UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21680
| Virtus Total Return Fund |
(Exact name of registrant as specified in charter)
| 101 Munson Street Greenfield, MA 01301-9668 |
(Address of principal executive offices) (Zip code)
| Kevin J. Carr, Esq. Vice President, Chief Legal Officer, Counsel and Secretary for Registrant 100 Pearl Street Hartford, CT 06103-4506 |
(Name and address of agent for service)
Registrant’s telephone number, including area code: (866) 270-7788
Date of fiscal year end: December 31
Date of reporting period: June 30, 2012
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
| Item 1. | Reports to Stockholders. |
The Report to Shareholders is attached herewith.
SEMIANNUAL REPORT
Virtus Total Return Fund
| Not FDIC Insured No Bank Guarantee May Lose Value |
June 30, 2012 |
MESSAGE TO SHAREHOLDERS
August 2012
Dear Virtus Total Return Fund Shareholder:
I am pleased to provide the manager’s report and commentary for the Virtus Total Return Fund for the six months ended June 30, 2012. The fund’s co-portfolio managers Duff & Phelps Investment Management Co. and Newfleet Asset Management, LLC discuss how the markets and their respective equity and fixed income portions of the portfolio performed for the period.
For the quarter ended June 30, 2012, the fund’s net asset value (NAV) increased 2.06%, including $0.078 in reinvested distributions. For the same period, the fund’s composite benchmark (60% MSCI World Infrastructure Sector Capped Index and 40% Barclays Capital U.S. Aggregate Bond Index) gained 1.26%, including reinvested dividends.
For the six months ended June 30, 2012, the fund’s NAV increased 6.93%, including $0.128 in reinvested distributions. For the same period, the fund’s composite benchmark gained 2.89%, including reinvested dividends.
I welcome new investors to the fund and thank all of our shareholders for entrusting your assets to us. Should you have any questions about the funds, the Virtus customer service team is ready to assist you at 1-866-270-7788, or through the closed-end fund section of our website, www.virtus.com.
Sincerely,
George R. Aylward
President and Trustee
Virtus Total Return Fund
1
VIRTUS TOTAL RETURN FUND
June 30, 2012 (Unaudited)
Managers Discussion of Fund Performance
2
VIRTUS TOTAL RETURN FUND
June 30, 2012 (Unaudited)
Managers Discussion of Fund Performance (Continued)
3
VIRTUS TOTAL RETURN FUND
June 30, 2012 (Unaudited)
Managers Discussion of Fund Performance (Continued)
4
VIRTUS TOTAL RETURN FUND
KEY INVESTMENT TERMS
ADR (American Depositary Receipt)
Represents shares of non-U.S. companies traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust. Non-U.S. companies use ADRs in order to make it easier for Americans to buy their shares.
Barclays Capital U.S. Aggregate Bond Index
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.
MSCI World Infrastructure Sector Capped Index
The MSCI World Infrastructure Sector Capped Index 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. Prior to September 1, 2008, the index allocation was 65% MSCI USA/utilities index, 20% MSCI World Telcom Services index and 15% MSCI World ex USA utilities index.
PIK (Payment-in-Kind)
A bond which pays interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock.
REIT (Real Estate Investment Trust)
A publicly traded company that owns, develops and operates income-producing real estate such as apartments, office buildings, hotels, shopping centers and other commercial properties.
S&P 500® Index
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.
5
6
VIRTUS TOTAL RETURN FUND
June 30, 2012
(Unaudited)
The following tables presents the portfolio holdings within certain sectors or countries as a percentage of total investments at June 30, 2012.
