		Title

/s/ George R. Aylward George R. Aylward		Trustee and President (principal executive officer)

/s/ W. Patrick Bradley W. Patrick Bradley		Chief Financial Officer and Treasurer (principal financial and accounting officer)

/s/ Leroy Keith, Jr. Leroy Keith, Jr.*		Trustee

/s/ Philip R. McLoughlin Philip R. McLoughlin*		Trustee and Chairman

/s/ Geraldine M. McNamara Geraldine M. McNamara*		Trustee

/s/ James M. Oates James M. Oates*		Trustee

/s/ Richard E. Segerson Richard E. Segerson*		Trustee

/s/ Ferdinand L.J. Verdonck Ferdinand L.J. Verdonck*		Trustee



*By		/s/ George R. Aylward
		*George R. Aylward, Attorney-in-Fact,
		pursuant to a power of attorney

Exhibits

Item 23.



d.18.		Fifth Amendment to Amended and Restated Investment Advisory Agreement, by and between the Registrant and VIA effective as of October 1, 2008.

e.2.		Form of Sales Agreement between VP Distributors and dealers (October 2008).

h.11.		Sub-Transfer Agency and Service Agreement between VP Distributors and Boston Financial Data Services, Inc. (“BFDS”), dated as of January 1, 2005.

h.12.		Amendment to Sub-Transfer Agency and Service Agreement between VP Distributors and BFDS, dated as of July 1, 2006.

h.13.		Amendment to Sub-Transfer Agency and Service Agreement between VP Distributors and BFDS, dated as of July 1, 2008.

j.		Consent of Independent Registered Public Accounting Firm.

p.1.		Amended and Restated Codes of Ethics of the Virtus Funds and the Distributor (VP Distributors) dated August 2008.

p.2.		Amended and Restated Code of Ethics of the Adviser (VIA) dated November 2008.

p.4.		Amended and Restated Code of Ethics of Subadviser (Duff & Phelps), dated December 31, 2007.

p.7.		Code of Ethics of Subadviser (Vontobel) dated April 23, 2008.

q.		Power of Attorney for all Trustees, dated February 28, 2008.

FIFTH AMENDMENT

TO AMENDED AND RESTATED

INVESTMENT ADVISORY AGREEMENT

THIS AMENDMENT effective as of the 1 ^st day of October, 2008 amends that certain Amended and Restated Investment Advisory Agreement dated as of November 20, 2002, as Amended as of June 8, 2006, as of June 27, 2007, as of September 24, 2007 and as of January 31, 2008 (the “Agreement”) by and between Phoenix Opportunities Trust (formerly known as Phoenix-Seneca Funds), a Delaware statutory trust (the “Trust”) and Virtus Investment Advisers, Inc., a Massachusetts corporation (the “Adviser”) as follows:

1.	All references to Phoenix Growth Opportunities Fund and Phoenix International Strategies Fund are hereby deleted from the Agreement.

The names of the series party to this agreement have been changed as follows: Phoenix Bond Fund is now Virtus Bond Fund; Phoenix Diversifier PHOLIO is now Virtus Alternatives Diversifier Fund; Phoenix Market Neutral Fund is now Virtus Market Neutral Fund; Phoenix Wealth Accumulator PHOLIO is now Virtus Wealth Accumulator Fund; Phoenix Wealth Builder PHOLIO is now Virtus Wealth Builder Fund; Phoenix Wealth Guardian PHOLIO is now Virtus Wealth Guardian Fund; Phoenix CA Tax-Exempt Bond Fund is now Virtus CA Tax-Exempt Bond Fund; Phoenix Core Bond Fund is now Virtus Core Bond Fund; Phoenix Global Utilities Fund is now Virtus Global Infrastructure Fund; Phoenix High Yield Fund is now Virtus High Yield Fund; Phoenix International Real Estate Securities Fund is now Virtus International Real Estate Securities Fund; Phoenix Money Market Fund is now Virtus Money Market Fund; Phoenix Multi-Sector Fixed Income Fund is now Virtus Multi-Sector Fixed Income Fund; Phoenix Multi-Sector Short Term Bond Fund is now Virtus Multi-Sector Short Term Bond Fund; Phoenix Real Estate Securities Fund is now Virtus Real Estate Securities Fund; Phoenix Senior Floating Rate Fund is now Virtus Senior Floating Rate Fund; Phoenix Worldwide Strategies Fund is now Virtus Worldwide Strategies Fund and Phoenix Foreign Opportunities Fund is now Virtus Foreign Opportunities Fund.

3.	Schedule A to the Agreement is hereby deleted in its entirety and Schedule A attached hereto is substituted in its place.

Except as expressly amended hereby, all provisions of the Agreement shall remain in full force and effect and are unchanged in all other respects. All initial capitalized terms used herein shall have such meanings as ascribed thereto in the Agreement, as amended. All terms and phrases in quotations shall have such meaning as ascribed thereto in the Investment Company Act of 1940, as amended.

5.	This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original and, all of which, when taken together, shall constitute but one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, the parties hereto intending to be legally bound have caused this Agreement to be executed by their duly authorized officers of other representatives.


PHOENIX OPPORTUNITIES TRUST

By:		/s/ George R. Aylward
Name:		George R. Aylward
Title:		President


VIRTUS INVESTMENT ADVISERS, INC.

By:		/s/ John H. Beers
Name:		John H. Beers
Title:		Vice President and Clerk

SCHEDULE A


Series	Investment Advisory Fee
Virtus Alternatives Diversifier Fund	0.10	%
Virtus Bond Fund	0.50	%
Virtus Market Neutral Fund	1.50	%
Virtus Wealth Accumulator Fund	0.10	%
Virtus Wealth Builder Fund	0.10	%
Virtus Wealth Guardian Fund	0.10	%


	1 ^st $1 Billion		$1+ Billion through $2 Billion		$2+ Billion
Virtus CA Tax-Exempt Bond Fund	0.45	%	0.40	%	0.35	%
Virtus Core Bond Fund	0.45	%	0.40	%	0.35	%
Virtus Global Infrastructure Fund	0.65	%	0.60	%	0.55	%
Virtus High Yield Fund	0.65	%	0.60	%	0.55	%
Virtus International Real Estate Securities Fund	1.00	%	0.95	%	0.90	%
Virtus Money Market Fund	0.40	%	0.35	%	0.30	%
Virtus Multi-Sector Fixed Income Fund	0.55	%	0.50	%	0.45	%
Virtus Multi-Sector Short Term Bond Fund	0.55	%	0.50	%	0.45	%
Virtus Real Estate Securities Fund	0.75	%	0.70	%	0.65	%
Virtus Senior Floating Rate Fund	0.60	%	0.55	%	0.50	%
Virtus Worldwide Strategies Fund	0.85	%	0.80	%	0.75	%

	1 ^st $2 Billion		$2+ Billion through $4 Billion		$4+ Billion
Virtus Foreign Opportunities Fund	0.85	%	0.80	%	0.75	%

LOGO

PHOENIX EQUITY PLANNING CORPORATION

56 Prospect St.

P.O. Box 150480

Hartford, CT 06115-0480

PHOENIX FUNDS

SALES AGREEMENT

To:	Dealer Name

Attention:

Address

City,

State, Zip Code

Phoenix Equity Planning Corporation (“PEPCO”, “we”, “us”, or “our”) invites you to participate in the sale and distribution of shares of registered investment companies (which shall collectively be referred to hereinafter as the “Funds”) for which we are national distributor or principal underwriter, and which may be listed in Annex A hereto which such Annex may be amended by us from time to time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares of each of the Funds (hereafter “Shares”) subject, however, to the terms and conditions hereof including our right to suspend or cease the sale of such shares. For the purposes hereof, the above referenced dealer shall be referred to as “you”.

You understand and agree that in all sales of Shares to the public, you shall act as dealer for your own account. All purchase orders and applications are subject to acceptance or rejection by us in our sole discretion and are effective only upon confirmation by us. Each purchase will be deemed to have been consummated in our principal office subject to our acceptance and effective only upon confirmation to you by us.

2.	You agree that all purchases of Shares by you shall be made only for the purpose of covering purchase orders already received from your customers (who may be any person other than a securities dealer or broker) or for your own bona-fide investment.

You shall offer and sell Shares purchased pursuant to this agreement for the purpose of covering purchase orders of your customers, to the extent applicable, (a) at the current public offering price (“Offering Price”) for Class A Shares or (b) at the Net Asset Value for Class B and Class C shares as set forth in the current prospectus of each of the funds. The offer and sale of Class B Shares by you is subject to Annex B hereto, “Compliance Standards for the Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements”.

You shall pay us for Shares purchased within three (3) business days of the date of our confirmation to you of such purchase or within such time as required by applicable rule or law. The purchase price shall be (a) the Offering Price, less only the applicable dealer discount (Dealer Discount) for Class A Shares, if applicable, or (b) the Net Asset Value, less only the applicable sales commission (Sales Commission) for Class B or Class C Shares, if applicable, as set forth in the current prospectus at the time the purchase is received by us. We have the right, without notice, to cancel any order for which payment of good and sufficient funds has not been received by us as provided in this paragraph, in which case you may be held responsible for any loss suffered by us resulting from your failure to make payment as aforesaid.

You understand and agree that any Dealer Discount, Sales Commission or fee is subject to change from time to time without prior notice. Any orders placed after the effective date of any such change shall be subject to the Dealer Discount or Sales Commission in effect at the time such order is received by us.

You understand and agree that Shares purchased by you under this Agreement will not be delivered until payment of good and sufficient funds has been received by us. Delivery of Shares will be made by credit to a shareholder open account unless delivery of certificates is specified in the purchase order. In order

to avoid unnecessary delay, it is understood that, at your request, any Shares resold by you to one of your customers will be delivered (whether by credit to a shareholder open account or by delivery of certificates) in the name of your customer.

You understand that on all purchases of Shares to which the terms of this Agreement are applicable by a shareholder for whom you are dealer of record, we will pay you an amount equal to the Dealer Discount, Sales Commission or fees which would have been paid to you with respect to such Shares if such Shares had been purchased through you. You understand and agree that the dealer of record for this purpose shall be the dealer through whom such shareholder most recently purchased Shares of such fund, unless the shareholder or you have instructed us otherwise. You understand that all amounts payable to you under this paragraph and currently payable under this agreement will be paid as of the end of the month unless specified otherwise for the total amount of Shares to which this paragraph is applicable but may be paid more frequently as we may determine in our discretion. Your request for Dealer Discount or Sales Commission reclaims will be considered if adequate verification and documentation of the purchase in question is supplied to us, and the reclaim is requested within three years of such purchase.

We appoint the transfer agent (or identified sub-transfer agent) for each of the Funds as our agent to execute the purchase transaction of Shares and to confirm such purchases to your customers on your behalf, and you guarantee the legal capacity of your customers so purchasing such Shares. You further understand that if a customer’s account is established without the customer signing the application form, you hereby represent that the instructions relating to the registration and shareholder options selected (whether on the application form, in some other document or orally) are in accordance with the customer’s instructions and you agree to indemnify the Funds, the transfer agent (or identified sub-transfer agent) and us for any loss or liability resulting from acting upon such instructions.

9.	Upon the purchase of Class A Shares pursuant to a Letter of Intent, you will promptly return to us any excess of the Dealer Discount previously allowed or paid to you over that allowable in respect to such larger purchases.

10.

Unless at the time of transmitting a purchase order you advise us to the contrary, we may consider that the investor owns no other Shares and may further assume that the investor is not entitled to any lower sales charge than that accorded to a single transaction in the amount of the purchase order, as set forth in the current prospectus.

11.

You understand and agree that if any Shares purchased by you under the terms of this Agreement are, within seven (7) business days after the date of our confirmation to you of the original purchase order for such Shares, repurchased by us as agent for such fund or are tendered to such fund for redemption, you shall forfeit the right to, and shall promptly pay over to us the amount of, any Dealer Discount or Sales Commission allowed to you with respect to such Shares. We will notify you of such repurchase or redemption within ten (10) days of the date upon which certificates are delivered to us or to such fund or the date upon which the holder of Shares held in a shareholder open account places or causes to be placed with us or with such fund an order to have such shares repurchased or redeemed.

12.

You agree that, in the case of any repurchase of any Shares made more than seven (7) business days after confirmation by us of any purchase of such Shares, except in the case of Shares purchased from you by us for your own bona fide investment, you will act only as agent for the holders of such Shares and will place the orders for repurchase only with us. It is understood that you may charge the holder of such Shares a fair commission for handling the transaction.

13.

Our obligations to you under this Agreement are subject to all the provisions of the respective distribution agreements entered into between us and each of the Funds. You understand and agree that in performing your services under this agreement you are acting in the capacity of an independent contractor, and we are in no way responsible for the manner of your performance or for any of your acts or omissions in connection therewith. Nothing in the Agreement shall be construed to constitute you or any of your agents, employees, or representatives as our agent, partner or employee, or the agent, partner of employee of any of the Funds.

In connection with the sale and distribution of shares of Phoenix Funds, you agree to indemnify and hold us and our affiliates, employees, and/or officers harmless from any damage or expense as a result of (a) the negligence, misconduct or wrongful act by you or any employee, representative, or agent of yours

and/or (b) any actual or alleged violation of any securities laws, regulations or orders. Any indebtedness or obligation of yours to us whether arising hereunder or otherwise, and any liabilities incurred or moneys paid by us to any person as a result of any misrepresentation, wrongful or unauthorized act or omission, negligence of, or failure of you or your employees, representatives or agents to comply with the Sales Agreement, shall be set off against any compensation payable under this agreement. Any differential between such expenses and compensation payable hereunder shall be payable to us upon demand. The terms of this provision shall not be impaired by the termination of this agreement.

In connection with the sale and distribution of shares of Phoenix Funds, we agree to indemnify and hold you harmless from any damage or expense on account of the gross and willful negligence, misconduct or wrongful act of us or any employee, representative, or agent of ours which arises out of or is based upon any untrue statement or alleged untrue statement of material fact, or the omission or alleged omission of a material fact in: (i) any registration statement, including any prospectus or any post-effective amendment thereto; or (ii) any material prepared and/or supplied by us for use in conjunction with the offer or sale of Phoenix Funds; or (iii) any state registration or other document filed in any state or jurisdiction in order to qualify any Fund under the securities laws of such state or jurisdiction. The terms of this provision shall not be impaired by the termination of this agreement.

14.

We will supply you with reasonable quantities of the current prospectus, periodic reports to shareholders, and sales materials for each of the Funds. You agree not to use any other advertising or sales material relating to the sale of shares of any of the Funds unless other advertising or sales material is pre-approved in writing by us.

15.

You agree to offer and sell Shares only in accordance with the terms and conditions of the then current prospectus of each of the Funds and subject to the provisions of this Agreement, and you will make no representations not contained in any such prospectus or any authorized supplemental sales material supplied by us. You agree to use your best efforts in the development and promotion of sales of the Shares covered by this Agreement, and agree to be responsible for the proper instruction, training and supervision of all sales representatives employed by you in order that such Shares will be offered in accordance with the terms and conditions of this Agreement and all applicable laws, rules and regulations. All expenses incurred by you in connection with your activities under this Agreement shall be borne by you. In consideration for the extension of the right to exercise telephone exchange and redemption privileges to you and your registered representatives, you agree to bear the risk of any loss resulting from any unauthorized telephone exchange or redemption instructions from you or your registered representatives. In the event we determine to refund any amounts paid by any investor by reason of such violation on your part, you shall forfeit the right to, and pay over to us, the amount of any Dealer Discount or Sales Commission allowed to you with respect to the transaction for which the refund is made.

16.

You represent that you are properly registered as a broker or dealer under the Securities and Exchange Act of 1934 and are member of the Financial Industry Regulatory Authority, Inc. (FINRA) and agree to maintain membership with FINRA or in the alternative, that you are a foreign dealer not eligible for membership with FINRA. You agree to notify us promptly of any change, termination or suspension of the foregoing status. You agree to abide by all the rules and regulations of FINRA and NASD Rules, including NASD Conduct Rule 2830, which is incorporated herein by reference as if set forth in full. You further agree to comply with all applicable state and Federal laws and the rules and regulations of applicable regulatory agencies. You further agree that you will not sell, or offer for sale, Shares in any jurisdiction in which such Shares have not been duly registered or qualified for sale. You agree to promptly notify us with respect to (a) the initiation and disposition of any formal disciplinary action by the FINRA or any other agency or instrumentality having jurisdiction with respect to the subject matter hereof against you or any of your employees or agents; (b) the issuance of any form of deficiency notice by the FINRA or any such agency regarding your training, supervision or sales practices; and (c) the effectuation of any consensual order with respect thereto.

16.1

Patriot Act. You shall employ policies and procedures designed to comply with the rules and regulations promulgated from time to time by the Office of Foreign Asset Control (including transactions involving embargoed countries or Specifically Designated Nationals and Blocked Persons) and all other applicable money laundering restrictions, including, without limitation, such restrictions as may be adopted pursuant to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) of

2001 with respect to similarly situated financial institutions as PEPCO. You agree that you will perform the Customer Identification Program requirements of the USA Patriot Act, as applicable, with respect to Accounts established and transactions made pursuant to this Agreement.

16.2

Sarbanes-Oxley Act. You agree to cooperate with PEPCO and will facilitate the filing by PEPCO, each underlying registered investment companies (collectively, the “Funds”) and/or their respective officers and auditors of any and all certifications or attestations as required by the Sarbanes-Oxley Act of 2002, including, without limitation, furnishing such sub-certifications from your relevant officers with respect to the services performed by you under this Agreement as reasonably requested from time to time.

16.3

Rule 38a-1. Upon reasonable request, you agree to provide your written policies and procedures to the Funds’ chief compliance officer for review and the Funds’ board of trustees’ approval to assist our compliance with Rule 38a-1 under the Investment Company Act of 1940, as amended. You further agree to cooperate with PEPCO in its review of such written policies and procedures, including, without limitation, furnishing such certifications and sub-certifications as PEPCO shall reasonably request from time to time. You agree that you shall promptly notify PEPCO and Funds in the event that a “material compliance matter” (as such term is defined pursuant to Rule 38a-1 under the 1940 Act) arises with respect the services you provide under this Agreement.

16.4

Late Trading. You will accept no orders for the purchase and redemption of Fund shares after 4:00 p.m. Eastern time on any Business Day. For the purposes hereof, a “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which a Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission (hereinafter, the “SEC”), as amended from time to time, subject to such terms and conditions as may be set forth in the registration statements for the Funds as filed with the SEC, as the same shall be amended from time to time.

16.5

Market Timing. PEPCO may refuse to sell shares of any Fund (or series thereof) to any person, or suspend or terminate the offering of shares of any Fund (or series thereof), if such action is required by law or by regulatory authorities having jurisdiction with respect to PEPCO or Fund, as the case may be, or is, in the reasonable discretion of PEPCO, reasonably necessary in order to protect the best interests of its investors. You shall establish and maintain policies and procedures reasonably designed to detect, monitor and deter (including, without limitation, rejecting specific purchase orders) account owners (or their agents) whose purchase and redemption activity follows a market timing pattern, and to take such other actions as you deem necessary to discourage or reduce market timing activity. For the purposes hereof, “market timing activity” shall mean and refer to any discernable pattern of excessive trading in and out of a Fund (or series thereof) by one or more account owners (or their agents), including, without limitation, any purchase and sale (round trip) in and out of a single series of a Fund within any thirty day period. The parties acknowledge that, if necessary, such policies and procedures may include the identification of account owners engaged in such market timing activity and the imposition of restrictions on their requests to purchase or exchange Fund shares. You shall provide reasonable reports regarding your implementation and enforcement of such restrictions on purchase and redemption activity that follows a market-timing pattern upon request.

17.

Shareholder Information and SEC Rule 22c-2. If trading as an Intermediary (a broker, dealer, bank or other entity that holds securities of record issued by the Funds in nominee name; and in the case of a participant-directed employee benefit plan that owns securities issued by the Funds; a retirement plan administrator under ERISA or any entity that maintains the plan’s participant records) you hereby agree as follows:

17.1

Agreement to Provide Information. Intermediary agrees to provide the Funds, upon written request, the taxpayer information number (“TIN”), if known, of any or all Shareholder(s) of the account and the amount, date, name or other identifier of any investment professional(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Fund shares held through an account maintained by the Intermediary during the period covered by the request.

17.1.1

Period Covered by Request. Requests must set forth a specific period, not to exceed _180_ days from the date of the request, for which transaction information is sought. The Fund may request transaction information older than _180_ days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purposes of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. If requested by the Fund, Intermediary agrees to provide the information specified in 1.1 for each trading day.

17.1.2

Form and Timing of Response. Intermediary agrees to transmit the requested information that is on its books and records to the Funds or its designee promptly, but in any event not later than 10 business days, after receipt of a request. If the requested information is not on the Intermediary’s books and records, Intermediary agrees to use reasonable efforts to: (i) promptly obtain and transmit the requested information; (ii) obtain assurances from the accountholder that the requested information will be provided directly to the Fund Agent promptly; or (iii) if directed by the Fund Agent, block further purchases of Fund shares from such accountholder. In such instance, Intermediary agrees to inform the Fund Agent whether it plans to perform (i), (ii) or (iii). Responses required by this paragraph must be communicated in writing and in format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to the Fund Agent should be consistent with the NSCC Standardized Data Reporting Format.

17.1.3

Limitations on Use of Information. The Fund Agent agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Intermediary.

17.2.

Agreement to Restrict Trading. Intermediary agrees to execute written instructions from the Fund Agent to restrict or prohibit further purchases or exchanges of Fund shares by a Shareholder that has been identified by the Fund Agent as having engaged in transactions of the Funds’ shares (directly or indirectly through the Intermediary’s account) that violate policies established by the Funds for the purposes of eliminating or reducing any dilution of the value of the outstanding shares issued by the Funds.

17.2.1

Form of Instructions. Instructions must include the TIN, if known, and the specific restriction(s) to be executed. If the TIN is not known, the instructions must include any equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.

17.2.2

Timing of Response. Intermediary agrees to execute instructions as soon as reasonably practicable, but not later than five business days after receipt of the instructions by the Intermediary.

17.2.3

Confirmation by Intermediary. Intermediary must provide written confirmation to the Fund Agent that instructions have been executed. Intermediary agrees to provide confirmation as soon as reasonably practicable, but not later than ten business days after the instructions have been executed.

17.3

Definitions. For purposes of this paragraph:

17.3.1

The term “Funds” includes the fund’s principal underwriter and transfer agent. The term not does include any “excepted funds” as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940.

17.3.2

The term “Shares” means the interests of Shareholders corresponding to the redeemable securities of record issued by the Fund under the Investment Company Act of 1940 that are held by the Intermediary.

17.3.3

The term “Shareholder” means the beneficial owner of Shares, whether the Shares are held directly or by the Intermediary in nominee name or, if applicable, the Plan participant notwithstanding that the Plan may be deemed to be the beneficial owner of Shares.

18.

Either party may terminate this agreement for any reason by written or electronic notice to the other party which termination shall become effective fifteen (15) days after the date of mailing or electronically transmitting such notice to the other party. We may also terminate this agreement for cause or as a result of a violation by you, as determined by us in our discretion, of any of the provisions of this Agreement, said termination to be effective on the date of mailing written or electronic notice to you of the

same. Without limiting the generality of the foregoing, your own expulsion from the FINRA will automatically terminate this Agreement without notice. Your suspension from the FINRA or violation of applicable state or Federal laws or rules and regulations of applicable regulatory agencies will terminate this Agreement effective upon the date of our mailing written notice or transmitting electronic notice to you of such termination. Our failure to terminate this Agreement for any cause shall not constitute a waiver of our right to so terminate at a later date.

19.	All communications and notices to you or us shall be sent to the addresses set forth at the beginning of this Agreement or to such other address as may be specified in writing from time to time.

20.

PEPCO agrees to comply with all laws, rules, regulations, and ordinances relating to privacy, confidentiality, security, data security, and the handling of customer information which may from time to time be established. PEPCO agrees not to disclose or use any consumer nonpublic personal information (including nonpublic personal financial information and nonpublic personal health information), which may be supplied by you to PEPCO in performance under this Agreement other than to: a) carry out the purpose for which the information was provided; and b) to use or disclose the information as otherwise permitted or required by law. You agree to comply with all laws, rules, regulations, and ordinances relating to privacy, confidentiality, security, data security, and the handling of customer information which may from time to time be established. You agree not to disclose or use any consumer nonpublic personal information (including nonpublic personal financial information and nonpublic personal health information), which may be supplied by PEPCO to you in performance under this Agreement other than to: a) carry out the purpose for which the information was provided; and b) to use or disclose the information as otherwise permitted or required by law. This provision will survive and continue in full force and effect after the termination of this Agreement.

21.

This agreement shall become effective upon the date of its acceptance by us as set forth herein. This agreement may be amended by PEPCO from time to time. This Agreement and all rights and obligations of the parties hereunder shall be governed by and construed under the laws of the State of Connecticut. This agreement is not assignable or transferable, except that we may assign or transfer this agreement to any successor distributor of the Shares described herein.


ACCEPTED ON BEHALF OF PHOENIX EQUITY PLANNING CORPORATION:		ACCEPTED ON BEHALF OF


		Name of Dealer Firm

Date		Date

By		By

Name	John Steven Neamtz	Print Name

Title	Senior Vice President	Print Title

		FINRA CRD Number

PEP80(10/08)

LOGO

Amended Annex A – October 2008

Virtus Mutual Funds Sales Agreement

Phoenix Equity Planning Corporation

Virtus Mutual Funds and Available Share Classes


EQUITY		INTERNATIONAL/GLOBAL
Virtus All-Cap Growth Fund	A B C	Virtus Foreign Opportunities Fund	A C I
Virtus Capital Growth Fund	A B C	Virtus Emerging Market Opportunities Fund	A C I
Virtus Growth & Income Fund	A B C I	Virtus Worldwide Strategies Fund	A B C
Virtus Growth Opportunities Fund	A C I
Virtus Core Equity Fund	A C I
Virtus Index Fund	A I	FIXED INCOME
Virtus Disciplined Small-Cap Growth Fund	A C I	Virtus Bond Fund	A B C I
Virtus Disciplined Small-Cap Opportunity Fund	A C I	Virtus CA Tax-Exempt Bond Fund	A I
Virtus Disciplined Small-Cap Value Fund	A C I	Virtus Core Bond Fund	A B C
Virtus Value Equity Fund	A C I	Virtus High Yield Fund	A B C
Virtus Mid-Cap Growth Fund	A B C I	Virtus High Yield Income Fund	A C I
Virtus Mid-Cap Value Fund	A C I	Virtus Intermediate Government Bond Fund	A I
Virtus Quality Small-Cap Fund	A C I	Virtus Intermediate Tax-Exempt Bond Fund	A C I
Virtus Small-Cap Growth Fund	A B C	Virtus Short/Intermediate Bond Fund	A C I
Virtus Small-Cap Sustainable Growth Fund	A C I	Virtus Tax-Exempt Bond Fund	A C I
Virtus Small-Cap Value Fund	A B C	Virtus Insight Money Market Fund	A E I
Virtus Small-Mid Cap Fund	A B C I	Virtus Insight Government Money Market Fund	A I
Virtus Strategic Growth Fund	A B C I	Virtus Insight Tax-Exempt Money Market Fund	A I
Virtus Value Opportunities Fund	A C I	Virtus Institutional Bond Fund	XY
		Virtus Money Market Fund	A
BALANCED		Virtus Multi-Sector Fixed Income Fund	A B C
Virtus Balanced Fund	A B C	Virtus Multi-Sector Short Term Bond Fund	A B C I T
Virtus Income & Growth Fund	A B C	Virtus Senior Floating Rate Fund	A C I
Virtus Balanced Allocation Fund	A C I

PHOLIOs		ALTERNATIVE
Virtus Alternatives Diversifier Fund ^SM	A C	Virtus Global Infrastructure Fund	A C I
Virtus Wealth Accumulator Fund ^SM	A C	Virtus International Real Estate Securities Fund	A C I
Virtus Wealth Builder Fund ^SM	A C	Virtus Market Neutral Fund *	A B C
Virtus Wealth Guardian Fund ^SM	A C	Virtus Real Estate Securities Fund	A B C I

Phoenix Equity Planning Corporation, One American Row, Hartford, CT 06102

Marketing: (800) 243-4361 Customer Service: (800) 243-1574 VirtusInvestmentParters.com

Applicable waivers of Class A sales charges and Class B and C contingent deferred sales charges are described in the prospectus.

