-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kai49HnsBpGsQQjH3mFG5R6scyTUJD8/eQ1hQVVNp3GXVhNUSlLgOdkVIYOlax6X vAMSCSe8uEIw8UFlUJdSIQ== 0000935069-08-002917.txt : 20081205 0000935069-08-002917.hdr.sgml : 20081205 20081205154050 ACCESSION NUMBER: 0000935069-08-002917 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081205 DATE AS OF CHANGE: 20081205 EFFECTIVENESS DATE: 20081205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRTUS OPPORTUNITIES TRUST CENTRAL INDEX KEY: 0001005020 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07455 FILM NUMBER: 081232830 BUSINESS ADDRESS: STREET 1: 101 MUNSON STREET CITY: GREENFIELD STATE: MA ZIP: 01301 BUSINESS PHONE: 415 677-1570 MAIL ADDRESS: STREET 1: 56 PROSPECT STREET STREET 2: P.O. BOX 150480 CITY: HARTFORD STATE: CT ZIP: 06115-0480 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX OPPORTUNITIES TRUST DATE OF NAME CHANGE: 20060127 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX SENECA FUNDS DATE OF NAME CHANGE: 19990122 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FUNDS DATE OF NAME CHANGE: 19951218 0001005020 S000001336 VIRTUS BOND FUND C000003572 CLASS A SAVAX C000003573 CLASS B SAVBX C000003574 CLASS C SAVCX C000003575 CLASS I SAVYX 0001005020 S000018001 VIRTUS CA TAX-EXEMPT BOND FUND C000049899 Class A CTESX C000049900 Class I CTXEX 0001005020 S000018002 VIRTUS REAL ESTATE SECURITIES FUND C000049901 Class A PHRAX C000049902 Class B PHRBX C000049903 Class C PHRCX C000049904 Class I PHRIX 0001005020 S000018003 VIRTUS CORE BOND FUND C000049905 Class A PHGBX C000049906 Class B PUSBX C000049907 Class C PUSCX 0001005020 S000018005 VIRTUS HIGH YIELD FUND C000049911 Class B PHCCX C000049912 Class C PGHCX C000049913 Class A PHCHX 0001005020 S000018006 VIRTUS MONEY MARKET FUND C000049914 Class A PMMXX 0001005020 S000018007 VIRTUS MULTI-SECTOR FIXED INCOME FUND C000049915 Class A NAMFX C000049916 Class B NBMFX C000049917 Class C NCMFX 0001005020 S000018008 VIRTUS MULIT-SECTOR SHORT TERM BOND FUND C000049918 Class A NARAX C000049919 Class B PBARX C000049920 Class C PSTCX C000049921 Class T PMSTX C000066828 Class I Shares PIMSX 0001005020 S000018009 VIRTUS GLOBAL INFRASTRUCTURE FUND C000049922 Class A PGUAX C000049923 Class C PGUCX C000066829 Class I Shares PGIUX 0001005020 S000018010 VIRTUS MARKET NEUTRAL FUND C000049924 Class A EMNAX C000049925 Class B EMNBX C000049926 Class C EMNCX 0001005020 S000018969 VIRTUS FOREIGN OPPORTUNITIES FUND C000052519 Class A JVIAX C000052520 Class C JVICX C000052521 Class I JVXIX 0001005020 S000018970 VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND C000052522 Class A PXRAX C000052523 Class C PXRCX C000052524 Class I PXRIX 0001005020 S000018972 VIRTUS WORLDWIDE STRATEGIES FUND C000052528 Class A NWWOX C000052529 Class B WWOBX C000052530 Class C WWOCX 0001005020 S000018973 VIRTUS WEALTH ACCUMULATOR FUND C000052531 Class A PWAAX C000052532 Class C PWACX 0001005020 S000018974 VIRTUS WEALTH BUILDER FUND C000052533 Class A PWBAX C000052534 Class C PWBCX 0001005020 S000018975 VIRTUS WEALTH GUARDIAN FUND C000052535 Class A PSWAX C000052536 Class C PSWCX 0001005020 S000018976 VIRTUS ALTERNATIVES DIVERSIFIER FUND C000052537 Class A PDPAX C000052538 Class C PDPCX 0001005020 S000020772 VIRTUS SENIOR FLOATING RATE FUND C000058006 Class A PSFRX C000058007 Class C PFSRX C000058008 Class I PSFIX N-CSR 1 g49153virtusoppstrust.txt VIRTUS OPPORTUNITIES TRUST AR 2008 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 811-07455 --------- Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust) ------------------------------------------------------------------------------- (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 56 Prospect St. Hartford, CT 06115-0480 ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (800) 243-1574 -------------- Date of fiscal year end: September 30 ------------ Date of reporting period: September 30, 2008 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. ANNUAL REPORT (VIRTUS LOGO) MUTUAL FUNDS ALTERNATIVE FUNDS Virtus Global Infrastructure Fund Virtus International Real Estate Securities Fund Virtus Market Neutral Fund FUNDS OF FUNDS Virtus Alternatives Diversifier Fund Virtus Wealth Accumulator Fund Virtus Wealth Builder Fund Virtus Wealth Guardian Fund 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 Senior Floating Rate Fund INTERNATIONAL FUNDS Virtus Worldwide Strategies Fund - -------------------------------------------------------------------------------- WOULDN'T YOU RATHER HAVE THIS DOCUMENT E-MAILED TO YOU? TRUST NAME: ELIGIBLE SHAREHOLDERS CAN SIGN UP FOR VIRTUS OPPORTUNITIES TRUST September 30, 2008 E-DELIVERY AT VIRTUS.COM NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
TABLE OF CONTENTS Message to Shareholders ........... 1 Glossary .......................... 2 Disclosure of Fund Expenses ....... 4
FUND SCHEDULE OF FUND* SUMMARY INVESTMENTS Virtus Global Infrastructure Fund (formerly "Phoenix Global Utilities Fund") ....... 6 36 Virtus International Real Estate Securities Fund (formerly "Phoenix International Real Estate Securities Fund") .................. 8 37 Virtus Market Neutral Fund (formerly "Phoenix Market Neutral Fund") ................ 10 38** Virtus Alternatives Diversifier Fund (formerly "Phoenix Diversifier PHOLIO(SM)") ... 12 43 Virtus Wealth Accumulator Fund (formerly "Phoenix Wealth Accumulator PHOLIO(SM)") .. 14 44 Virtus Wealth Builder Fund (formerly "Phoenix Wealth Builder PHOLIO(SM)") .......... 16 45 Virtus Wealth Guardian Fund (formerly "Phoenix Wealth Guardian PHOLIO(SM)") ........ 18 46 Virtus Bond Fund (formerly "Phoenix Bond Fund") .................................... 20 47 Virtus CA Tax-Exempt Bond Fund (formerly "Phoenix CA Tax-Exempt Bond Fund") ........ 22 50 Virtus Core Bond Fund (formerly "Phoenix Core Bond Fund") .......................... 24 52 Virtus High Yield Fund (formerly "Phoenix High Yield Fund") ........................ 26 56 Virtus Money Market Fund (formerly "Phoenix Money Market Fund") .................... 28 59 Virtus Multi-Sector Fixed Income Fund (formerly "Phoenix Multi-Sector Fixed Income Fund") ................................................................... 30 60 Virtus Senior Floating Rate Fund (formerly "Phoenix Senior Floating Rate Fund") .... 32 67 Virtus Worldwide Strategies Fund (formerly "Phoenix Worldwide Strategies Fund") .... 34 69 Statements of Assets and Liabilities .................................................. 76 Statements of Operations .............................................................. 80 Statements of Changes in Net Assets ................................................... 84 Financial Highlights .................................................................. 94 Notes to Financial Statements ......................................................... 106 Report of Independent Registered Public Accounting Firm ............................... 121 Tax Information Notice ................................................................ 122 Results of Shareholder Meeting ........................................................ 123 Fund Management Tables ................................................................ 124
* Please see Notes 1 and 3 in the Notes to Financial Statements for more information on the name change. ** Schedule of Investments and Securities Sold Short. - -------------------------------------------------------------------------------- PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX) The adviser and subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Funds voted proxies during the most recent 12-month period ended June 30, 2008, free of charge, by calling toll-free 800-541-0171. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for each Fund 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. - -------------------------------------------------------------------------------- This report is not authorized for distribution to prospective investors in the Funds presented in this book unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS Fellow Shareholders of Virtus Mutual Funds: (PHOTO OF GEORGE R. AYLWARD) The third quarter of 2008 likely will be remembered as a time of extremes in the global financial markets. There was historic volatility in all the major markets, the collapse of well-known financial firms, and unprecedented government interventions into the economy. The scope of events that occurred in the past quarter was truly extraordinary. There was the U.S. government's takeover of Fannie Mae and Freddie Mac; a federal line of credit for the insurer, AIG; the seizure of Washington Mutual and sale to JPMorgan Chase; and the proposed $700 billion taxpayer rescue of the financial sector, which was approved in early October. The quarter also saw the end of the investment banking model with the merger of Merrill Lynch and Bank of America, the collapse of Lehman Brothers, and the decisions by Goldman Sachs and Morgan Stanley to convert to traditional banking institutions. This global turmoil was reflected in the major market indices. More than half (37 of 64) of the Dow Jones Industrial Average's third-quarter trading days had wide positive or negative swings of greater than 100 points. For the quarter, the Dow was down 3.7 percent (16.5 percent year-to-date), the S&P 500 stock index was down 8.4 percent (19.3 percent year-to-date); and EAFE was off 20.5 percent (28.9 percent for the year). At the start of the fourth quarter, governments around the world demonstrated their resolve to actively pursue solutions to this financial upheaval. Among the responses from the U.S. government is the Department of the Treasury's Temporary Money Market Fund Guarantee Program. While officials and economists believe the government interventions will bring stability to the financial markets, few will predict a timeline for recovery. This is a period when investors should pay particular attention to their accounts - and rely on the discipline and focus of professional investment managers and financial advisors. The extraordinary activity of the past several months may tempt some investors to react inappropriately to market events and deviate from their well-considered, long-term financial plans. We believe that during periods of unusual market volatility, discipline is the key for the investor, the financial advisor, and the professional money manager. We encourage you to consult with a financial advisor to review your holdings and to ensure they continue to reflect your current investment objectives and your tolerance for risk. Virtus Mutual Funds offer a wide range of equity, fixed income and money market funds, and we hope you will consider our investment choices when you and your financial advisor review your portfolio allocations. On a much different note, we began the fourth quarter with the rebranding of our company in preparation for our spin-off as an independent, publicly-traded company. Our company is now Virtus Investment Partners, the PhoenixFunds are now the Virtus Mutual Funds, and the investment adviser to the funds is now Virtus Investment Advisers. As you will notice throughout this report, the individual funds have incorporated the "Virtus" name. For your convenience, all mutual fund ticker symbols remain unchanged. I encourage you to visit our new website, www.virtus.com, to learn more about our company and our services for investors, and to access information about your account. Customer service is also available at 800-243-1574. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our partner companies and subadvisers, I want to thank you for entrusting your assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds OCTOBER 2008 PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. 1 GLOSSARY ADR (AMERICAN DEPOSITARY RECEIPT) Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. AMBAC American Municipal Bond Assurance Corporation BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX The Barclays Capital California Municipal Bond Index (formerly Lehman Brothers 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. BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX Barclays Capital High Yield 2% Issuer Cap Index (formerly Lehman Brothers 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. BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX The Barclays Capital U.S. Aggregate Bond Index (formerly Lehman Brothers U.S. Aggregate Bond Index) measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. CITIGROUP 90-DAY TREASURY BILLS INDEX (10/1/07 - 8/31/08) The Citigroup 90-Day Treasury Bills Index measures monthly return equivalents of yield averages that are not marked to market. The 90-Day Treasury Bills Index is an average of the last three three-month Treasury bill issues. EXCHANGE-TRADED FUNDS (ETF) Portfolios of stocks or bonds that track a specific market index. FGIC Financial Guaranty Insurance Company FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation FNMA OR "FANNIE MAE" Federal National Mortgage Association FSA Financial Security Assurance, Inc. FUND OF FUNDS A mutual fund that invests in the shares of other open-end mutual funds according to an established asset allocation model, resulting in a diversified portfolio of asset classes and investment strategies appropriate for pursuit of the overall investment objective. GLOBAL INFRASTRUCTURE FUND COMPOSITE INDEX Through August 31, 2008, this composite index consisted of 65% MSCI USA/Utilities Index, which tracks the performance of utility stocks from the United States; 20% MSCI World Telecom Services Index, which tracks the performance of telecom-related stocks from around the world; and 15% MSCI World ex USA/Utilities Index, which tracks the performance of utility stocks from around the world excluding the United States. Effective September 1, 2008, the Fund's 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. GNMA OR "GINNIE MAE" Government National Mortgage Association HUD U.S. Department of Housing and Urban Development ISHARES Represents shares of an open-end Exchange-Traded Fund. JPMORGAN EMERGING MARKETS BOND INDEX PLUS The JPMorgan Emerging Markets Bond Index Plus measures traded external debt instruments in emerging markets. The index is calculated on a total return basis. JPY Japanese Yen 2 GLOSSARY (CONTINUED) LONG POSITION ("LONG") Ownership of a security, giving the investor the right to transfer ownership to someone else, the right to receive income paid by the security, and the right to any profits or losses as the security's value changes. MBIA Municipal Bond Insurance Association MSCI EAFE(R) INDEX The MSCI EAFE(R) Index 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 gross dividends reinvested. MSCI WORLD(SM) INDEX (NET) 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. PIK (PAYMENT-IN-KIND SECURITY) 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(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. S&P/LSTA LEVERAGED LOAN 100 INDEX The S&P/LSTA U.S. Leveraged Loan 100 Index is designed to reflect the largest facilities in the leveraged loan market. It mirrors the market-weighted performance of the largest institutional leveraged loans based upon market weightings, spreads, and interest payments. SHORT POSITION ("SHORT") Stock shares that an investor has sold without actually owning (by borrowing the certificates from a broker) in anticipation of a decline in the stock value by a certain date. If the price falls, the investor buys the shares at the lower rate and makes a profit on the difference. It the price rises, the investor must buy at the higher price and sustains a loss. SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. These shares carry all the rights of the common share such as voting rights. ADRs must be sponsored to be able to trade on the NYSE. USD OR US $ United States Dollars WEALTH BUILDER FUND COMPOSITE INDEX A composite index consisting of 80% S&P 500(R) Index and 20% Barclays Capital U.S. Aggregate Bond Index. WEALTH GUARDIAN FUND COMPOSITE INDEX A composite index consisting of 60% S&P 500(R) Index and 40% Barclays Capital U.S. Aggregate Bond Index. WHEN-ISSUED AND DELAYED DELIVERY 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 a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or 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. XLCA XL Capital Assurance INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. VIRTUS OPPORTUNITIES TRUST (FORMERLY PHOENIX OPPORTUNITIES TRUST) DISCLOSURE OF FUND EXPENSES FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 (UNAUDITED) We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of a Virtus Opportunities Trust Fund you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class I shares are sold without sales charges. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Virtus Opportunities Trust Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. EXPENSE TABLE
- ------------------------------------------------------------------------- Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - ------------------------------------------------------------------------- GLOBAL INFRASTRUCTURE FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 868.60 1.15% $ 5.37 Class C 1,000.00 865.70 1.90% 8.86 Class I 1,000.00 824.90 0.90% 2.60 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.18 1.15% 5.82 Class C 1,000.00 1,015.38 1.90% 9.62 Class I 1,000.00 1,020.44 0.90% 4.56 HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION)++ Class I 1,000.00 1,012.97 0.90% 2.88 - ------------------------------------------------------------------------- INTERNATIONAL REAL ESTATE SECURITIES FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 778.00 1.50% $ 6.67 Class C 1,000.00 774.60 2.22% 9.85 Class I 1,000.00 779.10 1.23% 5.47 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.41 1.50% 7.59 Class C 1,000.00 1,013.76 2.22% 11.24 Class I 1,000.00 1,018.77 1.23% 6.23 - ------------------------------------------------------------------------- MARKET NEUTRAL FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 956.10 3.54% $17.31 Class B 1,000.00 952.70 4.20% 20.50 Class C 1,000.00 953.50 4.21% 20.56 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,007.08 3.54% 17.92 Class B 1,000.00 1,003.74 4.20% 21.26 Class C 1,000.00 1,003.69 4.21% 21.31 - ------------------------------------------------------------------------- ALTERNATIVES DIVERSIFIER FUND # - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 921.60 0.30% $ 1.44 Class C 1,000.00 917.30 1.05% 5.03 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,023.48 0.30% 1.52 Class C 1,000.00 1,019.68 1.05% 5.32 - ------------------------------------------------------------------------- WEALTH ACCUMULATOR FUND # - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 866.80 0.27% $ 1.26 Class C 1,000.00 864.60 1.02% 4.75 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,023.63 0.27% 1.37 Class C 1,000.00 1,019.84 1.02% 5.16 - ------------------------------------------------------------------------- WEALTH BUILDER FUND # - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 888.00 0.22% $ 1.04 Class C 1,000.00 884.60 0.97% 4.57 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,023.89 0.22% 1.11 Class C 1,000.00 1,020.09 0.97% 4.91 - ------------------------------------------------------------------------- WEALTH GUARDIAN FUND # - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 904.80 0.22% $ 1.05 Class C 1,000.00 900.90 0.97% 4.61 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,023.89 0.22% 1.11 Class C 1,000.00 1,020.09 0.97% 4.91
4 VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 (UNAUDITED) EXPENSE TABLE
- ------------------------------------------------------------------------- Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - ------------------------------------------------------------------------- BOND FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 969.60 0.95% $ 4.68 Class B 1,000.00 965.70 1.71% 8.40 Class C 1,000.00 966.70 1.70% 8.36 Class I 1,000.00 971.00 0.65% 3.20 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.19 0.95% 4.81 Class B 1,000.00 1,016.34 1.71% 8.66 Class C 1,000.00 1,016.39 1.70% 8.61 Class I 1,000.00 1,021.71 0.65% 3.29 - ------------------------------------------------------------------------- CA TAX-EXEMPT BOND FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 973.56 0.85% $ 4.19 Class I 1,000.00 975.62 0.60% 2.96 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.70 0.85% 4.30 Class I 1,000.00 1,021.96 0.60% 3.04 - ------------------------------------------------------------------------- CORE BOND FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 955.20 1.00% $ 4.89 Class B 1,000.00 951.30 1.75% 8.54 Class C 1,000.00 951.50 1.75% 8.54 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.94 1.00% 5.06 Class B 1,000.00 1,016.14 1.75% 8.86 Class C 1,000.00 1,016.14 1.75% 8.86 - ------------------------------------------------------------------------- HIGH YIELD FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 927.10 1.34% $ 6.46 Class B 1,000.00 924.40 2.09% 10.05 Class C 1,000.00 924.70 2.09% 10.06 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.22 1.34% 6.78 Class B 1,000.00 1,014.42 2.09% 10.58 Class C 1,000.00 1,014.42 2.09% 10.58 - ------------------------------------------------------------------------- MONEY MARKET FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,009.80 0.76% $ 3.82 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,021.15 0.76% 3.85 - ------------------------------------------------------------------------- MULTI-SECTOR FIXED INCOME FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 926.70 1.18% $ 5.68 Class B 1,000.00 924.00 1.93% 9.28 Class C 1,000.00 923.40 1.93% 9.28 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.03 1.18% 5.97 Class B 1,000.00 1,015.23 1.93% 9.77 Class C 1,000.00 1,015.23 1.93% 9.77
EXPENSE TABLE
- ------------------------------------------------------------------------- Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - ------------------------------------------------------------------------- SENIOR FLOATING RATE FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 978.40 1.20% $ 5.94 Class C 1,000.00 974.80 1.96% 9.68 Class I 1,000.00 979.50 0.95% 4.70 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.92 1.20% 6.08 Class C 1,000.00 1,015.08 1.96% 9.92 Class I 1,000.00 1,020.19 0.95% 4.81 - ------------------------------------------------------------------------- WORLDWIDE STRATEGIES FUND - ------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 799.00 1.69% $ 7.60 Class B 1,000.00 797.00 2.44% 10.96 Class C 1,000.00 796.30 2.44% 10.96 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,016.44 1.69% 8.56 Class B 1,000.00 1,012.65 2.44% 12.35 Class C 1,000.00 1,012.65 2.44% 12.35
* Expenses are equal to the Funds' annualized expense ratio which includes waived fees, reimbursed expenses and dividends on short sales, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 366 days to reflect the one-half year period. Exceptions noted under ++. ++ Inception date is June 6, 2008. Expenses are equal to the Fund's annualized expense ratio, which includes waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (113) expenses were accrued, then divided by 366 to reflect the period since inception. # For the fund of funds, the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses had been included, the expenses would have been higher. Expenses Paid During Period for the following funds include extraordinary expenses which include, but are not limited to, trust consolidation expenses and/or merger expenses. If such expenses were excluded, Expenses Paid During Period would have been as follows:
Hypothetical (5% return before Fund Actual expenses) - ---- ------ ----------------- BOND FUND Class A $4.58 $4.71 Class B 8.26 8.51 Class C 8.21 8.45 Class I 3.06 3.14
You can find more information about the Funds' expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 5 TICKER SYMBOLS: AN ALTERNATIVE INVESTMENT FUND Class A: PGUAX Class C: PGUCX GLOBAL INFRASTRUCTURE FUND Class I: PGIUX [ ] VIRTUS GLOBAL INFRASTRUCTURE FUND ("GLOBAL INFRASTRUCTURE FUND" OR THE "FUND") is diversified and has an investment objective to seek both capital appreciation and current income. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (15.63)%; Class C shares returned (16.18)%; Class I shares returned (17.51)%* (since inception, June 6, 2008). For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%; the Global Infrastructure Fund Composite Index, the Fund's style-specific benchmark appropriate for comparison which, effective September 1, 2008, consists of the MSCI World Infrastructure Sector Capped Index, returned (17.86)%. Prior to September 1, 2008, the Fund's Composite Index consisted of 65% MSCI USA Utilities Index, 20% MSCI World Telecom Services Index, and 15% MSCI World ex USA/Utilities Index. * Returns less than 1 year are not annualized. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] Effective August 18, 2008, the Fund changed its name and enhanced its strategy to include energy and transportation infrastructure sectors in addition to the communications and utilities infrastructure sectors already in the Fund. As a result, our comments relate to those sectors owned in the Fund for the majority of the year. [ ] During the last 12 months the fundamentals of the utilities sector have remained strong. However, due to economic and credit concerns, primarily during the last quarter, the stocks have come under pressure. Given the essential nature of utility services, we expect that softening of demand will be relatively modest. Additionally, the utilities owned in the portfolio have significant portions of their revenues under the purview of state or federal regulatory authorities. In the current environment such regulation is a source of stability, and mandated environmental and renewable capital expenditures provide the opportunity for growth. Utilities should also be able to navigate through the credit crisis relatively unscathed given that the companies are not over-leveraged, and their secure revenue profiles provide cash flow visibility. [ ] The last 12 months have been mixed for the communications sector. Financially, the companies have solid balance sheets with low levels of debt and strong cash flows. This supports attractive dividends across most of the sector. Operationally, growth in wireless has been driven by adoption of smart phones and increased data usage. Concern about the health and stability of the fixed line business has once again been raised as cable continues to make inroads into this segment. Additionally, broadband is showing signs of maturity. As the economy weakened over the course of the year, investors have debated whether communications remains an essential service. We believe that communications services overall will continue to be viewed as non-discretionary, but the mix may be different than in past economic slowdowns as wireless is now considered to be more necessary than fixed-line services. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] For the fiscal year, the Fund outperformed its blended benchmark primarily due to strong stock selection in the communications and utilities sectors. The overweight in communications detracted from performance as that sector underperformed utilities. [ ] On a regional basis, stock selection contributed positively to performance both in Europe and North America. The Fund's overweight in Europe and underweight in North America and Asia was a modest detractor to performance as European components in the benchmark underperformed the North American and Asian components. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. BECAUSE THE FUND IS HEAVILY WEIGHTED IN THE UTILITIES SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 6 AN ALTERNATIVE INVESTMENT FUND GLOBAL INFRASTRUCTURE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year to 9/30/08 Date - ---------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (15.63)% 7.01% 12/30/04 - ---------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (20.48)% 5.33% 12/30/04 - ---------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (16.18)% 6.22% 12/30/04 - ---------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (16.18)% 6.22% 12/30/04 - ---------------------------------------------------------------------------- CLASS I SHARES AT NAV --% (17.51)% 6/6/08 - ---------------------------------------------------------------------------- S&P 500(R) INDEX (21.98)% NOTE 5 NOTE 5 - ---------------------------------------------------------------------------- GLOBAL INFRASTRUCTURE FUND COMPOSITE INDEX (17.86)% NOTE 6 NOTE 6 - ----------------------------------------------------------------------------
FUND EXPENSE RATIOS(7): A SHARES: GROSS 1.22%, NET 1.15%; C SHARES: GROSS 1.97%, NET 1.90%; I SHARES: GROSS 0.97%, NET 0.90%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 0.94% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND (13.71)% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 7.53% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND (18.95)% FOR CLASS I (SINCE 6/6/08). (7) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Share Class Share Class S&P 500(R) Composite A(1,3,4) C(1,4) Index Index ex US ----------- ----------- ---------- ----------- 12/04 $ 9,425 $10,000 $10,000 $10,000 9/05 $10,378 $10,959 $10,291 $11,567 9/06 $11,381 $11,911 $11,401 $12,702 9/07 $14,405 $14,964 $13,276 $15,986 9/08 $12,153 $12,543 $10,358 $13,131
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Utilities 37% - --------------------------------------------- Telecommunication Services 36% - --------------------------------------------- Energy 14% - --------------------------------------------- Industrials 10% - --------------------------------------------- Other (includes short-term investments) 3% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 7 TICKER SYMBOLS: AN ALTERNATIVE INVESTMENT FUND Class A: PXRAX Class C: PXRCX INTERNATIONAL REAL ESTATE SECURITIES FUND Class I: PXRIX [ ] VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND ("INTERNATIONAL REAL ESTATE SECURITIES FUND" OR THE "FUND") is non-diversified and has a primary investment objective to seek long-term capital appreciation and a secondary investment objective of income. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (31.46)%; Class C shares returned (32.09)%; Class I shares returned (31.32)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (23.00)%; FTSE EPRA/NAREIT Global ex U.S. Rental Index, the Fund's style-specific benchmark, appropriate for comparison, returned (35.14)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] Since the October 2007 inception of the International Real Estate Securities Fund, the investment environment for international real estate equities has been extremely challenging as a result of the well documented credit crisis that has afflicted global investment markets. This challenging environment is well reflected in the negative returns that have been posted by the Fund. In addition to negative local market returns, the U.S. Dollar has appreciated slightly versus most major currencies since the Fund's inception, which has had a negative impact on total returns as well. Thus, overall total returns have been negative and to a far greater degree than has been observed for U.S. real estate equities during the fiscal year. [ ] We believe the divergence in performance relative to the U.S. can partly be explained by the under-performance of U.S. real estate equities in 2007 relative to international real estate equities. Additionally, we believe U.S. real estate equities have benefited relative to international real estate equities as a result of the more accommodating monetary policy by the U.S. Federal Reserve thus far in 2008 relative to its international central bank peers. Historically, U.S. real estate equities have relatively out-performed other U.S. equity classes during a falling short-term interest rate environment, and that has been the experience year-to-date through September. Lastly, the overall U.S. economic environment was more resilient than expected during the first half of 2008 as compared to the international economic environment, which experienced a significant deterioration in performance. This factor has supported U.S. real estate market fundamentals. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] Despite the negative absolute returns posted by the Fund since inception, the Fund has out-performed its benchmark over both time periods. We believe this out-performance is rooted in our philosophy, style and process, which has been in-place and successfully executed upon for our U.S. real estate equities strategy over the last decade. More specifically, we believe our out-performance relative to our benchmark has been driven by superior stock selection, which has allowed us to avoid many of the value-traps and land mines that have been present in this challenging environment. Additionally, we believe our focus on companies with a "rental" business profile has served us well, given the lower economic sensitivity of these companies' revenue streams relative to their "non-rental" peers. [ ] Going forward, we expect the landscape for investing in international real estate equities to remain challenging at least through the balance of 2008 and possibly into 2009. However, by adhering to our investment process we believe we can continue to perform well relative to our benchmark and our peers. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. INVESTING IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, CHANGES IN THE VALUE OF PROPERTIES REITS OWN, DEPENDENCY ON MANAGEMENT SKILLS, ECONOMIC IMPACT ON THE INDUSTRY AND RISKS SIMILAR TO THOSE LINKED TO SMALL-COMPANY INVESTING. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 8 AN ALTERNATIVE INVESTMENT FUND INTERNATIONAL REAL ESTATE SECURITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception to 9/30/08 Date - -------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (31.46)% 10/1/07 - -------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (35.40)% 10/1/07 - -------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (32.09)% 10/1/07 - -------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (32.09)% 10/1/07 - -------------------------------------------------------------------- CLASS I SHARES AT NAV (31.32)% 10/1/07 - -------------------------------------------------------------------- S&P 500(R) INDEX (23.00)% 10/1/07 - -------------------------------------------------------------------- FTSE EPRA/NAREIT GLOBAL EX U.S. RENTAL INDEX (35.14)% 10/1/07 - --------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.79%, NET 1.50%; C SHARES: GROSS 2.54%, NET 2.25%; CLASS I SHARES: GROSS 1.54%, NET 1.25%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A CONTRACTUAL FEE WAIVER IN EFFECT THROUGH 1/31/09. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF CONTRACTUAL FEE WAIVER. GROWTH OF $10,000 For period ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
FTSE EPRA/NAREIT Share Class Share Class Share Class S&P 500(R) Global ex U.S. A(1,3,4) C(1,4) I Index Rental Index ----------- ----------- ----------- ---------- ---------------- 10/07 $9,425 $10,000 $10,000 $10,000 $10,000 9/08 $6,460 $ 6,791 $ 6,868 $ 7,700 $ 6,486
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Retail REITS 44% - --------------------------------------------- Real Estate Management & Development 18% - --------------------------------------------- Office REITS 13% - --------------------------------------------- Diversified REITS 8% - --------------------------------------------- Industrial REITS 6% - --------------------------------------------- Specialized REITS 6% - --------------------------------------------- Residential REITS 2% - --------------------------------------------- Other (includes short-term investments) 3% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 9 TICKER SYMBOLS: AN ALTERNATIVE INVESTMENT FUND Class A: EMNAX Class B: EMNBX MARKET NEUTRAL FUND Class C: EMNCX [ ] VIRTUS MARKET NEUTRAL FUND ("MARKET NEUTRAL FUND" OR THE "FUND") is diversified and has an investment objective to seek long-term capital appreciation while maintaining minimal portfolio exposure to general equity market risk. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (5.36)%, Class B shares returned (6.04)% and Class C shares returned (6.04)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%, and the Citigroup 90-Day Treasury Bills Index, which is the Fund's style-specific index appropriate for comparison, returned 2.55%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] Global equity markets began stumbling in August 2007 and the decline steepened late in the 4th quarter of '07. This volatility continued as we began 2008. The failure and subsequent acquisition of Bear Stearns marked an historic turning point in March, as the pervasiveness of the sub-prime backed securities was revealed. [ ] Oil continued its record-breaking climb (along w/most commodities) to $149/bbl by mid-July before collapsing in the face of a global recession. [ ] While equity markets seemingly struggled to limit losses, the biggest drops would not come until late September, after Barclays snatched up Lehman Brothers. Oil prices crumbled to $63 and hopes for a global "growth recession" were dashed. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Multi-Alpha Market Neutral Equity strategy did not perform to our expectations, slipping roughly 3% during the YTD period through 9/30 (The Boston Company Asset Management began managing the Virtus Market Neutral Fund in mid-January '08). However, relative to the MSCI World (down 24%) and the S&P 500 (down 19%), the Virtus Market Neutral Fund has protected capital relatively well. [ ] With that said, however, it has been the irrational, momentum-driven market that has hurt performance and caused our stock selection to struggle. In the first several quarters of '08, valuations mattered very little (even valuations based upon normalized earnings estimates) and price momentum drove stock returns. As the third quarter progressed, valuation factor efficacy returned, but extreme volatility magnified investor fears, and fundamentals seemingly became detached from price movements. [ ] We have seen markets in the past where fundamentals have become detached from stock movements, and history has taught us that sticking to our time-proven philosophy and process insures success when rational behavior returns (and it always does). As always, we continue to believe that solid companies with strong management teams, healthy balance sheets, and good growth prospects will outperform in the medium and long-term, and we continue to utilize the depth and breadth of our investment research capabilities to find those companies. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS, SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES. INVESTING IN FUNDS THAT USE AGGRESSIVE INVESTMENT STRATEGIES SUCH AS SHORT SELLING, LEVERAGE, AND THE USE OF DERIVATIVES MAY PRODUCE HIGHER LOSSES THAN FUNDS THAT DO NOT USE THESE INVESTMENT STRATEGIES. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 10 AN ALTERNATIVE INVESTMENT FUND MARKET NEUTRAL FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 09/30/08 - --------------------------------------------------------------------------------
1 year 5 years 10 years - ------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (5.36)% (2.25)% 0.02% - ------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (10.80)% (3.40)% (0.57)% - ------------------------------------------------------------------- CLASS B SHARES AT NAV(2) (6.04)% (2.97)% (0.69)% - ------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) (9.76)% (3.16)% (0.69)% - ------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (6.04)% (2.96)% (0.70)% - ------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (6.04)% (2.96)% (0.70)% - ------------------------------------------------------------------- S&P 500(R) INDEX (21.98)% 5.17% 3.06% - ------------------------------------------------------------------- CITIGROUP 90-DAY TREASURY BILLS INDEX 2.55% 3.09% 3.39% - -------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 3.88% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES), NET 3.41% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES); B SHARES: GROSS 4.63% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES), NET 4.16% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES); C SHARES: GROSS 4.63% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES), NET 4.16% (WHICH INCLUDES 1.64% OF DIVIDENDS ON SHORT SALES). ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A SIX YEAR PERIOD. CDSC CHARGES FOR C SHARES ARE 1.25% IN THE FIRST YEAR AND 0% THEREAFTER. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Citigroup 90-Day Share Class Share Class Share Class S&P 500(R) Treasury Bills A(1,3,4) B(1,4) C(1,4) Index Index ----------- ----------- ----------- ---------- ---------------- 9/98 $ 9,425 $10,000 $10,000 $10,000 $10,000 9/99 $ 9,191 $ 9,682 $ 9,672 $12,773 $10,463 9/00 $ 8,831 $ 9,242 $ 9,229 $14,480 $11,051 9/01 $10,057 $10,448 $10,439 $10,624 $11,608 9/02 $11,767 $12,135 $12,118 $ 8,448 $11,837 9/03 $10,587 $10,844 $10,831 $10,511 $11,982 9/04 $10,745 $10,921 $10,909 $11,969 $12,106 9/05 $11,052 $11,162 $11,150 $13,434 $12,410 9/06 $10,448 $10,469 $10,454 $14,884 $12,958 9/07 $ 9,982 $ 9,928 $ 9,921 $17,331 $13,607 9/08 $ 9,447 $ 9,328 $ 9,321 $13,522 $13,953
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- Long Short Positions Positions - --------------------------------------------------------------- Consumer Discretionary 18% 19% - --------------------------------------------------------------- Health Care 15% 16% - --------------------------------------------------------------- Financials 15% 16% - --------------------------------------------------------------- Consumer Staples 13% 10% - --------------------------------------------------------------- Industrials 9% 13% - --------------------------------------------------------------- Information Technology 9% 8% - --------------------------------------------------------------- Utilities/Materials 7% 8% - --------------------------------------------------------------- Other (includes short-term investments) 14% 10% - --------------------------------------------------------------- * % of total investments as of September 30, 2008 For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 11 TICKER SYMBOLS: FUND OF FUNDS Class A: PDPAX Class C: PDPCX ALTERNATIVES DIVERSIFIER FUND [ ] VIRTUS ALTERNATIVES DIVERSIFIER FUND ("DIVERSIFIER FUND" OR THE "FUND") is diversified and has an investment objective of seeking long-term capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (8.94)%; Class C shares returned (9.71)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] During the Fund's fiscal year, equity markets struggled: [ ] In the United States, the Standard & Poor's 500 Index lost nearly 22%, while the Russell 2000 index of small-capitalization stocks declined by over 16%. [ ] International markets fared even worse, with the MSCI EAFE Index declining 30.5% for the period. Real Estate investment trusts (REIT) performed somewhat better for the period, declining a little over 11% according to the FTSE NAREIT Equity REIT Index. Fixed income markets were very much a story about credit, with government bonds having positive returns, while lower quality bonds, such as high yield bonds, lost money over the course of the year. [ ] The commodities markets, as measured by the Dow Jones-AIG Commodity Total Return Index, were down 5.8% during the fiscal year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Fund performed well relative to the Standard & Poor's 500 Equity Index, but still posted a negative return on the year. [ ] The Fund's investment in a market neutral strategy helped relative performance, while domestic and global REIT exposure, as well as utility/infrastructure exposure, hurt relative performance. [ ] Commodity exposure was a net relative positive contributor, however, the extreme volatility and summer collapse of commodity prices, and the commensurate drop in the equities with commodity exposure, hurt the end of fiscal year performance. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN EXCHANGE TRADED FUNDS (ETFS) WILL FLUCTUATE IN VALUE, SO THAT WHEN SHARES ARE SOLD OR REDEEMED THEY MAY BE WORTH MORE OR LESS THAN WHEN THEY WERE PURCHASED. TRACKING ERROR, MANAGEMENT EXPENSES, AND LIQUIDITY OF THE MARKET THAT THE ETF INVESTS IN CAN LEAD TO RETURNS THAT DON'T MATCH THAT OF THE MARKET. EVERY TIME YOU BUY OR SELL AN ETF, YOU PAY A BROKERAGE COMMISSION. FOR SOME INVESTORS, THESE FEES CAN OFFSET THE LOWER ANNUAL COSTS THAT ETFS USUALLY CHARGE. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 12 FUND OF FUNDS ALTERNATIVES DIVERSIFIER FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year to 9/30/08 Date - ------------------------------------------------------------- CLASS A SHARES AT NAV(2) (8.94)% 3.56% 11/30/05 - ------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (14.18)% 1.42% 11/30/05 - ------------------------------------------------------------- CLASS C SHARES AT NAV(2) (9.71)% 2.76% 11/30/05 - ------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (9.71)% 2.76% 11/30/05 - ------------------------------------------------------------- S&P 500(R) INDEX (21.98)% (0.49)% 11/30/05 - -------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 0.51%, NET 0.30%; C SHARES: GROSS 1.26%, NET 1.05%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER AND EXCLUDING EXTRAORDINARY EXPENSES. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Share Class Share Class S&P 500(R) A(1,3,4) C(1,4) Index ----------- ----------- ---------- 11/05 $ 9,425 $10,000 $10,000 9/06 $10,059 $10,606 $10,855 9/07 $11,431 $11,965 $12,640 9/08 $10,409 $10,803 $ 9,862
FUND INVESTMENT ALLOCATION as of 9/30/08* - ---------------------------- Domestic Equity Funds 41% - ---------------------------- Exchange Traded Funds 32% - ---------------------------- Foreign Equity Funds 27% - ---------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 13 FUND OF FUNDS TICKER SYMBOLS: Class A: PWAAX WEALTH ACCUMULATOR FUND Class C: PWACX [ ] VIRTUS WEALTH ACCUMULATOR FUND ("WEALTH ACCUMULATOR FUND" OR THE "FUND") is diversified and has an investment objective of seeking long-term capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (24.20)%; Class C shares returned (24.68)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] During the Fund's fiscal year, equity markets struggled: [ ] In the United States, the Standard & Poor's 500 Index lost nearly 22%, while the Russell 2000 index of small-capitalization stocks declined by over 16%. [ ] International markets fared even worse, with the MSCI EAFE Index declining 30.5% for the period. Real Estate investment trusts (REIT) performed somewhat better for the period, declining a little over 11% according to the FTSE NAREIT Equity REIT Index. Fixed income markets were very much a story about credit, with government bonds having positive returns, while lower quality bonds, such as high yield bonds, lost money over the course of the year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The fund's substantial exposure to equity markets worldwide drove performance during the year. The difficult stock markets globally hurt overall performance. [ ] The Fund's performance was negatively impacted by its allocation to non-U.S. equity markets, as those markets generally performed even more poorly than U.S. equity markets. The Fund's REIT and market neutral exposure did help relative performance, although both strategies did drop some in value, they did outperform other broad market indexes. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS, SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 14 FUND OF FUNDS WEALTH ACCUMULATOR FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year to 9/30/08 Date - ---------------------------------------------------------------- CLASS A SHARES AT NAV(2) (24.20)% 0.01% 8/04/05 - ---------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (28.56)% (1.85)% 8/04/05 - ---------------------------------------------------------------- CLASS C SHARES AT NAV(2) (24.68)% (0.73)% 8/04/05 - ---------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (24.68)% (0.73)% 8/04/05 - ---------------------------------------------------------------- S&P 500(R) INDEX (21.98)% 0.12% 8/04/05 - ----------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 0.42%, NET 0.20%; C SHARES: GROSS 1.17%, NET 0.95%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER (DISCONTINUED EFFECTIVE SEPTEMBER 22, 2008). GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Share Class Share Class S&P 500(R) A(1,3,4) C(1,4) Index ----------- ----------- ---------- 8/05 $ 9,425 $10,000 $10,000 9/05 $ 9,529 $10,100 $ 9,973 9/06 $10,484 $11,018 $11,050 9/07 $12,437 $12,975 $12,866 9/08 $ 9,428 $ 9,773 $10,039
FUND INVESTMENT ALLOCATION as of 9/30/08* - --------------------------- Domestic Equity Funds 73% - --------------------------- Foreign Equity Funds 27% - --------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 15 FUND OF FUNDS TICKER SYMBOLS: Class A: PWBAX WEALTH BUILDER FUND Class C: PWBCX [ ] VIRTUS WEALTH BUILDER FUND ("WEALTH BUILDER FUND" OR THE "FUND") is diversified and has an investment objective of seeking long-term capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (19.66)%; Class C shares returned (20.35)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%; the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%; and the Wealth Builder Fund Composite Index, the Fund's style-specific benchmark, returned (17.23)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] During the Fund's fiscal year, equity markets struggled: [ ] In the United States, the Standard & Poor's 500 Index lost nearly 22%, while the Russell 2000 index of small-capitalization stocks declined by over 16%. [ ] International markets fared even worse, with the MSCI EAFE Index declining 30.5% for the period. Real Estate investment trusts (REIT) performed somewhat better for the period, declining a little over 11% according to the FTSE NAREIT Equity REIT Index. Fixed income markets were very much a story about credit, with government bonds having positive returns, while lower quality bonds, such as high yield bonds, lost money over the course of the year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The fund's substantial exposure to equity markets worldwide drove performance during the year. The difficult stock markets globally hurt overall performance. [ ] The Fund's performance was negatively impacted by its allocation to non-U.S. equity markets, as those markets generally performed even more poorly than U.S. equity markets. The Fund's REIT and market neutral exposure did help relative performance, although both strategies did drop some in value, they did outperform other broad market indexes. [ ] The Fund's 20% allocation to fixed income funds did help relative performance, but many of the underlying funds within the fixed income portion had a greater weighting to credit product (non-Treasury government), and thus that hurt absolute performance. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS, SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 16 FUND OF FUNDS WEALTH BUILDER FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year 5 years to 9/30/08 Date - -------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (19.66)% 4.17% 4.28% 8/01/03 - -------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (24.28)% 2.95% 3.09% 8/01/03 - -------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (20.35)% 3.41% 3.50% 8/01/03 - -------------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (20.35)% 3.41% 3.50% 8/01/03 - -------------------------------------------------------------------------------------- S&P 500(R) INDEX (21.98)% 5.17% 5.38% 8/01/03 - -------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 4.33% 8/01/03 - -------------------------------------------------------------------------------------- WEALTH BUILDER FUND COMPOSITE INDEX (17.23)% 4.99% 5.26% 8/01/03 - --------------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 0.42%, NET 0.20%; C SHARES: GROSS 1.17%, NET 0.95%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER (DISCONTINUED EFFECTIVE SEPTEMBER 22, 2008). GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Wealth Builder Barclays Capital Composite: 80% S&P 500/20% Share Class Share Class S&P 500(R) U.S. Aggregate Barclays Capital U.S. A(1,3,4) C(1,4) Index Bond Index Aggregate Bond Index ----------- ----------- ---------- ---------------- -------------------------- 8/03 $ 9,425 $10,000 $10,000 $10,000 $10,000 9/03 $ 9,538 $10,100 $10,191 $10,338 $10,221 9/04 $10,528 $11,074 $11,603 $10,718 $11,431 9/05 $11,576 $12,084 $13,024 $11,018 $12,616 9/06 $12,603 $13,063 $14,430 $11,422 $13,797 9/07 $14,567 $14,999 $16,802 $12,009 $15,751 9/08 $11,702 $11,946 $13,109 $12,447 $13,038
FUND INVESTMENT ALLOCATION as of 9/30/08* - --------------------------------- Domestic Equity Funds 57% - --------------------------------- Foreign Equity Funds 24% - --------------------------------- Domestic Fixed Income Funds 19% - --------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 17 FUND OF FUNDS TICKER SYMBOLS: Class A: PSWAX WEALTH GUARDIAN FUND Class C: PSWCX [ ] VIRTUS WEALTH GUARDIAN FUND ("WEALTH GUARDIAN FUND" OR THE "FUND") is diversified and has an investment objective of seeking long-term capital appreciation and current income. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (15.94)%; Class C shares returned (16.59)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%; the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%; and the Wealth Guardian Fund Composite Index, the Fund's style-specific benchmark, returned (12.29)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] During the Fund's fiscal year, equity markets struggled: [ ] In the United States, the Standard & Poor's 500 Index lost nearly 22%, while the Russell 2000 index of small-capitalization stocks declined by over 16%. [ ] International markets fared even worse, with the MSCI EAFE Index declining 30.5% for the period. Real Estate investment trusts (REIT) performed somewhat better for the period, declining a little over 11% according to the FTSE NAREIT Equity REIT Index. Fixed income markets were very much a story about credit, with government bonds having positive returns, while lower quality bonds, such as high yield bonds, lost money over the course of the year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Fund's performance reflected its blend of 60% equity investments and 40% fixed income investments. [ ] The fund's substantial exposure to equity markets worldwide drove performance during the year. The difficult stock markets globally hurt overall performance. [ ] The Fund's performance was negatively impacted by its allocation to non-U.S. equity markets, as those markets generally performed even more poorly than U.S. equity markets. The Fund's REIT and market neutral exposure did help relative performance, although both strategies did drop some in value, they did outperform other broad market indexes. [ ] The Fund's 40% allocation to fixed income funds did help relative performance, but many of the underlying funds within the fixed income portion had a greater weighting to credit product (non-Treasury government), and thus that hurt absolute performance. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 18 FUND OF FUNDS WEALTH GUARDIAN FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year 5 years to 9/30/08 Date - -------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (15.94)% 3.61% 3.86% 8/01/03 - -------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (20.78)% 2.39% 2.68% 8/01/03 - -------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (16.59)% 2.85% 3.09% 8/01/03 - -------------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (16.59)% 2.85% 3.09% 8/01/03 - -------------------------------------------------------------------------------------- S&P 500(R) INDEX (21.98)% 5.17% 5.38% 8/01/03 - -------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 4.33% 8/01/03 - -------------------------------------------------------------------------------------- WEALTH GUARDIAN FUND COMPOSITE INDEX (12.29)% 4.76% 5.10% 8/01/03 - --------------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 0.41%, NET 0.20%; C SHARES: GROSS 1.16%, NET 0.95%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER (DISCONTINUED EFFECTIVE SEPTEMBER 22, 2008). GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Wealth Guardian Barclays Capital Composite: 60% S&P 500/40% Share Class Share Class S&P 500(R) U.S. Aggregate Barclays Capital U.S. A(1,3,4) C(1,4) Index Bond Index Aggregate Index ----------- ----------- ---------- ---------------- -------------------------- 8/03 $ 9,425 $10,000 $10,000 $10,000 $10,000 9/03 $ 9,604 $10,170 $10,191 $10,338 $10,252 9/04 $10,469 $11,011 $11,603 $10,718 $11,256 9/05 $11,299 $11,798 $13,024 $11,018 $12,211 9/06 $12,112 $12,551 $14,430 $11,422 $13,180 9/07 $13,641 $14,032 $16,802 $12,009 $14,747 9/08 $11,466 $11,703 $13,109 $12,447 $12,935
FUND INVESTMENT ALLOCATION as of 9/30/08* - --------------------------------- Domestic Equity Funds 43% - --------------------------------- Domestic Fixed Income Funds 41% - --------------------------------- Foreign Equity Funds 16% - --------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 19 TICKER SYMBOLS: Class A: SAVAX FIXED INCOME FUNDS Class B: SAVBX Class C: SAVCX BOND FUND Class I: SAVYX [ ] VIRTUS BOND FUND ("BOND FUND" OR THE "FUND") is diversified and has an investment objective to seek high total return from both current income and capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class I shares returned (0.16)%, Class A shares returned (0.49)%, Class B shares returned (1.23)% and Class C Shares returned (1.14)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, which serves as the broad-based and style-specific benchmark index appropriate for comparison, returned 3.65%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] Market performance during the Fund's fiscal year was dominated by the global credit crunch and the pressure it put on bond prices. [ ] In corporate credit, high yield produced a negative 10.51 percent total return, while high grade corporate bonds lost 4.79 percent. [ ] The performance of mortgage and asset backed securities was mixed. Agency pass-throughs produced solid positive returns, while non-agency, especially subprime mortgages, struggled. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Fund successfully navigated the corporate credit shoals by avoiding the most distressed credits, such as Lehman Brothers, Washington Mutual, and the subprime lenders. [ ] Returns were also bolstered by the solid performance of US Government agency pass-throughs. [ ] Performance was hindered by exposure to the non-agency mortgage market, specifically, Prime, AAA pass-throughs originated in 2007. While these securities suffered no principal loss, they declined in price in conjunction with other mortgage types that didn't enjoy a Federal guarantee. [ ] While they comprised a small portion of the portfolio, preferred and junior subordinated obligations of financial institutions also hindered portfolio performance. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. THE FUND INVESTS IN SECURITIES GUARANTEED BY THE US GOVERNMENT AS TO THE TIMELY PAYMENT OF INTEREST AND PRINCIPAL, HOWEVER, SHARES OF THE FUND ARE NOT INSURED NOR GUARANTEED. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 20 FIXED INCOME FUNDS BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
1 year 5 years 10 years - ------------------------------------------------------------------------ CLASS I SHARES AT NAV (0.16)% 2.98% 4.86% - ------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) (0.49)% 2.70% 4.48% - ------------------------------------------------------------------------ CLASS A SHARES AT POP(3) (5.21)% 1.71% 3.98% - ------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) (1.23)% 1.93% 3.70% - ------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) (5.04)% 1.93% 3.70% - ------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) (1.14)% 1.94% 3.71% - ------------------------------------------------------------------------ CLASS C SHARES WITH CDSC(4) (1.14)% 1.94% 3.71% - ------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20%
FUND EXPENSE RATIOS(5): I SHARES: GROSS 0.84%, NET 0.60%; A SHARES: GROSS 1.09%, NET 0.85%; B SHARES: GROSS 1.84%, NET 1.60%; C SHARES: GROSS 1.84%, NET 1.60%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER. GROSS EXPENSE; DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Share Class Share Class Share Class Share Class U.S. Aggregate A(1,3,4) B(1,4) C(1,4) I Bond Index ----------- ----------- ----------- ----------- --------------- 9/97 $ 9,525 $10,000 $10,000 $10,000 $10,000 9/98 $ 9,759 $10,167 $10,166 $10,351 $ 9,963 9/99 $10,329 $10,681 $10,687 $10,990 $10,660 9/00 $11,315 $11,608 $11,612 $12,071 $12,040 9/01 $11,937 $12,168 $12,172 $12,788 $13,076 9/02 $12,925 $13,073 $13,075 $13,885 $13,783 9/03 $13,485 $13,535 $13,537 $14,516 $14,290 9/04 $13,773 $13,719 $13,720 $14,869 $14,690 9/05 $14,257 $14,103 $14,103 $15,440 $15,229 9/06 $14,840 $14,563 $14,562 $16,107 $16,011 9/07 $14,768 $14,384 $14,397 $16,081 $16,596
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - ------------------------------------------- Agency Mortgage-Backed Securities 40% - ------------------------------------------- Domestic Corporate Bonds 23% - ------------------------------------------- U.S. Government Securities 23% - ------------------------------------------- Foreign Corporate Bonds 5% - ------------------------------------------- Agency Non-Mortgage-Backed Securities 3% - ------------------------------------------- Non-Agency Mortgage-Backed Securities 1% - ------------------------------------------- Other 5% - ------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 21 FIXED INCOME FUNDS TICKER SYMBOLS: Class A: CTESX CA TAX-EXEMPT BOND FUND Class I: CTXEX [ ] VIRTUS CA TAX-EXEMPT BOND FUND ("CA TAX-EXEMPT BOND FUND" OR THE "FUND") is diversified and 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. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (1.94)% and Class I shares returned (1.61)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%; the Barclays Capital California Municipal Bond Index, the Fund's style-specific benchmark, returned (2.66)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The financial markets, including the municipal bond market, are suffering through one of the most difficult periods in more than 70 years. Limited liquidity, severe erosion of investor confidence, and weakening credit fundamentals are three primary factors creating a challenging market. [ ] As the market's non-traditional investors -- hedge funds and leveraged buyers -- have exited the market en masse, and as mutual funds have experienced increased redemptions, the balance of supply and demand has become distorted causing yields to increase to extreme levels across the entire municipal bond market. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The fund's focus on high-quality issues has been very beneficial to relative performance as credit spreads on all lower quality issues have widened to extreme levels. [ ] Diversification across the entire yield curve and among a variety of sectors within the municipal bond market has benefited performance as pre-refunded bonds and shorter maturity issues, in which the fund has exposure, were the best performing areas of the market. INCOME FROM THE FUND MAY BE SUBJECT TO STATE AND LOCAL TAXES AND THE ALTERNATIVE MINIMUM TAX, IF APPLICABLE. CIRCULAR 230 NOTICE: THE INFORMATION CONTAINED IN THIS COMMUNICATION (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED TO (AND CANNOT) BE USED BY ANYONE TO AVOID PENALTIES UNDER THE INTERNAL REVENUE CODE. THIS COMMUNICATION SUPPORTS THE PROMOTION AND MARKETING OF THE PRODUCTS OR MATTERS DISCUSSED. INDIVIDUALS SHOULD SEEK INDEPENDENT TAX ADVICE BASED ON THEIR OWN CIRCUMSTANCES. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 22 FIXED INCOME FUNDS CA TAX-EXEMPT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year 5 years 10 years to 9/30/08 Date - -------------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (1.94)% 2.08% 3.39% -- -- - -------------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (6.60)% 1.09% 2.88% -- -- - -------------------------------------------------------------------------------------------------------- CLASS I SHARES AT NAV (1.61)% -- -- 0.22% 9/29/06 - -------------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20% 4.38% 9/29/06 - -------------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX (2.66)% 3.07% 4.18% 0.12% 9/29/06 - --------------------------------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): I SHARES: GROSS 0.77%, NET 0.60%; A SHARES: GROSS 1.02%, NET 0.85%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN ONE YEAR FOLLOWING PURCHASES ON WHICH A FINDER'S FEE HAS BEEN PAID. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Barclays Capital Share Class California Municipal U.S. Aggregate A(1,3,4) Bond Index Bond Index ----------- -------------------- ---------------- 9/98 $ 9,525 $10,000 $10,000 9/99 $ 9,274 $ 9,904 $ 9,963 9/00 $ 9,903 $10,605 $10,660 9/01 $10,827 $11,642 $12,040 9/02 $11,849 $12,647 $13,076 9/03 $11,999 $12,955 $13,783 9/04 $12,418 $13,678 $14,290 9/05 $12,799 $14,369 $14,690 9/06 $13,319 $15,031 $15,229 9/07 $13,562 $15,477 $16,011 9/08 $13,299 $15,066 $16,596