| Asset Allocation | ||||||||
| Common Stocks |
62 | % | ||||||
| Utilities |
20 | % | ||||||
| Telecommunication Services |
15 | |||||||
| Energy |
14 | |||||||
| All other sectors |
13 | |||||||
| Corporate Bonds and Notes |
20 | |||||||
| Financials |
7 | |||||||
| Industrials |
4 | |||||||
| Energy |
3 | |||||||
| All other sectors |
6 | |||||||
| Loan Agreements |
6 | |||||||
| Mortgage-Backed Securities |
6 | |||||||
| Foreign Government Securities |
4 | |||||||
| Asset-Backed Securities |
2 | |||||||
|
|
|
|||||||
| 100 | % | |||||||
|
|
|
|||||||
| Country Weightings | ||||
| United States |
60 | % | ||
| Canada |
10 | |||
| United Kingdom |
7 | |||
| Australia |
3 | |||
| Brazil |
2 | |||
| Netherlands |
2 | |||
| Spain |
2 | |||
| Other |
14 | |||
|
|
|
|||
| Total |
100 | % | ||
|
|
|
|||
The accompanying notes are an integral part of these financial statements
7
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
8
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
9
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
10
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
11
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
12
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
13
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
14
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
15
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
16
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
See Notes to Financial Statements
17
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
FOOTNOTE LEGEND:
| (1) | Federal Income Tax Information: For tax information at June 30, 2012, see Note 5 Federal Income Tax Information in the Notes to Financial Statements. |
| (2) | Non-income producing. |
| (3) | Variable or step coupon security; interest rate shown reflects the rate in effect at June 30, 2012. |
| (4) | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2012, these securities amounted to a value of $16,104 or 14.0% of net assets. |
| (5) | Regulation S security. Security is offered and sold outside of the United States, therefore, it is exempt from registration with the SEC under rules 903 and 904 of the Securities Act of 1933, as amended. |
| (6) | Interest payments may be deferred. |
| (7) | No contractual maturity date |
| (8) | This note was issued for the sole purpose of funding a loan agreement between the issuer and the borrower. As the credit risk for this security lies solely with the borrower, the name represented here is that of the borrower. |
See Notes to Financial Statements
18
VIRTUS TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (Continued)
JUNE 30, 2012 (Unaudited)
($ reported in thousands)
The following table provides a summary of inputs used to value the Fund’s net assets as of June 30, 2012 (see Security Valuation Note 2A in the Notes to Financial Statements):
| Total Value at June 30, 2012 |
Level 1 – Quoted Prices |
Level 2 – Significant Observable Inputs |
||||||||||
| Investment in Securities: |
|
|||||||||||
| Debt Securities: |
||||||||||||
| Asset-Backed Securities |
$ | 2,889 | $ | — | $ | 2,889 | ||||||
| Corporate Bonds and Notes |
30,577 | — | 30,577 | |||||||||
| Foreign Government Securities |
6,132 | — | 6,132 | |||||||||
| Loan Agreements |
9,744 | — | 9,744 | |||||||||
| Mortgage-Backed Securities |
9,670 | — | 9,670 | |||||||||
| Municipal Bonds |
468 | — | 468 | |||||||||
| Equity Securities: |
||||||||||||
| Preferred Stock |
305 | 120 | 185 | |||||||||
| Common Stocks |
92,529 | 92,529 | — | |||||||||
| Short-Term Investments |
1,601 | 1,601 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Investments |
$ | 153,915 | $ | 94,250 | $ | 59,665 | ||||||
|
|
|
|
|
|
|
|||||||
There are no Level 3 (significant unobservable inputs) priced securities.
See Notes to Financial Statements
19
VIRTUS TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2012 (Unaudited)
(Reported in thousands except shares and per share amounts)
| Assets | ||||
| Investment in securities at value (Identified cost $148,081) |
$ | 153,915 | ||
| Foreign currency at value (Identified cost $1) |
1 | |||
| Cash |
204 | |||
| Receivables |
||||
| Investment securities sold |
999 | |||
| Dividends and interest |
1,306 | |||
| Tax reclaims |
41 | |||
| Prepaid expenses |
50 | |||
|
|
|
|||
| Total assets |
156,516 | |||
|
|
|
|||
| Liabilities | ||||
| Payables |
||||
| Borrowings (Note 8) |
40,000 | |||
| Investment securities purchased |
1,311 | |||
| Investment advisory fee |
105 | |||
| Administration fee |
12 | |||
| Professional fee |
23 | |||