*	The Virtus Market Neutral Fund currently operates under a separate sales load and dealer compensation schedule for Class B and C shares only. Please refer to the last page of this Annex A for details.

Class A Shares

Dealer Concession:

Class A Shares

Equity, Balanced, PHOLIOs,

International/Global, Alternative Funds


Amount of Transaction Plus Applicable Rights of Accumulation:	Sales Charge As Percentage of Offering Price		Dealer Discount or Agency Fee As Percentage of Offering Price
Less than $50,000	5.75	%	5.00	%
$50,000 but under $100,000	4.75		4.25
$100,000 but under $250,000	3.75		3.25
$250,000 but under $500,000	2.75		2.25
$500,000 but under $1,000,000	2.00		1.75
$1,000,000 or more	None		None


	Class A Shares Fixed Income Funds*				Class A Shares Virtus Multi-Sector Short Term Bond
Amount of Transaction Plus Applicable Rights of Accumulation:	Sales Charges As Percentage of Offering Price		Dealer Discount or Agency Fee As Percentage of Offering Price		Sales Charge As Percentage of Offering Price		Dealer Discount or Agency Fee As Percentage of Offering Price
Less than $50,000	4.75	%	4.25	%	2.25	%	2.00	%
$50,000 but under $100,000	4.50		4.00		1.25		1.00
$100,000 but under $250,000	3.50		3.00		1.00		1.00
$250,000 but under $500,000	2.75		2.25		1.00		1.00
$500,000 but under $1,000,000	2.00		1.75		0.75		0.75
$1,000,000 or more	None		None		None		None

*	Excluding All Money Market Funds and Virtus Multi-Sector Short Term Bond Fund. Shares of the Virtus Multi-Sector Short Term Bond Fund are offered as indicated above.

Distribution Fee: 0.10% For distribution services with respect to the Virtus Insight Money Market Fund, Virtus Insight Government Money Market Fund and the Virtus Insight Tax-Exempt Money Market Fund, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.10% annually, based on the average daily net asset value of such Funds sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 in each such fund to qualify for payment.

Service Fee: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class A shares (except Virtus Money Market Fund) sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund Class to qualify for payment in that Fund Class.

Terms and Conditions for Service and Distribution Fees: The Distribution and Service Fees are paid pursuant to one or more distribution and/or service plans (“Plan”) adopted by certain of the Funds pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the “Act”). Payment of these fees will automatically terminate in the event such Plan terminates or is not continued or in the event that this Agreement terminates, is assigned or ceases to remain in effect. In addition, these fees may be terminated at any time, without the payment of any penalty, by vote of a majority of the members of the Funds’ Board of Trustees who are not interested persons of the Funds and have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan, or by vote of a majority of the outstanding voting securities of any Fund or Funds on not more than sixty days’ written notice to any other party to the Agreement.

$1 Million NAV Sales Finder’s Fee: 1% From its own profits and resources, PEPCO intends to pay a fee to dealers who are responsible for Class A share aggregate purchases of $1 million or more as indicated in the table below. The $1 Million NAV Sales Finder’s Fee is not paid on purchases eligible for the Qualified Plan Finder’s Fee (see below) or on purchases of any Money Market Fund.


Eligible Class A Share Fund Sale	Breakpoint Percentage
$1,000,000 to $3,000,000	1.00	%
$3,000,001 to $10,000,000	0.50	%
Greater than $10,000,000	0.25	%

Qualified Plan Finder’s Fee: 1% From its own profits and resources, PEPCO intends to pay dealers an amount equal to 1% of the first $3 million, 0.50% on the next $3 million and 0.25% on the amount in excess of $6 million of Class A share aggregate purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees. The Qualified Plan Finder’s Fee is not paid on purchases eligible for the $1 Million NAV Sales Finder’s Fee (see above) or on purchases of any Money Market Fund.

CDSC: A contingent deferred sales charge of 1% may apply on certain redemptions made within one year following purchases of Class A shares on which a $1 Million NAV Sales Finder’s Fee or a Qualified Plan Finder’s Fee has been paid to a dealer. The one year period begins on the last day of the month preceding the month in which the purchase was made. A deferred sales charge may be waived where the investor’s dealer of record, due to the nature of the investor’s account, notifies the Distributor prior to the time of the investment that the dealer waives the Finder’s Fee otherwise payable to the dealer, or agrees to receive such Finder’s Fee ratably over a 12 month period.

Class B Shares**


	Class B Shares (Except Virtus Multi-Sector Short Term Bond Fund)		Virtus Multi-Sector Short Term Bond Fund
	Sales Commission: 4.0%		Sales Commission: 2.0%
Years since Each Purchase:	Contingent Deferred Sales Charge:		Contingent Deferred Sales Charge:
First	5.0	%	2.0	%
Second	4.0		1.5
Third	3.0		1.0
Fourth	2.0		0.0
Fifth	2.0		0.0
Sixth	0.0		0.0

Dealers maintaining omnibus accounts, upon redemption of a customer account within the time frames specified above, shall charge such customer account the appropriate contingent deferred sales charge as indicated and shall forward the proceeds to PEPCO.

Service Fee*: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class B shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund Class to qualify for payment in that Fund Class. The Class B Service Fee is paid beginning in the 13 ^th month following each purchase.

Class C Shares**


Sales Commission:		1% for all Class C Funds except Virtus Multi-Sector Short Term Bond Fund
		0% for Virtus Multi-Sector Short Term Bond Fund
		For exchanges from Virtus Multi-Sector Short Term Bond Fund Class C to other Class C shares, the dealer will receive 1% sales commission on the exchanged amount.

CDSC: 1% Dealers maintaining omnibus accounts, upon redemption of a customer account within the time frames specified below, shall charge such customer account the appropriate contingent deferred sales charge as indicated and shall forward the proceeds to PEPCO. The CDSC on Class C shares is 1% for one year from each purchase. There is no CDSC on the Virtus Multi-Sector Short Term Bond Fund.

Distribution Fee: 0.25%- 0.75% PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually for Virtus Multi-Sector Short Term Bond Fund and 0.75% annually for all other Class C Funds, based on the average daily net asset value of Class C shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. The Class C Trail Fee is paid beginning in the 13 ^th month following each purchase except for the Virtus Multi-Sector Short Term Bond Fund. There is no hold for the Class C Trail Fee for the Virtus Multi-Sector Short Term Bond Fund.

Service Fee*: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class C shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. The Class C Service Fee is paid beginning in the 13 ^th month following each purchase. There is no hold for the Class C Service Fee for the Virtus Multi-Sector Short Term Bond Fund.

Finder’s Fee (Virtus Multi-Sector Short Term Bond Fund Only): 0.25% - 0.50% In connection with Class C share purchases of $250,000 or more, PEPCO, from its own profits and resources, intends to pay dealers an amount equal to 0.50% of shares purchased above $250,000 but under $3 million, plus 0.25% on the amount in excess of $3 million. If all or part of such purchases are subsequently redeemed or exchanged to another C share fund within one year of the investment date, the dealer will refund to PEPCO the full Finder’s Fee paid.

Terms and Conditions for Service and Distribution Fees: The Service and Distribution Fees are paid pursuant to one or more distribution and/or service plans (“Plan”) adopted by certain of the Funds pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the “Act”). Payment of these fees will automatically terminate in the event such Plan terminates or is not continued or in the event that this Agreement terminates, is assigned or ceases to remain in effect. In addition, these fees may be terminated at any time, without the payment of any penalty, by vote of a majority of the members of the Funds’ Board of Trustees who are not interested persons of the Funds and have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan, or by vote of a majority of the outstanding voting securities of any Fund or Funds on not more than sixty days’ written notice to any other party to the Agreement.

**	The Virtus Market Neutral Fund currently operates under a separate sales load and dealer compensation schedule for Class B and C shares only. Please refer to the last page of this Annex A for details.

Class B Shares – Virtus Market Neutral Fund only

Class B Share Contingent Deferred Sales Charge


Years Since Purchase	CDSC		Years Since Purchase	CDSC		Class B Share Dealer Concession
First	5	%	Fifth	2	%	4% of purchase amount
Second	4	%	Sixth	1	%
Third	3	%	Seventh	0	%
Fourth	3	%

Class C Shares – Virtus Market Neutral Fund only


Class C Share Contingent Deferred Sales Charge	Class C Share Dealer Concession
1.25% for one year	1.00	%

Service Fee* Class B, and C – Virtus Market Neutral Fund only

A Service Fee may be paid to financial services firms, for providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders. FINRA member firms may also be paid a portion of the asset-based sales charges on Class C Shares, so that these dealers receive such reallowances at the following aggregate annual rates: (i) 0.25% commencing one year after purchase for the Class B Shares and (ii) 0.95% commencing one year after purchase for the Class C Shares.

Class I Shares

There is no dealer compensation payable on Class I shares.

Class T Shares – Virtus Multi-Sector Short Term Bond Fund only

Dealer Concession: 1%

CDSC: 1% for one year from the date of each purchase.

Service Fee*: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class T shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. The Class T Service Fee is paid beginning in the 13 ^th month following each purchase.

Distribution Fee: 0.75% PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.75% annually, based on the average daily net asset value of Class T shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. The Class T Distribution Fee is paid beginning in the 13 ^th month following each purchase.

Class X and Y Shares Virtus Institutional Bond Fund Only

Finder’s Fee: 0.10% - 0.50% PEPCO may pay dealers, from its own profits and resources, a percentage of the net asset value of Class X and Class Y shares sold, equal to 0.50% on the first $5 million, 0.25% on the next $5 million, plus 0.10% on the amount in excess of $10 million. If all or part of such purchases are subsequently redeemed within one year of the investment date, the dealer will refund to PEPCO the full Finder’s Fee paid.

Class Y Service Fee*: 0.25% For providing shareholder services, PEPCO intends to pay qualifying dealers a quarterly fee at the equivalent of 0.25% annually, based on the average daily net asset value of Class Y shares sold by such dealers and remaining on the Funds’ books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund to qualify for payment in that Fund. No Service Fee is paid on any Class X shares.

PXP 80A (10-08)

SUB-TRANSFER AGENCY AND SERVICE AGREEMENT

BETWEEN

PHOENIX EQUITY PLANNING CORPORATION

AND

BOSTON FINANCIAL DATA SERVICES, INC.

TABLE OF CONTENTS


		Page
1. Terms of Appointment and Duties		1

2. Third Party Administrators for Defined Contribution Plans		4

3. Fees and Expenses		5

4. Representations and Warranties of the Sub-Transfer Agent		6

5. Representations and Warranties of the Transfer Agent		7

6. Wire Transfer Operating Guidelines		7

7. Data Access and Proprietary Information		9

8. Indemnification		10

9. Standard of Care/Limitation of Liability		12

10. Confidentiality		12

11. Covenants of the Transfer Agent and the Sub-Transfer Agent		13

12. Termination of Agreement		13

13. Assignment and Third Party Beneficiaries		14

14. Subcontractors		15

15. Miscellaneous		15

16. Additional Funds		17

SUB-TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the 1 ^ST day of January, 2005, by and between PHOENIX EQUITY PLANNING CORPORATION, a Connecticut corporation, having its principal office and place of business at 56 Prospect St., Hartford, Connecticut 06115 (the “Transfer Agent”), and BOSTON FINANCIAL DATA SERVICES, INC., a Massachusetts corporation having its principal office and place of business at 2 Heritage Drive, North Quincy, Massachusetts 02171 (the “Sub-Transfer Agent”).

WHEREAS, the Transfer Agent has been assigned 030197 as its six-digit FINS number by the Depository Trust Company of New York, NY (“DTC”);

WHEREAS, the Transfer Agent registered with the U. S. Securities and Exchange Commission, its appropriate regulatory authority (“ARA”) and has been assigned a seven digit number (generally beginning with an “84” or an “85”) ARA number of 084-5491;

WHEREAS, the Transfer Agent has been appointed by each of the investment companies (including each series thereof, a “Portfolio”, and collectively as the “Portfolios”) listed on Schedule A (the “Fund(s)”) which may be amended by the parties from time to time and made subject to this Agreement in accordance with Section 16 , each an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended, as transfer agent, dividend disbursing agent and shareholder servicing agent in connection with certain activities, and the Transfer Agent has accepted each such appointment;

WHEREAS, the Transfer Agent has entered into a Transfer Agency and Service Agreement with each of the Funds (including each series thereof) listed on Schedule A pursuant to which the Transfer Agent is responsible for certain transfer agency and dividend disbursing functions and the Transfer Agent is authorized to subcontract for the performance of its obligations and duties thereunder in whole or in part with the Sub-Transfer Agent;

WHEREAS, the Transfer Agent is desirous of having the Sub-Transfer Agent perform certain shareholder accounting, administrative and servicing function (collectively “Shareholder and Record-Keeping Services”);

WHEREAS, the Transfer Agent desires to appoint the Sub-Transfer Agent as its agent, and the Sub-Transfer Agent desires to accept such appointment; and

WHEREAS, the parties hereto acknowledge and agree that the Sub-Transfer Agency and Service Agreement between Phoenix Equity Planning Corporation and State Street Bank and Trust Company effective June 1, 1994 is terminated as of January 1, 2005.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

1.	Terms of Appointment; Duties

1.1

Sub-Transfer Agency Services. Subject to the terms and conditions set forth in this Agreement, the Transfer Agent hereby employs and appoints the Sub-Transfer Agent to act as, and the Sub-Transfer Agent agrees to act as, the agent of the Transfer Agent for

the shares of the Funds in connection with any accumulation, open-account, retirement plans or similar plan provided to the shareholders of each Fund (“Shareholders”) and set out in the currently effective prospectus and statement of additional information (“prospectus”) of each such Fund, including without limitation any periodic investment plan or periodic withdrawal program. As used herein, the term “Shares” means the authorized and issued shares of common stock, or shares of beneficial interest, as the case may be, for each of the Funds (including each series thereof) enumerated in Schedule A. In accordance with procedures established from time to time by agreement between the Transfer Agent and the Sub-Transfer Agent, the Sub-Transfer Agent agrees that it will perform the following Shareholder and Record-Keeping services:

(a) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund authorized pursuant to the Articles of Incorporation of the Fund (the “Custodian”);

(b) Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account;

(c) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian;

(d) In respect to the transactions in items (a), (b) and (c) above, the Sub-Transfer Agent shall execute transactions directly with broker-dealers authorized by the Fund;

(e) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders;

(f) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions;

(g) Prepare and transmit payments for dividends and distributions declared by the Fund;

(h) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Sub-Transfer Agent of indemnification satisfactory to the Sub-Transfer Agent and protecting the Sub-Transfer Agent and the Fund, and the Sub-Transfer Agent at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity;

(i) Issue replacement checks and place stop orders on original checks based on Shareholder’s representation that a check was not received or was lost. Such stop orders and replacements will be deemed to have been made at the request of the Transfer Agent, and the Transfer Agent shall be responsible for all losses or claims resulting from such replacement;

(j) Maintain records of account for and advise the Transfer Agent and its Shareholders as to the foregoing; and

(k) Record the issuance of Shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund which are authorized,

based upon data provided to it by the Fund, and issued and outstanding. The Sub-Transfer Agent shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund.

1.2

Additional Services. In addition to, and neither in lieu nor in contravention of, the services set forth in the above paragraph, the Sub-Transfer Agent shall perform the following services:

(a) Other Customary Services. Perform the customary services of a transfer agent, dividend disbursing agent and, as relevant, agent in connection with accumulation, open-account or similar plan (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing Shareholder proxies, Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information;

(b) Control Book (also known as “Super Sheet”). Maintain a daily record and produce a daily report for the Fund of all transactions and receipts and disbursements of money and securities and deliver a copy of such report for the Fund for each business day to the Fund no later than 9:00 AM Eastern Time, or such earlier time as the Fund may reasonably require, on the next business day;

(c) “Blue Sky” Reporting . The Fund or Transfer Agent shall (i) identify to the Sub-Transfer Agent in writing those transactions and assets to be treated as exempt from blue sky reporting for each State and (ii) verify the establishment of transactions for each State on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of the Sub-Transfer Agent for the Fund’s blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Fund and providing a system which will enable the Fund to monitor the total number of Shares sold in each State;

(d) National Securities Clearing Corporation (the “NSCC”). (i) accept and effectuate the registration and maintenance of accounts through Networking and the purchase, redemption, transfer and exchange of shares in such accounts through Fund/SERV (Networking and Fund/SERV being programs operated by the NSCC on behalf of NSCC’s participants, including the Fund), in accordance with, instructions transmitted to and received by the Sub-Transfer Agent by transmission from NSCC on behalf of broker-dealers and banks which have been established by, or in accordance with the instructions of authorized persons, as hereinafter defined on the dealer file maintained by the Sub-Transfer Agent; (ii) issue instructions to Fund’s banks for the settlement of transactions between the Fund and NSCC (acting on behalf of its broker-dealer and bank

participants); (iii) provide account and transaction information from the affected Fund’s records on DST Systems, Inc. computer system TA2000 (“TA2000 System”) in accordance with NSCC’s Networking and Fund/SERV rules for those broker-dealers; and (iv) maintain Shareholder accounts on TA2000 System through Networking;

(e) New Procedures. New procedures as to who shall provide certain of these services in Section 1 may be established in writing from time to time by agreement between the Transfer Agent and the Sub-Transfer. The Sub-Transfer Agent may at times perform only a portion of these services and the Transfer Agent, the Funds or their agent may perform these services on the Fund’s behalf; and

(f) Anti-Money Laundering (“AML”) Delegation. If the Transfer Agent elects to delegate to the Sub-Transfer Agent certain AML duties under this Agreement, the parties will agree to such duties and terms as stated in the attached schedule (“Schedule 1.2(f) entitled “AML Delegation” which may be changed from time to time subject to mutual written agreement between the parties. In consideration of the performance of the duties by the Sub-Transfer Agent pursuant to this Section 1.2(f) , the Transfer Agent agrees to pay the Sub-Transfer Agent for the reasonable administrative expense that may be associated with such additional duties in the amount as the parties may from time to time agree in writing in accordance with Section 3 (Fees and Expenses) below.

1.3

Fiduciary Accounts . With respect to certain retirement plans (such as individual retirement accounts (“IRAs”)) or accounts, SIMPLE IRAs, SEP IRAs, Roth IRAs, Coverdell Education Savings Accounts, and 403(b) Plans (collectively, such accounts, “Fiduciary Accounts”), the Sub-Transfer Agent, at the request of the Transfer Agent, shall arrange for the provision of appropriate prototype plans as well as provide or arrange for the provision of various services to such plans and/or accounts, which services may include custodial services to be provided by State Street Bank and Trust Company (the “Bank”), account set-up maintenance, and disbursements as well as such other services as the parties hereto shall mutually agree upon.

2.	Third Party Administrators for Defined Contribution Plans

2.1

The Fund may decide to make available to certain of its customers, a qualified plan program (the “Program”) pursuant to which the customers (“Employers”) may adopt certain plans of deferred compensation (“Plan or Plans”) for the benefit of the individual Plan participant (the “Plan Participant”), such Plan(s) being qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (“Code”) and administered by third party administrators which may be plan administrators as defined in the Employee Retirement Income Security Act of 1974, as amended)(the “TPA(s)”).

2.2

In accordance with the procedures established in the initial Schedule 2.1 entitled “Third Party Administrator Procedures”, as may be amended by the Sub-Transfer Agent and the Fund from time to time (“Schedule 2.1”), the Sub-Transfer Agent shall:

(a) Treat Shareholder accounts established by the Plans in the name of the Trustees, Plans or TPAs as the case may be as omnibus accounts;

(b) Maintain omnibus accounts on its records in the name of the TPA or its designee as the Trustee for the benefit of the Plan; and

2.3

Transactions identified under Section 2 of this Agreement shall be deemed exception services (“Exception Services”) when such transactions:

(a) Require the Sub-Transfer Agent to use methods and procedures other than those usually employed by the Sub-Transfer Agent to perform services under Section 1 of this Agreement;

(b) Involve the provision of information to the Sub-Transfer Agent after the commencement of the nightly processing cycle of the TA2000 System; or

(c) Require more manual intervention by the Sub-Transfer Agent, either in the entry of data or in the modification or amendment of reports generated by the TA2000 System than is usually required by non-retirement plan and pre-nightly transactions.

3.	Fees and Expenses

3.1

Fee Schedule. For the performance by the Sub-Transfer Agent pursuant to this Agreement, the Transfer Agent agrees to pay the Sub-Transfer Agent an annual maintenance fee for each Shareholder account as set forth in the attached fee schedule (“Schedule 3.1”). Such fees and out-of-pocket expenses and advances identified under Section 3.2 below may be changed from time to time subject to mutual written agreement between the Transfer Agent and the Sub-Transfer Agent.

3.2

Out-of-Pocket Expenses. In addition to the fee paid under Section 3.1 above, the Transfer Agent agrees to reimburse the Sub-Transfer Agent for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, mailing and tabulating proxies, records storage, or advances incurred by the Sub-Transfer Agent for the items set out in Schedule 3.1 attached hereto. In addition, any other expenses incurred by the Sub-Transfer Agent at the request or with the consent of the Transfer Agent, will be reimbursed by the Fund.

3.3

Postage. Postage for mailing of dividends, proxies, Fund reports and other mailings to all shareholder accounts shall be advanced to the Transfer Agent by the Fund at least seven (7) days prior to the mailing date of such materials.

3.4

Invoices. The Transfer Agent agrees to pay all fees and reimbursable expenses within thirty (30) days following the receipt of the respective billing notice, except for any fees or expenses which are subject to good faith dispute. In the event of such a dispute, the Transfer Agent may only withhold that portion of the fee or expense subject to the good faith dispute. The Transfer Agent shall notify the Sub-Transfer Agent in writing within twenty-one (21) calendar days following the receipt of each billing notice if the Transfer Agent is disputing any amounts in good faith. If the Transfer Agent does not provide such notice of dispute within the required time, the billing notice will be deemed accepted by the Transfer Agent. The Fund shall settle such disputed amounts within five (5) days of the day on which the parties agree on the amount to be paid by payment of the agreed amount. If no agreement is reached, then such disputed amounts shall be settled by law or legal process.

3.5

Cost of Living Adjustment . Following the first year of the Initial Term, the total fee for all services for each succeeding year shall equal the fee that would be charged for the same services based on a fee rate (as reflected in a fee rate schedule) increased by the percentage increase (not to exceed 5%) for the twelve-month period of such previous calendar year of the CPI-W (defined below), or, in the event that publication of such Index is terminated, any successor or substitute index, appropriately adjusted, acceptable to both parties. As used herein, “CPI-W” shall mean the Consumer Price Index for Urban Wage Earners and Clerical Workers for Boston-Brockton-Nashua, MA-NH-ME-CT, (Base Period: 1982-84 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics.

3.6

Late Payments . If any undisputed amount in an invoice of the Sub-Transfer Agent (for fees or reimbursable expenses) is not paid when due, the Transfer Agent shall pay the Sub-Transfer Agent interest thereon (from the due date to the date of payment) at a per annum rate equal to one percent (1.0%) plus the prime Rate (that is, the base rate on corporate loans posted by large domestic banks) published by The Wall Street Journal (or, in the event such rate is not so published, a reasonably equivalent published rate selected by the Transfer Agent on the first day of publication during the month when such amount was due. Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable provision of Massachusetts law.

4.	Representations and Warranties of the Sub-Transfer Agent

The Sub-Transfer Agent represents and warrants to the Transfer Agent that:

4.1

It is a corporation duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts.

4.2

It is duly qualified to carry on its business in The Commonwealth of Massachusetts.

4.3

It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement.

4.4

All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.

4.5

It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.

4.6

It will provide security, as set forth in Section 10 of this Agreement, for Transfer Agent materials in Sub-Transfer Agent’s possession, in the same manner and to the same extent by which Sub-Transfer Agent treats its own Confidential information.

4.7

It will provide to Transfer Agent, upon request, Sub-Transfer Agent’s certification related to its internal controls for handling of Transfer Agent’s information. Upon request, Sub-Transfer Agent will provide a copy of its SAS 70 report to Transfer Agent on an annual basis.

5.	Representations and Warranties of the Transfer Agent

The Transfer Agent represents and warrants to the Sub-Transfer Agent that:

5.1

It is a corporation duly organized and existing and in good standing under the laws of the State of Connecticut.

5.2

It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement.

5.3

All corporate proceedings required by said Articles of Incorporation and By-Laws have been taken to authorize it to enter into and perform this Agreement.

5.4

Each Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended.

5.5

A registration statement under the Securities Act of 1933, as amended is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale.

5.6

It has obtained, from each Fund, all consents and approvals necessary for the subcontracting of the Shareholder and Record-Keeping Services being provided herein.

6.	Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code

6.1

Obligation of Sender . The Sub-Transfer Agent is authorized to promptly debit the appropriate Transfer Agent account(s) upon the receipt of a payment order in compliance with the selected security procedure (the “Security Procedure”) chosen for funds transfer and in the amount of money that the Sub-Transfer Agent has been instructed to transfer. The Sub-Transfer Agent shall execute payment orders in compliance with the Security Procedure and with the Transfer Agent instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this the customary deadline will be deemed to have been received the next business day.

6.2

Security Procedure . The Transfer Agent acknowledges that the Security Procedure it has designated on the Transfer Agent Selection Form was selected by the Transfer Agent from security procedures offered by the Sub-Transfer Agent. The Transfer Agent shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated to the Sub-Transfer Agent in writing. The Transfer Agent must notify the Sub-Transfer Agent immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Transfer Agent’s authorized personnel. The Sub-Transfer Agent shall verify the authenticity of all Transfer Agent instructions according to the Security Procedure.

6.3

Account Numbers . The Sub-Transfer Agent shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.

6.4

Rejection . The Sub-Transfer Agent reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of the Sub-Transfer Agent’s receipt of such payment order; (b) if initiating such payment order would cause the Sub-Transfer Agent, in the Sub-Transfer Agent’s sole judgement, to exceed any volume, aggregate dollar, network, time, credit or similar limits which are applicable to the Sub-Transfer Agent; or (c) if the Sub-Transfer Agent, in good faith, is unable to satisfy itself that the transaction has been properly authorized.

6.5

Cancellation Amendment . The Sub-Transfer Agent shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording the Sub-Transfer Agent reasonable opportunity to act. However, the Sub-Transfer Agent assumes no liability if the request for amendment or cancellation cannot be satisfied.

6.6

Errors . The Sub-Transfer Agent shall assume no responsibility for failure to detect any erroneous payment order provided that the Sub-Transfer Agent complies with the payment order instructions as received and the Sub-Transfer Agent complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.

6.7

Interest. The Sub-Transfer Agent shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless the Sub-Transfer Agent is notified of the unauthorized payment order within thirty (30) days of notification by the Sub-Transfer Agent of the acceptance of such payment order. In no event (including failure to execute a payment order) shall the Sub-Transfer Agent be liable for special, indirect or consequential damages, even if advised of the possibility of such damages.