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Pre-Refunded 29% - --------------------------------------------- General Obligation 20% - --------------------------------------------- General Revenue 16% - --------------------------------------------- Water & Sewer Revenue 8% - --------------------------------------------- Medical Revenue 6% - --------------------------------------------- Development Revenue 6% - --------------------------------------------- Power Revenue 3% - --------------------------------------------- Other (includes short-term investments) 12% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 23 TICKER SYMBOLS: FIXED INCOME FUNDS Class A: PHGBX Class B: PUSBX CORE BOND FUND Class C: PUSCX [ ] VIRTUS CORE BOND FUND ("CORE BOND FUND" OR THE "FUND") is diversified and has an investment objective to seek both current income and capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (2.39)%, Class B shares returned (3.00)% and Class C shares returned (3.10)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, which is both the broad-based and style-specific fixed income index appropriate for comparison, returned 3.65%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The broad U.S. fixed income market, as represented by the Barclays Capital U.S. Aggregate Bond Index returned 3.65% for the fiscal year ended September 30, 2008. [ ] In the first 7 meetings of the fiscal year (one of which was an unscheduled inter-meeting) the Federal Reserve cut the federal funds rate 2.75% from 4.75% to 2.00%, citing concerns over tightening credit conditions, and a weakening economy. In the remaining 3 meetings, towards the end of 2nd quarter 2008 and early 3rd quarter 2008, as commodities were hitting all time highs and inflation as measured by CPI was heightened, the Federal Reserve left rates unchanged citing concerns of downside risks to growth and upside inflation risks. [ ] Since the beginning of the fiscal year the yield curve has steepened, with rates declining across the curve but more pronounced at the front end of the curve. [ ] The credit markets during fiscal year ending September 30, 2008 were extraordinarily volatile. This was primarily due to fear surrounding the subprime mortgage market and its resulting contagion. During this period the economy has showed significant signs of weakening with unemployment on the rise, a deteriorating housing market, and unprecedented stress to the financial system, resulting in a severe lack of liquidity and uncertainty in the market. [ ] Despite the numerous efforts of the Federal Reserve to inject liquidity into the system these fears caused a very significant flight to quality which resulted in dramatic spread widening in all sectors of the bond market. So significant was this flight to quality, that it caused treasuries to outperform all non-Treasury sectors for the full reporting period. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The underperformance of the Fund can be attributed to our underweight to Treasuries in favor of non-Treasury sectors. Treasuries were the best performing sector in the fixed income market as what began the reporting period as a subprime crisis, soon became a credit crisis and ended the reporting period as a near global financial melt-down. The result was shattered confidence, a sharp decline in the stock market and the near shut down of the credit markets as banks essentially stopped lending altogether. This environment produced one of the most severe and prolonged flights to quality ever seen. This environment typically does not favor our style of investing; however, we have maintained diversification in all of our credit intensive sectors and have used the spread widening as an opportunity to invest in high quality issues that have widened in sympathy with the market. [ ] Our performance was most adversely affected by our use of non-agency mortgages as a substitute for agency mortgages. Agency mortgages were the best performing spread sector, while nonagency mortgages were among the worst. The underperformance in non-agencies can be attributed to the continued deterioration of the housing market as foreclosures continued to ramp up while housing prices declined. Additionally, a large number of downgrades to both individual bonds and bond insurers have put further pressure on the non-agency market. [ ] Our use of taxable municipal bonds helped the performance of the portfolio. Taxable municipals continued to prove an adequate substitute for investment grade corporates. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 24 FIXED INCOME FUNDS CORE BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year 5 years 10 years to 9/30/08 Date - -------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (2.39)% 2.15% 3.08% -- -- - -------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (7.02)% 1.16% 2.58% -- -- - -------------------------------------------------------------------------------------------------- CLASS B SHARES AT NAV(2) (3.00)% 1.40% 2.30% -- -- - -------------------------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) (6.73)% 1.40% 2.30% -- -- - -------------------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (3.10)% 1.41% -- 3.15% 10/11/99 - -------------------------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (3.10)% 1.41% -- 3.15% 10/11/99 - -------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20% 5.89% 10/11/99 - --------------------------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.16%, NET 1.00%; B SHARES: GROSS 1.91%, NET 1.75%; C SHARES: GROSS 1.91%, NET 1.75%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Share Class Share Class U.S. Aggregate A(1,3,4) B(1,4) Bond Index ----------- ----------- ---------------- 9/98 $ 9,525 $10,000 $10,000 9/99 $ 9,148 $ 9,535 $ 9,963 9/00 $ 9,603 $ 9,927 $10,660 9/01 $10,703 $10,986 $12,040 9/02 $11,161 $11,372 $13,076 9/03 $11,596 $11,714 $13,783 9/04 $11,849 $11,885 $14,290 9/05 $12,082 $12,016 $14,690 9/06 $12,448 $12,306 $15,229 9/07 $13,212 $12,944 $16,011 9/08 $12,896 $12,556 $16,596
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Agency Mortgage-Backed Securities 29% - --------------------------------------------- Non-Agency Mortgage-Backed Securities 27% - --------------------------------------------- Domestic Corporate Bonds 20% - --------------------------------------------- Municipal Bonds 11% - --------------------------------------------- Asset-Backed Securities 6% - --------------------------------------------- Foreign Corporate Bonds 4% - --------------------------------------------- Foreign Government Securities 1% - --------------------------------------------- Other (includes short-term investments) 2% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 25 TICKER SYMBOLS: FIXED INCOME FUNDS Class A: PHCHX Class B: PHCCX HIGH YIELD FUND Class C: PGHCX [ ] VIRTUS HIGH YIELD FUND ("HIGH YIELD FUND" OR THE "FUND") is diversified and has a primary investment objective to seek high current income and a secondary objective of capital growth. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (12.10)%, Class B shares returned (12.59)%, and Class C Shares returned (12.72)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%, and the Barclays Capital High Yield Bond 2% Issuer Cap Index, the Fund's style-specific index appropriate for comparison, returned (10.51)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The credit markets were under severe pressure throughout the Fund's fiscal year primarily due to a global credit crisis stemming from problems in the U.S. subprime mortgage market. Initially, this crisis resulted in a selloff in risky assets such as high yield bonds. As the fiscal year progressed, the problems in the U.S. subprime mortgage market led to unprecedented turmoil in the global markets including the failure of a number of major financial institutions. The availability of credit in the global financial system was dramatically curtailed despite unprecedented actions by policy makers to shore up the system. This curtailment of credit tipped the U.S. economy, as well as other economies around the globe, into a recession. In this environment, credit spreads substantially widened and bond prices fell on the expectation that corporate profits will materially weaken; default rates will spike; and potential recovery values, in the event of a restructuring, will be impaired. [ ] The high yield market was also adversely affected by technical selling pressures as the forced deleveraging by hedge funds and other investors led to a selloff of both high yield bonds and related leveraged loans. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Fund's performance benefited from an overweight in bonds rated BB and higher, which outperformed in the deteriorating credit environment, and a substantial underweight in riskier bonds rated CCC and below, which underperformed. On the negative side, while the Fund benefited from holdings in a number of credits that outperformed the market, on balance, its performance was adversely affected by individual credit selection. Of note, the sudden and unexpected default by a midstream energy company, one of the Fund's top holdings, adversely affected performance by over 160 bps in the fiscal year. In addition, two holdings of companies in the yellow-page directories industry also adversely affected performance after downward revisions in earnings and cash flow guidance led to a major selloff in their bonds. [ ] In terms of industry sectors, the Fund benefited from its overweight in sectors that outperformed such as aerospace/defense and metals and mining, but was hurt by its overweight in sectors that underperformed such as media, non-cable. In addition, the Fund benefited from its underweight in sectors that underperformed such as automotive and building materials, but was hurt by its underweight in sectors that outperformed such as electric utilities and healthcare. HIGH-YIELD BONDS GENERALLY ARE SUBJECT TO GREATER MARKET FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN ARE INVESTMENTS IN LOWER YIELDING BONDS. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 26 FIXED INCOME FUNDS HIGH YIELD FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
1 year 5 years 10 years - --------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (12.10)% 2.56% 2.05% - --------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (16.27)% 1.57% 1.55% - --------------------------------------------------------------------------------- CLASS B SHARES AT NAV(2) (12.59)% 1.79% 1.28% - --------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) (15.85)% 1.79% 1.28% - --------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (12.72)% 1.78% 1.28% - --------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (12.72)% 1.78% 1.28% - --------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20% - --------------------------------------------------------------------------------- BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX (10.51)% 4.37% 4.56% - ---------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: 1.32%, B SHARES: 2.07%, C SHARES: 2.07% ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Barclays Capital Share Class Share Class Share Class High Yield Bond 2% U.S. Aggregate A(1,3,4) B(1,4) C(1,4) Issuer Cap Index Bond Index ----------- ----------- ----------- ------------------ ---------------- 9/98 $ 9,525 $10,000 $10,000 $10,000 $10,000 9/99 $10,409 $10,844 $10,845 $10,289 $ 9,963 9/00 $10,588 $10,942 $10,942 $10,387 $10,660 9/01 $ 8,966 $ 9,206 $ 9,193 $ 9,824 $12,040 9/02 $ 8,639 $ 8,803 $ 8,787 $ 9,739 $13,076 9/03 $10,280 $10,394 $10,392 $12,609 $13,783 9/04 $11,171 $11,202 $11,196 $14,188 $14,290 9/05 $11,762 $11,694 $11,685 $15,122 $14,690 9/06 $12,336 $12,182 $12,171 $16,216 $15,229 9/07 $13,272 $12,997 $13,008 $17,451 $16,011 9/08 $11,666 $11,361 $11,353 $15,617 $16,596
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Domestic Corporate Bonds 73% - --------------------------------------------- Consumer Discretionary 28% - --------------------------------------------- Industrials 16% - --------------------------------------------- Telecommunication Services 11% - --------------------------------------------- Energy 10% - --------------------------------------------- Other 8% - --------------------------------------------- Foreign Corporate Bonds 9% - --------------------------------------------- Other (includes short-term investments) 18% - --------------------------------------------- * % of total investments as of September 30, 2008 For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 27 FIXED INCOME FUNDS TICKER SYMBOLS: Class A: PMMXX MONEY MARKET FUND [ ] VIRTUS MONEY MARKET FUND ("MONEY MARKET FUND" OR THE "FUND") is diversified and 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. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned 2.87%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%, and the Citigroup 90-Day Treasury Bills Index, which is the Fund's style-specific index appropriate for comparison, returned 2.55%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. 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. AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
1 year 5 years 10 years - --------------------------------------------------------------------- CLASS A SHARES AT NAV(2) 2.87% 2.76% 3.07% - --------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20% - --------------------------------------------------------------------- CITIGROUP 90-DAY TREASURY BILLS 2.55% 3.09% 3.39% - ---------------------------------------------------------------------
FUND EXPENSE RATIOS(3): A SHARES: 0.76% ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE). (3) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Share Class U.S. Aggregate Citigroup 90-Day A(1) Bond Index Treasury Bills ----------- ---------------- ---------------- 9/98 $10,000 $10,000 $10,000 9/99 $10,449 $ 9,963 $10,463 9/00 $11,020 $10,660 $11,051 9/01 $11,521 $12,040 $11,608 9/02 $11,689 $13,076 $11,837 9/03 $11,811 $13,783 $11,982 9/04 $11,888 $14,290 $12,106 9/05 $12,103 $14,690 $12,410 9/06 $12,575 $15,229 $12,958 9/07 $13,156 $16,011 $13,607 9/08 $13,534 $16,596 $13,953
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - ------------------------------------------------------- Commercial Paper 35% - ------------------------------------------------------- Medium Term Notes 35% - ------------------------------------------------------- Federal Agency Securities 28% - ------------------------------------------------------- Certificates of Deposit 2% - ------------------------------------------------------- * % of total investments as of September 30, 2008 For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 28 THIS PAGE INTENTIONALLY BLANK. TICKER SYMBOLS: FIXED INCOME FUNDS Class A: NAMFX Class B: NBMFX MULTI-SECTOR FIXED INCOME FUND Class C: NCMFX [ ] VIRTUS MULTI-SECTOR FIXED INCOME FUND ("MULTISECTOR FIXED INCOME FUND" OR THE "FUND") is diversified and has an investment objective to maximize current income while preserving capital. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (9.46)%, Class B shares returned (10.16)%, and Class C Shares returned (10.20)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, which is both the Fund's broad-based and style-specific fixed income index, returned 3.65%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The broad US fixed income market, as represented by the Barclays Capital U.S. Aggregate Bond Index, returned 3.65 percent for the fiscal year ended September 30, 2008. [ ] In the first 7 meetings of the fiscal year (one of which was an unscheduled inter-meeting) the Federal Reserve cut the federal funds rate 2.75 percent from 4.75 percent to 2.00 percent, citing concerns over tightening credit conditions and a weakening economy. In the remaining 3 meetings, toward the end of second quarter 2008 and early third quarter 2008, as commodities were hitting all-time highs and inflation, as measured by CPI, was heightened, the Federal Reserve left rates unchanged citing concerns of downside risks to growth and upside inflation risks. [ ] Since the beginning of the fiscal year, the yield curve has steepened, with rates declining across the curve but more pronounced at the front end of the curve. [ ] The credit markets during the fiscal year ending September 30, 2008 were extraordinarily volatile. This was primarily due to fear surrounding the subprime mortgage market and its resulting fallout. During this period the economy showed significant signs of weakening, with unemployment on the rise, a deteriorating housing market, and unprecedented stress to the financial system, resulting in a severe lack of liquidity and uncertainty in the market. [ ] Despite the numerous efforts of the Federal Reserve to inject liquidity into the system, fears of a credit crunch caused a very significant flight to quality which resulted in dramatic spread widening in all sectors of the bond market. This flight to quality was so significant that it caused Treasuries to outperform all spread sectors for the full reporting period. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The decision to maintain an underweight to U.S. Treasuries in favor of spread sectors was the largest detractor to performance for the fiscal year. Treasuries outperformed as concerns over subprime and the resulting credit crunch continued the flight to quality, causing spreads in many sectors to widen to historic or near-historic levels. This environment typically does not favor our style of investing; however, we have maintained diversification in all of our credit-intensive sectors and have used the spread widening as an opportunity to invest in high quality issues that have widened in conjunction with the market. [ ] Among the fund's investment in spread sectors, the overweight to corporate high yield, corporate high quality, and residential mortgage backed securities detracted the most from performance. [ ] The largest positive contributors to performance were the fund's exposure to agency mortgage backed securities and agency debentures, though both sectors underperformed U.S. Treasuries. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 30 FIXED INCOME FUNDS MULTI-SECTOR FIXED INCOME FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
1 year 5 years 10 years - ---------------------------------------------------------- CLASS A SHARES AT NAV(2) (9.46)% 3.01% 5.31% - ---------------------------------------------------------- CLASS A SHARES AT POP(3,4) (13.76)% 2.02% 4.80% - ---------------------------------------------------------- CLASS B SHARES AT NAV(2) (10.16)% 2.26% 4.53% - ---------------------------------------------------------- CLASS B SHARES WITH CDSC(4) (13.55)% 2.26% 4.53% - ---------------------------------------------------------- CLASS C SHARES AT NAV(2) (10.20)% 2.24% 4.53% - ---------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (10.20)% 2.24% 4.53% - ---------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 3.65% 3.78% 5.20% - ----------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: 1.19%, B SHARES: 1.94%, C SHARES: 1.94%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Barclays Capital Share Class Share Class Share Class U.S. Aggregate A(1,3,4) B(1,4) C(1,4) Bond Index ----------- ----------- ----------- ------------------ 9/98 $ 9,525 $10,000 $10,000 $10,000 9/99 $10,247 $10,684 $10,682 $ 9,963 9/00 $10,934 $11,311 $11,307 $10,660 9/01 $11,004 $11,299 $11,305 $12,040 9/02 $11,841 $12,068 $12,072 $13,076 9/03 $13,791 $13,947 $13,956 $13,783 9/04 $15,109 $15,171 $15,174 $14,290 9/05 $15,823 $15,775 $15,774 $14,690 9/06 $16,639 $16,452 $16,462 $15,229 9/07 $17,670 $17,360 $17,364 $16,011 9/08 $15,999 $15,597 $15,593 $16,596
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - ---------------------------------------------- Domestic Corporate Bonds 36% - ---------------------------------------------- Domestic Loan Agreements 17% - ---------------------------------------------- Foreign Corporate Bonds 17% - ---------------------------------------------- Agency Mortgage-Backed Securities 9% - ---------------------------------------------- Non-Agency Mortgage-Backed Securities 7% - ---------------------------------------------- Foreign Government Securities 7% - ---------------------------------------------- Municipal Bonds 3% - ---------------------------------------------- Other (includes short-term investments) 4% - ---------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 31 TICKER SYMBOLS: FIXED INCOME FUNDS Class A: PSFRX Class C: PFSRX SENIOR FLOATING RATE FUND Class I: PSFIX [ ] VIRTUS SENIOR FLOATING RATE FUND ("SENIOR FLOATING RATE FUND" OR THE "FUND") is diversified and has an investment objective of high total return from both current income and capital appreciation. [ ] For the fiscal period January 31, 2008 (inception date) through September 30, 2008, the Fund's Class A shares returned (2.12)%; Class C shares returned (2.59)%; Class I shares returned (1.96)%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed index, returned (1.03)%; S&P/LSTA Leveraged Loan Index, the Fund's style-specific benchmark, returned (4.93)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The U.S. leveraged loan market, as represented by the S&P/LSTA Leveraged Loan Index, returned (4.93) percent for the fiscal year ended September 30, 2008. [ ] The loan market was extraordinarily volatile during the fiscal year ending September 30, 2008. This was primarily due to fear surrounding the subprime mortgage market and its resulting affect on the credit markets. [ ] The economy showed significant signs of weakening with unemployment on the rise, a deteriorating housing market, weaker corporate earnings and unprecedented stress to the financial system, resulting in a severe lack of liquidity and uncertainty in the loan market. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The overall weakness in the U.S. leveraged loan market negatively impacted the fund; however, the fund's focus on higher quality issues, relative to the index, contributed to its outperformance. [ ] Also contributing to the fund's out-performance was the fund's emphasis on loans with stronger covenants and its focus on stronger companies within each rating tier, based on our internal analysis. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 32 FIXED INCOME FUNDS SENIOR FLOATING RATE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception to 9/30/08 Date - ------------------------------------------------------------------ CLASS A SHARES AT NAV(2) (2.12)% 1/31/08 - ------------------------------------------------------------------ CLASS A SHARES AT POP(3,4) (6.76)% 1/31/08 - ------------------------------------------------------------------ CLASS C SHARES AT NAV(2) (2.59)% 1/31/08 - ------------------------------------------------------------------ CLASS C SHARES WITH CDSC(4) (3.53)% 1/31/08 - ------------------------------------------------------------------ CLASS I SHARES AT NAV (1.96)% 1/31/08 - ------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX (1.03)% 1/31/08 - ------------------------------------------------------------------ S&P/LSTA LEVERAGED LOAN INDEX (4.93)% 1/31/08 - ------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.36%, NET 1.20%; C SHARES: GROSS 2.11%, NET 1.95%; I SHARES: GROSS 1.11%, NET 0.95%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. NET EXPENSE: EXPENSES REDUCED BY A CONTRACTUAL FEE WAIVER IN EFFECT THROUGH 1/31/09. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF CONTRACTUAL FEE WAIVER. GROWTH OF $10,000 For period ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
S&P/LSTA Barclays Capital Share Class Share Class Share Class Leveraged Loan U.S. Aggregate A(1,3,4) C(1,4) I Index Bond Index ----------- ----------- ----------- -------------- ---------------- 1/08 $9,525 $10,000 $10,000 $10,000 $10,000 9/08 $9,324 $ 9,647 $ 9,804 $ 9,507 $ 9,897
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Materials 18% - --------------------------------------------- Industrials 17% - --------------------------------------------- Health Care 15% - --------------------------------------------- Telecommunication Services 12% - --------------------------------------------- Consumer Discretionary 11% - --------------------------------------------- Energy 6% - --------------------------------------------- Information Technology 3% - --------------------------------------------- Other (includes short-term investments) 18% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 33 TICKER SYMBOLS: INTERNATIONAL FUNDS Class A: NWWOX Class B: WWOBX WORLDWIDE STRATEGIES FUND Class C: WWOCX [ ] VIRTUS WORLDWIDE STRATEGIES FUND ("WORLDWIDE STRATEGIES FUND" OR THE "FUND") is diversified and has an investment objective to seek capital appreciation. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (30.50)%, Class B shares returned (30.93)%, and Class C Shares returned (30.95)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%, and the MSCI World(R) Index (Net), the Fund's style-specific benchmark appropriate for comparison, returned (26.05)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. VIRTUS INVESTMENT ADVISERS, INC. (F/K/A PHOENIX INVESTMENT COUNSEL, INC.), HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] U.S. stocks suffered losses due to a credit crisis that resulted from declining housing prices and defaults on mortgages. Economic statistics signaled we are headed toward a recession as job losses mounted and the unemployment rate rose. [ ] The large cap benchmark Standard & Poor's 500 fell 21.98 percent during the fiscal year. Small capitalization stocks also posted losses with the Russell 2000 posting a 14.48 percent decline. The Russell 1000 Growth index fell less than the Russell 1000 Value index, with decreases of 20.88 percent and 23.56 percent, respectively. VIRTUS INVESTMENT ADVISERS, INC. (F/K/A PHOENIX INVESTMENT COUNSEL, INC.), WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The Fund's performance was most adversely affected by losses in the financial, information technology and industrial sectors. The sectors that least impacted the Fund's performance were utilities, consumer staples and materials. [ ] The top contributing individual stocks were Massey Energy, Occidental Petroleum, McDonald's, Wal-Mart and Amgen. The stocks with the most negative contributions were AT&T, Bank of America, American International Group, Cisco Systems and Exxon Mobil. NEW STAR, HOW DID THE MARKETS PERFORM DURING THE FISCAL PERIOD? [ ] Markets sold off heavily as the full extent of the damage caused by the securitization mania on the over-leveraged western boundary system became apparent. [ ] Systemic risk to the banking system threatened banking companies and the economies. WHAT FACTORS AFFECTED FUND PERFORMANCE? [ ] Our underweight banks proved positive for the period. [ ] Our overweight "other financials" (European financials/Asian property) were a negative. [ ] Underweight UK sterling was a positive. ACADIAN, HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] Global equity markets saw unprecedented levels of market volatility as recessionary conditions intensified amid a worsening credit crisis. [ ] A number of key Wall Street players buckled under the weight of heavy losses on mortgage-linked securities, and world governments made extraordinary interventions in an effort to resuscitate key banking and financial institutions. [ ] In this environment, markets fell sharply (both Europe and Asia Pacific down approximately 30 percent in USD) and deleveraging and fund outflows continued, creating highly difficult conditions for quantitative, value-oriented strategies. ACADIAN, WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] Active stock selection was a key source of the fund's 700-basis-point underperformance, in addition to risk exposures related to valuation and size. [ ] Detracting most significantly from active return was stock selection in Japan, the Netherlands, France and Germany. Leading declines in these markets were Japanese trading company Marubeni, Dutch financial services provider ING Groep, French steel producer ArcelorMittal and German steelmaker ThyssenKrupp. [ ] The portfolio's opportunistic exposure to Russia proved more successful, driven by a position in wireless provider Mobile TeleSystems. Underweight positions in Finland and Ireland also added considerable value, as these markets were among the worst performers in Europe for the period, down (45.1) percent and (58.3) percent, respectively. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS, SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 34 INTERNATIONAL FUNDS WORLDWIDE STRATEGIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - --------------------------------------------------------------------------------
Inception Inception 1 year 5 years 10 years to 9/30/08 Date -------- ------- -------- ---------- --------- - ------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) (30.50)% 6.09% 3.13% -- -- - ------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3,4) (34.50)% 4.84% 2.52% -- -- - ------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) (30.93)% 5.34% 2.37% -- -- - ------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) (33.62)% 5.34% 2.37% -- -- - ------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) (30.95)% 5.34% -- 1.31% 12/15/98 - ------------------------------------------------------------------------------------ CLASS C SHARES WITH CDSC(4) (30.95)% 5.34% -- 1.31% 12/15/98 - ------------------------------------------------------------------------------------ S&P 500(R) INDEX (21.98)% 5.17% 3.06% 1.70% 12/15/98 - ------------------------------------------------------------------------------------ MSCI WORLD(SM) INDEX (NET) (26.05)% 7.32% 3.80% 1.88% 12/31/98 - ------------------------------------------------------------------------------------
FUND EXPENSE RATIOS(5): A SHARES: 1.60%, B SHARES: 2.35%, C SHARES: 2.35%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 For periods ended 9/30 - -------------------------------------------------------------------------------- (PERFORMANCE GRAPH)
Share Class Share Class S&P 500(R) MSCI World A(1,3,4) B(1,4) Index Index (Net) ----------- ----------- ---------- ----------- 9/98 $ 9,425 $10,000 $10,000 $10,000 9/99 $11,439 $12,037 $12,773 $12,947 9/00 $13,089 $13,679 $14,480 $14,004 9/01 $ 9,426 $ 9,765 $10,624 $10,063 9/02 $ 7,921 $ 8,159 $ 8,448 $ 8,133 9/03 $ 9,545 $ 9,739 $10,511 $10,198 9/04 $10,943 $11,088 $11,969 $11,941 9/05 $13,155 $13,232 $13,434 $14,201 9/06 $15,239 $15,218 $14,884 $16,216 9/07 $18,458 $18,290 $17,331 $19,636 9/08 $12,828 $12,633 $13,522 $14,522
SECTOR WEIGHTINGS as of 9/30/08* - ---------------------------------------------------------------------------- - --------------------------------------------- Financials 21% - --------------------------------------------- Information Technology 13% - --------------------------------------------- Energy 12% - --------------------------------------------- Industrials 11% - --------------------------------------------- Consumer Discretionary 10% - --------------------------------------------- Health Care 9% - --------------------------------------------- Materials 8% - --------------------------------------------- Other (includes short-term investments) 16% - --------------------------------------------- * % of total investments as of September 30, 2008. For information regarding the indexes and certain investment terms, see the glossary starting on page 2. 35 VIRTUS GLOBAL INFRASTRUCTURE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE -------------- --------------- DOMESTIC COMMON STOCKS--41.7% ELECTRIC UTILITIES--12.8% American Electric Power Co., Inc. 24,070 $ 891 Entergy Corp. 13,820 1,230 Exelon Corp. 35,430 2,219 FirstEnergy Corp. 23,430 1,570 FPL Group, Inc. 30,620 1,540 Northeast Utilities 26,240 673 Southern Co. (The) 48,520 1,829 --------------- 9,952 --------------- GAS UTILITIES--1.2% Northwest Natural Gas Co. 17,280 898 --------------- INTEGRATED TELECOMMUNICATION SERVICES--12.1% AT&T, Inc. 187,270 5,228 Fairpoint Communications, Inc. 87,340 757 Verizon Communications, Inc. 73,780 2,368 Windstream Corp. 97,410 1,066 --------------- 9,419 --------------- MULTI-UTILITIES--7.3% Dominion Resources, Inc. 41,080 1,757 NSTAR 18,270 612 PG&E Corp. 28,860 1,081 Public Service Enterprise Group, Inc. 23,600 774 Sempra Energy 28,940 1,461 --------------- 5,685 --------------- OIL & GAS STORAGE & TRANSPORTATION--6.7% Spectra Energy Corp. 149,130 3,549 Williams Cos., Inc. (The) 70,420 1,666 --------------- 5,215 --------------- WIRELESS TELECOMMUNICATION SERVICES--1.6% American Tower Corp. Class A(b) 33,560 1,207 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $37,785) 32,376 - --------------------------------------------------------------------------------
SHARES VALUE -------------- --------------- FOREIGN COMMON STOCKS(c)--57.5% AIRPORT SERVICES--2.0% Fraport AG Frankfurt Airport Services Worldwide (Germany) 25,900 $ 1,539 --------------- ELECTRIC UTILITIES--10.9% E.ON AG (Germany) 69,690 3,508 Energias de Portugal SA (Portugal) 164,400 690 Fortum Oyj (Finland) 32,095 1,077 Iberdrola S.A. (Spain) 98,570 1,001 Red Electrica Corp. S.A. (Spain) 16,770 854 Scottish and Southern Energy plc (United Kingdom) 51,760 1,317 --------------- 8,447 --------------- GAS UTILITIES--0.9% Enagas S.A. (Spain) 33,500 723 --------------- HIGHWAYS & RAILTRACKS--7.0% Abertis Infraestructuras S.A. (Spain) 122,740 2,416 Atlantia S.p.A. (Italy) 52,030 1,072 Brisa - Auto-Estradas de Portugal SA (Portugal) 193,100 1,921 --------------- 5,409 --------------- INTEGRATED TELECOMMUNICATION SERVICES--15.3% Chunghwa Telecom Co., Ltd. ADR (Taiwan)(b) 57,750 1,367 Deutsche Telekom AG Sponsored ADR (Germany) 51,200 780 France Telecom SA Sponsored ADR (France) 61,590 1,725 Koninklijke KPN N.V. (Netherlands) 110,350 1,594 Nippon Telegraph & Telephone Corp. ADR (Japan) 37,370 841 Singapore Telecommunications Ltd. (Singapore) 438,400 1,002 Telefonica S.A. Sponsored ADR (Spain) 47,040 3,363 TELUS Corp. (Canada) 32,060 1,171 --------------- 11,843 ---------------
SHARES VALUE -------------- --------------- MARINE PORTS & SERVICES--1.5% Koninklijke Vopak NV (Netherlands) 24,030 $ 1,130 --------------- MULTI-UTILITIES--4.5% GDF Suez (France) 30,330 1,578 National Grid plc (United Kingdom) 66,010 838 RWE AG (Germany) 11,740 1,119 --------------- 3,535 --------------- OIL & GAS STORAGE & TRANSPORTATION--7.9% Enbridge, Inc. (Canada) 87,100 3,318 TransCanada Corp. (Canada) 77,610 2,805 --------------- 6,123 --------------- WIRELESS TELECOMMUNICATION SERVICES--7.5% KDDI Corp. (Japan) 231 1,309 Rogers Communications, Inc. Class B (Canada) 35,940 1,166 Vodafone Group plc Sponsored ADR (United Kingdom) 151,420 3,346 --------------- 5,821 - -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $49,817) 44,570 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.2% (IDENTIFIED COST $87,602) 76,946 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--3.2% MONEY MARKET MUTUAL FUNDS--3.2% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 2,495,196 2,495 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $2,495) 2,495 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--102.4% (IDENTIFIED COST $90,097) 79,441(a) Other assets and liabilities, net--(2.4)% (1,839) --------------- NET ASSETS--100.0% $ 77,602 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $387 and gross depreciation of $11,114 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $90,168. (b) Non-income producing. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. See Notes to Financial Statements 36 VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE -------------- --------------- FOREIGN COMMON STOCKS(c)--86.8% AUSTRALIA--18.3% CFS Retail Property Trust (Retail REITs) 628,452 $ 1,140 Commonwealth Property Office Fund (Office REITs) 550,923 649 Dexus Property Group (Diversified REITs) 708,987 834 Goodman Group (Industrial REITs) 610,640 1,232 GPT Group (Diversified REITs) 564,972 826 Westfield Group (Retail REITs) 472,946 6,479 --------------- 11,160 --------------- CANADA--7.2% Allied Properties Real Estate Investment Trust (Office REITs) 29,500 514 Boardwalk Real Estate Investment Trust (Residential REITs) 29,260 981 Brookfield Properties Corp. (Real Estate Operating Companies) 78,100 1,220 Cominar Real Estate Investment Trust (Diversified REITs) 31,750 630 RioCan Real Estate Investment Trust (Retail REITs) 55,900 1,062 --------------- 4,407 --------------- FINLAND--1.1% Citycon Oyj (Diversified Real Estate Activities) 203,166 665 --------------- FRANCE--12.9% Fonciere Des Regions (Diversified REITs) 6,147 642 Gecina SA (Diversified REITs) 4,380 472 Klepierre (Retail REITs) 36,096 1,413 Societe Immobiliere de Location Pour L'industrie Et Le Commerce (Diversified Real Estate Activities) 5,492 679 Unibail-Rodamco (Retail REITs) 23,255 4,705 --------------- 7,911 ---------------
SHARES VALUE -------------- --------------- GERMANY--2.6% Alstria Office Reit-AG (Specialized REITs) 19,832 $ 245 Deutsche Euroshop AG (Diversified Real Estate Activities) 20,718 675 DIC Asset AG (Diversified Real Estate Activities) 18,401 258 GAGFAH S.A. (Diversified Real Estate Activities) 35,151 446 --------------- 1,624 --------------- HONG KONG--6.2% Champion Reit (Specialized REITs) 1,804,000 738 Hongkong Land Holdings Ltd. (Real Estate Operating Companies) 551,000 1,631 Link (The) (Retail REITs) 699,000 1,453 --------------- 3,822 --------------- JAPAN--8.6% Japan Prime Realty Investment Corp. (Office REITs) 303 719 Japan Real Estate Investment Corp. (Office REITs) 157 1,267 Nippon Accomodations Fund, Inc. (Specialized REITs) 69 333 Nippon Building Fund, Inc. (Office REITs) 182 1,759 Nippon Residential Investment Corp. (Specialized REITs) 116 291 Nomura Real Estate Office Fund, Inc. (Office REITs) 127 868 --------------- 5,237 --------------- NETHERLANDS--3.7% Corio N.V. (Retail REITs) 17,081 1,214 Eurocommercial Properties N.V. (Specialized REITs)(b) 23,712 1,032 --------------- 2,246 --------------- SINGAPORE--4.2% Ascendas Real Estate Investment Trust (Industrial REITs) 692,000 914 CapitaCommercial Trust (Office REITs) 626,000 582 CapitaMall Trust (Retail REITs) 523,000 834 CDL Hospitality Trusts (Specialized REITs) 353,000 215 --------------- 2,545 ---------------
SHARES VALUE -------------- --------------- SWEDEN--2.5% Castellum AB (Real Estate Operating Companies) 90,066 $ 792 Fabege AB (Real Estate Operating Companies) 128,809 731 --------------- 1,523 --------------- SWITZERLAND--1.8% PSP Swiss Property AG (Real Estate Operating Companies)(b) 18,546 1,080 --------------- UNITED KINGDOM--17.7% Big Yellow Group plc (Diversified Real Estate Activities) 46,146 271 British Land Co. plc (Diversified REITs) 130,973 1,767 Brixton plc (Industrial REITs) 105,904 399 Derwent London plc (Diversified Real Estate Activities) 36,046 678 Great Portland Estates plc (Office REITs) 104,453 631 Hammerson plc (Retail REITs) 92,609 1,633 Land Securities Group plc (Retail REITs) 127,953 2,890 Liberty International plc (Retail REITs) 68,765 1,189 Safestore Holdings Ltd. (Specialized REITs) 159,419 369 Segro plc (Industrial REITs) 133,428 1,006 --------------- 10,833 - -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $61,670) 53,053 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--86.8% (IDENTIFIED COST $61,670) 53,053 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--3.0% MONEY MARKET MUTUAL FUNDS--3.0% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 1,819,834 1,820 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,820) 1,820 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--89.8% (IDENTIFIED COST $63,490) 54,873(a) Other assets and liabilities, net--10.2% 6,244 --------------- NET ASSETS--100.0% $ 61,117 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $0 and gross depreciation of $9,130 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $64,003. (b) Non-income producing. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. See Notes to Financial Statements 37 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- DOMESTIC COMMON STOCKS--76.4% ADVERTISING--0.9% Omnicom Group, Inc. 30,400 $ 1,173 --------------- AEROSPACE & DEFENSE--2.2% Curtiss-Wright Corp. 13,150 598 Goodrich Corp. 12,420 517 Lockheed Martin Corp. 7,580 831 Raytheon Co. 15,430 825 --------------- 2,771 --------------- AIRLINES--0.6% Delta Air Lines, Inc.(b) 60,350 450 US Airways Group, Inc.(b) 41,360 249 --------------- 699 --------------- APPAREL RETAIL--4.5% American Eagle Outfitters, Inc. 45,440 693 Children's Place Retail Stores, Inc. (The)(b) 21,270 709 Citi Trends, Inc.(b) 29,310 478 Coldwater Creek, Inc.(b) 99,880 578 Gap, Inc. (The) 36,640 652 Jos. A. Bank Clothiers, Inc.(b) 29,400 988 Ross Stores, Inc. 24,100 887 TJX Cos., Inc. (The) 21,730 663 --------------- 5,648 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--3.2% Gildan Activewear, Inc.(b) 20,540 468 Hanesbrands, Inc.(b) 32,140 699 Jones Apparel Group, Inc. 25,840 478 Lululemon Athletica, Inc.(b) 18,720 431 Phillips-Van Heusen Corp. 14,880 564 True Religion Apparel, Inc.(b) 51,950 1,343 --------------- 3,983 --------------- APPLICATION SOFTWARE--0.8% Adobe Systems, Inc.(b) 11,140 440 Concur Technologies, Inc.(b) 15,670 599 --------------- 1,039 --------------- ASSET MANAGEMENT & CUSTODY BANKS--0.8% Blackstone Group LP/The 64,460 989 --------------- AUTO PARTS & EQUIPMENT--0.4% Drew Industries, Inc.(b) 29,950 512 --------------- AUTOMOTIVE RETAIL--0.5% Advance Auto Parts, Inc. 16,430 652 --------------- BIOTECHNOLOGY--1.2% Alexion Pharmaceuticals, Inc.(b) 6,550 257 Amgen, Inc.(b) 4,580 272 BioMarin Pharmaceutical, Inc.(b) 12,230 324 Gilead Sciences, Inc.(b) 5,480 250 Vertex Pharmaceuticals, Inc.(b) 13,970 464 --------------- 1,567 ---------------
SHARES VALUE --------------- --------------- BREWERS--0.3% Molson Coors Brewing Co. Class B 7,300 $ 341 --------------- BUILDING PRODUCTS--0.1% Masco Corp. 9,290 167 --------------- CASINOS & GAMING--0.4% WMS Industries, Inc.(b) 14,700 449 --------------- COMMODITY CHEMICALS--0.2% Celanese Corp. Series A 8,770 245 --------------- COMMUNICATIONS EQUIPMENT--1.4% Cisco Systems, Inc.(b) 12,060 272 Emulex Corp.(b) 64,730 691 Juniper Networks, Inc.(b) 37,620 792 --------------- 1,755 --------------- COMPUTER HARDWARE--0.4% Apple, Inc.(b) 4,150 472 --------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--0.6% Terex Corp.(b) 26,480 808 --------------- CONSUMER ELECTRONICS--0.3% Harman International Industries, Inc. 9,950 339 --------------- DATA PROCESSING & OUTSOURCED SERVICES--2.2% Alliance Data Systems Corp.(b) 20,270 1,285 Hewitt Associates, Inc. Class A(b) 17,340 632 Western Union Co. (The) 35,150 867 --------------- 2,784 --------------- DEPARTMENT STORES--0.5% Saks, Inc.(b) 63,910 591 --------------- DIVERSIFIED BANKS--0.7% Comerica, Inc. 27,330 896 --------------- DRUG RETAIL--1.1% CVS Caremark Corp. 40,660 1,369 --------------- ELECTRIC UTILITIES--2.9% Allegheny Energy, Inc. 29,010 1,067 DPL, Inc. 38,890 964 Portland General Electric Co. 66,280 1,568 --------------- 3,599 --------------- ELECTRICAL COMPONENTS & EQUIPMENT--0.4% Thomas & Betts Corp.(b) 11,960 467 --------------- ELECTRONIC COMPONENTS--0.4% Amphenol Corp. Class A 12,690 509 --------------- ENVIRONMENTAL & FACILITIES SERVICES--0.8% Clean Harbors, Inc.(b) 7,580 512 Covanta Holding Corp.(b) 18,990 455 --------------- 967 ---------------
SHARES VALUE --------------- --------------- FERTILIZERS & AGRICULTURAL CHEMICALS--0.2% Monsanto Co. 2,920 $ 289 --------------- FOOD RETAIL--0.6% Whole Foods Market, Inc. 19,202 385 Winn-Dixie Stores, Inc.(b) 28,490 396 --------------- 781 --------------- FOOTWEAR--0.3% Timberland Co. (The) Class A(b) 20,910 363 --------------- GENERAL MERCHANDISE STORES--0.7% Family Dollar Stores, Inc. 39,340 932 --------------- HEALTH CARE DISTRIBUTORS--0.4% Cardinal Health, Inc. 6,390 315 Schein (Henry), Inc.(b) 3,910 210 --------------- 525 --------------- HEALTH CARE EQUIPMENT--7.1% Becton, Dickinson & Co. 9,040 726 Covidien Ltd. 21,840 1,174 Hospira, Inc.(b) 56,060 2,141 NuVasive, Inc.(b) 2,900 143 ResMed, Inc.(b) 13,340 574 SonoSite, Inc.(b) 24,470 768 St. Jude Medical, Inc.(b) 37,250 1,620 Volcano Corp.(b) 92,210 1,594 Zimmer Holdings, Inc.(b) 3,840 248 --------------- 8,988 --------------- HEALTH CARE FACILITIES--0.3% Universal Health Services, Inc. Class B 5,620 315 --------------- HEALTH CARE SERVICES--0.2% Medco Health Solutions, Inc.(b) 5,750 259 --------------- HOME FURNISHINGS--0.6% Ethan Allen Interiors, Inc. 27,940 783 --------------- HOME IMPROVEMENT RETAIL--0.5% Home Depot, Inc. (The) 22,830 591 --------------- HOMEFURNISHING RETAIL--0.2% Williams-Sonoma, Inc. 18,308 296 --------------- HOUSEHOLD PRODUCTS--0.6% Colgate-Palmolive Co. 9,220 695 --------------- HOUSEWARES & SPECIALTIES--0.5% Newell Rubbermaid, Inc. 37,430 646 --------------- HYPERMARKETS & SUPER CENTERS--1.4% BJ's Wholesale Club, Inc.(b) 44,830 1,742 --------------- INDUSTRIAL CONGLOMERATES--0.5% McDermott International, Inc.(b) 12,770 326 Tyco International Ltd. 7,610 267 --------------- 593 ---------------
See Notes to Financial Statements 38 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- INDUSTRIAL MACHINERY--1.2% Altra Holdings, Inc.(b) 59,660 $ 881 Eaton Corp. 11,320 636 --------------- 1,517 --------------- INTEGRATED OIL & GAS--0.5% ConocoPhillips 9,310 682 --------------- INTERNET SOFTWARE & SERVICES--0.5% DealerTrack Holdings, Inc.(b) 34,970 589 --------------- INVESTMENT BANKING & BROKERAGE--1.5% Investment Technology Group, Inc.(b) 11,926 363 Jefferies Group, Inc. 24,100 540 Piper Jaffray Cos.(b) 23,560 1,019 --------------- 1,922 --------------- IT CONSULTING & OTHER SERVICES--0.7% CACI International, Inc. Class A(b) 18,530 928 --------------- LEISURE PRODUCTS--0.3% Brunswick Corp. 24,280 311 --------------- LIFE & HEALTH INSURANCE--0.4% MetLife, Inc. 9,310 521 --------------- LIFE SCIENCES TOOLS & SERVICES--2.6% Invitrogen Corp.(b) 5,390 204 Parexel International Corp.(b) 23,000 659 Thermo Fisher Scientific, Inc.(b) 35,160 1,934 Waters Corp.(b) 8,310 483 --------------- 3,280 --------------- MANAGED HEALTH CARE--0.5% Aetna, Inc. 17,710 640 --------------- METAL & GLASS CONTAINERS--0.3% Pactiv Corp.(b) 12,510 311 --------------- MORTGAGE REITS--1.1% Annaly Capital Management, Inc. 57,060 767 Redwood Trust, Inc. 30,310 659 --------------- 1,426 --------------- MOVIES & ENTERTAINMENT--0.4% News Corp. Class B 39,900 485 --------------- MULTI-UTILITIES--0.9% CMS Energy Corp. 93,220 1,162 --------------- OFFICE REITS--0.4% BioMed Realty Trust, Inc. 16,430 435 --------------- OFFICE SERVICES & SUPPLIES--0.5% Steelcase, Inc. Class A 59,340 638 --------------- OIL & GAS DRILLING--0.4% Unit Corp.(b) 8,950 446 ---------------
SHARES VALUE --------------- --------------- OIL & GAS EXPLORATION & PRODUCTION--1.3% Chesapeake Energy Corp. 10,414 $ 373 XTO Energy, Inc. 26,430 1,230 --------------- 1,603 --------------- OIL & GAS STORAGE & TRANSPORTATION--0.4% Williams Cos., Inc. (The) 21,270 503 --------------- PACKAGED FOODS & MEATS--2.6% Dean Foods Co.(b) 17,070 399 Kellogg Co. 7,400 415 Ralcorp Holdings, Inc.(b) 31,680 2,136 Smithfield Foods, Inc.(b) 21,360 339 --------------- 3,289 --------------- PAPER PACKAGING--0.9% Temple-Inland, Inc. 73,040 1,115 --------------- PAPER PRODUCTS--0.2% International Paper Co. 11,690 306 --------------- PERSONAL PRODUCTS--0.7% Estee Lauder Cos., Inc. (The) Class A 18,720 934 --------------- PHARMACEUTICALS--0.2% Schering-Plough Corp. 14,970 276 --------------- PROPERTY & CASUALTY INSURANCE--1.4% Fidelity National Financial, Inc. Class A 30,680 451 First American Corp. 17,530 517 ProAssurance Corp.(b) 13,370 749 --------------- 1,717 --------------- REGIONAL BANKS--2.4% City National Corp. 17,530 952 First Horizon National Corp. 51,560 482 Pacific Capital Bancorp. 42,360 862 PNC Financial Services Group, Inc. (The) 9,770 730 --------------- 3,026 --------------- REINSURANCE--0.8% PartnerRe Ltd. 13,790 939 --------------- RESEARCH & CONSULTING SERVICES--0.8% Dun & Bradstreet Corp. 10,970 1,035 --------------- RESTAURANTS--0.5% Darden Restaurants, Inc. 23,087 661 --------------- SECURITY & ALARM SERVICES--0.4% Brink's Co. (The) 8,770 535 --------------- SEMICONDUCTORS--0.5% Maxim Integrated Products, Inc. 37,890 686 --------------- SOFT DRINKS--1.1% Coca-Cola Enterprises, Inc. 52,590 882 Dr. Pepper Snapple Group, Inc.(b) 1 --(f) PepsiCo, Inc. 7,400 527 --------------- 1,409 ---------------
SHARES VALUE --------------- --------------- SPECIALIZED CONSUMER SERVICES--0.5% Regis Corp. 24,930 $ 686 --------------- SPECIALIZED REITS--0.3% LaSalle Hotel Properties 18,630 434 --------------- SPECIALTY STORES--1.3% OfficeMax, Inc. 111,390 990 PetSmart, Inc. 28,120 695 --------------- 1,685 --------------- SYSTEMS SOFTWARE--1.2% Macrovision Solutions Corp.(b) 52,530 808 Sybase, Inc.(b) 22,830 699 --------------- 1,507 --------------- TOBACCO--1.3% Lorillard, Inc. 5,930 422 Philip Morris International, Inc. 25,930 1,247 --------------- 1,669 --------------- TRADING COMPANIES & DISTRIBUTORS--0.7% Interline Brands, Inc.(b) 55,880 906 --------------- TRUCKING--1.1% Heartland Express, Inc. 31,500 489 Landstar System, Inc. 19,540 861 --------------- 1,350 --------------- WIRELESS TELECOMMUNICATION SERVICES--1.7% Leap Wireless International, Inc.(b) 31,860 1,214 MetroPCS Communications, Inc.(b) 26,570 372 Sprint Nextel Corp. 92,120 562 --------------- 2,148 - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $101,357) 96,301 - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS(c)--15.2% ADVERTISING--0.4% WPP Group plc (United Kingdom) 70,890 573 --------------- AIR FREIGHT & LOGISTICS--0.8% UTi Worldwide, Inc. (United States) 63,180 1,075 --------------- APPAREL RETAIL--0.3% Esprit Holdings Ltd. (China) 63,200 392 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--0.4% adidas AG (Germany) 10,430 557 --------------- APPLICATION SOFTWARE--0.6% Amdocs Ltd. (United States)(b) 26,270 719 ---------------
See Notes to Financial Statements 39 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- AUTOMOBILE MANUFACTURERS--0.5% Daihatsu Motor Co., Ltd. (Japan) 55,000 $ 602 --------------- BROADCASTING--0.4% Central European Media Enterprises Ltd. (Bermuda)(b) 6,940 454 --------------- COMMUNICATIONS EQUIPMENT--0.8% Nokia Oyj (Finland) 24,370 454 Nokia Oyj Sponsored ADR (Finland) 12,960 242 Research In Motion Ltd. (Canada)(b) 4,380 299 --------------- 995 --------------- CONSUMER ELECTRONICS--0.4% Panasonic Corp. 33,000 569 --------------- DIVERSIFIED BANKS--0.9% Shinhan Financial Group Co. Ltd. (South Korea) 4,950 353 Unibanco-Uniao de Bancos Brasileiros SA GDR (Brazil) 7,600 767 --------------- 1,120 --------------- DIVERSIFIED METALS & MINING--0.2% Freeport-McMoRan Copper & Gold, Inc. (United States) 3,930 223 --------------- ELECTRICAL COMPONENTS & EQUIPMENT--0.4% Spectris plc (United Kingdom) 41,750 499 --------------- FOOD RETAIL--0.3% Casino Guichard Perrachon SA (France) 5,080 453 --------------- HEALTH CARE EQUIPMENT--0.5% Fresenius SE (Germany) 8,580 624 --------------- HOTELS, RESORTS & CRUISE LINES--0.5% Thomas Cook Group plc (United Kingdom) 151,840 603 --------------- INTEGRATED OIL & GAS--0.5% LUKOIL Sponsored ADR (Russia) 10,070 599 --------------- INTEGRATED TELECOMMUNICATION SERVICES--0.9% Magyar Tavkozlesi Rt (Matav) ADR (Hungary) 29,170 679 Telefonica Data Argentina S.A. (Argentina)(b)(d) 1,400 0 Telefonica Moviles S.A. (Argentina)(b)(d) 1,400 0 Telefonos de Mexico S.A. de C.V. ADR Series L (Mexico) 16,990 438 --------------- 1,117 --------------- IT CONSULTING & OTHER SERVICES--0.3% Accenture Ltd. Class A (United States) 11,500 437 ---------------
SHARES VALUE --------------- --------------- LIFE SCIENCES TOOLS & SERVICES--0.6% MDS, Inc. (Canada)(b) 66,900 $ 800 --------------- PACKAGED FOODS & MEATS--0.3% Cadbury plc ADR (United Kingdom) 8,346 342 --------------- PHARMACEUTICALS--1.2% Bayer AG (Germany) 7,730 566 Novartis AG ADR (Switzerland) 4,840 256 Novartis AG Registered Shares (Switzerland) 12,500 658 --------------- 1,480 --------------- PROPERTY & CASUALTY INSURANCE--1.4% ACE Ltd. (United States) 32,320 1,750 --------------- REINSURANCE--0.7% Arch Capital Group Ltd. (United States)(b) 12,050 880 --------------- SOFT DRINKS--0.5% Coca-Cola Femsa S.A. de C.V. Sponsored ADR (Mexico) 13,170 665 --------------- STEEL--0.4% POSCO ADR (South Korea) 4,950 461 --------------- TOBACCO--1.0% British American Tobacco plc (United Kingdom) 18,840 615 Imperial Tobacco Group plc (United Kingdom) 19,280 619 --------------- 1,234 - -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $22,087) 19,223 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--91.6% (IDENTIFIED COST $123,444) 115,524 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--16.2% MONEY MARKET MUTUAL FUNDS--16.2% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 20,404,147 20,404 --------------- - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $20,404) 20,404 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--107.8% (IDENTIFIED COST $143,848) 135,928(a) --------------- SECURITIES SOLD SHORT--(90.7)% (PROCEEDS $124,586) (114,393) Other assets and liabilities, net--82.9% 104,513 --------------- NET ASSETS--100.0% $ 126,048 ===============
SHARES VALUE --------------- --------------- SECURITIES SOLD SHORT--90.7% DOMESTIC COMMON STOCKS SOLD SHORT--79.8% ADVERTISING--0.3% Interpublic Group of Cos., Inc. (The) 55,690 $ 432 --------------- AIR FREIGHT & LOGISTICS--0.5% United Parcel Service, Inc. Class B 9,860 620 --------------- AIRLINES--0.4% Alaska Air Group, Inc. 26,020 531 --------------- AIRPORT SERVICES--0.3% Macquarie Infrastructure Co. LLC 25,200 333 --------------- ALUMINUM--0.2% Alcoa, Inc. 10,680 241 --------------- APPAREL RETAIL--1.9% Crew (J.) Group, Inc. 28,120 804 Guess?, Inc. 21,910 762 Men's Wearhouse, Inc. (The) 37,070 787 --------------- 2,353 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--1.6% Polo Ralph Lauren Corp. 6,760 451 Quiksilver, Inc. 128,820 739 Under Armour, Inc. Class A 26,960 856 --------------- 2,046 --------------- APPLICATION SOFTWARE--1.1% Citrix Systems, Inc. 13,510 341 FactSet Research Systems, Inc. 15,980 835 Nuance Communications, Inc. 21,910 267 --------------- 1,443 --------------- ASSET MANAGEMENT & CUSTODY BANKS--0.8% Franklin Resources, Inc. 4,320 381 Invesco Ltd. 29,260 614 --------------- 995 --------------- AUTO PARTS & EQUIPMENT--0.5% Gentex Corp. 44,920 642 --------------- CATALOG RETAIL--0.4% Liberty Media Corp. - Interactive Class A 41,180 532 --------------- COMMERCIAL PRINTING--0.6% Donnelley (R.R.) & Sons Co. 29,580 726 --------------- COMMODITY CHEMICALS--0.3% Westlake Chemical Corp. 16,530 348 --------------- COMMUNICATIONS EQUIPMENT--1.3% CommScope, Inc. 28,400 984 JDS Uniphase Corp. 82,080 694 --------------- 1,678 ---------------
See Notes to Financial Statements 40 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMPUTER & ELECTRONICS RETAIL--0.5% Best Buy Co., Inc. 17,770 $ 666 --------------- COMPUTER HARDWARE--0.8% NCR Corp. 47,660 1,051 --------------- COMPUTER STORAGE & PERIPHERALS--0.8% QLogic Corp. 63,000 968 --------------- CONSTRUCTION & ENGINEERING--1.5% EMCOR Group, Inc. 28,490 750 Furmanite Corp. 55,780 577 Pike Electric Corp. 39,530 582 --------------- 1,909 --------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--2.8% Caterpillar, Inc. 11,320 675 Deere & Co. 22,190 1,098 Trinity Industries, Inc. 20,270 522 Wabtec Corp. 24,010 1,230 --------------- 3,525 --------------- CONSTRUCTION MATERIALS--1.0% Martin Marietta Materials, Inc. 6,310 707 Texas Industries, Inc. 14,690 600 --------------- 1,307 --------------- DATA PROCESSING & OUTSOURCED SERVICES--0.9% Automatic Data Processing, Inc. 13,790 590 Paychex, Inc. 17,990 594 --------------- 1,184 --------------- DEPARTMENT STORES--0.9% Nordstrom, Inc. 40,210 1,159 --------------- DISTILLERS & VINTNERS--2.1% Brown-Forman Corp. Class B 30,770 2,210 Constellation Brands, Inc. Class A 19,260 413 --------------- 2,623 --------------- DISTRIBUTORS--1.1% LKQ Corp. 80,340 1,363 --------------- DIVERSIFIED CHEMICALS--0.2% Eastman Chemical Co. 5,480 302 --------------- DIVERSIFIED METALS & MINING--0.4% Compass Minerals International, Inc. 9,770 512 --------------- DIVERSIFIED SUPPORT SERVICES--0.9% Healthcare Services Group, Inc. 60,990 1,115 --------------- DIVERSIFIED SUPPORT SERVICES--0.8% Ritchie Bros. Auctioneers, Inc. 42,220 986 --------------- ELECTRICAL COMPONENTS & EQUIPMENT--1.5% Baldor Electric Co. 12,050 347 Rockwell Automation, Inc. 17,070 637 Smith (A.O.) Corp. 12,780 501
SHARES VALUE --------------- --------------- ELECTRICAL COMPONENTS & EQUIPMENT--(CONTINUED) Woodward Governor Co. 10,590 $ 374 --------------- 1,859 --------------- ELECTRONIC COMPONENTS--0.5% Hirose Electric Co. Ltd. 6,400 610 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5% Rofin-Sinar Technologies, Inc. 19,920 610 --------------- ELECTRONIC MANUFACTURING SERVICES--0.3% Tyco Electronics Ltd. 12,420 344 --------------- GENERAL MERCHANDISE STORES--0.5% Big Lots, Inc. 20,820 579 --------------- HEALTH CARE DISTRIBUTORS--1.8% Owens & Minor, Inc. 27,530 1,335 Patterson Cos., Inc. 32,870 1,000 --------------- 2,335 --------------- HEALTH CARE EQUIPMENT--5.3% Bard (C.R.), Inc. 14,150 1,342 Edwards Lifesciences Corp. 18,810 1,087 IDEXX Laboratories, Inc. 25,380 1,391 Intuitive Surgical, Inc. 3,520 848 Kinetic Concepts, Inc. 7,850 225 Mentor Corp. 39,730 948 Meridian Bioscience, Inc. 27,940 811 --------------- 6,652 --------------- HEALTH CARE FACILITIES--0.2% LifePoint Hospitals, Inc. 8,240 265 --------------- HEALTH CARE SERVICES--0.2% Lincare Holdings, Inc. 8,220 247 --------------- HEALTH CARE SUPPLIES--1.5% Merit Medical Systems, Inc. 101,340 1,902 --------------- HOME FURNISHINGS--1.1% Mohawk Industries, Inc. 20,090 1,354 --------------- HOMEBUILDING--0.7% KB Home 43,690 858 --------------- HOTELS, RESORTS & CRUISE LINES--0.5% Choice Hotels International, Inc. 23,640 641 --------------- HOUSEWARES & SPECIALTIES--0.5% Jarden Corp. 25,774 604 --------------- INDUSTRIAL MACHINERY--1.5% Graco, Inc. 22,000 784 Mueller Water Products, Inc. 128,090 1,150 --------------- 1,934 --------------- INTEGRATED OIL & GAS--0.4% China Petroleum & Chemical Corp. 6,050 474 ---------------
SHARES VALUE --------------- --------------- INTEGRATED TELECOMMUNICATION SERVICES--3.1% General Communication, Inc. Class A 158,220 $ 1,465 Iowa Telecommunications Services, Inc. 86,460 1,615 Verizon Communications, Inc. 25,930 832 --------------- 3,912 --------------- INTERNET SOFTWARE & SERVICES--1.5% Equinix, Inc. 19,260 1,338 VeriSign, Inc. 19,900 519 --------------- 1,857 --------------- LEISURE FACILITIES--0.5% Life Time Fitness, Inc. 19,240 602 --------------- LIFE SCIENCES TOOLS & SERVICES--1.4% Amag Pharmaceuticals, Inc. 5,660 219 Bruker Corp. 58,830 784 Millipore Corp. 9,730 669 Sequenom, Inc. 5,540 148 --------------- 1,820 --------------- MOTORCYCLE MANUFACTURERS--1.5% Harley-Davidson, Inc. 50,490 1,883 --------------- MOVIES & ENTERTAINMENT--0.5% Walt Disney Co. (The) 20,540 630 --------------- MULTI-LINE INSURANCE--0.3% Hartford Financial Services Group, Inc. (The) 10,070 413 --------------- OFFICE ELECTRONICS--0.6% Zebra Technologies Corp. Class A 26,980 751 --------------- OFFICE REITS--0.7% SL Green Realty Corp. 14,240 923 --------------- OIL & GAS EQUIPMENT & SERVICES--0.5% Dril-Quip, Inc. 13,150 571 --------------- OIL & GAS EXPLORATION & PRODUCTION--2.2% EOG Resources, Inc. 5,390 482 Noble Energy, Inc. 6,850 381 Quicksilver Resources, Inc. 23,830 468 Range Resources Corp. 12,690 544 Southwestern Energy Co. 28,390 867 --------------- 2,742 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES--0.6% Bank of America Corp. 23,071 807 --------------- PACKAGED FOODS & MEATS--4.4% Cal-Maine Foods, Inc. 13,360 366 Hain Celestial Group, Inc. (The) 15,060 415 Hershey Co. (The) 21,180 837 Hormel Foods Corp. 59,340 2,153 Smucker (J.M.) Co. (The) 13,196 669 Tootsie Roll Industries, Inc. 36,250 1,048 --------------- 5,488 ---------------
See Notes to Financial Statements 41 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- PERSONAL PRODUCTS--1.6% Chattem, Inc. 26,110 $ 2,041 --------------- PHARMACEUTICALS--1.2% Allergan, Inc. 9,970 513 Medicis Pharmaceutical Corp. Class A 54,960 819 Novo Nordisk A/S 4,660 239 --------------- 1,571 --------------- REGIONAL BANKS--7.0% Bank of Hawaii Corp. 24,560 1,313 Frontier Financial Corp. 29,230 393 KeyCorp 41,270 493 Prosperity Bancshares, Inc. 63,000 2,141 Regions Financial Corp. 52,770 507 Synovus Financial Corp. 92,100 953 TCF Financial Corp. 49,010 882 Westamerica Bancorp 36,890 2,122 --------------- 8,804 --------------- REINSURANCE--0.5% Montpelier Re Holdings Ltd. 38,070 628 --------------- RESTAURANTS--2.9% Chipotle Mexican Grill, Inc. Class A 15,800 877 Panera Bread Co. Class A 15,570 792 Sonic Corp. 138,430 2,017 --------------- 3,686 --------------- SPECIALIZED FINANCE--0.8% MSCI, Inc. Class A 39,950 959 --------------- SPECIALTY CHEMICALS--1.1% Nalco Holding Co. 18,270 339 Sensient Technologies Corp. 27,760 781 Sigma-Aldrich Corp. 4,570 239 --------------- 1,359 --------------- SPECIALTY STORES--0.8% Sally Beauty Holdings, Inc. 48,750 419 Tiffany & Co. 16,250 577 --------------- 996 --------------- STEEL--0.6% Nucor Corp. 6,760 267 United States Steel Corp. 6,730 522 --------------- 789 ---------------