| Interest payable on line of credit |
23 | |||
| Transfer agent fees and expenses |
2 | |||
| Trustees’ fees and expenses |
1 | |||
| Other accrued expenses |
34 | |||
|
|
|
|||
| Total liabilities |
41,511 | |||
|
|
|
|||
| Net Assets | $ | 115,005 | ||
|
|
|
|||
| Net Assets Consist of: | ||||
| Common stock ($0.001 par value unlimited shares authorized) |
$ | 27 | ||
| Capital paid in on shares of beneficial interest |
241,995 | |||
| Accumulated undistributed net investment income (loss) |
1,302 | |||
| Accumulated undistributed net realized gain (loss) |
(134,154 | ) | ||
| Net unrealized appreciation (depreciation) |
5,835 | |||
|
|
|
|||
| Net Assets | $ | 115,005 | ||
|
|
|
|||
| NET ASSET VALUE PER SHARE |
$ | 4.19 | ||
|
|
|
|||
See Notes to Financial Statements
20
VIRTUS TOTAL RETURN FUND
SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)
($ reported in thousands)
| Investment Income | ||||
| Dividends |
$ | 1,908 | ||
| Interest |
1,906 | |||
| Foreign taxes withheld |
(134 | ) | ||
|
|
|
|||
| Total investment income |
3,680 | |||
|
|
|
|||
| Expenses | ||||
| Investment advisory fees |
601 | |||
| Administration fees |
71 | |||
| Transfer agent fees and expenses |
7 | |||
| Custodian fees |
18 | |||
| Sub-administration and accounting fees |
26 | |||
| Interest expense and fees |
187 | |||
| Printing fees and expenses |
18 | |||
| Professional fees |
84 | |||
| Miscellaneous |
50 | |||
|
|
|
|||
| Total expenses |
1,062 | |||
|
|
|
|||
| Net investment income | 2,618 | |||
|
|
|
|||
| Net Realized and Unrealized Gain (Loss) on Investments | ||||
| Net realized gain (loss) on investments |
729 | |||
| Net realized gain (loss) on foreign currency transactions |
— | (1) | ||
| Net change in unrealized appreciation (depreciation) on investments |
3,685 | |||
| Net change in unrealized appreciation (depreciation) on foreign currency translations |
(1 | ) | ||
|
|
|
|||
| Net realized and unrealized gain (loss) on investments | 4,413 | |||
|
|
|
|||
| Net increase (decrease) in net assets resulting from operations | $ | 7,031 | ||
|
|
|
| (1) | Amount is less than $500. |
See Notes to Financial Statements
21
VIRTUS TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
($ reported in thousands)
| Six Months Ended June 30, 2012 (Unaudited) |
Year Ended December 31, 2011 |
|||||||
| INCREASE/(DECREASE) IN NET ASSETS | ||||||||
| From Operations | ||||||||
| Net investment income (loss) |
$ | 2,618 | $ | 5,045 | ||||
| Net realized gain (loss) |
729 | (140 | ) | |||||
| Net change in unrealized appreciation (depreciation) |
3,684 | 1,834 | ||||||
|
|
|
|
|
|||||
| Increase (decrease) in net assets resulting from operations |
7,031 | 6,739 | ||||||
|
|
|
|
|
|||||
| From Distributions to Shareholders | ||||||||
| Net investment income |
(3,516 | ) | (4,120 | ) | ||||
|
|
|
|
|
|||||
| Decrease in net assets from distributions to shareholders | (3,516 | ) | (4,120 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets | 3,515 | 2,619 | ||||||
| Net Assets | ||||||||
| Beginning of period |
111,490 | 108,871 | ||||||
|
|
|
|
|
|||||
| End of period | $ | 115,005 | $ | 111,490 | ||||
|
|
|
|
|
|||||
| Undistributed net investment income at end of period |
$ | 1,302 | $ | 2,200 | ||||
See Notes to Financial Statements
22
VIRTUS TOTAL RETURN FUND
STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)
| Cash Flows Provided by Operating Activities | ||||
| Increase (decrease) in net assets from operations |
$ | 7,031 | ||
|
|
|
|||
| Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: |
||||
| Proceeds from sales and paydowns of long-term investments |
24,478 | |||
| Purchase of long-term investments |
(75,060 | ) | ||
| Net proceeds from sales of short-term securities |
11,895 | |||
| Net change in unrealized (appreciation)/depreciation |
(3,684 | ) | ||
| Net realized gain from sales of long-term investments |
(661 | ) | ||
| Increase in dividends and interest receivable |
(379 | ) | ||
| Decrease in tax reclaims |
18 | |||
| Decrease in prepaid expenses |
15 | |||
| Increase in interest expense payable |
23 | |||
| Increase in investment advisory fees payable |
49 | |||
| Increase in other affiliates payable |
2 | |||
| Decrease in Trustees’ fees payable |
(9 | ) | ||
| Decrease in other accrued expenses payable |
(5 | ) | ||
|
|
|
|||
| Cash provided by operating activities |
(36,287 | ) | ||
|
|
|
|||
| Cash used for financing activities: |
||||
| Cash receipts from borrowings |
40,000 | |||
| Cash dividends paid to shareholders |
(3,516 | ) | ||
|
|
|
|||
| Cash used for financing activities |