6.8

ACH Credit Entries/Provisional Payments . When the Transfer Agent initiates or receives Automated Clearing House credit and debit entries pursuant to these guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, the Bank will act as an Originating Depository Financial Institution and/or Receiving Depository Financial Institution, as the case may be, with respect to such entries. Credits given by the Sub-Transfer Agent with respect to an ACH credit entry are provisional until the Sub-Transfer Agent receives final settlement for such entry from the Federal Reserve Bank. If the Sub-Transfer Agent does not receive such final settlement, the Transfer Agent agrees that the Sub-Transfer Agent shall receive a refund of the amount credited to the Transfer Agent in connection with such entry, and the party making payment to the Transfer Agent via such entry shall not be deemed to have paid the amount of the entry.

6.9

Confirmation . Confirmation of Sub-Transfer Agent’s execution of payment orders shall ordinarily be provided within twenty four (24) hours notice of which may be delivered through the Sub-Transfer Agent’s proprietary information systems, or by facsimile or call-back. Transfer Agent must report any objections to the execution of an order within thirty (30) days.

7.	Data Access and Proprietary Information

7.1

The Transfer Agent acknowledges that the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Transfer Agent by the Sub-Transfer Agent as part of the Fund’s ability to access certain Fund-related data (“Customer Data”) maintained by the Sub-Transfer Agent on databases under the control and ownership of the Sub-Transfer Agent or other third party (“Data Access Services”) constitute copyrighted, trade secret, or other proprietary information (collectively, “Proprietary Information”) of substantial value to the Sub-Transfer Agent or other third party. In no event shall Proprietary Information be deemed Customer Data. The Transfer Agent agrees to treat all Proprietary Information as proprietary to the Sub-Transfer Agent and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Transfer Agent agrees for itself and its employees and agents to:

(a) Use such programs and databases (i) solely on the Transfer Agent’s computers, or (ii) solely from equipment at the location agreed to between the Sub-Transfer Agent and the Transfer Agent and (iii) solely in accordance with the Sub-Transfer Agent’s applicable user documentation;

(b) Refrain from copying or duplicating in any way (other than in the normal course of performing processing on the Transfer Agent’s computer(s)), the Proprietary Information;

(c) Refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the Sub-Transfer Agent’s instructions;

(d) Refrain from causing or allowing information transmitted from the Sub-Transfer Agent’s computer to the Transfer Agent’s terminal to be retransmitted to any other computer terminal or other device except as expressly permitted by the Transfer Agent (such permission not to be unreasonably withheld);

(e) Allow the Transfer Agent to have access only to those authorized transactions as agreed to between the Sub-Transfer Agent and the Transfer Agent; and

(f) Honor all reasonable written requests made by the Sub-Transfer Agent to protect at the Sub-Transfer Agent’s expense the rights of the Sub-Transfer Agent in Proprietary Information at common law, under federal copyright law and under other federal or state law.

7.2

Proprietary Information shall not include all or any portion of any of the foregoing items that: (i) are or become publicly available without breach of this Agreement; (ii) are released for general disclosure by a written release by the Sub-Transfer Agent; or (iii) are already in the possession of the receiving party at the time of receipt without obligation of confidentiality or breach of this Agreement.

7.3

The Transfer Agent acknowledges that its obligation to protect the Sub-Transfer Agent’s Proprietary Information is essential to the business interest of the Sub-Transfer Agent and that the disclosure of such Proprietary Information in breach of this Agreement would cause the Sub-Transfer Agent immediate, substantial and irreparable harm, the value of which would be extremely difficult to determine. Accordingly, the parties agree that, in addition to any other remedies that may be available in law, equity, or otherwise for the disclosure or use of the Proprietary Information in breach of this Agreement, the Sub-Transfer Agent shall be entitled to seek and obtain a temporary restraining order, injunctive relief, or other equitable relief against the continuance of such breach.

7.4

If the Transfer Agent notifies the Sub-Transfer Agent that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Sub-Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Sub-Transfer Agent may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Transfer Agent agrees to make no claim against the Sub-Transfer Agent arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE SUB-TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

7.5

If the transactions available to the Transfer Agent include the ability to originate electronic instructions to the Sub-Transfer Agent in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event the Sub-Transfer Agent shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Sub-Transfer Agent from time to time.

7.6

Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 7 . The obligations of this Section shall survive any earlier termination of this Agreement.

8.	Indemnification

8.1

The Sub-Transfer Agent shall not be responsible for, and the Transfer Agent shall indemnify and hold the Sub-Transfer Agent and with respect to Section 8.1(e) herein, also the Bank, harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:

(a) All actions of the Sub-Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, (including the defense of any law suit in which the Sub-Transfer Agent or affiliate is a named party), provided that such actions are taken in good faith and without negligence or willful misconduct;

(b) The Transfer Agent’s lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Transfer Agent hereunder;

(c) The reliance upon, and any subsequent use of or action taken or omitted, by the Sub-Transfer Agent, or its agents or subcontractors on: (i) any information, records, documents, data, stock certificates or services, which are received by the Sub-Transfer Agent or its agents or subcontractors by machine readable input, facsimile, CRT data entry, electronic instructions or other similar means authorized by the Transfer Agent, and which have been prepared, maintained or performed by the Transfer Agent or each Fund or any other person or firm on behalf of the Transfer Agent or each Fund including but not limited to any broker-dealer, TPA or previous transfer agent or registrar; (ii) any instructions or requests of the Transfer Agent or each Fund or any of its officers; (iii) any instructions or opinions of legal counsel with respect to any matter arising in connection with the services to be performed by the Sub-Transfer Agent under this Agreement which are provided to the Sub-Transfer Agent after consultation with such legal counsel; or (iv) any paper or document reasonably believed to be genuine, authentic, or signed by the proper person or persons;

(d) The acceptance of e-mail and facsimile transaction requests on behalf of individual Shareholders received from broker-dealers, TPAs, the Funds or the Transfer Agent, and the reliance by the Sub-Transfer Agent on the broker-dealer, TPA, the Fund or the Transfer Agent ensuring that the original source documentation is in good order and properly retained;

(e) The offer or sale of Shares in violation of federal or state securities laws or regulations requiring that such Shares be registered or in violation of any stop order or other determination or ruling by any federal or any state agency with respect to the offer or sale of such Shares;

(f) The negotiation and processing of any checks, wires and ACH payments including without limitation for deposit into the Fund’s demand deposit account maintained at the Bank; or

(g) Upon the Fund’s request entering into any agreements required by the NSCC for the transmission of Fund or Shareholder data through the NSCC clearing systems

8.2

In order that the indemnification provisions contained in this Section 8 shall apply, upon the assertion of a claim for which the Transfer Agent may be required to indemnify the Sub-Transfer Agent, the Sub-Transfer Agent shall promptly notify the Transfer Agent of such assertion, and shall keep the Transfer Agent advised with respect to all developments concerning such claim. The Transfer Agent shall have the option to participate with the Sub-Transfer Agent in the defense of such claim or to defend

against said claim in its own name or in the name of the Sub-Transfer Agent. The Sub-Transfer Agent shall in no case confess any claim or make any compromise in any case in which the Transfer Agent may be required to indemnify the Sub-Transfer Agent except with the Transfer Agent’s prior written consent.

9.	Standard of Care/Limitation of Liability

The Sub-Transfer Agent shall at all times act in good faith and agrees to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors, including encoding and payment processing errors, unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees or agents. The parties agree that any encoding or payment processing errors shall be governed by this standard of care and Section 4-209 of the Uniform Commercial Code is superseded by Section 9 of this Agreement. This standard of care shall apply to Exception Services as defined in Section 2.3 herein, but such application shall take into consideration the manual processing involved in, and time sensitive nature of, Exception Services. Notwithstanding the foregoing, Sub-Transfer Agent’s aggregate liability during any term of this Agreement with respect to, arising from or arising in connection with this Agreement, or from all services provided or omitted to be provided by Sub-Transfer Agent under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the aggregate of the amounts actually received hereunder by Sub-Transfer Agent as fees and charges, but not including reimbursable expenses, during the six (6) calendar months immediately preceding the event for which recovery from Sub-Transfer Agent is being sought.

10.	Confidentiality

10.1

The Sub-Transfer Agent and the Transfer Agent agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any customers’ lists, trade secrets, cost figures and projections, profit figures and projections, or any other secret or confidential information whatsoever, whether of the Sub-Transfer Agent or of the Transfer Agent, used or gained by the Sub-Transfer Agent or the Transfer Agent during performance under this Agreement. The Sub-Transfer Agent and the Transfer Agent further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of the Sub-Transfer Agent or the Transfer Agent and their successors and assigns. In the event of breach of the foregoing by either party, the remedies provided by Section 7.3 shall be available to the party whose confidential information is disclosed. The above prohibition of disclosure shall not apply to the extent that the Sub-Transfer Agent must disclose such data to its sub-contractor or Fund agent for purposes of providing services under this Agreement.

10.2

In the event that any requests or demands are made for the inspection of the Shareholder records of the Fund, other than request for records of Shareholders pursuant to standard subpoenas from state or federal government authorities (i.e., divorce and criminal actions), the Sub-Transfer Agent will use best efforts to notify the Transfer Agent and to secure instructions from an authorized officer of the Transfer Agent as to such

inspection. The Sub-Transfer Agent expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order.

11.	Covenants of the Transfer Agent and the Sub-Transfer Agent

11.1

The Sub-Transfer Agent hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Transfer Agent for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices.

11.2

The Sub-Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Sub-Transfer Agent agrees that all such records prepared or maintained by the Sub-Transfer Agent relating to the services to be performed by the Sub-Transfer Agent hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.

12.	Termination of Agreement

12.1

Term. The initial term of this Agreement (the “Initial Term”) shall be three years from the date first stated above unless terminated pursuant to the provisions of this Section 12 . Unless a terminating party gives written notice to the other party one hundred and twenty (120) days before the expiration of the Initial Term or any Renewal Term, this Agreement will renew automatically from year to year (each such year-to-year renewal term a “Renewal Term”). One hundred and twenty (120) days before the expiration of the Initial Term or a Renewal Term the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. Otherwise the fees shall be increased pursuant to Section 3.5 of this Agreement.

12.2

Termination by Transfer Agent for Cause. If Sub-Transfer Agent defaults in the performance of any of its material obligations (or repeatedly defaults in the performance of any of its other obligations) under this Agreement, and does not cure such default within sixty days (60) of notice of the default, then Transfer Agent may, by giving notice to Sub-Transfer Agent, terminate this Agreement as of the termination date specified in the notice of termination.

12.3

Early Termination. Notwithstanding anything contained in this Agreement to the contrary, should the Transfer Agent desire to move any of its services provided by the Sub-Transfer Agent hereunder to a successor service provider prior to the expiration of the then current Initial or Renewal Term, or without the required notice, the Sub-Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date; however, there can be no guarantee or assurance that the Sub-Transfer Agent will be able to facilitate a conversion of services on such prior date. In connection with the foregoing, should services be converted to a successor service provider, or if the Fund is liquidated or its assets merged or purchased or the like with or by another entity which does not utilize the services of the Transfer Agent, the fees payable to the Sub-Transfer

Agent shall be calculated as if the services had been performed by the Sub-Transfer Agent until the expiration of the then current Initial or Renewal Term and calculated at the asset and/or Shareholder account levels, as the case may be, on the date notice of termination was given to the Sub-Transfer Agent. In addition to the foregoing, the Transfer Agent shall pay to the Sub-Transfer Agent an amount equal to the aggregate of all discounts on fees received by the Transfer Agent which would, other than for such discounts, have been due and owed by the Transfer Agent to the Sub-Transfer Agent during the Initial Term or subsequent Renewal Term. For purposes of this provision the parties have calculated this amount to be $377,000 for each year or partial year remaining in the then current term. The payment of all fees to the Sub-Transfer Agent as set forth shall be accelerated to the business day immediately prior to the conversion or termination of services.

12.4

Expiration of Term. During the Initial Term or Renewal Term, whichever currently is in effect, should either party exercise its right to terminate, all out-of-pocket expenses or costs associated with the movement of records and material will be borne by the Transfer Agent. Additionally, the Sub-Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination.

12.5

Confidential Information. Upon termination of this Agreement, each party shall return to the other party all copies of confidential or proprietary materials or information received from such other party hereunder, other than materials or information required to be retained by such party under applicable laws or regulations.

12.6

Unpaid Invoices. The Sub-Transfer Agent may terminate this Agreement immediately upon an unpaid invoice payable by the Transfer Agent to the Sub-Transfer Agent being outstanding for more than ninety (90) days, except with respect to any amount subject to a good faith dispute within the meaning of Section 3.4 of this Agreement.

12.7

Bankruptcy. Either party hereto may terminate this Agreement by notice to the other party, effective at any time specified therein, in the event that (a) the other party ceases to carry on its business or (b) in the event that any of the following occur(s) and is not discharged within thirty days: (i) voluntary institution by the other party of insolvency, receivership, bankruptcy, or any other proceedings for the settlement of the other party’s debt, (ii) involuntary institution of insolvency, receivership, bankruptcy or any other proceedings for settlement of the other party’s debt, (iii) the making of general assignment by the other party for the benefit of creditors; or (iv) the dissolution of the other party.

13.	Assignment and Third Party Beneficiaries

13.1

Except as provided in Section 14.1 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. Any attempt to do so in violation of this Section shall be void. Unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or responsibility under this Agreement.

13.2

Except as explicitly stated elsewhere in this Agreement, nothing under this Agreement shall be construed to give any rights or benefits in this Agreement to anyone other than the Sub-Transfer Agent and the Transfer Agent, and the duties and responsibilities undertaken pursuant to this Agreement shall be for the sole and exclusive benefit of the Sub-Transfer Agent and the Transfer Agent. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.

13.3

This Agreement does not constitute an agreement for a partnership or joint venture between the Sub-Transfer Agent and the Transfer Agent. Other than as provided in Section 14.1 and Schedule 1.2(f), neither party shall make any commitments with third parties that are binding on the other party without the other party’s prior written consent.

14.	Subcontractors

14.1

The Sub-Transfer Agent may, with notice, but without further consent on the part of the Transfer Agent, subcontract for the performance hereof with a Sub-Transfer Agent affiliate duly registered as a transfer agent under Section 17A(c)(2) of the Securities Exchange Act of 1934; provided, however, that the Sub-Transfer Agent shall be fully responsible to the Transfer Agent for the acts and omissions of the Sub-Transfer Agent or its affiliate as it is for its own acts and omissions.

14.2

Nothing herein shall impose any duty upon the Sub-Transfer Agent in connection with or make the Sub-Transfer Agent liable for the actions or omissions to act of unaffiliated third parties such as, by way of example and not limitation, Airborne Services, Federal Express, United Parcel Service, the U.S. Mails, the NSCC and telecommunication companies, provided, if the Sub-Transfer Agent selected such company, the Sub-Transfer Agent shall have exercised due care in selecting the same.

15.	Miscellaneous

15.1

Amendment. This Agreement may be amended or modified by a written agreement executed by both parties.

15.2

Massachusetts Law to Apply. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.

15.3

Force Majeure. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. Performance under this Agreement shall resume when the affected party or parties are able to perform substantially that party’s duties.

15.4

Consequential Damages. Neither party to this Agreement shall be liable to the other party for consequential, indirect or special damages under any provision of this Agreement or for any consequential, indirect or special damages arising out of any act or failure to act hereunder.

15.5

Survival. All provisions regarding indemnification, warranty, liability, and limits thereon, and confidentiality and/or protections of proprietary rights and trade secrets shall survive the termination of this Agreement.

15.6

Severability. If any provision or provisions of this Agreement shall be held invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.

15.7

Priorities Clause. In the event of any conflict, discrepancy or ambiguity between the terms and conditions contained in this Agreement and any Schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.

15.8

Waiver. No waiver by either party or any breach or default of any of the covenants or conditions herein contained and performed by the other party shall be construed as a waiver of any succeeding breach of the same or of any other covenant or condition.

15.9

Merger of Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.

15.10

Counterparts. This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

15.11

Reproduction of Documents. This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction shall likewise be admissible in evidence.

15.12

Notices. All notices and other communications as required or permitted hereunder shall be in writing and sent by first class mail, postage prepaid, addressed as follows or to such other address or addresses of which the respective party shall have notified the other.

(a) If to Boston Financial Data Services, Inc. to:

Boston Financial Data Services, Inc.

2 Heritage Drive, 4 ^th Floor

North Quincy, Massachusetts 02171

Attn: Legal Department

Facsimile: (617) 483-2490

(b) If to the Transfer Agent, to:

Phoenix Equity Planning Corporation

101 Munson Street

Greenfield, Massachusetts 01301

Attention: Heidi Griswold

Facsimile: (413) 772-4112

cc: Phoenix Equity Planning Corporation

One American Row

Hartford, Connecticut 06115

Attention: Matthew Swendiman

16.	Additional Funds

In the event that any Fund establishes one or more series of Shares or a new investment company is added in addition to those listed on the attached Schedule A, with respect to which the Transfer Agent desires to have the Sub-Transfer Agent render services as sub-transfer agent under the terms hereof, it shall so notify the Sub-Transfer Agent in writing, and if the Sub-Transfer Agent agrees in writing to provide such services, such Fund or such series of Shares shall become a Portfolio (as the case may be) hereunder.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.


PHOENIX EQUITY PLANNING CORPORATION

By:		/s/ Heidi Griswold
Name:		Heidi Griswold
Title:		AVP, Mutual Fund Services

ATTEST:

/s/ Thomas J. Almstead


BOSTON FINANCIAL DATA SERVICES, INC.

BY:		/s/ Jane L. Brennan
		Jane Brennan, Divisional Vice President

ATTEST:

/s/ Steve Silverman, Client Service Officer

SCHEDULE A

January 1, 2005

Phoenix Equity Trust

Phoenix Mid-Cap Value Fund

Phoenix-Aberdeen Worldwide Opportunities Fund

Phoenix Partner Select Funds

Phoenix Partner Select Wealth Builder Fund

Phoenix Partner Select Wealth Guardian Fund

The Phoenix-Engemann Funds

Phoenix-Engemann Balanced Return Fund

Phoenix-Engemann Focus Growth Fund

Phoenix-Engemann Nifty Fifty Fund

Phoenix-Engemann Small-Cap Growth

Phoenix Multi-Series Trust

Phoenix-Goodwin Multi-Sector Fixed Income Fund

Phoenix-Goodwin Multi-Sector Short Term Bond Fund

Phoenix Institutional Mutual Funds

Phoenix Institutional Bond Fund

Phoenix Strategic Equity Series Fund

Phoenix-Seneca Growth Fund

Phoenix-Seneca Strategic Theme Fund

Phoenix Equity Series Fund

Phoenix Growth & Income Fund

Phoenix Portfolios

Phoenix Market Neutral Fund

Phoenix Institutional Mutual Funds

Phoenix Institutional Bond Fund

Phoenix Investment Series Fund

Phoenix Income & Growth Fund

Phoenix Global Utilities Fund

Phoenix Investment Trust 97

Phoenix Small Cap Value Fund

Phoenix Value Equity Fund

Phoenix-Goodwin Multi Sector Fixed Income Fund, Inc.

Phoenix Goodwin California Tax-Exempt Bond Fund

Phoenix Strategic Allocation Fund

Phoenix Multi-Portfolio Fund

Phoenix-Aberdeen International Fund

Phoenix-Duff & Phelps Real Estate Securities Fund

Phoenix-Goodwin Emerging Markets Bond Fund

Phoenix-Goodwin Tax Exempt Bond Fund

Phoenix-Kayne Funds

Phoenix-Kayne Rising Dividends Fund

Phoenix-Kayne Small-Mid Cap Fund

Phoenix-Kayne International Fund

Phoenix-Kayne Intermediate Total Return Bond Fund

Phoenix-Kayne California Intermediate Tax-Free Bond Fund

SCHEDULE A

January 1, 2005

(continued)

Phoenix-Seneca Funds

Phoenix-Seneca Bond Fund

Phoenix-Seneca Mid-Cap “EDGE” Fund

Phoenix-Seneca Equity Income Fund

Phoenix Series Fund

Phoenix Core Bond Fund

Phoenix-Engemann Mid-Cap Growth Fund

Phoenix-Engemann Capital Growth Fund

Phoenix-Goodwin High Yield Fund

Phoenix-Goodwin Money Market Fund


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Jane L. Brennan
Name:	Heidi Griswold		Jane Brennan, Divisional Vice President
Title:	AVP, Mutual Fund Services

SCHEDULE 1.2(g)

AML DELEGATION

Delegation. In connection with the enactment of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and the regulations promulgated thereunder, (collectively, the “USA PATRIOT Act”), the Transfer Agent and the Funds have developed and implemented a written anti-money laundering program (the “AML Program”), which is designed to satisfy the requirements of the USA PATRIOT Act. Under the USA PATRIOT Act, a mutual fund can elect to delegate certain duties with respect to the implementation and operation of its AML Program to a service provider, including its transfer agent. The Funds have made such a delegation to the Transfer Agent. In accordance with the Funds’ delegation, the Transfer Agent is desirous of having the Sub-Transfer Agent perform certain delegated duties pursuant to the AML Program and the Sub-Transfer Agent desires to accept such delegation.

Limitation on Delegation. The Transfer Agent acknowledges and agrees that in accepting the delegation hereunder, the Sub-Transfer Agent is agreeing to perform only those services that have been expressly delegated hereby as the same may from time to time be amended and is not undertaking and shall not be responsible for any other aspect of the AML Program or for the overall compliance by the Funds with the USA PATRIOT Act or for any other matters delegated by the Funds to the Transfer Agent that have not been further delegated hereunder. Additionally, the parties acknowledge and agree that the Sub-Transfer Agent shall only be responsible for performing the delegated duties with respect to the ownership of, and transactions in, shares in the Funds for which the Sub-Transfer Agent maintains the applicable shareholder information.

Consent to Examination. In connection with the performance by the Sub-Transfer Agent of the delegated duties below, the Sub-Transfer Agent understands and acknowledges that the Transfer Agent and the Funds remain responsible for assuring compliance with the USA PATRIOT Act and that the records the Sub-Transfer Agent maintains for the Transfer Agent on behalf of the Funds relating to the AML Program may be subject, from time to time, to examination and/or inspection by federal regulators in order that the regulators may evaluate such compliance. The Sub-Transfer Agent hereby consents to such examination and/or inspection and agrees to cooperate with such federal examiners in connection with their review. For purposes of such examination and/or inspection, the Sub-Transfer Agent will use its best efforts to make available, during normal business hours and on reasonable notice all required records and information for review by such examiners.

4.	Delegated Duties.

4.1

Consistent with the services provided by the Sub-Transfer Agent and with respect to the beneficial ownership of, and transactions in, shares in the Fund for which the Sub-Transfer Agent maintains the applicable shareholder information, the Sub-Transfer Agent shall:

(a)

Submit all financial and non-financial transactions through the Office of Foreign Assets Control (“OFAC”) database and such other lists or databases as may be required from time to time by applicable regulatory authorities;

SCHEDULE 1.2(f)

AML DELEGATION

(continued)

(b)

Review special payee checks through OFAC database;

(c)

Review redemption transactions that occur within thirty (30) days of account establishment or maintenance;

(d)

Review wires sent pursuant to banking instructions other than those on file with the Sub-Transfer Agent;

(e)

Review accounts with small balances followed by large purchases;

(f)

Review accounts with frequent activity within a specified date range followed by a large redemption;

(g)

On a daily basis, review purchase and redemption activity per tax identification number (“TIN”) within the Funds to determine if activity for that TIN exceeded the $100,000 threshold on any given day;

(h)

Monitor and track cash equivalents under $10,000 for a rolling twelve-month period and file IRS Form 8300 and issue the Shareholder notices required by the IRS;

(i)

Determine when a suspicious activity report (“SAR”) should be filed as required by regulations applicable to mutual funds; prepare and file the SAR. Provide the Transfer Agent with a copy of the SAR within a reasonable time after filing; notify the Transfer Agent if any further communication is received from U.S. Department of the Treasury or other law enforcement agencies regarding the SAR;

(j)

Compare account information to any FinCEN request received by the Transfer Agent and provided to the Transfer Agent pursuant to USA PATRIOT Act Sec. 314(a). Provide the Transfer Agent with documentation/information necessary to respond to requests under USA PATRIOT Act Sec. 314(a) within required time frames; and

(k)

In accordance with procedures agreed upon by the parties (which may be amended from time to time by mutual agreement of the parties) (i) verify the identity of any person seeking to open an account with a Fund, (ii) Maintain records of the information used to verify the person’s identity and (iii) Determine whether the person appears on any lists of known or suspected terrorists or terrorists organizations provided to the Transfer Agent by any government agency.

SCHEDULE 1.2(f)

AML DELEGATION

(continued)

4.2

In the event that the Sub-Transfer Agent detects suspicious activity as a result of the foregoing procedures, which necessitates the filing by the Sub-Transfer Agent of a SAR, a Form 8300 or other similar report or notice to OFAC, then the Sub-Transfer Agent shall also immediately notify the Transfer Agent, unless prohibited by applicable law.


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Jane L. Brennan
Name:	Heidi Griswold		Jane Brennan, Divisional Vice President
Title:	AVP, Mutual Fund Services

SCHEDULE 2.1

THIRD PARTY ADMINISTRATOR(S) PROCEDURES

Dated: January 1, 2005

On each day on which both the New York Stock Exchange and the Fund are open for business (a “Business Day”), the TPA(s) shall receive, on behalf of and as agent of the Fund, Instructions (as hereinafter defined) from the Plan. Instructions shall mean as to each Fund (i) orders by the Plan for the purchases of Shares, and (ii) requests by the Plan for the redemption of Shares; in each case based on the Plan’s receipt of purchase orders and redemption requests by Participants in proper form by the time required by the terms of the Plan, but not later than the time of day at which the net asset value of a Fund is calculated, as described from time to time in that Fund’s prospectus. Each Business Day on which the TPA receives Instructions shall be a “Trade Date”.

2.	The TPA(s) shall communicate the TPA(s)’s acceptance of such Instructions, to the applicable Plan.

On the next succeeding Business Day following the Trade Date on which it accepted Instructions for the purchase and redemption of Shares, (TD+1), the TPA(s) shall notify the Sub-Transfer Agent of the net amount of such purchases or redemptions, as the case may be, for each of the Plans. In the case of net purchases by any Plan, the TPA(s) shall instruct the Trustees of such Plan to transmit the aggregate purchase price for Shares by wire transfer to the Sub-Transfer Agent on (TD+1). In the case of net redemptions by any Plan, the TPA(s) shall instruct the Fund’s custodian to transmit the aggregate redemption proceeds for Shares by wire transfer to the Trustees of such Plan on (TD+1). The times at which such notification and transmission shall occur on (TD+1) shall be as mutually agreed upon by each Fund, the TPA(s), and the Sub-Transfer Agent.

The TPA(s) shall maintain separate records for each Plan, which record shall reflect Shares purchased and redeemed, including the date and price for all transactions, and Share balances. The TPA(s) shall maintain on behalf of each of the Plans a single master account with the Sub-Transfer Agent and such account shall be in the name of that Plan, the TPA(s), or the nominee of either thereof as the record owner of Shares owned by such Plan.

5.	The TPA(s) shall maintain records of all proceeds of redemptions of Shares and all other distributions not reinvested in Shares.

The TPA(s) shall prepare, and transmit to each of the Plans, periodic account statements showing the total number of Shares owned by that Plan as of the statement closing date, purchases and redemptions of Shares by the Plan during the period covered by the statement, and the dividends and other distributions paid to the Plan on Shares during the statement period (whether paid in cash or reinvested in Shares).

7.	The TPA(s) shall, at the request and expense of each Fund, transmit to the Plans prospectuses, proxy materials, reports, and other information provided by each Fund for delivery to its shareholders.