SHARES VALUE --------------- --------------- SYSTEMS SOFTWARE--1.0% Red Hat, Inc. 81,530 $ 1,229 --------------- TOBACCO--0.3% Reynolds American, Inc. 7,120 346 --------------- WATER UTILITIES--2.3% American Water Works Co., Inc. 47,020 1,011 Aqua America, Inc. 106,730 1,898 --------------- 2,909 - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS SOLD SHORT (PROCEEDS $108,312) 100,574 - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS SOLD SHORT(c)--10.9% APPAREL, ACCESSORIES & LUXURY GOODS--0.5% Hermes International (France) 4,710 766 --------------- BROADCASTING--0.5% Grupo Televisa SA Sponsored ADR (Mexico) 28,880 632 --------------- CONSUMER ELECTRONICS--0.5% Sanyo Electric Co. Ltd. (Japan) 356,000 618 --------------- DEPARTMENT STORES--0.4% Marks & Spencer Group plc (United Kingdom) 134,200 490 --------------- DISTILLERS & VINTNERS--0.5% Pernod-Ricard SA (France) 6,670 588 --------------- DIVERSIFIED BANKS--0.9% ICICI Bank Ltd. Sponsored ADR (India) 31,190 734 Toronto-Dominion Bank (Canada) 6,810 415 --------------- 1,149 --------------- ELECTRONIC COMPONENTS--0.2% Alps Electric Co. Ltd (Japan) 32,900 258 --------------- HEALTH CARE EQUIPMENT--0.9% Nobel Biocare Holding AG (Switzerland) 22,040 737 William Demant Holding (Denmark) 8,720 392 --------------- 1,129 ---------------
SHARES VALUE --------------- --------------- HEALTH CARE SUPPLIES--0.6% Coloplast A/S Class B (Denmark) 9,680 $ 718 --------------- HOTELS, RESORTS & CRUISE LINES--0.4% Intercontinental Hotels Group plc (United Kingdom) 40,880 506 --------------- HOUSEHOLD APPLIANCES--0.4% Husqvarna AB (Sweden) 70,320 529 --------------- INTEGRATED OIL & GAS--0.4% PetroChina Co. Ltd. ADR (China) 4,760 489 --------------- MARINE--0.7% Diana Shipping, Inc. (Greece) 46,650 919 --------------- PACKAGED FOODS & MEATS--0.5% Groupe Danone (France) 9,380 665 --------------- PERSONAL PRODUCTS--0.5% L'Oreal SA (France) 6,410 629 --------------- PHARMACEUTICALS--0.7% GlaxoSmithKline plc Sponsored ADR (United Kingdom) 11,500 500 UCB SA (Belgium) 11,320 402 --------------- 902 --------------- PRECIOUS METALS & MINERALS--0.6% Compania de Minas Buenaventura SA ADR (Peru) 31,460 739 --------------- RESTAURANTS--1.3% Tim Hortons, Inc. (Canada) 56,330 1,669 --------------- WATER UTILITIES--0.4% Consolidated Water Co. Ltd. (Cayman Islands) 24,930 424 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS SOLD SHORT (PROCEEDS $16,274) 13,819 - -------------------------------------------------------------------------------- TOTAL SECURITIES SOLD SHORT (PROCEEDS $124,586) 114,393(e) - --------------------------------------------------------------------------------
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $3,564 and gross depreciation of $12,373 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $144,737. (b) Non-income producing. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header or parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (d) Illiquid and restricted security. At September 30, 2008, these securities amounted to a value of $0 or 0% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. (e) Federal Tax Information: Net unrealized appreciation of securities sold short is comprised of gross appreciation of $12,513 and gross depreciation of $3,360 for federal income tax purposes. At September 30, 2008, the aggregate proceeds of securities sold short for federal income tax purposes was $123,546. (f) Amount less than $500 (not reported in thousands). See Notes to Financial Statements 42 VIRTUS ALTERNATIVES DIVERSIFIER FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- MUTUAL FUNDS--67.5% DOMESTIC EQUITY FUNDS(c)--40.8% Virtus Market Neutral Fund Class A 10,079,566 $ 98,881 Virtus Real Estate Securities Fund Class A 2,277,344 66,476 --------------- 165,357 --------------- FOREIGN EQUITY FUNDS(c)--26.7% Virtus Global Infrastructure Fund Class A 5,150,541 56,192 Virtus International Real Estate Securities Fund Class A 7,748,160 52,068 --------------- 108,260 - -------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $293,074) 273,617 - -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS--32.2% iShares S&P North American Natural Resources Sector Index Fund 1,182,711 42,542 PowerShares DB Commodity Index Tracking Fund(b) 1,710,123 57,956 PowerShares DB G10 Currency Harvest Fund(b) 1,235,778 29,980 - -------------------------------------------------------------------------------- TOTAL EXCHANGE TRADED FUNDS (IDENTIFIED COST $133,103) 130,478 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.7% (IDENTIFIED COST $426,177) 404,095 - --------------------------------------------------------------------------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--0.1% MONEY MARKET MUTUAL FUNDS--0.1% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 469,009 $ 469 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $469) 469 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--99.8% (IDENTIFIED COST $426,646) 404,564(a) Other assets and liabilities, net--0.2% 694 --------------- NET ASSETS--100.0% $ 405,258 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $6,440 and gross depreciation of $41,322 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $439,446. (b) Non-income producing. (c) Affiliated Fund. See Notes to Financial Statements 43 VIRTUS WEALTH ACCUMULATOR FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- MUTUAL FUNDS--99.7% DOMESTIC EQUITY FUNDS(c)--72.8% Virtus Capital Growth Fund Class A(b) 65,638 $ 844 Virtus Growth & Income Fund Class A 117,289 1,736 Virtus Growth Opportunities Fund Class A(b) 77,447 855 Virtus Market Neutral Fund Class A 74,743 733 Virtus Mid-Cap Value Fund Class A 28,989 567 Virtus Quality Small-Cap Fund Class A 25,266 242 Virtus Real Estate Securities Fund Class A 18,190 531 Virtus Small-Cap Growth Fund Class A(b) 9,653 258 Virtus Small-Cap Sustainable Growth Fund Class A 30,995 284 Virtus Small-Cap Value Fund Class A(b) 26,520 279 Virtus Value Opportunities Fund Class A 174,220 1,575 --------------- 7,904 --------------- FOREIGN EQUITY FUNDS(c)--26.9% Virtus Foreign Opportunities Fund Class A 97,407 2,001 Virtus Global Infrastructure Fund Class A 40,303 440 Virtus International Real Estate Securities Fund Class A 70,735 475 --------------- 2,916 - -------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $12,802) 10,820 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.7% (IDENTIFIED COST $12,802) 10,820 - --------------------------------------------------------------------------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--0.3% MONEY MARKET MUTUAL FUNDS--0.3% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 35,107 $ 35 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $35) 35 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $12,837) 10,855(a) Other assets and liabilities, net--0.0% (3) --------------- NET ASSETS--100.0% $ 10,852 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $0 and gross depreciation of $2,072 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $12,927. (b) Non-income producing. (c) Affiliated Fund. See Notes to Financial Statements 44 VIRTUS WEALTH BUILDER FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- MUTUAL FUNDS--99.9% DOMESTIC EQUITY FUNDS(c)--55.9% Virtus Capital Growth Fund Class A(b) 392,403 $ 5,046 Virtus Growth & Income Fund Class A 672,462 9,952 Virtus Growth Opportunities Fund Class A(b) 428,730 4,733 Virtus Market Neutral Fund Class A 634,068 6,220 Virtus Mid-Cap Value Fund Class A 189,110 3,699 Virtus Quality Small-Cap Fund Class A 187,021 1,792 Virtus Real Estate Securities Fund Class A 131,675 3,844 Virtus Small-Cap Growth Fund Class A(b) 64,519 1,729 Virtus Small-Cap Sustainable Growth Fund Class A 218,581 2,002 Virtus Small-Cap Value Fund Class A(b) 182,444 1,918 Virtus Value Opportunities Fund Class A 1,123,112 10,153 --------------- 51,088 --------------- FOREIGN EQUITY FUNDS(c)--24.5% Virtus Foreign Opportunities Fund Class A 738,489 15,168 Virtus Global Infrastructure Fund Class A 334,914 3,654 Virtus International Real Estate Securities Fund Class A 525,692 3,533 --------------- 22,355 ---------------
SHARES VALUE --------------- --------------- DOMESTIC FIXED INCOME FUNDS(c)--19.5% Virtus Bond Fund Class A 719,709 $ 7,017 Virtus High Yield Income Fund Class A 186,943 1,881 Virtus Institutional Bond Fund Class Y 244,531 7,004 Virtus Multi-Sector Short Term Bond Fund Class A 458,756 1,931 --------------- 17,833 - -------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $100,108) 91,276 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.9% (IDENTIFIED COST $100,108) 91,276 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--99.9% (IDENTIFIED COST $100,108) 91,276(a) Other assets and liabilities, net--0.1% 127 --------------- NET ASSETS--100.0% $ 91,403 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $2,647 and gross depreciation of $12,216 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $100,845. (b) Non-income producing. (c) Affiliated Funds. See Notes to Financial Statements 45 VIRTUS WEALTH GUARDIAN FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- MUTUAL FUNDS--100.3% DOMESTIC EQUITY FUNDS(c)--42.8% Virtus Capital Growth Fund Class A(b) 148,415 $ 1,909 Virtus Growth & Income Fund Class A 252,266 3,734 Virtus Growth Opportunities Fund Class A(b) 180,405 1,992 Virtus Market Neutral Fund Class A 299,230 2,935 Virtus Mid-Cap Value Fund Class A 67,922 1,329 Virtus Quality Small-Cap Fund Class A 70,495 675 Virtus Real Estate Securities Fund Class A 41,288 1,205 Virtus Small-Cap Growth Fund Class A(b) 25,793 691 Virtus Small-Cap Sustainable Growth Fund Class A 72,870 667 Virtus Small-Cap Value Fund Class A(b) 61,220 643 Virtus Value Opportunities Fund Class A 399,739 3,614 --------------- 19,394 --------------- FOREIGN EQUITY FUNDS(c)--16.5% Virtus Foreign Opportunities Fund Class A 267,267 5,490 Virtus Global Infrastructure Fund Class A 80,148 874 Virtus International Real Estate Securities Fund Class A 168,411 1,132 --------------- 7,496 --------------- DOMESTIC FIXED INCOME FUNDS(c)--41.0% Virtus Bond Fund Class A 731,734 7,135 Virtus High Yield Income Fund Class A 190,195 1,913 Virtus Institutional Bond Fund Class Y 269,382 7,715 Virtus Multi-Sector Short Term Bond Fund Class A 427,161 1,799 --------------- 18,562 - -------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $50,099) 45,452 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--100.3% (IDENTIFIED COST $50,099) 45,452 - --------------------------------------------------------------------------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--0.2% MONEY MARKET MUTUAL FUNDS--0.2% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 89,185 $ 89 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $89) 89 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--100.5% (IDENTIFIED COST $50,188) 45,541(a) Other assets and liabilities, net--(0.5)% (246) --------------- NET ASSETS--100.0% $ 45,295 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $673 and gross depreciation of $5,800 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $50,668. (b) Non-income producing. (c) Affiliated Fund. See Notes to Financial Statements 46 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--23.5% U.S. TREASURY BONDS--3.0% U.S. Treasury Bond 6.250% due 8/15/23 $ 4,340 $ 5,211 --------------- U.S. TREASURY NOTES--20.5% U.S. Treasury Note 2.750% due 7/31/10 31,520 32,010 2.750% due 2/28/13 2,035 2,025 4.750% due 8/15/17 1,180 1,265 --------------- 35,300 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $39,958) 40,511 - -------------------------------------------------------------------------------- AGENCY MORTGAGE-BACKED SECURITIES--41.8% FHLMC 2503 B 5.500% due 9/15/17 250 254 2764 HW 5.000% due 3/15/19 455 451 7.000% due 1/1/33 255 268 5.500% due 1/1/38(g) 5,021 5,001 6.500% due 8/1/38 1,099 1,128 FNMA 7.000% due 5/1/14 27 28 8.000% due 1/1/15 5 6 5.000% due 12/1/22 4,516 4,489 6.000% due 1/1/33 4,892 4,994 4.500% due 1/1/35 429 407 5.500% due 3/1/35 2,776 2,772 6.000% due 11/1/36 4,162 4,220 5.000% due 2/1/37 11,075 10,806 4.500% due 4/1/37 16,705 15,826 6.000% due 6/1/37 1,648 1,671 6.000% due 9/1/37 62 63 6.000% due 1/1/38 149 151 6.000% due 2/1/38 128 130 6.000% due 3/1/38 921 934 6.500% due 3/1/38 9,113 9,398 6.500% due 5/1/38 865 887 5.500% due 8/1/38 1,972 1,968 6.000% due 8/1/38 4,168 4,225 6.000% due 8/1/38 299 304 6.000% due 8/1/38 699 709 6.500% due 8/1/38 1,093 1,122 - -------------------------------------------------------------------------------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $72,989) 72,212 - -------------------------------------------------------------------------------- AGENCY NON-MORTGAGE-BACKED SECURITIES--3.4% FHLMC 7.500% due 7/1/09 3 3 3.750% due 6/28/13 2,845 2,823 7.500% due 4/1/14 36 39 7.000% due 4/1/16 29 31 FNMA 3.250% due 8/12/10 2,955 2,962 - -------------------------------------------------------------------------------- TOTAL AGENCY NON-MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $5,877) 5,858 - --------------------------------------------------------------------------------
PAR VALUE VALUE --------------- --------------- DOMESTIC CORPORATE BONDS--23.9% ADVERTISING--0.3% Affinion Group, Inc. 10.125% due 10/15/13 $ 560 $ 529 --------------- AEROSPACE & DEFENSE--0.7% Bombardier, Inc. 144A 8.000% due 11/15/14(b) 675 672 DI Finance/Dyncorp International, Inc. 144A 9.500% due 2/15/13(b) 555 548 --------------- 1,220 --------------- APPLICATION SOFTWARE--0.2% Intuit, Inc. 5.750% due 3/15/17 450 398 --------------- ASSET MANAGEMENT & CUSTODY BANKS--0.2% Janus Capital Group, Inc. 6.250% due 6/15/12 355 336 --------------- BROADCASTING--0.9% EchoStar DBS Corp. 7.125% due 2/1/16 530 428 Time Warner Cable, Inc. 6.750% due 7/1/18 445 416 United Artists Theatre Circuit, Inc. Series BD-1 9.300% due 7/1/15(e) 28 25 Viacom, Inc. 5.750% due 4/30/11 650 631 --------------- 1,500 --------------- CASINOS & GAMING--0.3% Icahn Enterprises LP/Icahn Enterprises Finance Corp. 7.125% due 2/15/13 650 501 --------------- COMMUNICATIONS EQUIPMENT--0.4% Cisco Systems, Inc. 5.500% due 2/22/16 635 610 --------------- CONSUMER FINANCE--1.2% American General Finance Corp. 4.000% due 3/15/11 450 176 5.750% due 9/15/16 490 224 Capital One Financial Corp. 5.700% due 9/15/11 620 549 6.150% due 9/1/16 730 548 Hertz Corp. (The) 8.875% due 1/1/14 580 503 --------------- 2,000 --------------- DATA PROCESSING & OUTSOURCED SERVICES--0.5% Fiserv, Inc. 6.125% due 11/20/12 925 897 ---------------
PAR VALUE VALUE --------------- --------------- DIVERSIFIED BANKS--0.8% Wachovia Corp. 5.750% due 2/1/18 $ 520 $ 390 Wells Fargo & Co. 5.625% due 12/11/17 590 542 Wells Fargo Capital XIII 7.700% due 12/29/49(c) 535 467 --------------- 1,399 --------------- ELECTRIC UTILITIES--0.8% Appalachian Power Co. 5.550% due 4/1/11 810 800 Florida Power Corp. 6.650% due 7/15/11 610 638 --------------- 1,438 --------------- ELECTRONIC MANUFACTURING SERVICES--0.2% Tyco Electronic Group SA 6.000% due 10/1/12 385 379 --------------- FOOD RETAIL--0.3% Safeway, Inc. 6.500% due 3/1/11 440 453 --------------- GAS UTILITIES--0.5% Atmos Energy Corp. 6.350% due 6/15/17 545 513 South Carolina Electric & Gas Co. 6.500% due 11/1/18 365 371 --------------- 884 --------------- HEALTH CARE SERVICES--0.3% Quest Diagnostics, Inc. 6.400% due 7/1/17 435 423 --------------- HOME FURNISHINGS--0.2% Mohawk Industries, Inc. 5.750% due 1/15/11 430 411 --------------- HYPERMARKETS & SUPER CENTERS--0.3% Costco Wholesale Corp. 5.500% due 3/15/17 490 486 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.3% MidAmerican Energy Co. 5.800% due 10/15/36 705 580 --------------- INTEGRATED TELECOMMUNICATION SERVICES--0.9% AT&T, Inc. 6.250% due 3/15/11 465 470 Qwest Corp. 8.875% due 3/15/12 385 379 Verizon Communications, Inc. 5.500% due 2/15/18 385 341 Windstream Corp. 7.000% due 3/15/19 435 350 --------------- 1,540 ---------------
See Notes to Financial Statements 47 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- INVESTMENT BANKING & BROKERAGE--1.6% Bear Stearns Cos., Inc. (The) 7.250% due 2/1/18 $ 675 $ 650 Merrill Lynch & Co., Inc. 5.054% due 5/12/10(c) 325 313 6.875% due 4/25/18 810 717 Morgan Stanley 4.904% due 5/14/10(c) 175 128 6.625% due 4/1/18 715 473 UBS Preferred Funding Trust V Series 1 6.243% due 5/29/49(c) 715 551 --------------- 2,832 --------------- LIFE & HEALTH INSURANCE--2.0% Lincoln National Corp. 5.650% due 8/27/12(h) 1,195 1,175 Protective Life Secured Trust 4.000% due 4/1/11(h) 1,670 1,658 Prudential Financial, Inc. 8.875% due 6/15/38(c) 605 569 --------------- 3,402 --------------- MANAGED HEALTH CARE--0.7% Wellpoint, Inc. 5.000% due 1/15/11(h) 1,160 1,153 --------------- MULTI-LINE INSURANCE--0.9% Genworth Financial, Inc. 6.515% due 5/22/18 405 332 6.150% due 11/15/66(c) 420 184 Genworth Global Funding Trusts 5.125% due 3/15/11 1,080 1,021 --------------- 1,537 --------------- OFFICE REITS--0.1% Duke Realty LP 5.625% due 8/15/11 225 220 --------------- OFFICE SERVICES & SUPPLIES--0.4% IKON Office Solutions, Inc. 7.750% due 9/15/15 670 704 --------------- OIL & GAS EQUIPMENT & SERVICES--0.3% Allis-Chalmers Energy, Inc. 8.500% due 3/1/17 630 542 --------------- OIL & GAS EXPLORATION & PRODUCTION--1.1% Encore Acquisition Co. 6.000% due 7/15/15 310 248 EOG Resources, Inc. 5.875% due 9/15/17 490 461 6.875% due 10/1/18 420 418 XTO Energy, Inc. 5.900% due 8/1/12 855 844 --------------- 1,971 --------------- OIL & GAS STORAGE & TRANSPORTATION--1.0% Enbridge Energy Partners LP 5.875% due 12/15/16 350 320 Energy Transfer Partners LP 6.700% due 7/1/18 665 630 Kinder Morgan Energy Partners LP 5.850% due 9/15/12 415 403
PAR VALUE VALUE --------------- --------------- OIL & GAS STORAGE & TRANSPORTATION -- (CONTINUED) Pacific Energy Partners LP/Pacific Energy Finance Corp. 6.250% due 9/15/15 $ 325 $ 306 --------------- 1,659 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES--2.1% Bank of America Corp. 5.750% due 8/15/16 715 595 8.125% due 12/29/49(c) 385 311 Citigroup, Inc. 5.000% due 9/15/14 840 644 General Electric Capital Corp. 5.625% due 5/1/18 140 118 6.375% due 11/15/67(c) 715 579 JPMorgan Chase & Co. 5.750% due 1/2/13 1,020 976 Series 1 7.900% due 4/29/49(c) 460 387 --------------- 3,610 --------------- PACKAGED FOODS & MEATS--0.2% Kraft Foods, Inc. 6.125% due 8/23/18 405 378 --------------- PAPER PRODUCTS--0.1% Exopack Holding Corp. 11.250% due 2/1/14 200 169 --------------- PHARMACEUTICALS--0.5% Johnson & Johnson 5.150% due 7/15/18 935 919 --------------- PROPERTY & CASUALTY INSURANCE--0.5% Chubb Corp. 6.375% due 3/29/67(c) 490 374 CNA Financial Corp. 6.500% due 8/15/16 560 517 --------------- 891 --------------- REGIONAL BANKS--0.3% Credit Suisse First Boston 6.000% due 2/15/18 660 575 --------------- RESIDENTIAL REITS--0.6% AvalonBay Communities, Inc. 5.750% due 9/15/16 410 358 ERP Operating LP 5.375% due 8/1/16 745 632 --------------- 990 --------------- RETAIL REITS--0.4% Simon Property Group LP 5.600% due 9/1/11 755 745 --------------- SEMICONDUCTORS--0.3% Amkor Technology, Inc. 7.750% due 5/15/13 620 532 --------------- SPECIALTY CHEMICALS--0.1% Huntsman International LLC 7.375% due 1/1/15 250 211 ---------------
PAR VALUE VALUE --------------- --------------- SYSTEMS SOFTWARE--0.4% Oracle Corp. 5.750% due 4/15/18 $ 685 $ 636 --------------- THRIFTS & MORTGAGE FINANCE--0.4% Countrywide Home Loan, Inc. Series L 4.000% due 3/22/11 720 619 --------------- TOBACCO--0.6% Philip Morris International, Inc. 4.875% due 5/16/13 185 182 5.650% due 5/16/18 960 888 --------------- 1,070 - -------------------------------------------------------------------------------- TOTAL DOMESTIC CORPORATE BONDS (IDENTIFIED COST $45,477) 41,349 - -------------------------------------------------------------------------------- NON-AGENCY MORTGAGE-BACKED SECURITIES--0.7% Citigroup Mortgage Loan Trust, Inc. 04-NCM2, 2CB3 8.000% due 8/25/34 51 50 DLJ Mortgage Acceptance Corp. 96-M, 1 144A 0.000% due 11/28/11(b)(c)(f) 14 11 Merrill Lynch Mortgage Trust 05-MCP1, A2 4.556% due 6/12/43 725 705 Morgan Stanley Mortgage Loan Trust 04-3, 3A 6.000% due 4/25/34 587 535 - -------------------------------------------------------------------------------- TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $1,382) 1,301 - -------------------------------------------------------------------------------- FOREIGN CORPORATE BONDS(d)--5.7% CANADA--0.7% Compton Petroleum Finance Corp. 7.625% due 12/1/13 380 336 Husky Energy, Inc. 6.200% due 9/15/17 785 713 TransCanada Pipelines Ltd. 6.350% due 5/15/67(c) 300 237 --------------- 1,286 --------------- ITALY--0.1% Telecom Italia Capital SA 5.250% due 10/1/15 250 208 --------------- JAPAN--0.4% Resona Bank Ltd. 144A 5.850% due 4/15/49(b)(c) 985 724 --------------- NETHERLANDS--0.7% ING Groep N.V. 5.775% due 12/8/49(c)(h) 1,445 1,155 ---------------
See Notes to Financial Statements 48 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- SPAIN--1.3% Santander Issuances S.A Unipersonal 144A 5.911% due 6/20/16(b) $ 1,085 $ 1,008 Telefonica Emisiones S.A 5.984% due 6/20/11(h) 1,255 1,241 --------------- 2,249 --------------- UNITED KINGDOM--1.4% Barclays Bank plc 144A 7.700% due 4/25/49(b)(c) 700 493 HBOS plc 144A 6.657% due 5/21/49(b)(c) 1,100 622 Royal Bank of Scotland Group plc 144A 6.990% due 10/29/49(b)(c) 955 713 Virgin Media Finance plc 8.750% due 4/15/14 610 515 --------------- 2,343 --------------- UNITED STATES--1.1% Credit Suisse Guernsey Ltd. 5.860% due 5/29/49(c) 815 617 Freeport-McMoRan Copper & Gold, Inc. 8.375% due 4/1/17 275 271 WEA Finance LLC/WCI Finance LLC 144A 5.700% due 10/1/16(b) 1,065 918 --------------- 1,806 - -------------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $11,957) 9,771 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.0% (IDENTIFIED COST $177,640) 171,002 - --------------------------------------------------------------------------------
SHARE VALUE --------------- --------------- SHORT-TERM INVESTMENTS--4.5% MONEY MARKET MUTUAL FUNDS--4.5% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 7,724,232 $ 7,724 --------------- - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $7,724) 7,724 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--103.5% (IDENTIFIED COST $185,364) 178,726(a) Other assets and liabilities, net--(3.5)% (6,159) --------------- NET ASSETS--100.0% $ 172,567 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $549 and gross depreciation of $7,324 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $185,501. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $5,709 or 3.3% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (e) Illiquid security. Security valued at fair value as determined in good faith by or under the direction of the Trustees. (f) Illiquid and restricted security. At September 30, 2008, this security amounted to a value of $11 or 0.0% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. (g) When-issued security. (h) All or a portion segregated as collateral for when-issued securities. See Notes to Financial Statements 49 VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE -------------- --------------- MUNICIPAL TAX-EXEMPT BONDS(c)--97.3% DEVELOPMENT REVENUE--5.5% Hercules Redevelopment Agency Tax-Allocation (AMBAC Insured) 5.000% due 8/1/29 $ 500 $ 448 Ontario Redevelopment Financing Authority, Project No. 1 (MBIA Insured) 6.900% due 8/1/10 70 74 5.250% due 8/1/13 500 518 San Diego Redevelopment Agency, Center City (AMBAC Insured) Series A 4.750% due 9/1/30 500 431 Series B 5.350% due 9/1/24 1,000 991 Santa Clara Redevelopment Agency Tax Allocation (MBIA Insured) 5.000% due 6/1/22 1,000 975 --------------- 3,437 --------------- EDUCATION REVENUE--3.1% North City West School Facilities Financing Authority, Series B (AMBAC Insured) 5.250% due 9/1/19 1,000 998 Sweetwater Unified High School District, Public Financing Authority, Series A (FSA Insured) 5.000% due 9/1/29 1,000 908 --------------- 1,906 --------------- GENERAL OBLIGATION--19.8% Antelope Valley Union High School District, Series A (MBIA Insured) 5.000% due 2/1/27 1,000 963 Brea & Olinda Unified School District, Series A (FGIC Insured) 6.000% due 8/1/15 150 168 Butte-Glenn Community College District, Series A (MBIA Insured) 5.500% due 8/1/19 1,000 1,040 California State 5.250% due 6/1/16 65 65 5.000% due 2/1/20 750 751 5.500% due 3/1/26 500 500 5.000% due 9/1/30 600 551 5.000% due 11/1/32 700 640 5.000% due 12/1/37 250 226 California State Veterans Bonds, Series BG 5.150% due 12/1/14 895 905 Series CC 4.500% due 12/1/37 330 263 Desert Community College District (MBIA Insured) 5.000% due 8/1/18 990 1,026 Gilroy Unified School District (FGIC Insured) 5.000% due 8/1/27 500 469
PAR VALUE VALUE -------------- --------------- GENERAL OBLIGATION--(CONTINUED) Grossmont-Cuyamaca Community College District Election of 2002 Series A (MBIA Insured) 5.000% due 8/1/19 $ 40 $ 41 Los Angeles Unified School District, Series A-1 (MBIA Insured) 4.500% due 1/1/28 500 424 Metropolitan Water District Southern California, Series A 5.250% due 3/1/11 180 182 Placer Union High School District (FSA Insured) 0.000% due 8/1/32 1,500 351 Rancho Santiago Community College District (FSA Insured) 0.000% due 9/1/27 1,200 375 San Rafael Elementary School District, Election of 2002-B (FGIC Insured) 0.000% due 8/1/26 1,000 333 Santa Ana Unified School District (FGIC Insured) 5.700% due 8/1/22 400 408 Santa Clara Unified School District (FGIC Insured) 5.500% due 7/1/20 1,000 1,029 Walnut Valley Unified School District, Series A (MBIA Insured) 0.000% due 8/1/19 3,095 1,565 --------------- 12,275 --------------- GENERAL REVENUE--15.4% Anaheim Public Financing Authority, Series C (FSA Insured) 6.000% due 9/1/16 1,600 1,782 California State Public Works Board, Department of Health Services, Richmond Lab Series B (XLAC Insured) 5.000% due 11/1/17 460 471 California State Public Works Board, Highway Patrol Series C 5.250% due 11/1/20 500 509 Golden State Tobacco Securitization Corp., Series A-1 5.125% due 6/1/47 1,500 989 5.750% due 6/1/47 500 368 Los Angeles County Public Works Financing Authority, Series A (FSA Insured) 5.500% due 10/1/18 450 485 Pomona Certificates of Participation (AMBAC Insured) 5.500% due 6/1/28 1,365 1,373 San Diego County Certificates of Participation (AMBAC Insured) 5.250% due 11/1/15 960 995 San Jose Financing Authority, Series F (MBIA Insured) 5.000% due 9/1/15 1,000 1,033
PAR VALUE VALUE -------------- --------------- GENERAL REVENUE--(CONTINUED) South Bay Regional Public Communications Authority (ACA Insured) 4.750% due 1/1/31 $ 635 $ 481 South Coast Air Quality Management Corp. (AMBAC Insured) 6.000% due 8/1/11 1,000 1,072 --------------- 9,558 --------------- HIGHER EDUCATION REVENUE--2.9% California State Public Works Board, University of California Series D 5.000% due 5/1/30 1,000 926 University of California, Series B 4.750% due 5/15/38 500 431 University of California, Series G (FGIC Insured) 4.750% due 5/15/35 525 451 --------------- 1,808 --------------- MEDICAL REVENUE--6.3% California Health Facilities Financing Authority, Cedars-Sinai Medical Center 5.000% due 11/15/34 500 431 California Health Facilities Financing Authority, Stanford Hospital and Clinics Series A 5.000% due 11/15/14 250 256 California Health Facilities Financing Authority, Sutter Health Series A 5.000% due 11/15/42 870 736 California State Public Works Board, Department of Mental Health Series A 5.500% due 6/1/16 1,000 1,050 California Statewide Communities Development Authority, Kaiser Permanente, Series B 5.000% due 3/1/41 500 419 California Statewide Communities Development Authority, St. Joseph Health System (FGIC Insured) 5.750% due 7/1/47 500 470 San Joaquin General Hospital Project, Certificates of Participation (MBIA Insured) 5.250% due 9/1/12 100 102 Santa Clara County Financing Authority, Series A (AMBAC Insured) 7.750% due 11/15/11 400 453 --------------- 3,917 --------------- MUNICIPAL UTILITY DISTRICT REVENUE--1.9% East Bay Municipal Utility District (MBIA Insured) 5.000% due 6/1/35 500 469 Sacramento Municipal Utilities District, Financing Authority (MBIA Insured) 4.750% due 7/1/26 500 410
See Notes to Financial Statements 50 VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE -------------- --------------- MUNICIPAL UTILITY DISTRICT REVENUE--(CONTINUED) Sacramento Municipal Utility District, Series O (MBIA Insured) 5.250% due 8/15/15 $ 310 $ 321 --------------- 1,200 --------------- NATURAL GAS REVENUE--1.1% Roseville Natural Gas Financing Authority 5.000% due 2/15/24 750 653 --------------- POWER REVENUE--3.2% Northern California Power Agency, Hydroelectric Project No. 1 Series A (MBIA Insured) 5.200% due 7/1/32 330 334 Northern California Power Agency, Hydroelectric Project Series A (MBIA Insured) 5.000% due 7/1/15 1,000 1,011 Southern California Public Power Authority, Series B (FSA Insured) 5.000% due 7/1/12 635 674 --------------- 2,019 --------------- PRE-REFUNDED--29.1% Contra Costa County Home Mortgage (GNMA Collateralized) 7.500% due 5/1/14(b) 500 599 Cypress Single Family Residential Mortgage, Series B (Private Mortgage Insurance) 7.250% due 1/1/12(b) 200 226 Duarte Redevelopment Agency Single Family Mortgage, Series A (FNMA Collateralized) 6.875% due 11/1/11(b) 300 336 Grossmont-Cuyamaca Community College District Election of 2002 Series A Pre-refunded 8/1/13 @100 (MBIA Insured) 5.000% due 8/1/19 210 226 Huntington Park Redevelopment Agency Single Family Residential Mortgage, Series A (FHA/VA/PRIV MTGS Insured) 8.000% due 12/1/19(b) 2,400 3,152 Los Angeles Harbor Department (FSA Insured) 7.600% due 10/1/18(b) 895 1,061 Lucia Mar Unified School District, Election of 2004 Series A, Pre-refunded 8/1/14 @ 100 (FGIC Insured) 5.000% due 8/1/27 1,000 1,079
PAR VALUE VALUE -------------- --------------- PRE-REFUNDED--(CONTINUED) M-S-R Public Power Agency San Juan Project, Series D (MBIA Insured) 6.750% due 7/1/20(b) $ 1,740 $ 2,010 Modesto Wastewater Treatment Facility (MBIA Insured) 6.000% due 11/1/12(b) 735 818 Northern California Power Agency, Hydroelectric Project No. 1 Series A Pre-refunded 7/1/21 @ 100 (AMBAC Insured) 7.500% due 7/1/23 195 243 Pomona Unified School District, Series C (MBIA Insured) 5.600% due 8/1/12(b) 1,500 1,637 Riverside County Redevelopment Agency, Pre-refunded 10/01/11 @ 102 (AMBAC Insured) 5.250% due 10/1/17 250 272 Riverside County Single Family (GNMA Collateralized) Series A 7.800% due 5/1/21(b) 4,000 4,929 Series B 8.625% due 5/1/16(b) 1,000 1,268 Stockton Housing Facility, O'Connor Woods Project Series A, Pre-refunded 9/20/17 @ 100 (GNMA Collateralized) 5.600% due 3/20/28 200 203 --------------- 18,059 --------------- TRANSPORTATION REVENUE--1.4% Alameda Corridor Transportation Authority, Series A (MBIA Insured) 5.125% due 10/1/16 150 153 5.125% due 10/1/17 125 127 Los Angeles Harbor Department Revenue (MBIA Insured) 4.500% due 8/1/27 500 382 San Francisco Bay Area Rapid Transit District 5.250% due 7/1/17 180 182 --------------- 844 --------------- WATER & SEWER REVENUE--7.6% California Statewide Communities Development Authority, Anheuser-Bush Project 4.800% due 9/1/46 1,000 709 Delta Diablo Sanitation District, Certificates of Participation (MBIA Insured) 0.000% due 12/1/16 1,070 729
PAR VALUE VALUE -------------- --------------- WATER & SEWER REVENUE--(CONTINUED) El Dorado Irrigation District, Certificates of Participation, Series A (FGIC Insured) 5.250% due 3/1/16 $ 365 $ 377 Modesto Wastewater, Series A (FSA Insured) 5.000% due 11/1/19 245 249 Mountain View Shoreline Regional Park Community, Series A (MBIA Insured) 5.500% due 8/1/21 1,000 1,002 Redlands Financing Authority, Series A (FSA Insured) 5.000% due 9/1/17 1,000 1,027 Sweetwater Water Authority (AMBAC Insured) 5.250% due 4/1/10 85 87 Westlands Water District, Certificates of Participation (MBIA Insured) 5.250% due 9/1/14 500 530 --------------- 4,710 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL TAX-EXEMPT BONDS (IDENTIFIED COST $61,945) 60,386 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--97.3% (IDENTIFIED COST $61,945) 60,386 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--1.6%
SHARES -------------- MONEY MARKET MUTUAL FUNDS--1.6% State Street Institutional Tax Free Money Market Fund (seven-day effective yield 4.890%) 1,016,182 1,016 --------------- - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,016) 1,016 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--98.9% (IDENTIFIED COST $62,961) 61,402(a) Other assets and liabilities, net--1.1% 688 --------------- NET ASSETS--100.0% $ 62,090 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $1,661 and gross depreciation of $3,220 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $62,961. (b) Escrowed to maturity. (c) At September 30, 2008, the concentration of the Fund's investments by state or territory determined as a percentage of net assets is as follows: California 97.3%. At September 30, 2008, 78.3% of the securities in the portfolio are backed by insurance of financial institutions and financial guaranty assurance agencies. Insurers with a concentration greater than 10% of net assets are as follows: MBIA 28.9%, AMBAC 11.9%, GNMA 11.3%, and FSA 11.1%. See Notes to Financial Statements 51 VIRTUS CORE BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--0.7% U.S. TREASURY BONDS--0.6% U.S. Treasury Bond 4.000% due 8/15/18(h) $ 365 $ 370 5.000% due 5/15/37(h) 5 6 --------------- 376 --------------- U.S. TREASURY NOTES--0.1% U.S. Treasury Note 3.875% due 5/15/18 30 30 --------------- - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $412) 406 - -------------------------------------------------------------------------------- AGENCY MORTGAGE-BACKED SECURITIES--28.9% FHLMC 6.000% due 10/1/34 601 610 FNMA 6.000% due 10/1/14 357 366 6.500% due 6/1/16 238 247 6.000% due 7/1/17 104 106 5.500% due 9/1/17 275 280 5.000% due 4/1/20 371 369 4.500% due 5/1/20 708 691 5.000% due 8/1/21 257 256 6.000% due 5/1/29 240 244 6.500% due 7/1/29 396 410 6.500% due 5/1/30 8 9 7.500% due 3/1/31 150 162 7.000% due 7/1/31 102 107 7.000% due 9/1/31 174 183 6.500% due 2/1/32 368 380 6.500% due 3/1/32 168 174 5.500% due 4/1/33 234 234 5.500% due 6/1/33 1,381 1,381 5.500% due 7/1/33 1,898 1,899 5.000% due 9/1/33 343 335 04-W6, 1A4 5.500% due 7/25/34 238 231 5.000% due 7/1/35 287 280 5.500% due 12/1/35 312 311 6.000% due 6/1/36 404 410 6.000% due 9/1/36 495 502 5.500% due 2/1/37 426 425 6.000% due 3/1/37 610 619 5.500% due 4/1/37 236 236 5.500% due 4/1/37 413 412 6.000% due 2/1/38 62 63 6.000% due 2/1/38 224 227 6.000% due 2/1/38 311 315 5.000% due 4/1/38 222 217 6.000% due 4/1/38 300 304 6.000% due 5/1/38 606 614 5.500% due 7/1/38 309 308 6.000% due 8/1/38 239 242 GNMA 8.500% due 11/15/22 1 1 6.500% due 9/15/28 177 183 7.500% due 9/15/29 150 162 5.000% due 7/15/33 1,883 1,851 6.000% due 6/15/34 396 402 - -------------------------------------------------------------------------------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $16,558) 16,758 - --------------------------------------------------------------------------------
PAR VALUE VALUE --------------- --------------- MUNICIPAL BONDS--11.2% ARIZONA--1.0% Salt River Project Agricultural Improvement & Power District 5.000% due 1/1/38 $ 625 $ 587 --------------- FLORIDA--2.3% Broward County Series A 5.000% due 1/1/21 600 599 Miami-Dade County Educational Facilities Authority Taxable Series C 5.480% due 4/1/16 110 108 Orange County Tourist Development (MBIA Insured) 5.000% due 10/1/17 640 648 --------------- 1,355 --------------- ILLINOIS--1.0% State of Illinois 5.000% due 1/1/19 580 595 --------------- INDIANA--1.0% Indiana Transportation Finance Authority Series A Prerefunded 6/1/14 @ 100 (FGIC Insured) 5.250% due 6/1/20 520 563 --------------- KANSAS--1.5% Department of Transportation, Highway Revenue Series A (FSA Insured) 5.500% due 3/1/19 785 853 --------------- MICHIGAN--0.4% City of Flat Rock Tax Increment Finance Authority Taxable Series A 6.750% due 10/1/16 95 99 Tobacco Settlement Finance Authority Taxable Series A 7.309% due 6/1/34 180 155 --------------- 254 --------------- NEW YORK--0.5% City of New York Series A-1 (MBIA Insured) 5.000% due 8/1/17 265 277 --------------- PENNSYLVANIA--0.6% City of Pittsburgh Pension Obligation Taxable Series C (FGIC Insured) 6.500% due 3/1/17 340 340 --------------- RHODE ISLAND--1.8% City of Woonsocket Pension Funding Taxable (FSA Insured) 5.660% due 7/15/13 1,000 1,027 ---------------
PAR VALUE VALUE --------------- --------------- TEXAS--1.0% Cypress-Fairbanks Independent School District (PSF Guaranteed) 5.000% due 2/15/32 $ 625 $ 590 --------------- VIRGINIA--0.1% Tobacco Settlement Financing Corp. Taxable Series A-1 6.706% due 6/1/46 90 70 --------------- - -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $6,767) 6,511 - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--6.4% AmeriCredit Automobile Receivables Trust 05-AX, A4 3.930% due 10/6/11 1,280 1,198 06-BG, A3 5.210% due 10/6/11 100 98 Capital Auto Receivables Asset Trust Series 06-2, A3A 4.980% due 5/15/11 122 121 Capital One Auto Finance Trust 07-B, A3A 5.030% due 4/15/12 491 474 Carmax Auto Owner Trust 07-2, A3 5.230% due 12/15/11 442 443 Ford Credit Auto Owner Trust 07-A, A3B 2.518% due 8/15/11(c) 295 284 GMAC Mortgage Corp. Loan Trust 05-AR2, 2A 4.867% due 5/25/35(c) 248 202 Greenwich Structured ARM Products 05-5A, N2 144A 6.690% due 9/27/45(b)(c)(f) 315 142 Renaissance Home Equity Loan Trust 06-2, AF4 6.115% due 8/25/36(c) 730 615 Saxon Asset Securities Trust 05-3, A2C 3.487% due 11/25/35(c) 139 135 - -------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $4,194) 3,712 - -------------------------------------------------------------------------------- DOMESTIC CORPORATE BONDS--20.2% AIRLINES--1.1% American Airlines, Inc. 99-1 7.024% due 10/15/09 365 346 Continental Airlines, Inc. 98-1A 6.648% due 9/15/17 324 275 --------------- 621 --------------- APPLICATION SOFTWARE--0.1% Intuit, Inc. 5.750% due 3/15/17 45 40 --------------- ASSET MANAGEMENT & CUSTODY BANKS--0.7% Allied Capital Corp. 6.000% due 4/1/12 100 93 Bank of New York Mellon Corp. (The) 4.950% due 11/1/12 115 110
See Notes to Financial Statements 52 VIRTUS CORE BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- ASSET MANAGEMENT & CUSTODY BANKS--(CONTINUED) Janus Capital Group, Inc. 6.250% due 6/15/12 $ 125 $ 118 Northern Trust Corp. 5.500% due 8/15/13 75 75 --------------- 396 --------------- AUTOMOBILE MANUFACTURERS--0.2% Daimler Finance North America LLC 6.500% due 11/15/13 95 93 --------------- BROADCASTING--0.9% Comcast Corp. 5.300% due 1/15/14 105 96 5.875% due 2/15/18 65 58 Cox Communications, Inc. 144A 6.250% due 6/1/18(b) 140 130 Time Warner Cable, Inc. 5.850% due 5/1/17 70 62 6.750% due 7/1/18 130 121 Viacom, Inc. 6.250% due 4/30/16 70 63 --------------- 530 --------------- BUILDING PRODUCTS--0.1% Masco Corp. 5.850% due 3/15/17 45 38 Owens Corning, Inc. 6.500% due 12/1/16 35 31 --------------- 69 --------------- CONSTRUCTION MATERIALS--0.1% Vulcan Materials Co. 5.600% due 11/30/12 80 78 --------------- CONSUMER ELECTRONICS--0.1% Best Buy Co., Inc. 144A 6.750% due 7/15/13(b) 85 86 --------------- CONSUMER FINANCE--1.7% American Express Credit Corp. 5.875% due 5/2/13 140 129 Capital One Financial Corp. 5.250% due 2/21/17 70 54 GMAC LLC 6.875% due 8/28/12 180 72 HSBC Finance Corp. 8.000% due 7/15/10 300 306 SLM Corp. 6.880% due 2/1/10(c) 500 414 --------------- 975 --------------- DATA PROCESSING & OUTSOURCED SERVICES--0.4% Broadridge Financial Solutions, Inc. 6.125% due 6/1/17 110 94 Fiserv, Inc. 6.125% due 11/20/12 125 121 --------------- 215 --------------- DIVERSIFIED BANKS--0.4% Wachovia Corp. 4.875% due 2/15/14 200 123 5.750% due 2/1/18 125 94 --------------- 217 ---------------
PAR VALUE VALUE --------------- --------------- DIVERSIFIED SUPPORT SERVICES--0.2% Cintas Corporation No. 2 6.125% due 12/1/17 $ 105 $ 102 --------------- ELECTRIC UTILITIES--1.3% Dominion Resources, Inc. Series D 5.000% due 3/15/13 90 87 Florida Power Corp. Series A 5.800% due 9/15/17 135 132 Great River Energy 144A 5.829% due 7/1/17(b) 122 116 NiSource Finance Corp. 6.400% due 3/15/18 130 116 Northeast Utilities 5.650% due 6/1/13 140 137 PPL Capital Funding Trust I Series A 4.330% due 3/1/09 190 189 --------------- 777 --------------- FOOD RETAIL--0.1% Kroger Co. (The) 6.800% due 12/15/18 70 68 --------------- HEALTH CARE SERVICES--0.1% Quest Diagnostics, Inc. 6.400% due 7/1/17 65 63 --------------- HOME FURNISHINGS--0.3% Mohawk Industries, Inc. 6.125% due 1/15/16 160 144 --------------- HOTELS, RESORTS & CRUISE LINES--0.2% Starwood Hotels & Resort Worldwide, Inc. 6.250% due 2/15/13 110 104 --------------- HOUSEHOLD APPLIANCES--0.2% Black & Decker Corp. (The) 5.750% due 11/15/16 115 104 --------------- INDUSTRIAL REITS--0.1% ProLogis 6.625% due 5/15/18 60 52 --------------- INTEGRATED TELECOMMUNICATION SERVICES--0.9% AT&T, Inc. 5.875% due 2/1/12 130 130 5.625% due 6/15/16 130 120 Embarq Corp. 6.738% due 6/1/13 65 57 Qwest Corp. 7.875% due 9/1/11 65 63 Verizon Communications, Inc. 4.900% due 9/15/15 130 116 5.500% due 4/1/17 70 63 --------------- 549 --------------- INVESTMENT BANKING & BROKERAGE--1.2% Bear Stearns Cos., Inc. (The) 7.250% due 2/1/18 80 77 Credit Suisse USA, Inc. 5.850% due 8/16/16 135 121
PAR VALUE VALUE --------------- --------------- INVESTMENT BANKING & BROKERAGE--(CONTINUED) Goldman Sachs Group, Inc. (The) 5.125% due 1/15/15 $ 160 $ 132 6.150% due 4/1/18 140 116 Lehman Brothers Holdings, Inc. 6.500% due 7/19/12(g) 55 7 5.625% due 1/24/13(g) 65 9 Merrill Lynch & Co., Inc. 6.110% due 1/29/37 150 104 Morgan Stanley 5.375% due 10/15/15 250 155 --------------- 721 --------------- LEISURE PRODUCTS--0.2% Hasbro, Inc. 6.300% due 9/15/17 135 130 --------------- MANAGED HEALTH CARE--0.2% WellPoint, Inc. 5.250% due 1/15/16 125 115 --------------- MORTGAGE REITS--0.2% iStar Financial, Inc. 6.050% due 4/15/15 200 98 --------------- MOVIES & ENTERTAINMENT--0.2% Time Warner, Inc. 5.875% due 11/15/16 130 114 --------------- MULTI-LINE INSURANCE--0.1% Assurant, Inc. 5.625% due 2/15/14 70 65 --------------- OFFICE ELECTRONICS--0.3% Xerox Corp. 6.750% due 2/1/17 170 160 --------------- OIL & GAS EXPLORATION & PRODUCTION--0.3% Petropower I Funding Trust 144A 7.360% due 2/15/14(b) 104 99 XTO Energy, Inc. 6.500% due 12/15/18 95 88 --------------- 187 --------------- OIL & GAS STORAGE & TRANSPORTATION--1.3% Buckeye Partners LP 5.125% due 7/1/17 200 181 Energy Transfer Partners LP 5.950% due 2/1/15 135 128 Enterprise Products Partners L.P. 6.300% due 9/15/17 100 93 Kinder Morgan Energy Partners LP 6.000% due 2/1/17 135 123 NGPL PipeCo. LLC 144A 6.514% due 12/15/12(b) 100 100 Williams Cos., Inc. (The) 7.125% due 9/1/11 125 123 --------------- 748 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES--3.0% Bank of America Corp. 5.750% due 12/1/17 100 85 5.490% due 3/15/19 300 233
See Notes to Financial Statements 53 VIRTUS CORE BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- OTHER DIVERSIFIED FINANCIAL SERVICES--(CONTINUED) Citigroup, Inc. 5.500% due 8/27/12 $ 90 $ 81 6.500% due 8/19/13 280 249 5.500% due 2/15/17 95 73 General Electric Capital Corp. 6.750% due 3/15/32 500 417 International Lease Finance Corp. 4.750% due 1/13/12 225 154 JPMorgan Chase & Co. 5.125% due 9/15/14 155 138 5.250% due 5/1/15 85 78 6.000% due 1/15/18 125 114 National Rural Utilities Cooperative Finance Corp. 5.500% due 7/1/13 115 114 --------------- 1,736 --------------- PROPERTY & CASUALTY INSURANCE--0.2% Travelers Cos., Inc. 5.750% due 12/15/17 100 93 --------------- REGIONAL BANKS--0.7% Credit Suisse First Boston 6.000% due 2/15/18 65 57 PNC Bank NA 4.875% due 9/21/17 155 129 SunTrust Banks, Inc. 5.250% due 11/5/12 135 121 Zions Bancorp. 5.500% due 11/16/15 200 114 --------------- 421 --------------- RESEARCH & CONSULTING SERVICES--0.2% Equifax, Inc. 6.300% due 7/1/17 130 121 --------------- RESIDENTIAL REITS--0.2% UDR, Inc. 5.250% due 1/15/15 150 139 --------------- RESTAURANTS--0.5% Starbucks Corp. 6.250% due 8/15/17 135 129 Yum! Brands, Inc. 6.250% due 4/15/16 140 136 --------------- 265 --------------- RETAIL REITS--0.4% Simon Property Group LP 5.100% due 6/15/15 70 62 Tanger Factory Outlet Centers 6.150% due 11/15/15 190 180 --------------- 242 --------------- SPECIALIZED FINANCE--0.4% Caterpillar Financial Services Corp. 6.200% due 9/30/13 95 95 CIT Group, Inc. 5.125% due 9/30/14 200 99 CME Group, Inc. 5.400% due 8/1/13 65 65 --------------- 259 ---------------
PAR VALUE VALUE --------------- --------------- SPECIALIZED REITS--0.7% Health Care REIT, Inc. 5.875% due 5/15/15 $ 225 $ 198 Nationwide Health Properties, Inc. 6.250% due 2/1/13 130 130 Realty Income Corp. 6.750% due 8/15/19 110 99 --------------- 427 --------------- STEEL--0.2% Commercial Metals Co. 6.500% due 7/15/17 100 93 --------------- THRIFTS & MORTGAGE FINANCE--0.1% Countrywide Financial Corp. 6.250% due 5/15/16 65 46 Washington Mutual, Inc. 4.625% due 4/1/14(g) 155 26 --------------- 72 --------------- TOBACCO--0.2% Reynolds American, Inc. 6.750% due 6/15/17 95 89 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.2% Nextel Communications, Inc. Series D 7.375% due 8/1/15 70 46 Sprint Nextel Corp. 6.000% due 12/1/16 65 50 --------------- 96 - -------------------------------------------------------------------------------- TOTAL DOMESTIC CORPORATE BONDS (IDENTIFIED COST $13,616) 11,674 - -------------------------------------------------------------------------------- NON-AGENCY MORTGAGE-BACKED SECURITIES--26.4% Bear Stearns Adjustable Rate Mortgage Trust 05-12, 13A1 5.446% due 2/25/36(c) 159 134 Bear Stearns Commercial Mortgage Securities 06-PW12, A4 5.902% due 9/11/38(c) 370 336 Citigroup Mortgage Loan Trust, Inc. 05-5, 2A3 5.000% due 8/25/35 69 61 Citigroup/Deutsche Bank Commercial Mortgage Trust 05-CD1, AM 5.400% due 7/15/44(c) 650 551 06-CD2, A4 5.545% due 1/15/46(c) 655 580 07-CD4, A4 5.322% due 12/11/49 700 584 Countrywide Home Loan Mortgage Pass-Through Trust 04-13, 1A1 5.500% due 8/25/34 161 161 Credit Suisse Mortgage Capital Certificates 06-C1, A4 5.609% due 2/15/39(c) 935 839 Crown Castle Towers LLC 144A 05-1A, AFX 4.643% due 6/15/35(b) 450 446
PAR VALUE VALUE --------------- --------------- GE Capital Commercial Mortgage Corp. 04-C3, A4 5.189% due 7/10/39(c) $ 1,000 $ 929 Greenwich Capital Commercial Funding Corp. 04-GG1, A7 5.317% due 6/10/36(c) 1,000 942 GS Mortgage Securities Corp. II 07-GG10, A4 5.993% due 8/10/45(c) 475 406 JPMorgan Mortgage Trust 05-S3, 2A2 5.500% due 1/25/21 270 251 Lehman Brothers - UBS Commercial Mortgage Trust 04-C7, A6 4.786% due 10/15/29(c) 1,000 906 06-C6, A4 5.372% due 9/15/39 710 621 07-C2, A2 5.303% due 2/15/40 225 209 07-C6, A2 5.845% due 7/15/40 360 338 07-C7, A3 5.866% due 9/15/45(c) 310 266 Lehman Brothers Commercial Conduit Mortgage Trust 07-C3, A4 6.135% due 7/15/44(c) 170 148 MASTR Asset Securitization Trust 03-10, 3A1 5.500% due 11/25/33 302 277 MASTR Resecuritization Trust 144A 05-4CI, N2 6.429% due 4/26/45(b)(c)(f) 170 17 Merrill Lynch Mortgage Trust 06-C1, AM 5.841% due 5/12/39(c) 320 264 04-KEY2, A4 4.864% due 8/12/39(c) 1,000 908 Merrill Lynch/Countrywide Commercial Mortgage Trust 06-3, A4 5.414% due 7/12/46(c) 445 390 Morgan Stanley Capital I 06-T23, A4 5.984% due 8/12/41(c) 360 326 07-IQ14, A2 5.610% due 4/15/49 350 326 07-IQ14, A4 5.692% due 4/15/49(c) 315 268 Morgan Stanley Mortgage Loan Trust 05-5AR, 4A1 5.530% due 9/25/35(c) 278 202 Paine Webber Mortgage Acceptance Corp. 99-C1, D 7.150% due 6/15/32(c) 190 191 Residential Accredit Loans, Inc. 06-QA1, A21 5.957% due 1/25/36(c) 542 399 Residential Funding Mortgage Securities I, Inc. 05-SA1, 2A 4.839% due 3/25/35(c) 267 235 SBA Commercial Mortgage Backed Securities Trust 144A 06-1A, B 5.451% due 11/15/36(b) 140 130
See Notes to Financial Statements 54 VIRTUS CORE BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- Wachovia Bank Commercial Mortgage Trust 07-C30, A5 5.342% due 12/15/43 $ 435 $ 359 Wachovia Mortgage Loan Trust LLC 06-A, B1 5.412% due 5/20/36(c) 258 140 Washington Mutual Mortgage Pass-Through Certificates, Inc. 05-AR3, A2 4.636% due 3/25/35(c) 548 473 Wells Fargo Mortgage Backed Securities Trust 04-BB, A1 4.556% due 1/25/35(c) 226 195 05-AR4, 2A2 4.537% due 4/25/35(c) 201 174 05-AR4, 2A1 4.537% due 4/25/35(c) 240 208 05-AR16, 6A3 5.001% due 10/25/35(c) 543 484 05-14, 2A1 5.500% due 12/25/35 707 634 - -------------------------------------------------------------------------------- TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $17,458) 15,308 - -------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES--0.8% CHILE--0.3% Republic of Chile 5.500% due 1/15/13 150 160 --------------- RUSSIA--0.5% Russian Federation RegS 7.500% due 3/31/30(c)(e) 300 303 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $462) 463 - -------------------------------------------------------------------------------- FOREIGN CORPORATE BONDS(d)--3.6% ARUBA--0.2% UFJ Finance AEC 6.750% due 7/15/13 100 105 --------------- AUSTRALIA--0.4% Rio Tinto Finance USA Ltd. 6.500% due 7/15/18 95 90 Westfield Capital Corp. Ltd./ Westfield Finance Authority 144A 5.125% due 11/15/14(b) 150 133 --------------- 223 ---------------
PAR VALUE VALUE --------------- --------------- CANADA--0.5% Agrium, Inc. 6.750% due 1/15/19 $ 130 $ 127 EnCana Corp. 5.900% due 12/1/17 80 72 Petro-Canada 6.050% due 5/15/18 45 39 Xstrata Finance Canada Ltd. 144A 5.800% due 11/15/16(b) 70 63 --------------- 301 --------------- GERMANY--0.2% Deutsche Bank AG 4.875% due 5/20/13 30 29 Deutsche Telekom International Finance BV 5.750% due 3/23/16 100 89 --------------- 118 --------------- ITALY--0.1% Telecom Italia Capital SA 6.999% due 6/4/18 95 85 --------------- LUXEMBOURG--0.2% ArcelorMittal 144A 6.125% due 6/1/18(b) 105 92 --------------- QATAR--0.4% Ras Laffan Liquefied Natural Gas Co., Ltd. II RegS 5.298% due 9/30/20(e) 250 227 --------------- RUSSIA--0.6% Gazprom OAO (Gaz Capital SA) 144A 6.212% due 11/22/16(b) 130 103 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670% due 3/5/14(b) 170 139 TNK-BP Finance SA RegS 6.125% due 3/20/12(e) 105 83 --------------- 325 --------------- SINGAPORE--0.2% ICICI Bank Ltd. RegS 5.750% due 11/16/10(e) 105 103 --------------- SOUTH KOREA--0.2% Export-Import Bank of Korea 5.500% due 10/17/12 135 128 ---------------
PAR VALUE VALUE --------------- --------------- UNITED KINGDOM--0.4% Barclays Bank plc 144A 6.050% due 12/4/17(b) $ 125 $ 116 Vodafone Group plc 5.000% due 9/15/15 80 71 6.150% due 2/27/37 70 56 --------------- 243 --------------- UNITED STATES--0.2% CRH America, Inc. 6.000% due 9/30/16 135 116 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $2,302) 2,066 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--98.2% (IDENTIFIED COST $61,769) 56,898 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--1.9%
SHARES --------------- MONEY MARKET MUTUAL FUNDS--1.9% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 717,718 718 State Street Navigator Prime Plus (seven-day effective yield 2.765%)(i) 386,036 386 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,104) 1,104 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--100.1% (IDENTIFIED COST $62,873) 58,002(a) Other assets and liabilities, net--(0.1)% (59) --------------- NET ASSETS--100.0% $ 57,943 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $0 and gross depreciation of $5,259 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $63,261. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $1,912 or 3.3% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, or parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (e) 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. (f) Illiquid and restricted security. At September 30, 2008, these securities amounted to a value of $159 or 0.3% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. (g) Security in default and non-income producing. (h) All or a portion of security is on loan. (i) Represents security purchased with cash collateral received for securities on loan. See Notes to Financial Statements 55 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- DOMESTIC CORPORATE BONDS--80.6% ADVERTISING--2.2% Affinion Group, Inc. 10.125% due 10/15/13 $ 645 $ 610 11.500% due 10/15/15 1,555 1,454 --------------- 2,064 --------------- AEROSPACE & DEFENSE--5.1% BE Aerospace, Inc. 8.500% due 7/1/18 585 569 Bombardier, Inc. 144A 8.000% due 11/15/14(b)(i) 1,565 1,557 DI Finance/Dyncorp International, Inc. 144A 9.500% due 2/15/13(b) 790 780 Series B 9.500% due 2/15/13 530 519 L-3 Communications Corp. 7.625% due 6/15/12 980 968 5.875% due 1/15/15 550 501 --------------- 4,894 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--1.0% Levi Strauss & Co. 9.750% due 1/15/15(i) 150 126 8.875% due 4/1/16(i) 1,025 825 --------------- 951 --------------- AUTOMOTIVE RETAIL--0.8% AutoNation, Inc. 7.000% due 4/15/14(i) 855 748 --------------- BROADCASTING--5.8% CSC Holdings, Inc. Series B 7.625% due 4/1/11 1,050 1,013 EchoStar DBS Corp. 6.625% due 10/1/14 410 330 7.125% due 2/1/16 1,630 1,316 Mediacom Broadband LLC 8.500% due 10/15/15(i) 555 461 Mediacom LLC/Mediacom Capital Corp. 9.500% due 1/15/13(i) 870 783 Sinclair Television Group, Inc. 8.000% due 3/15/12 1,075 1,040 United Artists Theatre Circuit, Inc. Series 95-A 9.300% due 7/1/15(g) 333 304 Series BD-1 9.300% due 7/1/15(g) 359 328 Series AW-0 9.300% due 7/1/15(g) 2 2 Series BE-9 9.300% due 7/1/15(g) 13 12 --------------- 5,589 --------------- BUILDING PRODUCTS--1.8% Gibraltar Industries, Inc. Series B 8.000% due 12/1/15 2,040 1,714 ---------------
PAR VALUE VALUE --------------- --------------- CASINOS & GAMING--4.9% Harrahs Operating Co., Inc. 144A 10.750% due 2/1/16(b)(i) $ 1,405 $ 724 Icahn Enterprises LP/ Icahn Enterprises Finance Corp. 8.125% due 6/1/12 1,515 1,295 7.125% due 2/15/13(i) 480 370 MGM MIRAGE 7.500% due 6/1/16(i) 615 452 7.625% due 1/15/17(i) 945 685 OED Corp./Diamond Jo LLC 8.750% due 4/15/12 1,265 1,157 --------------- 4,683 --------------- COMMUNICATIONS EQUIPMENT--1.5% Dycom Industries, Inc. 8.125% due 10/15/15 1,140 1,009 Valor Telecommunications Enterprises Finance Corp. 7.750% due 2/15/15 480 457 --------------- 1,466 --------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--0.8% Trinity Industries, Inc. 6.500% due 3/15/14 825 782 --------------- CONSUMER FINANCE--4.1% Ford Motor Credit Co. LLC 7.375% due 2/1/11 330 220 7.800% due 6/1/12 1,635 1,016 7.000% due 10/1/13 540 332 8.000% due 12/15/16(i) 1,415 896 Hertz Corp. (The) 8.875% due 1/1/14(i) 1,025 889 10.500% due 1/1/16 680 571 --------------- 3,924 --------------- DATA PROCESSING & OUTSOURCED SERVICES--2.3% First Data Corp. 144A 9.875% due 9/24/15(b) 1,170 920 Lender Processing Services, Inc. 144A 8.125% due 7/1/16(b) 1,330 1,303 --------------- 2,223 --------------- DISTRIBUTORS--0.8% Susser Holdings LLC 10.625% due 12/15/13 765 755 --------------- DIVERSIFIED SUPPORT SERVICES--1.2% Harland Clarke Holdings Corp. 9.500% due 5/15/15 1,635 1,169 --------------- ELECTRIC UTILITIES--2.7% Reliant Energy, Inc. 6.750% due 12/15/14 475 408 Texas Competitive Electric Holdings Co. LLC 144A 10.250% due 11/1/15(b) 2,360 2,142 --------------- 2,550 ---------------
PAR VALUE VALUE --------------- --------------- ENVIRONMENTAL & FACILITIES SERVICES--0.8% Allied Waste North America, Inc. 6.125% due 2/15/14(i) $ 780 $ 722 --------------- FOOD RETAIL--0.8% Stater Brothers Holdings, Inc. 8.125% due 6/15/12 640 630 7.750% due 4/15/15 140 132 --------------- 762 --------------- HEALTH CARE FACILITIES--2.7% Community Health Systems, Inc. 8.875% due 7/15/15(i) 755 721 HCA, Inc. 9.250% due 11/15/16 1,890 1,843 --------------- 2,564 --------------- HEAVY ELECTRICAL EQUIPMENT--1.0% Biomet, Inc. 11.625% due 10/15/17 965 975 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--2.5% AES Corp. 8.000% due 10/15/17 265 241 144A 8.000% due 6/1/20(b) 1,290 1,135 NRG Energy, Inc. 7.375% due 1/15/17(i) 1,150 1,049 --------------- 2,425 --------------- INTEGRATED TELECOMMUNICATION SERVICES--6.4% Citizens Communications Co. 7.125% due 3/15/19 1,170 936 Hughes Network Systems LLC/Hughes Network Systems Finance Corp. 9.500% due 4/15/14 1,960 1,911 Qwest Corp. 8.875% due 3/15/12 615 606 6.500% due 6/1/17(i) 1,345 1,076 Sprint Capital Corp. 8.750% due 3/15/32 1,110 866 Windstream Corp. 7.000% due 3/15/19 865 696 --------------- 6,091 --------------- INTERNET RETAIL--1.4% Expedia, Inc. 144A 8.500% due 7/1/16(b) 1,430 $ 1,294 --------------- IT CONSULTING & OTHER SERVICES--0.7% Unisys Corp. 12.500% due 1/15/16(i) 750 716 --------------- METAL & GLASS CONTAINERS--0.5% AEP Industries, Inc. 7.875% due 3/15/13(i) 590 445 ---------------
See Notes to Financial Statements 56 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MOVIES & ENTERTAINMENT--1.4% WMG Acquisition Corp. 7.375% due 4/15/14 $ 1,010 $ 755 WMG Holdings Corp. 0.000% due 12/15/14(c) 1,050 583 --------------- 1,338 --------------- OFFICE SERVICES & SUPPLIES--1.8% IKON Office Solutions, Inc. 7.750% due 9/15/15 1,685 1,769 --------------- OIL & GAS EQUIPMENT & SERVICES--2.2% Allis-Chalmers Energy, Inc. 8.500% due 3/1/17 1,200 1,032 Seitel, Inc. 9.750% due 2/15/14 1,270 1,041 --------------- 2,073 --------------- OIL & GAS EXPLORATION & PRODUCTION--6.2% Chesapeake Energy Corp. 6.625% due 1/15/16 1,240 1,119 Encore Acquisition Co. 6.000% due 7/15/15(i) 1,525 1,220 Pioneer Natural Resources Co. 6.650% due 3/15/17 100 90 6.875% due 5/1/18 2,475 2,216 Plains Exploration & Production Co. 7.000% due 3/15/17 715 626 Sabine Pass Liquid Natural Gas LP 7.500% due 11/30/16(i) 900 706 --------------- 5,977 --------------- PAPER PRODUCTS--3.0% Exopack Holding Corp. 11.250% due 2/1/14 1,910 1,614 Rock-Tenn Co. 144A 9.250% due 3/15/16(b) 605 617 Verso Paper Holdings LLC/Verso Paper, Inc. 9.125% due 8/1/14 770 666 --------------- 2,897 --------------- PUBLISHING--2.7% Belo Corp. 6.750% due 5/30/13 1,615 1,413 Dex Media, Inc. 8.000% due 11/15/13 2,490 1,158 --------------- 2,571 --------------- SEMICONDUCTORS--2.5% Amkor Technology, Inc. 7.750% due 5/15/13(i) 1,205 1,035 9.250% due 6/1/16 490 414 Freescale Semiconductor, Inc. 8.875% due 12/15/14 1,405 976 --------------- 2,425 ---------------
PAR VALUE VALUE --------------- --------------- SPECIALIZED CONSUMER SERVICES--0.6% Stewart Enterprises, Inc. 6.250% due 2/15/13 $ 615 $ 569 --------------- SPECIALIZED REITS--2.0% Felcor Lodging LP 8.500% due 6/1/11 1,030 896 Host Hotels & Resorts LP Series O 6.375% due 3/15/15 1,220 998 --------------- 1,894 --------------- SPECIALTY CHEMICALS--0.6% Huntsman International LLC 7.375% due 1/1/15 710 600 --------------- STEEL--2.3% Ryerson, Inc. 144A 12.000% due 11/1/15(b) 905 774 Steel Dynamics, Inc. 144A 7.750% due 4/15/16(b) 1,590 1,423 --------------- 2,197 --------------- TOBACCO--0.5% Alliance One International, Inc. 11.000% due 5/15/12 520 512 --------------- TRADING COMPANIES & DISTRIBUTORS--0.5% RSC Equipment Rental, Inc. 9.500% due 12/1/14(i) 575 438 --------------- WIRELESS TELECOMMUNICATION SERVICES--2.5% Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% due 6/15/13 480 478 Intelsat Corp. 144A 9.250% due 8/15/14(b) 2,065 1,941 --------------- 2,419 - -------------------------------------------------------------------------------- TOTAL DOMESTIC CORPORATE BONDS (IDENTIFIED COST $86,873) 77,185 - -------------------------------------------------------------------------------- FOREIGN CORPORATE BONDS(d)--9.9% CANADA--4.1% Compton Petroleum Finance Corp. 7.625% due 12/1/13 1,720 1,518 Russel Metals, Inc. 6.375% due 3/1/14 1,015 920 Videotron/Quebecor Media Inc. 144A 9.125% due 4/15/18(b) 1,490 1,512 --------------- 3,950 --------------- POLAND--0.1% Poland Telecom Finance BV Series B 14.000% due 12/1/07(e)(f)(h) 4,942 62 ---------------
PAR VALUE VALUE --------------- --------------- UNITED KINGDOM--3.2% Ineos Group Holdings plc 144A 8.500% due 2/15/16(b)(i) $ 880 $ 480 Inmarsat Finance II plc 0.000% due 11/15/12(c)(i) 765 757 Inmarsat Finance plc 7.625% due 6/30/12 480 463 Virgin Media Finance plc 8.750% due 4/15/14 1,600 1,352 --------------- 3,052 --------------- UNITED STATES--2.5% Dollarama Group LP 8.875% due 8/15/12 415 355 Freeport-McMoRan Copper & Gold, Inc. 8.375% due 4/1/17 1,480 1,460 Stratos Global Corp. 9.875% due 2/15/13(i) 615 602 --------------- 2,417 - -------------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $15,068) 9,481 - -------------------------------------------------------------------------------- DOMESTIC COMMON STOCKS--0.1%
SHARES --------------- AUTO PARTS & EQUIPMENT--0.1% CB Cambridge Industries Liquidating Trust Interests(e)(f)(h) 5,164 64 --------------- COMMERCIAL PRINTING--0.0% ACG Holdings, Inc.(e)(h) 76 0 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $358) 64 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--90.6% (IDENTIFIED COST $102,299) 86,730 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--19.3% MONEY MARKET MUTUAL FUNDS--19.3% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 7,639,488 7,639 State Street Navigator Prime Plus (seven-day effective yield 2.765%)(j) 10,867,673 10,868 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $18,507) 18,507 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--109.9% (IDENTIFIED COST $120,806) 105,237(a) Other assets and liabilities, net--(9.9)% (9,499) --------------- NET ASSETS--100.0% $ 95,738 ===============
See footnote legend on page 58. See Notes to Financial Statements 57 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $0 and gross depreciation of $16,022 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $121,259. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $16,602 or 17.3% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, or parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (e) Non-income producing. (f) Security in default. (g) Illiquid security. Security valued at fair value as determined in good faith by or under the direction of the Trustees. (h) Illiquid and restricted security. Security valued at fair value as determined in good faith by or under the direction of the Trustees. At September 30, 2008, these securities amounted to a value of $126 or 0.2% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. (i) All or a portion of security is on loan. (j) Represents security purchased with cash collateral received for securities on loan. See Notes to Financial Statements 58 VIRTUS MONEY MARKET FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
FACE VALUE VALUE --------------- --------------- FEDERAL AGENCY SECURITIES(f)--26.3% FHLB 2.250% due 10/3/08 $ 625 $ 625 2.000% due 10/10/08 1,190 1,189 2.550% due 10/22/08 500 499 2.350% due 10/27/08 1,500 1,497 2.400% due 10/27/08 820 819 2.611% due 11/21/08(c) 2,000 2,000 4.750% due 12/12/08(d) 1,780 1,788 2.800% due 2/6/09(c) 1,500 1,500 2.800% due 5/6/09 2,000 2,000 3.150% due 7/14/09 1,500 1,500 3.000% due 7/28/09 1,500 1,500 FHLMC 5.125% due 10/15/08(d) 1,610 1,612 2.900% due 6/12/09 1,500 1,494 3.150% due 7/28/09 1,500 1,500 FNMA 2.400% due 11/5/08 1,000 998 2.821% due 1/15/09(d) 500 496 3.850% due 4/14/09(d) 1,500 1,505 - -------------------------------------------------------------------------------- TOTAL FEDERAL AGENCY SECURITIES (IDENTIFIED COST $22,522) 22,522 - -------------------------------------------------------------------------------- FEDERAL AGENCY SECURITIES--VARIABLE (c)(g)--1.5% SBA (Final Maturity 2/25/23) 2.500% due 10/1/08 243 243 SBA (Final Maturity 1/25/21) 2.500% due 10/1/08 26 26 SBA (Final Maturity 10/25/22) 2.500% due 10/1/08 319 319 SBA (Final Maturity 11/25/21) 2.625% due 10/1/08 281 281 SBA (Final Maturity 2/25/23) 2.500% due 10/1/08 188 188 SBA (Final Maturity 3/25/24) 2.375% due 10/1/08 73 70 SBA (Final Maturity 5/25/21) 2.500% due 10/1/08 109 109 - -------------------------------------------------------------------------------- TOTAL FEDERAL AGENCY SECURITIES--VARIABLE (IDENTIFIED COST $1,236) 1,236 - --------------------------------------------------------------------------------
FACE VALUE VALUE --------------- --------------- COMMERCIAL PAPER(f)--35.0% ABN-AMRO N.A. Finance, Inc. 2.400% due 10/1/08 $ 2,025 $ 2,025 2.340% due 10/6/08 450 450 2.380% due 10/14/08 1,500 1,499 Bank of America Corp. 2.580% due 10/16/08 835 834 2.660% due 11/3/08 2,205 2,200 Cargill, Inc. 3.250% due 10/22/08 550 549 Cintas Corp. No. 2 4.500% due 10/1/08 1,870 1,870 2.650% due 10/3/08 1,800 1,800 Du Pont (E.I.) de Nemours & Co. 2.110% due 10/22/08 1,650 1,648 2.200% due 11/10/08 1,395 1,392 Eaton Corp. 2.200% due 11/7/08 2,000 1,995 Govco LLC 2.700% due 11/6/08 2,880 2,872 2.700% due 12/8/08 1,700 1,691 Praxair, Inc. 2.500% due 10/2/08 1,500 1,500 2.150% due 10/9/08 1,500 1,499 Private Export Funding Corp. 2.200% due 10/3/08 850 850 Procter & Gamble Co. 2.550% due 10/20/08 1,500 1,498 Toyota Motor Credit Corp. 2.420% due 11/5/08 1,000 998 2.520% due 11/18/08 2,000 1,993 Wal-Mart Stores, Inc. 2.200% due 12/1/08 800 797 - -------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (IDENTIFIED COST $29,960) 29,960 - -------------------------------------------------------------------------------- MEDIUM TERM NOTES--36.4% Abbott Laboratories 3.500% due 2/17/09 2,000 2,007 Associates Corp. of North America 6.250% due 11/1/08 1,000 1,003 Bear Stearns Cos., Inc (The) 3.250% due 3/25/09 1,500 1,500 2.901% due 8/21/09(c) 1,500 1,498