36,484 | |||
|
|
|
|||
| Cash impact from foreign exchange fluctuations |
(1 | ) | ||
|
|
|
|||
| Net decrease in cash |
196 | |||
|
|
|
|||
| Cash: |
||||
| Cash and foreign currency at beginning of period |
9 | |||
|
|
|
|||
| Cash and foreign currency at end of period |
$ | 205 | ||
|
|
|
|||
| Cash flow information: |
||||
| Cash paid for interest |
$ | 319 |
See Notes to Financial Statements
23
VIRTUS TOTAL RETURN FUND
(Selected per share data and ratios for a share outstanding throughout each period)
| For the
Six Months Ended June 30, 2012 (Unaudited) |
Year Ended December 31(1) | |||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||
| PER SHARE OPERATING DATA: | ||||||||||||||||
| Net asset value, beginning of period |
$ | 4.06 | $ | 3.96 | $ | 2.77 | $ | 2.38 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from investment operations: | ||||||||||||||||
| Net investment income/(loss) |
0.10 | (3) | 0.18 | (3) | 0.23 | (3) | 0.12 | |||||||||
| Net realized and unrealized gain/(loss) |
0.16 | 0.07 | 1.15 | 0.46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
0.26 | 0.25 | 1.38 | 0.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dividends and/or Distributions to Shareholders: | ||||||||||||||||
| Dividends from net investment income |
(0.13 | ) | (0.15 | ) | (0.19 | ) | (0.19 | ) | ||||||||
| Dividends from net realized gain on investments |
— | — | — | — | ||||||||||||
| Distributions from return of capital |
— | — | — | — | (4) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Dividends and Distributions to Shareholders |
(0.13 | ) | (0.15 | ) | (0.19 | ) | (0.19 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Asset Value, End of Period |
$ | 4.19 | $ | 4.06 | $ | 3.96 | $ | 2.77 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Market Price, End of Period(11) |
$ | 3.70 | $ | 3.50 | $ | 3.45 | $ | 2.39 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Return, Net Asset Value(5) |
6.93 | %(10) | 6.73 | % | 51.90 | % | 29.07 | % | ||||||||
| Total Return, Market Value(6) |
9.54 | %(10) | 5.61 | % | 53.38 | % | 32.67 | % | ||||||||
| Net Assets, End of Period (000’s) |
$ | 115,005 | $ | 111,490 | $ | 108,871 | $ | 39,182 | ||||||||
| RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
| Ratio of Total Expenses to Average Net Assets |
1.90 | %(7) | 1.38 | % | 1.90 | % | 2.42 | % | ||||||||
| Ratio of Operating Expenses to Average Net Assets(8) |
1.57 | %(7) | 1.38 | % | 1.90 | % | 2.41 | % | ||||||||
| Ratio of Net Investment Income/(Loss) to Average Net Assets |
4.69 | %(7) | 4.42 | % | 6.51 | % | 5.32 | % | ||||||||
| Portfolio Turnover Rate |
18 | %(10) | 138 | % | 67 | % | 90 | % | ||||||||
| Bank Borrowings: | ||||||||||||||||
| Loan Outstanding, End of Period (000’s) |
$ | 40,000 | N/A | N/A | N/A | |||||||||||
| Asset Coverage for Loan Outstanding, End of Period |
388 | % | N/A | N/A | N/A | |||||||||||
| (1) | Prior to December 10, 2011, the Fund was known as the DCA Total Return Fund. Prior to March 16, 2009, the DCA Total Return Fund was known as the Dividend Capital Realty Income Allocation Fund. |
| (2) | The Fund changed its fiscal year end from September 30 to December 31. Amounts shown are for the period from October 1, 2007 to December 31, 2007. |
| (3) | Calculated based on average shares outstanding. |
| (4) | Less than $0.005 per share. |
| (5) | NAV return is calculated using the opening Net Asset Value price of the Fund’s common stock on the first business day and the closing Net Asset Value price of the Fund’s common stock on the last business day of each period reported. Dividends and distributions, if any, are assumed for the purpose of this calculation, to be reinvested at prices obtained under the Fund’s Automatic Reinvestment and Cash Purchase Plan. |
See Notes to Financial Statements
24
VIRTUS TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS (Continued)
(Selected per share data and ratios for a share outstanding throughout each period)
| For Year Ended December 31, 2008(1) |
For the Period Ended December 31, 2007(1)(2) |
For the Year Ended September 30, 2007(1) |
||||||||
| $ | 8.44 | $ | 11.03 | $ | 15.08 | |||||
|
|
|
|
|
|
|
|||||
| 0.71 | — | (4) | 1.02 | |||||||
| (5.81 | ) | (2.26 | ) | (3.61 | ) | |||||
|
|
|
|
|
|
|
|||||
| (5.10 | ) | (2.26 | ) | (2.59 | ) | |||||
|
|
|
|
|
|
|
|||||
| (0.84 | ) | (0.33 | ) | (1.38 | ) | |||||
| — | — | (0.08 | ) | |||||||
| (0.12 | ) | — | — | |||||||
|
|
|
|
|
|
|
|||||
| (0.96 | ) | (0.33 | ) | (1.46 | ) | |||||
|
|
|
|
|
|
|
|||||
| $ | 2.38 | $ | 8.44 | $ | 11.03 | |||||
|
|
|
|
|
|
|