SCHEDULE 2.1

THIRD PARTY ADMINISTRATOR(S) PROCEDURES

Dated: January 1, 2005

(continued)

8.	The TPA(s) shall, at the request of each Fund, prepare and transmit to each Fund or any agent designated by it such periodic reports covering Shares of each Plan as each Fund shall reasonably conclude are necessary to enable the Fund to comply with state Blue Sky requirements.

9.	The TPA(s) shall transmit to the Plans confirmation of purchase orders and redemption requests placed by the Plans; and

10.	The TPA(s) shall, with respect to Shares, maintain account balance information for the Plan(s) and daily and monthly purchase summaries expressed in Shares and dollar amounts.

11.

Plan sponsors may request, or the law may require, that prospectuses, proxy materials, periodic reports and other materials relating to each Fund be furnished to Participants in which event the Sub-Transfer Agent or each Fund shall mail or cause to be mailed such materials to Participants. With respect to any such mailing, the TPA(s) shall, at the request of the Sub-Transfer Agent or each Fund, provide at the TPA(s)’s expense a complete and accurate set of mailing labels with the name and address of each Participant having an interest through the Plans in Shares.


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Jane L. Brennan
Name:	Heidi Griswold		Jane Brennan, Divisional Vice President
Title:	AVP, Mutual Fund Services

SCHEDULE 2.1

FEES

January 1, 2005 through December 31, 2007

General: Fees are billable on a monthly basis at the rate of 1/12 ^th of the annual fee and include National Quality Review charges. A charge is made for an account in the month that an account opens or closes. Account service fees are the higher of; (a) open account charges plus closed account charges or, (b) the CUSIP minimum. A CUSIP that merges with another CUSIP shall be charged account service fees through May of the year following the calendar year in which the CUSIP merged. CUSIPs are subject to account service fees until purged from the TA2000 System.


Annual Account Service Fees*
Open Account
Closed Account

*Note: A CUSIP Minimum Fee of $ /month applies.

Other Annual Fees
Investor
12b-1 Commissions/TASS
COMFEE Processing
Transaction Fees
Checkwriting
Automated Work Station (“AWD”) Support Fees
1-150 Workstations
151+ Workstations
AWD AUTOSOURCE
NT Fax

Out-of-Pocket Expenses**: Out-of-pocket expenses include but are not limited to confirmation statement files, NSCC charges, postage, forms, audio response, Internet based applications, disaster backup, project management, business event management, programming, reports, telephone/line charges, faxes, transmissions, freight, records retention, federal funds wires, microfiche, CD ROMS, fund implementation and expenses incurred at the specific direction of the Transfer Agent.

**Note:

The Sub-Transfer Agent agrees to inform the Transfer Agent of rate changes prior to their implementation.


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Jane L. Brennan
Name:	Heidi Griswold		Jane Brennan, Divisional Vice President
Title:	AVP, Mutual Fund Services

AMENDMENT

SUB-TRANSFER AGENCY AND SERVICE AGREEMENT

BETWEEN

PHOENIX EQUITY PLANNING CORPORATION AND

BOSTON FINANCIAL DATA SERVICES, INC.

This Amendment is made as of this 1 ^st day of July 2006 between Phoenix Equity Planning Corporation (the “Transfer Agent”) and Boston Financial Data Services, Inc. (the “Sub-Transfer Agent”). In accordance with Article 3 (Fees and Expenses), Article 15.1 (Amendment) and Article 16 (Additional Funds) of the Sub-Transfer Agency and Service Agreement between the Transfer Agent and Sub-Transfer Agent dated as of January 1, 2005 (the “Agreement”), the parties desire to amend the Agreement as set forth herein.

NOW THEREFORE, the parties agree as follows:

1.	Schedule A. The Schedule A dated November 10, 2005 is hereby replaced with the attached Schedule A dated July 1, 2006.

2.	Schedule 3.1. The fee schedule dated January 1, 2005 through December 31, 2007 to the Agreement is hereby replaced with the attached Schedule 3.1 effective July 1, 2006 through June 30, 2009.

2.	All defined terms and definitions in the Agreement shall be the same in this amendment (the “2006 Amendment”) except as specifically revised by this 2006 Amendment.


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Steve Silverman
Name:	Heidi Griswold	Name:	Steve Silverman
Title:	2 ^nd VP, Mutual Fund Services	Title:	Client Service Officer

SCHEDULE A

July 1, 2006

Phoenix Adviser Trust

Phoenix Focused Value Fund

Phoenix Foreign Opportunities Fund

Phoenix Asset Trust

Phoenix CA Intermediate Tax-Free Bond Fund

Phoenix Rising Dividends Fund

Phoenix Small-Mid Cap Fund

Phoenix CA Tax-Exempt Bond Fund

Phoenix Equity Series Fund

Phoenix Growth & Income Fund

Phoenix Equity Trust

Phoenix Mid-Cap Value Fund

Phoenix Pathfinder Fund

Phoenix Relative Value Fund

Phoenix Total Value Fund

Phoenix Worldwide Strategies Fund

Phoenix Insight Funds Trust

Phoenix Insight Balanced Fund

Phoenix Insight Bond Fund

Phoenix Insight Core Equity Fund

Phoenix Insight Emerging Markets Fund

Phoenix Insight Equity Fund

Phoenix Insight Government Money Market Fund

Phoenix Insight High Yield Bond Fund

Phoenix Insight Index Fund

Phoenix Insight Intermediate Government Bond Fund

Phoenix Insight Intermediate Tax-Exempt Bond Fund

Phoenix Insight International Fund

Phoenix Insight Money Market Fund

Phoenix Insight Short/Intermediate Bond Fund

Phoenix Insight Small-Cap Growth Fund

Phoenix Insight Small-Cap Opportunity Fund

Phoenix Insight Small-Cap Value Fund

Phoenix Insight Tax-Exempt Bond Fund

Phoenix Insight Tax-Exempt Money Market Fund

SCHEDULE A

(continued)

July 1, 2006

Phoenix Institutional Mutual Funds

Phoenix Institutional Bond Fund

Phoenix Low-Duration Core Plus Bond Fund

Phoenix Investment Series Fund

Phoenix Global Utilities Fund

Phoenix Income & Growth Fund

Phoenix Investment Trust 06

Phoenix All-Cap Growth Fund

Phoenix Nifty Fifty Fund

Phoenix Small-Cap Growth Fund

Phoenix Investment Trust 97

Phoenix Quality Small-Cap Fund

Phoenix Small-Cap Sustainable Growth Fund

Phoenix Small-Cap Value Fund

Phoenix Value Equity Fund

Phoenix Multi-Portfolio Fund

Phoenix Emerging Markets Bond Fund

Phoenix International Strategies Fund

Phoenix Real Estate Securities Fund

Phoenix Tax-Exempt Bond Fund

Phoenix Multi-Series Trust

Phoenix High Yield Securities Fund

Phoenix Multi-Sector Fixed Income Fund

Phoenix Multi-Sector Short Term Bond Fund

Phoenix Opportunities Trust

Phoenix Bond Fund

Phoenix Earnings Driven Growth Fund

Phoenix Growth Opportunities Fund

Phoenix PHOLIOs ^SM

Phoenix Conservative Income PHOLIO

Phoenix Diversifier PHOLIO

Phoenix International PHOLIO

Phoenix Wealth Accumulator PHOLIO

Phoenix Wealth Builder PHOLIO

Phoenix Wealth Guardian PHOLIO

SCHEDULE A

(continued)

July 1, 2006

Phoenix Wealth Preserver PHOLIO

Phoenix Portfolios

Phoenix Market Neutral Fund

Phoenix Series Fund

Phoenix Balanced Fund

Phoenix Capital Growth Fund

Phoenix Core Bond Fund

Phoenix High Yield Fund

Phoenix Mid-Cap Growth Fund

Phoenix Money Market Fund

Phoenix Strategic Equity Series Fund

Phoenix Dynamic Growth Fund

Phoenix Fundamental Growth Fund

Phoenix Large-Cap Growth Fund

Phoenix Strategic Growth Fund


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Steve Silverman
Name:	Heidi Griswold	Name:	Steve Silverman
Title:	2 ^nd VP, Mutual Fund Services	Title:	Client Service Officer

Schedule 3.1

Fees

July 1, 2006 through June 30, 2009

General: Fees are billable on a monthly basis at the rate of 1/12 ^th of the annual fee and include National Quality Review charges. A charge is made for an account in the month that an account opens or closes. Account service fees are open account charges plus closed account charges. A CUSIP that merges with another CUSIP shall be charged account service fees through May of the year following the calendar year in which the CUSIP merged. CUSIPs are subject to account service fees until purged from the TA2000 System.


Annual Account Service Fees
Open Accounts: (up to 800,000 accounts)*
Direct Accounts
Networked Accounts
Closed Accounts

Other Annual Fees
Investor
Complex Base Fee
12b-1 Commissions/TASS (per account)
COMFEE Processing (once initialized)

Transaction Fees
Checkwriting

*	A discount of $ per account will be applied for each account in excess of 800,000 accounts. An additional discount of $.25 per account will be applied for accounts in excess of 1,000,000 accounts.

Out-of-Pocket Expenses ** : Out-of-pocket expenses include but are not limited to Automated Work Station “AWD” support fees, confirmation statement files, NSCC charges, postage, forms, audio response, Internet based applications, disaster backup, project management, business event management, programming, reports, telephone/line charges, faxes, transmissions, freight, records retention, federal funds wires, microfiche, CD ROMS, fund implementation and expenses incurred at the specific direction of the Transfer Agent.


PHOENIX EQUITY PLANNING CORPORATION		BOSTON FINANCIAL DATA SERVICES, INC.

By:	/s/ Heidi Griswold	By:	/s/ Steve Silverman
Name:	Heidi Griswold	Name:	Steve Silverman
Title:	2 ^nd VP, Mutual Fund Services	Title:	Client Service Officer

AMENDMENT

Sub-Transfer Agency and Service Agreement

Between

Phoenix Equity Planning Corporation

and

Boston Financial Data Services, Inc.

This Amendment is effective as of July 1, 2008 (the “Effective Date”), between Phoenix Equity Planning Corporation (the “Transfer Agent”) and Boston Financial Data Services, Inc. (the “Sub-Transfer Agent”). The Transfer Agent and the Sub-Transfer Agent are parties to a Sub-Transfer Agency and Service Agreement dated January 1, 2005, as amended (the “Agreement”). In accordance with Section 15.1 (Amendment) of the Agreement, the parties desire to amend the Agreement as set forth herein.

NOW THEREFORE, the parties agree as follows:

1.	Section 1.1 The last sentenced is hereby modified and replaced with the following:

In accordance with procedures established from time to time by agreement between the Transfer Agent and the Sub-Transfer Agent, and as further defined in Section 1.2(h) , the Sub-Transfer Agent agrees that it will perform the following Shareholder and Record-Keeping services

2.	Section 1.2 of the Agreement is hereby amended as follows:

The following sentence is added to Sub-section 1.2(a):

To the extent that the Sub-Transfer Agent provides any services under this Agreement that relate to compliance by the Transfer Agent with the Internal Revenue Code of 1986 or any other tax law, including without limitation the services described in this Section 1.2(a), the Sub-Transfer Agent not make any judgments or exercise any discretion of any kind (except to the extent of making mathematical calculations, classifications or other actions based on express instructions from the Transfer Agent), including with regard to: (i) determining the actions required for compliance or when compliance has been achieved; (ii) determining the amounts of taxes that should be withheld on Shareholder accounts; (iii) determining the amounts that should be reported in or on any specific box or line of any tax form; (iv) classifying the status of Shareholders and Shareholders accounts under applicable tax law; and (v) paying withholding and other taxes.

The period at the end of sub-section 1.2(f) is replaced with a semicolon;

The following new sub-sections to Section 1.2, including the attached Schedule 1.2(g) , Schedule 1.2(h) and Schedule 1.2(i) are hereby added to the Agreement:

(g)

Omnibus Transparency Services. Upon request of the Transfer Agent, the Sub-Transfer Agent shall carry out certain information requests, analyses and reporting services in support of the Fund’s obligations pursuant to Rule 22c-2(a)(2)(3) under the Investment Company Act of 1940, as amended. The parties will agree to such services and terms as stated in the attached schedule (“ Schedule 1.2(g) ” entitled “Omnibus Transparency Services”) that may be changed from time to time subject to mutual written agreement between the parties. In consideration of the performance of the services by the Sub-Transfer Agent pursuant to this Section 1.2(g) , the Transfer Agent agrees to pay the Sub-Transfer Agent such fees and expenses associated with such additional services as set forth under the heading “Omnibus Transparency Full Service Fees” on Schedule 3.1 . If at any time the Sub-Transfer Agent discontinues providing these services, the corresponding fees and expenses shall no longer apply;

(h)

Performance of Certain Services by the Fund or Affiliates or Agents. New procedures as to who shall provide certain of these services may be established in writing from time to time by agreement between the Fund and the Transfer Agent. The Sub-Transfer Agent may at times perform only a portion of these services and the Transfer Agent, the Fund or others appointed by the Transfer Agent or the Fund may perform the remainder of these services. As of the commencement of this Agreement, the parties agree that the division of the services as between the Transfer Agent and the Sub-Transfer Agent shall be as outlined in Schedule 1.2(h) , entitled “Division of Services,” and the fees set forth in Schedule 3.1 shall be payment for such division of services. Any material change to Schedule 1.2(h) shall be by mutual written agreement of the parties and in connection there with, the fees set forth in Schedule 3.1 shall be modified accordingly by the mutual written agreement of the parties;

(i)

Key Personnel. The Sub-Transfer Agent will use its best efforts to maintain the stability and continuity of Key Personnel (defined below) to provide services to the Transfer Agent and will not arbitrarily replace or reassign Key Personnel during the term of this Agreement. For purposes of this Agreement, Key Personnel shall mean the Relationship Manager and the Client Service Officer assigned to the Transfer Agent as of the date of this Amendment;

(j)

Dedicated Processing Team. The Sub-Transfer Agent will use its best efforts to maintain a dedicated transaction processing team to provide Services on behalf of the Transfer Agent to Phoenix Fund shareholders and will not arbitrarily replace or reassign team members during the term of this Agreement.

(k)

Service Level Agreement. The Parties will agree from time to time on service levels with respect to performance under this Agreement. Such Service Levels shall be set forth in a separate written agreement executed by both Parties, which may be modified by agreement of the Parties in writing from time to time.

As of either the Effective Date or, if later, the Conversion Date (as defined below), the fee schedule dated July 1, 2006 through June 30, 2009 is hereby replaced with the attached revised Schedule 3.1 , entitled “Fees.” The “Conversion Date” shall be the date upon which the parties mutually agree in good faith and in writing that the transition to the division of services set forth in Schedule 1.2(h) hereto is substantially complete.

4.	Section 3.5 of the Agreement is deleted and replaced with the following:

3.5

Cost of Living Adjustment . The fees hereunder shall not be adjusted prior to June 1, 2011. Beginning on June 1, 2011, the total fee for all services for each year shall equal the fee that would be charged for the same services based on a fee rate (as reflected in the then-current Schedule 3.1 ) adjusted by the lesser of (i) the percentage change for the twelve-month period of the previous calendar year of the Consumer Price Index (as more specifically defined below), and (ii) three percent (3%).

(a) Consumer Price Index . The parties agree to use the Consumer Price Index for all Urban Consumers (CPI-U) Northeast Urban Index (not seasonally adjusted) (Series ID CUUR0100SA0), Base Period 1982-1984 = 100 (the “CPI”), as the basis for cap on changes in fees. The CPI is published by the Bureau of Labor Statistics (the “ BLS ”) of the U.S. Department of Labor. For purposes of this Agreement, the most recently published CPI as of the date on which a cost of living adjustment occurs is the “ CPI Current Index ”, and the “ CPI Base Index ” is the CPI most recently published as of June 1, 2011 and the CPI most recently published as of the date for subsequent adjustments. If, on June 1 of any year beginning in 2011, the CPI Current Index is higher or lower than the CPI Base Index, then, effective as of such date, an adjustment to the fees will be made by increasing or decreasing the fees no greater than by the percentage that the CPI Current Index increased or decreased from the CPI Base Index, subject to the cap on changes to fees as stated above. In calculating the percentage change, the parties agree to round to one decimal place. The parties acknowledge and agree that Sub-Transfer Agent will adjust the fees and will advise Transfer Agent of such adjustments in writing so that the new fees will amend this Agreement and become effective on June 1 of the applicable year, subject to the terms hereof. If no adjustment is made on June 1 of any year beginning with 2011 for any reason, Sub-Transfer Agent will advise Transfer Agent in writing of such fact.

(b) Changes to Index . In the event that the BLS should stop publishing the CPI or should substantially change the content, format or calculation methodology of the CPI, the parties will substitute another comparable measure published by a mutually agreeable source, except as noted below. If the change is to redefine the base period for the CPI from one period to some other period, the parties will continue to use the index but will use the new base period figures for all future adjustments. If the change is to the name of the CPI, the new name will be used instead of the old name so long as the numbers previously published for the index have not changed.

5.	Section 8.1 of the Agreement is hereby amended as follows:

Subparagraph (f) is amended to remove the “or” from the end of the sentence. Subparagraph (g) is amended to add a semi-colon and “or” to the end of the sentence.

A new subparagraph (h) is added, which reads as follows:

“(h) Upon request of the Transfer Agent, the transmission by facsimile of shareholder or other information by the Sub-Transfer Agent to third parties designated by the Transfer Agent.”

6.	The following new Section 11.3 is hereby added to the Agreement:

11.3

In connection with the services provided under this Agreement, the Sub-Transfer Agent maintains and agrees to continue to maintain information security safeguards against the destruction, loss, theft or alteration of client-specific information in the possession of the Sub-Transfer Agent. The electronic delivery or transmission by the Sub-Transfer Agent to the Transfer Agent of any reports containing client-specific information shall be made only in accordance with mutually agreed upon procedures.

7.	As of the Effective Date of this Amendment (and not to be interpreted as in any manner invalidating the effectiveness of the Agreement prior such Effective Date), Section 12.1 of the Agreement is deleted and replaced with the following:

12.1.

Term. The term of this Agreement (the “Initial Term”) shall be from June 1, 2008 through May 31, 2012 unless terminated pursuant to the provisions of this Section 12 . Unless a terminating party gives written notice to the other party one hundred twenty (120) days before the expiration of the Initial Term or any Renewal Term, this Agreement will renew automatically from year to year (each such year-to-year renewal a “Renewal Term”). One hundred twenty (120) days before the expiration of the Initial Term or a Renewal Term, the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. Otherwise the fees shall be adjusted pursuant to Section 3.5 of the Agreement.

8.	Section 12.3 of the Agreement is deleted and replaced with the following

12.3 Early Termination. Notwithstanding anything contained in this Agreement to the contrary, should the Transfer Agent desire to move any of its services provided by the Sub-Transfer Agent hereunder to a successor service provider prior to the expiration of the Initial Term, or without the required notice, the Sub-Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date; however, there can be no guarantee or assurance that the Sub-Transfer Agent will be able to facilitate a conversion of services on such prior date. In connection with the foregoing, should the Transfer Agent determine to convert the services to a successor service provider, or if the Funds are liquidated or their assets merged or purchased or the like with or by another entity which does not utilize the services of the Sub-Transfer Agent, except in the case of termination by the Transfer Agent pursuant to Section 12.2 hereof, the Transfer Agent shall pay to

the Sub-Transfer Agent an early termination fee (“Early Termination Fee”). The Early Termination Fee payable to the Sub-Transfer Agent shall be calculated at no more than $590,000, to be reduced pro rata monthly over four (4) years from the Effective Date of this Amendment, so that at the end of such 4-year period there shall be no further Early Termination Fee. The payment of the Early Termination Fee to the Sub-Transfer Agent as set forth shall be accelerated to the business day immediately prior to the conversion or termination of services.

9.	The addresses listed in Section 15.12 of the Agreement are deleted and replaced with the following:

(a)

If to the Sub-Transfer Agent, to:

Boston Financial Data Services, Inc.

2 Heritage Drive

North Quincy, Massachusetts 02171

Attn: General Counsel, Legal Department

Facsimile: (617) 483-2490

(b)

If to the Transfer Agent, to:

Phoenix Equity Planning Corporation

101 Munson Street

Greenfield, Massachusetts 01301

Attention: Heidi Griswold

Facsimile: (413) 772-4112

With a copy to:

The Phoenix Companies, Inc.

One American Row

Hartford, Connecticut 06115

Attention: General Counsel

10.	All defined terms and definitions in the Agreement shall be the same in this amendment (the “Amendment”) except as specifically revised by this Amendment.

11.	Except as specifically set forth in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.

(SIGNATURES TO FOLLOW ON NEXT PAGE)

July 1, 2008 AMENDMENT

SIGNATURE PAGE


PHOENIX EQUITY PLANNING CORPORATION						BOSTON FINANCIAL DATA SERVICES, INC.

By: /s/ Heidi Griswold						By: /s/ Jane L. Brennan

Name: Heidi Griswold						Name: Jane L. Brennan

Title: Vice President, Mutual Fund Services						Title: Division Vice President

SCHEDULE 1.2(g)

OMNIBUS TRANSPARANCY SERVICES

Dated: July 1, 2008

A.	The Transfer Agent shall provide the following information to the Sub-Transfer Agent:

The name and contact information for each Financial Intermediary with which the Funds have a “shareholder information agreement” (under which the Financial Intermediary agrees to provide, at the Transfer Agent’s request, identity and transaction information about shareholders who hold their shares through an account with the Financial Intermediary (an “accountlet”)), that is to receive an information request;

The Funds to be included, along with each Fund’s frequent trading policy, under surveillance for the Financial Intermediary;

The frequency of supplemental data requests from the Sub-Transfer Agent;

The duration of supplemental data requests (e.g. 60 days, 90 days); and

The expected turnaround time for a response from the Financial Intermediary to an information request (including requests for supplemental data).

B.	Upon receipt of the foregoing information, the Transfer Agent hereby authorizes and instructs the Sub-Transfer Agent to perform the following Services:

Financial Intermediary Surveillance Schedules

(a)

Create a system profile and infrastructure to establish and maintain Financial Intermediary surveillance schedules and communication protocol/links.

(b)

Initiate information requests to the Financial Intermediaries.

Data Management Monitoring

(a)

Monitor status of information requests until all supplemental data is received.

(b)

If a Financial Intermediary does not respond to a second request from the Sub-Transfer Agent, the Sub-Transfer Agent shall notify the Transfer Agent for the Transfer Agent to follow up with the Financial Intermediary.

Customized Reporting for Market Timing Analysis

(a)

Run information received from the Financial Intermediaries through TA2000 System functionalities (utilizing PowerSelect tables, Short Term Trader and Excessive Trader).

SCHEDULE 1.2(g)

(continued)

(b)

Generate exception reports using parameters provided by the Transfer Agent.

Daily Exception Analysis of Market Timing Policies for Supplemental Data Provided

(a)

Review daily short-term trader exceptions, daily excessive trader exceptions, and daily supplemental data reconciliation exceptions.

(b)

Analyze Financial Intermediary supplemental data (items), which are identified as “Potential Violations” based on parameters established by the Funds.

(c)

Confirm exception trades and if necessary, request additional information regarding Potential Violations.

Communication and Resolution of Market Timing Exceptions

(a)

Communicate results of analysis to the Transfer Agent or upon request of the Transfer Agent directly to the Financial Intermediary.

(b)

Unless otherwise requested by the Transfer Agent and as applicable, instruct the Financial Intermediary to (i) restrict trading on the accountlet, (ii) cancel a trade, or (iii) prohibit future purchases or exchanges.

(c)

Update AWD with comments detailing resolution.

Management Reporting

(a)

Provide periodic reports, in accordance with agreed-upon frequency and content parameters, to the Funds. As reasonably requested by the Transfer Agent, the Sub-Transfer Agent shall also furnish ad hoc reports to the Transfer Agent.

Support Due Diligence Programs

(a)

Update system watch list with pertinent information on trade violators.


PHOENIX EQUITY PLANNING CORPORATION						BOSTON FINANCIAL DATA SERVICES, INC.

By: /s/ Heidi Griswold						By: /s/ Jane L. Brennan

Name: Heidi Griswold						Name: Jane L. Brennan

Title: Vice President, Mutual Fund Services						Title: Division Vice President

SCHEDULE 1.2(h)

DIVISION OF SERVICES


Function	Transfer Agent	Sub-Transfer Agent
*Transaction Processing*
Remittance Cash Processing (DDPS System)		X
Remittance Cash Processing QA		X
Offline Cash Deposits		X
Remittance Cash Processing – Items not in good order		X
Check Imaging – (ESTUB)		X
Plan Allocation Group Purchase Lists/Transmissions		X
Prepare Cash Estimates		X
ACH Payroll		X
ACH Payroll QA		X

Federal Fund Wire Purchases		X
Federal Fund Wire Purchases QA		X

New Account Setup		X
New Account Quality Assurance (QA)		X

Transfers (Re-registrations)		X
Transfers QA		X

Exchanges		X
Exchanges QA		X

Redemptions		X
Redemptions QA		X
Federal Funds Wire Redeems		X
Federal Funds Wire Redeems QA		X

Wire Order
Trade Establishment		X
Trade Settlement (Checks to BFDS)		X
QA		X
Monitoring of Outstanding Trades		X

Maintenance		X
Maintenance QA		X


Function	Transfer Agent	Sub-Transfer Agent
*Transaction Processing*
Certificates		X
Certificates QA		X

Adjustments		X
Adjustments QA		X

Vendor Oversight
SLA Review and Adherence	X
Management and Board Reporting	X
Ongoing Due Diligence and Feedback	X
Invoice and Billing Reconciliation	X

Customer Service
Telephones for Open and Closed End Funds (Series 6)	X
Correspondence (Shareholder/Dealer Letters/Emails)	X
Correspondence QA	X

Dealer Services
NSCC FundServ/Networking Implementation	X	X
NSCC FundServ/Networking Activity Monitoring and Trade Corrections		X
Dealer and Advisor File Maintenance		X
System Enhancements		X
Create NSCC Position Files		X
Create NSCC Commission Files		X
Telephones for NSCC Firms — segregation for Focus Firms		X

Operator Security
TA2000		X
AWD		X

Fund Control Reconciliation
Cash Settlement (including NSCC)		X
Reconcile Transfer Agent DDA’s		X
Compile Fund Share Activity & Estimates and Transmit to PFPC		X
Checkwriting Payments		X
Research and Resolve Imbalances	X	X


Function	Transfer Agent	Sub-Transfer Agent
Fund Control Reconciliation
Calculate and Pay Distributions		X
Produce Commission Data		X
Prepare Manual Checks		X
Sub Transfer Agent/Networking Invoice Reconciliation and Payment	X	X

Print & Electronic Output
Checks (Redeem, SWP, Dividend, Replacement)	X (Personix)
Investor Statements (Daily & Quarterly)	X (Personix)
Maintenance Verification (Bank or Address change)	X (Personix)
Tax Forms	X (Personix)
Corrected Tax Forms		X (DSTOutput)
RPO Mail		X
Microfiche (COOL)		N/A
CD Rom (Investment Checks)		X
E-Statements/Tax Forms	X (EPSIIA)
Dealer Statement CDRoms	X (EPSIIA)
Statement Suppression & Consent Database	X (EPSIIA)
Annual Account History Transcripts (COOL)	X

Compliance/Regulatory
Year End Tax Reporting		X
Proxy Mailing and Tabulation		X
Lost Shareholder Recovery and Reporting		X
Lost Certificate Filing and Processing		X
B & C Notice Reporting		X
Notice of Levy & Subpoena		X
Escheatment		X
W-8, W-9 Solicitation		X
Withholding Filing & Disbursement		X
Non Resident Alien Tax Reporting		X
Monitor Unusual Activity Report		X
Multi-State Bank Match Process		X
Monitor As Of Activity		X
Anti-Money Laundering/USA Patriot Act		X
Complaint Review and Reporting	X
Daily Excess Activity Review	X	X
22c2 – Monitoring and Reporting	X	X


Function	Transfer Agent	Sub-Transfer Agent
Client Services
Run Monthly Transaction Jobs		X
New Fund Setup	X	X
Fund Option Updates		X
Adhoc TA2000 Reports		X
Fund Mergers	X	X
Fund Closings	X	X
Mailings		X
Fiduciary Administration Fee	X	X
Billing to Fund for TA Services		X

Support
Maintain Dedicated PO Box		X
Mail Pickup		X
Mail Sort		X
Scanning		X
Records Retention	X	X
Global Systems Enhancements		X
Fund Specific Systems Enhancements	X	X
AWD Reporting	X	X
Reports On Line		X
Network Support/Maintenance		X
AWD Mainframe Support/Maintenance	X	X
Technical Support	X	X


PHOENIX EQUITY PLANNING CORPORATION						BOSTON FINANCIAL DATA SERVICES, INC.