PAR VALUE VALUE --------------- --------------- Beneficial Corp. 6.470% due 11/17/08 $ 875 $ 878 Citigroup, Inc. 2.836% due 1/30/09(c) 400 399 Danske Bank A/S 144A (Denmark) 3.178% due 1/16/09(b)(c)(e) 2,000 2,000 Danske Corp. 144A 3.041% due 4/9/09(b)(c) 2,500 2,500 General Electric Capital Corp. 2.919% due 6/15/09(c) 2,250 2,253 2.910% due 8/31/09(c) 900 899 4.125% due 9/1/09 1,300 1,315 HSBC Finance Corp. 5.875% due 2/1/09 500 504 ING USA Global Funding Trust 3.514% due 9/18/09(c) 2,000 2,000 National Australia Bank Ltd. 144A (Australia) 2.463% due 3/6/09(b)(c)(e) 2,000 2,000 Nordea Bank AB 144A (Sweden) 2.477% due 2/6/09(b)(c)(e) 2,000 2,000 3.149% due 10/1/09(b)(c)(e) 2,000 2,000 Procter & Gamble International Funding 2.879% due 2/19/09(c) 1,000 1,000 144A 5.300% due 7/6/09(b) 900 915 Royal Bank of Canada 3.215% due 10/1/09 1,500 1,500 144A 2.888% due 10/15/09(b)(c)(e) 1,000 1,000 Wells & Fargo Co. 144A 2.638% due 2/17/09(b)(c) 2,000 2,000 - -------------------------------------------------------------------------------- TOTAL MEDIUM TERM NOTES (IDENTIFIED COST $31,171) 31,171 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--99.2% (IDENTIFIED COST $84,889) 84,889(a) Other assets and liabilities, net--0.8% 645 --------------- NET ASSETS--100.0% $ 85,534 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: At September 30, 2008, the aggregate cost of securities was the same for book and federal income tax purposes. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $14,415 or 16.9% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) The interest rate shown is the coupon rate. (e) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (f) The rate shown is the discount rate. (g) The maturity date shown is the reset date. See Notes to Financial Statements 59 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- AGENCY MORTGAGE-BACKED SECURITIES--9.1% FNMA 04-W6, 1A4 5.500% due 7/25/34 $ 919 $ 893 05-57, CK 5.000% due 7/25/35 354 354 05-74, AG 5.000% due 9/25/35 245 245 5.500% due 4/1/37 486 485 6.000% due 9/1/37 1,160 1,176 5.500% due 11/1/37 1,304 1,301 5.500% due 4/1/38 1,817 1,814 5.500% due 5/1/38 1,870 1,866 6.000% due 5/1/38 481 488 6.000% due 5/1/38 488 495 5.500% due 7/1/38 322 321 5.500% due 7/1/38 1,294 1,292 - -------------------------------------------------------------------------------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $10,737) 10,730 - -------------------------------------------------------------------------------- MUNICIPAL BONDS--2.5% ARIZONA--0.6% Salt River Project Agricultural Improvement & Power District 5.000% due 1/1/38 730 687 --------------- MICHIGAN--0.1% Tobacco Settlement Finance Authority Taxable Series A 7.309% due 6/1/34 170 147 --------------- MINNESOTA--1.3% State of Minnesota 5.000% due 8/1/19 1,500 1,562 --------------- SOUTH DAKOTA--0.2% Educational Enhancement Funding Corp. Taxable Series A 6.720% due 6/1/25 257 254 --------------- VIRGINIA--0.3% Tobacco Settlement Financing Corp. Taxable Series A-1 6.706% due 6/1/46 355 275 --------------- - -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $3,097) 2,925 - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--2.7% Bombardier Capital Mortgage Securitization Corp. 99-A, A3 5.980% due 1/15/18(d) 869 796 Carmax Auto Owner Trust 07-2, B 5.370% due 3/15/13 350 316 Conseco Finance Securitizations Corp. 01-3, A4 6.910% due 5/1/33(d) 846 796 Dunkin Securitization 144A 06-1, M1 8.285% due 6/20/31(b) 690 517
PAR VALUE VALUE --------------- --------------- FMAC Loan Receivables Trust 144A 98-CA, A2 6.660% due 9/15/20(b) $ 168 $ 153 GreenTree Financial Corp. 99-2, M2 7.210% due 12/1/30(d) 460 10 IndyMac Manufactured Housing Contract 98-1, A3 6.370% due 9/25/28 670 623 MASTR Alternative Net Interest Margin 144A 06-6, N1 4.429% due 9/26/46(b)(d)(r) 83 --(q) - -------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $3,686) 3,211 - -------------------------------------------------------------------------------- DOMESTIC CORPORATE BONDS--35.6% AEROSPACE & DEFENSE--1.5% DRS Technologies, Inc. 6.625% due 2/1/16 500 507 L-3 Communications Corp. 7.625% due 6/15/12 425 420 6.125% due 1/15/14 550 511 Series B 6.375% due 10/15/15 250 231 Moog, Inc. 144A 7.250% due 6/15/18(b) 100 97 --------------- 1,766 --------------- AIRLINES--2.3% American Airlines, Inc. 01-1 6.977% due 5/23/21 1,546 1,020 Continental Airlines, Inc. 98-1A 6.648% due 9/15/17 414 352 Delta Air Lines, Inc. 00-1 7.379% due 5/18/10 514 500 United Airlines, Inc. 00-2 7.032% due 10/1/10 632 618 01-1 6.071% due 3/1/13 192 184 --------------- 2,674 --------------- APPLICATION SOFTWARE--0.2% Intuit, Inc. 5.750% due 3/15/17 265 235 --------------- ASSET MANAGEMENT & CUSTODY BANKS--0.5% BlackRock, Inc. 6.250% due 9/15/17 225 216 Janus Capital Group, Inc. 6.250% due 6/15/12 375 355 --------------- 571 --------------- AUTOMOBILE MANUFACTURERS--0.2% Ford Motor Co. 7.450% due 7/16/31 375 163 General Motors Corp. 7.200% due 1/15/11 200 118 --------------- 281 ---------------
PAR VALUE VALUE --------------- --------------- BROADCASTING--2.0% Charter Communications Holdings I LLC 11.750% due 5/15/14(d) $ 175 $ 68 Charter Communications Holdings I LLC/Charter Communications Holdings I Capital Corp. 11.000% due 10/1/15 375 246 Comcast Cable Holdings LLC 7.875% due 8/1/13 500 520 COX Communications, Inc. 5.450% due 12/15/14 375 350 EchoStar DBS Corp. 6.625% due 10/1/14 600 483 Time Warner Cable, Inc. 6.750% due 7/1/18 350 328 Viacom, Inc. 6.250% due 4/30/16 375 338 --------------- 2,333 --------------- BUILDING PRODUCTS--1.3% Esco Corp. 144A 8.625% due 12/15/13(b) 600 591 Masco Corp. 5.850% due 3/15/17 540 456 Owens Corning, Inc. 6.500% due 12/1/16 495 439 --------------- 1,486 --------------- CABLE & SATELLITE--0.7% DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 6.375% due 6/15/15 1,000 885 --------------- CASINOS & GAMING--0.8% MGM MIRAGE 8.500% due 9/15/10 300 277 Pokagon Gaming Authority 144A 10.375% due 6/15/14(b) 117 119 River Rock Entertainment Authority (The) 9.750% due 11/1/11 250 231 Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC 144A 5.319% due 3/15/14(b)(d) 75 57 Station Casinos, Inc. 6.875% due 3/1/16 750 214 --------------- 898 --------------- COMPUTER STORAGE & PERIPHERALS--0.3% Seagate Technology HDD Holdings, Inc. 6.375% due 10/1/11 320 316 --------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--0.1% Terex Corp. 7.375% due 1/15/14 145 133 ---------------
See Notes to Financial Statements 60 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- CONSTRUCTION MATERIALS--0.8% Building Materials Corp. of America 7.750% due 8/1/14 $ 390 $ 310 CRH America, Inc. 8.125% due 7/15/18 650 639 --------------- 949 --------------- CONSUMER ELECTRONICS--0.3% Best Buy Co., Inc. 144A 6.750% due 7/15/13(b) 385 390 --------------- CONSUMER FINANCE--3.1% American Express Credit Corp. Series C 7.300% due 8/20/13 450 434 American Honda Finance Corp. 144A 6.700% due 10/1/13(b) 275 274 Ford Motor Credit Co. LLC 7.875% due 6/15/10 385 294 8.625% due 11/1/10 395 280 9.875% due 8/10/11 345 238 7.241% due 4/15/12(d) 55 49 GMAC LLC 7.250% due 3/2/11 1,000 473 6.875% due 9/15/11 400 179 6.000% due 12/15/11 1,000 445 Hertz Corp. (The) 8.875% due 1/1/14 350 304 10.500% due 1/1/16 100 84 SLM Corp. 5.450% due 4/25/11 300 210 8.450% due 6/15/18 500 340 --------------- 3,604 --------------- DATA PROCESSING & OUTSOURCED SERVICES--0.8% Broadridge Financial Solutions, Inc. 6.125% due 6/1/17 525 450 Western Union Co. (The) 5.930% due 10/1/16 560 504 --------------- 954 --------------- DISTILLERS & VINTNERS--0.2% Constellation Brands, Inc. 8.375% due 12/15/14 165 164 7.250% due 5/15/17 120 111 --------------- 275 --------------- DIVERSIFIED BANKS--0.1% Wachovia Corp. 5.750% due 2/1/18 150 113 --------------- ELECTRIC UTILITIES--0.6% Allegheny Energy Supply 144A 8.250% due 4/15/12(b) 145 147 Midwest Generation LLC Series B 8.560% due 1/2/16 121 125 Northeast Utilities 5.650% due 6/1/13 270 264 Texas Competitive Electric Holdings Co. LLC 144A 10.250% due 11/1/15(b) 200 181 --------------- 717 ---------------
PAR VALUE VALUE --------------- --------------- ELECTRICAL COMPONENTS & EQUIPMENT--0.4% General Cable Corp. 7.125% due 4/1/17 $ 500 $ 453 --------------- ELECTRONIC MANUFACTURING SERVICES--0.6% Jabil Circuit, Inc. 8.250% due 3/15/18 600 564 Tyco Electronic Group SA 6.000% due 10/1/12 125 123 --------------- 687 --------------- GAS UTILITIES--0.4% AmeriGas Partners LP 7.250% due 5/20/15 500 458 --------------- HEALTH CARE DISTRIBUTORS--0.2% Viant Holdings, Inc. 144A 10.125% due 7/15/17(b) 295 240 --------------- HEALTH CARE FACILITIES--0.3% Psychiatric Solutions, Inc. 7.750% due 7/15/15 375 351 --------------- HEALTH CARE SERVICES--0.4% Quest Diagnostics, Inc. 6.400% due 7/1/17 450 438 --------------- HEALTH CARE SUPPLIES--0.1% Bausch & Lomb, Inc. 144A 9.875% due 11/1/15(b) 125 119 --------------- HOTELS, RESORTS & CRUISE LINES--0.9% Royal Caribbean Cruises Ltd. 6.875% due 12/1/13 1,250 1,050 --------------- HOUSEHOLD PRODUCTS--0.3% Yankee Acquisition Corp. Series B 9.750% due 2/15/17 535 308 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.1% AES Corp. (The) 7.750% due 10/15/15 100 91 --------------- INDUSTRIAL REITS--0.1% ProLogis 6.625% due 5/15/18 185 159 --------------- INTEGRATED TELECOMMUNICATION SERVICES--0.7% Qwest Corp. 6.500% due 6/1/17 215 173 Windstream Corp. 8.625% due 8/1/16 500 464 7.000% due 3/15/19 250 201 --------------- 838 --------------- INVESTMENT BANKING & BROKERAGE--1.3% Bear Stearns Cos., Inc. (The) 7.250% due 2/1/18 700 675 Goldman Sachs Group, Inc. (The) 5.950% due 1/18/18 300 248
PAR VALUE VALUE --------------- --------------- INVESTMENT BANKING & BROKERAGE--(CONTINUED) Lehman Brothers Holdings, Inc. 5.625% due 1/24/13(g) $ 145 $ 19 6.750% due 12/28/17(g) 265 1 Merrill Lynch & Co., Inc. 6.110% due 1/29/37 500 348 Morgan Stanley 144A (Brazil) 10.090% due 5/3/17(b) 1,000(k) 305 --------------- 1,596 --------------- LEISURE FACILITIES--0.0% Scientific Games Corp. 144A 7.875% due 6/15/16(b) 55 53 --------------- LEISURE PRODUCTS--0.7% Brunswick Corp. 9.750% due 8/15/13 600 613 Hasbro, Inc. 6.300% due 9/15/17 275 266 --------------- 879 --------------- LIFE SCIENCES TOOLS & SERVICES--0.5% Fisher Scientific International, Inc. 6.750% due 8/15/14 600 588 --------------- MORTGAGE REITS--0.4% iStar Financial, Inc. Series B 5.950% due 10/15/13 1,000 521 --------------- MOVIES & ENTERTAINMENT--0.3% Time Warner, Inc. 6.875% due 5/1/12 370 367 --------------- OFFICE ELECTRONICS--0.3% Xerox Corp. 6.750% due 2/1/17 350 331 --------------- OIL & GAS EQUIPMENT & SERVICES--0.2% Helix Energy Solutions Group, Inc. 144A 9.500% due 1/15/16(b) 200 188 --------------- OIL & GAS EXPLORATION & PRODUCTION--1.6% Chesapeake Energy Corp. 6.875% due 11/15/20 225 194 Petropower I Funding Trust 144A 7.360% due 2/15/14(b) 602 572 Plains Exploration & Production Co. 7.750% due 6/15/15 400 370 Swift Energy Co. 7.625% due 7/15/11 500 477 XTO Energy, Inc. 6.500% due 12/15/18 280 260 --------------- 1,873 --------------- OIL & GAS REFINING & MARKETING--0.3% Tesoro Corp. 6.500% due 6/1/17 480 386 ---------------
See Notes to Financial Statements 61 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- OIL & GAS STORAGE & TRANSPORTATION--0.5% Buckeye Partners LP 6.050% due 1/15/18 $ 225 $ 215 Kinder Morgan Management Co. 5.700% due 1/5/16 400 346 --------------- 561 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES--2.0% Bank of America Corp. 8.000% due 12/29/49(d) 375 297 Citigroup, Inc. 5.500% due 4/11/13 365 319 6.500% due 8/19/13 400 356 Glencore Funding LLC 144A 6.000% due 4/15/14(b) 1,000 945 JPMorgan Chase & Co. Series 1 7.900% due 12/31/49(d) 247 208 National Rural Utilities Cooperative Finance Corp. 5.500% due 7/1/13 200 199 --------------- 2,324 --------------- PACKAGED FOODS & MEATS--0.3% Tyson Foods, Inc. 6.860% due 4/1/16 400 332 --------------- PAPER PACKAGING--0.5% Jefferson Smurfit Corp. 8.250% due 10/1/12 135 113 Plastipak Holdings, Inc. 144A 8.500% due 12/15/15(b) 500 425 --------------- 538 --------------- PAPER PRODUCTS--0.5% Verso Paper Holdings LLC/Verso Paper, Inc. Series B 11.375% due 8/1/16 750 611 --------------- PUBLISHING--0.5% Donnelley (R.H.) Corp. 144A 8.875% due 10/15/17(b) 7 2 Donnelley (R.H.), Inc. 144A 11.750% due 5/15/15(b) 187 115 Idearc, Inc. 8.000% due 11/15/16 500 139 Reader's Digest Association, Inc. (The) 9.000% due 2/15/17 500 285 --------------- 541 --------------- REGIONAL BANKS--1.1% First Tennessee Bank 2.839% due 1/23/09(d) 126 123 2.867% due 5/18/09(d) 220 208 Northern Trust Co. (The) 6.500% due 8/15/18 350 358 PNC Financial Services Group, Inc. (The) 8.250% due 5/29/49(d) 350 328 Sovereign Bancorp, Inc. 8.750% due 5/30/18 400 274 --------------- 1,291 ---------------
PAR VALUE VALUE --------------- --------------- RESEARCH & CONSULTING SERVICES--0.8% Equifax, Inc. 6.300% due 7/1/17 $ 1,000 $ 931 --------------- RESTAURANTS--0.0% OSI Restaurants Partners LLC 10.000% due 6/15/15 50 23 --------------- SPECIALIZED CONSUMER SERVICES--0.2% Mobile Mini, Inc. 6.875% due 5/1/15 250 219 --------------- SPECIALIZED FINANCE--0.2% Caterpillar Financial Services Corp. 6.200% due 9/30/13 275 275 --------------- SPECIALIZED REITS--1.4% Health Care REIT, Inc. 5.875% due 5/15/15 1,000 882 Host Hotels & Resorts LP 6.875% due 11/1/14 400 348 Realty Income Corp. 6.750% due 8/15/19 425 384 --------------- 1,614 --------------- STEEL--0.2% Steel Dynamics, Inc. 7.375% due 11/1/12 225 207 --------------- TOBACCO--1.1% Reynolds American, Inc. 7.300% due 7/15/15 500 502 7.625% due 6/1/16 375 373 UST, Inc. 5.750% due 3/1/18 500 482 --------------- 1,357 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.4% Nextel Communications, Inc. Series D 7.375% due 8/1/15 650 429 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC CORPORATE BONDS (IDENTIFIED COST $50,441) 41,807 - -------------------------------------------------------------------------------- NON-AGENCY MORTGAGE-BACKED SECURITIES--7.3% American Home Mortgage Assets 07-2, M4 3.737% due 3/25/47(d)(h) 644 84 American Tower Trust 144A L 07-1A, C 5.615% due 4/15/37(b) 750 626 Bear Stearns Commercial Mortgage Securities 07-PW18, AM 6.084% due 6/11/50(d) 725 572
PAR VALUE VALUE --------------- --------------- Bear Stearns Structured Products, Inc. 144A 4-15, A2 0.000% due 11/27/34(b) $ 17 $ 17 05-10 4.972% due 4/26/35(b)(d) 264 172 05-20N, B 6.707% due 10/25/45(b)(d) 750 506 Chase Mortgage Finance Corp. 06-A1, 4A1 6.031% due 9/25/36(d) 1,068 896 Citicorp Mortgage Securities, Inc. 06-7, 1A1 6.000% due 12/25/36 894 727 Credit Suisse Mortgage Capital Certificates 06-C1 A3 5.711% due 2/15/39(d) 300 282 Crown Castle Towers LLC 144A 05-1A, B 4.878% due 6/15/35(b) 500 479 First Horizon Asset Securities, Inc. 05-AR1, 2A1 4.998% due 4/25/35(d) 549 480 GS Mortgage Securities Corp. II 07-GG10, A4 5.993% due 8/10/45(d) 650 557 IndyMac Index Mortgage Loan Trust 06-AR25, 3A1 6.331% due 9/25/36(d) 952 640 Lehman Brothers - UBS Commercial Mortgage Trust 05-C3, AM 4.794% due 7/15/40 350 293 07-C7, A3 5.866% due 9/15/45(d) 400 343 Lehman Brothers - UBS Commercial Mortgage Trust 144A 07-C2, H 6.180% due 2/15/40(b)(d) 850 287 MASTR Resecuritization Trust 144A 05-1 5.000% due 10/28/34(b) 287 158 Merrill Lynch-Countrywide Commercial Mortgage Trust 06-4, A3 5.172% due 12/12/49(d) 650 560 Residential Accredit Loans, Inc. 02-QS12, B1 6.250% due 9/25/32 381 112 Timberstar Trust 06-1, C 144A 5.884% due 10/15/36(b) 1,000 730 - -------------------------------------------------------------------------------- TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $11,772) 8,521 - -------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES--7.1% ARGENTINA--0.2% Republic of Argentina Series GDP 0.000% due 12/15/35(d) 3,200 259 ---------------
See Notes to Financial Statements 62 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- AUSTRALIA--0.5% Commonwealth of Australia Series 909 7.500% due 9/15/09 690(j) $ 557 --------------- BRAZIL--0.5% Federative Republic of Brazil 12.500% due 1/5/22 1,125(k) 613 --------------- COLOMBIA--0.2% Republic of Colombia 12.000% due 10/22/15 600,000(l) 288 --------------- EGYPT--0.6% Arab Republic of Egypt Series 364 0.000% due 11/4/08 3,725(m) 674 --------------- INDONESIA--0.3% Republic of Indonesia Series FR-23 11.000% due 12/15/12 3,500,000(n) 349 --------------- NORWAY--0.2% Kingdom of Norway 5.500% due 5/15/09 1,600(o) 272 --------------- RUSSIA--0.1% Russian Federation RegS 7.500% due 3/31/30(d)(f) $ 148 149 --------------- TRINIDAD AND TOBAGO--0.1% Republic of Trinidad and Tobago RegS 9.875% due 10/1/09(f) 135 142 --------------- TURKEY--0.7% Republic of Turkey 11.500% due 1/23/12 450 513 7.250% due 3/15/15 250 249 --------------- 762 --------------- UKRAINE--0.2% Republic of Ukraine 144A 6.580% due 11/21/16(b) 250 194 --------------- VENEZUELA--3.5% Republic of Venezuela RegS 5.375% due 8/7/10(f) 2,260 2,011 8.500% due 10/8/14 350 277 5.750% due 2/26/16 325 213 9.250% due 9/15/27 2,090 1,564 --------------- 4,065 - -------------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $9,289) 8,324 - -------------------------------------------------------------------------------- FOREIGN CORPORATE BONDS(e)--16.5% AUSTRALIA--0.5% Rio Tinto Finance USA Ltd. 6.500% due 7/15/18 600 568 ---------------
PAR VALUE VALUE --------------- --------------- BRAZIL--0.2% Usiminas Commercial Ltd. 144A 7.250% due 1/18/18(b) $ 180 $ 175 --------------- CANADA--1.9% Agrium, Inc. 6.750% due 1/15/19 320 314 Canadian National Resources Ltd. 5.900% due 2/1/18 300 265 Catalyst Paper Corp. 7.375% due 3/1/14 750 514 EnCana Corp. 5.900% due 12/1/17 240 215 Petro-Canada 6.050% due 5/15/18 140 122 Rogers Wireless Communications, Inc. 6.375% due 3/1/14 575 551 Videotron/Quebecor Media Inc. 6.375% due 12/15/15 180 159 Videotron/Quebecor Media Inc.144A 9.125% due 4/15/18(b) 82 83 --------------- 2,223 --------------- CHILE--0.3% Empresa Nacional de Electricidad SA 8.350% due 8/1/13 350 374 --------------- CHINA--0.2% China Properties Group Ltd. 144A 9.125% due 5/4/14(b) 500 221 --------------- CYPRUS--0.4% ABH Financial Ltd. (Alfa Markets Ltd.) 144A 8.200% due 6/25/12(b) 150 115 Alfa MTN Invest Ltd. 144A 9.250% due 6/24/13(b) 350 346 --------------- 461 --------------- FRANCE--0.2% Compagnie Generale de Geophysique-Veritas 7.750% due 5/15/17 225 215 --------------- GERMANY--0.3% Deutsche Bank AG 4.875% due 5/20/13 100 96 E.ON International Finance BV 144A 5.800% due 4/30/18(b) 325 311 --------------- 407 --------------- INDIA--0.2% ICICI Bank Ltd. 144A 6.375% due 4/30/22(b)(d) 375 259 ---------------
PAR VALUE VALUE --------------- --------------- INDONESIA--0.6% Majapahit Holding BV 144A 7.250% due 6/28/17(b) $ 825 $ 730 --------------- ISRAEL--0.2% Israel Electric Corp. Ltd. 144A 7.250% due 1/15/19(b) 200 201 --------------- ITALY--0.3% Telecom Italia Capital SA 6.999% due 6/4/18 350 315 --------------- JAPAN--0.5% Resona Bank Ltd. 144A 5.850% due 9/29/49(b)(d) 750 552 --------------- KAZAKHSTAN--1.1% Kazkommerts International BV RegS 8.000% due 11/3/15(f) 250 144 KazMunaiGaz Finance Sub BV 144A 9.125% due 7/2/18(b) 400 342 TengizChevroil Finance Co. S.A.R.L. 144A 6.124% due 11/15/14(b) 929 747 --------------- 1,233 --------------- LUXEMBOURG--0.2% ArcelorMittal 144A 6.125% due 6/1/18(b) 280 245 --------------- MALAYSIA--0.6% Malaysia International Shipping Corp. Capital Ltd. 144A 6.125% due 7/1/14(b) 750 730 --------------- RUSSIA--3.9% European Bank for Reconstruction & Development 6.000% due 2/14/12 20,400(p) 739 Evraz Group SA 144A 8.875% due 4/24/13(b) 100 76 9.500% due 4/24/18(b) 205 149 Gaz Captial SA 144A 8.146% due 4/11/18(b) 100 87 Gazprom International SA 144A 7.201% due 2/1/20(b) 805 731 Gazprom OAO (Gaz Capital SA) 144A 6.212% due 11/22/16(b) 935 742 6.510% due 3/7/22(b) 315 228 International Bank For Reconstruction & Development 5.750% due 6/25/10 15,100(p) 567 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670% due 3/5/14(b) 390 319
See Notes to Financial Statements 63 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- RUSSIA--(CONTINUED) OJSC Vimpel Communications (UBS Luxembourg SA) 144A 8.375% due 10/22/11(b) $ 500 $ 441 Russian Agricultural Bank OJSC (RSHB Capital SA) 144A 6.299% due 5/15/17(b) 380 272 TNK-BP Finance SA 144A 7.500% due 3/13/13(b) 325 258 --------------- 4,609 --------------- SINGAPORE--0.4% UOB Cayman Ltd. 144A 5.796% due 12/29/49(b)(d) 500 437 --------------- SOUTH KOREA--0.9% Korea Development Bank 5.300% due 1/17/13 187 186 Woori Bank 144A 6.125% due 5/3/16(b)(d) 1,000 909 --------------- 1,095 --------------- UNITED ARAB EMIRATES--0.6% Abu Dhabi National Energy Co. 144A 5.875% due 10/27/16(b) 825 754 --------------- UNITED KINGDOM--1.1% HBOs plc 144A 6.750% due 5/21/18(b) 115 97 Ineos Group Holdings plc 144A 8.500% due 2/15/16(b) 500 272 Petroplus Finance Ltd. 144A 6.750% due 5/1/14(b) 375 319 Vedanta Resources plc 144A 9.500% due 7/18/18(b) 375 307 Vodafone Group plc 6.150% due 2/27/37 375 302 --------------- 1,297 --------------- UNITED STATES--1.5% Freeport-McMoRan Copper & Gold, Inc. 6.875% due 2/1/14 320 317 GTL Trade Finance, Inc. 144A 7.250% due 10/20/17(b) 545 524 Nova Chemicals Corp. 5.953% due 11/15/13(d) 1,125 939 --------------- 1,780 --------------- VENEZUELA--0.4% Petroleos de Venezuela S.A. 5.250% due 4/12/17 950 515 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $22,937) 19,396 - --------------------------------------------------------------------------------
PAR VALUE VALUE --------------- --------------- DOMESTIC CONVERTIBLE BONDS--0.2% PHARMACEUTICALS--0.2% Par Pharmaceutical Cos., Inc. 2.875% due 9/30/10 $ 300 $ 255 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC CONVERTIBLE BONDS (IDENTIFIED COST $273) 255 - -------------------------------------------------------------------------------- FOREIGN CONVERTIBLE BONDS--0.1% BRAZIL--0.1% Vale Capital Ltd. 5.500% due 6/15/10 4 152 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN CONVERTIBLE BONDS (IDENTIFIED COST $200) 152 - -------------------------------------------------------------------------------- DOMESTIC LOAN AGREEMENTS(d)--16.7% ADVERTISING--0.1% Lamar Media Corp. Tranche F 4.000% due 3/31/14 125 118 --------------- AEROSPACE & DEFENSE--0.1% TransDigm Inc. Tranche 4.655% due 6/23/13 118 110 --------------- APPAREL RETAIL--0.2% HBI Branded Apparel Ltd., Inc. Tranche B 6.994% due 3/15/14 200 185 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--0.3% Totes Isotoner Corp. Tranche 2 8.630% due 1/16/14 500 413 --------------- APPLICATION SOFTWARE--0.2% Getty Tranche B 7.250% due 2/15/13 229 223 --------------- AUTO PARTS & EQUIPMENT--0.4% Mark IV Industries, Inc. Tranche B 7.410% due 6/21/11 562 400 Tranche 2 11.490% due 12/19/11 175 72 --------------- 472 --------------- AUTOMOBILE MANUFACTURERS--0.3% Ford Motor Co. Tranche B 5.490% due 12/16/13 370 247 General Motors Corp. Tranche B 5.163% due 11/29/13 244 159 --------------- 406 --------------- BROADCASTING--0.6% Charter Communications Operating LLC Tranche 5.260% due 11/30/14 739 591 MCC Georgia LLC Tranche E 6.500% due 1/3/16 80 78 --------------- 669 ---------------
PAR VALUE VALUE --------------- --------------- COMMODITY CHEMICALS--0.6% Celanese Holdings LLC Tranche B 4.283% due 3/30/14 $ 744 $ 686 --------------- COMMUNICATIONS EQUIPMENT--0.5% CommScope, Inc. Tranche B 5.132% due 12/27/14 677 636 --------------- CONSUMER FINANCE--0.2% Hertz Corp. Letter of Credit 2.599% due 12/21/12 50 45 Tranche B 4.223% due 12/21/12 235 209 --------------- 254 --------------- DATA PROCESSING & OUTSOURCED SERVICES--0.9% First Data Corp. Tranche B 5.438% due 9/24/14 398 343 Tranche B3 5.551% due 9/24/14 495 425 Reynolds & Reynolds Co. (The) Tranche FL 4.801% due 10/24/12 274 246 --------------- 1,014 --------------- DEPARTMENT STORES--0.9% Neiman-Marcus Group, Inc. (The) Tranche B 4.565% due 4/6/13 1,213 1,067 --------------- DIVERSIFIED REAL ESTATE ACTIVITIES--0.0% Tropicana Entertainment LLC Tranche B 8.250% due 1/3/12 83 58 --------------- DIVERSIFIED SUPPORT SERVICES--0.1% ARAMARK Corp. Letter of Credit 2.233% due 1/26/14 10 9 Tranche B1 4.676% due 1/26/14 158 138 --------------- 147 --------------- ELECTRIC UTILITIES--0.3% Texas Competitive Electric Holdings Co. LLC Tranche B3 6.154% due 10/10/14 139 118 Tranche B2 6.154% due 10/10/14 262 222 --------------- 340 --------------- ELECTRICAL COMPONENTS & EQUIPMENT--0.3% Baldor Electric Co. Tranche 4.750% due 1/31/14 322 303 ---------------
See Notes to Financial Statements 64 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE -------------- --------------- ENVIRONMENTAL & FACILITIES SERVICES--0.2% Allied Waste North America, Inc. Letter of Credit A 2.295% due 3/28/14 $ 121 $ 118 Tranche B 4.204% due 3/28/14 171 166 --------------- 284 --------------- HEALTH CARE FACILITIES--1.2% HCA, Inc. Tranche A 4.801% due 11/18/12 110 97 Tranche B 4.946% due 11/18/13 428 381 Health Management Associates, Inc. Tranche B 4.446% due 2/28/14 188 160 Healthsouth Corp. Tranche 6.944% due 3/10/13 552 504 LifePoint Hospitals, Inc. Tranche B 4.435% due 4/15/12 234 213 --------------- 1,355 --------------- HEALTH CARE SERVICES--0.1% Psychiatric Solutions, Inc. Tranche 4.219% due 7/1/12 174 160 --------------- HEALTH CARE SUPPLIES--0.4% Bausch & Lomb, Inc. Tranche DD 4.450% due 4/26/15 100 93 Tranche B 6.051% due 4/26/15 397 372 --------------- 465 --------------- HOUSEHOLD PRODUCTS--0.1% Yankee Candle Co., Inc. Tranche B 4.635% due 2/6/14 139 113 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.7% NRG Energy, Inc. Letter of Credit 2.596% due 2/1/13 669 585 Tranche B 4.963% due 2/1/13 233 205 --------------- 790 --------------- INTEGRATED TELECOMMUNICATION SERVICES--1.0% Level 3 Communications, Inc. Tranche B 4.876% due 3/13/14 90 77 NTELOS, Inc. Tranche B1 4.720% due 8/24/11 455 432 Time Warner Telecom Holdings, Inc. Tranche B 4.470% due 1/7/13 742 705 --------------- 1,214 ---------------
SHARES VALUE -------------- --------------- LEISURE FACILITIES--0.5% AMF Bowling Worldwide, Inc. Tranche B 5.377% due 5/17/13 $ 518 $ 417 PTI Group, Inc. Tranche 9.625% due 2/28/13 160 146 --------------- 563 --------------- METAL & GLASS CONTAINERS--0.3% Anchor Glass Container Corp. Tranche 7.750% due 6/1/13 352 342 --------------- OIL & GAS EQUIPMENT & SERVICES--0.2% Helix Energy Solutions Group, Inc. Tranche 4.786% due 7/1/13 197 183 --------------- OIL & GAS EXPLORATION & PRODUCTION--0.5% ATP Oil & Gas Corp. Tranche 1 8.500% due 7/15/14 428 390 Tranche 2 8.500% due 1/15/11 245 223 --------------- 613 --------------- PACKAGED FOODS & MEATS--0.2% Wrigley (WM) Jr. Co. Tranche B 6.634% due 9/30/14 195 192 --------------- PAPER PRODUCTS--1.4% Boise Paper Holdings LLC Tranche 11.000% due 2/22/15 463 421 Georgia-Pacific Corp. Tranche B 4.569% due 12/20/10 335 313 Tranche B1 4.690% due 12/20/12 631 554 NewPage Corp. Tranche B 7.156% due 12/22/14 423 388 --------------- 1,676 --------------- PUBLISHING--0.6% Idearc, Inc. Tranche B 4.635% due 11/17/14 983 587 Tribune Co. Tranche B 5.786% due 6/4/14 212 111 --------------- 698 --------------- SEMICONDUCTORS--0.5% Freescale Semiconductor, Inc. Tranche 4.236% due 12/1/13 761 625 --------------- SPECIALIZED FINANCE--1.0% Sungard Data Systems, Inc. Tranche B 4.553% due 2/28/14 1,408 1,231 ---------------
PAR VALUE VALUE -------------- --------------- SPECIALTY CHEMICALS--0.1% JohnsonDiversey, Inc. Tranche B 4.791% due 12/16/11 $ 121 $ 111 --------------- WIRELESS TELECOMMUNICATION SERVICES--1.7% ALLTEL Communications, Inc. Tranche B2 5.316% due 5/15/15 174 168 Tranche B3 4.997% due 5/15/15 371 364 Cricket Communications, Inc. Tranche B 6.500% due 6/16/13 611 586 MetroPCS Wireless, Inc. Tranche B 4.854% due 2/20/14 945 850 --------------- 1,968 - -------------------------------------------------------------------------------- TOTAL DOMESTIC LOAN AGREEMENTS (IDENTIFIED COST $22,727) 19,684 - -------------------------------------------------------------------------------- FOREIGN LOAN AGREEMENTS(d) -- 0.5% GERMANY--0.5% Fresenius Medical Care AG & Co. KGaA Tranche B 4.153% due 3/31/13 675 633 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN LOAN AGREEMENTS (IDENTIFIED COST $675) 633 - --------------------------------------------------------------------------------
SHARES -------------- DOMESTIC PREFERRED STOCK--0.1% THRIFTS & MORTGAGE FINANCE--0.1% FNMA Pfd. 5.160% 38,000 82 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC PREFERRED STOCK (IDENTIFIED COST $655) 82 - -------------------------------------------------------------------------------- DOMESTIC COMMON STOCKS--0.0% INTEGRATED TELECOMMUNICATION SERVICES--0.0% AT&T Latin America Corp. Class A(c)(h)(i) 137,550 0 --------------- PAPER PRODUCTS--0.0% Northampton Pulp LLC(c)(i)(r) 3,650 0 --------------- - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $730) 0 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--98.4% (IDENTIFIED COST $137,219) 115,720 - -------------------------------------------------------------------------------- MONEY MARKET MUTUAL FUNDS--0.3% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 302,737 303 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $303) 303 - --------------------------------------------------------------------------------
See Notes to Financial Statements 65 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE -------------- --------------- TOTAL INVESTMENTS--98.7% (IDENTIFIED COST $137,522) $ 116,023(a) Other assets and liabilities, net--1.3% 1,518 --------------- NET ASSETS--100.0% $ 117,541 ===============
At September 30, 2008, the Fund had entered into forward currency contracts as follows (reported in thousands):
Net Unrealized Contract In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) - ----------- ----------- ---------- ------ -------------- JPY 106,309 USD 975 11/14/08 $1,006 $31 ===
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $24 and gross depreciation of $21,590 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $137,589. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $20,638 or 17.6% of net assets. (c) Non-income producing. (d) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (e) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, or parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (f) 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. (g) Security in default and non-income producing. (h) Illiquid security. (i) Security valued at fair value as determined in good faith by or under the direction of the Trustees. At September 30, 2008, these securities amounted to a value of $0 or 0.0% of net assets. (j) Par value represents Australian Dollar (reported in thousands). (k) Par value represents Brazilian Real (reported in thousands). (l) Par value represents Colombian Peso (reported in thousands). (m) Par value represents Egyptian Pound (reported in thousands). (n) Par value represents Indonesian Rupiah (reported in thousands). (o) Par value represents Norwegian Krone (reported in thousands). (p) Par value represents Russian Ruble (reported in thousands). (q) Amount is less than $500 (not reported in thousands). (r) Illiquid and restricted security. At September 30, 2008, these securities amounted to a value of $0 or 0.0% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. See Notes to Financial Statements 66 VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- FOREIGN CORPORATE BONDS(c)--1.8% UNITED STATES--1.8% Nova Chemicals Corp. 5.953% due 11/15/13(b) $ 325 $ 271 --------------- - -------------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $284) 271 - -------------------------------------------------------------------------------- DOMESTIC LOAN AGREEMENTS(b)--93.9% AEROSPACE & DEFENSE--3.3% TransDigm Inc. Tranche 4.801% due 6/23/13 520 485 --------------- APPAREL, ACCESSORIES & LUXURY GOODS--1.7% Hanesbrands, Inc. Tranche B 4.548% due 9/5/13 285 260 --------------- APPLICATION SOFTWARE--0.8% Getty Tranche B 8.053% due 2/15/13 125 121 --------------- AUTOMOBILE MANUFACTURERS--3.0% Ford Motor Co. Tranche B 5.470% due 12/15/13 561 374 General Motors Corp. Tranche B 5.163% due 11/29/13 108 71 --------------- 445 --------------- BROADCASTING--2.7% CSC Holdings, Inc. Tranche A1 4.214% due 2/24/12 397 360 MCC Georgia LLC Tranche E 6.500% due 1/3/16 40 39 --------------- 399 --------------- CASINOS & GAMING--1.4% Harrahs Operating Co., Inc. Tranche B3 5.800% due 1/28/15 249 207 --------------- COMMODITY CHEMICALS--2.5% Celanese Holdings LLC Tranche B 4.283% due 3/30/14 398 367 --------------- COMMUNICATIONS EQUIPMENT--2.2% CommScope, Inc. Tranche B 5.132% due 12/27/14 348 327 --------------- DATA PROCESSING & OUTSOURCED SERVICES--7.6% First Data Corp. Tranche B3 5.551% due 9/24/14 680 584 Reynolds & Reynolds Co. (The) Tranche FL 4.801% due 10/24/12 618 556 --------------- 1,140 ---------------
PAR VALUE VALUE --------------- --------------- ELECTRIC UTILITIES--3.7% Texas Competitive Electric Holdings Co. LLC Tranche B3 6.145% due 10/10/14 $ 660 $ 559 --------------- ENVIRONMENTAL & FACILITIES SERVICES--3.0% Allied Waste North America, Inc. Letter of Credit A 4.098% due 3/28/14 195 190 Tranche B 3.965% due 3/28/14 273 265 --------------- 455 --------------- HEALTH CARE FACILITIES--7.6% Community Health Systems, Inc. Tranche DD 3.688% due 7/25/14 32 28 Tranche 4.806% due 7/25/14 627 554 HCA, Inc. Tranche A 4.801% due 11/18/12 629 559 --------------- 1,141 --------------- HEALTH CARE SERVICES--4.3% DaVita, Inc. Tranche B 4.183% due 10/5/12 400 362 Psychiatric Solutions, Inc. Tranche 4.273% due 7/1/12 304 279 --------------- 641 --------------- HEALTH CARE SUPPLIES--3.1% Bausch & Lomb, Inc. Tranche B 6.051% due 4/26/15 397 372 Tranche DD 7.301% due 4/26/15 100 93 --------------- 465 --------------- HOUSEHOLD PRODUCTS--2.0% Yankee Candle Co., Inc. Tranche B 4.635% due 2/6/14 375 305 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--2.2% NRG Energy, Inc. Letter of Credit 4.301% due 2/1/13 123 108 Tranche B 4.301% due 2/1/13 251 220 --------------- 328 --------------- INDUSTRIAL MACHINERY--3.2% Manitowoc Co., Inc. Tranche B 7.641% due 4/14/14 500 481 ---------------
PAR VALUE VALUE --------------- --------------- INTEGRATED TELECOMMUNICATION SERVICES--7.4% NTELOS, Inc. Tranche B1 5.010% due 8/24/11 $ 645 $ 612 Time Warner Telecom Holdings, Inc. Tranche B 4.470% due 1/7/13 511 486 --------------- 1,098 --------------- LEISURE FACILITIES--0.5% PTI Group, Inc. Tranche 9.625% due 2/28/13 80 73 --------------- METAL & GLASS CONTAINERS--1.7% Anchor Glass Container Corp. Tranche 7.979% due 6/1/13 265 258 --------------- OIL & GAS EQUIPMENT & SERVICES--3.3% Helix Energy Solutions Group, Inc. Tranche 4.626% due 7/1/13 531 493 --------------- OIL & GAS EXPLORATION & PRODUCTION--2.4% ATP Oil & Gas Corp. Tranche 2 8.711% due 1/15/11 145 132 Tranche 1 8.711% due 7/15/14 254 231 --------------- 363 --------------- PACKAGED FOODS & MEATS--0.7% Wrigley (WM) Jr. Co. Tranche B 6.634% due 9/30/14 112 110 --------------- PAPER PRODUCTS--9.1% Boise Paper Holdings LLC Tranche B 7.500% due 2/22/14 498 481 Tranche 11.000% due 2/22/15 33 30 Georgia-Pacific Corp. Tranche B1 4.465% due 12/20/12 501 440 NewPage Corp. Tranche B 7.156% due 12/21/14 448 411 --------------- 1,362 --------------- PUBLISHING--2.1% Idearc, Inc. Tranche B 4.635% due 11/17/14 531 317 --------------- SEMICONDUCTORS--0.6% Freescale Semiconductor, Inc. Tranche 8.266% due 12/1/13 100 83 ---------------
See Notes to Financial Statements 67 VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- SPECIALIZED FINANCE--3.1% Sungard Data Systems, Inc. Tranche B 4.553% due 2/28/14 $ 521 $ 456 --------------- SPECIALTY CHEMICALS--3.1% Tranche 4.791% due 12/16/10 77 71 Tranche B 4.791% due 12/16/11 431 396 --------------- 467 --------------- WIRELESS TELECOMMUNICATION SERVICES--5.6% ALLTEL Communications, Inc. Tranche B2 5.314% due 5/15/15 308 298 MetroPCS Wireless, Inc. Tranche B 4.906% due 11/3/13 597 537 --------------- 835 - -------------------------------------------------------------------------------- TOTAL DOMESTIC LOAN AGREEMENTS (IDENTIFIED COST $14,959) 14,041 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--95.7% (IDENTIFIED COST $15,243) 14,312 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--7.9%
SHARES --------------- MONEY MARKET MUTUAL FUNDS--7.9% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 1,172,939 1,173 --------------- - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,173) 1,173 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--103.6% (IDENTIFIED COST $16,416) 15,485(a) Other assets and liabilities, net--(3.6)% (545) --------------- NET ASSETS--100.0% $ 14,940 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $27 and gross depreciation of $958 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $16,416. (b) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. See Notes to Financial Statements 68 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE -------------- --------------- DOMESTIC COMMON STOCKS--32.4% UNITED STATES--32.4% Abbott Laboratories (Pharmaceuticals) 800 $ 47 Abercrombie & Fitch Co. Class A (Apparel Retail)(f) 430 17 Acuity Brands, Inc. (Electrical Components & Equipment)(f) 850 35 Adobe Systems, Inc. (Application Software)(b)(f) 2,370 94 Aetna, Inc. (Managed Health Care) 3,610 130 AFLAC, Inc. (Life & Health Insurance) 2,370 139 AGCO Corp. (Construction & Farm Machinery & Heavy Trucks)(b)(f) 1,420 60 Agilent Technologies, Inc. (Electronic Equipment & Instruments)(b)(f) 2,350 70 AK Steel Holding Corp. (Steel)(f) 2,190 57 Altria Group, Inc. (Tobacco) 7,430 147 Ameriprise Financial, Inc. (Asset Management & Custody Banks) 3,770 144 Amgen, Inc. (Biotechnology)(b)(f) 4,160 247 Amkor Technology, Inc. (Semiconductor Equipment)(b)(f) 3,050 19 Annaly Capital Management, Inc. (Mortgage REITs)(f) 13,660 184 AON Corp. (Insurance Brokers) 2,250 101 Apollo Group, Inc. Class A (Education Services)(b)(f) 440 26 Ares Capital Corp. (Asset Management & Custody Banks)(f) 2,150 22 AT&T, Inc. (Integrated Telecommunication Services) 22,689 633 Automatic Data Processing, Inc. (Data Processing & Outsourced Services)(f) 3,590 153 Bank of America Corp. (Other Diversified Financial Services)(f) 8,280 290 Bank of Hawaii Corp. (Regional Banks)(f) 810 43 Bank of New York Mellon Corp. (The) (Asset Management & Custody Banks) 10,353 337 Best Buy Co., Inc. (Computer & Electronics Retail)(f) 2,390 90 Big Lots, Inc. (General Merchandise Stores)(b)(f) 2,160 60
SHARES VALUE -------------- --------------- UNITED STATES--(CONTINUED) BJ's Wholesale Club, Inc. (Hypermarkets & Super Centers)(b) 2,470 $ 96 Block (H&R), Inc. (Specialized Consumer Services)(f) 3,290 75 BMC Software, Inc. (Systems Software)(b)(f) 1,750 50 Boeing Co. (The) (Aerospace & Defense) 3,550 204 Boston Scientific Corp. (Health Care Equipment)(b)(f) 6,460 79 Brandywine Realty Trust (Office REITs) 3,940 63 Bristol-Myers Squibb Co. (Pharmaceuticals) 9,210 192 Brown-Forman Corp. Class B (Distillers & Vintners)(f) 670 48 Cardinal Health, Inc. (Health Care Distributors) 5,650 278 Casey's General Stores, Inc. (Food Retail) 820 25 Caterpillar, Inc. (Construction & Farm Machinery & Heavy Trucks)(f) 1,790 107 CBS Corp. Class B (Broadcasting)(f) 6,950 101 Cephalon, Inc. (Biotechnology)(b)(f) 1,700 132 Chemtura Corp. (Specialty Chemicals)(f) 6,690 30 Chevron Corp. (Integrated Oil & Gas)(f) 6,680 551 Chubb Corp. (The) (Property & Casualty Insurance)(f) 2,670 147 CIGNA Corp. (Managed Health Care) 2,360 80 Cincinnati Financial Corp. (Property & Casualty Insurance) 2,710 77 Cisco Systems, Inc. (Communications Equipment)(b) 17,860 403 Citigroup, Inc. (Other Diversified Financial Services) 13,490 277 Coach, Inc. (Apparel, Accessories & Luxury Goods)(b)(f) 1,410 35 Coca-Cola Co. (The) (Soft Drinks) 2,560 135 Coca-Cola Enterprises, Inc. (Soft Drinks)(f) 7,440 125 ConocoPhillips (Integrated Oil & Gas)(f) 7,720 565 Corning, Inc. (Communications Equipment) 2,070 32 Cummins, Inc. (Construction & Farm Machinery & Heavy Trucks) 470 21
SHARES VALUE -------------- --------------- UNITED STATES--(CONTINUED) Darling International, Inc. (Agricultural Products)(b)(f) 2,670 $ 30 Devon Energy Corp. (Oil & Gas Exploration & Production)(f) 1,550 141 Dollar Tree, Inc. (General Merchandise Stores)(b) 1,060 39 Donnelley (R.R.) & Sons Co. (Commercial Printing)(f) 3,660 90 Dover Corp. (Industrial Machinery) 1,410 57 Dresser-Rand Group, Inc. (Oil & Gas Equipment & Services)(b) 2,020 64 Eaton Corp. (Industrial Machinery)(f) 2,640 148 eBay, Inc. (Internet Software & Services)(b) 7,060 158 Embarq Corp. (Integrated Telecommunication Services)(f) 1,360 55 Emerson Electric Co. (Electrical Components & Equipment) 5,560 227 Emulex Corp. (Communications Equipment)(b)(f) 3,610 39 Endo Pharmaceuticals Holdings, Inc. (Pharmaceuticals)(b)(f) 1,630 33 ENSCO International, Inc. (Oil & Gas Drilling)(f) 1,140 66 Expedia, Inc. (Internet Retail)(b)(f) 2,380 36 Exxon Mobil Corp. (Integrated Oil & Gas)(f) 15,440 1,199 Federated Investors, Inc. Class B (Asset Management & Custody Banks)(f) 1,680 48 Forest Laboratories, Inc. (Pharmaceuticals)(b)(f) 2,590 73 Foster Wheeler Ltd. (Construction & Engineering)(b) 3,050 110 Gap, Inc. (The) (Apparel Retail)(f) 5,090 90 Gardner Denver, Inc. (Industrial Machinery)(b) 970 34 General Dynamics Corp. (Aerospace & Defense) 910 67 GFI Group, Inc. (Investment Banking & Brokerage)(f) 4,850 23 Google, Inc. Class A (Internet Software & Services)(b) 300 120 Hartford Financial Services Group, Inc. (The) (Multi-line Insurance) 1,490 61 Hasbro, Inc. (Leisure Products)(f) 1,670 58 Healthsouth Corp. (Health Care Facilities)(b)(f) 950 17 Hewlett-Packard Co. (Computer Hardware) 13,630 630
See Notes to Financial Statements 69 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE -------------- --------------- UNITED STATES--(CONTINUED) Honeywell International, Inc. (Aerospace & Defense) 3,300 $ 137 Host Hotels & Resorts, Inc. (Specialized REITs)(f) 7,900 105 Illinois Tool Works, Inc. (Industrial Machinery)(f) 940 42 Intel Corp. (Semiconductors)(f) 16,200 303 International Business Machines Corp. (Computer Hardware)(f) 6,530 764 Invitrogen Corp. (Life Sciences Tools & Services)(b) 1,400 53 JDS Uniphase Corp. (Communications Equipment)(b)(f) 3,160 27 Johnson & Johnson (Pharmaceuticals) 5,680 393 JPMorgan Chase & Co. (Other Diversified Financial Services) 10,980 513 Juniper Networks, Inc. (Communications Equipment)(b) 1,830 39 KeyCorp (Regional Banks)(f) 2,400 29 Kimberly-Clark Corp. (Household Products)(f) 1,430 93 Kroger Co. (The) (Food Retail) 8,840 243 Lexington Realty Trust (Office REITs)(f) 5,350 92 Lincoln National Corp. (Life & Health Insurance)(f) 3,030 130 LSI Corp. (Semiconductors)(b)(f) 23,010 123 Lubrizol Corp. (The) (Specialty Chemicals)(f) 1,510 65 Macy's, Inc. (Department Stores)(f) 4,740 85 Massey Energy Co. (Coal & Consumable Fuels)(f) 450 16 McDonald's Corp. (Restaurants) 7,140 441 Medicis Pharmaceutical Corp. Class A (Pharmaceuticals)(f) 2,240 33 Merck & Co., Inc. (Pharmaceuticals) 10,320 326 MetLife, Inc. (Life & Health Insurance) 6,590 369 MF Global Ltd. (Investment Banking & Brokerage)(b)(f) 5,430 24 Microsoft Corp. (Systems Software) 31,810 849 NetApp, Inc. (Computer Storage & Peripherals)(b)(f) 2,850 52 NIKE, Inc. Class B (Footwear)(f) 2,890 193 Noble Energy, Inc. (Oil & Gas Exploration & Production)(f) 870 48 Northern Trust Corp. (Asset Management & Custody Banks) 3,270 236 Northrop Grumman Corp. (Aerospace & Defense) 1,570 95 NYSE Euronext (Specialized Finance)(f) 1,660 65 Occidental Petroleum Corp. (Integrated Oil & Gas)(f) 9,790 690 Omnicom Group, Inc. (Advertising)(f) 1,770 68 Oracle Corp. (Systems Software)(b) 15,030 305
SHARES VALUE -------------- --------------- UNITED STATES--(CONTINUED) Owens-Illinois, Inc. (Metal & Glass Containers)(b) 1,960 $ 58 Parker Hannifin Corp. (Industrial Machinery)(f) 1,505 80 Pepsi Bottling Group, Inc. (The) (Soft Drinks)(f) 1,930 56 PepsiAmericas, Inc. (Soft Drinks)(f) 2,650 55 Pfizer, Inc. (Pharmaceuticals) 34,140 630 Philip Morris International, Inc. (Tobacco) 1,270 61 Principal Financial Group, Inc. (Life & Health Insurance)(f) 3,130 136 Procter & Gamble Co. (The) (Household Products)(f) 6,050 422 Prudential Financial, Inc. (Life & Health Insurance)(f) 3,110 224 Public Service Enterprise Group, Inc. (Multi-Utilities) 5,330 175 QLogic Corp. (Computer Storage & Peripherals)(b)(f) 2,000 31 Quiksilver, Inc. (Apparel, Accessories & Luxury Goods)(b) 9,950 57 RadioShack Corp. (Computer & Electronics Retail)(f) 4,370 76 Ralcorp Holdings, Inc. (Packaged Foods & Meats)(b)(f) 550 37 Raytheon Co. (Aerospace & Defense)(f) 1,750 94 Reynolds American, Inc. (Tobacco)(f) 1,190 58 Schering-Plough Corp. (Pharmaceuticals)(f) 1,860 34 SEI Investments Co. (Asset Management & Custody Banks) 2,470 55 Sprint Nextel Corp. (Wireless Telecommunication Services)(f) 2,660 16 StanCorp Financial Group, Inc. (Life & Health Insurance)(f) 1,710 89 Stanley Works (The) (Household Appliances)(f) 1,100 46 State Street Corp. (Asset Management & Custody Banks) 3,750 213 Stone Energy Corp. (Oil & Gas Exploration & Production)(b)(f) 710 30 Symantec Corp. (Systems Software)(b)(f) 7,770 152 SYSCO Corp. (Food Distributors)(f) 10,140 313 TD Ameritrade Holding Corp. (Investment Banking & Brokerage)(b)(f) 3,290 53 Telephone & Data Systems, Inc. (Wireless Telecommunication Services)(f) 540 19 Terra Industries, Inc. (Fertilizers & Agricultural Chemicals)(f) 1,100 32 Texas Instruments, Inc. (Semiconductors)(f) 5,820 125 Thermo Fisher Scientific, Inc. (Life Sciences Tools & Services)(b) 3,320 183
SHARES VALUE -------------- --------------- UNITED STATES--(CONTINUED) Tidewater, Inc. (Oil & Gas Equipment & Services)(f) 920 $ 51 Tiffany & Co. (Specialty Stores)(f) 1,100 39 Time Warner, Inc. (Movies & Entertainment)(f) 15,080 198 TJX Cos., Inc. (The) (Apparel Retail)(f) 1,400 43 Transocean, Inc. (Oil & Gas Drilling)(b)(f) 1,470 161 Travelers Cos., Inc. (The) (Property & Casualty Insurance) 5,480 248 Tyco Electronics Ltd. (Electronic Manufacturing Services) 1,520 42 Tyco International Ltd. (Industrial Conglomerates)(f) 5,502 193 United Technologies Corp. (Aerospace & Defense) 6,090 366 UnitedHealth Group, Inc. (Managed Health Care) 3,190 81 Unum Group (Life & Health Insurance) 2,290 57 Verizon Communications, Inc. (Integrated Telecommunication Services) 7,410 238 VF Corp. (Apparel, Accessories & Luxury Goods)(f) 830 64 Viacom, Inc. Class B (Movies & Entertainment)(b) 6,790 169 W&T Offshore, Inc. (Oil & Gas Exploration & Production) 2,110 58 Wal-Mart Stores, Inc. (Hypermarkets & Super Centers) 4,180 250 Walt Disney Co. (The) (Movies & Entertainment)(f) 14,310 439 Waste Management, Inc. (Environmental & Facilities Services)(f) 2,620 82 WellPoint, Inc. (Managed Health Care)(b) 2,370 111 Wells Fargo & Co. (Diversified Banks)(f) 1,750 66 Western Union Co. (The) (Data Processing & Outsourced Services) 2,990 74 Williams Cos., Inc. (The) (Oil & Gas Storage & Transportation)(f) 3,410 81 Windstream Corp. (Integrated Telecommunication Services)(f) 18,440 202 - -------------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $24,878) 24,755 - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS(c)--66.7% AUSTRALIA--2.4% Aquila Resources Ltd. (Coal & Consumable Fuels)(b) 8,830 65 Ausenco Ltd. (Construction & Engineering) 1,109 10 Australian Vintage Ltd. (Brewers)(b) 13,002 7 BHP Billiton Ltd. (Diversified Metals & Mining) 15,427 399
See Notes to Financial Statements 70 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- AUSTRALIA--(CONTINUED) Carbon Energy Ltd. (Diversified Metals & Mining)(b) 20,639 $ 9 Flight Centre Ltd. (Education Services)(f) 1,296 20 Incitec Pivot Ltd. (Fertilizers & Agricultural Chemicals) 6,500 26 JB Hi-Fi Ltd. (Computer & Electronics Retail)(f) 4,030 40 Northern Iron Ltd. (Steel)(b) 9,375 21 Orica Ltd. (Diversified Chemicals) 10,557 178 Paladin Energy Ltd. (Coal & Consumable Fuels)(b)(f) 53,100 164 QBE Insurance Group Ltd. (Property & Casualty Insurance) 19,665 424 Rio Tinto Ltd. (Diversified Metals & Mining) 2,262 153 Riversdale Mining Ltd. (Diversified Metals & Mining)(b) 10,406 70 Santos Ltd. (Oil & Gas Exploration & Production) 16,224 248 Sims Group Ltd. (Steel) 1,882 46 --------------- 1,880 --------------- BELGIUM--0.7% Dexia SA (Diversified Banks)(f) 41,946 458 Sipef SA (Agricultural Products) 31 13 Tessenderlo Chemie NV (Commodity Chemicals) 806 40 --------------- 511 --------------- BERMUDA--0.2% Aquarius Platinum Ltd. (Precious Metals & Minerals) 14,898 67 Lancashire Holdings Ltd. (Multi-line Insurance) 2,728 15 Luk Fook Holdings International Ltd. (Specialty Stores) 16,000 6 OM Holdings Ltd. (Diversified Metals & Mining) 40,269 64 --------------- 152 --------------- BRAZIL--0.0% Metalurgica Gerdau SA (Steel) 1,100 17 --------------- CANADA--0.3% CGI Group, Inc. Class A (IT Consulting & Other Services)(b) 4,400 39 Churchill Corp. (The) Class A (Construction & Engineering)(b) 3,100 30 Cott Corp. (Soft Drinks)(b) 4,122 4 Empire Co., Ltd. Class A (Food Retail) 600 24 Glentel, Inc. (Computer & Electronics Retail) 214 2 Indigo Books & Music, Inc. (Specialty Stores)(b) 600 8 Sherritt International Corp. (Diversified Metals & Mining) 239 1
SHARES VALUE --------------- --------------- CANADA--(CONTINUED) Superior Plus Income Fund (Trading Companies & Distributors) 800 $ 9 Teck Cominco Ltd. (Diversified Metals & Mining) 5,280 150 --------------- 267 --------------- CHINA--0.5% China COSCO Holdings Co., Ltd. (Marine) 60,000 55 Huaneng Power International, Inc. (Electric Utilities) 202,000 134 PetroChina Co., Ltd. Class H (Integrated Oil & Gas) 156,000 162 SunVic Chemical Holdings Ltd. (Fertilizers & Agricultural Chemicals) 62,000 10 --------------- 361 --------------- DENMARK--0.3% D/S Norden (Marine) 5,125 247 --------------- FINLAND--0.8% Fortum Oyj (Electric Utilities) 8,000 269 Nokia Oyj (Communications Equipment) 16,900 315 --------------- 584 --------------- FRANCE--6.7% Alstom (Heavy Electrical Equipment) 3,026 230 AXA SA (Multi-line Insurance)(f) 11,600 380 Bigben Interactive (Leisure Products)(b) 3,426 32 BNP Paribas SA (Diversified Banks)(f) 12,055 1,151 Bouygues SA (Construction & Engineering) 3,200 145 France Telecom SA (Integrated Telecommunication Services) 38,444 1,078 GDF Suez (Multi-Utilities) 3,990 208 LVMH Moet Hennessy Louis Vuitton SA (Apparel, Accessories & Luxury Goods) 3,204 281 PSA Peugeot Citroen SA (Automobile Manufacturers) 12,487 470 Rallye SA (Specialty Stores) 921 27 Suez Environnement SA (Environmental & Facilities Services)(b) 1,050 26 Technip SA (Oil & Gas Equipment & Services) 2,411 135 Total SA (Integrated Oil & Gas) 7,300 443 UBISOFT Entertainment (Home Entertainment Software)(b) 538 37 Vallourec SA (Industrial Machinery) 700 151 Vivendi Universal SA (Movies & Entertainment) 10,677 335 --------------- 5,129 ---------------
SHARES VALUE --------------- --------------- GERMANY--6.1% Allgeier Holding AG (IT Consulting & Other Services) 3,049 $ 28 Allianz AG Registered Shares (Multi-line Insurance) 1,945 267 Arcandor AG (Department Stores)(b) 7,378 24 Arques Industries AG (Health Care Facilities)(b)(f) 1,074 9 Bayer AG (Pharmaceuticals) 4,500 330 Bechtle AG (IT Consulting & Other Services) 546 11 Daimler AG (Automobile Manufacturers) 1,728 86 Deutsche Bank AG Registered Shares (Diversified Capital Markets) 6,800 486 Deutsche Lufthansa AG Registered Shares (Airlines) 18,485 361 Deutsche Telekom AG Registered Shares (Integrated Telecommunication Services) 43,494 661 E.ON AG (Electric Utilities) 22,008 1,108 GEA Group AG (Industrial Machinery) 6,832 132 Gesco AG (Industrial Machinery) 1,247 74 Kloeckner & Co. AG (Trading Companies & Distributors) 4,571 105 Loewe AG (Consumer Electronics) 1,699 23 MAN AG (Industrial Machinery) 3,161 213 Medion AG (Distributors) 1,884 21 Norddeutsche Affinerie AG (Diversified Metals & Mining)(f) 1,413 60 Salzgitter AG (Steel) 1,434 145 Symrise AG (Fertilizers & Agricultural Chemicals) 7,089 120 ThyssenKrupp AG (Steel) 13,752 413 --------------- 4,677 --------------- GREECE--0.5% Alpha Bank AE (Diversified Banks) 15,254 332 Sprider Stores SA (Apparel, Accessories & Luxury Goods) 18,261 39 --------------- 371 --------------- HONG KONG--2.1% Bank of East Asia Ltd. (Diversified Banks) 43,000 135 Cheung Kong Holdings Ltd. (Real Estate Development) 22,000 249 China Mobile Ltd. (Wireless Telecommunication Services) 18,000 180 Chun Wo Development Holdings Ltd. (Construction & Engineering) 33,159 3 Hang Lung Properties Ltd. (Diversified Real Estate Activities) 83,000 195 Hutchison Whampoa Ltd. (Industrial Conglomerates) 50,000 384
See Notes to Financial Statements 71 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- HONG KONG--(CONTINUED) Midland Holdings Ltd. (Diversified Real Estate Activities) 62,000 $ 20 Norstar Founders Group Ltd. (Tires & Rubber) 456,000 79 Pacific Andes International Holdings Ltd. (Packaged Foods & Meats) 108,000 12 Sinolink Worldwide Holdings Ltd. (Diversified Real Estate Activities) 176,000 17 Television Broadcasts Ltd. (Broadcasting) 52,000 221 VTech Holdings Ltd. (Communications Equipment) 19,907 117 --------------- 1,612 --------------- ITALY--1.8% AS Roma S.p.A. (Movies & Entertainment)(b) 12,914 13 Banca Popolare dell'Emilia Romagna Scrl (Regional Banks) 1,113 16 ENI S.p.A. (Integrated Oil & Gas) 27,029 716 Fiat S.p.A. (Automobile Manufacturers) 14,716 198 Indesit Co. S.p.A. (Household Appliances) 3,033 32 Istituto Finanziario Industriale S.p.A. (Multi-Sector Holdings)(b) 1,354 15 UniCredito Italiano S.p.A. (Diversified Banks) 104,800 392 --------------- 1,382 --------------- JAPAN--16.5% 77 Bank Ltd. (The) (Regional Banks) 7,000 35 Able, Inc. (Diversified Real Estate Activities) 1,000 10 Aichi Bank Ltd. (The) (Regional Banks) 200 14 Aichi Machine Industry Co., Ltd. (Auto Parts & Equipment) 8,000 18 Aisin Seiki Co., Ltd. (Auto Parts & Equipment) 169 4 Allied Telesis Holdings KK (Communications Equipment)(b) 23,500 11 Alpen Co., Ltd. (Specialty Stores) 1,400 27 Arc Land Sakamoto Co., Ltd. (Home Improvement Retail) 2,500 23 Asset Managers Holdings Co., Ltd. (Asset Management & Custody Banks) 4 1 Bank of Nagoya Ltd. (The) (Regional Banks) 4,000 22 Bank of Yokohama Ltd. (The) (Regional Banks) 27,000 134 Belc Co., Ltd. (General Merchandise Stores) 1,800 17
SHARES VALUE --------------- --------------- JAPAN--16.5% Canon Marketing Japan, Inc. (Distributors) 20 $ --(e) Capcom Co., Ltd. (Home Entertainment Software)(f) 3,800 109 Chuo Denki Kogyo Co., Ltd. (Diversified Metals & Mining)(f) 3,000 25 Chuo Mitsui Trust Holdings, Inc. (Diversified Banks) 6,000 32 Daihatsu Motor Co., Ltd. (Automobile Manufacturers)(f) 21,000 230 Daikokutenbussan Co., Ltd. (General Merchandise Stores) 2,200 24 Daishinku Corp. (Construction Materials) 2,000 7 East Japan Railway Co. (Railroads) 55 410 Elecom Co., Ltd. (Computer Storage & Peripherals) 1,400 7 FamilyMart Co., Ltd. (Food Retail) 4,400 186 FANUC Ltd. (Industrial Machinery) 4,500 339 Fuji Heavy Industries Ltd. (Automobile Manufacturers)(f) 11,000 56 Fujikura Kasei Co., Ltd. (Construction Materials) 4,100 26 Fujitsu Ltd. (Computer Hardware) 29,000 163 Fukuda Corp. (Construction & Engineering) 8,000 17 Furuno Electric Co., Ltd. (Household Appliances) 1,000 9 Hanwa Co., Ltd. (Trading Companies & Distributors) 11,000 38 Hitachi Construction Machinery Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(f) 11,100 274 Hitachi Ltd. (Electronic Equipment & Instruments) 157,000 1,060 Hitachi Metals Ltd. (Steel)(f) 16,000 191 Hokkaido Gas Co., Ltd. (Gas Utilities) 4,000 10 Hosiden Corp. (Electronic Components)(f) 3,700 53 Hurxley Corp. (Restaurants) 3,500 35 Imasen Electric Industrial (Auto Parts & Equipment) 4,400 41 INPEX Corp. (Oil & Gas Exploration & Production)(f) 45 382 Intage, Inc. (Advertising) 1,000 15 Itoham Foods, Inc. (Packaged Foods & Meats) 3,000 14 Iyo Bank Ltd. (The) (Regional Banks)(f) 4,000 44 J-Oil Mills, Inc. (Packaged Foods & Meats) 2,000 9 JMS Co., Ltd. (Health Care Equipment) 5,000 13 Kanto Auto Works Ltd. (Auto Parts & Equipment) 1,700 21 Kao Corp. (Household Products) 8,000 215
SHARES VALUE --------------- --------------- JAPAN--(CONTINUED) Kato Sangyo Co., Ltd. (Food Distributors) 1,600 $ 19 Keiyo Bank Ltd. (The) (Regional Banks) 5,000 24 Kintetsu World Express, Inc. (Air Freight & Logistics) 800 13 Kinugawa Rubber Industrial Co., Ltd. (Auto Parts & Equipment) 22,000 46 Kioritz Corp. (Industrial Machinery) 4,000 8 Kishu Paper Co., Ltd. (Paper Products)(b) 8,000 9 Kito Corp. (Construction & Farm Machinery & Heavy Trucks) 20 22 KK DaVinci Holdings (Real Estate Services)(b)(f) 39 9 Kohnan Shoji Co., Ltd. (General Merchandise Stores) 2,500 37 Kosaido Co., Ltd. (Commercial Printing)(b) 9,300 29 Kyodo Printing Co., Ltd. (Commercial Printing) 2,000 5 Mag Net, Inc. (Industrial Conglomerates)(b) 1,000 3 Marubeni Corp. (Trading Companies & Distributors) 147,000 666 Mitsubishi Corp. (Trading Companies & Distributors) 10,400 217 Mitsubishi Electric Corp. (Heavy Electrical Equipment)(f) 3,000 20 Mitsubishi Paper Mills Ltd. (Paper Products) 9,000 19 Mitsubishi UFJ Financial Group, Inc. (Diversified Banks) 53,700 468 Mitsui & Co., Ltd. (Trading Companies & Distributors) 27,000 335 Mitsui Fudosan Co., Ltd. (Diversified Real Estate Activities) 17,000 328 Mitsui O.S.K. Lines Ltd. (Marine) 9,000 78 Murata Manufacturing Co., Ltd. (Electronic Components)(f) 6,700 271 Namura Shipbuilding Co., Ltd. (Construction & Farm Machinery & Heavy Trucks) 1,600 4 NEC Electronics Corp. (Semiconductors)(b)(f) 9,100 190 NGK Insulators Ltd. (Industrial Machinery) 7,000 86 Nichiban Co., Ltd. (Office Services & Supplies) 8,000 26 Nidec Corp. (Electronic Components)(f) 4,300 265 NIFTY Corp. (Internet Software & Services) 51 42 Nihon Housing Co., Ltd. (Diversified Real Estate Activities) 1,300 12 Nintendo Co. Ltd. (Home Entertainment Software) 2,200 933
See Notes to Financial Statements 72 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- JAPAN--(CONTINUED) Nippon Chemical Industrial Co., Ltd. (Fertilizers & Agricultural Chemicals) 8,000 $ 17 Nippon Shinyaku Co., Ltd. (Pharmaceuticals) 2,000 19 Nippon Telegraph & Telephone Corp. (Integrated Telecommunication Services) 112 500 NIS Group Co., Ltd. (Consumer Finance)(b) 14,800 16 Nissan Shatai Co., Ltd. (Auto Parts & Equipment) 3,000 20 Nomura Holdings, Inc. (Investment Banking & Brokerage) 31,100 406 Nomura Research Institute Ltd. (IT Consulting & Other Services) 14,000 288 Ogaki Kyoritsu Bank Ltd. (The) (Regional Banks) 3,000 16 Ohashi Technica, Inc. (Trading Companies & Distributors) 1,300 9 Okinawa Electric Power Co., Inc. (The) (Electric Utilities) 300 14 Ozeki Co., Ltd. (Food Retail) 700 19 Plenus Co., Ltd. (Restaurants 2,200 27 Proto Corp. (Advertising) 500 12 Raito Kogyo Co., Ltd. (Construction & Engineering) 5,900 13 Relo Holdings, Inc. (Diversified Support Services) 900 8 Ricoh Leasing Co., Ltd. (Specialized Finance) 600 10 Riso Kagaku Corp. (Office Electronics) 1,400 16 Sakai Moving Service Co., Ltd. (Trucking) 600 12 San-A Co., Ltd. (Hotels, Resorts & Cruise Lines) 400 13 Sanix, Inc. (Education Services)(b) 6,300 18 Sanken Electric Co., Ltd. (Semiconductors)(f) 14,000 59 Sanki Engineering Co., Ltd. (Construction & Engineering) 2,000 14 Sankyo-Tateyama Holdings, Inc. (Building Products) 11,000 12 Seiko Epson Corp. (Computer Storage & Peripherals)(f) 4,300 100 Shidax Corp. (Restaurants) 27 10 Shin-Etsu Chemical Co. Ltd. (Specialty Chemicals) 6,300 300 Shizuoka Gas Co., Ltd. (Gas Utilities) 4,000 15 Siix Corp. (Trading Companies & Distributors) 1,800 7 Sinko Industries Ltd. (Building Products) 7,000 30 Sumitomo Densetsu Co., Ltd. (Construction & Engineering) 2,900 14 Sumitomo Mitsui Financial Group, Inc. (Diversified Banks)(f) 72 451 Sun Frontier Fudousan Co., Ltd. (Diversified Real Estate Activities)(f) 40 17 Tachi-S Co., Ltd. (Auto Parts & Equipment) 4,800 42
SHARES VALUE --------------- --------------- JAPAN--(CONTINUED) Taihei Kogyo Co., Ltd. (Construction & Engineering) 10,000 $ 26 Taisei Rotec Corp. (Construction & Engineering) 35,000 57 Takara Printing Co., Ltd. (Commercial Printing) 1,100 10 Takeda Pharmaceutical Co., Ltd. (Pharmaceuticals)(f) 8,600 433 Toa Corp. (Construction & Engineering)(b) 30,000 33 Toa Road Corp. (Construction & Engineering) 6,000 8 Toagosei Co., Ltd. (Diversified Chemicals)(f) 9,000 23 Tokai Corp. (Gas Utilities) 9,000 46 Tokyo Tekko Co., Ltd. (Steel) 6,000 14 Tosei Corp. (Diversified Real Estate Activities) 68 22 Toyo Kohan Co., Ltd. (Steel) 3,000 12 Toyo Tire & Rubber Co., Ltd. (Tires & Rubber) 2,000 6 Toyoda Gosei Co., Ltd. (Auto Parts & Equipment) 1,495 25 Toyota Auto Body Co., Ltd. (Auto Parts & Equipment) 4,000 73 Toyota Motor Corp. (Automobile Manufacturers) 10,200 436 TS Tech Co., Ltd. (Tires & Rubber) 2,600 25 Tsudakoma Corp. (Industrial Machinery) 63,000 107 U-Shin Ltd. (Auto Parts & Equipment) 2,200 15 Usen Corp. (Broadcasting)(b)(f) 31,548 51 Yamaguchi Financial Group, Inc. (Regional Banks) 2,000 24 Yamato Kogyo Co., Ltd. (Steel)(f) 2,500 87 --------------- 12,612 --------------- KAZAKHSTAN--0.1% Kazakhmys plc (Diversified Metals & Mining) 6,725 71 --------------- LUXEMBOURG--1.0% ArcelorMittal (Steel) 15,039 762 --------------- MALAYSIA--0.1% Kulim Malaysia Bhd (Agricultural Products) 14,500 23 Lion Industries Corp. Bhd (Steel) 14,700 6 RHB Capital Bhd (Regional Banks) 17,300 20 --------------- 49 --------------- MEXICO--0.2% Grupo Mexico S.A.B. de C.V. Series B (Diversified Metals & Mining) 39,864 42 Grupo Simec S.A.B. de C.V. Series B (Building Products)(b) 8,500 25 Industrias CH S.A.B. de C.V. (Steel)(b) 6,300 23
SHARES VALUE --------------- --------------- MEXICO--(CONTINUED) Mexichem S.A.B. de C.V. (Fertilizers & Agricultural Chemicals) 40,063 $ 73 --------------- 163 --------------- NETHERLANDS--2.9% ASML Holding N.V. (Semiconductor Equipment)(d) 12,155 213 Draka Holding N.V. (Electrical Components & Equipment)(d)(f) 3,751 77 Heineken N.V. (Brewers)(d) 6,300 253 ING Groep N.V. (Other Diversified Financial Services)(d) 49,975 1,071 OCE N.V. (Office Electronics)(d)(f) 4,164 30 Unilever N.V. (Packaged Foods & Meats)(d) 9,732 274 Wolters Kluwer N.V. (Publishing)(d) 13,471 273 --------------- 2,191 --------------- NEW ZEALAND--0.2% New Zealand Oil & Gas Ltd. (Oil & Gas Exploration & Production) 107,865 93 Tower Ltd. (Multi-line Insurance) 50,048 59 --------------- 152 --------------- NORWAY--0.3% Ementor ASA (IT Consulting & Other Services)(b) 8,600 37 ODIM ASA (Highways & Railtracks)(b) 600 8 Yara International ASA (Fertilizers & Agricultural Chemicals) 4,400 157 --------------- 202 --------------- RUSSIA--0.5% Gazprom OAO Sponsored ADR (Integrated Oil & Gas) 3,150 98 Gazpromneft OAO ADR (Integrated Oil & Gas) 1,600 32 LUKOIL Sponsored ADR (Integrated Oil & Gas)(f) 4,839 288 --------------- 418 --------------- SINGAPORE--0.8% Boustead Singapore Ltd. (Trading Companies & Distributors) 52,000 34 CapitaLand Ltd. (Diversified Real Estate Activities) 63,000 137 Golden Agri-Resources Ltd. (Agricultural Products) 138,000 31 Hi-P International Ltd. (Industrial Machinery) 65,000 17 Jardine Cycle & Carriage Ltd. (Distributors)(f) 30,000 330 L.C. Development Ltd. (Diversified Real Estate Activities) 29,000 2