|||||
| $ | 2.00 | $ | 8.06 | $ | 11.16 | |||||
|
|
|
|
|
|
|
|||||
| (65.39 | )% | (20.62 | )%(10) | (19.05 | )% | |||||
| (69.55 | )% | (25.08 | )%(10) | (14.93 | )% | |||||
| $ | 33,720 | $ | 118,062 | $ | 153,970 | |||||
| 3.34 | % | 5.20 | %(7) | 4.11 | % | |||||
| 1.97 | % | 2.42 | %(7) | 1.70 | % | |||||
| 12.31 | % |
|
(0.00 |
)%(7) |
6.98 | % | ||||
| 23 | % | 7 | %(10) | 47 | % | |||||
| $ | 7,054 | (9) | $ | 53,872 | (9) | $ | 68,872 | (9) | ||
| 591 | % | 305 | % | 311 | % | |||||
| (6) | Total investment return is calculated assuming a purchase of common shares of the opening of the first day and sale on the closing of the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s Automatic Reinvestment and Cash Purchase Plan. Total investment return is not annualized for periods of less than one year. Brokerage commissions that a shareholder may pay are not reflected. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| (7) | Annualized. |
| (8) | Operating expenses do not include interest expense on the line of credit. |
| (9) | Bank Borrowings resulted from a secured line of credit which was fully paid off as of February 27, 2009. |
| (10) | Not Annualized. |
| (11) | Closing Price - New York Stock Exchange. |
See Notes to Financial Statements
25
VIRTUS TOTAL RETURN FUND
JUNE 30, 2012 (Unaudited)
Note 1. Organization
The Fund is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary investment objective is total return, consisting of capital appreciation and current income. While the Fund is registered as non-diversified, it is currently operating as a diversified fund and has been doing so since 2009.
Note 2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets during the reporting period. Actual results could differ from those estimates and those differences could be significant.
| A. | Security Valuation |
Security valuation procedures for the Fund, which include, nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Trustees (the “Board” or the “Trustees”). All internally fair valued securities are approved by a valuation committee (“Valuation Committee”) appointed by the Board. The Valuation Committee is comprised of the treasurer, assistant treasurer, secretary and chief compliance officer of the Fund. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of any model inputs and any changes to the model when applicable. Internal fair valuations are ratified by the Board at least quarterly.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
| Ÿ Level 1 – | quoted prices in active markets for identical securities |
| Ÿ Level 2 – | prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| Ÿ Level 3 – | prices determined using significant unobservable inputs (including the valuation committee’s own assumptions in determining the fair value of investments) |
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
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 and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the valuation committee, are generally categorized as Level 3 in the hierarchy.
26
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
Certain non-U.S. securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) (generally, 4 p.m. Eastern time the close of the New York Stock Exchange (“NYSE”)) that may impact the value of securities traded in these non-U.S. markets.
Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing which considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured Debt Instruments such as mortgage-backed and asset-backed securities may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the valuation committee are generally categorized as Level 3 in the hierarchy.
Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (“OTC”) derivative contracts, which include forward currency contracts and equity linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing NAV determined as of the close of regular trading on the NYSE each business day and are categorized as Level 1 in the hierarchy.
A summary of the inputs used to value the Fund’s major categories of assets and liabilities, which primarily include investments of the Fund, by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| B. | Security Transactions and Investment Income |
Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts on securities using the effective interest method.
| C. | Federal Income Taxes |
The Fund is treated as a separate taxable entity. It is the intention of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to
27
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made.