By: /s/ Heidi Griswold						By: /s/ Jane L. Brennan

Name: Heidi Griswold						Name: Jane L. Brennan

Title: Vice President, Mutual Fund Services						Title: Division Vice President

SCHEDULE 3.1

FEES

Effective Date: July 1, 2008 through June 30, 2012

General: Fees are billable on a monthly basis at the rate of 1/12 ^th of the annual fee. A charge is made for an account in the month that an account opens or closes. A CUSIP that merges with another CUSIP shall be charged account service fees through May of the year following the calendar year in which the CUSIP merged. CUSIPs are subject to account service fees until purged from the TA2000 System.


Annual Account Service Fees:
Open Accounts ¹

Up to 700,000 accounts ²
Direct Accounts
Networked Accounts (ML 3)

Accounts in excess of 700,000 accounts
Direct Accounts
Networked Accounts (ML 3)

Accounts in excess of 1,000,000 accounts
Direct Accounts
Networked Accounts (ML 3)

Closed Accounts

Complex Base Fee

Fees also include the following services at no additional charge:
Audio Response – not including long distance and advanced features
State Tax Reporting
AML – Networked & Non-Networked
Federal Wires
Compliance Program (cont’d on next page)

¹	Open Accounts are defined as an account which is open at any time during the month. Open Accounts may also be referred to as “Accounts Serviced”.

²	Breakpoint Discounts

For Phoenix accounts between 700,001-1,000,000 the Sub-Transfer Agent will provide a discount of .

For each Phoenix account the Sub-Transfer Agent services above 1,000,000 a TOTAL discount of will apply.

For example: if the Sub-Transfer Agent services 1,000,000 Phoenix accounts, the discount would be .

If the Sub-Transfer Agent services 1,050,000 Phoenix accounts, the discount would be .

SCHEDULE 3.1

FEES

(continued)

Fees also include the following services at no additional charge:

Regulatory Compliance

Same Day Cash

AWD RIP

Omnibus Transparency (investigation fees only)

Investor

12b1/TASS

12b1 processing

Checkwriting

Commfee

Crystal reporting (for agreed upon reports where information available thru Powerselect)

Sub-TA invoice process

Omnibus Transparency Full Service Fees:

Annual Technology Fee

Accountlets ³

0-500,000

500,001-2,000,000

2,000,001 and greater

Investigation Fees

Out of Pocket Expenses:

In accordance with Section 3.2 of the Agreement.

Out-of-pocket expenses will not be increased without the prior approval of the Transfer Agent.


PHOENIX EQUITY PLANNING CORPORATION						BOSTON FINANCIAL DATA SERVICES, INC.

By: /s/ Heidi Griswold						By: /s/ Jane L. Brennan

Name: Heidi Griswold						Name: Jane L. Brennan

Title: Vice President, Mutual Fund Services						Title: Division Vice President

³ An accountlet is the underlying sub-position on a Financial Intermediary’s system for an omnibus account.

⁴ Sub-Transfer Agent shall provide at least 60 days prior written notice to the Transfer Agent in the event Sub-Transfer Agent removes this fee waiver.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated November 18, 2008, relating to the financial statements and financial highlights of Virtus Real Estate Securities Fund and Virtus Multi-Sector Short Term Bond Fund and our reports dated November 19, 2008, relating to the financial statements and financial highlights of Virtus Foreign Opportunities Fund, Virtus Global Infrastructure Fund, Virtus International Real Estate Securities Fund, Virtus Alternatives Diversifier Fund, Virtus Wealth Builder Fund, Virtus Wealth Guardian Fund, Virtus Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus Core Bond Fund, Virtus High Yield Fund, Virtus Money Market Fund, Virtus Multi-Sector Fixed Income Fund, Virtus Senior Floating Rate Fund, Virtus Global Opportunities Fund (formerly Virtus Worldwide Strategies Fund), and Virtus Market Neutral Fund, which appear in the September 30, 2008 Annual Reports to Shareholders of the aforementioned portfolios of Virtus Opportunities Trust, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings “Financial Highlights”, “Independent Registered Public Accounting Firm” and “Financial Statements” in such Registration Statement.

Boston, Massachusetts

January 27, 2009

CODE OF ETHICS

PHOENIX FUNDS

PURSUANT TO RULE 17j-1

OF THE 1940 ACT

Amended and Restated 08/2008

This Code of Ethics applies to all Access Persons of each advisory and broker-dealer subsidiary in their management and administration of the Phoenix Funds. The Advisers include Phoenix Investment Counsel, Inc.; Duff & Phelps Investment Management Co.; Engemann Asset Management; Euclid Advisors, LLC; Kayne Anderson Rudnick Investment Management, LLC, ; Seneca Capital Management, LLC; and Phoenix/Zweig Advisers LLC (for use herein referred to collectively as “Adviser”). Phoenix Equity Planning Corporation is a registered broker/dealer, a related subsidiary which currently provides services to the Funds and acts as the principal underwriter of the Funds. Access Persons of the investment advisers and subadvisers to the Funds that are not affiliated with Phoenix are governed by separate codes. To the extent necessary, each subsidiary may impose further limitations of personal trading subject to notifying the Chief Legal Officer and the Chief Compliance Officer of the applicable Fund.

Notwithstanding the above, the prohibitions in Section 2 below are imposed by Rule 17j-1, and apply to all Affiliated persons of the Funds and their investment advisers and subadvisers, whether or not they are governed by this Code of Ethics.

1.	*Statement of Ethical Principles*

Each Adviser holds its employees to a high standard of integrity and business practices. In serving their respective shareholders and clients, each Adviser strives to avoid conflicts of interest or the appearance of conflicts of interest in connection with the personal trading activities of its employees and the Fund’s securities transactions.

While affirming their confidence in the integrity and good faith of all of their employees, officers, trustees, and directors, each Adviser recognizes that the knowledge of present or future portfolio transactions or the power to influence portfolio transactions, if held by such individuals, could place them in a position where their personal interests might conflict with the interests of the Fund, if they were to trade in securities eligible for investment by the Fund.

In view of the foregoing and of the provisions of Rule 17j-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), each Adviser has determined to adopt this Code of Ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict) and to establish reporting requirements and enforcement procedures.

When Access Persons covered by the terms of this Code of Ethics engage in personal securities transactions, they must adhere to the following general principles as well as to the Code’s specific provisions:

(a)	At all times, the interests of Fund shareholders must be paramount;

(b)	Personal transactions must be conducted consistent with this Code of Ethics in a manner that avoids any actual or potential conflict of interest; and

(c)	No inappropriate advantage should be taken of any position of trust and responsibility.

(d)	Compliance with all applicable federal securities laws must be maintained.

2.	*Unlawful Actions*

It is unlawful for any Affiliated person of any Fund or any of its Advisers, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by any Fund:

(a)

to employ any device, scheme or artifice to defraud any Fund;

(b)

to make any untrue statement of a material fact to any Fund or omit to state a material fact necessary in order to make the statements made to any Fund, in light of the circumstances under which they are made, not misleading;

(c)

to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on any Fund; or to engage in any manipulative practice with respect to any Fund.

(d)

to divulge or act upon any material, non-public information, as such term is defined under relevant securities laws.

3.	*Definitions*

(a)

“Access Person”: pursuant to Rule 17j-1 of the Investment Company Act of 1940, means any Advisory Person of a Fund or of a Fund’s investment adviser. All of Advisers directors, officers, and general partners are presumed to be Access Persons of any Fund advised by the investment adviser. All of the Funds directors, officers, and general partners are presumed to be Access Persons of the Fund.

(b)

In addition, Access Persons include any director, officer or general partner of PEPCO, the principal underwriter of the Funds, who, in the ordinary course of business, makes, participates in or obtains information regarding the purchase or sale of Covered Securities by the Fund for which PEPCO acts, or whose functions or duties in the ordinary course of business relate to the making of any recommendation to the Fund regarding the purchase or sale of Covered Securities.

(c)

Advisory Person of a Fund or of a Fund’s investment adviser means:

(i)

Any director, officer, general partner or employee of the Fund or investment advisor (or of any company in a control relationship to the Fund or investment adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the purchase or sale of Covered Securities by a Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and

(ii)

Any natural person in a control relationship to the Fund or investment adviser who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of Covered Securities by the Fund.

(iii)

Any Investment Personnel.

(d)

“Affiliated person” of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer.

(e)

“Beneficial ownership” shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations thereunder. Generally, beneficial ownership means having or sharing, directly or indirectly through any contract, arrangement, understanding, relationship, or otherwise, a direct or indirect “pecuniary interest” in the security. For the purposes hereof,

(i)

“Pecuniary interest” means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security.

(ii)

“Indirect pecuniary interest” includes, but is not limited to: (a) securities held by members of the person’s “immediate family” (this means any child, child-in-law, stepchild, grandchild, parent, parent-in-law, stepparent, grandparent, spouse, sibling, or sibling-in-law and includes adoptive relationships) sharing the same household (which ownership interest may be rebutted); (b) a general partner’s proportionate interest in portfolio securities held by a general or limited partnership; (c) a person’s right to dividends that is separated or separable from the underlying securities (otherwise, a right to dividends alone will not constitute a pecuniary interest in securities); (d) a person’s interest in securities held by a trust; (e) a person’s right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; and (f) a

performance-related fee, other than an asset based fee, received by any broker, dealer, bank, insurance company, investment company, investment manager, trustee, or person or entity performing a similar function, with certain exceptions ( see Rule 16a-1(a)(2)).

(f)

“Chief Compliance Officer” refers to the person appointed by the Boards of the funds pursuant to the provisions of Rule 38a-1. Such person is identified on Schedule A hereto.

(g)

“Compliance Officer” may refer to the Fund’s designated Compliance Officer or an Adviser’s Compliance Officer or any person designated by each such to perform the administrative functions of this Code. Such persons are identified on Schedule B hereto.

(h)

“Control” shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act.

(i)

“Covered Security” means all securities, including options , exchange traded funds and those issued by any reportable fund, except securities that are direct obligations of the Government of the United States, bankers’ acceptances, bank certificates of deposit, commercial paper and shares of traditional, unaffiliated registered open-end investment companies.

(j)

“Disinterested Trustee” means a Trustee of a Fund who is not an “interested person” of the Fund within the meaning of Section 2(a)(19) of the 1940 Act.

(k)

“Initial Public Offering” means an offering of securities registered under the Securities Act of 1933, as amended, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.

(l)

“Investment Personnel” shall mean:

(i)

any employee of the Fund or Adviser (or of any company in a control relationship to the Fund or Adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Fund; and

(ii)

any natural person who controls the Fund or an Adviser and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of securities by the Fund. Investment Personnel includes any Portfolio Manager or other investment person, such as an analyst or trader, who provides information and advice to a Portfolio Manager or assists in the execution of the investment decisions.

(m)

“Limited Offering” or “Private Placement” means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) thereof, or pursuant to Rule 504, Rule 505, or Rule 506 thereunder.

(n)

“Managed Portfolio” shall mean those Funds, individually and collectively, for which the Portfolio Manager makes buy and sell decisions. For those Funds operating as series companies, Managed Portfolio shall include only the series for which the Portfolio Manager serves as the Portfolio Manager.

(o)

“Portfolio Manager” means the person or portfolio management team entrusted to make or participate in the making of the buy and sell decisions for a Fund, or series thereof; as disclosed in the Fund(s) prospectus.

(p)

“Purchase or sale of a security” includes, among other things, the writing of an option to purchase or sell a security or the purchase or sale of a security that is exchangeable for or convertible into a security.

(q)

“Reportable Fund” includes those 1940 Act registered investment companies for which the Adviser or an affiliate acts as adviser or sub-adviser, or principal underwriter.

(r)

“Security” shall have the meaning set forth in Section 2(a)(36) of the 1940 Act.

(s)

“Security Held or to be Acquired” by a Fund means:

(i)

any Covered Security which, within the most recent 15 days:

(A)

is or has been held by the Fund; or

(B)

is being or has been considered by the Fund or any of its investment advisers for purchase by the Fund; and

(ii)

any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described in paragraph (p)(i) of this Section.

A security is “being considered for purchase or sale” when a recommendation to purchase or sell a security has been made and communicated and, with respect to the Investment Personnel making the recommendation, when such person seriously considers making such a recommendation.

4.	*Exempted Transactions*

The preclearance prohibitions of Section 5 of this Code, shall not apply to:

(a)

accounts for which a third party (e.g. broker, financial advisor) makes all investment decisions on behalf of the Access Person. The discretionary arrangement must be documented to the Adviser’s Compliance Officer or his or her designee.

(b)

Purchases or sales which are non-volitional on the part of either the Advisory Person or the Fund.

(c)

Purchases of shares necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and subsequent sales of such securities.

(d)

Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

(e)

Purchase or sale of securities issued under an employee stock purchase or incentive program unless otherwise restricted.

5.	*Prohibited Activities*

(a)

IPO Rule : No Access Person may directly or indirectly acquire beneficial ownership in any securities in an Initial Public Offering (including IPOs offered through the Internet), except with the prior written approval of the Adviser’s Compliance Officer. No NASD registered person may participate in an IPO pursuant to NASD Rule 2790.

(b)

Limited Offering/Private Placement Rule : No Access Person may directly or indirectly acquire beneficial ownership in any securities in a Limited Offering or Private Placement except with the prior written approval of the Adviser’s Compliance Officer.

(i)

The Adviser’s Compliance Officer will make a record of any decision, and the reasons supporting the decision, to grant approval for transactions in IPOs and Limited Offerings, and will maintain these records for at least five years after the end of the fiscal year in which the approval is granted.

(c)

Preclearance Rule : No Advisory Person may directly or indirectly acquire or dispose of beneficial ownership in a Covered Security unless such transaction has been precleared by the Adviser’s Compliance Officer. All option transactions must be precleared . Preclearance is required prior to executing any trade through any personal brokerage account, unless specifically exempted under Section 4 above. Preclearance is valid through the business day next following the day preclearance is given.

(i)

The Adviser’s Compliance Officer will monitor investment activity by the Advisory Person involving the precleared transaction.

(ii)

Compliance reserves up to one business day to respond to any request for preclearance.

Note : Each Adviser’s Compliance Officer may deny approval of any transaction requiring preclearance under this Preclearance Rule, even if the transaction is nominally permitted under this Code of Ethics, if he or she reasonably believes that denying preclearance is necessary for the protection of a Fund. Any such denial may be appealed to the Fund’s Chief Compliance Officer. The decision of the Chief Compliance Officer shall be final.

(d)

Open Order Rule : No Advisory Person may directly or indirectly acquire or dispose of beneficial ownership in any Covered Security on a day during which a Fund has a pending “buy” or “sell” order for that security of the same type (i.e., buy or sell) as the proposed personal trade, until the Fund’s order is executed or withdrawn.

Exceptions : The following securities transactions are exempt from the Open Order Rule:

Purchases or sales of up to 500 shares of an issuer ranked in the Standard & Poor’s 500 Composite Stock Index (S&P 500) at the time of purchase or sale The Adviser’s Compliance Officer shall make available an updated list of such issuers quarterly.

Purchases or sales approved by the Adviser’s Compliance Officer in his/her discretion.

(e)

Blackout Rule : No Investment Personnel may directly or indirectly acquire or dispose of beneficial ownership in a Covered Security within seven calendar days before and after a Managed Portfolio trades in that Security.

Transactions permitted under the Blackout Rule must also satisfy the Open Order Rule and the Preclearance Rule, if and to the extent the transaction is not covered by exceptions to those rules.

(f)

Ban on Short-term Trading. Advisory Persons must hold all reportable securities, including options, for a period of not less than sixty (60) days from date of acquisition. Options must be written for a minimum 60 day term.

(g)

Gifts . No Access Person shall accept any gift or other item (for the purpose of this Code “gifts” include but are not limited to cash, merchandise, gifts, prizes, travel expenses, meals and certain types of entertainment) of more than $100 in value from any person or entity that does business with or on behalf of the Advisor or the Fund. All gifts and entertainment received or given must be reported to the Advisor’s Compliance Department.

Any profits realized by a Portfolio Manager on a personal trade in violation of Sections 5(d) (e) and (f) must be disgorged at the request of the Fund.

(h)

Service as Director . No Advisory Person shall serve on the board of directors of a publicly traded company without prior authorization by the President or the Compliance Officer of the Fund. If board service is authorized, such Advisory Person shall have no role in making investment decisions with respect to the publicly traded company.

(i)

Market Timing Prohibited . No Portfolio Manager shall engage in excessive trading or market timing activities with respect to any mutual fund whether or not such mutual fund is a Managed Portfolio, or is managed by such Adviser/Subadvisor or any affiliated adviser or subadviser. For the purposes of the foregoing, “market timing” shall be defined as a purchase and redemption, regardless of size, in and out of the same mutual fund within any sixty (60) day period. The foregoing restrictions shall not apply to Portfolio Managers investing in mutual funds through automatic reinvestment programs, and any other non-volitional investment vehicles. Portfolio Managers shall provide quarterly certifications as to their compliance with this restriction.

6.	*Reporting and Compliance Procedures*

(a)

The Code of Ethics, and any amendments thereto, shall be provided to every Access Person.

(b)

All Access Persons (other than Disinterested Trustees) shall direct their brokers to supply, at the same time that they are sent to the Access Person, a copy of the confirmation for each personal securities trade and a copy of each periodic account statement to the Adviser’s Compliance Officer.

(c)

Every Access Person shall report to the Fund the information described in Section 6(c) of this Code with respect to transactions in any Covered Security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the Covered Security, provided that

(i)

a Disinterested Trustee of the Fund need not report securities transactions unless the Trustee knew or, in the ordinary course of fulfilling his or her official duties as a Fund Trustee, should have known that during the 15-day period immediately before or after the Trustee’s transaction in a Covered Security, the Fund purchased or sold the Covered Security or the Fund or any of its investment advisers or subadvisers considered purchasing or selling the Covered Security, and

(ii)

An Access Person whose duplicate broker trade confirmations or account statements are received by the Adviser’s Compliance Officer, pursuant to Section 6(a) with respect to the time period required by Section 6(c), may reference that duplicate information in their quarterly report if all of the information required in Section 6(c) is contained in those confirmations and statements.

(d)

Every report required pursuant to Section 6(b) above shall be made not later than 15 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:

(i)

with respect to any transaction during the quarter in a Covered Security in which the Access Person (other than Disinterested Trustees) had or acquired any direct or indirect beneficial ownership:

(A)

The date of the transaction, the title and number of shares; the maturity date, principal amount and interest rate of debt securities, of each Covered Security involved; and, as applicable, the exchange ticker symbol or CUSIP number;

(B)

The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);

(C)

The price of the Covered Security at which the transaction was effected; and

(D)

The name of the broker, dealer or bank with or through whom the transaction was effected; and

(ii)

with respect to any account established during the quarter in which Securities were held during the quarter for the direct or indirect benefit of the Access Person:

(A)

The name of the broker, dealer, or bank with whom the Access Person established the account; and

(B)

The date the account was established.

(iii)

Access Persons are required to report transactions in any affiliated mutual fund for which they have any direct or indirect beneficial ownership; except as specifically exempted by Section 4 above.

(iv)

The date the report is submitted by the Access Person.

(e)

No later than 10 days after becoming an Access Person, and annually thereafter on or before January 31 of each year, each Access Person (other than Disinterested Trustees) must submit to the Adviser’s Compliance Officer a report of his or her personal securities holdings (the “Initial Holdings Report” and the “Annual Holdings Report”, respectively), which must include the following information (the Applicable Date for the Initial Holdings Report is the date the person became an Access Person; the Applicable Date for the Annual Holdings Report must be a date no earlier than December 31 of the prior year):

(i)

The title and number of shares; and/or the maturity date, principal amount and interest rate of debt securities; and, as applicable the exchange ticker symbol or CUSIP number of each Covered Security in which the Access Person had any direct or indirect beneficial ownership as of the Applicable Date.

(ii)

The name of any broker, dealer or bank with whom the Access Person maintained an account in which securities were held for the direct or indirect benefit of the Access Person as of the Applicable Date.

(iii)

The date the report is submitted by the Access Person.

(f)

Each Access Person (other than Disinterested Trustees) shall submit annually to the Adviser’s Compliance Officer a certification by the Access Person that he or she has received, read and understood the Code of Ethics, has complied with the Code’s requirements, and has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code’s requirements. The certification will be submitted to the Compliance Officer by January 31 of each year.

(g)

Any report made under this Section 6 may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.

(h) (i)

Each Fund’s Compliance Officer shall furnish to the applicable Fund’s Board of Trustees annually, and such Board will consider, a written report that:

(A)

Summarizes the current procedures under the Code of Ethics;

(B)

Describes any issues arising from the Code of Ethics or procedures since the last report to the Board, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations; and

(C)

Certifies that the Fund or the Adviser, as applicable, has adopted procedures reasonably necessary to prevent Access Persons from violating the Code.

(ii)

The Fund’s Compliance Officer shall obtain from each investment adviser and the subadviser to the Fund whose Access Persons are governed by its own Code of Ethics, a written report including the information and certification required in (B) and (C) above with respect to that Code.

(iii)

The Board will consider all of these reports.

(iv)

These reports will be available to the Chief Compliance Officer of the Funds.

(i)

Any Access Person shall immediately report any potential violation of this Code of which he or she becomes aware to the Adviser’s Compliance Officer.

(j)

An Access Person need not make reports under this Section 6 with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control.

(k)

Each Adviser’s Compliance Officer will review all reports and other information submitted under this Section 6. This review will include such comparisons with trading records of the Fund as are necessary or appropriate to determine whether there have been any violations of the Code.

(l)

Each Adviser’s Compliance Officer will maintain a list of all Access Persons who are required to make reports under the Code, and shall inform those Access Persons of their reporting obligations. Each Adviser’s Compliance Officer shall promptly notify any Access Person when any report has not been filed on a timely basis.

(m)

Please refer to Schedule B for person(s) to contact for preclearance and to file Annual Holdings and Quarterly Personal Securities Transaction reports.

7.	*Sanctions*

Upon discovering a violation of this Code, the Board of Trustees of a Fund may impose such sanctions as it deems appropriate, including inter alia, a letter of censure or suspension or termination of employment, or suspension of personal trading privileges for such period as it may deem appropriate. Provided further, the Adviser’s Compliance Officer shall review and present sanctions levied for non-compliance at each regularly scheduled Board meeting. Please see attached Schedule A of Sanctions that may be levied for violations of this Code.

8.	*Exceptions*

Each Adviser’s Compliance Officer, in consultation with the Chief Legal Officer, may grant written exceptions to provisions of the Code based on equitable considerations. The exceptions may be granted to individuals or classes of individuals with respect to particular transactions, classes of transactions or all transactions, and may apply to past as well as future transactions, provided , however , that no exception will be granted where the exceptions would result in a violation of Rule 17j-1. To the extent any such exception relates to an Access Person of a Fund, the exception will be reported to a Fund’s Board at its next regularly scheduled meeting. Notwithstanding anything herein to the contrary, the Compliance Officer shall promptly report any and all exceptions to the Chief Compliance Officer of the applicable Fund and the Chief Compliance Officer may provide an independent report to the applicable Board regarding his/her assessment of the merits and potential repercussions of granting any such exceptions.

9.	*Recordkeeping*

All Code of Ethics records will be maintained pursuant to the provisions of Rules 17j-1 and 204A-1.

10.

Other Codes of Ethics

This Code of Ethics does not amend or supersede any other Code(s) of Ethics that may affect the duties and obligations of any person affected hereby.

(Revised July 2008; approved )

Schedule A

Chief Compliance Officer of the Funds: Marc Baltuch

Schedule B

Person to contact for preclearance and reporting requirements: Frances Crisafulli

CERTIFICATION:

By my signature below, I certify that I have received, read, and understood the foregoing policies of the Phoenix Funds Code of Ethics, and will comply in all respects with such policies.





Name				Date

Please print or type name:


Initial Holdings Report	Q Report	Q Report Affiliated MF Transactions	Annual Report	Pre-Clear
All Access Persons	All Access Persons	Investment Personnel	All Access Persons	Advisory Persons
• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning	• 1 ^st violation – written warning • 2 ^nd violation within the same year - $100 fine payable to the Phoenix Foundation and suspension of trading privileges for 30 days • 3 ^rd violation within the same year – suspension of trading privileges for 90 days
Pre-Clear IPOs & Limited Offerings*	Blackout	60-Day Holding Requirement	Market Timing Prohibition and Q Certificate	Open Order Rule
Advisory Personnel	Investment Personnel	Advisory Personnel	Investment Personnel	Investment Personnel
• 1 ^st violation – Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions • 2 ^nd violation – possible grounds for termination	• 1 ^st violation – disgorgement of profits on the personal trade • 2 ^nd violation - Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions. • 3 ^rd violation - possible grounds for termination	• 1 ^st violation – written warning • 2 ^nd violation - violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 60 days	• 1 ^st violation - possible grounds for termination at determination of Chief Legal Officer and President of Phoenix Investment Counsel	• 1 ^st violation – Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions. • 2 ^nd violation – possible grounds for termination

*	s/t NASD Prohibition Rule 2790.

CODE OF ETHICS

VIRTUS INVESTMENT ADVISERS, INC.

Amended and Restated 11/2008

This Code of Ethics applies to all Access Persons of Virtus Investment Advisers, Inc.

1.	*Statement of Ethical Principles*

The Adviser holds its employees to a high standard of integrity and business practices. In serving their respective shareholders and clients, the Adviser strives to avoid conflicts of interest or the appearance of conflicts of interest in connection with the personal trading activities of its employees and the securities transactions in any managed account.

While affirming their confidence in the integrity and good faith of all of their employees, officers, trustees, and directors, the Adviser recognizes that the knowledge of present or future portfolio transactions or the power to influence portfolio transactions, if held by such individuals, could place them in a position where their personal interests might conflict with the interests of the managed account, if they were to trade in securities eligible for investment by the managed account.

In view of the foregoing and of the provisions of Sections 204-2 and 204A-1 under the Investment Advisers Act of 1940, as amended, the Adviser has determined to adopt this Code of Ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict) and to establish reporting requirements and enforcement procedures. When Access Persons covered by the terms of this Code of Ethics engage in personal securities transactions, they must adhere to the following general principles as well as to the Code’s specific provisions:

(a)	At all times, the interests of the Adviser and the Adviser’s clients must be paramount;

(b)	Personal transactions must be conducted consistent with this Code of Ethics in a manner that avoids any actual or potential conflict of interest; and

(c)	No inappropriate advantage should be taken of any position of trust and responsibility.

(d)	Compliance with all applicable federal securities laws must be maintained, to include the Investment Advisers Act of 1940, and the Investment Company Act of 1940.

(e)	Access Persons are required to adhere to the standards of business conduct outlined in the The Phoenix Companies, Inc. Code of Conduct.