See Notes to Financial Statements 73 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- SINGAPORE--(CONTINUED) Mercator Lines Singapore Ltd. (Marine) 72,000 $ 11 Rotary Engineering Ltd. (Construction & Engineering) 44,000 14 Seagate Technology (Computer Storage & Peripherals)(f) 2,970 36 Swiber Holdings Ltd. (Oil & Gas Equipment & Services)(b) 10,000 8 --------------- 620 --------------- SOUTH AFRICA--0.1% ArcelorMittal South Africa Ltd. (Steel) 5,467 110 --------------- SOUTH KOREA--1.5% Hana Financial Group, Inc. (Regional Banks) 930 22 Hyundai Steel Co. (Steel) 1,020 51 Kookmin Bank (Diversified Banks)(h) 2,043 91 Korea Kumho Petrochemical Co. (Construction Materials) 1,720 57 KT Corp. (Integrated Telecommunication Services) 3,720 128 LG Display Co., Ltd. (Technology Distributors) 11,410 291 LG Electronics, Inc. (Household Appliances) 2,930 271 LG Micron Ltd. (Electronic Components)(b) 458 12 Samsung SDI Co., Ltd. (Electronic Components)(b) 224 16 Shinwon Corp. (Apparel, Accessories & Luxury Goods) 108,850 169 STX Pan Ocean Co., Ltd. (Marine)(f) 34,000 47 --------------- 1,155 --------------- SPAIN--1.2% Banco Santander SA (Diversified Banks) 20,852 313 Construcciones y Auxiliar de Ferrocarriles SA (Construction & Farm Machinery & Heavy Trucks) 85 30 Telefonica S.A. (Integrated Telecommunication Services) 23,700 563 --------------- 906 --------------- SWEDEN--0.4% Autoliv, Inc. (Auto Parts & Equipment)(f) 830 28 JM AB (Homebuilding) 3,200 26 Nordea Bank AB (Diversified Banks) 11,600 139 Telefonaktiebolaget LM Ericsson Class B (Communications Equipment) 14,543 138 --------------- 331 ---------------
SHARES VALUE --------------- --------------- SWITZERLAND--5.6% Credit Suisse Group AG Registered Shares (Diversified Capital Markets) 12,417 $ 580 Forbo Holding AG Registered Shares (Home Furnishings)(b) 30 12 Galenica AG Registered Shares (Health Care Distributors) 406 145 Holcim Ltd. Registered Shares (Construction Materials) 5,800 425 Kardex AG (Electronic Equipment & Instruments)(b) 1,741 78 Meyer Burger Technology AG (Industrial Machinery)(b) 78 17 Mobilezone Holding AG (Computer & Electronics Retail) 9,439 63 Nestle S.A. Registered Shares (Packaged Foods & Meats) 11,407 493 Novartis AG Registered Shares (Pharmaceuticals) 5,900 310 Roche Holding AG Registered Shares (Pharmaceuticals) 3,814 597 Syngenta AG Registered Shares (Fertilizers & Agricultural Chemicals) 1,000 211 Vaudoise Assurances Holding SA (Multi-line Insurance) 79 13 Zurich Financial Services AG Registered Shares (Multi-line Insurance) 4,867 1,348 --------------- 4,292 --------------- TAIWAN--0.7% Chi Mei Optoelectronics Corp. (Electronic Components) 11,550 8 Chunghwa Telecom Co., Ltd. (Integrated Telecommunication Services)(b) 124,674 293 Taiwan Semiconductor Manufacturing Co. Ltd. Sponsored ADR (Semiconductors)(f) 23,611 221 Tatung Co., Ltd. (Electronic Equipment & Instruments)(b) 19,000 4 --------------- 526 --------------- TURKEY--0.2% Sekerbank T.A.S. (Regional Banks) 6,629 10 Tupras-Turkiye Petro Rafinerileri A.S. (Oil & Gas Refining & Marketing) 6,335 115 --------------- 125 --------------- UNITED KINGDOM--11.6% 3i Group plc (Asset Management & Custody Banks) 15,349 194 Antofagasta plc (Diversified Metals & Mining) 88,022 639 AstraZeneca plc (Pharmaceuticals) 27,426 1,200
SHARES VALUE --------------- --------------- UNITED KINGDOM--11.6% Aveva Group plc (Application Software) 1,271 $ 26 Aviva plc (Multi-line Insurance) 24,270 211 BAE Systems plc (Aerospace & Defense) 29,710 219 BHP Billiton plc (Diversified Metals & Mining) 7,070 160 BP plc (Integrated Oil & Gas) 57,745 481 British American Tobacco plc (Tobacco) 11,675 381 British Sky Broadcasting Group plc (Cable & Satellite) 38,700 288 BT Group plc (Integrated Telecommunication Services) 48,160 140 Character Group plc (The) (Leisure Products) 2,889 2 GlaxoSmithKline plc (Pharmaceuticals) 22,300 483 IG Group Holdings plc (Investment Banking & Brokerage) 11,885 67 Legal & General Group plc (Life & Health Insurance) 172,300 311 Micro Focus International plc (Application Software) 3,289 17 National Grid plc (Multi-Utilities) 28,212 358 Petrofac Ltd. (Oil & Gas Equipment & Services) 1,523 16 Reckitt Benckiser Group plc (Household Products) 715 35 Rio Tinto plc (Diversified Metals & Mining) 6,897 433 Royal Dutch Shell plc Class A (Integrated Oil & Gas) 11,460 331 Royal Dutch Shell plc Class A (Integrated Oil & Gas)(d) 55,892 1,647 SABMiller plc (Brewers) 10,400 203 Smith & Nephew plc (Health Care Equipment) 21,200 224 Smiths Group plc (Industrial Conglomerates) 15,379 279 Telecom Plus plc (Integrated Telecommunication Services) 6,686 40 Thomas Cook Group plc (Hotels, Resorts & Cruise Lines) 8,757 35 Vodafone Group plc (Wireless Telecommunication Services) 201,925 446 --------------- 8,866 --------------- UNITED STATES--0.4% Accenture Ltd. Class A (IT Consulting & Other Services) 4,600 175 Freeport-McMoRan Copper & Gold, Inc. (Diversified Metals & Mining) 610 35 Herbalife Ltd. (Personal Products) 2,080 82
See Notes to Financial Statements 74 VIRTUS WORLDWIDE STRATEGIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands)
SHARES VALUE --------------- --------------- UNITED STATES--(CONTINUED) Ingersoll-Rand Co., Ltd. Class A (Industrial Machinery)(f) 660 $ 20 Methanex Corp. (Commodity Chemicals) 1,100 22 --------------- 334 - -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $61,264) 51,075 - -------------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.1% (IDENTIFIED COST $86,142) 75,830 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--18.8% MONEY MARKET MUTUAL FUNDS--18.8% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 463,858 464 State Street Navigator Prime Plus (seven-day effective yield 2.765%)(g) 13,953,313 13,953 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $14,417) 14,417 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS--117.9% (IDENTIFIED COST $100,559) 90,247(a) Other assets and liabilities, net--(17.9)% (13,716) --------------- NET ASSETS--100.0% $ 76,531 ===============
FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $5,036 and gross depreciation of $15,696 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $100,907. (b) Non-income producing. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (d) Shares traded on Amsterdam Exchange. (e) Amount is less than $500 (not reported in thousands). (f) All or a portion of security is on loan. (g) Represents security purchased with cash collateral received for securities on loan. (h) Illiquid security. Security valued at fair value as determined in good faith by or under the direction of the Trustees. At September 30, 2008, this security amounted to a value of $91 or 0.1% of net assets. See Notes to Financial Statements 75 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2008 (Amounts reported in thousands except per share amounts)
ALTERNATIVE FUNDS ----------------------------------------- INTERNATIONAL REAL GLOBAL ESTATE MARKET INFRASTRUCTURE SECURITIES NEUTRAL FUND FUND FUND -------------- ------------- -------- ASSETS Investment in securities at value(1) ........................................ $ 79,441 $54,873 $135,928 Investment in affiliated funds at value(2) .................................. -- -- -- Foreign currency at value(3) ................................................ 33 27 1 Cash ........................................................................ 165 -- 543 Deposits with broker for securities sold short .............................. -- -- 120,387 Receivables ................................................................. Investment securities sold ............................................... -- -- 6,586 Fund shares sold ......................................................... 234 6,503 406 Receivable from adviser .................................................. -- -- -- Receivable from non-affiliate ............................................ -- -- -- Dividends ................................................................ 167 165 187 Interest ................................................................. 4 4 38 Tax reclaims ............................................................. 28 4 4 Prepaid expenses ............................................................ 20 24 19 Other assets ................................................................ 1 -- 8 -------- ------- -------- Total assets .......................................................... 80,093 61,600 264,107 -------- ------- -------- LIABILITIES Cash overdraft .............................................................. -- -- -- Securities sold short at value(4) ........................................... -- -- 114,393 Payables .................................................................... Fund shares repurchased .................................................. 37 -- 13,696 Investment securities purchased .......................................... 2,346 388 9,454 Dividends on short sales ................................................. -- -- 249 Investment advisory fee .................................................. 36 21 141 Distribution and service fees ............................................ 18 12 33 Administration fee ....................................................... 5 3 8 Transfer agent fees and expenses ......................................... 5 1 13 Trustees' fee and expenses ............................................... 1 --(6) 1 Professional fee ......................................................... 29 29 37 Trustee deferred compensation plan ....................................... 1 -- 8 Other accrued expenses ................................................... 13 29 26 -------- ------- -------- Total liabilities ..................................................... 2,491 483 138,059 -------- ------- -------- NET ASSETS ..................................................................... $ 77,602 $61,117 $126,048 ======== ======= ======== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ............................ $ 87,792 $70,099 $152,408 Accumulated undistributed net investment income (loss) ...................... 80 330 (23) Accumulated undistributed net realized gain (loss) .......................... 389 (694) (28,553) Net unrealized appreciation (depreciation) on investments ................... (10,659) (8,618) (7,915) Net unrealized appreciation (depreciation) on securities sold short ......... -- -- 10,131 -------- ------- -------- NET ASSETS ..................................................................... $ 77,602 $61,117 $126,048 ======== ======= ======== CLASS A: Net asset value per share (Net assets/shares outstanding) ............. $ 10.91 $ 6.72 $ 9.81 -------- ------- -------- Maximum offering price per share(5) ................................... $ 11.58 $ 7.13 $ 10.41 -------- ------- -------- Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................................... 6,934 9,061 12,166 -------- ------- -------- Net Assets ............................................................ $ 75,664 $60,907 $119,387 -------- ------- -------- CLASS B: Net asset value (Net assets/shares outstanding) and offering price per share .............................................................. -- -- $ 9.47 -------- ------- -------- Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................................... -- -- 177 -------- ------- -------- Net Assets ............................................................ -- -- $ 1,678 -------- ------- -------- CLASS C: Net asset value (Net assets/shares outstanding) and offering price per share ........................................................... $ 10.89 $ 6.70 $ 9.43 -------- ------- -------- Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................................... 170 21 529 -------- ------- -------- Net Assets ............................................................ $ 1,856 $ 141 $ 4,983 -------- ------- -------- CLASS I: Net asset value (Net assets/shares outstanding) and offering price per share .............................................................. $ 10.90 $ 6.72 -- -------- ------- -------- Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................................... 8 10 -- -------- ------- -------- Net Assets ............................................................ $ 82 $ 69 -- -------- ------- -------- (1) Investment in securities at cost ....................................... $ 90,097 $63,490 $143,848 (2) Investment in affiliated funds at cost ................................. -- -- -- (3) Foreign currency at cost ............................................... 33 27 1 (4) Proceeds from securities sold short .................................... -- -- 124,586 (5) Maximum offering price per share represents NAV/(1-5.75%) (6) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements 76
FUNDS OF FUNDS - ------------------------------------------------ ALTERNATIVES WEALTH WEALTH WEALTH DIVERSIFIER ACCUMULATOR BUILDER GUARDIAN FUND FUND FUND FUND - ------------ ----------- -------- -------- $130,947 $ 35 $ -- $ 89 273,617 10,820 91,276 45,452 -- -- -- 201 -- -- -- -- -- -- -- 12,600 169 3,841 1,120 5,498 --(6) 41 15 53 4 5 3 --(6) -- -- -- -- -- 24 26 -- -- -- -- 3 --(6) 1 --(6) 33 13 19 15 --(6) --(6) 7 3 -------- ------- -------- ------- 422,952 11,041 95,214 46,723 -------- ------- -------- ------- -- -- 59 -- -- -- -- -- 2,870 35 275 440 14,538 127 3,375 935 -- -- -- -- -- -- -- -- 113 2 33 14 25 1 7 3 61 4 25 8 3 --(6) 1 --(6) 32 18 19 19 --(6) --(6) 7 3 52 2 10 6 -------- ------- -------- ------- 17,694 189 3,811 1,428 -------- ------- -------- ------- $405,258 $10,852 $ 91,403 $45,295 ======== ======= ======== ======= $442,130 $13,043 $ 99,321 $49,831 416 14 374 397 (15,206) (223) 540 (286) (22,082) (1,982) (8,832) (4,647) -- -- -- -- -------- ------- -------- ------- $405,258 $10,852 $ 91,403 $45,295 ======== ======= ======== ======= $ 10.62 $ 9.37 $ 9.95 $ 9.78 -------- ------- -------- ------- $ 11.27 $ 9.94 $ 10.56 $ 10.38 -------- ------- -------- ------- 25,179 778 4,162 2,388 -------- ------- -------- ------- $267,294 $ 7,290 $ 41,396 $23,358 -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- $ 10.50 $ 9.26 $ 9.88 $ 9.75 -------- ------- -------- ------- 13,136 385 5,061 2,249 -------- ------- -------- ------- $137,964 $ 3,562 $ 50,007 $21,937 -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- -- -- -- -- -------- ------- -------- ------- $133,572 $ 35 $ -- $ 89 293,074 12,802 100,108 50,099 -- -- -- -- -- -- -- --
See Notes to Financial Statements 77 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2008 (Amounts reported in thousands except per share amounts)
FIXED INCOME FUNDS ------------------------------------- CA TAX-EXEMPT CORE BOND FUND BOND FUND BOND FUND --------- ------------- --------- ASSETS Investment in securities at value(1)(2) ............................... $178,726 $61,402 $ 58,002 Foreign currency at value(3) .......................................... -- -- -- Cash .................................................................. -- -- 19 Receivables ........................................................... Investment securities sold ......................................... 8,708 -- -- Fund shares sold ................................................... 102 103 11 Dividends .......................................................... -- -- -- Interest ........................................................... 1,518 864 453 Tax reclaims ....................................................... -- -- -- Unrealized appreciation on forward currency contracts ................. -- -- -- Prepaid expenses ...................................................... 31 13 17 Other assets .......................................................... 6 4 4 -------- ------- -------- Total assets ................................................. 189,091 62,386 58,506 -------- ------- -------- LIABILITIES Cash overdraft ........................................................ 16 -- -- Payables .............................................................. Fund shares repurchased ............................................ 2,223 97 86 Investment securities purchased .................................... 14,084 -- -- Upon return of securities loaned ................................... -- -- 386 Dividend distributions ............................................. -- 125 -- Investment advisory fee ............................................ 66 14 14 Distribution and service fees ...................................... 11 7 14 Administration fee ................................................. 13 5 4 Transfer agent fees and expenses ................................... 11 4 16 Trustees' fees and expenses ........................................ 2 1 --(6) Professional fee ................................................... 35 30 30 Trustee deferred compensation plan ................................. 6 4 4 Other accrued expenses ............................................. 57 9 9 -------- ------- -------- Total liabilities ............................................ 16,524 296 563 -------- ------- -------- NET ASSETS ............................................................... $172,567 $62,090 $ 57,943 ======== ======= ======== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ...................... $194,155 $63,644 $ 74,495 Accumulated undistributed net investment income (loss) ................ 50 58 72 Accumulated undistributed net realized gain (loss) .................... (15,000) (53) (11,753) Net unrealized appreciation (depreciation) on investments ............. (6,638) (1,559) (4,871) -------- ------- -------- NET ASSETS ............................................................... $172,567 $62,090 $ 57,943 ======== ======= ======== CLASS A: Net asset value per share (Net assets/shares outstanding) ....... $ 9.75 $ 11.41 $ 7.75 -------- ------- -------- Maximum offering price per share(4) ............................. $ 10.24 $ 11.98 $ 8.14 -------- ------- -------- Shares of beneficial interest outstanding, unlimited authorization(5) ............................................. 2,443 2,996 7,141 -------- ------- -------- Net Assets ...................................................... $ 23,823 $34,197 $ 55,351 -------- ------- -------- CLASS B: Net asset value (Net assets/shares outstanding) and offering price per share .............................................. $ 9.55 -- $ 7.69 -------- ------- -------- Shares of beneficial interest outstanding, unlimited authorization(5) ............................................. 427 -- 157 -------- ------- -------- Net Assets ...................................................... $ 4,075 -- $ 1,207 -------- ------- -------- CLASS C: Net asset value (Net assets/shares outstanding) and offering price per share ................................................. $ 9.58 -- $ 7.72 -------- ------- -------- Shares of beneficial interest outstanding, unlimited authorization(5) ............................................. 296 -- 179 -------- ------- -------- Net Assets ...................................................... $ 2,839 -- $ 1,385 -------- ------- -------- CLASS I: Net asset value (Net assets/shares outstanding) and offering price per share .............................................. $ 9.86 $ 11.41 -- -------- ------- -------- Shares of beneficial interest outstanding, unlimited authorization(5) ............................................. 14,389 2,446 -- -------- ------- -------- Net Assets ...................................................... $141,830 $27,893 -- -------- ------- -------- (1) Investment in securities at cost ................................. $185,364 $62,961 $62,873 (2) Market value of securities on loan ............................... -- -- 371 (3) Foreign currency at cost ......................................... -- -- -- (4) Maximum offering price per share represents NAV/(1-4.75%) for Fixed Income Funds, and NAV/(1-5.75%) for International Funds. (5) All funds have no par value with the exception of the Bond Fund which has a $1 par value. (6) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 78
FIXED INCOME FUNDS INTERNATIONAL FUNDS - --------------------------------------------------------------------- ------------------- HIGH MULTI-SECTOR FIXED SENIOR FLOATING WORLDWIDE YIELD FUND MONEY MARKET FUND INCOME FUND RATE FUND STRATEGIES FUND - ---------- ----------------- ------------------ --------------- ------------------- $ 105,237 $ 84,889 $116,023 $ 15,485 $ 90,247 -- -- -- -- 362 -- 402 157 91 -- 3,007 6 1,002 87 415 1 486 169 -- 13 -- -- -- -- 264 2,351 315 1,731 20 1 -- -- -- -- 39 -- -- 31 -- -- 17 12 14 22 17 8 6 8 -- 6 - --------- --------- -------- --------- -------- 110,621 86,116 119,135 15,705 91,364 - --------- --------- -------- --------- -------- 118 -- -- -- 25 172 482 542 -- 255 3,550 -- 502 722 421 10,868 -- -- -- 13,953 -- 2 341 -- -- 54 30 56 1 58 23 -- 44 3 19 7 3 9 1 6 33 21 34 --(6) 27 1 1 1 --(6) 1 36 26 36 34 30 8 6 8 -- 6 13 11 21 4 32 - --------- --------- -------- --------- -------- 14,883 582 1,594 765 14,833 - --------- --------- -------- --------- -------- $ 95,738 $ 85,534 $117,541 $ 14,940 $ 76,531 ========= ========= ======== ========= ======== $ 283,038 $ 85,509 $160,472 $ 15,872 $ 88,835 78 25 1,687 28 647 (171,809) -- (23,148) (29) (2,621) (15,569) -- (21,470) (931) (10,330) - --------- --------- -------- --------- -------- $ 95,738 $ 85,534 $117,541 $ 14,940 $ 76,531 ========= ========= ======== ========= ======== $ 3.98 $ 1.00 $ 9.23 $ 9.41 $ 7.82 - --------- --------- -------- --------- -------- $ 4.18 $ 1.00 $ 9.69 $ 9.88 $ 8.30 - --------- --------- -------- --------- -------- 23,340 85,522 9,614 1,525 9,331 - --------- --------- -------- --------- -------- $ 92,907 $ 85,534 $ 88,744 $ 14,349 $ 73,003 - --------- --------- -------- --------- -------- $ 3.92 -- $ 9.22 -- $ 7.06 - --------- --------- -------- --------- -------- 349 -- 1,298 -- 337 - --------- --------- -------- --------- -------- $ 1,366 -- $ 11,969 -- $ 2,379 - --------- --------- -------- --------- -------- $ 3.94 -- $ 9.27 $ 9.41 $ 7.03 - --------- --------- -------- --------- -------- 372 -- 1,814 38 163 - --------- --------- -------- --------- -------- $ 1,465 -- $ 16,828 $ 359 $ 1,149 - --------- --------- -------- --------- -------- -- -- -- $ 9.41 -- - --------- --------- -------- --------- -------- -- -- -- 25 -- - --------- --------- -------- --------- -------- -- -- -- $ 232 -- - --------- --------- -------- --------- -------- $ 120,806 $ 84,889 $137,522 $ 16,416 $100,559 10,359 -- -- -- 13,973 -- -- -- -- 379
See Notes to Financial Statements 79 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS ($ reported in thousands)
ALTERNATIVE FUNDS ----------------------------------------------- GLOBAL INTERNATIONAL INFRASTRUCTURE REAL ESTATE MARKET FUND SECURITIES FUND NEUTRAL FUND -------------- --------------- ------------ 10/1/07 - 10/1/07 - 10/1/07 - 9/30/08 9/30/08 9/30/08 -------------- --------------- ------------ INVESTMENT INCOME Dividends ....................................................... $ 2,554 $ 955 $ 1,204 Income distributions received from affiliated funds ............. -- -- -- Income distributions received from non-affiliated funds ......... -- -- -- Interest ........................................................ 37 22 1,345 Foreign taxes withheld .......................................... (141) (106) (11) -------- ------- -------- Total investment income ...................................... 2,450 871 2,538 -------- ------- -------- EXPENSES Investment advisory fee ......................................... 449 205 1,428 Service fees, Class A ........................................... 167 51 218 Distribution and service fees, Class B .......................... -- -- 20 Distribution and service fees, Class C .......................... 22 2 59 Administration fee .............................................. 58 16 79 Transfer agent fees and expenses ................................ 34 12 88 Custodian fees .................................................. 29 47 61 Printing fees and expenses ...................................... 23 5 41 Professional fees ............................................... 36 37 58 Registration fees ............................................... 31 54 41 Excise tax expense .............................................. -- -- -- Trustees fees and expenses ...................................... 5 1 7 Miscellaneous ................................................... 10 5 14 -------- ------- -------- Total expenses ............................................... 864 435 2,114 Dividends on short sales ........................................ -- -- 1,600 Less expenses reimbursed by investment adviser .................. (51) (126) (334) Custodian fees paid indirectly .................................. (1) --(1) (2) -------- ------- -------- Net expenses ................................................. 812 309 3,378 -------- ------- -------- NET INVESTMENT INCOME (LOSS) .................................... 1,638 562 (840) ======== ======= ======== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ......................... 753 (690) (15,192) Net realized gain (loss) on investments from affiliated funds ... -- -- -- Net realized gain (loss) on securities sold short ............... -- -- 12,943 Net realized gain (loss) on foreign currency transactions ....... (3) (17) (17) Capital gain distributions received from affiliated funds ....... -- -- -- Net change in unrealized appreciation (depreciation) on investments ............................................... (16,282) (8,617) (10,305) Net change in unrealized appreciation (depreciation) on investments from affiliated funds ......................... -- -- -- Net change in unrealized appreciation (depreciation) on securities sold short ..................................... -- -- 7,203 Net change in unrealized appreciation (depreciation) on foreign currency translations ............................. (4) (1) (57) -------- ------- -------- NET GAIN (LOSS) ON INVESTMENTS .................................. (15,536) (9,325) (5,425) -------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... $(13,898) $(8,763) $ (6,265) ======== ======= ========
(1) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 80
FUNDS OF FUNDS - --------------------------------------------------------- ALTERNATIVES WEALTH DIVERSIFIER ACCUMULATOR WEALTH WEALTH FUND FUND BUILDER FUND GUARDIAN FUND - ------------ ----------- ------------ ------------- 10/1/07 - 10/1/07 - 10/1/07 - 10/1/07 - 9/30/08 9/30/08 9/30/08 9/30/08 - ------------ ----------- ------------ ------------- $ -- $ -- $ -- $ -- 2,227 107 2,054 1,432 966 -- -- -- 47 1 9 7 -- -- -- -- -------- ------- -------- -------- 3,240 108 2,063 1,439 -------- ------- -------- -------- 271 13 116 55 178 -- -- -- -- -- -- -- 825 31 486 208 225 11 98 47 374 27 175 61 14 5 10 8 69 3 26 13 51 22 28 24 64 40 45 39 16 -- -- -- 18 1 9 4 29 3 15 8 -------- ------- -------- -------- 2,134 156 1,008 467 -- -- -- -- (571) (87) (274) (137) (3) (1) --(1) --(1) -------- ------- -------- -------- 1,560 68 734 330 -------- ------- -------- -------- 1,680 40 1,329 1,109 ======== ======= ======== ======== (7,783) -- -- -- (6,406) (346) 338 (167) -- -- -- -- -- -- -- -- 2,722 375 2,972 966 (20,857) -- -- -- (10,733) (3,517) (29,159) (11,257) -- -- -- -- -- -- -- -- -------- ------- -------- -------- (43,057) (3,488) (25,849) (10,458) -------- ------- -------- -------- $(41,377) $(3,448) $(24,520) $ (9,349) ======== ======= ======== ========
See Notes to Financial Statements 81 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) ($ reported in thousands)
FIXED INCOME FUNDS -------------------------------------------------- CA TAX-EXEMPT CORE BOND HIGH YIELD BOND FUND BOND FUND FUND FUND --------- ------------- --------- ---------- 10/1/07 - 10/1/07 - 10/1/07 - 10/1/07 - 9/30/08 9/30/08 9/30/08 9/30/08 --------- ------------- --------- ---------- INVESTMENT INCOME Interest ................................................................ $ 6,209 $ 3,124 $ 3,498 $ 9,938 Dividends ............................................................... 9 -- -- -- Security lending ........................................................ -- -- 4 83 Foreign taxes withheld .................................................. -- -- -- -- -------- -------- -------- -------- Total investment income .............................................. 6,218 3,124 3,502 10,021 -------- -------- -------- -------- EXPENSES Investment advisory fee ................................................. 603 301 287 745 Service fees, Class A ................................................... 71 94 152 277 Distribution and service fees, Class B .................................. 43 -- 14 19 Distribution and service fees, Class C .................................. 25 -- 14 18 Administration fee ...................................................... 101 56 54 96 Transfer agent fees and expenses ........................................ 68 35 129 263 Custodian fees .......................................................... 27 15 23 21 Printing fees and expenses .............................................. 63 22 15 22 Professional fees ....................................................... 100 36 33 40 Registration fees ....................................................... 62 30 32 34 Trustees fees and expenses .............................................. 10 5 5 9 Miscellaneous ........................................................... 16 10 10 16 -------- -------- -------- -------- Total expenses ....................................................... 1,189 604 768 1,560 Dividends on short sales ................................................ -- -- -- -- Less expenses reimbursed by investment adviser .......................... (95) (109) (106) -- Custodian fees paid indirectly .......................................... (2) --(1) (1) (2) -------- -------- -------- -------- Net expenses ............................................................ 1,092 495 661 1,558 -------- -------- -------- -------- NET INVESTMENT INCOME (LOSS) ............................................ 5,126 2,629 2,841 8,463 ======== ======== ======== ======== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ................................. (3,840) 95 (6) (12,778) Net realized gain (loss) on foreign currency transactions ............... -- -- -- -- Net change in unrealized appreciation (depreciation) on investments ..... (4,696) (3,791) (4,194) (9,575) Net change in unrealized appreciation (depreciation) on foreign currency translations ......................................................... -- -- -- -- Payment by affiliate (Note 3) ........................................... -- -- -- -- -------- -------- -------- -------- NET GAIN (LOSS) ON INVESTMENTS .......................................... (8,536) (3,696) (4,200) (22,353) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............ $ (3,410) $ (1,067) $ (1,359) $(13,890) ======== ======== ======== ========
(1) Amount is less than $500 (not reported in thousands). (2) Inception date. See Notes to Financial Statements 82
INTERNATIONAL FIXED INCOME FUNDS FUNDS - --------------------------------------------------- --------------- MONEY MARKET MULTI-SECTOR FIXED SENIOR FLOATING WORLDWIDE FUND INCOME FUND RATE FUND STRATEGIES FUND - ------------ ------------------ --------------- --------------- 10/1/07 - 10/1/07 - 1/31/08(2)- 10/1/07 - 9/30/08 9/30/08 9/30/08 9/30/08 - ------------ ------------------ --------------- --------------- $ 3,423 $ 10,533 $ 754 $ 17 -- 105 -- 3,262 -- -- -- 80 -- (44) -- (269) ------- -------- -------- -------- 3,423 10,594 754 3,090 ------- -------- -------- -------- 383 757 61 888 -- 262 25 248 -- 136 -- 36 -- 195 1 16 34 116 8 88 207 194 7 212 20 48 6 135 18 26 4 21 29 40 39 43 24 32 28 51 7 10 1 9 13 23 3 16 ------- -------- -------- -------- 735 1,839 183 1,763 -- -- -- -- -- -- (61) -- --(1) (4) --(1) --(1) ------- -------- -------- -------- 735 1,835 122 1,763 ------- -------- -------- -------- 2,688 8,759 632 1,327 ======= ======== ======== ======== (1,111) (282) (29) (1,916) -- 171 -- 23 -- (21,706) (931) (34,427) -- 54 -- (36) 1,127 -- -- -- ------- -------- -------- -------- 16 (21,763) (960) (36,356) ------- -------- -------- -------- $ 2,704 $(13,004) $ (328) $(35,029) ======= ======== ======== ========
See Notes to Financial Statements 83 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS ($ reported in thousands)
ALTERNATIVE FUNDS ---------------------------- GLOBAL INFRASTRUCTURE FUND ---------------------------- 10/1/07- 5/1/07- 5/1/06- 9/30/08 9/30/07 4/30/07 -------- ------- ------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .............................................. $ 1,638 $ 800 $ 986 Net realized gain (loss) .................................................. 750 2,318 803 Net change in unrealized appreciation (depreciation) ...................... (16,286) (1,607) 6,717 -------- ------- ------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............... (13,898) 1,511 8,506 -------- ------- ------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ............................................ (1,528) (1,008) (787) Net investment income, Class B ............................................ -- -- -- Net investment income, Class C ............................................ (32) (25) (34) Net investment income, Class I ............................................ (1) -- -- Net realized short-term gains, Class A .................................... (243) -- -- Net realized short-term gains, Class B .................................... -- -- -- Net realized short-term gains, Class C .................................... (8) -- -- Net realized short-term gains, Class I .................................... -- -- -- Net realized long-term gains, Class A ..................................... (2,039) (605) -- Net realized long-term gains, Class B ..................................... -- -- -- Net realized long-term gains, Class C ..................................... (65) (18) -- Net realized long-term gains, Class I ..................................... -- -- -- -------- ------- ------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................. (3,916) (1,656) (821) -------- ------- ------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ..................... 35,041 6,904 29,555 Change in net assets from share transactions, Class B ..................... -- -- -- Change in net assets from share transactions, Class C ..................... 372 184 312 Change in net assets from share transactions, Class I ..................... 101 -- -- -------- ------- ------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................. 35,514 7,088 29,867 -------- ------- ------- NET INCREASE (DECREASE) IN NET ASSETS ..................................... 17,700 6,943 37,552 -------- ------- ------- NET ASSETS Beginning of period ....................................................... $ 59,902 52,959 15,407 -------- ------- ------- END OF PERIOD ............................................................. $ 77,602 $59,902 $52,959 ======== ======= ======= Accumulated undistributed net investment income (loss) at end of period ... $ 80 $ 5 $ 233
See Notes to Financial Statements 84
ALTERNATIVE FUNDS FUNDS OF FUNDS - -------------------------------------------------------------------------- ------------------------------ INTERNATIONAL REAL ESTATE SECURITIES FUND MARKET NEUTRAL FUND ALTERNATIVES DIVERSIFIER FUND - ----------------------------------------- ------------------------------ ------------------------------ 10/1/07- 10/1/07- 11/1/06- 11/1/05- 10/1/07- 8/1/07- 8/1/06- 9/30/08 9/30/08 9/30/07 10/31/06 9/30/08 9/30/07 7/31/07 -------- -------- -------- -------- -------- -------- -------- $ 562 $ (840) $ 858 $ 1,146 $ 1,680 $ 396 $ 951 (707) (2,266) (6,287) (8,251) (11,467) (2,124) 653 (8,618) (3,159) 1,847 (1,724) (31,590) 12,372 (2,914) ------- -------- -------- -------- -------- -------- -------- (8,763) (6,265) (3,582) (8,829) (41,377) 10,644 (1,310) ------- -------- -------- -------- -------- -------- -------- (214) (914) (1,038) -- (2,102) (59) (716) -- (20) (55) -- -- -- -- (3) (51) (194) -- (621) (37) (294) (2) -- -- -- -- -- -- -- -- -- -- -- (65) -- -- -- -- -- -- -- -- -- -- -- -- -- (41) -- -- -- -- -- -- -- -- -- -- -- -- -- (510) (2) -- -- -- -- -- -- -- -- -- -- -- -- (324) (2) -- -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- -------- (219) (985) (1,287) -- (2,723) (1,036) (1,014) ------- -------- -------- -------- -------- -------- -------- 69,745 71,472 (30,541) (15,950) 186,633 8,461 95,503 -- (836) (1,465) (3,098) -- -- -- 252 (1,806) (10,426) (19,931) 84,762 3,995 60,907 102 -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- -------- 70,099 68,830 (42,432) (38,979) 271,395 12,456 156,410 ------- -------- -------- -------- -------- -------- -------- 61,117 61,580 (47,301) (47,808) 227,295 22,064 154,086 ------- -------- -------- -------- -------- -------- -------- -- 64,468 111,769 159,577 177,963 155,899 1,813 ------- -------- -------- -------- -------- -------- -------- $61,117 $126,048 $ 64,468 $111,769 $405,258 $177,963 $155,899 ======= ======== ======== ======== ======== ======== ======== $ 330 $ (23) $ 969 $ 1,261 $ 416 $ 381 $ 238
See Notes to Financial Statements 85 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ reported in thousands)
FUNDS OF FUNDS ---------------------------- WEALTH ACCUMULATOR FUND ---------------------------- 10/1/07- 8/1/07- 8/1/06- 9/30/08 9/30/07 7/31/07 -------- ------- ------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................ $ 40 $ (1) $ 51 Net realized gain (loss) .................................... 29 (15) 371 Net change in unrealized appreciation (depreciation) ........ (3,517) 662 794 ------- ------- ------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................... (3,448) 646 1,216 ------- ------- ------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A .............................. (115) (29) (190) Net investment income, Class C .............................. (46) (13) (74) Net investment income, Class I .............................. -- -- --(1) Net realized short-term gains, Class A ...................... -- -- --(1) Net realized short-term gains, Class C ...................... -- -- -- Net realized short-term gains, Class I ...................... -- -- -- Net realized long-term gains, Class A ....................... (49) (97) (16) Net realized long-term gains, Class C ....................... (24) (46) (9) Net realized long-term gains, Class I ....................... -- -- -- ------- ------- ------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ... (234) (185) (289) ------- ------- ------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ....... 97 519 5,061 Change in net assets from share transactions, Class C ....... 312 522 1,048 Change in net assets from share transactions, Class I ....... -- -- -- ------- ------- ------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ... 409 1,041 6,109 NET INCREASE (DECREASE) IN NET ASSETS ....................... (3,273) 1,502 7,036 ------- ------- ------- NET ASSETS Beginning of period ......................................... 14,125 12,623 5,587 ------- ------- ------- END OF PERIOD ............................................... $10,852 $14,125 $12,623 ======= ======= ======= Accumulated undistributed net investment income (loss) at end of period .................................. $ 14 $ (1) $ 40
(1) Amount is less than $500. See Notes to Financial Statements 86
FUNDS OF FUNDS - ------------------------------------------------------------- WEALTH BUILDER FUND WEALTH GUARDIAN FUND - ------------------------------ ---------------------------- 10/1/07- 8/1/07- 8/1/06- 10/1/07- 8/1/07- 8/1/06- 9/30/08 9/30/07 7/31/07 9/30/08 9/30/07 7/31/07 - -------- -------- -------- -------- ------- ------- $ 1,329 $ 64 $ 1,472 $ 1,109 $ 77 $ 1,131 3,310 496 8,897 799 55 2,890 (29,159) 4,880 6,637 (11,257) 1,941 2,333 - -------- -------- -------- -------- ------- ------- (24,520) 5,440 17,006 (9,349) 2,073 6,354 - -------- -------- -------- -------- ------- ------- (1,078) (109) (1,832) (655) (115) (975) (909) (145) (1,955) (467) (126) (930) -- -- -- -- -- -- (98) (135) (200) (27) (62) (124) (127) (179) (277) (28) (68) (157) -- -- -- -- -- -- (671) (2,561) (757) (228) (845) (264) (864) (3,404) (1,048) (237) (924) (334) -- -- -- -- -- -- - -------- -------- -------- -------- ------- ------- (3,747) (6,533) (6,069) (1,642) (2,140) (2,784) - -------- -------- -------- -------- ------- ------- (4,741) 2,233 549 (825) 454 2,999 (11,433) 1,798 (5,504) (4,951) 85 (3,524) -- -- -- -- -- -- - -------- -------- -------- -------- ------- ------- (16,174) 4,031 (4,955) (5,776) 539 (525) (44,441) 2,938 5,982 (16,767) 472 3,045 - -------- -------- -------- -------- ------- ------- 135,844 132,906 126,924 62,062 61,590 58,545 - -------- -------- -------- -------- ------- ------- $ 91,403 $135,844 $132,906 $ 45,295 $62,062 $61,590 ======== ======== ======== ======== ======= ======= $ 374 $ 54 $ 243 $ 397 $ 72 $ 234
See Notes to Financial Statements 87 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ reported in thousands)
FIXED INCOME FUNDS ------------------- BOND FUND ------------------- 10/1/07- 10/1/06- 9/30/08 9/30/07 -------- -------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................................ $ 5,126 $ 4,006 Net realized gain (loss) .................................................... (3,840) 465 Net change in unrealized appreciation (depreciation) ........................ (4,696) (785) -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. (3,410) 3,686 -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A .............................................. (1,186) (1,223) Net investment income, Class B .............................................. (152) (185) Net investment income, Class C .............................................. (87) (54) Net investment income, Class I .............................................. (3,747) (2,660) Net realized short-term gains, Class A ...................................... -- -- Net realized short-term gains, Class B ...................................... -- -- Net realized short-term gains, Class C ...................................... -- -- Net realized short-term gains, Class I ...................................... -- -- Net realized long-term gains, Class A ....................................... -- -- Net realized long-term gains, Class B ....................................... -- -- Net realized long-term gains, Class C ....................................... -- -- Net realized long-term gains, Class I ....................................... -- -- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................... (5,172) (4,122) -------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ....................... (4,000) 1,184 Change in net assets from share transactions, Class B ....................... (19) (1,137) Change in net assets from share transactions, Class C ....................... 1,445 140 Change in net assets from share transactions, Class I ....................... 96,774 (10,840) -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................... 94,200 (10,653) NET INCREASE (DECREASE) IN NET ASSETS ....................................... 85,618 (11,089) -------- -------- NET ASSETS Beginning of period ......................................................... 86,949 98,038 -------- -------- END OF PERIOD ............................................................... $172,567 $ 86,949 ======== ======== Accumulated undistributed net investment income (loss) at end of period ..... $ 50 $ (8)
See Notes to Financial Statements 88
FIXED INCOME FUNDS - -------------------------------------------------------------- CA TAX-EXEMPT BOND FUND CORE BOND FUND - ----------------------------- ------------------------------ 10/1/07- 5/1/07- 5/1/06- 10/1/07- 11/1/06- 11/1/05- 9/30/08 9/30/07 4/30/07 9/30/08 9/30/07 10/31/06 - -------- ------- -------- -------- -------- -------- $ 2,629 $ 1,108 $ 2,344 $ 2,841 $ 2,683 $ 3,203 95 (147) 608 (6) 1,461 (549) (3,791) (833) (36) (4,194) (500) 537 - -------- ------- -------- -------- -------- -------- (1,067) 128 2,916 (1,359) 3,644 3,191 - -------- ------- -------- -------- -------- -------- (1,423) (604) (1,690) (2,836) (2,823) (3,378) -- -- (1) (57) (60) (88) -- -- -- (56) (47) (53) (1,183) (462) (698) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (42) (374) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (29) (258) -- -- -- - -------- ------- -------- -------- -------- -------- (2,606) (1,137) (3,021) (2,949) (2,930) (3,519) - -------- ------- -------- -------- -------- -------- (2,878) (2,553) (4,211) (3,707) (4,913) (10,189) -- -- (156) (307) (161) (616) -- -- -- 271 (87) 31 1,270 (262) 29,299 -- -- -- - -------- ------- -------- -------- -------- -------- (1,608) (2,815) 24,932 (3,743) (5,161) (10,774) (5,281) (3,824) 24,827 (8,051) (4,447) (11,102) - -------- ------- -------- -------- -------- -------- 67,371 71,195 46,368 65,994 70,441 81,543 - -------- ------- -------- -------- -------- -------- $ 62,090 $67,371 $ 71,195 $ 57,943 $ 65,994 $ 70,441 ======== ======= ======== ======== ======== ======== $ 58 $ 34 $ (11) $ 72 $ 20 $ 79
See Notes to Financial Statements 89 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ reported in thousands)
FIXED INCOME FUNDS ------------------------------- HIGH YIELD FUND ------------------------------- 10/1/07- 11/1/06- 11/1/05- 9/30/08 9/30/07 10/31/06 --------- -------- -------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................................ $ 8,463 $ 8,193 $ 9,135 Net realized gain (loss) .................................................... (12,778) 2,695 664 Net change in unrealized appreciation (depreciation) ........................ (9,575) (2,873) 1,043 Payment by affiliate ........................................................ -- -- -- --------- -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. (13,890) 8,015 10,842 --------- -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A .............................................. (8,449) (8,219) (9,234) Net investment income, Class B .............................................. (130) (198) (334) Net investment income, Class C .............................................. (123) (109) (83) Net realized short-term gains, Class A ...................................... -- -- -- --------- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................... (8,702) (8,526) (9,651) --------- -------- -------- From share transactions (See Note 5)......................................... Change in net assets from share transactions, Class A ....................... (10,410) (6,709) (12,773) Change in net assets from share transactions, Class B ....................... (882) (2,005) (3,252) Change in net assets from share transactions, Class C ....................... (256) 515 (187) --------- -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................... (11,548) (8,199) (16,212) --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ....................................... (34,140) (8,710) (15,021) --------- -------- -------- NET ASSETS Beginning of period ......................................................... 129,878 138,588 153,609 --------- -------- -------- END OF PERIOD ............................................................... $ 95,738 $129,878 $138,588 ========= ======== ======== Accumulated undistributed net investment income (loss) at end of period ..... $ 78 $ 135 $ (43)
See Notes to Financial Statements 90
FIXED INCOME FUNDS - ---------------------------------------------------------------- MONEY MARKET FUND MULTI-SECTOR FIXED INCOME FUND - ------------------------------ ------------------------------- 10/1/07- 11/1/06- 11/1/05- 10/1/07- 11/1/06- 11/1/05- 9/30/08 9/30/07 10/31/06 9/30/08 9/30/07 10/31/06 - -------- -------- -------- -------- -------- --------- $ 2,688 $ 3,894 $ 4,045 $ 8,759 $ 7,414 $ 7,847 (1,111) (5) -- (111) 988 467 -- -- -- (21,652) (1,394) 2,318 1,127 -- -- -- -- -- - -------- ------- -------- -------- -------- -------- 2,704 3,889 4,045 (13,004) 7,008 10,632 - -------- ------- -------- -------- -------- -------- (2,676) (3,894) (4,045) (6,796) (5,563) (5,923) -- -- -- (782) (581) (665) -- -- -- (1,112) (815) (705) (11) -- -- -- -- -- - -------- ------- -------- -------- -------- -------- (2,687) (3,894) (4,045) (8,690) (6,959) (7,293) - -------- ------- -------- -------- -------- -------- (11,302) (2,955) (11,616) (8,269) 22 (3,125) -- -- -- (75) 51 (3,087) -- -- -- (761) 3,486 1,666 - -------- ------- -------- -------- -------- -------- (11,302) (2,955) (11,616) (9,105) 3,559 (4,546) - -------- ------- -------- -------- -------- -------- (11,285) (2,960) (11,616) (30,799) 3,608 (1,207) - -------- ------- -------- -------- -------- -------- 96,819 99,779 111,395 148,340 144,732 145,939 - -------- ------- -------- -------- -------- -------- $ 85,534 $96,819 $ 99,779 $117,541 $148,340 $144,732 ======== ======= ======== ======== ======== ======== $ 25 $ 12 $ -- $ 1,687 $ 594 $ 8
See Notes to Financial Statements 91 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ reported in thousands)
FIXED INCOME FUNDS INTERNATIONAL FUNDS ------------------ -------------------------------- SENIOR FLOATING WORLDWIDE STRATEGIES RATE FUND FUND ------------------ -------------------------------- 1/31/08(2)- 10/1/07- 7/1/07- 7/1/06- 9/30/08 9/30/08 9/30/07 6/30/07 ------------------ -------- -------- -------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .................. $ 632 $ 1,327 $ 168 $ 1,121 Net realized gain (loss) ...................... (29) (1,893) 1,843 13,035 Net change in unrealized appreciation (depreciation) ............................. (931) (34,463) 228 11,519 ------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ (328) (35,029) 2,239 25,675 ------- -------- -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ................ (587) (880) (772) (1,242) Net investment income, Class B ................ -- (8) (18) (31) Net investment income, Class C ................ (8) (4) (7) (11) Net investment income, Class I ................ (9) -- -- -- Net realized short-term gains, Class A ........ -- (23) -- -- Net realized short-term gains, Class B ........ -- (1) -- -- Net realized short-term gains, Class C ........ -- --(1) -- -- Net realized short-term gains, Class I ........ -- -- -- -- Net realized long-term gains, Class A ......... -- (2,150) (6,668) -- Net realized long-term gains, Class B ......... -- (93) (315) -- Net realized long-term gains, Class C ......... -- (38) (117) -- Net realized long-term gains, Class I ......... -- -- -- -- ------- -------- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ............................... (604) (3,197) (7,897) (1,284) ------- -------- -------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ...................... 15,246 (7,662) 4,582 (8,068) Change in net assets from share transactions, Class B ...................... -- (1,263) 129 (1,391) Change in net assets from share transactions, Class C ...................... 379 (103) 111 (1,315) Change in net assets from share transactions, Class I ...................... 247 -- -- -- ------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ............................... 15,872 (9,028) 4,822 (10,774) NET INCREASE (DECREASE) IN NET ASSETS ......... 14,940 (47,254) (836) 13,617 NET ASSETS Beginning of period ........................... -- 123,785 124,621 111,004 ------- -------- -------- -------- END OF PERIOD ................................. $14,940 $ 76,531 $123,785 $124,621 ======= ======== ======== ======== Accumulated undistributed net investment income (loss) at end of period ............. $ 28 $ 647 $ 178 $ 787
(1) Amount is less than $500 (not reported in thousands). (2) Inception date. See Notes to Financial Statements 92 THIS PAGE INTENTIONALLY BLANK. VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------ - -------------------------- 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)
NET ASSET NET NET TOTAL DIVIDENDS VALUE, INVESTMENT REALIZED AND FROM FROM NET CHANGE IN BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT TOTAL NET ASSET OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME DISTRIBUTIONS 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)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 94
RATIO OF GROSS RATIO OF EXPENSES NET NET NET TO AVERAGE INVESTMENT ASSET ASSETS, RATIO OF NET NET ASSETS INCOME CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO NET ASSET END OF TOTAL PERIOD AVERAGE NET AND AVERAGE NET TURNOVER VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE - ------------------------------------------------------------------------------------------------------------- $(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%
RATIO OF NET RATIO OF GROSS RATIO OF NET EXPENSES EXPENSES EXPENSES (INCLUDING (EXCLUDING (INCLUDING DIVIDENDS DIVIDENDS DIVIDENDS ON SHORT ON SHORT RATIO OF NET NET ON SHORT SALES, SALES, BEFORE SALES, AFTER NET INVESTMENT ASSET ASSETS, AFTER EXPENSE EXPENSE EXPENSE INCOME VALUE, END OF REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT) (LOSS) TO PORTFOLIO END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TO AVERAGE AVERAGE NET TURNOVER PERIOD RETURN(1) (000S) NET ASSETS NET ASSETS NET ASSETS ASSETS 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
See Notes to Financial Statements 95 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CAPITAL GAIN NET NET DISTRIBUTIONS REALIZED ASSET NET RECEIVED AND TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT FROM UNREALIZED FROM FROM NET FROM NET BEGINNING INCOME AFFILIATED GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS) FUNDS (LOSS) OPERATIONS INCOME GAINS 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) - ----------------------- WEALTH ACCUMULATOR FUND - ----------------------- CLASS A 10/1/07 to 9/30/08 $12.58 $ 0.06(2) $0.33(2) $(3.38) $(2.99) $(0.15) $(0.07) $(0.22) 8/1/07 to 9/30/07 12.16 --(2)(5) -- 0.59 0.59 (0.04) (0.13) (0.17) 8/1/06 to 7/31/07 10.73 0.10(2) 0.76(2) 0.92 1.78 (0.32) (0.03) (0.35) 8/4/05(6) to 7/31/06 10.00 0.07(2) 0.11(2) 0.60 0.78 (0.05) -- (0.05) CLASS C 10/1/07 to 9/30/08 $12.49 $(0.02)(2) $0.32(2) $(3.33) $(3.03) $(0.13) $(0.07) $(0.20) 8/1/07 to 9/30/07 12.09 (0.01)(2) -- 0.58 0.57 (0.04) (0.13) (0.17) 8/1/06 to 7/31/07 10.68 --(2)(5) 0.74(2) 0.94 1.68 (0.24) (0.03) (0.27) 8/4/05(6) to 7/31/06 10.00 (0.01)(2) 0.10(2) 0.61 0.70 (0.02) -- (0.02) - ------------------- 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)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 96
RATIO OF GROSS RATIO OF EXPENSES NET NET NET RATIO OF NET TO AVERAGE INVESTMENT ASSET ASSETS, OPERATING NET ASSETS INCOME CHANGE IN VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO NET ASSET END OF TOTAL PERIOD AVERAGE NET AND AVERAGE NET TURNOVER VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS 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) $(3.21) $ 9.37 (24.20)% $ 7,290 0.29%(7) 0.96% 0.56% 30% 0.42 12.58 4.83(4) 9,647 0.28(3) 0.83(3) 0.19(3) 1(4) 1.43 12.16 16.75 8,806 0.06 0.97 0.79 50 0.73 10.73 7.82(4) 3,208 0.09(3)(7) 7.43(3) 0.63(3) 13(4) $(3.23) $ 9.26 (24.68)% $ 3,562 1.04%(7) 1.72% (0.20)% 30% 0.40 12.49 4.69(4) 4,478 1.04(3) 1.58(3) (0.54)(3) 1(4) 1.41 12.09 15.85 3,818 0.80 1.79 0.04 50 0.68 10.68 6.97(4) 2,379 0.83(3)(7) 8.19(3) (0.12)(3) 13(4) $(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
See Notes to Financial Statements 97 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET CAPITAL GAIN NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT DISTRIBUTIONS REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME RECEIVED FROM UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS) AFFILIATED FUNDS GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------------------ - -------------------- WEALTH GUARDIAN FUND (CONTINUED) - -------------------- 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) - --------- 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) - ----------------------- 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)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 98
RATIO OF GROSS RATIO OF EXPENSES NET NET NET TO AVERAGE INVESTMENT ASSET ASSETS, RATIO OF NET NET ASSETS INCOME CHANGE IN VALUE, END OF EXPENSES TO (BEFORE (LOSS) TO PORTFOLIO NET ASSET END OF TOTAL PERIOD AVERAGE NET WAIVERS AND AVERAGE NET TURNOVER VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS RATE - ------------------------------------------------------------------------------------------------------ $(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 $(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 $(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
See Notes to Financial Statements 99 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET CHANGE BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL IN NET OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ASSET VALUE - ----------------------------------------------------------------------------------------------------------------------- - ----------------------- CA TAX-EXEMPT BOND FUND (CONTINUED) - ----------------------- CLASS I 10/1/07 to 9/30/08 $12.08 $0.49(2) $(0.67) $(0.18) $(0.49) $ -- $(0.49) $(0.67) 5/1/07 to 9/30/07 12.25 0.20(2) (0.17) 0.03 (0.19) (0.01) (0.20) (0.17) 9/29/06(6) to 4/30/07 12.43 0.28(2) (0.06) 0.22 (0.30) (0.10) (0.40) (0.18) - -------------- 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) $(0.57) 11/1/06 to 9/30/07 8.24 0.33(2) 0.11 0.44 (0.36) -- (0.36) 0.08 11/1/05 to 10/31/06 8.26 0.35(2) 0.02 0.37 (0.39) -- (0.39) (0.02) 11/1/04 to 10/31/05 8.65 0.32(2) (0.29) 0.03 (0.42) -- (0.42) (0.39) 11/1/03 to 10/31/04 8.76 0.37(2) (0.03) 0.34 (0.45) -- (0.45) (0.11) 11/1/02 to 10/31/03 8.93 0.39(2) (0.04) 0.35 (0.52) -- (0.52) (0.17) CLASS B 10/1/07 to 9/30/08 $ 8.26 $0.31(2) $(0.55) $(0.24) $(0.33) $ -- $(0.33) $(0.57) 11/1/06 to 9/30/07 8.18 0.27(2) 0.12 0.39 (0.31) -- (0.31) 0.08 11/1/05 to 10/31/06 8.21 0.29(2) 0.01 0.30 (0.33) -- (0.33) (0.03) 11/1/04 to 10/31/05 8.59 0.25(2) (0.27) (0.02) (0.36) -- (0.36) (0.38) 11/1/03 to 10/31/04 8.71 0.31(2) (0.05) 0.26 (0.38) -- (0.38) (0.12) 11/1/02 to 10/31/03 8.89 0.32(2) (0.05) 0.27 (0.45) -- (0.45) (0.18) CLASS C 10/1/07 to 9/30/08 $ 8.29 $0.31(2) $(0.55) $(0.24) $(0.33) $ -- $(0.33) $(0.57) 11/1/06 to 9/30/07 8.21 0.27(2) 0.12 0.39 (0.31) -- (0.31) 0.08 11/1/05 to 10/31/06 8.23 0.29(2) 0.02 0.31 (0.33) -- (0.33) (0.02) 11/1/04 to 10/31/05 8.62 0.25(2) (0.28) (0.03) (0.36) -- (0.36) (0.39) 11/1/03 to 10/31/04 8.73 0.31(2) (0.04) 0.27 (0.38) -- (0.38) (0.11) 11/1/02 to 10/31/03 8.91 0.32(2) (0.05) 0.27 (0.45) -- (0.45) (0.18) - --------------- HIGH YIELD FUND - --------------- CLASS A 10/1/07 to 9/30/08 $ 4.89 $0.34(2) $(0.90) $(0.56) $(0.35) $ -- $(0.35) $(0.91) 11/1/06 to 9/30/07 4.91 0.30(2) (0.01) 0.29 (0.31) -- (0.31) (0.02) 11/1/05 to 10/31/06 4.88 0.31(2) 0.05 0.36 (0.33) -- (0.33) 0.03 11/1/04 to 10/31/05 5.11 0.31(2) (0.19) 0.12 (0.35) -- (0.35) (0.23) 11/1/03 to 10/31/04 5.02 0.33(2) 0.11 0.44 (0.35) -- (0.35) 0.09 11/1/02 to 10/31/03(11) 4.51 0.35(2) 0.54 0.89 (0.38) -- (0.38) 0.51 CLASS B 10/1/07 to 9/30/08 $ 4.81 $0.30(2) $(0.88) $(0.58) $(0.31) $ -- $(0.31) $(0.89) 11/1/06 to 9/30/07 4.84 0.26(2) (0.01) 0.25 (0.28) -- (0.28) (0.03) 11/1/05 to 10/31/06 4.81 0.26(2) 0.06 0.32 (0.29) -- (0.29) 0.03 11/1/04 to 10/31/05 5.05 0.27(2) (0.20) 0.07 (0.31) -- (0.31) (0.24) 11/1/03 to 10/31/04 4.96 0.29(2) 0.11 0.40 (0.31) -- (0.31) 0.09 11/1/02 to 10/31/03(11) 4.47 0.31(2) 0.52 0.83 (0.34) -- (0.34) 0.49
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 100
RATIO OF GROSS RATIO OF EXPENSES TO NET NET NET RATIO OF AVERAGE INVESTMENT ASSET ASSETS, NET NET ASSETS INCOME VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO END OF TOTAL PERIOD AVERAGE AND AVERAGE TURNOVER PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE - --------------------------------------------------------------------------------- $11.41 (1.61)% $ 27,893 0.60% 0.76% 4.07% 10% 12.08 0.30(4) 28,277 0.64(3) 0.80(3) 3.99(3) 4(4) 12.25 1.79(4) 28,952 0.64(3) 0.79(3) 3.90(3) 19(4) $ 7.75 (2.39)% $ 55,351 1.00% 1.17% 4.50% 37% 8.32 5.44(4) 63,165 1.05(3) 1.24(3) 4.33(3) 46(4) 8.24 4.59 67,393 1.08(7) 1.24 4.28 48 8.26 0.34 77,880 1.25 1.25 3.73 65 8.65 3.95 92,278 1.18 1.18 4.29 45 8.76 3.96 104,092 1.16 1.16 4.37 101 $ 7.69 (3.00)% $ 1,207 1.75% 1.92% 3.74% 37% 8.26 4.68(4) 1,604 1.80(3) 2.01(3) 3.58(3) 46(4) 8.18 3.72 1,749 1.84(7) 1.98 3.54 48 8.21 (0.29) 2,390 2.00 2.00 2.97 65 8.59 3.10 3,668 1.93 1.93 3.57 45 8.71 3.08 6,628 1.91 1.91 3.62 101 $ 7.72 (3.10)% $ 1,385 1.75% 1.92% 3.76% 37% 8.29 4.76(4) 1,225 1.80(3) 1.99(3) 3.58(3) 46(4) 8.21 3.84 1,299 1.83(7) 1.99 3.54 48 8.23 (0.40) 1,273 2.00 2.00 2.99 65 8.62 3.21 1,298 1.93 1.93 3.57 45 8.73 3.06 1,385 1.91 1.91 3.63 101 $ 3.98 (12.10)% $ 92,907 1.34% 1.34% 7.41% 100% 4.89 6.06(4) 125,200 1.39(3) 1.39(3) 6.59(3) 102(4) 4.91 7.52 132,408 1.37 1.37 6.25 161 4.88 2.37 144,060 1.36 1.36 6.23 59 5.11 8.85 174,527 1.32 1.32 6.57 99 5.02 20.54 192,428 1.32 1.32 7.17 176 $ 3.92 (12.59)% $ 1,366 2.08% 2.08% 6.63% 100% 4.81 5.22(4) 2,597 2.13(3) 2.13(3) 5.78(3) 102(4) 4.84 6.83 4,595 2.12 2.12 5.46 161 4.81 1.46 7,791 2.11 2.11 5.47 59 5.05 8.18 14,574 2.07 2.07 5.90 99 4.96 19.39 22,499 2.07 2.07 6.43 176
See Notes to Financial Statements 101 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET REALIZED ASSET NET AND TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT UNREALIZED PAYMENT FROM FROM NET FROM NET BEGINNING INCOME GAIN BY INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS) (LOSS) AFFILIATE OPERATIONS INCOME GAINS DISTRIBUTIONS - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------- HIGH YIELD FUND (CONTINUED) - ---------------------------- CLASS C 10/1/07 to 9/30/08 $ 4.84 $ 0.30(2) $(0.89) -- $(0.59) $ (0.31) $-- $ (0.31) 11/1/06 to 9/30/07 4.87 0.26(2) (0.01) -- 0.25 (0.28) -- (0.28) 11/1/05 to 10/31/06 4.84 0.27(2) 0.05 -- 0.32 (0.29) -- (0.29) 11/1/04 to 10/31/05 5.07 0.27(2) (0.19) -- 0.08 (0.31) -- (0.31) 11/1/03 to 10/31/04 4.99 0.29(2) 0.10 -- 0.39 (0.31) -- (0.31) 11/1/02 to 10/31/03(11) 4.49 0.31(2) 0.53 -- 0.84 (0.34) -- (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) $ (0.03) 11/1/06 to 9/30/07 1.00 0.04 -- -- 0.04 (0.04) -- (0.04) 11/1/05 to 10/31/06 1.00 0.04 -- -- 0.04 (0.04) -- (0.04) 11/1/04 to 10/31/05 1.00 0.02 -- -- 0.02 (0.02) -- (0.02) 11/1/03 to 10/31/04 1.00 0.007 -- -- 0.007 (0.007) -- (0.007) 11/1/02 to 10/31/03 1.00 0.010 -- -- 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) $-- $ (0.68) 11/1/06 to 9/30/07 10.88 0.56(2) (0.03) -- 0.53 (0.52) -- (0.52) 11/1/05 to 10/31/06 10.63 0.59(2) 0.21 -- 0.80 (0.55) -- (0.55) 11/1/04 to 10/31/05 11.16 0.59(2) (0.40) -- 0.19 (0.72) -- (0.72) 11/1/03 to 10/31/04 10.85 0.69(2) 0.34 -- 1.03 (0.72) -- (0.72) 11/1/02 to 10/31/03(11) 9.82 0.71 0.99 -- 1.70 (0.67) -- (0.67) CLASS B 10/1/07 to 9/30/08 $10.88 $ 0.60 $(1.66) -- $(1.06) $ (0.60) $-- $ (0.60) 11/1/06 to 9/30/07 10.87 0.48(2) (0.02) -- 0.46 (0.45) -- (0.45) 11/1/05 to 10/31/06 10.61 0.51(2) 0.22 -- 0.73 (0.47) -- (0.47) 11/1/04 to 10/31/05 11.13 0.50(2) (0.40) -- 0.10 (0.62) -- (0.62) 11/1/03 to 10/31/04 10.82 0.61(2) 0.33 -- 0.94 (0.63) -- (0.63) 11/1/02 to 10/31/03(11) 9.80 0.63 0.98 -- 1.61 (0.59) -- (0.59) CLASS C 10/1/07 to 9/30/08 $10.94 $ 0.61 $(1.68) -- $(1.07) $ (0.60) $-- $ (0.60) 11/1/06 to 9/30/07 10.93 0.48(2) (0.02) -- 0.46 (0.45) -- (0.45) 11/1/05 to 10/31/06 10.67 0.51(2) 0.22 -- 0.73 (0.47) -- (0.47) 11/1/04 to 10/31/05 11.18 0.51(2) (0.40) -- 0.11 (0.62) -- (0.62) 11/1/03 to 10/31/04 10.87 0.61(2) 0.33 -- 0.94 (0.63) -- (0.63) 11/1/02 to 10/31/03(11) 9.84 0.64 0.98 -- 1.62 (0.59) -- (0.59)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 102