The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests.
Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. As of June 30, 2012, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2008 forward (with limited exceptions).
| D. | Distributions to Shareholders |
Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest.
| E. | Foreign Currency Translation |
Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
| F. | Use of Estimates |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
| G. | When-issued Purchases and Forward Commitment (Delayed-Delivery) Transactions |
The Fund may engage in when-issued or forward commitment transactions. Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed delivery transactions involve a commitment by the Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or forward commitments enable the Fund to lock in what is believed to be an
28
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. The Fund records when-issued and delayed delivery securities on the trade date. The Fund maintains collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date.
| H. | Loan Agreements |
The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the lender) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due. As of the date of this report, the Fund held only assignment loans.
| I. | Expenses |
Expenses incurred together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.
In addition to the net annual operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.
Note 3. Investment Advisory Fees and Related Party Transactions
| A. | Adviser |
Virtus Investment Advisers, Inc. (the “Adviser”), an indirect wholly owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the Adviser to the Fund. The Adviser manages the Fund’s investment program and general operations of the Fund, including oversight of the Fund’s subadvisers. As compensation for its services to the Fund, the Adviser will receive a monthly fee at an annual rate of 0.85% of the Fund’s average daily total net assets which is defined as the average daily net assets value of the total assets of the Fund minus the sum of all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings or other indebtedness, constituting financial leverage).
29
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
| B. | Subadvisers |
The subadvisers manage the investments of the Fund, for which they are paid a fee by the Adviser. DPIM, an indirect wholly-owned subsidiary of Virtus, is the subadviser for the Equity portfolio of the Fund, and Newfleet, an indirect wholly-owned subsidiary of Virtus, is the subadviser for the Fixed Income portfolio of the Fund.
| C. | Administrator |
($ reported in thousands)
VP Distributors, LLC, an indirect, wholly-owned subsidiary of Virtus serves as the Fund’s Administrator (the “Administrator”). During the period ended June 30, 2012, the Fund incurred Administration fees totaling $71, which are included in the Statement of Operations. A portion of these fees was paid to an outside entity.
| D. | Trustees |
($ reported in thousands)
The Fund pays each Trustee not affiliated with the Adviser a quarterly retainer plus a fee for certain meetings of the Board and committees of the Board attended. Fees paid to Trustees for the period were $5.
Note 4. Purchases and Sales of Securities
($ reported in thousands)
Purchases and sales of securities (excluding U.S. Government and agency securities, and short term investments) during the period ended June 30, 2012, were as follows:
| Purchases |
$ | 67,586 | ||
| Sales |
24,957 |
Purchases and sales of long term U.S. Government Securities and agency securities for the period ended June 30, 2012 were as follows:
| Purchases |
$ | 2,356 | ||
| Sales |
520 |
Note 5. Federal Income Tax Information
($ reported in thousands)
At June 30, 2012, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows:
| Federal Tax Cost |
Unrealized |
Unrealized (Depreciation) |
Net Unrealized (Depreciation) | |||
| $148,081 | $8,074 | $(2,240) | $5,834 |
The Fund has capital loss carryovers which may be used to offset future capital gains, as follows:
|
Expiration Year | ||||||
| 2016 |
2017 |
2018 |
Total | |||
| $61,473 | $57,803 | $12,736 | $132,012 | |||
30
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized for tax years beginning after December 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
The Fund may not realize the benefit of these losses to the extent the Fund does not realize gains on investments prior to the expiration of the capital loss carryovers.
Note 6. Indemnifications
Under the Fund’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide a variety of indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund and that have not occurred. However, the Fund has not had prior claims or losses pursuant to such arrangements and expects the risk of loss to be remote.
Note 7. Capital Transactions
At June 30, 2012, the Fund had one class of common stock, par value $0.001 per share, of which unlimited shares are authorized and 27,466,109 shares are outstanding. Registered shareholders may elect to have all distributions paid by check mailed directly to the shareholder by Computershare as dividend paying agent. Pursuant to the Automatic Reinvestment and Cash Purchase Plan (the “Plan”), shareholders not making such election will have all such amounts automatically reinvested by Computershare, as the Plan agent, in whole or fractional shares of the Fund, as the case may be. During the periods ended June 30, 2012 and December 31, 2011, there were no shares issued pursuant to the Plan.