(f)	Access Persons of the Advisor are required to adhere to the Virtus Mutual Funds Code of Ethics.

2.	*Unlawful Actions*

It is unlawful for any Affiliated person, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by any client account:

(a)

to employ any device, scheme or artifice to defraud any client;

(b)

to make any untrue statement of a material fact to any client or omit to state a material fact necessary in order to make the statements made to any client, in light of the circumstances under which they are made, not misleading;

(c)

to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on any client; or to engage in any manipulative practice with respect to any client;

(d)

to divulge or act upon any material, non-public information, as such term is defined under relevant securities laws.

3.	*Definitions*

(a)

“Access Person” means any Director, officer, general partner, Portfolio Manager or Advisory Person of the adviser. An Access person is any supervised person who has access to nonpublic information regarding purchase or sales in managed accounts, or portfolio holdings of a managed account. The Compliance Department shall maintain a list of the Adviser’s Access Persons.

(b)

“Adviser” means Virtus Investment Advisers, Inc.

(c)

“Advisory Person” means

(i)

any employee of the Adviser or of any company in a control relationship to the Adviser, who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of securities by the Adviser for a Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and

(ii)

(iii)

Any Investment Personnel.

(d)

(i)

“Pecuniary interest” means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security.

(ii)

(e)

“Chief Compliance Officer” refers to the person appointed by the Advisor pursuant to the provisions of Section 206(4)-7.

(f)

“Client” means each and every investment company, or series thereof, or other institutional account managed by the Adviser, individually and collectively.

(g)

“Compliance Officer” may refer to the Adviser’s designated Compliance Officer or any person designated to perform the administrative functions of this Code.

(h)

“Control” shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act of 1940, as amended (the “1940 Act”).

(i)

“Covered Security” means all securities, including options, exchange traded funds and those issued by any reportable fund, except securities that are direct obligations of the Government of the United States, bankers’ acceptances, bank certificates of deposit, commercial paper and shares of traditional, unaffiliated registered open-end investment companies.

(j)

(k)

“Investment Personnel” shall mean:

(i)

any employee of the Adviser (or of any company in a control relationship to the Adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities; and

(ii)

any natural person who controls the Adviser and who obtains information concerning recommendations made regarding the purchase or sale of securities by the Fund. Investment Personnel includes any Portfolio Manager or other investment person, such as an analyst or trader, who provides information and advice to a Portfolio Manager or assists in the execution of the investment decisions.

(l)

(m)

“Managed Account” shall mean those Clients’ accounts, individually and collectively, for which the Portfolio Manager makes buy and sell decisions.

(n)

“Portfolio Manager” means the person or portfolio management team entrusted to make or participate in the making of the buy and sell decisions for a Client.

(o)

(p)

“Security” shall have the meaning set forth in Section 2(a)(36) of the 1940 Act.

(q)

“Reportable Fund” includes those 1940 Act registered investment companies for which the Adviser or an affiliate acts as adviser or sub-adviser, or principal underwriter.

4.	*Exempted Transactions*

The preclearance prohibitions of Section 5 of this Code, shall not apply to:

(a)

Purchases or sales effected in any account over which the Advisory Person has no direct or indirect influence or control in the reasonable estimation of the Adviser’s Compliance Officer. This exemption will also apply to personal brokerage accounts for which a third party (e.g. broker, financial advisor) makes all investment decisions on behalf of the Access Person. The discretionary arrangement must be documented to the Adviser’s Compliance Department.

(b)

Purchases or sales which are non-volitional on the part of either the Advisory Person or the managed account.

(c)

Purchases of shares necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and subsequent sales of such securities.

(d)

(e)

Purchase or sale of securities issued under an employee stock purchase or incentive program unless otherwise restricted.

5.	*Prohibited Activities*

(a)

IPO Rule : No Access Person may directly or indirectly acquire beneficial ownership in any securities in an Initial Public Offering (including IPOs offered through the Internet), except with the prior written approval of the Adviser’s Compliance Officer. No FINRA registered person may participate in an IPO pursuant to NASD Rule 2790.

(b)

(i)

(c)

Preclearance Rule : No Advisory Person may directly or indirectly acquire or dispose of beneficial ownership in a Covered Security unless such transaction has been precleared by the Adviser’s Compliance Officer. All option transactions must be precleared. Preclearance is required prior to executing any trade through any personal brokerage account, unless specially exempted under Section 4 above. Preclearance is valid through the business day next following the day preclearance is given.

(i)

The Adviser’s Compliance Officer will monitor investment activity by the Advisory Person involving the precleared transaction.

(ii)

Compliance reserves up to one business day to respond to any request for preclearance.

Note : The Adviser’s Compliance Officer may deny approval of any transaction requiring preclearance under this Preclearance Rule, even if the transaction is nominally permitted under this Code of Ethics, if he or she reasonably believes that denying preclearance is necessary for the protection of a Managed Account. Any such denial may be appealed to the Adviser’s Chief Compliance Officer. The decision of the Chief Compliance Officer shall be final.

(d)

Open Order Rule : No Advisory Person may directly or indirectly acquire or dispose of beneficial ownership in any Covered Security on a day during which a Managed Account has a pending “buy” or “sell” order for that security of the same type (i.e., buy or sell) as the proposed personal trade, until such order is executed or withdrawn.

Exceptions : The following securities transactions are exempt from the Open Order Rule:

Purchases or sales approved by the Adviser’s Compliance Officer in his/her discretion.

(e)

Transactions permitted under the Blackout Rule must also satisfy the Open Order Rule and the Preclearance Rule, if and to the extent the transaction is not covered by exceptions to those rules.

Any profits realized by a Portfolio Manager on a personal trade in violation of Sections 5(d) and (e) must be disgorged at the request of the Fund.

(f)

Ban on Short-term Trading. Advisory Persons must hold all reportable securities, including options, for a period of not less than sixty (60) days from date of acquisition. Options must be written for a minimum 60 day term.

(g)

Gifts . No Access Person shall accept any gift or other item (for the purpose of this Code “gifts” include but are not limited to cash, merchandise, gifts, prizes, travel expenses, meals and certain types of entertainment) of more than $100 in value per year from any person or entity that does business with or on behalf of the Advisor or the Fund. All gifts and entertainment received or given must be reported to the Advisor’s Compliance Department.

(h)

Service as Director . No Advisory Person shall serve on the board of directors of a publicly traded company without prior authorization by the President or the Compliance Officer of the Adviser. If board service is authorized, such Advisory Person shall have no role in making investment decisions with respect to the publicly traded company.

(i)

Market Timing Prohibited . No Portfolio Manager shall engage in excessive trading or market timing activities with respect to any mutual fund whether or not such mutual fund is a Managed Account, or is managed by such Adviser/Subadvisor or any affiliated adviser or subadviser. For the purposes of the foregoing, “market timing” shall be defined as a purchase and redemption, regardless of size, in and out of the same mutual fund within any sixty (60) day period. The foregoing restrictions shall not apply to Portfolio Managers investing in mutual funds through automatic reinvestment programs, and any other non-volitional investment vehicles. Portfolio Managers shall provide quarterly certifications as to their compliance with this restriction.

6.	*Reporting and Compliance Procedures*

(a)

The Advisor shall provide a copy of the Code of Ethics, and any amendments thereto, to all Access Persons.

(b)

All Access Persons shall direct their brokers to supply, at the same time that they are sent to the Access Person, a copy of the confirmation for each personal securities trade and a copy of each periodic account statement to the Adviser’s Compliance Officer.

(c)

Every Access Person shall report to the Adviser’s Compliance Officer the information described in Section 6(c) of this Code with respect to transactions in any Covered Security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the Covered Security, provided that an Access Person whose duplicate broker trade confirmations or account statements are received by the Adviser’s Compliance Officer, pursuant to Section 6(a) with respect to the time period required by Section 6(c), may reference that duplicate information in their quarterly report if all of the information required in Section 6(c) is contained in those confirmations and statements.

(d)

(i)

with respect to any transaction during the quarter in a Covered Security in which the Access Person had or acquired any direct or indirect beneficial ownership:

(A)

The date of the transaction, the title and number of shares of equity securities; or, the maturity date, principal amount and interest rate of debt securities, of each Covered Security involved; and as applicable the exchange ticker symbol or CUSIP number;

(B)

The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);

(C)

The price of the Covered Security at which the transaction was effected; and

(D)

The name of the broker, dealer or bank with or through whom the transaction was effected.

(ii)

with respect to any account established during the quarter in which Securities were held during the quarter for the direct or indirect benefit of the Access Person:

(A)

The name of the broker, dealer, or bank with whom the Access Person established the account; and

(B)

The date the account was established.

(iii)

Access Persons are required to report transactions in any affiliated mutual fund for which they have any direct or indirect beneficial ownership; except as specifically exempted by Section 4 above.

(iv)

The date the report is submitted by the Access Person.

(e)

(the Applicable Date for the Initial Holdings Report is the date the person became an Access Person; the Applicable Date for the Annual Holdings Report must be a date no earlier than December 31 of the prior year):

(i)

The title, type and number of shares; and/or the maturity date, principal amount and interest rate of debt securities; and as applicable, the exchange ticker symbol or CUSIP number of each Covered Security in which the Access Person had any direct or indirect beneficial ownership as of the Applicable Date.

(ii)

The title, number of shares, and, as applicable the exchange ticker symbol or CUSIP number of any Reportable Fund holding in which the Access Person had any direct or indirect beneficial ownership as of the Applicable Date.

(iii)

(iv)

The date the report is submitted by the Access Person.

(f)

Each Access Person shall submit annually to the Adviser’s Compliance Officer a certification by the Access Person that he or she has received, read and understood the Code of Ethics, has complied with the Code’s requirements, and has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code’s requirements. The certification will be submitted to the Compliance Officer by January 31 of each year.

(g)

(h) (i)

The Adviser’s Compliance Officer shall submit an annual report to the Directors of the Adviser that summarizes the current Code of Ethics procedures, identifies any violations requiring significant remedial action, and recommends appropriate changes to the Code, if any.

(ii)

The Adviser’s Compliance Officer shall submit to the managed fund’s Compliance Officer an annual written report that

(A)

Summarizes the current procedures under the Code of Ethics;

(B)

Describes any issues arising from the Code of Ethics or procedures since the last report, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations; and

(C)

Certifies that the Adviser, has adopted procedures reasonably necessary to prevent Access Persons from violating the Code.

(iii)

These reports will be available to the Chief Compliance Officer of the Funds.

(i)

Any Access Person shall immediately report any potential violation of this Code of which he or she becomes aware to the Adviser’s Compliance Officer.

(j)

An Access Person need not make reports under this Section 6 with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control.

(k)

Each Adviser’s Compliance Officer will review all reports and other information submitted under this Section 6. This review will include such comparisons with trading records of managed accounts as are necessary or appropriate to determine whether there have been any violations of the Code.

(l)

7.	*Sanctions*

Upon discovering a violation of this Code, the Directors of the Adviser may impose such sanctions as it deems appropriate, including inter alia, a letter of censure or suspension or termination of employment, or suspension of personal trading privileges for such period as it may deem appropriate. Provided further, the Adviser’s Compliance Officer shall review and present sanctions levied for non-compliance at each regularly scheduled Fund Board meeting. Recommended sanctions are attached as Schedule A.

8.	*Exceptions*

The Adviser’s Compliance Officer, may grant written exceptions to provisions of the Code based on equitable considerations. The exceptions may be granted to individuals or classes of individuals with respect to particular transactions, classes of transactions or all transactions, and may apply to past as well as future transactions, provided , however , that no exception will be granted where the exceptions would result in a violation of Section 204-2. Exceptions granted will be reported to the Directors of the Advisor, as well as the Boards of any managed fund.

9.	*Recordkeeping*

All Code of Ethics records will be maintained pursuant to the provisions of Rules 204A-1 and 17j-1.

10.

Other Codes of Ethics

This Code of Ethics does not amend or supercede any other Code(s) of Ethics that may affect the duties and obligations of any person affected hereby.

CERTIFICATION:

By my signature below, I certify that I have received, read, and understood the foregoing policies of the Virtus Investment Advisers, Inc. Code of Ethics, and will comply in all respects with such policies.




Name				Date

Please print or type name:____________________________


Initial Holdings Report	Q Report	Q Report Affiliated MF Transactions	Annual Report	Pre-Clear
All Access Persons	All Access Persons	Investment Personnel	All Access Persons	Advisory Persons

• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning • 2 ^nd violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 30 days	• 1st violation – written warning	• 1 ^st violation – written warning • 2 ^nd violation within the same year - $100 fine payable to the Phoenix Foundation and suspension of trading privileges for 30 days • 3 ^rd violation within the same year – suspension of trading privileges for 90 days

Pre-Clear IPOs & Limited Offerings*	Blackout	60-Day Holding Requirement	Market Timing Prohibition and Q Certificate	Open Order Rule
Advisory Personnel	Investment Personnel	Advisory Personnel	Investment Personnel	Investment Personnel

• 1 ^st violation – Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions. • 2 ^nd violation – possible grounds for termination	• 1 ^st violation – disgorgement of profits on the personal trade • 2 ^nd violation - Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions. • 3 ^rd violation - possible grounds for termination	• 1 ^st violation – written warning • 2 ^nd violation - violation within the same year - $50.00 fine payable to the Phoenix Foundation • 3 ^rd violation within the same year – suspension of trading privileges for 60 days	• 1 ^st violation - possible grounds for termination at determination of Chief Legal Officer and President of Phoenix Investment Counsel	• 1 ^st violation – Reported to Chief Legal Officer and President of Phoenix Investment Counsel for determination of appropriate sanctions. • 2 ^nd violation – possible grounds for termination

*	s/t NASD Prohibition Rule 2790

DUFF & PHELPS INVESTMENT MANAGEMENT CO.

AMENDED AND RESTATED

CODE OF ETHICS (amended December 31, 2007)

1.	Standard of Business Conduct

Statement of Ethical Principles

In view of the foregoing and of the provisions of Section 204-2 under the Investment Advisers Act of 1940, as amended, the Adviser has determined to adopt this Code of Ethics to specify and prohibit certain types of transactions deemed to create conflicts of interest (or at least the potential for or the appearance of such a conflict) and to establish reporting requirements and enforcement procedures. When Supervised Persons covered by the terms of this Code of Ethics engage in personal securities transactions, they must adhere to the following general principles as well as to the Code’s specific provisions:

Supervised Persons covered by the terms of this Code of Ethics must adhere to the following general principles as well as to the Code’s specific provisions:

a) At all times, the interests of Adviser Clients must be paramount;

b) Personal transactions must be conducted consistent with this Code of Ethics in a manner that avoids any actual or potential conflict of interest; and

c) No inappropriate advantage should be taken of any position of trust and responsibility and;

d) Information concerning the identity of security holdings and financial circumstances of clients is confidential.

e) Ensure that the investment management and overall business of the firm complies with the policies of Duff & Phelps, Phoenix Companies and applicable U.S. federal and state securities laws and regulations.

f) Supervised Persons are required to adhere to the standards of business conduct in The Phoenix Companies Code of Conduct.

Unlawful Actions

a) to employ any device, scheme or artifice to defraud any client;

b) to make any untrue statement of a material fact to any client or omit to state a material fact necessary in order to make the statements made to any client, in light of the circumstances under which they are made, not misleading;

c) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on any client; or to engage in any manipulative practice with respect to any client;

d) to divulge or act upon any material, non-public information, as such term is defined under relevant securities laws.

2.	Definitions

“Supervised Persons” include directors, officers, and partners of the adviser (or other persons occupying a similar status or performing similar functions); Employees of the adviser; and Any other person who provides advice on behalf of the adviser and is subject to the adviser’s supervision and control.

“Access Person” means any director, officer, general partners and partners of the adviser (or other persons occupying a similar status or performing similar functions), has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any fund the adviser or its control affiliates manage or is involved in making securities recommendations to clients, or has access to such recommendations that are non-public, or Advisory Person of the Adviser. The Compliance Department shall maintain a list of the Adviser’s Access Persons.

“Adviser” means Duff & Phelps Investment Management Co.

“Advisory Person” means (i) any employee of the Adviser or of any company in a control relationship to the Adviser, who, in connection with his regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of a security by the Adviser for the Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control relationship to the Adviser who obtains information concerning recommendations made to the Client with regard to the purchase or sale of a security. This grouping customarily includes the Portfolio Manager and other investment personnel comprising an investment team, such as an analyst or trader, who provide information and advice that enter into the investment decision to buy or sell a security for a Client.

“Affiliated Officer” means (i) any corporate officers or director of the Adviser who is not a resident at the adviser’s business location: and (ii) is subject to the provisions of an affiliate’s (e.g. PIC or the Phoenix Funds) code of ethics for personal trading. In which case Corporate Compliance would have responsibility for administration of all aspects of their code with respect to those individuals. Corporate compliance will provide certification that these individuals are in compliance with their code.

A security is “being considered for purchase or sale” when a recommendation to purchase or sell a security has been made and communicated and, with respect to the Advisory Person making the recommendation, when such person seriously considers making such a recommendation.

“Beneficial ownership” shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. An Access person is presumed to be a beneficial owner of securities that are held by his or her immediate family members sharing the access person’s household.

“Client” means each and every investment company, or series thereof, or other account managed by the Adviser, individually and collectively.

“Control” shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act, as amended.

“Initial Public Offering” means a public sale of an issue not previously offered to the public.

“Managed Fund or Portfolio” shall mean those Clients, individually and collectively, for whom the Portfolio Manager makes buy and sell decisions.

“Portfolio Manager” means the person (or one of the persons) entrusted with the day-to-day management of the Client’s portfolio.

“Private Placement” or “Limited Offering” means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) thereof, or pursuant to Rule 504, Rule 505 or Rule 506 thereunder.

Purchase or sale of a reportable security” includes, among other things, the writing of an option or the purchase or sale of a security that is exchangeable for or convertible into, a security that is held or to be acquired for a Client.

“Reportable security” shall have the meaning set forth in Section 2(a)(36) of the Investment Company Act, as amended, and Rule 204A-1 as amended, including all ETFs and UIT ETFs except that it shall not include transactions and holdings in direct obligations of Government of the United States; money market instruments; bankers’ acceptances, bank certificates of deposit, commercial paper, repurchase agreements and other high quality short-term debt instruments; shares of money market funds; transactions and holdings in shares of open-end mutual funds, unless the adviser or a control affiliate acts as the investment adviser or principal underwriter for the fund; and transactions in units of unit investment trust if the unit investment trust is invested exclusively in unaffiliated open-end mutual funds.

3.	Exempted Transactions

The prohibitions of Section 4 of this Code shall not apply to:

Purchases or sales of reportable securities effected in any account over which the Access Person has no direct or indirect influence or control in the reasonable estimation of the Compliance Officer.

Purchases or sales of reportable securities (1) not eligible for purchase or sale by the Client; or (2) specified from time to time by the Directors, subject to such rules, if any, as the Directors shall specify.

Purchases or sales which are non-volitional on the part of either the Access Person or the Client.

Purchases of shares of reportable securities necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and the subsequent sales of such reportable securities.

Purchases of reportable securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

Purchases or sales of reportable securities issued under an employee stock purchase or incentive program unless otherwise restricted.

Transactions of reportable securities effected pursuant to an automatic investment plan.

4.	Prohibited Activities

IPO Rule: No Access Person may purchase any securities in an Initial Public Offering, except with the prior approval of the Compliance Department. This rule also applies to IPO’s offered through the Internet.

Private Placement Rule or “Limited Offering”: No Access Person may purchase securities any in a Private Placement or Limited Offering unless such purchase has been approved by the Compliance Department. Any such approved purchase should be disclosed to the Client if that issuer’s securities are being considered for purchase or sale by the Client.

Pre-Clearance Rule: No Access Person may purchase or sell a reportable security unless such purchase or sale has been pre-cleared by the Compliance Department. Pre-clearance is required prior to executing a trade through a personal brokerage account or an Internet brokerage account. Pre-clearance is also required for transactions in puts, calls, ETF’s, UIT ETFs, closed-end funds, and other well-known stock indices (e.g. the S&P 500). Pre-clearance is valid through the next business day (3 p.m. cst) following preclearance approval.

Exceptions: The following reportable securities transactions do not require pre-clearance:

Purchases or sales of up to 500 shares of reportable securities of issuers ranked in the Standard & Poor’s 500 Composite Stock Index (S&P 500) at the time of purchase or sale. The Phoenix Companies Compliance Department maintains this list on the Intranet web site and updates it after the end of each quarter. A paper copy is available for review in the DPIM compliance department.

Purchase orders of reportable securities sent directly to the issuer via mail (other than in connection with a Private Placement or Limited Offering) or sales of such securities which are redeemed directly by the issuer via mail.

Transactions of reportable securities effected pursuant to an automatic investment plan.

Note: The Compliance Department may deny approval of any transaction requiring preclearance under this Preclearance Rule, even if nominally permitted under this Code of Ethics, if it is believed that denying preclearance is necessary for the protection of the client or the Adviser. Any such denial may be appealed to the Adviser’s Counsel. The decision of Counsel shall be final.

Open Order Rule: No Access Person may purchase or sell, directly or indirectly, any reportable security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, when the Client has a pending “buy” or “sell” order for that security of the same type (i.e. buy or sell) as the proposed personal trade, until the Client’s order is executed or withdrawn

Exceptions: The following reportable securities transactions are exempt from the Open Order Rule:

Purchases or sales of up to 500 shares of reportable securities of issuers ranked in the Standard & Poor’s 500 Composite Stock Index (S&P 500) at the time of purchase or sale.

Purchases or sales of reportable securities approved by the Compliance Department in his/her discretion.

Any profits realized on a personal trade in violation of this Section 4D must be disgorged.

Blackout Rule: If a Portfolio Manager’s portfolio holds a reportable security that is the subject of a proposed personal trade by that Portfolio Manager, such personal trade may be permitted only as follows:

If the proposed personal trade is on the same side as the last portfolio transaction in that security, the personal trade cannot occur within two days of such portfolio transaction (i.e. neither at T nor T + 1 calendar day).

If the proposed personal trade is on the opposite side of the last portfolio transaction in that security, the personal trade cannot occur unless (a) it is more than two days after the portfolio transaction (i.e. T + 2 calendar days or later) and (b) the pre-clearance request, if required, for such personal transaction at the time of purchase or sale, is to the reasonable satisfaction of the Compliance Department, and an explanation of the reasons the portfolio is not effecting a similar transaction.

Portfolio Managers of Mutual Funds may not directly or indirectly acquire or dispose of beneficial ownership in a covered security within seven calendar days before and after the Fund portfolio trades in that security.

Any profits realized by a Portfolio Manager on a personal trade in violation of this Section 4E must be disgorged.

Holding Period Rule: Access Persons must hold each reportable security, for a period of not less than sixty (60) days, whether or not the purchase of such reportable security was an exempt transaction under any other provision of Section 4.

No Access Person shall accept any gift or other item (for the purpose of this Code “gifts” include but are not limited to cash, merchandise, gifts, prizes, travel expenses, meal and certain types of entertainment) of more than $100 in value from any person or entity that does business with or on behalf of the Client or the Adviser. All gifts and entertainment received or given must be reported to the Compliance Department.

No Advisory Person shall serve on the board of directors of a publicly traded company without prior authorization from Counsel or the Compliance Department. If board service is authorized, such Advisory Person shall have no role in making investment decisions with respect to the publicly traded company.

No Portfolio Manager shall engage in excessive trading or market timing activities with respect to any mutual fund whether or not such mutual fund is managed by such Adviser/Sub-advisor or any affiliated adviser/sub-advisor. For the purposes of the foregoing, “market timing” shall be defined as a purchase and redemption, regardless of size, in and out of the same mutual fund within any sixty (60) day period. The foregoing restrictions shall not apply to Portfolio Managers investing in mutual funds through asset allocation programs, automatic reinvestment programs, and any other non-volitional investment vehicles. Portfolio Managers shall provide quarterly certifications as to their compliance with this restriction.

No Supervised Person shall divulge or act upon any material, non-public information, as such term is defined under relevant securities laws .

5.	Compliance Reporting Procedures

All Access Persons shall direct their brokers to supply, at the same time that they are sent to the Access Person, a copy of the confirmation for each personal reportable securities trade and a copy, at least quarterly, of an account statement to the Compliance Department.

Every Access Person shall report to the Adviser the information described in Section 5C of this Code with respect to transactions in any reportable security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the reportable security; provided, however, that an Access Person shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence. Additionally every Access Persons must include Phoenix affiliated mutual fund transactions not included in any received brokerage statements, including Phoenix-Fidelity 401K for which the Adviser does not require broker confirms or statements

Every transaction report required pursuant to Section 5B above shall be made not later than 15days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:

(i)

The date of the transaction, the title and the number of shares, and the principal amount of each reportable security involved;

(ii)

The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);

(iii)

The price at which the transaction was effected;

(iv)

The name of the broker, dealer or bank with or through whom the transaction was effected; and

(v)

The date of approval of the transaction and the person who approved it as required by Section 4B or C above.

Each Access Person shall submit an Initial Holdings and Annual Holdings report listing all personal reportable securities holdings to the Compliance Department upon the commencement of service and annually thereafter (the “Initial Holdings Report” and the “Annual Holdings Report”, respectively). The information on the Initial Holdings Report must be current as of a date not more than 45 days prior to the date the individual becomes an Access Person. An Initial Holdings Report must be submitted to Compliance no later than 10 days after becoming an Access Person. The Annual Holdings Report holdings information shall be as of December 31 and include a certification by the Access Person that he or she has read and understood the Code of Ethics and has complied with the Code’s requirements. The annual report and certification will be submitted to the Compliance Department by January 31. Annually, any Phoenix affiliated mutual fund, open or closed must be disclosed including those held in the Access Person’s Phoenix Fidelity 401K plan. If the Access Person does not own any Phoenix funds in the Phoenix Fidelity 401K plan he/she does not need to disclose the open-end mutual fund holdings

Every “Initial Holdings Report” and “Annual Holdings Report” required pursuant to Section 5D above shall contain the following information:

(i)

The title and type of reportable security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the access person has any direct or indirect beneficial ownership;

(ii)

The name of any broker,, dealer or bank with which the access person maintains an account in which any reportable securities are held for the access person’s direct or indirect benefit;

(iii)

The date the access person submits the report.

(iv)

For “Annual Holdings Report” only, a certification by the access person that he or she has read and understood the Code and has complied with the Code’s requirements.

Exceptions to reporting requirements (Quarterly Transactions and Initial and Annual Holdings):

Any report with respect to reportable securities held in accounts over which the access person had no direct or indirect influence or control;

(ii)

A transaction report with respect to reportable securities transactions effected pursuant to an automatic investment plan;

(iii)

A transaction report if the report would duplicate information contained in broker trade confirmations or account statements received no later than 30 days after the end of the applicable calendar quarter;

(iv)

(v)

Any person who is an access person by virtue of being a director of a Fund, but who is not an “interested person” (as defined in the Investment Company Act of 1940) with respect to that Fund need not make a quarterly transaction report under 5C above unless such person, at the time of any transaction during the quarter, knew, or in the ordinary course of fulfilling his or her official duties as a director of the Fund should have known, that the security such person purchased or sold is or was purchased or sold by the Fund or was being considered for purchase or sale by the Fund.

Any report made under this Section 5 may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.

The Compliance Officer shall submit an annual report to the Adviser’s Fund Board of Directors that summarizes the current Code of Ethics procedures, identifies any violations requiring significant remedial action, and recommends appropriate changes to the Code, if any.

Any Access Person shall immediately report any potential violation of this Code of which he or she becomes aware to the Compliance Department. No employee will be terminated or otherwise retaliated against for submitting any potential violations of this Code.

The Adviser’s Compliance Personnel will review all reports and other information submitted under Section 5. This review will include such comparisons with trading records of client accounts as are necessary or appropriate to determine whether there have been any violations of the Code.