RATIO OF GROSS RATIO OF EXPENSES TO NET NET NET RATIO OF AVERAGE INVESTMENT ASSET ASSETS, NET NET ASSETS INCOME CHANGE VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO IN NET END OF TOTAL PERIOD AVERAGE AND AVERAGE TURNOVER ASSET VALUE PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE - ----------------------------------------------------------------------------------------------------------- $(0.90) $ 3.94 (12.72)% $ 1,465 2.09% 2.09% 6.66% 100% (0.03) 4.84 5.20(4) 2,081 2.14(3) 2.14(3) 5.89(3) 102(4) 0.03 4.87 6.80 1,585 2.12 2.12 5.48 161 (0.23) 4.84 1.66 1,758 2.11 2.11 5.48 59 0.08 5.07 8.14 1,990 2.07 2.07 5.87 99 0.50 4.99 19.30 2,877 2.07 2.07 6.43 176 $ -- $ 1.00 2.87%(12) $ 85,534 0.77% 0.77% 2.81% N/A -- 1.00 4.22(4) 96,819 0.86(3) 0.86(3) 4.55(3) N/A -- 1.00 4.04 99,779 0.84 0.90 3.95 N/A -- 1.00 2.00 111,395 0.85 0.89 1.94 N/A -- 1.00 0.66 139,996 0.65 0.92 0.65 N/A -- 1.00 1.00 156,098 0.37 0.87 1.00 N/A $(1.66) $ 9.23 (9.46)% $ 88,744 1.15% 1.15% 6.54% 91% 0.01 10.89 4.95(4) 113,458 1.19(3) 1.19(3) 5.55(3) 92(4) 0.25 10.88 7.74 113,362 1.17 1.17 5.52 96 (0.53) 10.63 1.73 113,885 1.20 1.20 5.36 136 0.31 11.16 9.78 116,079 1.18 1.18 6.30 156 1.03 10.85 17.73 113,345 1.24 1.24 6.68 204 $(1.66) $ 9.22 (10.16)% $ 11,969 1.90% 1.90% 5.80% 91% 0.01 10.88 4.25(4) 14,205 1.94(3) 1.94(3) 4.80(3) 92(4) 0.26 10.87 7.05 14,147 1.92 1.92 4.78 96 (0.52) 10.61 0.91 16,879 1.95 1.95 4.61 136 0.31 11.13 8.99 21,554 1.93 1.93 5.56 156 1.02 10.82 16.84 26,754 1.99 1.99 5.94 204 $(1.67) $ 9.27 (10.20)% $ 16,828 1.90% 1.90% 5.80% 91% 0.01 10.94 4.22(4) 20,677 1.94(3) 1.94(3) 4.81(3) 92(4) 0.26 10.93 7.00 17,222 1.91 1.91 4.77 96 (0.51) 10.67 0.99 15,175 1.95 1.95 4.62 136 0.31 11.18 8.95 10,941 1.93 1.93 5.56 156 1.03 10.87 16.99 8,902 2.00(10) 2.00 5.93 204
See Notes to Financial Statements 103 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - --------------------------------------------------------------------------------------------------------------------------- - -------------------------- SENIOR FLOATING RATE FUND - -------------------------- CLASS A 1/31/08(6) to 9/30/08 $10.00 $ 0.41 $(0.61) $(0.20) $(0.39) $ -- $(0.39) CLASS C 1/31/08(6) to 9/30/08 $10.00 $ 0.37 $(0.61) $(0.24) $(0.35) $ -- $(0.35) CLASS I 1/31/08(6) to 9/30/08 $10.00 $ 0.43 $(0.61) $(0.18) $(0.41) $ -- $(0.41) - -------------------------- WORLDWIDE STRATEGIES 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)
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. See Note 3 in the Notes to Financial Statements. (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. (10) 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. See Notes to Financial Statements 104
RATIO OF GROSS RATIO OF EXPENSES NET NET NET RATIO OF TO AVERAGE INVESTMENT ASSET ASSETS, NET NET ASSETS INCOME CHANGE VALUE, END OF EXPENSES TO (BEFORE WAIVERS (LOSS) TO PORTFOLIO IN NET END OF TOTAL PERIOD AVERAGE AND AVERAGE TURNOVER ASSET VALUE PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE - ---------------------------------------------------------------------------------------------------------- $(0.59) $ 9.41 (2.12)%(4) $ 14,349 1.20%(3) 1.80%(3) 6.25%(3) 27%(4) $(0.59) $ 9.41 (2.59)%(4) $ 359 1.95%(3) 2.57%(3) 5.58%(3) 27%(4) $(0.59) $ 9.41 (1.96)%(4) $ 232 0.95%(3) 1.56%(3) 6.51%(3) 27%(4) $(3.77) $ 7.82 (30.50)% $ 73,003 1.65% 1.65% 1.31% 62% (0.56) 11.59 1.93(4) 116,983 1.60(3) 1.60(3) 0.59(3) 15(4) 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(4) 4,945 2.35(3) 2.35(3) (0.15)(3) 15(4) 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(4) 1,857 2.35(3) 2.35(3) (0.15)(3) 15(4) 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
(11) 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:
Net realized and Net investment unrealized Net investment income (loss) gains (loss) income ratio Year Increase/ Increase/ Increase/ Fund Ended (Decrease) (Decrease) (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)
(12) Total return includes the effect of a payment by affiliate. Without this effect, the total return would have been 1.87%. See Note 3 in the Notes to Financial Statements. See Notes to Financial Statements 105 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2008 1. ORGANIZATION Effective October 1, 2008, the Phoenix Funds became Virtus Mutual Funds, and all of the Funds were renamed to reflect the new Virtus name. On October 20, 2008, the Trusts' names were also updated to reflect the new name. Virtus Opportunities Trust (formerly "Phoenix Opportunities Trust") (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. As of the date of this report, eighteen funds are offered for sale (each a "Fund"), of which fifteen are reported in this annual report. Each Funds' investment objective is outlined on the respective Fund summary page. The Funds offer the following classes of shares for sale:
CLASS A CLASS B CLASS C CLASS I SHARES SHARES SHARES SHARES ------- ------- ------- ------- ALTERNATIVE FUNDS Global Infrastructure Fund ....... [X] -- [X] [X] International Real Estate Securities Fund ............... [X] -- [X] [X] Market Neutral Fund .............. [X] [X] [X] -- FUNDS OF FUNDS Alternatives Diversifier Fund .... [X] -- [X] -- Wealth Accumulator Fund .......... [X] -- [X] -- Wealth Builder Fund .............. [X] -- [X] -- Wealth Guardian Fund ............. [X] -- [X] -- FIXED INCOME FUNDS Bond Fund ........................ [X] [X] [X] [X] CA Tax-Exempt Bond Fund .......... [X] -- -- [X] Core Bond Fund ................... [X] [X] [X] -- High Yield Fund .................. [X] [X] [X] -- Money Market Fund ................ [X] -- -- -- Multi-Sector Fixed Income Fund ... [X] [X] [X] -- Senior Floating Rate Fund ........ [X] -- [X] [X] INTERNATIONAL FUNDS Worldwide Strategies Fund ........ [X] [X] [X] --
106 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 Class A shares for the Fixed Income Funds are sold with a front-end sales charge of up to 4.75%, except for the Money Market Fund. Class A shares for the Alternative Funds, Fund of Funds and International Funds are sold with a front-end sales charge of up to 5.75%. Class A shares of Money Market Fund are sold without a front-end sales charge. Generally, Class A shares are not subject to any charges when redeemed; however, a 1% contingent deferred sales charge may be imposed on certain redemptions made within one year following purchases on which a finder's fee has been paid with the exception of the Money Market Fund. The one year period begins on the last day of the month in which the purchase was made. Class B shares are generally sold with a contingent deferred sales charge, which declines from 5% to zero depending on the period of time the shares are held. Class C shares are generally sold with a 1%, or 1.25% for the Market Neutral Fund, contingent deferred sales charge if redeemed within one year of purchase. Class I shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class I shares bear no distribution and/or service expenses. Income and other expenses and realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service, which utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities in determining value. Due to excessive volatility in the current market (please see note on Market Conditions - Note 18), valuations developed through pricing techniques may materially vary from the actual amounts realized upon sale of the securities. For Funds of Funds, investments in the underlying funds are valued at each fund's net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time). As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. Certain foreign common stocks may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In these cases, information from an external vendor may be utilized to adjust closing market prices of certain foreign common stocks to reflect their fair value. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. On September 30, 2008, the Global Infrastructure Fund, International Real Estate Fund, Market Neutral Fund, and Worldwide Strategies Fund each utilized fair value pricing for their foreign stocks. Certain securities held by the Fund were valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. At September 30, 2008, the total value of these securities represented approximately 4% of the net assets of the Senior Floating Rate Fund. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. The Money Market Fund uses the amortized cost method of security valuation absent extraordinary or unusual market conditions. In the opinion of the Trustees, this represents the fair value of the securities. The Trustees monitor the deviations between the Fund's net asset value per share as determined by using available market quotations and its net asset value per share using amortized cost. If the deviation exceeds 1/2 of 1%, the Board of Trustees will consider what action, if any should be initiated to provide fair valuation. Using this method, the Fund attempts to maintain a constant net asset value of $1 per share. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. Dividend income is recorded using management's estimate of the income included in distributions received from the REIT investments. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund in the Trust to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Trust may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Each Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Funds' tax positions and has concluded that no provision for income tax is required in the Funds' financial statements. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Each of the Funds' federal tax returns for the 107 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 prior three fiscal years remain subject to examination by the Internal Revenue Service. D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by each Fund on the ex-dividend date. For the CA Tax-Exempt Fund, Money Market Fund and the Multi-Sector Fixed Income Fund income distributions are recorded daily. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more appropriately made. In addition to the Net Annual Operating Expenses that the Funds bear directly, the shareholders in the Funds of Funds indirectly bear the Fund's pro-rata expenses of the underlying mutual funds in which each Fund invests. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. FOREIGN SECURITY COUNTRY DETERMINATION: A combination of the following criteria is used to assign the countries of risk listed in the schedules of investments: country of incorporation, actual building address, primary exchange on which the security is traded and country in which the greatest percentage of company revenue is generated. H. FORWARD CURRENCY CONTRACTS: Certain Funds may enter into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by each Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, the Fund records a realized gain or loss equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: Certain Funds may engage in when-issued or delayed delivery transactions. Each Fund records when-issued and delayed delivery securities on the trade date. Each Fund maintains collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date. J. LOAN AGREEMENTS: Certain Funds 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. K. CREDIT LINKED NOTES: Certain Funds may invest in credit linked notes which are usually issued by a special purpose vehicle that is selling credit protection through a credit default swap. The performance of the notes is linked to the performance of the underlying reference obligation. The special purpose vehicle invests the proceeds from the notes to cover its contingent obligation. Credit linked notes may also have risks with default by the referenced obligation, currency and/or interest rates. L. SHORT SALES: Certain funds may sell securities short. A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in market price. To sell a security short, the Fund must borrow the security. The Fund's obligation to replace the security borrowed and sold short will be fully collateralized at all times by the proceeds from the short sale retained by the broker and by cash and securities deposited in a segregated account with the Fund's custodian. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will realize a loss unlimited, and if the price declines during the period, the Fund will realize a gain limited. Any realized gain will be decreased, and any realized loss increased, by the amount of transaction costs. On ex-dividend date, dividends on short sales are recorded as an expense to the Fund. At September 30, 2008, the value of securities sold short in the Market Neutral Fund amounted to $114,393 (reported in thousands) against which collateral of $235,911 (reported in thousands) was held. The collateral includes the deposits with broker for securities sold short and the long-term investments held long, as shown in the Schedule of Investments and Securities Sold Short. Short selling used in the management of the Fund may accelerate the velocity of potential losses if the prices of securities sold short appreciate quickly. Stocks purchased may decline in value at the same time stocks sold short appreciate in value, thereby increasing potential losses. 108 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 M. SECURITY LENDING: Certain Funds may loan securities to qualified brokers through an agreement with State Street Bank and Trust Company (the "Custodian"). Under the terms of agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash and securities issued by the U.S. Government. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by the Custodian for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At September 30, 2008, the following Funds had securities on loan as follows (reported in thousands):
MARKET VALUE OF SECURITIES CASH FUND LOANED COLLATERAL - ---- ------------ ---------- Core Bond Fund ................ $ 371 $ 386 High Yield Fund ............... 10,359 10,868 Worldwide Strategies Fund(1) .. 13,973 13,953
(1) Cash collateral is less than the market value of securities loaned due to significant market value changes on September 30, 2008. Collateral was subsequently adjusted on October 1, 2008 and the Fund remained in compliance. As of the close of business on September 17, 2008, Lehman Brothers Holding Inc. was in default of the security lending agreement with the High Yield Fund and the Worldwide Strategies Fund. As a result, State Street Bank and Trust Company as Securities Lending Agent took possession of the collateral and repurchased the securities in the Funds through open market purchases. Under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("FAS 140"), the criteria for sales accounting have been met. As a result of recording the sale of the original securities out on loan at market value and the repurchase of the securities into the Funds at replacement value, the High Yield Fund and the Worldwide Strategies Fund had realized losses of ($25,775) and ($25,633), respectively, which did not have an impact on the financial statements or net asset values of the Funds. The transactions are being treated as non-taxable events. N. REPURCHASE AGREEMENTS: Certain Funds may invest in repurchase agreements. A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ reported in thousands except as noted) On February 7, 2008, The Phoenix Companies, Inc. ("PNX") announced its intention to spin off various subsidiaries constituting its asset management business to PNX's shareholders. Once spun off from PNX, the company holding the asset management subsidiaries, Virtus Investment Partners, Inc. ("Virtus"), will become an independent public company. The spinoff is expected to occur at a date later in the year based on regulatory approval. In preparation for this spinoff, certain of the asset management subsidiaries have changed their names to reflect the Virtus brand, including the Funds' adviser, Phoenix Investment Counsel, Inc., which is now known as Virtus Investment Advisers, Inc. (the "Adviser"). As compensation for its services to the Trust, the Adviser, an indirect wholly-owned subsidiary of PNX, is entitled to a fee based upon the following annual rates as a percentage of the average daily assets of each Fund:
1ST $1+ BILLION - $2+ BILLION $2 BILLION BILLION ------- ------------- ------- Global Infrastructure Fund ... 0.65% 0.60% 0.55% International Real Estate Securities Fund ........... 1.00% 0.95% 0.90% CA Tax-Exempt Bond Fund ...... 0.45% 0.40% 0.35% Core Bond Fund ............... 0.45% 0.40% 0.35% High Yield Fund .............. 0.65% 0.60% 0.55% Money Market Fund ............ 0.40% 0.35% 0.30% Multi-Sector Fixed Income Fund 0.55% 0.50% 0.45% Senior Floating Rate Fund .... 0.60% 0.55% 0.50% Worldwide Strategies Fund .... 0.85% 0.80% 0.75%
For the Funds shown below the individual rates are as follows: Market Neutral Fund ............................ 1.50% Alternatives Diversifier Fund .................. 0.10% Wealth Accumulator Fund ........................ 0.10% Wealth Builder Fund ............................ 0.10% Wealth Guardian Fund ........................... 0.10% Bond Fund ...................................... 0.50%
The Adviser has voluntarily agreed to limit each Fund's total operating expenses (excluding interest, taxes, and extraordinary expenses), so that such expenses do not exceed the following percentages of the average daily net asset values for the following funds: CLASS A CLASS B CLASS C CLASS I ------- ------- ------- ------- Global Infrastructure Fund(2) ... 1.15% -- 1.90% -- Market Neutral Fund(1)(2) ....... 1.77% 2.52% 2.52% -- Alternatives Diversifier Fund(2) ...................... 0.20% -- 0.20% -- Wealth Accumulator Fund(2)(3) ................... 0.20% -- 0.20% -- Wealth Builder Fund(2)(3) ....... 0.20% -- 0.20% -- Wealth Guardian Fund(2)(3) ...... 0.20% -- 0.20% -- Bond Fund(4)(5) ................. 0.85% 1.60% 1.60% 0.60% CA Tax-Exempt Bond Fund(4) ...................... 0.85% -- -- 0.60% Core Bond Fund(4) ............... 1.00% 1.75% 1.75% -- (1) Excluding dividends on short sales. (2) Excluding 12b-1 fees and acquired fund fees and expenses. (3) The Adviser voluntarily agreed to limit the Fund's operating expenses as stated for the period October 1, 2007 through September 21, 2008. Effective September 22, 2008, the Adviser discontinued the voluntary expense cap. (4) The Adviser may discontinue this voluntary expense cap at any time. (5) For the period October 1, 2007 through May 15, 2008, the expenses were limited as follows: Class A 1.15%, Class B 1.90%, Class C 1.90%, Class I 0.90%. 109 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Adviser has contractually agreed to limit the below listed Funds total operating expenses (excluding interest, taxes, and extraordinary expenses) through January 31, 2009 so that such expenses do not exceed the following percentages of the average daily net asset values for the following funds:
CLASS A CLASS C CLASS I ------- ------- ------- International Real Estate Securities Fund ........... 1.50% 2.25% 1.25% Senior Floating Rate Fund .... 1.20% 1.95% 0.95%
Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under this arrangement, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. Each Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with applicable expense limitations. All or a portion of the following Adviser reimbursed expenses through September 30, 2008 may be recaptured by the fiscal year ending:
EXPIRATION DATE ------------------- 2010 2011 TOTAL ---- ---- ----- Global Infrastructure Fund .................... $ 8 $ 51 $ 59 Market Neutral Fund ........................... 10 191 201 Alternatives Diversifier Fund ................. 36 571 607 Wealth Accumulator Fund ....................... 7 87 94 Wealth Builder Fund ........................... 29 274 303 Wealth Guardian Fund .......................... 12 137 149 Bond Fund ..................................... -- 95 95 CA Tax-Exempt Bond Fund ....................... 7 109 116 Core Bond Fund ................................ 12 105 117 Senior Floating Rate Fund ..................... -- 61 61
The Adviser manages the Funds' investment program and general operations of the Funds, including oversight of the Funds' subadvisers. The subadvisers to the funds are as follows: FUND SUBADVISER - ---- ------------------------------------------- Global Infrastructure Fund ..................... Duff & Phelps Investment Management Co. ("DPIM") International Real Estate Securities Fund .......... Duff & Phelps Investment Management Co. ("DPIM") Market Neutral Fund(1) ...... The Boston Company Asset Management LLC ("TBCAM") Bond Fund ................... SCM Advisors LLC ("SCM") CA Tax-Exempt Bond Fund ..... Goodwin Capital Advisers, Inc. ("Goodwin") Core Bond Fund .............. Goodwin Capital Advisers, Inc. ("Goodwin") High Yield Fund ............. SCM Advisors LLC ("SCM") Money Market Fund ........... Goodwin Capital Advisers, Inc. ("Goodwin") Multi-Sector Fixed Income Fund ..................... Goodwin Capital Advisers, Inc. ("Goodwin") Senior Floating Rate Fund ................... Goodwin Capital Advisers, Inc. ("Goodwin") Worldwide Strategies Fund ... Acadian Asset Management, Inc. ("Acadian") and New Star Institutional Managers Limited ("New Star") DPIM, GOODWIN, AND SCM ARE INDIRECT, WHOLLY-OWNED SUBSIDIARIES OF PNX. (1) AS OF JANUARY 10, 2008, TBCAM IS THE SUBADVISER TO THE FUND. FOR THE PERIOD JUNE 27, 2007 THROUGH JANUARY 9, 2008, EUCLID ADVISORS LLC ("EUCLID") SERVED AS THE SUBADVISER. EUCLID IS A WHOLLY-OWNED SUBSIDIARY OF ZWEIG ADVISERS LLC, (FORMERLY PHOENIX/ZWEIG ADVISERS), WHICH IS A WHOLLY-OWNED SUBSIDIARY OF VIRTUS. VIRTUS IS THE INDIRECT WHOLLY-OWNED ASSET MANAGEMENT SUBSIDIARY OF PNX. ZWEIG ADVISERS LLC AND EUCLID ARE AFFILIATED INVESTMENT ADVISERS. As distributor of each Fund's shares, Phoenix Equity Planning Corporation ("PEPCO"), an indirect wholly-owned subsidiary of PNX, has advised the Funds that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2008, as follows:
CLASS A CLASS B CLASS C NET DEFERRED DEFERRED SELLING SALES SALES COMMISSIONS CHARGES CHARGES ----------- -------- -------- Global Infrastructure Fund ........ $ 5 $ -- $ 1 International Real Estate Securities Fund ................ --(1) -- -- Market Neutral Fund ............... 1 12 --(1) Alternatives Diversifier Fund ..... 239 -- 48 Wealth Accumulator Fund ........... 5 -- 1 Wealth Builder Fund ............... 16 -- 7 Wealth Guardian Fund .............. 7 -- 2 Bond Fund ......................... 1 2 1 CA Tax-Exempt Bond Fund ........... 1 -- -- Core Bond Fund .................... 3 3 --(1) High Yield Fund ................... 4 3 1 Multi-Sector Fixed Income Fund .... 9 8 6 Worldwide Strategies Fund ......... 3 8 --(1)
(1) Amount is less than $500 (not reported in thousands). In addition, each Fund pays PEPCO distribution and/or service fees at the following annual rates as a percentage of the average daily net assets of each respective class:
CLASS A CLASS B CLASS C ------- ------- ------- Global Infrastructure Fund ........ 0.25% -- 1.00% International Real Estate Securities Fund ................ 0.25% -- 1.00% Market Neutral Fund ............... 0.25% 1.00% 1.00% Alternatives Diversifier Fund ..... 0.10% -- 0.85% Wealth Accumulator Fund ........... none -- 0.75% Wealth Builder Fund ............... none -- 0.75% Wealth Guardian Fund .............. none -- 0.75% Bond Fund ......................... 0.25% 1.00% 1.00% CA Tax-Exempt Bond Fund ........... 0.25% -- -- Core Bond Fund .................... 0.25% 1.00% 1.00% High Yield Fund ................... 0.25% 1.00% 1.00% Multi-Sector Fixed Income Fund .... 0.25% 1.00% 1.00% Senior Floating Rate Fund ......... 0.25% -- 1.00% Worldwide Strategies Fund ......... 0.25% 1.00% 1.00%
There are no distribution and/or service fees for Class I. The Money Market Fund does not have distribution and/or service fees. To avoid duplication of distribution and/or service fees, each class of shares of the Funds of Funds has reduced the distribution and/or service fees by the amount of the underlying affiliated mutual funds' Class A and Class Y distribution and/or service fees. The net amounts are shown in the above table. 110 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. PEPCO serves as the Administrator to the Trust. For its services, which include financial agent services, PEPCO receives an administration fee at an annual rate of 0.09% of the first $5 billion, 0.08% on the next $10 billion, and 0.07% over $15 billion of the average net assets across all non-money market funds in the Virtus Mutual Funds and certain other affiliated funds. For the money market funds, the fee is 0.035% of the average net assets across all money market funds within The Virtus Mutual Funds and certain other affiliated funds. For the period ended September 30, 2008, the Trust incurred administration fees totaling $1,087. PEPCO serves as the Trust's transfer agent. For the period ended September 30, 2008, transfer agent fees were $1,886 as reported in the Statements of Operations. At September 30, 2008, PNX and its affiliates, the retirement plans of PNX and its affiliates, and Virtus affiliated funds held shares of the funds which may be redeemed at any time that aggregated the following:
AGGREGATE NET ASSET SHARES VALUE ---------- --------- Global Infrastructure Fund, Class A ......................... 6,184,881 $ 67,477 Class C ......................... 11,402 124 Class I ......................... 7,568 82 International Real Estate Securities Fund, Class A ......................... 9,002,559 60,497 Class C ......................... 10,136 68 Class I ......................... 10,221 69 Market Neutral Fund, Class A ......................... 11,087,607 108,769 Alternatives Diversifier Fund, Class C ......................... 10,289 108 Bond Fund, Class A ......................... 1,451,429 14,151 Class C ......................... 10,854 103,982 Core Bond Fund, Class C ......................... 45 --(1) Money Market Fund, Class A ......................... 151,602 152 Senior Floating Rate Fund, Class A ......................... 1,518,724 14,291 Class C ......................... 20,703 195 Class I ......................... 20,838 196
(1) Amount is less than $500 (not reported in thousands). Until March 1, 2007, the Trust provided a deferred compensation plan to its trustees who were not officers of Virtus. Under the deferred compensation plan, trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the trustees. Investments in such funds are included in "Other assets" on the Statements of Assets and Liabilities at September 30, 2008. On September 16, 2008, certain subsidiaries of PNX purchased two short-term notes from the Money Market Fund. These notes were purchased at a price equal to the notes' par totaling $3,220,000, of which $1,127 (reported in thousands) was a contribution from certain subsidiaries of PNX representing the amount in excess of the estimated value of the notes determined in good faith. 4. PURCHASES AND SALES OF SECURITIES ($ reported in thousands) Purchases and sales of investment securities for all Funds except the Money Market Fund (excluding U.S. Government securities and agency securities, forward currency contracts, futures and short-term securities) during the period ended September 30, 2008, were as follows:
PURCHASES SALES --------- -------- Global Infrastructure Fund ..... $ 73,731 $ 40,181 International Real Estate Securities Fund ............. 63,936 1,575 Market Neutral Fund ............ 501,411 494,546 Alternatives Diversifier Fund... 362,415 88,212 Wealth Accumulator Fund ........ 4,430 3,865 Wealth Builder Fund ............ 26,123 41,325 Wealth Guardian Fund ........... 13,415 17,663 Bond Fund ...................... 67,756 97,158 CA Tax-Exempt Bond ............. 6,615 7,898 Core Bond Fund ................. 11,817 14,609 High Yield Fund ................ 107,079 120,140 Multi-Sector Fixed Income ...... 82,519 87,179 Senior Floating Rate Fund ...... 18,941 3,864 Worldwide Strategies Fund ...... 64,134 74,008
Purchases and sales of long term U.S. Government and agency securities for the Funds during the period ended September 30, 2008, were as follows:
PURCHASES SALES --------- -------- Bond Fund ...................... $318,411 $317,018 Core Bond Fund ................. 11,092 11,481 Multi-Sector Fixed Income ...... 40,966 45,126
111 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 5. CAPITAL SHARE TRANSACTIONS (reported in thousands) Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:
------------------- ----------------- ----------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- ------ -------- - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 5/1/07 - 5/1/06 - GLOBAL INFRASTRUCTURE FUND 9/30/08 9/30/07 4/30/07 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 3,531 $ 46,054 1,186 $ 16,030 2,533 $ 31,313 Reinvestment of distributions 282 3,775 120 1,595 67 780 Shares repurchased (1,110) (14,788) (821) (10,721) (203) (2,538) ------ -------- ----- -------- ----- -------- Net increase / (decrease) 2,703 $ 35,041 485 $ 6,904 2,397 $ 29,555 ====== ======== ===== ======== ===== ======== CLASS C Sale of shares 44 $ 586 20 $ 262 52 $ 649 Reinvestment of distributions 7 98 3 36 3 29 Shares repurchased (25) (312) (9) (114) (30) (366) ------ -------- ----- -------- ----- -------- Net increase / (decrease) 26 $ 372 14 $ 184 25 $ 312 ====== ======== ===== ======== ===== ======== CLASS I(1) Sale of shares 8 $ 100 -- $ -- -- $ -- Reinvestment of distributions --(5) 1 -- -- -- -- Shares repurchased -- -- -- -- -- -- ------ -------- ----- -------- ----- -------- Net increase / (decrease) 8 $ 101 -- $ -- -- $ -- ====== ======== ===== ======== ===== ======== - -------------------------------- ------------------- INTERNATIONAL REAL ESTATE 10/1/07(2) - SECURITIES FUND 9/30/08 - -------------------------------- ------------------- CLASS A Sale of shares 9,133 $ 70,334 Reinvestment of distributions 25 213 Shares repurchased (97) (802) ------ -------- Net increase / (decrease) 9,061 $ 69,745 ====== ======== CLASS C Sale of shares 94 $ 794 Reinvestment of distributions -- 2 Shares repurchased (73) (544) ------ -------- Net increase / (decrease) 21 $ 252 ====== ======== CLASS I Sale of shares 10 $ 100 Reinvestment of distributions --(5) 2 Shares repurchased -- -- ------ -------- Net increase / (decrease) 10 $ 102 ====== ======== - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 11/1/06 - 11/1/05 - MARKET NEUTRAL FUND 9/0/08 9/30/07 10/31/06 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 9,220 $ 93,882 3,427 $ 37,237 5,692 $ 65,052 Reinvestment of distributions 86 895 88 950 -- -- Shares repurchased (2,328) (23,305) (6,286) (68,728) (7,093) (81,002) ------ -------- ------ -------- ------ -------- Net increase / (decrease) 6,978 $ 71,472 (2,771) $(30,541) (1,401) $(15,950) ====== ======== ====== ======== ====== ======== CLASS B Sale of shares 11 $ 118 21 $ 222 41 $ 452 Reinvestment of distributions 2 18 4 45 -- -- Shares repurchased (97) (972) (166) (1,732) (320) (3,550) ------ -------- ------ -------- ------ -------- Net increase / (decrease) (84) $ (836) (141) $ (1,465) (279) $ (3,098) ====== ======== ====== ======== ====== ======== CLASS C Sale of shares 51 $ 508 33 $ 350 252 $ 2,814 Reinvestment of distributions 5 45 16 173 -- -- Shares repurchased (237) (2,359) (1,049) (10,949) (2,073) (22,745) ------ -------- ------ -------- ------ -------- Net increase / (decrease) (181) $ (1,806) (1,000) $(10,426) (1,821) $(19,931) ====== ======== ====== ======== ====== ========
112 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 8/1/07 - 8/1/06 - ALTERNATIVES DIVERSIFIER FUND 9/30/08 9/30/07 7/31/07 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 20,960 $244,592 1,208 $13,656 8,790 $ 99,697 Reinvestment of distributions 136 1,627 36 420 41 460 Shares repurchased (5,205) (59,586) (498) (5,615) (405) (4,654) ------ -------- ----- ------- ----- -------- Net increase / (decrease) 15,891 $186,633 746 $ 8,461 8,426 $ 95,503 ====== ======== ===== ======= ===== ======== CLASS C Sale of shares 8,893 $103,128 528 $ 5,893 5,586 $ 62,713 Reinvestment of distributions 45 528 13 150 10 106 Shares repurchased (1,644) (18,894) (182) (2,048) (168) (1,912) ------ -------- ----- ------- ----- -------- Net increase / (decrease) 7,294 $ 84,762 359 $ 3,995 5,428 $ 60,907 ====== ======== ===== ======= ===== ======== - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 8/1/07 - 8/1/06 - WEALTH ACCUMULATOR FUND 9/30/08 9/30/07 7/31/07 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 162 $ 1,866 51 $ 612 472 $ 5,599 Reinvestment of distributions 13 156 9 112 17 197 Shares repurchased (164) (1,925) (17) (205) (64) (735) ------ -------- ----- ------- ----- -------- Net increase / (decrease) 11 $ 97 43 $ 519 425 $ 5,061 ====== ======== ===== ======= ===== ======== CLASS C Sale of shares 92 $ 1,036 54 $ 659 162 $ 1,863 Reinvestment of distributions 4 48 3 38 6 73 Shares repurchased (69) (772) (15) (175) (75) (888) ------ -------- ----- ------- ----- -------- Net increase / (decrease) 27 $ 312 42 $ 522 93 $ 1,048 ====== ======== ===== ======= ===== ======== - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 8/1/07 - 8/1/06 - WEALTH BUILDER FUND 9/30/08 9/30/07 7/31/07 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 489 $ 5,817 122 $ 1,566 919 $ 11,761 Reinvestment of distributions 162 2,002 169 2,168 201 2,528 Shares repurchased (1,067) (12,560) (116) (1,501) (1,071) (13,740) ------ -------- ----- ------- ----- -------- Net increase / (decrease) (416) $ (4,741) 175 $ 2,233 49 $ 549 ====== ======== ===== ======= ===== ======== CLASS C Sale of shares 224 $ 2,504 218 $ 2,774 734 $ 9,313 Reinvestment of distributions 218 2,741 123 1,566 215 2,681 Shares repurchased (1,441) (16,678) (197) (2,542) (1,384) (17,498) ------ -------- ----- ------- ----- -------- Net increase / (decrease) (999) $(11,433) 144 $ 1,798 (435) $ (5,504) ====== ======== ===== ======= ===== ======== - -------------------------------- ------------------- ----------------- ----------------- 10/1/07 - 8/1/07 - 8/1/06 - WEALTH GUARDIAN FUND 9/30/08 9/30/07 7/31/07 - -------------------------------- ------------------- ----------------- ----------------- CLASS A Sale of shares 523 $ 6,027 67 $ 802 617 $ 7,397 Reinvestment of distributions 69 790 71 848 93 1,102 Shares repurchased (680) (7,642) (101) (1,196) (461) (5,500) ------ -------- ----- ------- ----- -------- Net increase / (decrease) (88) $ (825) 37 $ 454 249 $ 2,999 ====== ======== ===== ======= ===== ======== CLASS C Sale of shares 152 $ 1,729 79 $ 938 295 $ 3,491 Reinvestment of distributions 22 260 33 393 41 485 Shares repurchased (623) (6,940) (104) (1,246) (635) (7,500) ------ -------- ----- ------- ----- -------- Net increase / (decrease) (449) $ (4,951) 8 $ 85 (299) $ (3,524) ====== ======== ===== ======= ===== ======== - -------------------------------- ------------------- ----------------- 10/1/07 - 10/1/06 - BOND FUND 9/30/08 9/30/07 - -------------------------------- ------------------- ----------------- CLASS A Sale of shares 339 $ 3,490 425 $ 4,351 Reinvestment of distributions 111 1,127 112 1,143 Plan of Reorganization (Note 11) 125 1,283 -- -- Shares repurchased (979) (9,900) (420) (4,310) ------ -------- ----- ------- Net increase / (decrease) (404) $ (4,000) 117 $ 1,184 ====== ======== ===== =======
113 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008
----------------- ----------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- ------- ------- - ----------------------------------- ----------------- ----------------- 10/1/07 - 10/1/06 - BOND FUND (CONTINUED) 9/30/08 9/30/07 - ----------------------------------- ----------------- ----------------- CLASS B Sale of shares 95 $ 955 25 $ 256 Reinvestment of distributions 10 103 12 120 Plan of Reorganization (Note 11) -- -- -- -- Shares repurchased (107) (1,077) (150) (1,513) ------ -------- ------ -------- Net increase / (decrease) (2) $ (19) (113) $ (1,137) ====== ======== ====== ======== CLASS C Sale of shares 288 $ 2,901 74 $ 746 Reinvestment of distributions 6 62 4 41 Plan of Reorganization (Note 11) 40 402 -- -- Shares repurchased (191) (1,920) (64) (647) ------ -------- ------ -------- Net increase / (decrease) 143 $ 1,445 14 $ 140 ====== ======== ====== ======== CLASS I Sale of shares 400 $ 4,110 442 $ 4,581 Reinvestment of distributions 290 2,946 184 1,899 Plan of Reorganization (Note 11) 12,554 129,630 -- -- Shares repurchased (3,900) (39,912) (1,675) (17,320) ------ -------- ------ -------- Net increase / (decrease) 9,344 $ 96,774 (1,049) $(10,840) ====== ======== ====== ======== - ----------------------------------- ----------------- ----------------- -------------------- 10/1/07 - 5/1/07 - 5/1/06 - CA TAX-EXEMPT BOND FUND 9/30/08 9/30/07 4/30/07 - ----------------------------------- ----------------- ----------------- -------------------- CLASS A Sale of shares 44 $ 528 10 $ 122 55 $ 680 Reinvestment of distributions 68 814 30 362 94 1,161 Plan of Reorganization (Note 11) -- -- -- -- 6 72 Shares repurchased (350) (4,220) (253) (3,037) (499) (6,124) ------ -------- ------ -------- ----- ------- Net increase / (decrease) (238) $ (2,878) (213) $ (2,553) (344) $(4,211) ====== ======== ====== ======== ===== ======= CLASS B Sale of shares -- $ -- -- $ -- --(5) $ --(4) Reinvestment of distributions -- -- -- -- --(5) --(4) Plan of Reorganization (Note 11) -- -- -- -- (6) (72) Shares repurchased -- -- -- -- (7) (84) ------ -------- ------ -------- ----- ------- Net increase / (decrease) -- $ -- -- $ -- (13) $ (156) ====== ======== ====== ======== ===== ======= CLASS I(3) Sale of shares 549 $ 6,638 57 $ 684 130 $ 1,489 Reinvestment of distributions 37 443 15 183 27 328 Plan of Reorganization (Note 11) -- -- -- -- 2,503 31,008 Shares repurchased (481) (5,811) (95) (1,129) (296) (3,526) ------ -------- ------ -------- ----- ------- Net increase / (decrease) 105 $ 1,270 (23) $ (262) 2,364 $29,299 ====== ======== ====== ======== ===== =======
----------------- ----------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- ------- -------- - ----------------------------------- ----------------- ----------------- -------------------- 10/1/07 - 11/1/06 - 11/1/05 - CORE BOND FUND 9/30/08 9/30/07 10/31/06 - ----------------------------------- ----------------- ----------------- -------------------- CLASS A Sale of shares 215 $ 1,789 190 $ 1,588 201 $ 1,657 Reinvestment of distributions 238 1,955 233 1,936 278 2,272 Shares repurchased (902) (7,451) (1,014) (8,437) (1,726) (14,118) ---- ------- ------ ------- ------ -------- Net increase / (decrease) (449) $(3,707) (591) $(4,913) (1,247) $(10,189) ==== ======= ====== ======= ====== ======== CLASS B Sale of shares 62 $ 509 125 $ 1,027 98 $ 805 Reinvestment of distributions 6 47 6 49 9 73 Shares repurchased (105) (863) (150) (1,237) (184) (1,494) ---- ------- ------ ------- ------ -------- Net increase / (decrease) (37) $ (307) (19) $ (161) (77) $ (616) ==== ======= ====== ======= ====== ======== CLASS C Sale of shares 85 $ 714 50 $ 411 24 $ 197 Reinvestment of distributions 5 45 4 36 5 38 Shares repurchased (59) (488) (64) (534) (25) (204) ---- ------- ------ ------- ------ -------- Net increase / (decrease) 31 $ 271 (10) $ (87) 4 $ 31 ==== ======= ====== ======= ====== ========
114 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008
------------------ ------------------ ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------ --------- ------ --------- - ------------------------------ ------------------ ------------------ -------------------- 10/1/07- 11/1/06- 11/1/05- HIGH YIELD FUND 9/30/08 9/30/07 10/31/06 - ------------------------------ ------------------ ------------------ -------------------- CLASS A Sale of shares 1,283 $ 5,881 2,256 $ 11,148 2,756 $ 13,448 Reinvestment of distributions 1,217 5,496 1,069 5,289 1,202 5,866 Shares repurchased (4,763) (21,787) (4,664) (23,146) (6,555) (32,087) ------ ------- ------ ------- ------ ------- Net increase / (decrease) (2,263) $(10,410) (1,339) $ (6,709) (2,597) $(12,773) ====== ======== ====== ======== ====== ======== CLASS B Sale of shares 108 $ 483 73 $ 352 211 $ 1,014 Reinvestment of distributions 16 72 21 101 33 156 Shares repurchased (314) (1,437) (503) (2,458) (914) (4,422) ------ ------- ------ ------- ------ ------- Net increase / (decrease) (190) $ (882) (409) $ (2,005) (670) $ (3,252) ====== ======== ====== ======== ====== ======== CLASS C Sale of shares 104 $ 473 214 $ 1,057 125 $ 604 Reinvestment of distributions 15 66 11 55 10 50 Shares repurchased (177) (795) (121) (597) (173) (841) ------ ------- ------ ------- ------ ------- Net increase / (decrease) (58) $ (256) 104 $ 515 (38) $ (187) ====== ======== ====== ======== ====== ======== - ------------------------------ ------------------ ------------------ --------------------- 10/1/07- 11/1/06- 11/1/05- MONEY MARKET FUND 9/30/08 9/30/07 10/31/06 - ------------------------------ ------------------ ------------------ --------------------- CLASS A Sale of shares 66,313 $ 66,313 67,326 $ 67,326 95,573 $ 95,573 Reinvestment of distributions 2,643 2,643 3,761 3,761 3,923 3,923 Shares repurchased (80,258) (80,258) (74,042) (74,042) (111,112) (111,112) ------- ------- ------- ------- -------- -------- Net increase / (decrease) (11,302) $(11,302) (2,955) $ (2,955) (11,616) $ (11,616) ======= ======== ====== ======== ======= ========= - ------------------------------ ------------------ ------------------ --------------------- 10/1/07- 11/1/06- 11/1/05- MULTI-SECTOR FIXED INCOME FUND 9/30/08 9/30/07 10/31/06 - ------------------------------ ------------------ ------------------ --------------------- CLASS A Sale of shares 1,048 $ 11,016 1,894 $ 20,760 1,911 $ 20,550 Reinvestment of distributions 426 4,391 321 3,523 351 3,769 Shares repurchased (2,274) (23,676) (2,217) (24,261) (2,559) (27,444) ------ -------- ------ -------- ------ -------- Net increase / (decrease) (800) $ (8,269) (2) $ 22 (297) $ (3,125) ====== ======== ====== ======== ====== ======== CLASS B Sale of shares 171 $ 1,781 210 $ 2,306 267 $ 2,866 Reinvestment of distributions 43 446 31 337 36 388 Shares repurchased (222) (2,302) (237) (2,592) (592) (6,341) ------ -------- ------ -------- ------ -------- Net increase / (decrease) (8) $ (75) 4 $ 51 (289) $ (3,087) ====== ======== ====== ======= ====== ======= CLASS C Sale of shares 473 $ 4,959 703 $ 7,777 572 $ 6,172 Reinvestment of distributions 67 698 50 544 42 452 Shares repurchased (616) (6,418) (439) (4,835) (460) (4,958) ------ -------- ------ -------- ------ -------- Net increase / (decrease) (76) $ (761) 314 $ 3,486 154 $ 1,666 ====== ======== ====== ======== ====== ======== - ------------------------------ ------------------ 1/31/08(2)- SENIOR FLOATING RATE FUND 9/30/08 - ------------------------------ ------------------ CLASS A Sale of shares 1,466 $ 14,660 Reinvestment of distributions 59 586 Shares repurchased -- -- ----- -------- Net increase / (decrease) 1,525 $ 15,246 ===== ======== CLASS C Sale of shares 37 $ 371 Reinvestment of distributions 1 8 Shares repurchased -- -- ----- -------- Net increase / (decrease) 38 $ 379 ===== ========
115 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008
------------------ ------------------ ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------ --------- ------ --------- - ------------------------------ ----------------- SENIOR FLOATING RATE FUND 1/31/08(2)- (CONTINUED) 9/30/08 - ------------------------------ ----------------- CLASS I Sale of shares 24 $238 Reinvestment of distributions 1 9 Shares repurchased -- -- --- ---- Net increase / (decrease) 25 $247 === ====
- ------------------------------ ------------------ ------------------ ------------------- 10/1/07- 7/1/07- 7/1/06- WORLDWIDE STRATEGIES FUND 9/30/08 9/30/07 6/30/07 - ------------------------------ ------------------ ------------------ ------------------- CLASS A Sale of shares 215 $ 2,248 63 $ 768 323 $ 3,514 Reinvestment of distributions 267 2,785 598 6,814 102 1,120 Shares repurchased (1,248) (12,695) (252) (3,000) (1,165) (12,702) ------ -------- ---- ------- ------ -------- Net increase / (decrease) (766) $ (7,662) 409 $ 4,582 (740) $ (8,068) ====== ======== ==== ======= ====== ======== CLASS B Sale of shares 49 $ 476 34 $ 373 90 $ 906 Reinvestment of distributions 10 95 30 307 3 30 Shares repurchased (194) (1,834) (51) (551) (234) (2,327) ------ -------- ---- ------- ------ -------- Net increase / (decrease) (135) $ (1,263) 13 $ 129 (141) $ (1,391) ====== ======== ==== ======= ====== ======== CLASS C Sale of shares 35 $ 331 5 $ 53 16 $ 160 Reinvestment of distributions 3 36 10 106 1 9 Shares repurchased (53) (470) (4) (48) (166) (1,484) ------ -------- ---- ------- ------ -------- Net increase / (decrease) (15) $ (103) 11 $ 111 (149) $ (1,315) ====== ======== ==== ======= ====== ========
(1) Inception date of the Class is 6/6/08. (2) Inception date of the Fund. (3) Inception date of the Class is 9/29/06. (4) Amount is less than $500. (5) Shares less than 500. 6. 10% SHAREHOLDERS As of September 30, 2008, certain Funds had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below.
% OF SHARES NUMBER OF OUTSTANDING ACCOUNTS ----------- --------- Global Infrastructure Fund ........................... 72% 1* International Real Estate Securities Fund ............ 75% 1* Market Neutral Fund .................................. 88% 1* Alternatives Diversifier Fund ........................ 30% 2 Wealth Accumulator Fund .............................. 26% 2 Wealth Builder Fund .................................. 30% 1 Wealth Guardian Fund ................................. 26% 1 Bond Fund ............................................ 40% 1 CA Tax-Exempt Bond Fund .............................. 29% 2 Senior Floating Rate Fund ............................ 96% 1*
* Includes affiliated shareholder accounts. The Funds of Funds do not invest in the underlying funds for the purpose of exercising management or control; however, investments made by each Fund within each of its principal investment strategies may represent a significant portion of an underlying fund's net assets. At September 30, 2008, the Funds were the owner of record of the following approximate percentages of the total outstanding shares of the underlying funds as detailed below:
WEALTH WEALTH ALTERNATIVES BUILDER GUARDIAN DIVERSIFIER FUND FUND FUND ------- -------- ------------ Virtus Global Infrastructure Fund--Class A ........... --% --% 72% Virtus Growth Opportunities Fund--Class A ........... 14% --% --% Virtus International Real Estate Fund--Class A .... --% --% 85% Virtus Market Neutral Fund--Class A ........... --% --% 88% Virtus Institutional Bond Fund--Class Y ........... --% 10% --% Virtus Small-Cap Sustainable Growth Fund--Class A ........... 12% --% --% Virtus Value Opportunities Fund--Class A ........... 14% --% --%
The investments of the Wealth Accumulator Fund do not represent greater than 10% of any of the underlying funds' total outstanding shares. 7. ILLIQUID AND RESTRICTED SECURITIES Investments shall be considered illiquid if they cannot be disposed of within seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining liquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the 116 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are footnoted as such at the end of each Fund's Schedule of Investments where applicable. Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933. Generally, 144A securities are excluded from this category, except where defined as illiquid. At September 30, 2008, the Funds held the following illiquid and restricted securities (reported in thousands):
% OF MARKET NET VALUE ASSETS ACQUISITION ACQUISITION AT AT DATE COST 9/30/08 9/30/08 ----------- ----------- ------- ------- Market Neutral Fund - ------------------- Telefonica Moviles S.A. 12/20/01 $ 0 $ 0 0.0% Telefonica Data Argentina S.A 12/20/01 $ 0 $ 0 0.0% Bond Fund - --------- DLJ Mortgage Acceptance Corp. 96-M, 1 144A 0.000% due 11/28/11 $ 16 $ 11 0.0% Core Bond Fund - -------------- Greenwich Structured ARM Products 05-5A, N2 144A 6.690% due 9/27/45 2/28/06 $ 315 $142 0.3% MASTR Resecuritization Trust 05-4CI, N2 144A 6.429% due 4/26/45 11/12/06 $ 170 $ 17 0.0% High Yield Fund - --------------- Poland Telecom Finance BV Series B 14.000% due 12/1/07 11/24/97 $5,000 $ 62 0.1% CB Cambridge Industries Liquidating Trust Interests 12/24/01 $ 369 $ 64 0.1% ACG Holdings, Inc. 12/4/93 $ 358 $ 0 0.0% Multi-Sector Fixed Income Fund - ------------------------------ MASTR Alternative Net Interest Margin 06-6 N1 144A 4.429% due 9/26/46 8/3/06 $ 91 $ --(1) 0.0% Northampton Pulp LLC 12/30/99 $ 349 $ 0 0.0%
(1) Amount is less than $500 (not reported in thousands). The Funds will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 8. CREDIT RISK AND ASSET CONCENTRATION In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. Since the Market Neutral Fund does not clear its own short selling transactions, it has established accounts with its broker for this purpose. This results in concentration of credit risk with the brokerage firm. Such risk, however, is mitigated by the broker's obligation to comply with rules and regulations governing their business activities. These rules and regulations generally require maintenance of net capital and segregation of customer's funds and securities from holdings of the firm. In the event that the clearing broker becomes insolvent, recovery of segregated funds may be limited to a pro rata share of all customer-segregated funds available. In such an instance, the Fund could incur losses to the extent that the recovery amount is less than the total cash and other securities deposited with the clearing broker. Certain Funds may invest a high percentage of their assets in specific sectors of the market in their pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on a Fund, positive or negative, than if a Fund did not concentrate its investments in such sectors. At September 30, 2008, the Global Infrastructure Fund held securities issued by various companies in the Utilities and Telecommunication Services industries, representing 37% and 36%, respectively, of the total investments of the Fund. 9. INDEMNIFICATIONS Under the Funds' organizational documents, their trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, the Funds enter into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these arrangements. 10. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by The Phoenix Companies, Inc. and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. In February 2005, the NASD notified PNX that it was asserting violations of trade reporting rules by a subsidiary. PNX responded to the NASD allegations in May 2005. Thereafter, in January 2007, the NASD notified PNX that the matter was being referred for potential violations and possible action. On May 3, 2007, the NASD accepted a letter of acceptance, waiver and consent submitted by the subsidiary to resolve this matter. Without admitting or denying the NASD's findings, in accordance with the terms of the letter the subsidiary agreed to a censure, to pay a fine of $8,000 and to revise its supervisory procedures. The Company does not believe that the outcome of this matter will be material to these financial statements. 117 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 11. PLANS OF REORGANIZATION (All amounts except for per share amounts are reported in thousands) On May 16, 2008, the Bond Fund acquired all of the net assets of the Phoenix Insight Bond Fund ("Insight Bond Fund") of the Phoenix Insight Funds Trust pursuant to an Agreement and Plan of Reorganization approved by the Insight Bond Fund's Board of Trustees on May 13, 2008. The acquisition was accomplished by a tax-free exchange of 12,554 Class I shares, 125 Class A shares, and 40 Class C shares of the Bond Fund outstanding on May 16, 2008 (valued at $129,630, $1,283 and $402, respectively) for 13,616 Class I shares, 135 Class A shares, and 42 Class C shares of the Insight Bond Fund outstanding on May 16, 2008. The Insight Bond Fund had net assets on that date of $131,315 including $1,714 of net depreciation, which were combined with those of the Bond Fund. The aggregate net assets of Bond Fund immediately after the merger were $202,610. The shareholders of each Class of the Insight Bond Fund received for each share owned approximately 0.92, 0.93 and 0.95 share, respectively, of Class I, Class A, and Class C shares of the Bond Fund. On October 6, 2006, the CA Tax-Exempt Bond Fund acquired all of the net assets of the CA Intermediate Tax-Free Bond Fund ("CA Intermediate Tax-Free Bond Fund") of the Phoenix Asset Trust pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees of the Phoenix Asset Trust on July 28, 2006. The acquisition was accomplished by a tax-free exchange of 2,503 Class I shares (f/k/a Class X) of the CA Tax-Exempt Bond Fund outstanding on October 6, 2006 (valued at $31,008) for 2,950 Class I (f/k/a Class X) shares of the CA Intermediate Tax-Free Bond Fund outstanding on October 6, 2006. The Intermediate Tax-Free Bond Fund had net assets on that date of $31,008 including $263 of net appreciation, which were combined with those of the Fund. The aggregate net assets of the Fund immediately after the merger were $75,668. The shareholders of the CA Intermediate Tax-Free Bond Fund received for each share owned approximately 0.85 Class I share (f/k/a Class X) of the same class of the Fund. 12. EXEMPTIVE ORDER On June 5, 2006, the SEC issued an order under Section 12(d) (1) (J) of the Investment Company Act ("1940 Act") granting an exemption from Sections 12(d) (1) (A) and (B) of the 1940 Act and under Sections 6(c) and 17(b) of the 1940 Act granting an exemption from Section 17(a) of the 1940 Act, which permits the Trust to invest in other affiliated and unaffiliated funds, including exchange traded funds. 13. RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Funds' financial statement disclosures. The Funds will be adopting SFAS 157 effective with the December 31, 2008 quarterly reporting of the schedules of investments. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161"), was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Management is currently evaluating the impact of FAS 161 on financial statement disclosures, if any. 14. TREASURY GUARANTEE PROGRAM On September 30, 2008, the Board authorized the Money Market Fund to apply for participation in the U.S. Department of the Treasury's Temporary Money Market Fund Guarantee Program (the "Program"). The Fund was subsequently accepted into the Program. Subject to certain conditions and limitations, in the event that the per share value of a Fund falls below $0.995 and a Fund liquidates its holdings, the Program will provide coverage to shareholders in the Fund for up to $1.00 per share for the lesser of either the number of shares the investor held in the Fund at the close of business on September 19, 2008 or the number of shares the investor held the date the per share value fell below $0.995. Shares acquired by investors after September 19, 2008 generally are not eligible for protection under the Program. Participation in the initial three months of the Program (i.e., until December 18, 2008) required a non-refundable payment to the U.S. Department of the Treasury in the amount of 0.01% based on the number of outstanding shares of the Fund as of September 19, 2008. This expense will be borne by the Fund. The Fund paid $8,026, to participate in the Program which will be amortized through December 18, 2008. The Secretary of the Treasury may extend the Program beyond its initial three-month term through the close of business on September 18, 2009. If the Program is extended, Fund management will consider whether to continue to participate. 118 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 15. FEDERAL INCOME TAX INFORMATION ($ reported in thousands) The Funds have capital loss carryovers which may be used to offset future capital gains, as follows:
EXPIRATION YEAR ---------------------------------------------------------------------------------- 2009 2010 2011 2012 2013 2014 2015 2016 TOTAL ------- ------- ------- ------- ------ ------ ------ ---- -------- Market Neutral Fund ........... $ -- $ -- $10,522 $ -- $ -- $7,527 $6,744 $ 24 $ 24,817 Alternatives Diversifier Fund(1) .................... -- -- -- -- -- -- -- 443 443 Bond Fund ..................... 237 -- -- 274 5,461 41 4,349 770 11,132 CA Tax-Exempt Bond Fund ....................... -- -- -- -- -- -- 41 -- 41 Core Bond Fund ................ -- 2,929 -- 7,849 -- 782 -- 6 11,566 High Yield Fund ............... 66,603 70,135 21,887 -- -- 143 -- -- 158,768 Multi-Sector Fixed Income Fund ................ 7,667 13,774 -- -- -- -- -- -- 21,441 Senior Floating Rate Fund ....................... -- -- -- -- -- -- -- 29 29
The Trust may not realize the benefit of these losses to the extent each Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. (1) Tax year end of the Fund is July 31. For the period ended September 30, 2008, the Funds utilized losses deferred in prior years against current year capital gains as follows: Wealth Accumulator Fund $ 6 CA Tax-Exempt Bond Fund 105 High Yield Fund 16 Money Market Fund 5 Multi-Sector Fixed Income Fund 278
The following Funds had capital loss carryovers which expired in 2008: Market Neutral $ 5,119 Core Bond Fund 8,192 High Yield Fund 27,820 Multi-Sector Fixed Income Fund 8,760
Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2008, the Funds deferred and recognized post- October losses as follows:
CAPITAL CAPITAL CURRENCY CURRENCY LOSS LOSS LOSS LOSS DEFERRED RECOGNIZED DEFERRED RECOGNIZED -------- ---------- -------- ---------- Global Infrastructure Fund ............ $ -- $ -- $ 4 $-- International Real Estate Fund ........ 231 -- 17 -- Market Neutral Fund ................... 1,807 -- 17 -- Alternatives Diversifier Fund(1) ...... 1,822 -- -- -- Wealth Accumulator Fund ............... 133 -- -- -- Bond Fund ............................. 3,731 689 -- -- CA Tax Exempt Bond Fund ............... 11 -- -- -- Core Bond Fund ........................ 181 -- -- -- High Yield Fund ....................... 12,696 -- -- -- Multi-Sector Fixed Income Fund ........ 1,639 -- -- -- Worldwide Strategies Fund ............. 2,274 -- -- --
(1) Tax year end of the Fund is July 31. The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed in the Schedules of Investments) consist of the following:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM TAX-EXEMPT INCOME CAPITAL GAINS INCOME ------------- ------------- ------------- Global Infrastructure Fund ............ $ 84 $ 461 $-- International Real Estate Fund ........ 397 -- -- Market Neutral Fund ................... -- -- -- Alternatives Diversifier Fund(1) ...... 216 -- -- Wealth Accumulator Fund ............... 15 -- -- Wealth Builder Fund ................... 379 1,277 -- Wealth Guardian Fund .................. 401 195 -- Bond Fund ............................. 57 -- -- CA Tax Exempt Bond Fund ............... -- -- 67 Core Bond Fund ........................ 80 -- -- High Yield Fund ....................... 84 -- -- Money Market Fund ..................... 32 -- -- Multi-Sector Fixed Income Fund ........ 1,724 -- -- Senior Floating Rate Fund ............. 28 -- -- Worldwide Strategies Fund ............. 653 -- --
(1) Tax year end of the Fund is July 31. For the period ended September 30, 2008, the CA Tax-Exempt Bond Fund distributed $2,564 of exempt interest dividends. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 119 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 16. RECLASSIFICATION OF CAPITAL ACCOUNTS For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2008, the Funds recorded reclassifications to increase (decrease) the accounts as listed below ($ reported in thousands):
CAPITAL PAID IN ON ACCUMULATED UNDISTRIBUTED SHARES OF NET NET BENEFICIAL REALIZED INVESTMENT INTEREST GAIN (LOSS) INCOME (LOSS) ------------ ----------- ------------- Global Infrastructure Fund(1) ......... $ 315 $ (313) $ (2) International Real Estate Fund ........ -- 13 (13) Market Neutral Fund ................... (5,911) 5,078 833 Alternatives Diversifier Fund(1)(2) ... 105 (1,183) 1,078 Wealth Accumulator Fund ............... (8) (129) 137 Wealth Builder Fund(1) ................ 189 (1,167) 978 Wealth Guardian Fund(1) ............... 25 (362) 337 Bond Fund ............................. 9,106 (9,210) 104 CA Tax Exempt Bond Fund ............... (1) -- 1 Core Bond Fund ........................ (8,178) 8,018 160 High Yield Fund ....................... (27,768) 27,586 182 Money Market Fund ..................... (1) -- 1 Multi-Sector Fixed Income Fund ........ (8,736) 7,712 1,024 Senior Floating Rate Fund ............. -- -- -- Worldwide Strategies Fund ............. (11) (23) 34
(1) The Fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from net investment income and realized capital gains. (2) Tax year end of the Fund is July 31. 17. SUBSEQUENT EVENT Effective August 20, 2008, The Board of Trustees of the Phoenix Opportunities Trust (the "Board"), on behalf of the Phoenix Wealth Accumulator Fund, has unanimously approved the merger of the Phoenix Wealth Accumulator Fund with and into the Phoenix Wealth Builder Fund, also a series of the Phoenix Opportunities Trust. The merger will be effective on or about November 21, 2008. 18. MARKET CONDITIONS Recent events in the financial sector have resulted in an unusually high degree of volatility in the financial markets and the net asset value of many mutual funds, including the Funds. Such events include, but are not limited to, the seizure of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation by U.S. banking regulators, the bankruptcy filing of Lehman Brothers and sale of Merrill Lynch to Bank of America, and the government bailout of AIG. These companies represent financial institutions with which certain of the Funds conduct business and/or whose securities are or may be held within the Funds. The potential investment of each Fund's investments in these issuers, and the financial sector in general, as reflected in each Fund's schedule of investments, exposes investors to the negative (or positive) performance resulting from these and other events. 120 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PRICEWATERHOUSECOOPERS LOGO) To the Board of Trustees and Shareholders of Virtus Opportunities Trust In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments of Virtus Global Infrastructure Fund (formerly Phoenix Global Utilities Fund), Virtus International Real Estate Securities Fund (formerly Phoenix International Real Estate Securities Fund), Virtus Alternatives Diversifier Fund (formerly Phoenix Diversifier PHOLIO(SM)), Virtus Wealth Accumulator Fund (formerly Phoenix Wealth Accumulator PHOLIO(SM)), Virtus Wealth Builder Fund (formerly Phoenix Wealth Builder PHOLIO(SM)), Virtus Wealth Guardian Fund (formerly Phoenix Wealth Guardian PHOLIO(SM)), Virtus Bond Fund (formerly Phoenix Bond Fund), Virtus CA Tax-Exempt Bond Fund (formerly Phoenix CA Tax-Exempt Bond Fund), Virtus Core Bond Fund (formerly Phoenix Core Bond Fund), Virtus High Yield Fund (formerly Phoenix High Yield Fund), Virtus Money Market Fund (formerly Phoenix Money Market Fund), Virtus Multi-Sector Fixed Income Fund (formerly Phoenix Multi-Sector Fixed Income Fund), Virtus Senior Floating Rate Fund (formerly Phoenix Senior Floating Rate Fund) and Virtus Worldwide Strategies Fund (formerly Phoenix Worldwide Strategies Fund) and the schedule of investments and securities sold short of Virtus Market Neutral Fund (formerly Phoenix Market Neutral Fund) fifteen series of Virtus Opportunities Trust, (formerly Phoenix Opportunities Trust), hereafter referred to as the "Funds", and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Funds at September 30, 2008 and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2008 by correspondence with the custodian, brokers and underlying funds' transfer agent, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts November 19, 2008 121 PHOENIX OPPORTUNITIES TRUST TAX INFORMATION NOTICE (UNAUDITED) SEPTEMBER 30, 2008 - -------------------------------------------------------------------------------- For the fiscal year ended September 30, 2008, the Funds make the following disclosures for federal income tax purposes. Below is listed the percentages, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Funds which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Funds designate the amounts below, or if subsequently different, as long-term capital gains dividends ("LTCG") (reported in thousands).