On July 2, 2012, the Fund announced a distribution of $0.05 to shareholders of record on July 12, 2012. This distribution has an ex-dividend date of July 10, 2012, and is payable on July 19, 2012.
Note 8. Borrowings
($ reported in thousands)
On February 15, 2012, the Fund entered into a Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank, up to a limit of $45,000. Borrowings under the Agreement are collateralized by investments of the Fund. Interest is charged at LIBOR (London Interbank Offered Rate) plus an additional percentage rate on the amount borrowed and on the undrawn balance (the commitment fee). Total commitment fees paid and accrued for the period ended June 30, 2012, were $4 and are included in interest expense and fees on the Statement of Operations. The Agreement is renewable and can also be converted to a 1-year fixed term facility. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default. For the period from February 15, 2012-June 30, 2012, the average daily borrowings under the Agreement and the weighted daily
31
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
average interest rate were $40,000 and 1.914%, respectively. At June 30, 2012, the amount of such outstanding borrowings was as follows:
| Outstanding |
Interest |
Term | ||
| $40,000 | 1.19175% | 31 days |
Note 9. Certain Provisions of the Declaration of Trust
The Fund’s Amended and Restated Declaration of Trust (“Declaration”) contains restrictions on the acquisitions and dispositions of its shares. The restrictions on acquisitions and dispositions of the Fund’s shares are intended to preserve the benefit of the Fund’s capital loss carryforwards and certain other tax attributes for tax purposes.
The restrictions are designed to prevent an “ownership change”, as such term is defined in the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code imposes significant limitations on the ability of an entity classified as a corporation to use its capital loss carryforwards to offset income in circumstances where such entity has experienced an “ownership change” and may also limit such an entity’s ability to use any built-in losses recognized within five years of any “ownership change.” For a more detailed discussion of the definition of an “ownership change” under the Code, please see Note 10 below.
The restrictions in the Declaration generally prohibit any attempt to purchase or acquire in any manner whatsoever the Fund’s shares or any option, warrant or other right to purchase or acquire shares, or any convertible securities (the “Shares”), if as a result of such purchase or acquisition of such Shares, any person or group becomes a greater than 4.99% shareholder (as defined in the Code), which generally includes a person or group that beneficially owns 4.99% or more of the market value of the total outstanding shares, or the percentage of the Fund’s shares owned by a 4.99% shareholder (as defined in the Code) would be increased. As a result of these restrictions, certain transfers of shares by existing 4.99% shareholders are prohibited. Any attempted transfer in violation of the foregoing restrictions will be void ab initio unless the transferor or transferee obtains the written approval of the Board, which it may grant or deny in its sole and absolute discretion. The purported transferee will not be entitled to any rights of shareholders of the Fund with respect to the shares that are the subject of the prohibited transfer, including the right to vote such shares and to receive dividends or distributions, whether liquidating or otherwise, in respect of such shares.
If the Board determines that a transfer would be prohibited, then, upon the Fund’s written demand, the purported transferee will transfer the shares that are the subject of the prohibited transfer, or cause such shares to be transferred, to the Fund, which shall be deemed an agent for the limited purpose of consummating a sale of the share to a person who is not a 4.99% shareholder. The proceeds of the sale of any such shares will be applied first to the Fund acting in its role as the agent for the sale of the prohibited shares, second, to the extent of any remaining proceeds, to reimburse the intended transferee for any payments made to the transferor by such intended transferee for such shares, and the remainder, if any, to the original transferor.
32
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
Note 10. Existing Tax Attribute Limitation and Potential for Additional Tax Attribute Limitation
In the acquisition by the Fund of the assets and liabilities of DCW on September 25, 2010 (the “Reorganization”), DCA succeeded to DCW Total Return Fund (“DCW”) federal income tax attributes, which included capital loss carryforwards and net unrealized built-in gains in its assets. However, the Reorganization caused DCW to undergo an “ownership change” within the meaning of Section 382 of the Code because the shareholders of the Fund prior to the Reorganization owned more than 50% of the Fund immediately following the Reorganization. As a result of such ownership change, the Fund became subject to a specific annual limitation on the amount of capital loss carryforwards (and net unrealized built-in gains) received from DCW that the Fund can use to offset gains recognized by the Fund in each taxable year.