The Adviser’s Compliance Personnel will maintain a list of all Access Persons who are required to make reports under the Code, and shall inform those Access Persons of their reporting obligations.

6.	Recordkeeping Requirements

The Adviser will maintain and cause to be maintained in an easily accessible place, the following records:

(i)

A copy of any Code of Ethics for the organization that is in effect, or at any time within the past (5) years was in effect.

(ii)

A record of any violation or of any action taken as a result of the violation of any such Code that occurred during the current year and the past five (5) calendar years;

(iii)

A copy of each report made by an access person during the current year and the past five (5) calendar years as required by Rule 17j-1 and/or Rule 204A-1 and Section 5C and 5D of this Code, including any information provided in lieu of the reports under Section 5C and 5D above;

(iv)

A list of all persons, currently or with in the past five (5) years who are or were required to make reports pursuant to Rule 17j-1 and/or Rule 204A-1 and Section 5C and 5D above, or who were responsible for reviewing those reports, together with an appropriate description of their title or employment;

(v)

A copy of each report made by the Compliance Officer pursuant to Section 5F above during the current year and the past five (5) calendar years;

(vi)

A record of any decision made during the current year and the past five (5) calendar years by the Compliance Officer, and the reasons supporting each such decision, to grant prior approval pursuant to Section 4A and 4B above for acquisition by an access person of securities in an initial public offering or a private placement transaction.

Sanctions

Upon discovering a violation of this Code, the Parent of the Adviser or if applicable the Funds Board of Directors, in addition to any remedial action already taken by the respective adviser or related entity, may impose such sanctions as it deems appropriate (see under separate cover the currently imposed sanctions), including, among other things, a letter of censure or suspension or termination of employment, or suspension of personal trading privileges for such period as it may deem appropriate

Vontobel Asset Management, Inc.

LOGO

CODE OF ETHICS

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

TABLE OF CONTENTS


			Page(s)
1.	STATEMENT OF GENERAL PRINCIPLES		2
	1.1.	Adherence to Ethical Standards of Vontobel Group	2
	1.2.	Compliance with Applicable U.S. Legislation	2
	1.3.	General Principles	3

2.	DEFINITIONS		3-5

3.	PRINCIPLES FOR DOING BUSINESS		6
	3.1.	Confidentiality	6
	3.2.	Conflicts of Interest	6
	3.3.	Service as a Director	6
	3.4.	Personal Fiduciary Appointments	6
	3.5.	Service on Civic and Charitable Organizations	6
	3.6.	Fees to Consultants and Agents	7
	3.7.	Personal Benefits	7
	3.8.	Personal Fees and Commissions	7
	3.9.	Dealings with Suppliers	7
	3.10.	Borrowing	7
	3.11.	Political Contributions	8
	3.12.	Duty to Report Violations or Potential Conflicts of Interest	8
	3.13.	Full Disclosure	8
	3.14	Policy for Portfolio Holding Disclosure	8

4.	PERSONAL SECURITIES TRANSACTIONS		9
	4.1.	Summary	9
	4.2.	Prohibited and Restricted Transactions	9
	4.3.	Blackout Period	10
	4.4.	Short-Term Trading	11
	4.5.	Prior Written Clearance of Personal Securities Trades	11-12
		and Full Disclosure of Securities Holdings

5.	INSIDER TRADING		13
	5.1.	Policy and Policy Statement	13
	5.2.	Elements of Insider Trading	14
	5.3.	Penalties for Insider Trading	15
	5.4.	Procedures	16
	5.5.	Supervision	17-18

	Appendix A Excerpts from cited SEC legislation		19-29
	Appendix B Officers authorized to approve trades		30
	Appendix C Personal securities trading authorization form		31-32
	Appendix D Initial and annual report forms		33-35
	Appendix E Security list (included and exclude)		36

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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1.	STATEMENT OF GENERAL PRINCIPLES

1.1	Adherence to Ethical Standards of Vontobel Group

The emphasis placed on the observance of the highest ethical standards by the Vontobel Group’s management is well known to the Swiss financial marketplace. The cornerstones of its standing in the financial community are its integrity and, as a predominantly family-controlled organization, its independence from commercial considerations that could lead it to place its own interest before that of its clients. As a subsidiary of Vontobel Holding, Vontobel Asset Management, Inc. is held to the same standards of ethical conduct that govern the business activities of the Vontobel Group.

1.2	Compliance with Applicable U.S. Legislation

As an investment adviser registered with the US Securities and Exchange Commission (“SEC”), Vontobel Asset Management, Inc. is subject to the provisions of the Investment Advisers Act of 1940 (the “Advisers Act”). Rule 204A-1 under the Advisers Act requires all investment advisers to adopt and maintain a code of ethics and requires the adviser’s personnel to prepare and submit certain specified reports. A copy of Section 204A-1 is included in Appendix A.

Section 206 of the Advisers Act provides that it shall be unlawful for any investment adviser:

(1)

to employ any device, scheme, or artifice to defraud any client or prospective client;

(2)

to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client;

(3)

(4)

to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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Vontobel Asset Management, Inc. is also subject to certain provisions of the Investment Company Act of 1940 (“the Investment Company Act”) with respect to fraudulent trading, as discussed in Section 4 hereunder, and the Insider Trading and Securities Fraud Enforcement Act of 1988, as discussed in Section 5 hereunder.

Vontobel Personnel shall at all times comply with these and all other laws and regulations that may be applicable to Vontobel Asset Management, Inc.’s business. In some instances, where such laws and regulations may be ambiguous and difficult to interpret, Vontobel Personnel shall seek the advice of Vontobel Asset Management, Inc.’s management, who shall obtain the advice of outside counsel as is necessary to comply with this policy of observance of all applicable laws and regulations. Excerpts from the securities legislation cited above are provided in Appendix A .

1.3	General Principles

This Code of Ethics is based on the following principles:

(a)

The officers, directors and employees of Vontobel Asset Management, Inc. owe a fiduciary duty to all Vontobel Clients and, therefore, must at all times place the interests of Vontobel Clients ahead of their own.

(b)

Vontobel Personnel shall avoid any conduct that could create any actual or potential conflict of interest, and must ensure that their personal securities transactions do not in any way interfere with, or appear to take advantage of, the portfolio transactions undertaken on behalf of Vontobel Clients.

(c)

Vontobel Personnel shall not take inappropriate advantage of their positions with Vontobel Asset Management, Inc. to secure personal benefits that would otherwise be unavailable to them.

It is imperative that all Vontobel Personnel avoid any situation that might compromise, or call into question, the exercise of fully independent judgment in the interests of Vontobel Clients. All Vontobel Personnel are expected to adhere to these general principles in the conduct of the firm’s business, even in situations that are not specifically addressed in this Code’s provisions, procedures and restrictions. Serious and/or repeated violations of this Code may constitute grounds for dismissal.

2.	DEFINITIONS

For purposes of this Code:

“Beneficial Ownership” and “Beneficial Owner(s)” shall be as defined in Section 16 of the Securities Exchange Act of 1934, which, generally speaking, encompasses those situations where the Beneficial Owner has the right to enjoy some economic benefits which are substantially equivalent to ownership regardless of who is the registered owner (see Appendix A ). This would include:

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

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(a)

securities which a person holds for his or her own benefit either in bearer form, registered in his or her own name or otherwise, regardless of whether the securities are owned individually or jointly;

(b)

securities held in the name of a member of his or her immediate family or any adult living in the same household;

(c)

securities held by a trustee, executor, administrator, custodian or broker;

(d)

securities owned by a general partnership of which the person is a member or a limited partnership of which such person is a general partner;

(e)

securities held by a corporation which can be regarded as a personal holding company of a person; and

(f)

securities recently purchased by a person and awaiting transfer into his or her name.

The “Corporation” shall mean Vontobel Asset Management, Inc.

“Security” shall have the meaning set forth in Section 202(a)(18)of the Advisers Act (see Appendix A ), irrespective of whether the issuer is a US or non-US entity and whether the security is being held by a US or non-US custodian or, directly or indirectly, in personal custody ; except that it shall not include:

shares of an investment club account

securities issued by the US Government or US federal agencies that are direct obligations of the US

bankers’ acceptances, bank certificates of deposits and commercial paper

shares of registered open-end investment companies (mutual funds) that Vontobel does not advise or sub-advise

ETFs that Vontobel does not manage and that are based on a broad-based index

common securities indicies

commodities or commodity futures

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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In addition to the items defined to be securities in Section 202(a)(18) of the Advisers Act, the following are expressly deemed to be securities subject to this Code :

ADR’s, ADS’s, GDR’s,

any type of preferred stock

corporate bonds

shares of registered open-end investment companies (mutual funds) that Vontobel advises or sub-advises.

closed-end investment funds that Vontobel advises or sub-advises.

For a more complete listing of items that are and are not securities please refer to Appendix E .

“Purchase or sale of a security” shall include the writing of an option to purchase or sell a security.

A security is “being considered for purchase or sale” or is “being purchased or sold” when a recommendation to purchase or sell the security by a Vontobel Asset Management, Inc. portfolio manager is under serious consideration or has already been made and the transaction executed.

“Restricted List” shall mean the list of securities (i) being considered for purchase or sale on behalf of a Vontobel Client; or (ii) being purchased or sold by a Vontobel Client.

“Vontobel Client(s)” shall mean both individual and institutional clients (including corporations, investment companies, trusts, endowments, foundations and other legal entities), whether resident or non-US-resident, for whom Vontobel Asset Management, Inc. provides investment supervisory services (discretionary management) or manages investment advisory accounts not involving investment supervisory services (non-discretionary management).

“Vontobel Employee(s)” shall include officers and employees of the Corporation.

“Vontobel Personnel” shall include officers, employees and directors of the Corporation.

“New Security” shall mean the establishment of a position which is not currently held by a client portfolio on the day the position is established.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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3.	PRINCIPLES FOR DOING BUSINESS

3.1	Confidentiality

Confidentiality is a fundamental principle of the investment management business. Vontobel Employees must maintain the confidential relationship between the Corporation and each of its Clients. Confidential information such as the identity of Vontobel Clients and the extent of their account relationship, must be held inviolate by those to whom it is entrusted and must never be discussed outside the normal and necessary course of the Corporation’s business. To the extent possible, all information concerning Vontobel Clients and their accounts shall be shared among Vontobel Employees on a strictly need-to-know basis. In this regard, Vontobel Employees shall be careful not to divulge to their colleagues or any third party any information concerning a Vontobel Client that could be considered “inside information”, as that term is defined in Section 5 hereof.

3.2	Conflicts of Interest

It shall be the first obligation of every Vontobel Employee to fulfill his or her fiduciary duty to Vontobel Clients. No Vontobel Employee shall undertake any outside employment, or engage in any personal business interest, that would interfere with the performance of this fiduciary duty. No Vontobel Employee may act on behalf of the Corporation in any transaction involving persons or organizations with whom he or she, or his or her family, have any significant connection or financial interest. In any closely held enterprise, even a modest financial interest held by the Vontobel Employee, or any member of his or her family, should be viewed as significant.

3.3	Service as an Outside Director

No Vontobel Employee shall become a director or any official of a business organized for profit without first obtaining written approval from the Board of Directors of the Corporation based upon its determination that such board service would not be inconsistent with the interests of the Corporation and its Clients.

3.4	Personal Fiduciary Appointments

No Vontobel Employee shall accept a personal fiduciary appointment without first obtaining the written approval of the Board of Directors of the Corporation, unless such appointment results from a close family relationship.

3.5	Service on Civic and Charitable Organizations

The Corporation encourages its employees to participate in local civic and charitable activities. In some cases, however, it may be improper for a Vontobel Employee to serve as a member, director, officer or employee of a municipal corporation, agency, school board, or library board. Such service is appropriate when adequate assurances, in writing, are first given to the Corporation that business relationships between the Corporation and such entities would not be prohibited or limited because of statutory or administrative requirements regarding conflicts of interest.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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3.6	Fees to Consultants and Agents

Any and all fees and payments, direct or indirect, to consultants, agents, solicitors and other third-party providers of professional services must be approved by the Chief Executive Officer prior to conclusion of any formal arrangements for services. No remuneration or consideration of any type shall be given by any Vontobel Employee to any person or organization outside of a contractual relationship that has received the prior approval of the Chief Executive Officer.

3.7	Personal Benefits

No Vontobel Employee, or member of his or her family, may accept a personal gift, benefit, service, form of entertainment or anything of more than de minimis value (typically greater than $200) (“gift”) from Vontobel Clients, suppliers, service providers, brokers and all other parties with whom the Corporation has contractual or other business arrangements if such gift is made because of the recipient’s affiliation with the Corporation or with a Vontobel Employee. Any Vontobel Employee who receives a gift, regardless of value, shall promptly notify the Chief Compliance Officer and may accept the gift only upon the latter’s written approval. The Chief Compliance Officer shall determine whether the gift exceeds the deminimis value and whether the gift shall be retained by the Vontobel Employee or member of his or her family, returned to the donor, or donated without tax deduction to a charitable organization selected by the Chief Compliance Officer, subject to the approval of the Chief Executive Officer. Where the value of the gift is not readily ascertainable, the Chief Compliance Officer shall make a good faith determination of the gift’s value based on the known value of comparable items.

3.8	Personal Fees and Commissions

No Vontobel Employee shall accept personal fees, commissions or any other form of remuneration in connection with any transactions on behalf of the Corporation or any of its Clients.

3.9	Dealings with Suppliers

Vontobel Employees shall award orders or contracts to outside suppliers on behalf of the Corporation solely on the basis of merit and competitive pricing, without regard to favoritism or nepotism.

3.10

Borrowing

No Vontobel Employee, or member of his or her family, may borrow money from any Vontobel Client or any of the Corporation’s suppliers, service providers, brokers and all other parties with whom the Corporation has contractual or other business arrangements under any circumstances.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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3.11	Political Contributions

Vontobel Asset Management, Inc. shall make no contributions to political parties or candidates for public office.

3.12	Duty to Report Violations or Potential Conflicts of Interest

The Corporation’s management and Board of Directors must be informed at all times of matters that may constitute violations of this Code of Ethics, or that may be considered of fraudulent or illegal nature, or potentially injurious to the good reputation of the Corporation or the Vontobel Group. Vontobel Employees shall have a duty to report such events immediately to the Chief Compliance Officer or the Chief Executive Officer or, if such events concern the Corporation’s management, they should be reported to the Chairman.

3.13	Full Disclosure

In responding to requests for information concerning the Corporation’s business practices from the Corporation’s internal or independent accountants and auditors, counsel, regulatory agencies or other third parties, Vontobel Employees shall be truthful in their communications and shall make full disclosure at all times.

3.14	Policy for Portfolio Holding Disclosure

For existing separate, institutional and commingled accounts (or the consultant representing the account), advised and sub-advised portfolios and managed accounts, full portfolio holdings are available upon request by the client or the consultant representing the client. Full portfolio holdings for representative accounts will be disseminated monthly with a 30 day lag to consultant databases, RFP’s, questionnaires, client reports, marketing books, and finals presentations.

Top 10 holdings with portfolio weightings for representative accounts will be disseminated monthly and or quarterly with a 10 day lag to consultant databases, upon client request, questionnaires, RFP’s, quarterly client reports, marketing books, and finals presentations.

Sector, industry, and country weightings will be made available to existing clients upon request as of the most recent month end with no lag. Sector, industry and country weightings for representative accounts will be disseminated monthly with no lag to consultant databases, RFP’s, questionnaires, quarterly client reports, upon client request, marketing books, and finals presentations.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

4.	PERSONAL SECURITIES TRANSACTIONS

4.1

Summary

This Section 4 of the Code of Ethics is based upon Rule 204A-1 under the Advisers Act which requires investment advisers to adopt policies and procedures relating to, among other things, the personal securities transactions of their employees. The key provisions of this Code with respect to personal trading are summarized as follows:

•

Prohibition on investing in initial public offerings

•

Restrictions on investing in private placements

•

Prior written clearance of personal trades

•

Seven-day blackout period

•

Thirty-day ban on short-term trading profits of securities held, or being considered for purchase for the portfolios of Vontobel Clients

•

Full disclosure of all securities trades and securities holdings

4.2	Prohibited and Restricted Transactions

4.2.1

Rule 204A-1 requires investment advisers to adopt written codes of ethics designed to reflect the business standards and fiduciary obligations of its employees, to prevent fraudulent trading and, further, to use reasonable diligence and institute procedures reasonably necessary to prevent violations of their code of ethics. Vontobel Employees shall not engage in any act, practice or course of conduct that would violate the provisions of Rule 204A-1 under the Advisers Act or any other provisions of the federal securities laws.

All Vontobel Employees are considered “access persons” as that term is defined under Rule 204A-1 of the Advisers Act. As may be required by the investment companies for which it acts as adviser or subadviser, Vontobel shall provide periodic reports with respect to the personal securities transactions of its access persons, as well as an annual compliance report.

No Vontobel Employee shall purchase or sell, directly or indirectly, any security listed on the firm’s Restricted List; except that the prohibitions of this section shall not apply to:

(a)

purchases or sales which are nonvolitional on the part of any Vontobel Employee;

(b)

purchases which are part of an automatic dividend reinvestment or other plan established by any Vontobel Employee prior to the time the security involved came within the purview of this Code; and

(c)

purchases effected upon the rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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4.2.2

No Vontobel Employee shall acquire any securities in an initial public offering.

4.2.3

No Vontobel Employee shall acquire securities in a private placement without the prior written approval of the Chief Compliance Officer or other officer designated by the Chief Executive Officer. In considering a request to invest in a private placement, the Chief Compliance Officer will take into account, among other factors, whether the investment opportunity should be reserved for a Vontobel Client, and whether the opportunity is being offered to a Vontobel Employee by virtue of his or her position with the Corporation.

4.3	Blackout Period *

4.3.1

No Vontobel Employee shall execute a securities transaction on a day during which Vontobel Asset Management, Inc. has a pending “buy” or “sell” order in that same security for a Vontobel Client or its own account until that order is executed or withdrawn.

4.3.2

Vontobel Employees are prohibited from purchasing or selling a security within seven (7) calendar days before or after the date on which a transaction in the same security is effected for a Vontobel Client.

Should any Vontobel Employee make an authorized personal trade within such blackout period, the Chief Compliance Officer (or, in his absence, any officer authorized to approve trades), shall, in his sole discretion and based on his assessment of the facts and circumstances surrounding such personal trade, determine whether the Vontobel Employee can be deemed to have benefited, or appear to have benefited, from the market effect of the trade for the Vontobel Client. If such officer so determines, the Vontobel Employee shall cancel the trade or promptly disgorge the imputed profit, if any, from his or her personal trade that shall have accrued between the date thereof and the trade date of the transaction in the same security for the Vontobel Client. Imputed profit shall in all cases mean the difference between the price at which the Vontobel Employee transacted and the price at which the trade for the Vontobel Client was transacted.

The prohibitions of this section shall not apply to:

(a)

purchases or sales which are nonvolitional on the part of either the Vontobel Employee or the Vontobel Client account;

The purpose of the blackout period before a client trade is to address front-running violations that occur when personal trades are made shortly before a client trade and benefit from the market effect of that trade. The blackout period after a client trade is intended to allow dissipation of the market effect of the client trade. It is also designed to prevent individuals from benefiting from a trade that is opposite the client trade (e.g., selling a security shortly after a purchase of the same security for a client boosted its price, or purchasing a security shortly after a sale of the same security for a client lowered its price).

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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(b)

purchases or sales which are part of an automatic dividend reinvestment or other plan established by Vontobel Employees prior to the time the security involved came within the purview of this Code;

(c)

purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and

(d)

purchases or sales on any one day of up to the greater of (i) 2,000 shares or (ii) one (1) percent of the prior ten (10) day average trading volume of any security listed on an exchange and held in a client account (or subsequently purchased for a client’s account). VAMUS’s Chief Compliance Officer along with the firm’s trading desk will review the liquidity of each requested purchase or sale prior to the transaction being approved. No VAMUS employee will be allowed to effect a purchase or sale of a security while a client has a pending purchase or sale order, for that security, until the client’s order is executed or withdrawn.

4.4	Short-Term Trading

No Vontobel Employee shall profit from the purchase and sale, or sale and purchase, of the same (or equivalent) securities which are owned by a Vontobel Client or which are being considered for purchase on behalf of Vontobel Clients, within thirty (30) calendar days. Any profits realized on such short-term trades must be disgorged and the profits will be paid to a charity selected by the Chief Compliance Officer and the Chief Executive Officer. The Chief Compliance Officer and any other officer authorized by the Chief Executive Officer to approve trades (see Appendix B ) may permit exemptions to the prohibition of this section on a case-by-case basis when no abuse is involved and the circumstances of the subject trades, as they are best able to determine, support an exemption, and shall note the reason for any such exemption on the trading authorization form (see 4.5.1. below). Vontobel Employees may sell a security covered by this section at a loss within thirty (30) calendar days of purchase, provided, however, that in such instance the Vontobel Employee may not repurchase the same security in less than thirty (30) calendar days.

4.5	Prior Written Clearance of Personal Securities Trades and Full Disclosure of Securities Holdings

4.5.1

Except with regard to those items listed in Appendix E that have been exempted from the firm’s pre-clearance requirements, all Vontobel Employees shall obtain written authorization of their personal securities transactions prior to executing an order. A written request must be submitted to one of the officers listed in Appendix B , and such officer must give his written authorization prior to the Vontobel Employee’s placing a purchase or sell order with a broker. Should such officer deny the request, he will give a reason for the denial. An approved request will remain valid for two (2) business days from the date of the approval.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

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Should any Vontobel Employee make an unauthorized personal trade in a security, he or she may be obliged, without benefit of tax deduction, to promptly sell the position and/or disgorge any imputed or realized profit that shall have accrued between the date of such unauthorized personal trade and the date of disgorgement. Profits disgorged by Vontobel Employees pursuant to this Code shall be paid to a charity selected by the Chief Compliance Officer and approved by the Chief Executive Officer.

Attached hereto as Appendix C is the personal securities trading authorization form.

4.5.2

Vontobel Employees shall instruct their broker(s), including the Corporation’s affiliate brokers, to supply the Chief Compliance Officer, on a timely basis (but in no event more than 30 days after the close of the calendar quarter in which the transactions occurred), with duplicate copies of confirmations of all personal securities transactions and copies of all periodic statements for all securities accounts containing securities in which Vontobel Employees have Beneficial Ownership.

4.5.3

The Chief Compliance Officer, or his designee, shall review the personal securities holdings and transaction reports of Vontobel Employees and evidence such review in writing.

4.5.5

The Chief Compliance Officer shall receive and maintain all reports required hereunder.

4.5.6

All Vontobel employees shall promptly report to the Chief Compliance Officer any apparent violation of this Code. The Chief Compliance Officer shall conduct an investigation into the alleged violation and, in consultation with the CEO, impose whatever sanctions are appropriate under the circumstances. On a semi-annual basis the Chief Compliance Officer shall report any violations of the Code to the Board of Directors. The Chief Compliance Officer shall be responsible for maintaining and updating Vontobel’s Code of Ethics.

4.5.7

This Code of Ethics, a copy of each report made by Vontobel Personnel, each memorandum made by the Chief Compliance Officer hereunder, and a record of any violation hereof and any action taken as a result of such violation, shall be maintained by the Chief Compliance Officer, as required by Rule 204-2(a)(12) of the Advisers Act.

4.5.8

Vontobel Employees shall disclose their personal securities holdings to the Chief Compliance Officer within ten (10) days of the commencement of employment.

4.5.9

Annually, Vontobel Personnel shall be required to certify that they have (a) read and understand the Code, and recognize that they are subject thereto; (b) instructed each financial institution through which they, or any member of their household, effect securities transactions to send duplicate copies of their account statements and trading confirmations to Vontobel; (c) complied with

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

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Telefax +1-212-415-70 87

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the requirements of the Code; (d) disclosed and reported all personal securities transactions required to be disclosed; and (e) disclosed all personal securities holdings. Such annual report and certification shall be submitted within thirty (30) days of the end of the calendar year and shall be current as of a date no more than forty-five (45) days before submission.

4.5.10

The Chief Compliance Officer shall prepare an annual report to the Corporation’s Board of Directors. Such report shall (a) include a copy of the Code of Ethics; (b) summarize existing procedures concerning personal investing and any changes in the Code’s policies or procedures during the past year; (c) identify any violations of the Code; and (d) identify any recommended changes in existing restrictions, policies or procedures based upon the Corporation’s experience under the Code, any evolving practices, or developments in applicable laws or regulations.

5.	INSIDER TRADING

The Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) requires that all investment advisers and broker-dealers establish, maintain and enforce written policies and procedures designed to detect and prevent the misuse of material nonpublic information by such investment adviser and/or broker-dealer, or any person associated with the investment adviser and/or broker-dealer.

Section 204A of the Advisers Act states that an investment adviser must adopt and disseminate written policies with respect to ITSFEA, and an investment adviser must also vigilantly review, update and enforce them. Accordingly, Vontobel Asset Management, Inc. has adopted the following policy, procedures and supervisory procedures as an integral part of its Code of Ethics applicable to all of its officers, employees and directors (sometimes referred to herein as Vontobel Personnel).

5.1

Policy

The purpose of this Section 5 is to familiarize Vontobel Personnel with issues concerning insider trading and assist them in putting into context the policy and procedures on insider trading.

Policy Statement :

No Vontobel Personnel may trade in a security, either personally or on behalf of Vontobel Clients, while in possession of material, nonpublic information regarding that security; nor may any officer, employee or director communicate material, nonpublic information to others in violation of the law. This conduct is commonly referred to as “insider trading”. This policy extends to activities within and without the individual job functions of Vontobel Personnel and covers not

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

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only their personal transactions, but indirect trading by family, friends and others, or the nonpublic distribution of inside information from them to others. Any questions regarding the policy and procedures should be referred to the Chief Compliance Officer.

The term “insider trading” is not defined in federal securities laws, but generally is used to refer to the use of material nonpublic information to trade in securities (whether or not one is an “insider”) or the communication of material nonpublic information to others who may then seek to benefit from such information.

While the law concerning insider trading is not static and may undergo revisions from time to time, it is generally understood that the law prohibits:

(a)

trading by an insider, while in possession of material nonpublic information, or

(b)

trading by a non-insider, while in possession of material nonpublic information, where the information either was disclosed to the non-insider in violation of an insider’s duty to keep it confidential or was misappropriated, or

(c)

communicating material nonpublic information to others.

5.2	Elements of Insider Trading

5.2.1

Who Is an Insider?

The concept of “insider” is broad. It includes officers, directors and employees of a company. In addition, a person can be a “temporary insider” if he or she enters into a special confidential relationship in the conduct of a company’s affairs and as a result is given access to information solely for the company’s purposes. A temporary insider can include, among others, a company’s attorneys, accountants, consultants, bank lending officers, and the employees of such service providers. In addition, an investment adviser may become a temporary insider of a company it advises or for which it performs other services. According to the Supreme Court, the company must expect the outsider to keep the disclosed nonpublic information confidential and the relationship must at least imply such a duty before the outsider will be considered an insider.

5.2.2

What Is Material Information?

Trading on inside information can be the basis for liability when the information is material. In general, information is “material” when there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company’s securities. Information that officers, directors and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems and extraordinary management developments.

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

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5.2.3

What Is Nonpublic Information?

Information is nonpublic until it has been effectively communicated to the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the SEC, or appearing in Bloomberg electronic news reports, or in The Wall Street Journal or other publications of general circulation would be considered public. (Depending on the nature of the information, and the type and timing of the filing or other public release, it may be appropriate to allow for adequate time for the information to be “effectively” disseminated.)