FUND QDI DRD LTCG ---- ---- --- ------ Global Infrastructure Fund 100% 80% $ 777 International Real Estate Securities Fund 60 -- -- Market Neutral Fund -- -- -- Alternatives Diversifier Fund(1) 48 39 -- Wealth Accumulator Fund 67 38 73 Wealth Builder Fund 35 21 2,575 Wealth Guardian Fund 21 12 594 Bond Fund -- -- -- CA Tax-Exempt Bond Fund -- -- -- Core Bond Fund -- -- -- High Yield Fund -- -- -- Money Market Fund -- -- -- Multi-Sector Fixed Income Fund -- -- -- Senior Floating Rate Fund -- -- -- Worldwide Strategies Fund 100 33 473
For federal income tax purposes, 98% of the income dividends paid by the CA Tax Exempt Fund qualify as exempt-interest dividends. For the period ended September 30, 2008, the Global Infrastructure Fund, International Real Estate Fund, and Worldwide Opportunities Fund recognized $1,145, $952, and $2,611, respectively, (reported in thousands) of foreign source income on which the Funds paid foreign taxes of $118, $26, and $189, respectively, (reported in thousands). This information is being furnished to you pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. (1) Tax year end of the Fund is July 31. - -------------------------------------------------------------------------------- 122 RESULTS OF SHAREHOLDER MEETING VIRTUS OPPORTUNITIES TRUST DECEMBER 27, 2007 (UNAUDITED) At a special meeting of shareholders of Virtus Market Neutral Fund (f/k/a Phoenix Market Neutral Fund), a series of Virtus Opportunities Trust (f/k/a Phoenix Opportunities Trust), held on December 27, 2007, shareholders voted on the following proposals: NUMBER OF ELIGIBLE UNITS VOTED:
FOR AGAINST ABSTAIN --------- ------- ------- To approve a Subadvisory Agreement between Virtus Investment Advisers, Inc. (f/k/a Phoenix Investment Counsel, Inc.) and The Boston Company Asset Management, LLC . . . . 4,363,841 5,972 23,863 To approve a proposal to permit Virtus Investment Advisers, Inc. to hire and replace subadvisers or to modify subadvisory agreements without shareholder approval . . . . . . . . . . . . . . . . . . . . . . 4,335,240 33,923 24,513
123 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2008, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 56 Prospect Street, Hartford, CT 06115-0480. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES - -------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - -------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management YOB: 1939 (commodities business) (2007-present). Partner, Elected: 1993 Stonington Partners, Inc. (private equity firm) 50 Funds (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios). - -------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New YOB: 1951 York (private bank) (1982-2006). Elected: 2001 52 Funds - -------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) YOB: 1946 (1994-present). Chairman, Hudson Castle Group, Inc. Elected: 1993 (formerly IBEX Capital Markets, Inc.) (financial 50 Funds 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 Managing Director, Northway Management Company YOB: 1946 (1998-present). Elected: 1998 50 Funds - -------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). YOB: 1942 Mr. Verdonck is also a director of several non-U.S. Elected: 2004 companies. 50 Funds - -------------------------------------------------------------------------------- 124 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. - -------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - -------------------------------------------------------------------------------- George R. Aylward(1) Senior Executive Vice President and President, Asset YOB: 1964 Management (2007-present), Senior Vice President and Elected: 2006 Chief Operating Officer, Asset Management 52 Funds (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Director and President (2006-present), Chief Operating Officer (2004-2006), Vice President, Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. 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). - -------------------------------------------------------------------------------- Philip R. McLoughlin(2) Partner, Cross Pond Partners, LLC (2006-Present). YOB: 1946 Director, Argo Group International Holdings Ltd. Elected: 1993 (insurance), World Trust Fund and KBC Asset 70 Funds Management, Ltd. - -------------------------------------------------------------------------------- (1) 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. (2) Mr. McLoughlin is treated as an "interested person," as defined in the Investment Company Act of 1940, because of his participation in certain retirement plans maintained by Virtus Investment Partners, Inc. and/or its affiliates. 125 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) OFFICERS OF THE FUND WHO ARE NOT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ---------------------------------------------------------------------------------------------------------------------------------- Nancy G. Curtiss Senior Vice President since 2006. Vice President, Head of Asset Management YOB: 1952 Operations (2007-present), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Assistant Treasurer (2001-present), Phoenix Equity Planning Corporation. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). - ---------------------------------------------------------------------------------------------------------------------------------- Marc Baltuch Vice President and Chief Compliance Officer since 2004. Chief Compliance Officer, Zweig-DiMenna c/o Zweig-DiMenna Associates, Associates LLC (1989-present). Vice LLC President, The Zweig Total Return Fund, 900 Third Avenue Inc. (2004-present). Vice President, The New York, NY 10022 Zweig Fund, Inc. (2004-present). YOB: 1945 President and Director of Watermark Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). - ---------------------------------------------------------------------------------------------------------------------------------- W. Patrick Bradley Chief Financial Officer and Treasurer since 2005. Vice President, Fund Administration YOB: 1972 (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. Senior Manager, Audit, Deloitte & Touche, LLP (1999-2004). - ---------------------------------------------------------------------------------------------------------------------------------- Kevin J. Carr Vice President, Chief Legal Officer, Counsel and Vice President, Counsel and Secretary, YOB: 1954 Secretary since 2005. 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). - ----------------------------------------------------------------------------------------------------------------------------------
126 THIS PAGE INTENTIONALLY BLANK. VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES George R. Aylward Leroy Keith, Jr. Philip R. McLoughlin, Chairman Geraldine M. McNamara James M. Oates Richard E. Segerson Ferdinand L.J. Verdonck OFFICERS George R. Aylward, President Nancy G. Curtiss, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 56 Prospect Street Hartford, CT 06115-0480 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 TRANSFER AGENT Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110-1707 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site VIRTUS.COM - -------------------------------------------------------------------------------- IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. - -------------------------------------------------------------------------------- ------------ PRSRT STD U.S. POSTAGE PAID LANCASTER, PA (VIRTUS MUTUAL FUNDS LOGO) PERMIT 1793 ------------ c/o State Street Bank and Trust Company P.O. Box 8301 Boston, MA 02266-8301 For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM. 8008 11-08 ANNUAL REPORT [LOGO OMITTED] Virtus Foreign Opportunities Fund ================================================================================ WOULDN'T YOU RATHER HAVE THIS DOCUMENT E-MAILED TO YOU? ELIGIBLE SHAREHOLDERS CAN TRUST NAME: SIGN UP FOR E-DELIVERY VIRTUS OPPORTUNITIES September 30, 2008 AT VIRTUS.COM TRUST NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE TABLE OF CONTENTS VIRTUS FOREIGN OPPORTUNITIES FUND* ("Foreign Opportunities Fund," formerly Phoenix Foreign Opportunities Fund) Message to Shareholders ................................................. 1 Glossary ................................................................ 3 Disclosure of Fund Expenses ............................................. 4 Fund Summary ............................................................ 6 Schedule of Investments ................................................. 8 Statement of Assets and Liabilities ..................................... 12 Statement of Operations ................................................. 13 Statement of Changes in Net Assets ...................................... 14 Financial Highlights .................................................... 16 Notes to Financial Statements ........................................... 18 Report of Independent Registered Public Accounting Firm ................. 29 Tax Information Notice .................................................. 30 Fund Management Tables .................................................. 31 * Please see Notes 1 and 3 in the Notes to Financial Statements for more information on the name change. - -------------------------------------------------------------------------------- PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2008, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the Fund 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. - -------------------------------------------------------------------------------- This report is not authorized for distribution to prospective investors in the Virtus Foreign Opportunities Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS Fellow Shareholders of Virtus Mutual Funds: [GRAPHIC OMITTED] The third quarter of 2008 likely will be remembered as a time of extremes in the global financial markets. There was historic volatility in all the major markets, the collapse of well-known financial firms, and unprecedented government interventions into the economy. The scope of events that occurred in the past quarter was truly extraordinary. There was the U.S. government's takeover of Fannie Mae and Freddie Mac; a federal line of credit for the insurer, AIG; the seizure of Washington Mutual and sale to JPMorgan Chase; and the proposed $700 billion taxpayer rescue of the financial sector, which was approved in early October. The quarter also saw the end of the investment banking model with the merger of Merrill Lynch and Bank of America, the collapse of Lehman Brothers, and the decisions by Goldman Sachs and Morgan Stanley to convert to traditional banking institutions. This global turmoil was reflected in the major market indices. More than half (37 of 64) of the Dow Jones Industrial Average's third-quarter trading days had wide positive or negative swings of greater than 100 points. For the quarter, the Dow was down 3.7 percent (16.5 percent year-to-date), the S&P 500 stock index was down 8.4 percent (19.3 percent year-to-date); and EAFE was off 20.5 percent (28.9 percent for the year). At the start of the fourth quarter, governments around the world demonstrated their resolve to actively pursue solutions to this financial upheaval. Among the responses from the U.S. government is the Department of the Treasury's Temporary Money Market Fund Guarantee Program. While officials and economists believe the government interventions will bring stability to the financial markets, few will predict a timeline for recovery. This is a period when investors should pay particular attention to their accounts - and rely on the discipline and focus of professional investment managers and financial advisors. The extraordinary activity of the past several months may tempt some investors to react inappropriately to market events and deviate from their well-considered, long-term financial plans. We believe that during periods of unusual market volatility, discipline is the key for the investor, the financial advisor, and the professional money manager. We encourage you to consult with a financial advisor to review your holdings and to ensure they continue to reflect your current investment objectives and your tolerance for risk. Virtus Mutual Funds offer a wide range of equity, fixed income and money market funds, and we hope you will consider our investment choices when you and your financial advisor review your portfolio allocations. 1 On a much different note, we began the fourth quarter with the rebranding of our company in preparation for our spin-off as an independent, publicly-traded company. Our company is now Virtus Investment Partners, the PhoenixFunds are now the Virtus Mutual Funds, and the investment adviser to the funds is now Virtus Investment Advisers. As you will notice throughout this report, the individual funds have incorporated the "Virtus" name. For your convenience, all mutual fund ticker symbols remain unchanged. I encourage you to visit our new website, WWW.VIRTUS.COM, to learn more about our company and our services for investors, and to access information about your account. Customer service is also available at 800-243-1574. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our partner companies and subadvisers, I want to thank you for entrusting your assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds OCTOBER 2008 PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 2 GLOSSARY ADR (AMERICAN DEPOSITARY RECEIPT) Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. INR Indian Rupee MSCI EAFE(R) INDEX (NET) 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 gross dividends reinvested. SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. These shares carry all the rights of the common share such as voting rights. ADRs must be sponsored to be able to trade on the NYSE. S&P 500(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. USD United States Dollar INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 3 VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Foreign Opportunities Fund you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class I shares are sold without a sales charge and do not incur distribution and service fees. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Virtus Foreign Opportunities Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. 4 VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 EXPENSE TABLE - -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - -------------------------------------------------------------------------------- FOREIGN OPPORTUNITIES FUND - -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 798.90 1.38% $ 6.21 Class C 1,000.00 795.80 2.13 9.56 Class I 1,000.00 799.50 1.13 5.08 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.01 1.38 6.99 Class C 1,000.00 1,014.22 2.13 10.78 Class I 1,000.00 1,019.28 1.13 5.72 * Expenses are equal to the Fund's annualized expense ratio which includes waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 366 days to reflect the one-half year period. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 5 VIRTUS FOREIGN OPPORTUNITIES FUND TICKER SYMBOLS: Class A: JVIAX Class C: JVICX Class I: JVXIX [ ] VIRTUS FOREIGN OPPORTUNITIES FUND ("Foreign Opportunities Fund" or the "Fund") is diversified and has an investment objective to seek long-term capital appreciation. THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS OBJECTIVE. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (26.48)%, Class C shares returned (27.04)% and Class I shares returned (26.31)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)% and the MSCI EAFE(R) Index (Net), the Fund's style-specific index appropriate for comparison, returned (30.50)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTION AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] World markets appear to have come to the end of a comfortable period of heady returns. Through the discomfort of negative absolute performance, it is important to remember that volatile markets create opportunities for patient and diligent investors. [ ] Overall it has been a very negative market environment regardless of geographic location. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The fund continues to be significantly overweight in Consumer Staples, as companies in this sector continue to meet our investment criteria. The sector made a strong positive contribution to relative performance during the period. [ ] Our underweight in financial stocks had a positive effect on our portfolio performance. [ ] On a relative basis, the Fund's underweighting in Japan and its strong currency affected the Fund negatively. BECAUSE THE FUND IS HEAVILY WEIGHTED IN THE CONSUMER STAPLES AND ENERGY SECTORS, IT WILL BE IMPACTED BY THOSE SECTORS' PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. THE ECONOMICS OF DEVELOPING COUNTRIES MAY BE ADVERSELY AFFECTED BY TRADE BARRIERS, EXCHANGE CONTROLS, MANAGED ADJUSTMENTS IN RELATIVE CURRENCY VALUES AND OTHER PROTAGONIST MEASURES IMPOSED OR NEGOTIATED BY THE COUNTRIES WITH WHICH THEY TRADE. SECTOR WEIGHTINGS as of 9/30/08* - -------------------------------------------------------- Consumer Staples 31% - -------------------------------------------------------- Energy 21% - -------------------------------------------------------- Financials 13% - -------------------------------------------------------- Utilities 8% - -------------------------------------------------------- Materials 5% - -------------------------------------------------------- Health Care 5% - -------------------------------------------------------- Industrials 4% - -------------------------------------------------------- Other 13% - -------------------------------------------------------- * % of total investments as of September 30, 2008. 6 VIRTUS FOREIGN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - -------------------------------------------------------------------------------- Inception 1 5 10 to Inception Year Years Years 9/30/08 Date - -------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (26.48)% 13.14% 6.91% -- -- - -------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (30.70)% 11.81% 6.28% -- -- - -------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (27.04)% -- -- 11.73% 10/10/03 - -------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) (27.04)% -- -- 11.73% 10/10/03 - -------------------------------------------------------------------------------- CLASS I SHARES AT NAV (26.31)% -- -- (1.18)% 5/15/06 - -------------------------------------------------------------------------------- S&P (500)(R) INDEX (21.98)% 5.17% 3.06% NOTE 5 NOTE 5 - -------------------------------------------------------------------------------- MSCI EAFE(R) INDEX (NET) (30.50)% 9.69% 5.02% NOTE 6 NOTE 6 - -------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): I SHARES: 1.15%; A SHARES: 1.40%; C SHARES: 2.15%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 4.77% FOR CLASS C (SINCE 10/10/03) AND (2.38)% FOR CLASS I (SINCE 5/15/06). (6) INDEX PERFORMANCE IS 8.37% FOR CLASS C (SINCE 10/10/03) AND (5.95)% FOR CLASS I (SINCE 5/15/06). (7) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 for periods ended 9/30 - -------------------------------------------------------------------------------- [LINE GRAPH OMITTED] PLOT POINTS FOR EDGAR REPRESENTATION ARE AS FOLLOWS: Phoenix Foreign Opportunities Fund Class A MSCI EAFE Index (Net) S&P 500 Index 9/30/98 9,425 10,000 10,000 9/30/99 12,219 13,118 12,773 9/29/00 13,727 13,533 14,480 9/28/01 8,951 9,656 10,624 9/30/02 8,288 8,157 8,448 9/30/03 9,914 10,278 10,511 9/30/04 12,164 12,548 11,969 9/30/05 15,910 15,784 13,434 9/29/06 19,796 18,809 14,884 9/28/07 25,002 23,485 17,331 9/30/08 18,382 16,322 13,522 For information regarding the indexes, see the glossary section on page 3. 7 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- DOMESTIC COMMON STOCKS--7.2% UNITED STATES--7.2% Canadian Natural Resources (Oil & Gas Exploration & Production) 21,700 $ 1,486 Philip Morris International, Inc. (Tobacco) 1,077,915 51,848 Transocean, Inc. (Oil & Gas Drilling)(b)(i) 242,600 26,647 - ----------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $89,381) 79,981 - ----------------------------------------------------------------------------- FOREIGN COMMON STOCKS(c)--89.9% AUSTRALIA--3.8% BHP Billiton Ltd. (Diversified Metals & Mining) 6,842 177 Coca-Cola Amatil Ltd. (Soft Drinks) 1,236,839 8,258 Incitec Pivot Ltd. (Fertilizers & Agricultural Chemicals) 1,121,542 4,858 QBE Insurance Group Ltd. (Property & Casualty Insurance) 18,975 409 Rio Tinto Ltd. (Diversified Metals & Mining) 4,952 334 Woolworths Ltd. (Food Retail) 608,955 13,414 WorleyParsons Ltd. (Oil & Gas Equipment & Services) 582,021 14,396 ---------- 41,846 ---------- BRAZIL--5.4% Banco Itau Holding Financeira SA ADR (Diversified Banks)(e)(i) 1,328,882 23,255 CIA Vale do Rio Doce ADR (Diversified Metals & Mining) 15,700 301 Petroleo Brasileiro SA ADR (Integrated Oil & Gas) 527,937 23,203 SHARES VALUE ---------- ---------- BRAZIL--(CONTINUED) Souza Cruz SA (Tobacco) 574,677 $ 13,593 ---------- 60,352 ---------- CANADA--4.1% Canadian Natural Resources Ltd. (Oil & Gas Exploration & Production) 417,820 28,659 Potash Corp. of Saskatchewan, Inc. (Fertilizers & Agricultural Chemicals) 5,800 766 Suncor Energy, Inc. (Integrated Oil & Gas) 405,638 16,771 ---------- 46,196 ---------- CHINA--1.2% China Mobile Ltd. (Wireless Telecommunication Services) 23,000 230 CNOOC Ltd. (Oil & Gas Exploration & Production) 12,012,558 13,495 The9 Ltd. (Home Entertainment Software)(b) 734 12 ---------- 13,737 ---------- DENMARK--1.6% Novo Nordisk A/S Class B (Pharmaceuticals) 332,379 17,231 ---------- FRANCE--4.0% Air Liquide (Industrial Gases) 147,273 16,183 Cie Generale D'optique Essilor International SA (Health Care Supplies) 219,673 10,972 GDF Suez (Multi-Utilities) 1 --(k) Sanofi-Aventis SA (Pharmaceuticals) 5,900 388 Total SA (Integrated Oil & Gas) 273,700 16,627 ---------- 44,170 ---------- GERMANY--3.2% E.ON AG (Electric Utilities) 25,056 1,261 See Notes to Financial Statements 8 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- GERMANY--(CONTINUED) Muenchener Rueckversicherungs-Gesellschaft AG Registered Shares (Reinsurance) 3,592 $ 542 RWE AG (Multi-Utilities) 271,042 25,840 Siemens AG Registered Shares (Industrial Conglomerates) 85,700 7,994 ---------- 35,637 ---------- HONG KONG--0.5% Cheung Kong Holdings Ltd. (Real Estate Development) 21,000 238 Jardine Matheson Holdings Ltd. (Industrial Conglomerates) 206,158 5,360 Television Broadcasts Ltd. (Broadcasting) 57,000 242 ---------- 5,840 ---------- INDIA--9.7% Bharti Airtel Ltd. (Wireless Telecommunication Services)(b) 1,108,846 18,808 HDFC Bank Ltd. (Diversified Banks) 506,450 13,315 HDFC Bank Ltd. ADR (Diversified Banks)(i) 256,895 21,823 Housing Development Finance Corp. (Consumer Finance) 457,258 21,265 Infosys Technologies Ltd. (IT Consulting & Other Services) 71,700 2,181 Infosys Technologies Ltd. Sponsored ADR (IT Consulting & Other Services)(i) 95,500 3,181 ITC Ltd. (Tobacco) 3,257,800 13,210 United Spirits Ltd. (Brewers) 527,771 14,438 ---------- 108,221 ---------- SHARES VALUE ---------- ---------- ITALY--0.6% ENI S.p.A. (Integrated Oil & Gas) 23,249 $ 616 Maire Tecnimont S.p.A. (Construction & Engineering) 1,729,311 6,136 ---------- 6,752 ---------- JAPAN--7.0% East Japan Railway Co. (Railroads) 64 477 INPEX Corp. (Oil & Gas Exploration & Production) 52 442 Kao Corp. (Household Products) 9,000 241 Millea Holdings, Inc. (Property & Casualty Insurance) 931,300 34,192 Mitsubishi Corp. (Trading Companies & Distributors) 412,800 8,611 Nintendo Co. Ltd. (Home Entertainment Software) 26,800 11,368 Secom Co. Ltd. (Security & Alarm Services) 545,500 22,724 Shin-Etsu Chemical Co. Ltd. (Specialty Chemicals) 7,000 333 ---------- 78,388 ---------- MEXICO--2.5% America Movil S.A.B. de C.V. ADR Series L (Wireless Telecommunication Services) 365,953 16,966 Fomento Economico Mexicano S.A. de C.V. ADR (Soft Drinks) 297,000 11,327 ---------- 28,293 ---------- NETHERLANDS--7.5% Core Laboratories N.V. (Oil & Gas Equipment & Services)(i) 365,168 36,999 Heineken N.V. (Brewers) 17,769 714 See Notes to Financial Statements 9 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- NETHERLANDS--(CONTINUED) ING Groep N.V. (Other Diversified Financial Services)(i) 50,464 $ 1,082 Schlumberger Ltd. (Oil & Gas Equipment & Services)(e) 399,500 31,197 Schlumberger Ltd. (Oil & Gas Equipment & Services)(d) 20,095 1,543 Unilever N.V. (Packaged Foods & Meats) 449,042 12,640 ---------- 84,175 ---------- NORWAY--1.4% Orkla ASA (Industrial Conglomerates)(i) 1,718,847 15,818 Yara International ASA (Fertilizers & Agricultural Chemicals) 2,700 96 ---------- 15,914 ---------- RUSSIA--0.0% Gazpromneft OAO ADR (Integrated Oil & Gas) 3,900 58 ---------- SINGAPORE--0.0% Jardine Cycle & Carriage Ltd. (Distributors) 24,000 264 Keppel Corp., Ltd. (Industrial Conglomerates) 32,000 177 ---------- 441 ---------- SPAIN--6.5% Enagas S.A. (Gas Utilities)(i) 1,844,181 39,768 Red Electrica Corp. S.A. (Electric Utilities) 628,100 31,984 Telefonica S.A. (Integrated Telecommunication Services) 26,300 625 ---------- 72,377 ---------- SHARES VALUE ---------- ---------- SWITZERLAND--6.5% ABB Ltd. Registered Shares (Heavy Electrical Equipment)(b) 21,700 $ 420 Lindt & Spruengli AG (Packaged Foods & Meats) 4,593 11,199 Nestle S.A. Registered Shares (Packaged Foods & Meats) 801,700 34,647 Novartis AG Registered Shares (Pharmaceuticals) 7,000 369 Roche Holding AG Registered Shares (Pharmaceuticals) 162,563 25,448 Syngenta AG Registered Shares (Fertilizers & Agricultural Chemicals) 600 127 ---------- 72,210 ---------- TAIWAN--0.0% Taiwan Semiconductor Manufacturing Co. Ltd. Sponsored ADR (Semiconductors)(i) 26,418 248 ---------- UNITED KINGDOM--24.4% AMEC plc (Oil & Gas Equipment & Services)(i) 840,106 9,636 Antofagasta plc (Diversified Metals & Mining) 111,000 806 BG Group plc (Integrated Oil & Gas) 887,975 16,104 BHP Billiton plc (Diversified Metals & Mining) 1,119,168 25,354 BP plc (Integrated Oil & Gas) 67,213 560 British American Tobacco plc (Tobacco) 1,963,272 64,095 Diageo plc (Distillers & Vintners) 1,044,238 17,814 GlaxoSmithKline plc (Pharmaceuticals) 33,400 724 HSBC Holdings plc (Diversified Banks) 519,400 8,295 HSBC Holdings plc Sponsored ADR (Diversified Banks) 90,200 7,291 See Notes to Financial Statements 10 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- UNITED KINGDOM--(CONTINUED) Imperial Tobacco Group plc (Tobacco) 962,657 $ 30,902 Reckitt Benckiser Group plc (Household Products) 445,707 21,610 Royal Dutch Shell plc Class A (Integrated Oil & Gas)(f) 13,100 378 Royal Dutch Shell plc Class A (Integrated Oil & Gas)(g) 66,830 1,969 SABMiller plc (Brewers) 11,700 229 Standard Chartered plc (Diversified Banks)(f) 912,066 22,442 Standard Chartered plc (Diversified Banks)(h) 15,700 376 Tesco plc (Food Retail) 5,402,930 37,577 Xstrata plc (Diversified Metals & Mining) 179,700 5,600 ---------- 271,762 - ----------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $1,069,050) 1,003,848 - ----------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--97.1% (IDENTIFIED COST $1,158,431) 1,083,829 - ----------------------------------------------------------------------------- SHARES VALUE ---------- ---------- SHORT-TERM INVESTMENTS--6.8% MONEY MARKET MUTUAL FUNDS--6.8% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 7,075,429 $ 7,075 State Street Navigator Prime Plus (seven-day effective yield 2.765%)(j) 69,260,478 69,260 - ----------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $76,335) 76,335 - ----------------------------------------------------------------------------- TOTAL INVESTMENTS--103.9% (IDENTIFIED COST $1,234,766) 1,160,164(a) Other assets and liabilities, net--(3.9)% (43,791) ---------- NET ASSETS--100.0% $1,116,373 ========== At September 30, 2008, the Fund had entered into forward currency contracts as follows (reported in thousands): Unrealized Contract In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) - --------------- ------------- ------------ -------- -------------- INR 1,017,570 USD 21,572 3/16/09 $21,613 $(41) ==== FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $31,827 and gross depreciation of $120,939 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $1,249,276. (b) Non-income producing. (c) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (d) Shares traded on Alternative ("AHX") Exchange. (e) Shares traded on NYSE. (f) Shares traded on London Exchange. (g) Shares traded on Amsterdam Exchange. (h) Shares traded on Hong Kong exchange. (i) All or a portion of security is on loan. (j) Represents security purchased with cash collateral received for securities on loan. (k) Amounts are less than $500 (not reported in thousands). See Notes to Financial Statements 11 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2008 (Amounts reported in thousands except per share amounts) ASSETS Investment securities at value(1)(3) ............ $ 1,160,164 Foreign currency at value(2) .................... 2,330 Cash ............................................ 158 Receivables Investment securities sold .................... 60,577 Fund shares sold .............................. 9,201 Dividends ..................................... 3,649 Interest ...................................... 50 Tax reclaims .................................. 376 Prepaid expenses ................................ 97 Other assets .................................... 17 ------------ Total assets ............................... 1,236,619 ------------ LIABILITIES Payables Fund shares repurchased ....................... 7,147 Investment securities purchased ............... 42,007 Upon return of securities loaned .............. 69,260 Foreign capital gain taxes .................... 70 Investment advisory fees ...................... 850 Distribution and service fees ................. 231 Administration fees ........................... 89 Transfer agent fees and expenses .............. 220 Trustees' fees and expenses ................... 10 Professional fees ............................. 63 Other accrued expenses ........................ 241 Trustee deferred compensation plan ............ 17 Unrealized depreciation on forward currency contracts ............................ 41 ------------ Total liabilities .......................... 120,246 ------------ NET ASSETS ...................................... $ 1,116,373 ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ........................... $ 1,310,054 Accumulated undistributed net investment income (loss) ................................. 5,790 Accumulated undistributed net realized gain (loss) ................................... (124,213) Net unrealized appreciation (depreciation) ...... (75,258) ------------ NET ASSETS ...................................... $ 1,116,373 ============ CLASS A Net asset value (net assets/shares outstanding) per share ........................ $20.54 Offering price per share $20.54/(1-5.75%) ....... $21.79 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ..... 30,233 Net Assets ...................................... $ 620,952 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .................. $20.27 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ..... 4,712 Net Assets ...................................... $ 95,523 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .................. $20.58 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ..... 19,427 Net Assets ...................................... $ 399,898 (1) Investment securities at cost .............. $ 1,234,766 (2) Foreign currency at cost ................... $2,354 (3) Market value of securities on loan ......... $73,267 See Notes to Financial Statements 12 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2008 ($ reported in thousands) INVESTMENT INCOME Dividends ....................................... $ 27,655 Interest ........................................ 1,439 Security lending ................................ 599 Foreign taxes withheld .......................... (2,015) ------------ Total investment income ................. 27,678 ------------ EXPENSES Investment advisory fees ........................ 10,981 Service fees, Class A ........................... 1,839 Distribution and service fees, Class C .......... 1,190 Administration fees ............................. 1,091 Transfer agent fees and expenses ................ 1,314 Custodian fees .................................. 807 Printing fees and expenses ...................... 182 Registration fees ............................... 117 Trustees' fees and expenses ..................... 98 Professional fees ............................... 64 Miscellaneous expenses .......................... 144 ------------ Total expenses .......................... 17,827 Less expenses reimbursed by investment adviser .. (341) Custodian fees paid indirectly .................. (5) ------------ Net expenses ............................ 17,481 ------------ NET INVESTMENT INCOME (LOSS) .................... 10,197 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ......... (93,591) Net realized gain (loss) on foreign currency transactions ......................... (3,632) Net change in unrealized appreciation (depreciation) on investments ................. (301,116) Net change in unrealized appreciation (depreciation) on foreign currency translations ......................... 1,771 ------------ NET GAIN (LOSS) ON INVESTMENTS .................. (396,568) ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................... $ (386,371) ============ See Notes to Financial Statements 13 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF CHANGES IN NET ASSETS
($ reported in thousands) 10/1/07 - 3/1/07 - 3/1/06 - 9/30/08 9/30/07 2/28/07 ----------- ---------- ----------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 10,197 $ 7,897 $ 2,051 Net realized gain (loss) (97,223) 2,926 21,657 Net change in unrealized appreciation (depreciation) (299,345) 110,208 21,289 ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (386,371) 121,031 44,997 ----------- ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A (4,273) (1,345) (1,513) Net investment income, Class C (216) (130) (46) Net investment income, Class I (3,178) (1,056) (499) Net realized short-term gains, Class A (6,704) (180) (800) Net realized short-term gains, Class C (1,119) (25) (56) Net realized short-term gains, Class I (4,041) (128) (249) Net realized long-term gains, Class A (5,433) (538) (4,377) Net realized long-term gains, Class C (907) (76) (388) Net realized long-term gains, Class I (3,275) (378) (1,110) ----------- ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (29,146) (3,856) (9,038) ----------- ---------- ---------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A 189,908 238,239 204,396 Change in net assets from share transactions, Class C 26,960 51,541 37,383 Change in net assets from share transactions, Class I 108,471 309,681 77,166 ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 325,339 599,461 318,945 ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS (90,178) 716,636 354,904 NET ASSETS Beginning of period 1,206,551 489,915 135,011 ----------- ---------- ---------- END OF PERIOD $ 1,116,373 $1,206,551 $ 489,915 =========== ========== ========== Accumulated undistributed net investment income (loss) at end of period $ 5,790 $ 7,615 $ (1,463)
See Notes to Financial Statements 14 THIS PAGE INTENTIONALLY BLANK. VIRTUS FOREIGN OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED RETURN OF OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS CAPITAL - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/07-9/30/08 $28.58 $ 0.20 $(7.59)(4) $(7.39) $(0.17) $(0.48) $ -- 3/1/07-9/30/07 25.00 0.22(4) 3.46 3.68 (0.06) (0.04) -- 3/1/06-2/28/07 21.47 0.21(4) 4.08 4.29 (0.17) (0.59) -- 3/1/05-2/28/06 19.02 0.17(4) 3.85 4.02 (0.22) (1.35) -- 3/1/04-2/28/05 15.47 0.16 3.81 3.97 (0.16) (0.26) -- 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) CLASS C 10/1/07-9/30/08 $28.31 $ 0.01 $(7.52)(4) $(7.51) $(0.05) $(0.48) $ -- 3/1/07-9/30/07 24.85 0.10(4) 3.44 3.54 (0.04) (0.04) -- 3/1/06-2/28/07 21.41 (0.01)(4) 4.11 4.10 (0.07) (0.59) -- 3/1/05-2/28/06 19.11 (0.06)(4) 3.92 3.86 (0.21) (1.35) -- 3/1/04-2/28/05 15.55 0.01 3.84 3.85 (0.03) (0.26) -- 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) -- CLASS I 10/1/07-9/30/08 $28.61 $ 0.27 $(7.61)(4) $(7.34) $(0.21) $(0.48) $ -- 3/1/07-9/30/07 25.00 0.25(4) 3.47 3.72 (0.07) (0.04) -- 5/15/06 (inception)- 2/28/07 22.54 0.13(4) 3.14 3.27 (0.22) (0.59) --
(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. See Note 5 in the Notes to Financial Statements. (8) Blended net expense ratio. See Note 3 in the Notes to Financial Statements. See Notes to Financial Statements 16
RATIO NET OF NET PAYMENT CHANGE ASSET NET ASSETS, EXPENSES TO BY IN NET VALUE, END OF AVERAGE TOTAL AFFILIATE/ ASSET END OF TOTAL PERIOD NET DISTRIBUTIONS NON-AFFILIATE VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/07-9/30/08 $(0.65) $ -- $(8.04) $20.54 (26.48)% $620,952 1.37%(8) 3/1/07-9/30/07 (0.10) --(5)(7) 3.58 28.58 14.72(3) 667,719 1.36(2) 3/1/06-2/28/07 (0.76) -- 3.53 25.00 20.39 360,822 1.37 3/1/05-2/28/06 (1.57) -- 2.45 21.47 21.82 128,991 1.25 3/1/04-2/28/05 (0.42) --(5)(6) 3.55 19.02 26.15(6) 2,714 1.25 1/1/04-2/29/04 -- -- 0.63 15.47 4.25(3) 1,482 1.25(2) 1/1/03-12/31/03 (0.55) 0.02 2.98 14.84 30.07 1,473 2.87 CLASS C 10/1/07-9/30/08 $(0.53) $ -- $(8.04) $20.27 (27.04)% $ 95,523 2.12%(8) 3/1/07-9/30/07 (0.08) --(5)(7) 3.46 28.31 14.24(3) 106,847 2.11(2) 3/1/06-2/28/07 (0.66) -- 3.44 24.85 19.46 45,154 2.13 3/1/05-2/28/06 (1.56) -- 2.30 21.41 20.96 6,019 2.00 3/1/04-2/28/05 (0.29) --(5)(6) 3.56 19.11 25.21 39 2.00 1/1/04-2/29/04 -- -- 0.60 15.55 4.01(3) 12 2.00(2) 10/10/03 (inception)- 12/31/03 (0.43) 0.02 1.04 14.95 10.71(3) 11 1.92(2) CLASS I 10/1/07-9/30/08 $(0.69) $ -- $(8.03) $20.58 (26.31)% $399,898 1.12%(8) 3/1/07-9/30/07 (0.11) --(5)(7) 3.61 28.61 14.88(3) 431,985 1.11(2) 5/15/06 (inception)- 2/28/07 (0.81) -- 2.46 25.00 14.84(3) 83,938 1.13(2)
RATIO OF GROSS EXPENSES TO RATIO OF AVERAGE NET NET ASSETS INVESTMENT (BEFORE INCOME (LOSS) PORTFOLIO WAIVERS AND TO AVERAGE TURNOVER REIMBURSEMENTS) NET ASSETS RATE - -------------------------------------------------------------------------------- CLASS A 10/1/07-9/30/08 1.39% 0.78% 129% 3/1/07-9/30/07 1.40(2) 1.44(2) 49(3) 3/1/06-2/28/07 1.43 0.88 57 3/1/05-2/28/06 1.62 0.85 52 3/1/04-2/28/05 2.10 1.50 32 1/1/04-2/29/04 2.63(2) 0.18(2) 41(3) 1/1/03-12/31/03 3.21 0.11 65 CLASS C 10/1/07-9/30/08 2.15% 0.03% 129% 3/1/07-9/30/07 2.16(2) 0.64(2) 49(3) 3/1/06-2/28/07 2.17 (0.06) 57 3/1/05-2/28/06 2.35 (0.29) 52 3/1/04-2/28/05 2.86 0.76 32 1/1/04-2/29/04 3.38(2) (1.05)(2) 41(3) 10/10/03 (inception)- 12/31/03 5.85(2) (0.14)(2) 65(3) CLASS I 10/1/07-9/30/08 1.15% 1.01% 129% 3/1/07-9/30/07 1.15(2) 1.59(2) 49(3) 5/15/06 (inception)- 2/28/07 1.17(2) 0.71(2) 57(3) See Notes to Financial Statements 17 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2008 1. ORGANIZATION Effective October 1, 2008, the Phoenix Funds became Virtus Mutual Funds, and all of the Funds were renamed to reflect the new Virtus name. On October 20, 2008, the Trusts' names were also updated to reflect the new name. Virtus Opportunities Trust, formerly Phoenix Opportunities Trust (the "Trust"), is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. As of the date of this report, eighteen funds are offered for sale, of which the Foreign Opportunities Fund (the "Fund") is reported in this annual report. The Fund's investment objective is outlined in the fund summary page. The Fund offers Class A shares, Class C shares and Class I shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge may be imposed 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 the purchase was made. Class C shares are generally sold with a 1% contingent deferred sales charge, if applicable, if redeemed within one year of purchase. Class I shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class I bears no distribution and/or service expenses. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service, which utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities in determining value. As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. 18 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 Certain foreign common stocks may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In these cases, information from an external vendor may be utilized to adjust closing market prices of certain foreign common stocks to reflect their fair value. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. On September 30, 2008, the Fund utilized foreign fair value pricing. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The 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. FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Each of the Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. 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, gain or loss on futures contracts, partnerships, operating losses and losses 19 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately made. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. FOREIGN SECURITY COUNTRY DETERMINATION: A combination of the following criteria is used to assign the countries of risk listed in the schedule of investments: country of incorporation, actual building address, primary exchange on which the security is traded and country in which the greatest percentage of company revenue is generated. H. FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, the Fund records a realized gain or loss equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. 20 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 I. SECURITY LENDING: The Fund may loan securities to qualified brokers through an agreement with State Street Bank and Trust Company (the "Custodian"). Under the terms of the agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash, or securities issued or guaranteed by the U.S. Government or its agencies. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by the Custodian for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At September 30, 2008, the Fund had securities on loan as follows ($ reported in thousands): MARKET VALUE OF SECURITIES CASH LOANED COLLATERAL -------------- ------------- $73,267 $69,260 Cash collateral is less than the market value of securities loaned due to significant market increases on September 30, 2008. Collateral was subsequently adjusted on October 1, 2008 and the Fund remained in compliance. J. EQUITY LINKED CERTIFICATES: The Fund may invest in equity linked certificates. The Fund purchases the certificates ("notes") from a broker, who in turn purchases shares in the local market and issues a call note hedged on the underlying holding. If the Fund exercises its call and closes its position, the shares are sold and the note redeemed with the proceeds. Each note represents one share of the underlying stocks; therefore, the price, performance and liquidity of the note are all directly linked to the underlying stock. The notes can be redeemed for 100% of the value of the underlying stock, less transaction costs. In addition to the market risk of the underlying holding, the Fund bears additional counterparty risk to the issuing broker. K. OPTIONS: The Fund may write covered options or purchase options contracts for the purpose of hedging against changes in the market value of the underlying securities or foreign currencies. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. Gains and losses on written options are reported separately in the Statement of Operations. When a written option is exercised, the proceeds on sales or amounts paid are adjusted by the amount of premium received. Options written are reported as a liability in the Statement of Assets and Liabilities and subsequently marked-to-market to reflect the current value of the option. The risk associated with written options is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, or if a liquid secondary market does not exist for the contracts. 21 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Fund may purchase options which are included in the Fund's Schedule of Investments and subsequently marked-to-market to reflect the current value of the option. When a purchased option is exercised, the cost of the security is adjusted by the amount of premium paid. The risk associated with purchased options is limited to the premium paid. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ reported in thousands except as noted) On February 7, 2008, the Phoenix Companies, Inc. ("PNX") announced its intention to spin off various subsidiaries constituting its asset management business to PNX's shareholders. Once spun off from PNX, the company holding the asset management subsidiaries, Virtus Investment Partners, Inc. ("Virtus"), will become an independent public company. The spinoff is expected to occur at a date later in the year based on regulatory approval. In preparation for this spinoff, certain of the asset management subsidiaries have changed their names to reflect the Virtus brand, including the Funds' adviser, Phoenix Investment Counsel, Inc., which is now known as Virtus Investment Advisers, Inc. (the "Adviser"). As compensation for its services to the Fund, the Adviser, an indirect wholly-owned subsidiary of PNX, is entitled to a fee based upon an annual rate of 0.85% as a percentage of the average daily net assets of the Fund. The Adviser contractually agreed to limit the Fund's total fund operating expenses (excluding interest, taxes, and extraordinary expenses) through June 30, 2008, so that such expenses do not exceed 1.35% for Class A Shares, 2.10% for Class C Shares and 1.10% for Class I Shares. The expense reimbursement arrangement was discontinued effective July 1, 2008. Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under this arrangement, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. The Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with applicable expense limitations. All or a portion of reimbursed expenses may be recaptured by the fiscal years ended as follows: 2010 2011 TOTAL -------- ------ ------- $189 $341 $530 The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser, Vontobel Asset Management, Inc. ("Vontobel"). As distributor of the Fund's shares, Phoenix Equity Planning Corporation ("PEPCO"), an indirect wholly-owned subsidiary of PNX, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2008, as follows: CLASS A CLASS A CLASS C NET SELLING DEFERRED DEFERRED COMMISSIONS SALES CHARGES SALES CHARGES -------------- --------------- --------------- $72 $--(1) $50 (1) Amount is less than $500 (not reported in thousands) 22 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Fund pays PEPCO distribution and/or service fees at the following annual rates as a percentage of the average daily net assets of each respective class: CLASS A CLASS C ----------- ---------- 0.25% 1.00% There are no distribution and/or service fees for Class I. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. PEPCO serves as the Administrator to the Fund. For its services, which include financial agent services, PEPCO receives an administration fee at an annual rate of 0.09% of the first $5 billion, 0.08% on the next $10 billion, and 0.07% over $15 billion of the average net assets across all non-money market Virtus Mutual Funds and certain other affiliated funds. For the period ended September 30, 2008, the Fund incurred administration fees totaling $1,091. PEPCO serves as the Trust's transfer agent. For the period ended September 30, 2008, transfer agent fees were $1,314 as reported in the Statement of Operations. At September 30, 2008, PNX and its affiliates, the retirement plans of PNX and its affiliates and Virtus affiliated Funds held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE ------------ ------------ Class A 1,103,163 $22,659 Until March 1, 2007, the Trust provided a deferred compensation plan to its Trustees who were not Officers of Virtus. Under the deferred compensation plan, Trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the Trustees. Investments in such Virtus Mutual Funds are included in "Other assets" on the Statements of Assets and Liabilities at September 30, 2008. 4. PURCHASES AND SALES OF SECURITIES ($ reported in thousands) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities and agency securities, forward currency contracts and short-term securities) during the period ended September 30, 2008, were as follows: PURCHASES SALES ------------- ---------- $1,841,172 $1,596,577 There were no purchases or sales of long-term U.S. Government and agency securities. 23 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 5. CAPITAL SHARE TRANSACTIONS (reported in thousands) Transactions in shares of capital stock, for the periods ended as indicated below, were as follows:
------------------- ------------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------- --------- ------ ---------- - ----------------------------- ------------------- ------------------- ------------------- FOREIGN 10/1/07 - 3/1/07 - 3/1/06 - OPPORTUNITIES FUND 9/30/08 9/30/07 2/28/07 - ----------------------------- ------------------- ------------------- ------------------- CLASS A Sale of shares 15,249 $ 403,457 11,830 $ 314,927 9,887 $239,921 Reinvestment of distributions 514 14,391 66 1,796 270 6,284 Plans of Reorganization (Note 13) 2,807 62,246 145 3,821 575 12,673 Shares repurchased (11,701) (290,186) (3,111) (82,305) (2,306) (54,482) ------- --------- ------- ---------- ------- -------- Net increase/(decrease) 6,869 $ 189,908 8,930 $ 238,239 8,426 $204,396 ======= ========= ======= ========== ======= ======== CLASS C Sale of shares 1,782 $ 47,916 2,145 $ 56,470 1,512 $ 36,932 Reinvestment of distributions 51 1,421 5 140 15 344 Plans of Reorganization (Note 13) 68 1,495 8 198 66 1,457 Shares repurchased (963) (23,872) (201) (5,267) (58) (1,350) ------- --------- ------- ---------- ------- -------- Net increase/(decrease) 938 $ 26,960 1,957 $ 51,541 1,535 $ 37,383 ======= ========= ======= ========== ======= ======== CLASS I Sale of shares 8,230 $ 206,483 2,150 $ 57,224 1,409 $ 34,448 Reinvestment of distributions 285 7,970 41 1,104 46 1,065 Plans of Reorganization (Note 13) -- -- 11,024 290,636 2,113 46,590 Shares repurchased (4,187) (105,982) (1,474) (39,283) (210) (4,937) ------- --------- ------- ---------- ------- -------- Net increase/(decrease) 4,328 $ 108,471 11,741 $ 309,681 3,358 $ 77,166 ======= ========= ======= ========== ======= ========
(1) During the period ended September 30, 2007, a non-affiliate reimbursed the Fund as a result of dilutions caused by incorrectly processed shareholder activity. The effect of this activity would have reduced total return by less than .01% for the Fund. 24 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 6. 10% SHAREHOLDERS As of September 30, 2008, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below. The shareholder is not affiliated with PNX. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS --------------- ------------ 13% 1 7. 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 a Fund's ability to repatriate such amounts. 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. At September 30, 2008, the Fund held securities issued by various companies in the consumer staples sector, representing 31% of the total investments of the Fund. 8. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 9. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by The Phoenix Companies, Inc. and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. In February 2005, the NASD notified PNX that it was asserting violations of trade reporting rules by a subsidiary. PNX responded to the NASD allegations in May 2005. Thereafter, in January 2007, the NASD notified PNX that the matter was being referred for potential violations and possible action. On May 3, 2007, the NASD accepted a letter of acceptance, waiver and consent submitted by the subsidiary to resolve this matter. Without admitting or denying the NASD's findings, in accordance with the terms of the letter the subsidiary agreed to a censure, to pay a fine of $8,000 and to revise its supervisory procedures. The Company does not believe that the outcome of this matter will be material to these financial statements. 25 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 10. RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures. The Fund will be adopting SFAS 157 effective with the December 31, 2008 quarterly reporting of the schedule of investments. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161"), was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Management is currently evaluating the impact of FAS 161 on financial statement disclosures, if any. 11. FEDERAL INCOME TAX INFORMATION ($ reported in thousands) The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: EXPIRATION YEAR -------------------------------------------------- 2009 2010 TOTAL --------------- ------------- --------------- $1,299 $379 $1,678 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. For the fiscal year ended September 30, 2008, the Fund utilized losses of $5,390 deferred in prior years against current year capital gains. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2008, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL CURRENCY LOSS LOSS LOSS DEFERRED RECOGNIZED DEFERRED ------------- ------------ ------------ $108,508 $1,487 $4,015 The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $10,298 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 26 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 12. RECLASSIFICATIONS OF CAPITAL ACCOUNTS ($ reported in thousands) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Fund. As of September 30, 2008, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON SHARES OF UNDISTRIBUTED ACCUMULATED BENEFICIAL NET INVESTMENT NET REALIZED INTEREST INCOME (LOSS) GAIN (LOSS) -------------- ---------------- -------------- $3,142 $(4,355) $1,213 The Fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from net investment income and realized capital gains. 13. PLANS OF REORGANIZATION (All values except for per share amounts are reported in thousands) On September 12, 2008, the Foreign Opportunities Fund acquired all of the net assets of the Phoenix International Strategies Fund ("International Strategies Fund") of the Phoenix Opportunities Trust ("Opportunities Trust") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees of Opportunities Trust on June 19, 2008. The acquisition was accomplished by a tax-free exchange of 2,807 Class A shares and 68 Class C shares of the Foreign Opportunities Fund outstanding on September 12, 2008 (valued at $62,246 and $1,495, respectively) for 5,615 Class A shares and 147 Class C shares of the International Strategies Fund outstanding on September 12, 2008. The International Strategies Fund had net assets on that date of $63,741 including $5,455 of net depreciation, which were combined with those of the Foreign Opportunities Fund. The aggregate net assets of Foreign Opportunities Fund immediately after the merger were $1,242,947. The shareholders of each Class of the International Strategies Fund received for each share owned approximately 0.50 and 0.46 share, respectively, of Class A and Class C shares of the Foreign Opportunities Fund. On April 13, 2007, the Foreign Opportunities Fund acquired all of the net assets of the Phoenix Insight International Fund ("International Fund") of the Phoenix Insight Funds Trust pursuant to an Agreement and Plan of Reorganization approved by the International Fund's Board of Trustees on November 15, 2006. The acquisition was accomplished by a tax-free exchange of 11,024 Class I shares, 145 Class A shares, and 8 Class C shares of the Foreign Opportunities Fund outstanding on April 13, 2007 (valued at $290,636, $3,821 and $198, respectively) for 15,423 Class I shares, 212 Class A shares, and 11 Class C shares of the International Fund outstanding on April 13, 2007. The International Fund had net assets on that date of $294,655 including $53,500 of net appreciation, which were combined with those of the Foreign Opportunities Fund. The aggregate net assets of Foreign Opportunities Fund immediately after the merger were $885,263. The shareholders of each Class of the International Fund received for each share owned 27 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 approximately 0.71, 0.68 and 0.69 share, respectively, of Class I, Class A, and Class C shares of the Foreign Opportunities Fund. On May 22, 2006, the Foreign Opportunities Fund acquired all of the net assets of the Phoenix Overseas Fund ("Overseas Fund") of the Phoenix Asset Trust pursuant to an Agreement and Plan of Reorganization approved by the Overseas Fund's Board of Trustees on February 16, 2006. The acquisition was accomplished by a tax-free exchange of 2,113 Class I (f/k/a Class X) shares, 575 Class A shares, and 66 Class C shares of the Foreign Opportunities Fund outstanding on May 19, 2006 (valued at $46,590, $12,673 and $1,457, respectively) for 3,027 Class I (f/k/a Class X) shares, 789 Class A shares, 39 Class B shares and 96 Class C shares of the Overseas Fund outstanding on May 19, 2006. The Overseas Fund had net assets on that date of $60,720 including $17,640 of net appreciation, which were combined with those of the Foreign Opportunities Fund. The aggregate net assets of Foreign Opportunities Fund immediately after the merger were $208,972. The shareholders of each Class of the Overseas Fund received for each share owned approximately 0.70, 0.69 and 0.69 share, respectively, of Class I (f/k/a Class X), Class A, and Class C shares of the Foreign Opportunities Fund. At the time of the merger all Class B shares of the Overseas Fund were converted to Class A shares. As a result each Class B shareholder of Overseas Fund received 0.69 of Class A shares of the Foreign Opportunities Fund. 28 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [LOGO OMITTED] PRICEWATERHOUSECOOPERS To the Board of Trustees of Virtus Opportunities Trust and Shareholders of Virtus Foreign Opportunities Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Foreign Opportunities Fund (formerly Phoenix Foreign Opportunities Fund, hereafter referred to as the "Fund"), a series of Virtus Opportunities Trust (formerly Phoenix Opportunities Trust), at September 30, 2008, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts November 19, 2008 29 VIRTUS FOREIGN OPPORTUNITIES FUND TAX INFORMATION NOTICE (UNAUDITED) SEPTEMBER 30, 2008 - -------------------------------------------------------------------------------- For the fiscal year ended September 30, 2008, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG -------------- -------------- -------------- 84% 6% $9,617 For the fiscal year ended September 30, 2008, the Fund recognized $27,030 ($ reported in thousands), of foreign source income on which the Fund paid foreign taxes of $1,651 ($ reported in thousands). This information is being furnished to you pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. - -------------------------------------------------------------------------------- 30 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2008 is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 56 Prospect Street, Hartford, CT 06115-0480. There is no stated term of office for Trustees of the Trust.