As of December 31, 2011, the Fund had approximately $120,475,907 of capital loss carryforwards (exclusive of such carryforwards received from DCW). The Fund’s capital loss carryforwards were not limited as a result of the Reorganization. However, an “ownership change” within the meaning of Section 382 of the Code can occur when one or more shareholders who each own directly or indirectly 5% or more of the Fund’s common shares (including certain “public groups” of shareholders which are treated for this purpose as owning 5% or more of the Fund’s common shares) increase their aggregate ownership of common shares by more than 50 percentage points of the lowest percentage of common shares that such shareholders owned within the preceding three years. As a result of the Reorganization, the Fund believes that it is only approximately 1.5% away from undergoing an “ownership change.” Consequently, the Fund could undergo an “ownership change” as a result (for example) of the acquisition by a single person of shares sufficient to cause such person to own 5% or more of the Fund’s common stock. If the Fund were to undergo an ownership change under Section 382 of the Code, any then-existing loss carryforwards (and net unrealized built-in losses) attributable to activities of the Fund would become subject to an annual loss limitation amount. If this were to occur, all of the Fund’s loss carryforwards (and net unrealized built-in losses) from periods prior to the ownership change (including those inherited from DCW and those generated by the Fund itself) would be substantially limited by operation of Section 382 of the Code.
As described in Note 9, above, the Fund’s Declaration contains provisions that are designed to prevent the Fund from undergoing an “ownership change” within the meaning of Section 382 of the Code. However, there can be no assurance that such provision of the Declaration will be enforceable under applicable state law or will succeed in avoiding an ownership change for the Fund.
Note 11. Credit Risk and Asset Concentrations
In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as the Fund’s ability to repatriate such amounts.
33
VIRTUS TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2012 (Unaudited)
The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors.
Note 12. Regulatory Exams
Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus and its subsidiaries (collectively “the Company”) with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements.
Note 13. Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that, there are no subsequent events requiring recognition or disclosure in these financial statements.
34
CERTIFICATION
In accordance with the requirements of the Sarbanes-Oxley Act, the Fund’s CEO (the President of the Fund) and CFO (the Treasurer of the Fund) have filed the required “Section 302” certifications with the SEC on Form N-CSR.
In accordance with Section 303A of the NYSE listed company manual, the CEO certification has been filed with the NYSE.
KEY INFORMATION
Virtus Total Return Fund Shareholder Relations: 1-866-270-7788
For general information and literature, as well as updates on net asset value, share price, major industry groups and other key information.
REINVESTMENT PLAN
Many of you have questions about our reinvestment plan. We urge shareholders who want to take advantage of this plan and whose shares are held in “Street Name,” to consult your broker as soon as possible to determine if you must change registration into your own name to participate.
REPURCHASE OF SECURITIES
Notice is hereby given in accordance with Section 23(c) of the 1940 Act that the Fund may from time to time purchase its shares of common stock in the open market when Fund shares are trading at a discount from their net asset value.
PROXY VOTING INFORMATION (FORM N-PX)
The Adviser and subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Fund’s Board. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, free of charge, by calling toll-free 1-866-270-7788. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q INFORMATION
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC’s Public Reference Room. Information on the operation of the SEC’s Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330.
35
VIRTUS TOTAL RETURN FUND
101 Munson Street
Greenfield, MA 01301-9668
Important Notice to Shareholders
The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-866-270-7788.
| Item 2. | Code of Ethics. |
Not applicable.
| Item 3. | Audit Committee Financial Expert. |
Not applicable.
| Item 4. | Principal Accountant Fees and Services. |
Not applicable.
| Item 5. | Audit Committee of Listed registrants. |
Not applicable.
| Item 6. | Investments. |
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recently filed annual report on Form N-CSR.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of Trustees that were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
| Item 11. | Controls and Procedures. |
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting |
| Item 12. | Exhibits. |
| (a)(1) | Not applicable. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Virtus Total Return Fund |
|||||
| By (Signature and Title)* | /s/ George R. Aylward |
|||||
| George R. Aylward, President | ||||||
| (principal executive officer) | ||||||
| Date | 09/06/2012 | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ George R. Aylward |
|||||
| George R. Aylward, President (principal executive officer) |
||||||
| Date | 09/06/2012 | |||||
| By (Signature and Title)* | /s/ W. Patrick Bradley |
|||||
| W. Patrick Bradley, Vice President, Chief Financial Officer, and Treasurer (principal financial officer) |
||||||
| Date | 09/06/2012 | |||||
| * | Print the name and title of each signing officer under his or her signature. |