5.2.4

Legal Bases for Liability

(a)

Fiduciary Duty Theory : In 1980 the Supreme Court found that there is no general duty to disclose before trading on material nonpublic information, but that such a duty arises only where there is a direct or indirect fiduciary relationship with the issuer or its agents. That is, there must be a relationship between the parties to the transaction such that one party has a right to expect that the other party will disclose any material nonpublic information or refrain from trading.

(b)

Misappropriation Theory : Another basis for insider trading liability is the “misappropriation theory”, where liability is established when trading occurs on material on nonpublic information that was stolen or misappropriated from any other person.

5.3	Penalties for Insider Trading

Penalties for trading on or communicating material nonpublic information are severe, both for individuals and their employers. An individual can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation:

•

civil injunctions

•

treble damages

•

disgorgement of profits

•

jail sentences

•

fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefitted, and

•

fines for the employer or other controlling person of up to the greater of $1 million or three times the amount of the profit gained or loss avoided.

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5.4.	Procedures

The following procedures have been established to aid Vontobel Personnel in avoiding insider trading, and to aid in preventing, detecting and imposing sanctions against insider trading. Vontobel Personnel must follow these procedures or risk serious sanctions, including dismissal, substantial personal liability and/or criminal penalties. If you have any questions about these procedures, you should consult the Chief Compliance Officer.

5.4.1

Identifying Inside Information . Before trading for yourself or others, including Vontobel Clients, in the securities of a company about which you may have potential inside information, ask yourself the following questions:

(a)

Is the information material? Is this information that an investor would consider important in making his or her investment decisions? If this information that would substantially affect the market price of the securities if generally disclosed?

(b)

Is the information nonpublic? To whom has this information been provided? Has the information been effectively communicated to the marketplace, e.g., by being published electronically by Bloomberg, or in The Wall Street Journal or other publications of general circulation?

If, after consideration of the above, you believe that the information is material and nonpublic, or if you have questions as to whether the information is material and nonpublic, you should report the matter immediately to the Chief Compliance Officer. Until he has had an opportunity to review the matter, you should not (i) purchase or sell the security on behalf of yourself or others, including Vontobel Clients, and (ii) communicate the information to anyone, other than to the Chief Compliance Officer. After the Chief Compliance Officer has reviewed the issue, you will be instructed to either continue the prohibitions against trading and communication, or you will be allowed to communicate the information and then trade.

5.4.2

Personal Security Trading . Each officer, director and employee must instruct their broker(s) to supply the Chief Compliance Officer, on a timely basis, with duplicate copies of confirmations of all personal securities transactions and copies of all periodic statements for all securities accounts owned or controlled by them or their families (including the spouse, minor children, and adults living in the same household), and trusts of which they are trustees or in which they have beneficial ownership or have participated.

5.4.3

Restricting Access to Material Nonpublic Information . Any information in your possession that you identify as material and nonpublic may not be communicated other than in the course of performing your duties to anyone, including your colleagues at Vontobel Asset Management, Inc., with the exception of the Chief Compliance Officer as provided in subparagraph 5.4.1 above. In addition, care should be taken so that such information is secure. For example, files containing material nonpublic information should be locked; access to computer files containing material nonpublic information should be restricted.

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5.4.4

Resolving Issues Concerning Insider Trading . If, after considerations of the items set forth in Section 5.2, doubt remains as to whether information is material or nonpublic, or if there is any unresolved question as to the applicability or interpretation of the foregoing procedures, or as to the propriety of any action, it must be discussed with the Chief Compliance Officer before trading or communicating the information to anyone.

5.5	Supervision

The supervisory role of the Chief Compliance Officer is critical to the implementation and maintenance of this Statement on Insider Trading, and encompasses the following.

5.5.1

Prevention of Insider Trading

To prevent insider trading, the Chief Compliance Officer shall:

•

answer promptly any questions regarding the Statement on Insider Trading

•

resolve issues of whether information received by any officer, employee or director is material and nonpublic

•

update the Statement on Insider Trading and distribute amendments thereto, as necessary, to all officers, employees and directors

•

obtain an annual written acknowledgement from all officers, employees and directors that they have reviewed the Corporation’s Code of Ethics, including the Statement on Insider Trading contained in this Section 5

•

when it has been determined that any officer, director or employee has material nonpublic information:

(i)

implement measures to prevent dissemination of such information, and

(ii)

if necessary, restrict officers, directors and employees from trading the securities.

5.5.2

Detection of Insider Trading

To detect insider trading, the Chief Compliance Officer shall:

•

Review for each officer, director and employee the periodic account statements and duplicate confirmations forwarded by their brokers to ensure that no trading took place in securities in which the Corporation was in possession of material nonpublic information;

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•

review the trading activity of the mutual funds and private account portfolios managed by the Corporation quarterly; and

•

coordinate, if necessary, the review of such reports with other appropriate officers, directors or employees of the Corporation.

5.5.3

Special Reports to Management

Promptly upon learning of a potential violation of the Statement on Insider Trading, the Chief Compliance Officer shall prepare a written report to the Chief Executive Officer and the Board of Directors of the Corporation and, if the violation occurred with respect to an investment company client, provide a copy of such report to the Board of Directors of the investment company concerned.

5.5.4

Annual Reports

On an annual basis, the Chief Compliance Officer shall prepare a written report to the Corporation’s Board of Directors setting forth the following:

•

a summary of the existing procedures to detect and prevent insider trading;

•

full details of any investigation, either internal or by a regulatory agency, of any suspected insider trading and the results of such investigation;

•

an evaluation of the current procedures and any recommendations for improvement.

An annual compliance report shall be furnished to the Board of Directors of the investment companies to which the Corporation acts as investment adviser or subadviser.

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APPENDIX A

Excerpts from cited SEC legislation:

•

Rule 204A-1 of the Investment Advisers Act of 1940 - Investment Adviser Code of Ethics

•

Section 204A of the Investment Advisers Act of 1940 - Prevention of Misuse of Nonpublic Information

•

Section 206 of the Investment Advisers Act of 1940 - Prohibited Transactions by Investment Advisers

•

Definitions:

“Beneficial Owner” - as defined in Section 16 of the Securities Exchange Act of 1934

“Security(ies) - as defined in Section 202(a)(18) of the Investment Advisers Act of 1940

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Rule 204A-1 Investment Adviser Codes of Ethics.

(a) Adoption of code of ethics. If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b–3), you must establish, maintain and enforce a written code of ethics that, at a minimum, includes:

(1) A standard (or standards) of business conduct that you require of your supervised persons, which standard must reflect your fiduciary obligations and those of your supervised persons;

(2) Provisions requiring your supervised persons to comply with applicable Federal securities laws;

(3) Provisions that require all of your access persons to report, and you to review, their personal securities transactions and holdings periodically as provided below;

(4) Provisions requiring supervised persons to report any violations of your code of ethics promptly to your chief compliance officer or, provided your chief compliance officer also receives reports of all violations, to other persons you designate in your code of ethics; and

(5) Provisions requiring you to provide each of your supervised persons with a copy of your code of ethics and any amendments, and requiring your supervised persons to provide you with a written acknowledgment of their receipt of the code and any amendments.

(b) Reporting requirements —(1) Holdings reports. The code of ethics must require your access persons to submit to your chief compliance officer or other persons you designate in your code of ethics a report of the access person’s current securities holdings that meets the following requirements:

(i) Content of holdings reports. Each holdings report must contain, at a minimum:

(A) The title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the access person has any direct or indirect beneficial ownership;

(B) The name of any broker, dealer or bank with which the access person maintains an account in which any securities are held for the access person’s direct or indirect benefit; and

(ii) Timing of holdings reports. Your access persons must each submit a holdings report:

(A) No later than 10 days after the person becomes an access person, and the information must be current as of a date no more than 45 days prior to the date the person becomes an access person.

(B) At least once each 12-month period thereafter on a date you select, and the information must be current as of a date no more than 45 days prior to the date the report was submitted.

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(2) Transaction reports. The code of ethics must require access persons to submit to your chief compliance officer or other persons you designate in your code of ethics securities transactions reports that meet the following requirements:

(i) Content of transaction reports. Each transaction report must contain, at a minimum, the following information about each transaction involving a reportable security in which the access person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership:

(A) The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;

(B) The nature of the transaction ( i.e. , purchase, sale or any other type of acquisition or disposition);

(D) The name of the broker, dealer or bank with or through which the transaction was effected; and

(E) The date the access person submits the report.

(ii) Timing of transaction reports. Each access person must submit a transaction report no later than 30 days after the end of each calendar quarter, which report must cover, at a minimum, all transactions during the quarter.

(3) Exceptions from reporting requirements. Your code of ethics need not require an access person to submit:

(i) Any report with respect to securities held in accounts over which the access person had no direct or indirect influence or control;

(ii) A transaction report with respect to transactions effected pursuant to an automatic investment plan;

(iii) A transaction report if the report would duplicate information contained in broker trade confirmations or account statements that you hold in your records so long as you receive the confirmations or statements no later than 30 days after the end of the applicable calendar quarter.

(c) Pre-approval of certain investments. Your code of ethics must require your access persons to obtain your approval before they directly or indirectly acquire beneficial ownership in any security in an initial public offering or in a limited offering.

(d) Small advisers. If you have only one access person ( i.e. , yourself), you are not required to submit reports to yourself or to obtain your own approval for investments in any security in an initial public offering or in a limited offering, if you maintain records of all of your holdings and transactions that this section would otherwise require you to report.

(e) Definitions. For the purpose of this section:

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(1) Access person means:

(i) Any of your supervised persons:

(A) Who has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund, or

(B) Who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic.

(ii) If providing investment advice is your primary business, all of your directors, officers and partners are presumed to be access persons.

(2) Automatic investment plan means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan.

(3) Beneficial ownership is interpreted in the same manner as it would be under §240.16a–1(a)(2) of this chapter in determining whether a person has beneficial ownership of a security for purposes of section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) and the rules and regulations thereunder. Any report required by paragraph (b) of this section may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect beneficial ownership in the security to which the report relates.

(4) Federal securities laws means the Securities Act of 1933 (15 U.S.C. 77a–aa), the Securities Exchange Act of 1934 (15 U.S.C. 78a–mm), the Sarbanes-Oxley Act of 2002 (Pub. L. 107–204, 116 Stat. 745 (2002)), the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment Advisers Act of 1940 (15 U.S.C. 80b), title V of the Gramm-Leach-Bliley Act (Pub. L. 106–102, 113 Stat. 1338 (1999), any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act (31 U.S.C. 5311–5314; 5316–5332) as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury.

(5) Fund means an investment company registered under the Investment Company Act.

(6) Initial public offering means an offering of securities registered under the Securities Act of 1933 (15 U.S.C. 77a), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)).

(7) Limited offering means an offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) (15 U.S.C. 77d(2) or 77d(6)) or pursuant to §§230.504, 230.505, or 230.506 of this chapter.

(8) Purchase or sale of a security includes, among other things, the writing of an option to purchase or sell a security.

(9) Reportable fund means:

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(i) Any fund for which you serve as an investment adviser as defined in section 2(a)(20) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(20)) ( i.e. , in most cases you must be approved by the fund’s board of directors before you can serve); or

(ii) Any fund whose investment adviser or principal underwriter controls you, is controlled by you, or is under common control with you. For purposes of this section, control has the same meaning as it does in section 2(a)(9) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(9)).

(10) Reportable security means a security as defined in section 202(a)(18) of the Act (15 U.S.C. 80b–2(a)(18)), except that it does not include:

(i) Direct obligations of the Government of the United States;

(ii) Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;

(iii) Shares issued by money market funds;

(iv) Shares issued by open-end funds other than reportable funds; and

(v) Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds.

[69 FR 41708, July 9, 2004]

Section 206 of the Investment Advisers Act of 1940

Prohibited Transactions by Investment Advisers

It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly–

(1)	to employ any device, scheme, or artifice to defraud any client or prospective client;

(2)	to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client;

(3)

acting as principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction. The prohibitions of this paragraph (3) shall not apply to any transaction with a customer of a broker or dealer if such broker or dealer is not acting as an investment adviser in relation to such transaction;

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(4)

to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative. The Commission shall, for the purposes of this paragraph (4) by rules and regulations define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.

Section 206A of the Investment Advisers Act of 1940 Exemptions

The Commission, by rules and regulations, upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person or transaction, or any class or classes or persons, or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this title.

Section 204A of the Investment Advisers Act of 1940

Prevention of Misuse of Nonpublic Information

Every investment adviser subject to section 204 of this title shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of such investment adviser’s business, to prevent the misuse in violation of this Act or the Securities Exchange Act of 1934, or the rules or regulations thereunder, of material, nonpublic information by such investment adviser or any person associated with such investment adviser. The Commission, as it deems necessary or appropriate in the public interest or for the protection of investors, shall adopt rules or regulations to require specific policies or procedures reasonably designed to prevent misuse in violation of this Act or the Securities Exchange Act of 1934 (or the rules or regulations thereunder) of material, nonpublic information.

Definitions:

“Beneficial Owner” - as defined in Section 16 of the Securities Exchange Act of 1934 - The term beneficial owner shall have the following applications:

Solely for purposes of determining whether a person is a beneficial owner of more than ten percent of any class of equity securities registered pursuant to section 12 of the Act, the term “beneficial owner” shall mean any person who is deemed a beneficial owner pursuant to section 13(d) of the Act and the rules thereunder; provided, however, that the following institutions or persons shall not be deemed the beneficial owner of securities of such class held for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business (or in the case of an employee benefit plan specified in paragraph (a)(1)(vi) of this section, of securities of such class allocated to plan participants where participants have voting power) as long as such shares are acquired by such institutions or persons without the purpose or effect of changing or influencing control of the issuer or engaging in any arrangement subject to Rule 13d-3(b) (§ 240.13d-3(b)):

•

A broker or dealer registered under section 15 of the Act (15 U.S.C. 78o);

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•

A bank as defined in section 3(a)(6) of the Act (15 U.S.C. 78c);

•

An insurance company as defined in section 3(a)(19) of the Act (15 U.S.C. 78c);

•

An investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8);

•

Any person registered as an investment adviser under Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under the laws of any state;

•

An employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1001 et seq. (“ERISA”) that is subject to the provisions of ERISA, or any such plan that is not subject to ERISA that is maintained primarily for the benefit of the employees of a state or local government or instrumentality, or an endowment fund;

•

A parent holding company or control person, provided the aggregate amount held directly by the parent or control person, and directly and indirectly by their subsidiaries or affiliates that are not persons specified in paragraphs (a)(1)(i) through (ix), does not exceed one percent of the securities of the subject class;

•

A savings association as defined in Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1813);

•

A church plan that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C. 80a-3); and

•

A group, provided that all the members are persons specified in § 240.16a-1(a)(1)(i) through (ix).

•

A group, provided that all the members are persons specified in § 240.16a-1(a)(1) (i) through (vii).

Note to paragraph (a). Pursuant to this section, a person deemed a beneficial owner of more than ten percent of any class of equity securities registered under section 12 of the Act would file a Form 3 (§ 249.103), but the securities holdings disclosed on Form 3, and changes in beneficial ownership reported on subsequent Forms 4 (§ 249.104) or 5 (§ 249.105), would be determined by the definition of “beneficial owner” in paragraph (a)(2) of this section.

Other than for purposes of determining whether a person is a beneficial owner of more than ten percent of any class of equity securities registered under Section 12 of the Act, the term beneficial owner shall mean any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the equity securities, subject to the following:

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The term pecuniary interest in any class of equity securities shall mean the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities.

The term indirect pecuniary interest in any class of equity securities shall include, but not be limited to:

Securities held by members of a person’s immediate family sharing the same household; provided, however, that the presumption of such beneficial ownership may be rebutted; see also § 240.16a-1(a)(4);

A general partner’s proportionate interest in the portfolio securities held by a general or limited partnership. The general partner’s proportionate interest, as evidenced by the partnership agreement in effect at the time of the transaction and the partnership’s most recent financial statements, shall be the greater of:

The general partner’s share of the partnership’s profits, including profits attributed to any limited partnership interests held by the general partner and any other interests in profits that arise from the purchase and sale of the partnership’s portfolio securities; or

The general partner’s share of the partnership capital account, including the share attributable to any limited partnership interest held by the general partner.

A performance-related fee, other than an asset-based fee, received by any broker, dealer, bank, insurance company, investment company, investment adviser, investment manager, trustee or person or entity performing a similar function; provided, however, that no pecuniary interest shall be present where:

The performance-related fee, regardless of when payable, is calculated based upon net capital gains and/or net capital appreciation generated from the portfolio or from the fiduciary’s overall performance over a period of one year or more; and

Equity securities of the issuer do not account for more than ten percent of the market value of the portfolio. A right to a nonperformance-related fee alone shall not represent a pecuniary interest in the securities;

A person’s right to dividends that is separated or separable from the underlying securities. Otherwise, a right to dividends alone shall not represent a pecuniary interest in the securities;

A person’s interest in securities held by a trust, as specified in § 240.16a-8(b); and

A person’s right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable.

A shareholder shall not be deemed to have a pecuniary interest in the portfolio securities held by a corporation or similar entity in which the person owns securities if the shareholder is not a controlling shareholder of the entity and does not have or share investment control over the entity’s portfolio.

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Where more than one person subject to section 16 of the Act is deemed to be a beneficial owner of the same equity securities, all such persons must report as beneficial owners of the securities, either separately or jointly, as provided in § 240.16a-3(j). In such cases, the amount of short-swing profit recoverable shall not be increased above the amount recoverable if there were only one beneficial owner.

Any person filing a statement pursuant to section 16(a) of the Act may state that the filing shall not be deemed an admission that such person is, for purposes of section 16 of the Act or otherwise, the beneficial owner of any equity securities covered by the statement.

The following interests are deemed not to confer beneficial ownership for purposes of section 16 of the Act:

Interests in portfolio securities held by any holding company registered under the Public Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.);

Interests in portfolio securities held by any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); and

Interests in securities comprising part of a broad-based, publicly traded market basket or index of stocks, approved for trading by the appropriate federal governmental authority.

The term call equivalent position shall mean a derivative security position that increases in value as the value of the underlying equity increases, including, but not limited to, a long convertible security, a long call option, and a short put option position.

The term derivative securities shall mean any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege at a price related to an equity security, or similar securities with a value derived from the value of an equity security, but shall not include:

Rights of a pledgee of securities to sell the pledged securities;

Rights of all holders of a class of securities of an issuer to receive securities pro rata, or obligations to dispose of securities, as a result of a merger, exchange offer, or consolidation involving the issuer of the securities;

Rights or obligations to surrender a security, or have a security withheld, upon the receipt or exercise of a derivative security or the receipt or vesting of equity securities, in order to satisfy the exercise price or the tax withholding consequences of receipt, exercise or vesting;

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Interests in broad-based index options, broad-based index futures, and broad-based publicly traded market baskets of stocks approved for trading by the appropriate federal governmental authority;

Interests or rights to participate in employee benefit plans of the issuer;

Rights with an exercise or conversion privilege at a price that is not fixed; or

Options granted to an underwriter in a registered public offering for the purpose of satisfying over-allotments in such offering.

The term equity security of such issuer shall mean any equity security or derivative security relating to an issuer, whether or not issued by that issuer.

The term immediate family shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

The term “officer” shall mean an issuer’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer. Officers of the issuer’s parent(s) or subsidiaries shall be deemed officers of the issuer if they perform such policy-making functions for the issuer. In addition, when the issuer is a limited partnership, officers or employees of the general partner(s) who perform policy-making functions for the limited partnership are deemed officers of the limited partnership. When the issuer is a trust, officers or employees of the trustee(s) who perform policy-making functions for the trust are deemed officers of the trust.

Note: “Policy-making function” is not intended to include policy-making functions that are not significant. If pursuant to Item 401(b) of Regulation S-K (§ 229.401(b)) the issuer identifies a person as an “executive officer,” it is presumed that the Board of Directors has made that judgment and that the persons so identified are the officers for purposes of Section 16 of the Act, as are such other persons enumerated in this paragraph (f) but not in Item 401(b).

The term portfolio securities shall mean all securities owned by an entity, other than securities issued by the entity.

The term put equivalent position shall mean a derivative security position that increases in value as the value of the underlying equity decreases, including, but not limited to, a long put option and a short call option position.

“Security(ies) - as defined in Section 202(a)(18) of the Investment Advisers Act of 1940 - “Security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or

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subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guaranty of, or warrant or right to subscribe to or purchase any of the foregoing.

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New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

APPENDIX B

Officers authorized to approve trades:

Joseph Mastoloni

Henry Schlegel

Thomas Wittwer

Frances Navarra

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

APPENDIX C

Personal securities trading authorization form

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

Authorization of Personal Securities Transaction

Submit a separate authorization for each account in which a transaction is intended.

I request prior written authorization to make a transaction in the following security for my personal account(s), for which I have instructed duplicate trade confirmations and statements to be mailed to Vontobel Asset Management, Inc.:

Name of security No. of shares Purchase Sale

Broker (personal a/c) Broker (personal IRA a/c)

Broker (family a/c) Broker (Schwab pension a/c)

Held in any Vontobel Client portfolio(s): Yes No

(If yes, identify: )

Exemption to prohibition on short-term trading:

I have no knowledge of an intended or pending purchase or sale of the above security in any Vontobel Client portfolio. If Vontobel Asset Management, Inc. places a trade in this security in any Vontobel Client portfolio within 7 calendar days before or after the date on which my proposed transaction is authorized, I acknowledge that:

Pursuant to Section 4.3 of the Code of Ethics, the Chief Compliance Officer (or, in his absence, any officer authorized to approve trades) shall, based on his assessment of the facts and circumstances surrounding the trade hereby authorized, determine whether I shall be obliged to cancel the transaction or disgorge any imputed or realized profit that shall have accrued between the date of my personal trade and that effected by Vontobel Asset Management, Inc. for a Vontobel Client.

2.	If the officer to whom I submit this request determines that the above trade would contravene the Code of Ethics, I undertake to abide by his decision.

3.	I have received and read the policies with respect to reporting of securities transactions and insider trading in the Code of Ethics, and I am aware that violation of such policies may represent cause for dismissal.

This authorization is valid for two business days only . If the trade hereby authorized is not effected within two days of the date hereof, I acknowledge that I shall be obliged to obtain a new authorization, and that if I fail to do so, I shall be considered to have placed an unauthorized trade.



Date:						Employee Signature:

Authorization:

Comments:

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

APPENDIX D

Initial and annual report forms

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

Initial Report of Securities Holdings

To the Chief Compliance Officer of Vontobel Asset Management:

1.	I hereby acknowledge receipt of a copy of Vontobel Asset Management’s Code of Ethics.

2.	I have read and understand the Code of Ethics and recognize that I am subject thereto.

Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship that may involve Vontobel Asset Management, Inc. or a Vontobel Client, such as any economic relationship between my transactions and securities held or to be acquired by Vontobel Asset Management on behalf of a Vontobel Client.

4.	As of the date below I had a direct or indirect Beneficial Ownership in the following securities:

AS REPORTED ON THE ATTACHED STATEMENT(S)

AND/OR:

AS INDICATED BELOW:


Security	No. of Shares	Principal Amount	Broker / Dealer	Type of Interest (Direct /Indirect)



Date:						Signature:

Print Name:

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

Annual Certification of Compliance and Disclosure of Securities Holdings

To the Chief Compliance Officer of Vontobel Asset Management:

1.	I hereby acknowledge that I have read and understand the Code of Ethics and recognize that I am subject thereto.

Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship that may involve Vontobel Asset Management or a Vontobel Client, such as any economic relationship between my transactions and securities held or to be acquired by Vontobel Asset Management on behalf of a Vontobel Client.

3.	I certify that I have instructed each financial institution with whom I, or any member of my household, effects securities transactions (as defined in the Code) to send duplicate copies of brokerage statements and trading confirmations to Vontobel Asset Management.

4.	I have disclosed and reported all personal securities transactions required to be disclosed.

5.	As of December 31, , I had a direct or indirect Beneficial Ownership in the following securities:

AS REPORTED ON DUPLICATE STATEMENTS FORWARDED TO VONTOBEL ASSET MANAGEMENT

AND/OR:

AS INDICATED BELOW :

Security

Date of
Transaction

No. of
Shares

US$ Amount
of
Transaction

Purchase,
Sale,
Other

Price

Broker/
Dealer



Date:						Signature:

Print Name:

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

Vontobel Asset Management, Inc.

LOGO

APPENDIX E

The following items are expressly included within the Code’s definition of “Security” and must be pre-cleared:

•

Equity security

•

warrants

•

rights

•

convertible security

•

ADR’s, ADS’s, GDR’s

•

any type of preferred stock

•

corporate bonds

•

shares of registered open-end investment companies (mutual funds) that Vontobel advises or sub-advises

•

closed-end investment funds that Vontobel advises or sub-advises

The following items are expressly excluded from the Code’s definition of “Security” and do not require pre-clearance:

•

shares of an investment club account

•

securities issued by the US Government or US federal agencies that are direct obligations of the US

•

bankers’ acceptances, bank certificates of deposits and commercial paper

•

shares of registered open-end investment companies (mutual funds) that Vontobel does not advise or sub-advise

•

ETFs that Vontobel does not manage and that are based on a broad-based index

•

common securities indicies

•

commodities or commodity futures

Vontobel Asset Management, Inc.

1540 Broadway, 38th Floor

New York, N.Y.10036

Telephone +1-212-415 70 00

Telefax +1-212-415-70 87

POWER OF ATTORNEY

I, the undersigned member of the Board of Trustees of the below-named trusts, with their respective file numbers under the Securities Act of 1933 noted, hereby constitute and appoint George R. Aylward, Tracy L. Rich and Kevin J. Carr, or any of them as my true and lawful attorneys and agents with full power to sign for me in the capacity indicated below, any or all registration statements on Form N-1A, amendments thereto, and such other filings as may be appropriate, with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940 relating to each of said mutual funds, and hereby ratify and confirm my signature as it may be signed by said attorneys and agents.


Phoenix Adviser Trust		(333-106142)

Phoenix Asset Trust		(333-08045)

Phoenix CA Tax-Exempt Bond Fund		(002-83024)

Phoenix Equity Series Fund		(333-29043)

Phoenix Equity Trust		(002-16590)

Phoenix Insight Funds Trust		(033-64915)

Phoenix Institutional Mutual Funds		(033-80057)

Phoenix Investment Series Fund		(033-06930)

Phoenix Investment Trust 06		(033-01922)

Phoenix Investment Trust 97		(333-34537)

Phoenix Multi-Portfolio Fund		(033-19423)

Phoenix Multi-Series Trust		(033-45758)

Phoenix PHOLIOs ⁽ ^sm ⁾		(333-05039)

Phoenix Portfolios		(333-45675)

Phoenix Opportunities Trust		(033-65137)

Phoenix Series Fund		(002-14069)

Phoenix Strategic Equity Series Fund		(033-06931)

I hereby declare that a photostatic, xerographic or other similar copy of this original instrument shall be as effective as the original.

IN WITNESS WHEREOF, this 28 ^th day of February, 2008.



/s/ E. Virgil Conway				/s/ Harry Dalzell-Payne
E. Virgil Conway, Trustee				Harry Dalzell-Payne, Trustee

/s/ Francis E. Jeffries				/s/ Dr. Leroy Keith, Jr.
Francis E. Jeffries, Trustee				Dr. Leroy Keith, Jr., Trustee

/s/ Geraldine M. McNamara				/s/ Philip R. McLoughlin
Geraldine M. McNamara, Trustee				Philip R. McLoughlin, Trustee

/s/ Richard E. Segerson				/s/ James M. Oates
Richard E. Segerson, Trustee				James M. Oates, Trustee

/s/ Ferdinand L. J. Verdonck				/s/ George R. Aylward
Ferdinand L. J. Verdonck, Trustee				George R. Aylward, Trustee

All signatures need not appear on the same copy of this Power of Attorney.