INDEPENDENT TRUSTEES - ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management (commodities business) (2007- YOB: 1939 present). Partner, Stonington Partners, Inc. (private equity firm) (2001-2007). Elected: 1993 Director/Trustee, Evergreen Funds (88 portfolios). 50 Funds - ----------------------------------------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (private bank) YOB: 1951 (1982-2006). Elected: 2001 52 Funds - ----------------------------------------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) (1994-present). Chairman, YOB: 1946 Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services) Elected: 1993 (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust 50 Funds (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. - ----------------------------------------------------------------------------------------------------------------- Richard E. Segerson Managing Director, Northway Management Company (1998-present). YOB: 1946 Elected: 1998 50 Funds - ----------------------------------------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). Mr. Verdonck is also a director YOB: 1942 of several non-U.S. companies. Elected: 2004 50 Funds - -----------------------------------------------------------------------------------------------------------------
31 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
- ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- George R. Aylward(1) Senior Executive Vice President and President, Asset Management (2007-present), YOB: 1964 Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Elected: 2006 Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. 52 Funds Director and President (2006-present), Chief Operating Officer (2004-2006), Vice President, Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. 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). - ----------------------------------------------------------------------------------------------------------------- Philip R. McLoughlin(2) Partner, Cross Pond Partners, LLC (2006-Present). Director, Argo Group YOB: 1946 International Holdings Ltd. (insurance), World Trust Fund and KBC Asset Elected: 1993 Management, Ltd. 70 Funds - -----------------------------------------------------------------------------------------------------------------
(1) 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. (2) Mr. McLoughlin is treated as an "interested person," as defined in the Investment Company Act of 1940, because of his participation in certain retirement plans maintained by Virtus Investment Partners, Inc. and/or its affiliates. 32 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------- POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ----------------------------------------------------------------------------------------------------------------- Nancy G. Curtiss Senior Vice President since Vice President, Head of Asset Management YOB: 1952 2006. Operations (2007-present), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Assistant Treasurer (2001-present), Phoenix Equity Planning Corporation. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). - ----------------------------------------------------------------------------------------------------------------- Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna c/o Zweig-DiMenna Chief Compliance Officer since Associates LLC (1989-present). Vice President, Associates, LLC 2004. The Zweig Total Return Fund, Inc. (2004-present). 900 Third Avenue Vice President, The Zweig Fund, Inc. (2004- New York, NY 10022 present). President and Director of Watermark YOB: 1945 Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). - ----------------------------------------------------------------------------------------------------------------- W. Patrick Bradley Chief Financial Officer and Vice President, Fund Administration (2007- YOB: 1972 Treasurer since 2005. 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. Senior Manager, Audit, Deloitte & Touche, LLP (1999-2004). - ----------------------------------------------------------------------------------------------------------------- Kevin J. Carr Vice President, Vice President, Counsel and Secretary, Virtus YOB: 1954 Chief Legal Officer, Investment Partners, Inc. and/or certain of its Counsel and subsidiaries (since 2008). Vice President and Secretary since 2005. 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). - -----------------------------------------------------------------------------------------------------------------
33 VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES George R. Aylward Leroy Keith, Jr. Philip R. McLoughlin, Chairman Geraldine M. McNamara James M. Oates Richard E. Segerson Ferdinand L.J. Verdonck OFFICERS George R. Aylward, President Nancy G. Curtiss, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 56 Prospect Street Hartford, CT 06115-0480 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 TRANSFER AGENT Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110-1707 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site VIRTUS.COM - -------------------------------------------------------------------------------- IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. - -------------------------------------------------------------------------------- THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. -------------- [LOGO OMITTED] PRSRT STD U.S. POSTAGE c/o State Street Bank and Trust Company PAID P.O. Box 8301 LANCASTER, PA Boston, MA 02266-8301 PERMIT 1793 -------------- For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM. 8011 10-08 ANNUAL REPORT [LOGO OMITTED] Virtus Multi-Sector Short Term Bond Fund ================================================================================ WOULDN'T YOU RATHER HAVE THIS DOCUMENT E-MAILED TO YOU? ELIGIBLE SHAREHOLDERS CAN TRUST NAME: SIGN UP FOR E-DELIVERY VIRTUS OPPORTUNITIES September 30, 2008 AT VIRTUS.COM TRUST NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE TABLE OF CONTENTS VIRTUS MULTI-SECTOR SHORT TERM BOND FUND* ("Multi-Sector Short Term Bond Fund," formerly Phoenix Multi-Sector Short Term Bond Fund) Message to Shareholders ............................................... 1 Glossary .............................................................. 3 Disclosure of Fund Expenses ........................................... 4 Fund Summary .......................................................... 6 Schedule of Investments ............................................... 9 Statement of Assets and Liabilities ................................... 27 Statement of Operations ............................................... 28 Statement of Changes in Net Assets .................................... 29 Financial Highlights .................................................. 30 Notes to Financial Statements ......................................... 34 Report of Independent Registered Public Accounting Firm ............... 44 Tax Information Notice ................................................ 45 Fund Management Tables ................................................ 46 * Please see Notes 1 and 3 in the Notes to Financial Statements for more information on the name change. - -------------------------------------------------------------------------------- PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2008, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the Fund 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. - -------------------------------------------------------------------------------- This report is not authorized for distribution to prospective investors in the Virtus Multi-Sector Short Term Bond Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS Fellow Shareholders of Virtus Mutual Funds: [PHOTO OMITTED] The third quarter of 2008 likely will be remembered as a time of extremes in the global financial markets. There was historic volatility in all the major markets, the collapse of well-known financial firms, and unprecedented government interventions into the economy. The scope of events that occurred in the past quarter was truly extraordinary. There was the U.S. government's takeover of Fannie Mae and Freddie Mac; a federal line of credit for the insurer, AIG; the seizure of Washington Mutual and sale to JPMorgan Chase; and the proposed $700 billion taxpayer rescue of the financial sector, which was approved in early October. The quarter also saw the end of the investment banking model with the merger of Merrill Lynch and Bank of America, the collapse of Lehman Brothers, and the decisions by Goldman Sachs and Morgan Stanley to convert to traditional banking institutions. This global turmoil was reflected in the major market indices. More than half (37 of 64) of the Dow Jones Industrial Average's third-quarter trading days had wide positive or negative swings of greater than 100 points. For the quarter, the Dow was down 3.7 percent (16.5 percent year-to-date), the S&P 500 stock index was down 8.4 percent (19.3 percent year-to-date); and EAFE was off 20.5 percent (28.9 percent for the year). At the start of the fourth quarter, governments around the world demonstrated their resolve to actively pursue solutions to this financial upheaval. Among the responses from the U.S. government is the Department of the Treasury's Temporary Money Market Fund Guarantee Program. While officials and economists believe the government interventions will bring stability to the financial markets, few will predict a timeline for recovery. This is a period when investors should pay particular attention to their accounts - and rely on the discipline and focus of professional investment managers and financial advisors. The extraordinary activity of the past several months may tempt some investors to react inappropriately to market events and deviate from their well-considered, long-term financial plans. We believe that during periods of unusual market volatility, discipline is the key for the investor, the financial advisor, and the professional money manager. We encourage you to consult with a financial advisor to review your holdings and to ensure they continue to reflect your current investment objectives and your tolerance for risk. Virtus Mutual Funds offer a wide range of equity, fixed income and money market funds, and we hope you will consider our investment choices when you and your financial advisor review your portfolio allocations. 1 On a much different note, we began the fourth quarter with the rebranding of our company in preparation for our spin-off as an independent, publicly-traded company. Our company is now Virtus Investment Partners, the PhoenixFunds are now the Virtus Mutual Funds, and the investment adviser to the funds is now Virtus Investment Advisers. As you will notice throughout this report, the individual funds have incorporated the "Virtus" name. For your convenience, all mutual fund ticker symbols remain unchanged. I encourage you to visit our new website, WWW.VIRTUS.COM, to learn more about our company and our services for investors, and to access information about your account. Customer service is also available at 800-243-1574. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our partner companies and subadvisers, I want to thank you for entrusting your assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds OCTOBER 2008 PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 2 GLOSSARY BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX The Barclays Capital U.S. Aggregate Bond Index (formerly Lehman Brothers U.S. Aggregate Bond Index) measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. FGIC Financial Guaranty Insurance Company FHLMC Federal Home Loan Mortgage Corporation FNMA OR "FANNIE MAE" Federal National Mortgage Association FSA Financial Security Assurance, Inc. GNMA OR "GINNIE MAE" Government National Mortgage Association JPY Japanese Yen MBIA Municipal Bond Insurance Association MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX The Merrill Lynch 1-2.99 Year Medium Quality Corporate Bonds 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. 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. USD United States Dollar WHEN-ISSUED AND DELAYED DELIVERY 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 a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or 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. THE INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 3 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Multi-Sector Short Term Bond Fund (the "Fund") you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B, Class C and Class T shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class I shares are sold without a sales charge and do not incur distribution and service fees. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Virtus Multi-Sector Short Term Bond Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if those transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. 4 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 TO SEPTEMBER 30, 2008 EXPENSE TABLE - -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - -------------------------------------------------------------------------------- MULTI-SECTOR SHORT TERM BOND FUND - -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 953.70 1.10% $5.37 Class B 1,000.00 949.00 1.60 7.80 Class C 1,000.00 950.70 1.35 6.58 Class T 1,000.00 948.10 1.85 9.01 Class I++ 1,000.00 948.90 0.89 2.75 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.43 1.10 5.57 Class B 1,000.00 1,016.90 1.60 8.10 Class C 1,000.00 1,018.17 1.35 6.83 Class T 1,000.00 1,015.63 1.85 9.37 Class I 1,000.00 1,020.49 0.89 4.51 HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION) Class I++ 1,000.00 1,013.00 0.89 2.84 * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 366 days to reflect the one-half year period. ++ Inception date is June 6, 2008. Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days (113) expenses were accrued, then divided by 366 to reflect the period since inception. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 5 TICKER SYMBOLS: VIRTUS MULTI-SECTOR SHORT TERM BOND FUND Class A: NARAX Class B: PBARX Class C: PSTCX Class T: PMSTX Class I: PIMSX [ ] VIRTUS MULTI-SECTOR SHORT TERM BOND FUND ("Multi-Sector Short Term Bond Fund" or the "Fund") is diversified and has an investment objective to seek 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. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (5.07)%; Class B shares returned (5.57)%; Class C shares returned (5.28)%; Class T shares returned (5.78)%; and Class I shares returned (5.11)%* for the period June 6, 2008 (inception) to September 30, 2008. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 3.65%; and the Merrill Lynch 1-2.99 Year Medium Quality Corporate Bonds Index, the Fund's style-specific index appropriate for comparison, returned (2.19)%. * Returns less than 1 year are not annualized. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. HOW DID THE BOND MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The broad US fixed income market, as represented by the Barclays Capital U.S. Aggregate Bond Index, returned 3.65 percent for the fiscal year ended September 30, 2008. [ ] In the first 7 meetings of the fiscal year (one of which was an unscheduled inter-meeting) the Federal Reserve cut the federal funds rate 2.75 percent from 4.75 percent to 2.00 percent, citing concerns over tightening credit conditions, a weakening economy. In the remaining 3 meetings, towards the end of second quarter 2008 and early third quarter 2008, as commodities were hitting all-time highs and inflation as measured by CPI was heightened, the Federal Reserve left rates unchanged citing concerns of downside risks to growth and upside inflation risks. [ ] Since the beginning of the fiscal year the yield curve has steepened, with rates declining across the curve but more pronounced at the front end of the curve. [ ] The credit markets during the fiscal year ending September 30, 2008 were extraordinarily volatile. This was primarily due to fear surrounding the sub-prime mortgage market and its resulting contagion. During this period the economy showed significant signs of weakening with unemployment on the rise, a deteriorating housing market, and unprecedented stress to the financial system, resulting in a severe lack of liquidity and uncertainty in the market. [ ] Despite the numerous efforts of the Federal Reserve to inject liquidity into the system, fears of a credit crunch caused a very significant flight to quality which resulted in dramatic spread widening in all sectors of the bond market. This flight to quality was so significant that it caused Treasuries to outperform all spread sectors for the full reporting period. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The decision to maintain an underweight to U.S. Treasuries in favor of spread sectors was the largest detractor to performance for the fiscal year. Treasuries outperformed as concerns over sub-prime and the resulting credit crunch continued the flight to quality, causing spreads in many sectors to widen to historic or near-historic levels. This environment typically does not favor our style of investing; however, we have maintained diversification in all of our credit-intensive sectors and have used the spread widening as an opportunity to invest in high quality issues that have widened in conjunction with the market. [ ] Among the fund's investment in spread sectors, the overweight to asset backed securities, corporate high yield, and residential mortgage backed securities detracted the most from performance. 6 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND (CONTINUED) [ ] The largest positive contributors to performance were the fund's exposure to agency mortgage backed securities and municipal bonds, though both sectors underperformed U.S. Treasuries. AS INTEREST RATES RISE, BOND PRICES FALL. AS SUCH, THIS FUND'S SHARE VALUE MAY DECLINE SUBSTANTIALLY, AND IT IS POSSIBLE TO LOSE A SIGNIFICANT PORTION OF YOUR PRINCIPAL WHEN INTEREST RATES RISE. FOREIGN INVESTING INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION AND LESS PUBLIC DISCLOSURE, AS WELL AS ECONOMIC AND POLITICAL RISKS. SECTOR WEIGHTINGS as of 9/30/08* - --------------------------------------------------------------- Domestic Corporate Bonds 23% - --------------------------------------------------------------- Agency Mortgage-Backed Securities 18% - --------------------------------------------------------------- Non-Agency Mortgage-Backed Securities 16% - --------------------------------------------------------------- Domestic Loan Agreements 11% - --------------------------------------------------------------- Foreign Corporate Bonds 10% - --------------------------------------------------------------- Asset-Backed Securities 10% - --------------------------------------------------------------- Foreign Government Securities 9% - --------------------------------------------------------------- Other (includes short-term investments) 3% - --------------------------------------------------------------- * % of total investments as of September 30, 2008. 7
AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - ----------------------------------------------------------------------------------------------------------- Inception 1 5 10 to Inception Year Years Years 9/30/08 Date - ----------------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) (5.07)% 2.21% 4.94% -- -- - ----------------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) (7.20) 1.74 4.70 -- -- - ----------------------------------------------------------------------------------------------------------- CLASS B SHARES AT NAV(2) (5.57) (1.70) (4.38) -- -- - ----------------------------------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) (6.92) 1.70 4.38 -- -- - ----------------------------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) (5.28) (1.97) (4.73) -- -- - ----------------------------------------------------------------------------------------------------------- CLASS T SHARES AT NAV(2) (5.78) 1.42 -- 1.55% 6/2/03 - ----------------------------------------------------------------------------------------------------------- CLASS T SHARES WITH CDSC(4) (5.78) (1.42) -- (1.55) 6/2/03 - ----------------------------------------------------------------------------------------------------------- CLASS I SHARES AT NAV -- -- -- (5.11) 6/6/08 - ----------------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX (3.65) (3.78) (5.20) NOTE 5 NOTE 5 - ----------------------------------------------------------------------------------------------------------- MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX (2.19) (2.14) (4.36) NOTE 6 NOTE 6 - ----------------------------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES 1.11%; B SHARES 1.61%; C SHARES 1.36%; T SHARES 1.86%; I SHARES 0.86%. - -----------------------------------------------------------------------------------------------------------
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 2.25% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CLASS B SHARES DECLINE FROM 2% TO 0% OVER A THREE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS T SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 3.52% FOR CLASS T (SINCE 6/2/03) AND (0.88)% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 2.21% FOR CLASS T (SINCE 6/2/03) AND (5.61)% FOR CLASS I (SINCE 6/6/08). (7) PER PROSPECTUS EFFECTIVE 1/31/08. [LINE GRAPH OMITTED] PLOT POINTS FOR EDGAR REPRESENTATION ARE AS FOLLOWS: GROWTH OF $10,000 for periods ended 9/30 - --------------------------------------------------------------------------------
Virtus Multi-Sector Virtus Multi-Sector Virtus Multi-Sector Merrill Lynch 1-2.99 Short Term Short Term Short Term Year Medium Quality Bond Fund Class A Bond Fund Class B Bond Fund Class C Corporate Bonds Index 9/30/1998 9,775 10,000 10,000 10,000 9/30/1999 10,521 10,687 10,736 10,409 9/29/2000 11,189 11,313 11,390 11,072 9/28/2001 12,089 12,140 12,302 12,256 9/30/2002 12,917 12,907 13,108 12,810 9/30/2003 14,210 14,134 14,410 13,784 9/30/2004 14,894 14,771 15,123 14,095 9/30/2005 15,335 15,133 15,528 14,312 9/29/2006 15,943 15,624 16,099 14,911 9/28/2007 16,693 16,281 16,774 15,670 9/30/2008 15,847 15,374 15,888 15,327
For information regarding the indexes, see the glossary on page 3. 8 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- U.S. GOVERNMENT SECURITIES--0.4% U.S. TREASURY BONDS--0.3% U.S. Treasury Bond 4.000% due 8/15/18 $ 5,600 $ 5,680 --------- U.S. TREASURY NOTES--0.1% U.S. Treasury Note 2.875% due 6/30/10 1,000 1,016 --------- - ---------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $6,761) 6,696 - ---------------------------------------------------------------------------- AGENCY MORTGAGE-BACKED SECURITIES--17.6% FHLMC 6.000% due 8/1/34 1,992 2,023 6.000% due 2/1/38 26,794 27,149 FNMA 5.500% due 1/1/17 765 779 6.000% due 5/1/17 212 217 5.500% due 8/1/17 136 138 4.500% due 4/1/18 1,610 1,587 5.000% due 4/1/18 1,497 1,501 5.000% due 10/1/19 2,656 2,657 5.500% due 2/1/20 894 903 5.500% due 3/1/20 1,142 1,155 5.500% due 3/1/20 439 444 5.500% due 3/1/20 1,041 1,052 5.500% due 3/1/20 2,013 2,035 5.500% due 4/1/20 1,641 1,659 5.000% due 6/1/20 4,599 4,585 5.000% due 8/1/20 5,639 5,623 6.000% due 12/1/32 308 313 5.500% due 2/1/33 667 667 5.500% due 5/1/34 2,760 2,758 04-W6, 1A4 5.500% due 7/25/34 9,287 9,021 6.000% due 8/1/34 1,585 1,613 6.000% due 8/1/34 2,081 2,118 5.500% due 10/1/34 2,531 2,530 6.000% due 10/1/34 1,397 1,420 6.000% due 10/1/34 2,202 2,237 5.500% due 11/1/34 2,978 2,976 5.500% due 11/1/34 2,141 2,139 6.000% due 11/1/34 2,778 2,823 5.500% due 12/1/34 1,594 1,590 PAR VALUE VALUE ------------ --------- 5.500% due 1/1/35 $ 3,345 $ 3,342 5.500% due 1/1/35 2,809 2,807 5.500% due 2/1/35 2,993 2,991 5.500% due 3/1/35 3,017 3,012 5.500% due 4/1/35 3,499 3,496 05-57, CK 5.000% due 7/25/35 2,686 2,683 05-65, DK 5.000% due 8/25/35 2,112 2,110 05-65, PJ 5.000% due 8/25/35 4,210 4,211 05-74, AG 5.000% due 9/25/35 1,787 1,787 5.500% due 6/1/36 9,061 9,044 6.500% due 8/1/36 9,589 9,843 6.000% due 10/1/36 5,218 5,291 6.000% due 1/1/37 3,988 4,044 6.000% due 1/1/37 2,252 2,283 5.500% due 2/1/37 6,785 6,773 5.500% due 2/1/37 3,746 3,738 5.500% due 4/1/37 4,096 4,088 5.500% due 7/1/37 24 24 6.000% due 7/1/37 1,432 1,452 6.000% due 9/1/37 13,723 13,913 5.500% due 11/1/37 13,012 12,986 6.000% due 12/1/37 5,841 5,923 5.500% due 2/1/38 7,330 7,315 6.000% due 2/1/38 7,429 7,533 6.000% due 2/1/38 4,763 4,829 6.000% due 2/1/38 8,153 8,267 5.500% due 4/1/38 28,925 28,866 6.000% due 4/1/38 4,406 4,467 5.500% due 5/1/38 3,937 3,929 6.000% due 5/1/38 9,620 9,754 5.500% due 7/1/38 9,591 9,572 5.500% due 7/1/38 18,078 18,041 5.500% due 9/1/38 4,250 4,241 GNMA 6.500% due 7/15/31 51 53 6.500% due 8/15/31 130 134 6.500% due 11/15/31 104 107 6.500% due 2/15/32 43 44 6.500% due 4/15/32 133 137 6.500% due 4/15/32 144 148 - ---------------------------------------------------------------------------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $298,842) 298,990 - ---------------------------------------------------------------------------- See Notes to Financial Statements 9 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- MUNICIPAL BONDS--2.8% ARIZONA--0.8% Arizona School Board Facilities Improvement 5.000% due 1/1/14 $ 12,325 $ 13,185 --------- CALIFORNIA--0.1% Fresno County Pension Obligation Taxable (FGIC Insured) 6.060% due 8/15/09 1,915 1,955 --------- CONNECTICUT--0.2% Mashantucket Western Pequot Tribe Taxable Series A 144A (MBIA Insured) 6.910% due 9/1/12(b) 3,215 3,251 --------- KENTUCKY--0.4% State Property & Buildings Commission (FSA Insured) 5.250% due 10/1/13 5,750 6,172 --------- NEW YORK--0.1% New York State Dormitory Authority Higher Education Taxable Series B 3.350% due 12/15/09 1,610 1,618 --------- PENNSYLVANIA--0.2% Philadelphia School District Taxable Series C (FSA Insured) 4.200% due 7/1/09 2,570 2,585 4.430% due 7/1/11 1,015 1,017 --------- 3,602 --------- SOUTH DAKOTA--0.0% Educational Enhancement Funding Corp. Taxable Series A 6.720% due 6/1/25 130 129 --------- TEXAS--0.8% State of Texas Public Finance Authority 5.000% due 10/1/12 12,950 13,772 --------- PAR VALUE VALUE ------------ --------- VIRGINIA--0.2% Tobacco Settlement Financing Corp. Taxable Series A-1 6.706% due 6/1/46 $ 4,965 $ 3,845 --------- - ---------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $48,980) 47,529 - ---------------------------------------------------------------------------- ASSET-BACKED SECURITIES--9.7% AmeriCredit Automobile Receivables Trust 06-RM, A2 5.420% due 8/8/11 5,361 5,182 07-CM, A3A 5.420% due 5/7/12 7,000 6,724 Banc of America Securities Auto Trust 06-G1, B 5.340% due 2/18/11 4,855 4,724 Bay View Auto Trust 05-LJ1, A4 4.090% due 5/25/12 2,694 2,562 Bayview Financial Acquisition Trust 06-B, 1A2 5.800% due 4/28/36(c) 4,000 3,750 Bombardier Capital Mortgage Securitization Corp. 99-A, A3 5.980% due 1/15/18(c) 2,911 2,671 Capital Auto Receivables Asset Trust 144A 06-1, D 7.160% due 1/15/13(b) 2,000 1,898 Capital One Auto Finance Trust 06-A, A3 5.330% due 11/15/10 898 894 Carmax Auto Owner Trust 05-1, C 4.820% due 10/15/11 4,135 3,938 07-2, B 5.370% due 3/15/13 5,702 5,138 Chase Funding Mortgage Loan Asset-Backed Certificates 04-1, 1A4 4.111% due 8/25/30 3,261 3,201 Citicorp Residential Mortgage Securities, Inc. 07-2, A4 6.538% due 6/25/37(c) 5,000 4,043 Conseco Finance Securitizations Corp.(c) 02-2, A2 6.030% due 3/1/33 2,000 1,849 01-3, A4 6.910% due 5/1/33 12,541 11,809 See Notes to Financial Statements 10 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- Credit Based Asset Servicing and Securitization LLC 07-CB1, AF2 5.721% due 1/25/37(c) $ 5,000 $ 3,855 Daimler Chrysler Auto Trust 08-B, A4A 5.320% due 11/10/14 4,820 4,648 Dunkin Securitization 144A 06-1, M1 8.285% due 6/20/31(b) 6,345 4,756 FMAC Loan Receivables Trust 144A 98-CA, A2 6.660% due 9/15/20(b) 4,443 4,043 Ford Credit Auto Owner Trust 06-C, A4A 5.150% due 2/15/12 6,750 6,604 GMAC Mortgage Corp. Loan Trust 05-HE2, A3 4.622% due 11/25/35(c) 1,027 946 06-HE2, A3 6.320% due 5/25/36 11,335 6,048 Great America Leasing Receivables 144A 05-1, A4 4.970% due 8/20/10(b) 6,319 6,290 GreenTree Financial Corp. 7.000% due 4/15/26 5,000 4,824 99-2, M2 7.210% due 12/1/30(c)(n) 2,247 46 Home Equity Asset Trust 144A 06-7, A 6.000% due 2/25/37(b)(p) 2,119 11 Hyundai Auto Receivables Trust 06-A, D 5.520% due 11/15/12 2,478 2,427 08-A, A3 4.930% due 12/17/12 6,800 6,721 IndyMac Manufactured Housing Contract 98-1, A3 6.370% due 9/25/28 2,312 2,148 Long Grove Collateral Loan Obligation Ltd. 144A(b)(c) 04-1A, C 5.211% due 5/25/16 1,600 1,162 04-1A, D 9.561% due 5/25/16 500 353 PAR VALUE VALUE ------------ --------- MASTR Alternative Net Interest Margin 144A 06-6, N1 4.429% due 9/26/46 (b)(c)(n)(p) $ 1,140 $ 1 Merrill Auto Trust Securitization 07-1, B 5.790% due 12/15/13 5,585 5,262 Renaissance Home Equity Loan Trust(c) 05-3, AF4 5.140% due 11/25/35 5,380 4,919 06-2, AF4 6.115% due 8/25/36 5,640 4,749 06-3, AF2 5.580% due 11/25/36 2,661 2,599 Renaissance Net Interest Margin Trust 144A 07-2, N 8.353% due 6/25/37(b)(n) 1,715 34 Residential Funding Mortgage Securities II, Inc. 04-HI3, A4 4.630% due 1/25/20 1,584 1,541 05-HI2, A3 4.460% due 5/25/35 1,157 1,149 06-HI2, A3 5.790% due 2/25/36 1,510 1,133 07-HI1, A2 5.640% due 3/25/37 10,000 8,237 07-HSA3, AI2 5.890% due 5/25/37(c) 7,340 5,634 Soundview Home Equity Loan Trust 05-CTX1, A3 5.322% due 11/25/35(c) 2,522 2,503 Structured Asset Securities Corp. 05-7XS, 1A2B 5.270% due 4/25/35(c) 7,161 7,064 Vanderbuilt Acquisition Loan Trust 02-1, A3 5.700% due 9/7/23(c) 107 106 Wachovia Auto Loan Owner Trust 144A(b) 06-1, A4 5.080% due 4/20/12 4,870 4,764 06-2A, E 7.050% due 5/20/14 5,000 2,624 - ---------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $191,591) 165,584 - ---------------------------------------------------------------------------- See Notes to Financial Statements 11 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- DOMESTIC CORPORATE BONDS--23.4% AEROSPACE & DEFENSE--0.3% L-3 Communications Corp. 7.625% due 6/15/12 $ 4,445 $ 4,389 Series B 6.375% due 10/15/15 925 856 --------- 5,245 --------- AGRICULTURAL PRODUCTS--0.3% Cargill, Inc. 144A 5.600% due 9/15/12(b) 4,845 4,787 --------- AIRLINES--1.8% American Airlines, Inc. 01-1 6.977% due 5/23/21 16,013 10,569 Continental Airlines, Inc. 98-1A 6.648% due 3/15/19 2,287 1,943 Delta Air Lines, Inc. 00-1 7.379% due 5/18/10 11,647 11,327 JetBlue Airways Corp. 04-2 5.904% due 5/15/10(c) 1,066 1,034 United Airlines, Inc. 00-2 7.032% due 10/1/10 3,326 3,251 01-1 6.071% due 3/1/13 2,501 2,439 --------- 30,563 --------- APPLICATION SOFTWARE--0.1% Intuit, Inc. 5.750% due 3/15/17 1,393 1,232 --------- ASSET MANAGEMENT & CUSTODY BANKS--0.5% Invesco Ltd. 4.500% due 12/15/09 2,750 2,637 Janus Capital Group, Inc. 6.250% due 6/15/12 2,663 2,517 Northern Trust Corp. 5.500% due 8/15/13 2,775 2,777 Nuveen Investment, Inc. 144A 10.500% due 11/15/15(b) 800 620 --------- 8,551 --------- AUTOMOBILE MANUFACTURERS--0.2% Daimler Finance North America LLC 6.500% due 11/15/13 3,390 3,308 General Motors Corp. 7.200% due 1/15/11 1,480 873 --------- 4,181 --------- PAR VALUE VALUE ------------ --------- BROADCASTING--0.9% Comcast Cable Holdings LLC 7.875% due 8/1/13 $ 3,800 $ 3,949 COX Communications, Inc. 3.875% due 10/1/08 1,000 1,000 4.625% due 6/1/13 5,620 5,195 Time Warner Cable, Inc. 6.200% due 7/1/13 2,915 2,828 Viacom, Inc. 5.750% due 4/30/11 2,700 2,623 --------- 15,595 --------- BUILDING PRODUCTS--0.1% Esco Corp. 144A 8.625% due 12/15/13(b) 1,725 1,699 CASINOS & GAMING--0.2% Harrah's Operating Co., Inc. 5.500% due 7/1/10 1,500 1,133 MGM MIRAGE 8.500% due 9/15/10 2,835 2,622 Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC 144A 5.319% due 3/15/14(b)(c) 767 579 --------- 4,334 --------- COMPUTER STORAGE & PERIPHERALS--0.3% Seagate Technology HDD Holdings, Inc. 6.375% due 10/1/11 4,530 4,473 --------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS--0.1% Terex Corp. 7.375% due 1/15/14 2,010 1,839 --------- CONSTRUCTION MATERIALS--0.3% CRH America, Inc. 8.125% due 7/15/18 4,770 4,680 --------- CONSUMER ELECTRONICS--0.1% Best Buy Co., Inc. 144A 6.750% due 7/15/13(b) 2,095 2,118 --------- CONSUMER FINANCE--3.0% American Express Credit Corp. 5.875% due 5/2/13 4,805 4,429 Series C 7.300% due 8/20/13 2,600 2,508 See Notes to Financial Statements 12 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- CONSUMER FINANCE--CONTINUED American Honda Finance Corp. 144A 6.700% due 10/1/13(b) $ 4,850 $ 4,822 ERAC USA Finance Co. 144A(b) 5.300% due 11/15/08 2,385 2,381 5.800% due 10/15/12 805 732 Ford Motor Credit Co. LLC 5.625% due 10/1/08 12,490 12,490 9.875% due 8/10/11 3,480 2,402 5.538% due 1/13/12(c) 2,000 1,280 7.241% due 4/15/12(c) 3,389 3,016 GMAC LLC 4.054% due 5/15/09(c) 4,815 3,484 6.875% due 9/15/11 4,205 1,877 6.750% due 12/1/14 900 346 Hertz Corp. (The) 8.875% due 1/1/14 2,595 2,251 HSBC Finance Corp. 4.125% due 11/16/09 2,000 1,934 SLM Corp. 6.302% due 2/1/10(c) 8,000 6,623 --------- 50,575 --------- DATA PROCESSING & OUTSOURCED SERVICES--0.2% Convergys Corp. 4.875% due 12/15/09 3,000 2,998 --------- DIVERSIFIED BANKS--0.9% Bank of America Corp. 4.900% due 5/1/13 2,930 2,651 Bank One Corp. 7.875% due 8/1/10 4,900 5,024 Wachovia Corp. 5.300% due 10/15/11 4,870 4,061 5.500% due 5/1/13 2,405 1,990 Wells Fargo & Co. 3.125% due 4/1/09 1,500 1,485 4.375% due 1/31/13 800 735 --------- 15,946 --------- DIVERSIFIED REAL ESTATE ACTIVITIES--0.3% Colonial Realty LP 4.800% due 4/1/11 5,000 4,750 --------- ELECTRIC UTILITIES--1.2% Allegheny Energy Supply 144A 8.250% due 4/15/12(b) 1,860 1,879 Consumers Energy Co. Series H 4.800% due 2/17/09 2,000 2,000 PAR VALUE VALUE ------------ --------- ELECTRIC UTILITIES--CONTINUED FPL Group Capital, Inc. 5.350% due 6/15/13 $ 1,000 $ 1,001 Midwest Generation LLC Series B 8.560% due 1/2/16 1,594 1,642 Northeast Utilities 5.650% due 6/1/13 3,950 3,859 Pacific Gas & Electric Co. 3.600% due 3/1/09 2,000 1,984 PPL Capital Funding Trust I Series A 4.330% due 3/1/09 4,250 4,235 PSE&G Energy Holdings Co. 8.500% due 6/15/11 2,250 2,289 Texas Competitive Electric Holdings Co. LLC 144A 10.250% due 11/1/15(b) 1,390 1,261 --------- 20,150 --------- ELECTRICAL COMPONENTS & EQUIPMENT--0.2% General Cable Corp. 5.166% due 4/1/15(c) 3,375 2,852 --------- ELECTRONIC MANUFACTURING SERVICES--0.1% Tyco Electronic Group SA 6.000% due 10/1/12 1,515 1,493 --------- FOOD RETAIL--0.3% Kroger Co. (The) 8.050% due 2/1/10 1,860 1,910 Safeway, Inc. 4.125% due 11/1/08 2,000 1,997 6.500% due 11/15/08 1,000 1,000 --------- 4,907 --------- GAS UTILITIES--0.1% AmeriGas Partners LP 7.250% due 5/20/15 860 787 ONEOK Partners LP 5.900% due 4/1/12 980 964 --------- 1,751 --------- HEALTH CARE FACILITIES--0.1% HCA, Inc. 9.125% due 11/15/14 1,739 1,696 --------- HEALTH CARE SERVICES--0.1% Medco Health Solutions, Inc. 7.250% due 8/15/13 1,000 1,060 --------- See Notes to Financial Statements 13 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- HOMEBUILDING--0.1% Horton (D.R.), Inc. 4.875% due 1/15/10 $ 2,500 $ 2,325 --------- HOTELS, RESORTS & CRUISE LINES--0.2% Starwood Hotels & Resort Worldwide, Inc. 6.250% due 2/15/13 2,815 2,653 --------- HOUSEHOLD PRODUCTS--0.2% Yankee Acquisition Corp. Series B 8.500% due 2/15/15 3,740 2,730 --------- INDUSTRIAL GASES--0.1% Air Products & Chemicals, Inc. 4.150% due 2/1/13 1,912 1,833 --------- INDUSTRIAL MACHINERY--0.0% SPX Corp. 144A 7.625% due 12/15/14(b) 250 250 --------- INDUSTRIAL REITS--0.1% ProLogis 6.625% due 5/15/18 1,110 953 --------- INTEGRATED TELECOMMUNICATION SERVICES--1.0% AT&T Corp. 7.300% due 11/15/11 3,015 3,131 Embarq Corp. 6.738% due 6/1/13 5,200 4,584 Qwest Capital Funding, Inc. 7.250% due 2/15/11 4,000 3,760 Qwest Corp. 7.875% due 9/1/11 5,220 5,011 --------- 16,486 --------- INVESTMENT BANKING & BROKERAGE--1.3% Bear Stearns Cos., Inc. (The) 7.250% due 2/1/18 4,365 4,201 Goldman Sachs Group, Inc. (The) 4.750% due 7/15/13 3,225 2,781 5.950% due 1/18/18 2,759 2,276 Lehman Brothers Holdings, Inc. 6.000% due 7/19/12(n) 5,485 713 5.625% due 1/24/13(n) 1,909 248 6.750% due 12/28/17(n) 3,640 18 Merrill Lynch & Co., Inc. 6.150% due 4/25/13 3,925 3,627 10.710% due 3/8/17 (Brazil) 6,880(g) 2,567 PAR VALUE VALUE ------------ --------- INVESTMENT BANKING & BROKERAGE--CONTINUED Morgan Stanley 144A (Brazil) 10.090% due 5/3/17(b) 10,525(g) $ 3,208 Piper Jaffray Equipment Trust Securities 144A 6.000% due 9/10/11(b) $ 3,009 2,407 --------- 22,046 --------- LEISURE FACILITIES--0.0% Scientific Games Corp. 144A 7.875% due 6/15/16(b) 810 776 --------- LEISURE PRODUCTS--0.3% Brunswick Corp. 9.750% due 8/15/13 5,419 5,542 --------- LIFE & HEALTH INSURANCE--0.1% Principal Life Global Funding I 144A 4.400% due 10/1/10(b) 1,500 1,500 --------- LIFE SCIENCES TOOLS & SERVICES--0.2% Fisher Scientific International, Inc. 6.750% due 8/15/14 985 964 6.125% due 7/1/15 2,125 2,051 --------- 3,015 --------- MORTGAGE REITS--0.2% iStar Financial, Inc. Series B 5.950% due 10/15/13 5,725 2,977 --------- MOVIES & ENTERTAINMENT--0.1% Time Warner, Inc. 6.875% due 5/1/12 1,500 1,487 --------- MULTI-LINE INSURANCE--0.1% ASIF Global Financing XXIII 144A 3.900% due 10/22/08(b) 2,000 1,967 --------- OFFICE ELECTRONICS--0.2% Xerox Corp. 5.650% due 5/15/13 4,345 4,220 --------- OFFICE SERVICES & SUPPLIES--0.2% Steelcase, Inc. 6.500% due 8/15/11 2,825 2,916 --------- OIL & GAS EQUIPMENT & SERVICES--0.1% Halliburton Co. 5.500% due 10/15/10 1,225 1,261 See Notes to Financial Statements 14 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- OIL & GAS EQUIPMENT & SERVICES--CONTINUED Helix Energy Solutions Group, Inc. 144A 9.500% due 1/15/16(b) $ 692 $ 650 --------- 1,911 --------- OIL & GAS EXPLORATION & PRODUCTION--1.0% Chesapeake Energy Corp. 6.875% due 11/15/20 3,600 3,096 EOG Resources, Inc. 6.125% due 10/1/13 2,070 2,074 Swift Energy Co. 7.625% due 7/15/11 4,875 4,655 XTO Energy, Inc. 5.900% due 8/1/12 1,980 1,955 5.750% due 12/15/13 5,910 5,674 --------- 17,454 --------- OIL & GAS REFINING & MARKETING--0.3% Frontier Oil Corp. 6.625% due 10/1/11 2,230 2,119 Tesoro Corp. 6.250% due 11/1/12 4,340 3,819 --------- 5,938 --------- OIL & GAS STORAGE & TRANSPORTATION--0.8% Buckeye Partners LP 6.050% due 1/15/18 854 814 Knight, Inc. 6.500% due 9/1/12 3,545 3,359 Pacific Energy Partners LP/Pacific Energy Finance Corp. 7.125% due 6/15/14 2,900 2,850 Transcontinental Gas Pipe Line Corp. Series B 7.000% due 8/15/11 3,865 3,957 Williams Cos., Inc. (The) 7.125% due 9/1/11 2,500 2,463 --------- 13,443 --------- OTHER DIVERSIFIED FINANCIAL SERVICES--1.3% Bank of America Corp. 7.400% due 1/15/11 3,815 3,737 Citigroup, Inc. 5.500% due 4/11/13 3,168 2,765 6.500% due 8/19/13 8,100 7,199 General Electric Capital Corp. 8.125% due 5/15/12 3,875 3,925 PAR VALUE VALUE ------------ --------- OTHER DIVERSIFIED FINANCIAL SERVICES--CONTINUED International Lease Finance Corp. 4.750% due 1/13/12 $ 1,120 $ 767 JPMorgan Chase & Co. Series 1 7.900% due 12/31/49(c) 3,360 2,829 MassMutual Global Funding II 144A 3.500% due 3/15/10(b) 1,750 1,734 --------- 22,956 --------- PAPER PACKAGING--0.1% Jefferson Smurfit Corp. 8.250% due 10/1/12 1,595 1,340 --------- PAPER PRODUCTS--0.5% Bowater, Inc. 5.819% due 3/15/10(c) 4,850 3,516 Georgia Pacific Corp. LLC 7.700% due 6/15/15 2,820 2,594 Rock-Tenn Co. 144A 9.250% due 3/15/16(b) 125 128 Verso Paper Holdings LLC and Verso Paper, Inc. Series B 6.551% due 8/1/14(c) 2,570 2,133 --------- 8,371 --------- PROPERTY & CASUALTY INSURANCE--0.1% Berkley (WR) Corp. 5.125% due 9/30/10 2,000 2,006 --------- REGIONAL BANKS--0.5% First Tennessee Bank(c) 2.839% due 1/23/09 723 705 2.867% due 5/18/09 1,380 1,308 KeyBank NA 5.700% due 8/15/12 1,800 1,427 7.413% due 5/6/15 1,000 823 National City Bank 3.889% due 6/29/09(c) 5,760 4,551 --------- 8,814 --------- RETAIL REITS--0.5% Kimco Realty Corp. 4.820% due 8/15/11 1,945 1,885 Simon Property Group LP 4.600% due 6/15/10 3,825 3,760 5.600% due 9/1/11 2,775 2,740 --------- 8,385 --------- See Notes to Financial Statements 15 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- SPECIALIZED FINANCE--0.8% Caterpillar Financial Services Corp. 6.200% due 9/30/13 $ 4,880 $ 4,880 CIT Group, Inc. 4.750% due 12/15/10 4,295 2,797 CME Group, Inc. 5.400% due 8/1/13 2,450 2,457 Textron Financial Corp. 5.125% due 11/1/10 3,865 3,893 --------- 14,027 --------- SPECIALIZED REITS--0.7% Host Hotels & Resorts LP 6.875% due 11/1/14 4,245 3,693 Nationwide Health Properties, Inc. 6.250% due 2/1/13 4,825 4,811 Trustreet Properties, Inc. 7.500% due 4/1/15 1,215 1,218 Ventas Realty LP/Ventas Capital Corp. 6.750% due 6/1/10 2,180 2,180 --------- 11,902 --------- SPECIALTY CHEMICALS--0.1% Lubrizol Corp. 4.625% due 10/1/09 875 871 --------- STEEL--0.1% Steel Dynamics, Inc. 7.375% due 11/1/12 1,630 1,500 --------- THRIFTS & MORTGAGE FINANCE--0.1% Countrywide Home Loans, Inc. 5.625% due 7/15/09 1,750 1,655 --------- TOBACCO--0.2% Philip Morris Capital Corp. 7.500% due 7/16/09 3,500 3,500 --------- WIRELESS TELECOMMUNICATION SERVICES--0.1% Nextel Communications, Inc. Series D 7.375% due 8/1/15 2,095 1,383 --------- - ---------------------------------------------------------------------------- TOTAL DOMESTIC CORPORATE BONDS (IDENTIFIED COST $449,046) 396,607 - ---------------------------------------------------------------------------- PAR VALUE VALUE ------------ --------- NON-AGENCY MORTGAGE-BACKED SECURITIES--15.7% American General Mortgage Loan Trust 144A 06-1, A2 5.750% due 12/25/35(b)(c) $ 8,392 $ 8,115 American Home Mortgage Assets 07-2, M4 3.737% due 3/25/47(c)(n)(o) 5,974 772 American Tower Trust 144A L 07-1A, C 5.615% due 4/15/37(b) 3,685 3,078 Asset Securitization Corp. 96-D3, A1C 7.400% due 10/13/26 154 154 Banc of America Commercial Mortgage, Inc. 05-6, AM 5.352% due 9/10/47(c) 1,600 1,351 Bear Stearns Commercial Mortgage Securities 144A 04-ESA, J 5.817% due 5/14/16(b) 8,510 8,578 Bear Stearns Structured Products, Inc. 144A(b) 4-15, A2 0.000% due 11/27/34 73 73 05-10 4.972% due 4/26/35(c) 2,466 1,609 05-20N, B 6.707% due 10/25/45(c) 5,000 3,375 05-20N, A 6.707% due 10/25/45(c) 1,151 1,046 06-2, 2A1 6.709% due 3/27/46(c) 1,268 1,079 Chase Mortgage Finance Corp. 04-S1, M 5.098% due 2/25/19(c) 1,860 1,568 04-S3, 3A1 6.000% due 3/25/34 3,600 3,283 06-A1, 4A1 6.032% due 9/25/36(c) 10,370 8,680 Citicorp Mortgage Securities, Inc. 06-7, 1A1 6.000% due 12/25/36 9,732 7,901 Citigroup Mortgage Loan Trust, Inc. 06-WF1, A2B 5.536% due 3/25/36(c) 529 522 06-FX1, A4 6.081% due 10/25/36(c) 7,000 5,386 See Notes to Financial Statements 16 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- Citigroup-Deutsche Bank Commercial Mortgage Trust 05-CD1, A4 5.400% due 7/15/44(c) $ 5,000 $ 4,587 Countrywide Home Loan Mortgage Pass-Through Trust 02-34, B2 5.750% due 1/25/33 1,595 1,450 02-36, B2 6.000% due 1/25/33 1,588 1,428 04-13, 1A1 5.500% due 8/25/34 5,033 5,032 Credit Suisse First Boston Mortgage Securities Corp. 05-12, 6A1 6.000% due 1/25/36 4,289 2,624 02-CKS4, B 5.333% due 11/15/36 5,000 4,774 Credit-Based Asset Servicing and Securitization LLC 05-CB6, A3 5.120% due 7/25/35(c) 4,318 4,080 Crown Castle Towers LLC 144A(b) 05-1A, AFX 4.643% due 6/15/35 8,000 7,926 05-1A, B 4.878% due 6/15/35 6,510 6,240 06-1A, C 5.470% due 11/15/36 5,000 4,540 First Horizon Asset Securities, Inc. 05-AR1, 2A1 4.998% due 4/25/35(c) 2,970 2,591 First Plus Home Loan Trust 97-3, M2 7.520% due 11/10/23 32 29 Global Signal Trust 144A 06-1, A2 5.450% due 2/15/36(b) 6,000 5,979 GMAC Commercial Mortgage Securities, Inc. 04-C3, A4 4.547% due 12/10/41 4,820 4,540 GS Mortgage Securities Corp. II 144A(b)(c) 07-EOP, G 3.007% due 3/6/20 5,840 5,227 07-EOP, H 3.137% due 3/6/20 1,850 1,656 PAR VALUE VALUE ------------ --------- GSR Mortgage Loan Trust 05-AR6, 3A1 4.560% due 9/25/35(c) $ 5,665 $ 4,779 Harborview Mortgage Loan Trust 05-9, B10 4.938% due 6/20/35(c)(o) 4,744 1,044 IndyMac Index Mortgage Loan Trust(c) 06-AR25, 3A1 6.331% due 9/25/36 4,698 3,147 07-AR2, B1 5.855% due 6/25/37(o) 4,735 852 JPMorgan Chase Commercial Mortgage Securities Corp. 01-CIBC, A3 6.260% due 3/15/33 467 467 05-LDP5, AM 5.387% due 12/15/44(c) 1,752 1,488 JPMorgan Mortgage Trust 05-S3, 2A2 5.500% due 1/25/21 1,062 985 06-A1, B1 5.414% due 2/25/36(c) 7,673 4,304 Lehman Brothers - UBS Commercial Mortgage Trust 06-C3, AM 5.712% due 3/15/39(c) 945 781 07-C2, A2 5.303% due 2/15/40 4,527 4,213 05-C3, AM 4.794% due 7/15/40 7,460 6,219 07-C6, A2 5.845% due 7/15/40 11,125 10,447 MASTR Alternative Net Interest Margin Trust 144A 05-CW1A, N1 6.750% due 12/26/35(b)(n)(p) 426 17 MASTR Resecuritization Trust 144A(b) 05-2 4.750% due 3/28/34 1,779 1,044 04-3 5.000% due 3/28/34 1,850 970 04-2 5.250% due 3/28/34 3,582 2,131 05-1 5.000% due 10/28/34 1,692 931 05-4CI, N2 6.429% due 4/26/45(c)(n)(p) 3,250 325 See Notes to Financial Statements 17 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- Merrill Lynch Mortgage Investors Trust 06-3, 2A1 6.073% due 10/25/36(c) $ 5,210 $ 4,750 Merrill Lynch Mortgage Trust 04-KEY2, A3 4.615% due 8/12/39 4,000 3,752 Merrill Lynch-Countrywide Commercial Mortgage Trust 06-4, A3 5.172% due 12/12/49(c) 9,500 8,156 Morgan Stanley Mortgage Loan Trust 05-5AR, 4A1 5.528% due 9/25/35(c) 2,167 1,580 PNC Mortgage Acceptance Corp. 00-C2, A2 7.300% due 10/12/33(c) 213 216 Prudential Securities Secured Financing Corp. 144A 99-NRF1, F 6.074% due 11/1/31(b) 5,000 4,990 Residential Funding Mortgage Securities I, Inc. 05-SA1, 2A 4.840% due 3/25/35(c) 2,723 2,391 06-S4, A2 6.000% due 4/25/36 7,411 6,674 SBA Commercial Mortgage Backed Securities Trust 144A(b) 06-1A, A 5.314% due 11/15/36 7,450 7,235 06-1A, B 5.451% due 11/15/36 2,875 2,675 Timberstar Trust 144A 06-1A, A 5.668% due 10/15/36(b) 2,240 2,070 Wachovia Bank Commercial Mortgage Trust 04-C12, A2 5.001% due 7/15/41 12,400 12,182 05-C22, AM 5.490% due 12/15/44(c) 720 613 Wachovia Mortgage Loan Trust LLC 06-A, B1 5.412% due 5/20/36(c) 3,434 1,869 Washington Mutual Mortgage Pass Through Certificates(c) 06-AR16, 1A1 5.609% due 12/25/36 6,355 4,536 00-1, M3 5.457% due 1/25/40 85 50 PAR VALUE VALUE ------------ --------- Wells Fargo Mortgage Backed Securities Trust 04-R, 2A1 4.369% due 9/25/34(c) $ 4,542 $ 3,827 04-EE, 2A3 4.109% due 12/25/34(c) 125 115 05-AR16, 6A3 5.001% due 10/25/35(c) 7,540 6,723 05-14, 2A1 5.500% due 12/25/35 10,644 9,550 06-AR2, B1 5.121% due 3/25/36(c) 13,934 7,762 07-AR3, A4 6.058% due 4/25/37(c) 14,479 11,068 - ---------------------------------------------------------------------------- TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $326,860) 266,201 - ---------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES--8.7% ARGENTINA--0.2% Republic of Argentina Series GDP 0.000% due 12/15/35(c) 44,890 3,636 --------- AUSTRALIA--0.2% Commonwealth of Australia Series 909 7.500% due 9/15/09 4,780(f) 3,858 --------- BRAZIL--1.4% Federative Republic of Brazil 10.000% due 8/7/11 9,000 10,372 7.875% due 3/7/15 6,650 7,122 12.500% due 1/5/16 3,414(g) 1,873 12.500% due 1/5/22 8,000(g) 4,357 --------- 23,724 --------- CANADA--0.3% Commonwealth of Canada 4.250% due 9/1/09 4,635(h) 4,415 --------- COLOMBIA--0.4% Republic of Colombia 9.750% due 4/23/09 3,500 3,622 12.000% due 10/22/15 7,975,000(i) 3,833 --------- 7,455 --------- See Notes to Financial Statements 18 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- COSTA RICA--0.2% Republic of Costa Rica 144A 6.548% due 3/20/14(b) $ 4,000 $ 4,080 --------- EGYPT--0.6% Arab Republic of Egypt Series 364 0.000% due 11/4/08 50,825(j) 9,203 --------- INDONESIA--0.3% Republic of Indonesia Series FR-23 11.000% due 12/15/12 44,100,000(k) 4,398 --------- NORWAY--0.2% Kingdom of Norway 5.500% due 5/15/09 22,135(l) 3,755 --------- PHILIPPINES--0.9% Republic of Philippines 9.875% due 3/16/10 8,610 9,353 8.375% due 2/15/11 6,135 6,595 --------- 15,948 --------- RUSSIA--0.0% Russian Federation RegS 8.250% due 3/31/10(e) 540 558 --------- TRINIDAD AND TOBAGO--0.2% Republic of Trinidad and Tobago RegS 9.875% due 10/1/09(e) 3,000 3,135 --------- TURKEY--0.9% Republic of Turkey 11.750% due 6/15/10 7,570 8,384 11.500% due 1/23/12 5,680 6,475 --------- 14,859 --------- PAR VALUE VALUE ------------ --------- VENEZUELA--2.9% Republic of Venezuela RegS 5.375% due 8/7/10(e) $ 22,927 $ 20,405 8.500% due 10/8/14 16,225 12,818 5.750% due 2/26/16 21,035 13,778 9.250% due 9/15/27 2,000 1,497 --------- 48,498 --------- - ---------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $156,098) 147,522 - ---------------------------------------------------------------------------- FOREIGN CORPORATE BONDS(d)--9.8% AUSTRALIA--0.8% National Australia Bank Ltd. 144A 5.350% due 6/12/13(b) 9,715 9,335 Rio Tinto Finance USA Ltd. 5.875% due 7/15/13 4,865 4,769 --------- 14,104 --------- CANADA--0.8% Barrick Gold Financeco LLC 6.125% due 9/15/13 4,500 4,422 Catalyst Paper Corp. Series D 8.625% due 6/15/11 4,000 3,160 7.375% due 3/1/14 1,055 723 Petro-Canada 6.050% due 5/15/18 1,200 1,047 Rogers Wireless Communications, Inc. 8.000% due 12/15/12 700 702 Thomson Corp. (The) 4.250% due 8/15/09 1,000 998 Videotron Ltee 6.375% due 12/15/15 3,500 3,098 --------- 14,150 --------- See Notes to Financial Statements 19 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- CHILE--0.3% Celulosa Arauco y Constitucion SA 7.750% due 9/13/11 $ 4,780 $ 5,032 --------- CHINA--0.1% NXP BV/NXP Funding LLC 5.541% due 10/15/13(c) 3,040 2,018 --------- CYPRUS--0.3% Alfa MTN Invest Ltd. 144A 9.250% due 6/24/13(b) 4,940 4,878 --------- FRANCE--0.2% Compagnie Generale de Geophysique-Veritas 7.750% due 5/15/17 3,600 3,438 --------- GERMANY--0.2% Deutsche Bank AG 4.875% due 5/20/13 1,835 1,753 Deutsche Telekom International Finance BV 8.500% due 6/15/10 1,000 1,038 --------- 2,791 --------- HONG KONG--0.1% Hutchison Whampoa International Ltd. 144A 5.450% due 11/24/10(b) 2,000 1,989 --------- INDIA--0.3% ICICI Bank Ltd. 144A 5.750% due 11/16/10(b) 4,775 4,607 --------- INDONESIA--0.1% Majapahit Holding BV 144A 7.250% due 6/28/17(b) 2,250 1,991 --------- ISRAEL--0.1% Israel Electric Corp. Ltd. 144A 7.250% due 1/15/19(b) 2,285 2,289 --------- PAR VALUE VALUE ------------ --------- KAZAKHSTAN--0.2% Kazkommerts International BV RegS 8.000% due 11/3/15(e) $ 1,000 $ 575 KazMunaiGaz Finance Sub BV 144A 8.375% due 7/2/13(b) 3,900 3,354 --------- 3,929 --------- LUXEMBOURG--0.3% EvrazSecurities SA 10.875% due 8/3/09 4,000 3,894 OJSC Vimpel Communications (VIP Finance Ireland Ltd.) 144A 8.375% due 4/30/13(b) 1,400 1,114 --------- 5,008 --------- MALAYSIA--0.2% Malaysia International Shipping Corporation Capital Ltd. 144A 5.000% due 7/1/09(b) 2,800 2,805 --------- MEXICO--0.2% Fideicomiso Petacalco Trust 144A 10.160% due 12/23/09(b) 2,172 2,215 Pemex Project Funding Master Trust 144A 4.119% due 6/15/10(b)(c) 1,500 1,476 --------- 3,691 --------- POLAND--0.2% Telekomunikacja Polska SA Finance BV 144A 7.750% due 12/10/08(b) 2,700 2,709 --------- QATAR--0.1% Ras Laffan Liquefied Natural Gas Co., Ltd. 144A 3.437% due 9/15/09(b) 984 986 --------- See Notes to Financial Statements 20 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- RUSSIA--2.3% European Bank for Reconstruction & Development 6.000% due 2/14/12 81,000(m) $ 2,926 Evraz Group SA 144A 8.875% due 4/24/13(b) $ 2,455 1,878 Gaz Capital SA 144A 7.343% due 4/11/13(b) 2,000 1,810 Gazprom International SA 144A 7.201% due 2/1/20(b) 2,415 2,186 Gazprom OAO (Gaz Capital SA) 144A(b) 6.212% due 11/22/16 10,405 8,228 6.510% due 3/7/22 3,235 2,329 International Bank For Reconstruction & Development 5.750% due 6/25/10 211,850(m) 7,961 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670% due 3/5/14(b) 5,715 4,664 Russian Agricultural Bank OJSC (RSHB Capital SA) 144A 6.299% due 5/15/17(b) 2,905 2,074 TNK-BP Finance SA 144A 7.500% due 3/13/13(b) 1,750 1,391 TNK-BP Finance SA RegS 6.125% due 3/20/12(e) 4,210 3,332 --------- 38,779 --------- SOUTH AFRICA--0.2% Sappi Pappier Holding AG 144A 6.750% due 6/15/12(b) 5,000 3,953 --------- SOUTH KOREA--0.3% Export-Import Bank of Korea 4.500% due 8/12/09 1,355 1,346 Korea Development Bank 3.875% due 3/2/09 3,000 2,980 5.300% due 1/17/13 1,113 1,106 --------- 5,432 --------- TURKEY--0.1% Bosphorus Financial Services Ltd. 144A 4.604% due 2/15/12(b)(c) 1,750 1,689 --------- PAR VALUE VALUE ------------ --------- UKRAINE--0.1% NAK Naftogaz Ukrainy (Standard Bank London Holdings plc) 8.125% due 9/30/09 $ 2,900 $ 2,431 --------- UNITED ARAB EMIRATES--0.4% Abu Dhabi National Energy Co. 144A 5.620% due 10/25/12(b) 6,730 6,663 --------- UNITED KINGDOM--0.4% British Telecommunications plc 8.625% due 12/15/10 1,500 1,568 HBOs plc 144A 6.750% due 5/21/18(b) 685 574 Petroplus Finance Ltd. 144A 6.750% due 5/1/14(b) 2,715 2,308 Vedanta Resources plc 144A 8.750% due 1/15/14(b) 3,400 2,924 --------- 7,374 --------- UNITED STATES--1.4% ArcelorMittal 144A 5.375% due 6/1/13(b) 4,825 4,563 Canadian National Resources Ltd. 4.900% due 12/1/14 2,916 2,551 Credit Suisse New York 5.000% due 5/15/13 4,335 4,017 CRH America, Inc. 5.625% due 9/30/11 3,500 3,411 Freeport-McMoRan Copper & Gold, Inc. 6.875% due 2/1/14 2,170 2,148 Nova Chemicals Corp. 5.953% due 11/15/13(c) 7,659 6,395 --------- 23,085 --------- VENEZUELA--0.1% Corporacion Andina de Fomento 5.200% due 5/21/13 1,000 981 --------- - ---------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $184,968) 166,802 - ---------------------------------------------------------------------------- See Notes to Financial Statements 21 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- DOMESTIC CONVERTIBLE BONDS--0.1% PHARMACEUTICALS--0.1% Par Pharmaceutical Cos., Inc. 2.875% due 9/30/10 $ 1,195 $ 1,016 --------- - ---------------------------------------------------------------------------- TOTAL DOMESTIC CONVERTIBLE BONDS (IDENTIFIED COST $1,089) 1,016 - ---------------------------------------------------------------------------- DOMESTIC LOAN AGREEMENTS(c)--10.5% ADVERTISING--0.1% Lamar Media Corp. Tranche F 4.000% due 3/31/14 925 869 --------- AEROSPACE & DEFENSE--0.1% TransDigm Inc. Tranche 4.801% due 6/23/13 1,882 1,757 --------- APPAREL RETAIL--0.1% HBI Branded Apparel Ltd., Inc. Tranche B 6.545% due 3/5/14 1,885 1,739 --------- APPAREL, ACCESSORIES & LUXURY GOODS--0.1% Hanesbrands, Inc. Tranche B 4.548% due 9/5/13 1,268 1,156 Totes Isotoner Corp. Tranche 6.500% due 1/16/13 471 389 --------- 1,545 --------- APPLICATION SOFTWARE--0.1% Getty Tranche B 8.053% due 2/15/13 1,716 1,669 --------- AUTOMOBILE MANUFACTURERS--0.2% Ford Motor Co. Tranche B 5.470% due 12/16/13 4,573 3,053 General Motors Corp. Tranche B 5.163% due 11/29/13 1,688 1,098 --------- 4,151 --------- BROADCASTING--0.7% Charter Communications Operating LLC Tranche 4.735% due 3/6/14 4,904 3,921 --------- PAR VALUE VALUE ------------ --------- BROADCASTING--CONTINUED CSC Holdings, Inc. Tranche A1 4.340% due 2/24/12 $ 595 $ 539 DIRECTV Holdings LLC Tranche 3.963% due 4/13/13 552 519 Intelstat Corp. Tranche B 5.184% due 1/3/14 968 871 Tranche BB 5.184% due 1/3/14 968 871 Tranche X2 5.184% due 1/3/14 968 871 MCC Georgia LLC Tranche E 6.500% due 1/3/16 550 539 Mediacom LLC Tranche B 4.215% due 1/31/15 4,359 3,907 --------- 12,038 --------- CASINOS & GAMING--0.0% Harrahs Operating Co., Inc. Tranche B3 5.800% due 1/28/15 418 347 --------- COMMODITY CHEMICALS--0.3% Celanese Holdings LLC Tranche B 4.283% due 3/30/14 5,197 4,788 --------- COMMUNICATIONS EQUIPMENT--0.3% CommScope, Inc. Tranche B 5.132% due 12/27/14 5,997 5,636 --------- CONSUMER FINANCE--0.1% Hertz Corp. Letter of Credit 4.551% due 12/21/12 285 255 Hertz Corp. Tranche B 4.210% due 12/21/12 1,350 1,203 --------- 1,458 --------- DATA PROCESSING & OUTSOURCED SERVICES--0.8% First Data Corp. Tranche B 5.438% due 9/24/14 1,990 1,713 Tranche B 5.438% due 9/24/14 495 429 Tranche B3 5.551% due 9/24/14 6,361 5,468 See Notes to Financial Statements 22 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- DATA PROCESSING & OUTSOURCED SERVICES--CONTINUED Reynolds & Reynolds Co. (The) Tranche FL 4.801% due 10/24/12 $ 5,727 $ 5,148 --------- 12,758 --------- DEPARTMENT STORES--0.4% Neiman-Marcus Group, Inc. (The) Tranche B 7.090% due 4/6/13 7,028 6,186 --------- DISTRIBUTORS--0.1% Building Materials Holding Corp. Tranche C 7.400% due 11/10/11 3,759 2,449 --------- DIVERSIFIED REAL ESTATE ACTIVITIES--0.0% Tropicana Entertainment LLC Tranche B 8.250% due 1/3/12 450 316 --------- DIVERSIFIED SUPPORT SERVICES--0.1% ARAMARK Corp. Tranche B1 4.676% due 1/26/14 1,184 1,038 Letter of Credit 4.676% due 1/26/14 75 66 --------- 1,104 --------- ELECTRIC UTILITIES--0.3% Texas Competitive Electric Holdings Co. LLC Tranche B3 6.145% due 10/10/14 3,347 2,837 Tranche B2 6.145% due 10/10/14 2,279 1,925 --------- 4,762 --------- ELECTRICAL COMPONENTS & EQUIPMENT--0.1% Baldor Electric Co. Tranche 4.750% due 1/31/14 2,296 2,165 --------- ENVIRONMENTAL & FACILITIES SERVICES--0.3% Allied Waste North America, Inc. Letter of Credit A 4.098% due 3/28/14 1,522 1,479 ENVIRONMENTAL & FACILITIES SERVICES--CONTINUED Allied Waste North America, Inc. Tranche B 3.965% due 3/28/14 $ 2,130 $ 2,069 Duratek, Inc. Tranche B1 5.470% due 6/30/16 339 312 EnergySolutions, Inc. Tranche B 5.470% due 6/7/13 706 650 EnviroCare Tranche B 4.710% due 6/30/16 45 41 --------- 4,551 --------- FERTILIZERS & AGRICULTURAL CHEMICALS--0.0% Mosaic Co. (The) Tranche B 4.438% due 12/1/13 160 153 --------- HEALTH CARE FACILITIES--0.7% HCA, Inc. Tranche A 4.696% due 11/18/12 2,201 1,953 Tranche B 4.946% due 11/18/13 2,855 2,542 Health Management Associates, Inc. Tranche B 4.551% due 2/28/14 1,179 1,005 Healthsouth Corp. Tranche 5.290% due 3/10/13 3,301 3,018 LifePoint Hospitals, Inc. Tranche B 4.274% due 4/15/12 2,778 2,524 --------- 11,042 --------- HEALTH CARE SERVICES--0.5% DaVita, Inc. Tranche B 4.148% due 10/5/12 4,157 3,764 Psychiatric Solutions, Inc. Tranche 4.273% due 7/1/12 4,522 4,146 --------- 7,910 --------- HOUSEHOLD PRODUCTS--0.1% Yankee Candle Co., Inc. Tranche B 4.635% due 2/6/14 2,672 2,171 --------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.5% Mirant North America LLC Tranche B 4.213% due 1/3/13 758 706 See Notes to Financial Statements 23 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--CONTINUED NRG Energy, Inc. Letter of Credit 4.301% due 2/1/13 $ 2,380 $ 2,081 Tranche B 4.301% due 2/1/13 6,794 5,975 --------- 8,762 --------- INTEGRATED TELECOMMUNICATION SERVICES--0.6% Level 3 Communications, Inc. Tranche B 4.872% due 3/13/14 667 571 NTELOS, Inc. Tranche B1 5.270% due 8/24/11 5,538 5,258 Time Warner Telecom Holdings, Inc. Tranche B 4.470% due 1/7/13 5,168 4,910 --------- 10,739 --------- LEISURE FACILITIES--0.2% AMF Bowling Worldwide, Inc. Tranche B 5.377% due 5/17/13 1,994 1,605 PTI Group, Inc. Tranche 9.250% due 2/28/13 1,435 1,306 --------- 2,911 --------- METAL & GLASS CONTAINERS--0.3% Anchor Glass Container Corp. Tranche 7.750% due 6/1/13 4,585 4,459 --------- OIL & GAS EQUIPMENT & SERVICES--0.2% Helix Energy Solutions Group, Inc. Tranche 4.626% due 7/1/13 3,357 3,116 --------- OIL & GAS EXPLORATION & PRODUCTION--0.2% ATP Oil & Gas Corp. Tranche 1 8.500% due 7/15/14 2,945 2,680 Tranche B2 8.500% due 1/15/11 1,687 1,535 --------- 4,215 --------- PAR VALUE VALUE ------------ --------- PACKAGED FOODS & MEATS--0.1% Wrigley (WM) Jr. Co. Tranche B 6.634% due 10/6/14 $ 2,123 $ 2,090 --------- PAPER PRODUCTS--0.9% Boise Paper Holdings LLC Tranche B 7.500% due 2/22/14 4,279 4,136 Tranche 11.000% due 2/22/15 2,790 2,539 Georgia-Pacific Corp. Tranche B 4.486% due 12/20/10 1,340 1,250 Tranche B1 4.465% due 12/20/12 4,728 4,150 NewPage Corp. Tranche B 7.156% due 12/20/14 4,214 3,873 --------- 15,948 --------- PUBLISHING--0.2% Idearc, Inc. Tranche B 4.635% due 11/17/14 3,703 2,215 Tribune Co. Tranche B 5.786% due 6/4/14 2,331 1,218 --------- 3,433 --------- SEMICONDUCTORS--0.3% Freescale Semiconductor, Inc. Tranche 4.214% due 12/1/13 7,052 5,792 --------- SPECIALIZED FINANCE--0.4% Sungard Data Systems, Inc. Tranche B 4.553% due 2/28/14 7,858 6,873 --------- SPECIALTY CHEMICALS--0.3% Compass Minerals Group, Inc. Tranche B 4.755% due 12/22/12 879 844 Huntsman International LLC Tranche B 4.213% due 8/16/12 2,489 2,207 See Notes to Financial Statements 24 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) PAR VALUE VALUE ------------ --------- SPECIALTY CHEMICALS--CONTINUED JohnsonDiversey, Inc. Tranche 4.791% due 12/16/10 $ 54 $ 49 Tranche B 4.791% due 12/16/11 1,327 1,221 ---------- 4,321 ---------- WIRELESS TELECOMMUNICATION SERVICES--0.8% ALLTEL Communications, Inc. Tranche B2 5.564% due 5/15/15 1,587 1,539 Tranche B3 5.208% due 5/15/15 4,811 4,712 Cricket Communications, Inc. Tranche B 6.500% due 6/16/13 3,519 3,378 MetroPCS Wireless, Inc. Tranche B 4.906% due 2/20/14 4,713 4,236 ---------- 13,865 ---------- - ---------------------------------------------------------------------------- TOTAL DOMESTIC LOAN AGREEMENTS (IDENTIFIED COST $199,973) 178,088 - ---------------------------------------------------------------------------- FOREIGN LOAN AGREEMENTS(c)(d)--0.4% GERMANY--0.2% Fresenius Medical Care AG & Co. KGaA Tranche B 4.136% due 3/31/13 3,643 3,415 UNITED KINGDOM--0.1% Ineos Group Holdings plc Tranche B2 4.885% due 12/16/13 1,371 1,142 Tranche C2 5.385% due 12/16/14 1,371 1,154 ---------- 2,296 ---------- PAR VALUE VALUE ------------ --------- UNITED STATES--0.1% Yell Group plc Tranche B1 4.463% due 10/27/12 $ 1,925 $ 1,655 ---------- - ---------------------------------------------------------------------------- TOTAL FOREIGN LOAN AGREEMENTS (IDENTIFIED COST $8,443) 7,366 - ---------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--99.1% (IDENTIFIED COST $1,872,651) 1,682,401 - ---------------------------------------------------------------------------- SHARES -------- SHORT-TERM INVESTMENTS--0.7% MONEY MARKET MUTUAL FUNDS--0.7% State Street Institutional Liquid Reserves Fund (seven-day effective yield 2.456%) 11,062,071 11,062 - ---------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $11,062) 11,062 - ---------------------------------------------------------------------------- TOTAL INVESTMENTS--99.8% (IDENTIFIED COST $1,883,713) 1,693,463(a) Other assets and liabilities, net--0.2% 2,823 ---------- NET ASSETS--100.0% $1,696,286 ========== See Footnote Legend on page 26. See Notes to Financial Statements 25 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) At September 30, 2008, the Fund had entered into forward currency contracts as follows (reported in thousands): In Unrealized Contracts Exchange Settlement Appreciation to Receive for Date Value (Depreciation) - -------------- ------------ ---------- ---------- --------------- JPY 1,417,455 USD 13,000 11/14/2008 $13,419 $419 ==== FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $2,505 and gross depreciation of $193,349 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $1,884,307. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2008, these securities amounted to a value of $234,656 or 13.8% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) A security is considered to be foreign if the security is issued in a foreign country. The country of risk, noted in the header or parenthetically, is determined based on criteria described in Note 2G, "Foreign security country determination" in the Notes to Financial Statements. (e) 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. (f) Par value represents Australian Dollar (reported in thousands). (g) Par value represents Brazilian Real (reported in thousands). (h) Par value represents Canadian Dollar (reported in thousands). (i) Par value represents Colombian Peso (reported in thousands). (j) Par value represents Egyptian Pound (reported in thousands). (k) Par value represents Indonesian Rupiah (reported in thousands). (l) Par value represents Norwegian Krone (reported in thousands). (m) Par value represents Russian Ruble (reported in thousands). (n) Security in default. (o) Illiquid security. (p) Illiquid and restricted security. At September 30, 2008, these securities amounted to a value of $354 or 0.0% of net assets. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. See Notes to Financial Statements 26 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2008
(Amounts reported in thousands except per share amounts) ASSETS Investment securities at value(1) ................................................... $1,693,463 Cash ................................................................................ 1,609 Receivables Investment securities sold ....................................................... 7,811 Fund shares sold ................................................................. 5,556 Interest ......................................................................... 18,990 Unrealized appreciation on forward currency contracts ............................... 419 Prepaid expenses .................................................................... 130 Other assets ........................................................................ 89 ---------- Total assets ................................................................... 1,728,067 ---------- LIABILITIES Payables Fund shares repurchased .......................................................... 12,689 Investment securities purchased .................................................. 14,614 Dividend distributions ........................................................... 2,269 Investment advisory fees ......................................................... 764 Distribution and service fees .................................................... 493 Administration fees .............................................................. 126 Transfer agent fees and expenses ................................................. 482 Trustees' fees and expenses ...................................................... 13 Professional fees ................................................................ 51 Trustee deferred compensation plan ............................................... 89 Other accrued expenses ........................................................... 191 ---------- Total liabilities .............................................................. 31,781 ---------- NET ASSETS .......................................................................... $1,696,286 ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................................... $1,914,831 Accumulated undistributed net investment income (loss) .............................. 5,170 Accumulated undistributed net realized gain (loss) .................................. (33,596) Net unrealized appreciation (depreciation) .......................................... (190,119) ---------- NET ASSETS .......................................................................... $1,696,286 ========== CLASS A Net asset value (Net assets/shares outstanding) per share ........................... $4.21 Offering price per share $4.21/(1-2.25%) ............................................ $4.31 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 327,306 Net Assets .......................................................................... $1,377,371 CLASS B Net asset value (Net assets/shares outstanding) and offering price per share ........ $ 4.19 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 3,799 Net Assets .......................................................................... $ 15,919 CLASS C Net asset value (Net assets/shares outstanding) and offering price per share ........ $4.24 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 38,130 Net Assets .......................................................................... $ 161,770 CLASS T Net asset value (Net assets/shares outstanding) and offering price per share ........ $4.23 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 33,327 Net Assets .......................................................................... $ 141,131 CLASS I Net asset value (Net assets/shares outstanding) and offering price per share ........ $4.21 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 23 Net Assets .......................................................................... $ 95 (1) Investment in securities at cost ............................................... $1,883,713
See Notes to Financial Statements 27 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2008
($ reported in thousands) INVESTMENT INCOME Interest ............................................................................ $ 120,347 Dividends ........................................................................... 296 Foreign taxes withheld .............................................................. (222) --------- Total investment income ........................................................ 120,421 --------- EXPENSES Investment advisory fees ............................................................ 9,600 Service fees, Class A ............................................................... 3,692 Distribution and service fees, Class B .............................................. 144 Distribution and service fees, Class C .............................................. 851 Distribution and service fees, Class T .............................................. 1,538 Administration fees ................................................................. 1,534 Transfer agent fees and expenses .................................................... 2,784 Printing fees and expenses .......................................................... 302 Custodian fees ...................................................................... 288 Trustees' fees and expenses ......................................................... 142 Registration fees ................................................................... 103 Professional fees ................................................................... 85 Miscellaneous expenses .............................................................. 266 --------- Total expenses ................................................................. 21,329 Custodian fees paid indirectly ...................................................... (56) --------- Net expenses ................................................................... 21,273 --------- NET INVESTMENT INCOME (LOSS) ........................................................ 99,148 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............................................. (20,881) Net realized gain (loss) on foreign currency transactions ........................... 1,815 Net change in unrealized appreciation (depreciation) on investments ................. (174,594) Net change in unrealized appreciation (depreciation) on foreign currency translations ............................................................ 460 --------- NET GAIN (LOSS) ON INVESTMENTS ...................................................... (193,200) --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................... $ (94,052) =========
See Notes to Financial Statements 28 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF CHANGES IN NET ASSETS
($ reported in thousands) 10/1/07 - 11/1/06 - 11/1/05 - 9/30/08 9/30/07 10/31/06 ---------- ---------- ---------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .......................... $ 99,148 $ 71,116 $ 66,521 Net realized gain (loss) .............................. (19,066) 4,156 (9,710) Net change in unrealized appreciation (depreciation) ...................................... (174,134) (17,594) 14,644 ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... (94,052) 57,678 71,455 ---------- ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................ (85,143) (57,792) (43,783) Net investment income, Class B ........................ (1,010) (1,076) (1,171) Net investment income, Class C ........................ (9,300) (8,376) (6,355) Net investment income, Class T ........................ (7,637) (6,070) (10,060) Net investment income, Class I ........................ (2) -- -- ---------- ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ..................................... (103,092) (73,314) (61,369) ---------- ---------- ---------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ............................................. 102,157 385,342 236,133 Change in net assets from share transactions, Class B ............................................. (3,603) (6,128) (5,366) Change in net assets from share transactions, Class C ............................................. 996 (24,573) (92,138) Change in net assets from share transactions, Class T ............................................. 2,204 3,465 (43,654) Change in net assets from share transactions, Class I ............................................. 102 -- -- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .................................. 101,856 358,106 94,975 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ................. (95,288) 342,470 105,061 NET ASSETS Beginning of period ................................... 1,791,574 1,449,104 1,344,043 ---------- ---------- ---------- END OF PERIOD ......................................... $1,696,286 $1,791,574 $1,449,104 ========== ========== ========== Accumulated undistributed net investment income (loss) at end of period .................................... $ 5,170 $ 1,620 $ 1,251
See Notes to Financial Statements 29 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED RETURN OF OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS CAPITAL - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/07-9/30/08 $4.70 $0.25(2) $(0.48) $(0.23) $(0.26) $ -- $ -- 11/1/06-9/30/07 4.74 0.21(2) (0.03) 0.18 (0.22) -- -- 11/1/05-10/31/06 4.70 0.22(2) 0.03 0.25 (0.21) -- -- 11/1/04-10/31/05 4.83 0.20(2) (0.12) 0.08 (0.19) --(7) (0.02) 11/1/03-10/31/04 4.78 0.21 0.06 0.27 (0.22) -- -- 11/1/02-10/31/03(5) 4.56 0.22 0.21 0.43 (0.21) -- -- CLASS B 10/1/07-9/30/08 $4.68 $0.23(2) $(0.48) $(0.25) $(0.24) $ -- $ -- 11/1/06-9/30/07 4.72 0.19(2) (0.03) 0.16 (0.20) -- -- 11/1/05-10/31/06 4.68 0.20(2) 0.02 0.22 (0.18) -- -- 11/1/04-10/31/05 4.82 0.18(2) (0.14) 0.04 (0.16) --(7) (0.02) 11/1/03-10/31/04 4.77 0.19 0.05 0.24 (0.19) -- -- 11/1/02-10/31/03(6) 4.55 0.20 0.21 0.41 (0.19) -- --
(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) In accordance with changes in generally accepted accounting principles, the Fund reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification for Class A shares had no impact on net investment income or net realized and unrealized gain (loss) per share for the period ended October 31, 2003. The net investment income ratio decreased by 0.06% for the period ended October 31, 2003. (6) In accordance with changes in generally accepted accounting principles, the Fund reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification for Class B shares was to reduce net investment income and to increase net realized and unrealized gain (loss) per share by $0.00 for the period ended October 31, 2003. The net investment income ratio decreased by 0.06% for the period ended October 31, 2003. (7) Amount is less than $0.005. See Notes to Financial Statements 30
RATIO OF NET NET NET CHANGE ASSET ASSETS, RATIO OF INVESTMENT IN NET VALUE, END OF EXPENSES TO INCOME (LOSS) PORTFOLIO TOTAL ASSET END OF TOTAL PERIOD AVERAGE TO AVERAGE NET TURNOVER DISTRIBUTIONS VALUE PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS ASSETS RATE - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/07-9/30/08 $(0.26) $(0.49) $4.21 (5.07)% $1,377,371 1.08% 5.54% 83% 11/1/06-9/30/07 (0.22) (0.04) 4.70 3.84(4) 1,435,415 1.11(3) 4.93(3) 57(4) 11/1/05-10/31/06 (0.21) 0.04 4.74 5.37 1,062,479 1.04 4.75 93 11/1/04-10/31/05 (0.21) (0.13) 4.70 1.64 819,283 1.02 4.24 83 11/1/03-10/31/04 (0.22) 0.05 4.83 5.69 372,463 1.03 4.17 95 11/1/02-10/31/03(5) (0.21) 0.22 4.78 9.68 229,020 1.08 4.28 135 CLASS B 10/1/07-9/30/08 $(0.24) $(0.49) $4.19 (5.57)% $ 15,919 1.57% 5.03% 83% 11/1/06-9/30/07 (0.20) (0.04) 4.68 3.38(4) 21,487 1.61(3) 4.40(3) 57(4) 11/1/05-10/31/06 (0.18) 0.04 4.72 4.64 27,845 1.54 4.24 93 11/1/04-10/31/05 (0.18) (0.14) 4.68 1.12 33,003 1.51 3.72 83 11/1/03-10/31/04 (0.19) 0.05 4.82 5.16 33,325 1.52 3.68 95 11/1/02-10/31/03(6) (0.19) 0.22 4.77 9.17 30,457 1.58 3.88 135
See Notes to Financial Statements 31 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (CONTINUED)
NET NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED RETURN OF OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS CAPITAL - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C 10/1/07-9/30/08 $4.73 $0.24(2) $(0.48) $(0.24) $(0.25) $ -- $ -- 11/1/06-9/30/07 4.77 0.20(2) (0.03) 0.17 (0.21) -- -- 11/1/05-10/31/06 4.73 0.21(2) 0.02 0.23 (0.19) -- -- 11/1/04-10/31/05 4.87 0.19(2) (0.13) 0.06 (0.18) --(7) (0.02) 11/1/03-10/31/04 4.81 0.21 0.05 0.26 (0.20) -- -- 11/1/02-10/31/03(5) 4.58 0.21 0.22 0.43 (0.20) -- -- CLASS T 10/1/07-9/30/08 $4.72 $0.22(2) $(0.48) $(0.26) $(0.23) $ -- $ -- 11/1/06-9/30/07 4.76 0.18(2) (0.03) 0.15 (0.19) -- -- 11/1/05-10/31/06 4.73 0.19(2) 0.01 0.20 (0.17) -- -- 11/1/04-10/31/05 4.86 0.17(2) (0.13) 0.04 (0.15) --(7) (0.02) 11/1/03-10/31/04 4.80 0.18 0.06 0.24 (0.18) -- -- 6/2/03 (inception) -10/31/03(6) 4.82 0.07 (0.02) 0.05 (0.07) -- -- CLASS I 6/6/08 (inception) -9/30/08 $4.53 $0.08(2) $(0.31) $(0.23) $(0.09) $ -- $ --
(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) In accordance with changes in generally accepted accounting principles, the Fund reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification for Class C shares was to reduce net investment income and to increase net realized and unrealized gain (loss) per share by $0.00 for the period ended October 31, 2003. The net investment income ratio decreased by 0.01% for the period ended October 31, 2003. (6) In accordance with changes in generally accepted accounting principles, the Fund reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification for Class T shares was to reduce net investment income and to increase net realized and unrealized gain (loss) per share by $0.00 for the period ending October 31, 2003. The net investment income ratio for the period ending October 31, 2003 decreased by 0.15%. (7) Amount is less than $0.005. See Notes to Financial Statements 32
RATIO OF NET NET NET CHANGE ASSET ASSETS, RATIO OF INVESTMENT IN NET VALUE, END OF EXPENSES TO INCOME TO PORTFOLIO TOTAL ASSET END OF TOTAL PERIOD AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS VALUE PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS ASSETS RATE - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C 10/1/07-9/30/08 $(0.25) $(0.49) $4.24 (5.28)% $ 161,770 1.33% 5.28% 83% 11/1/06-9/30/07 (0.21) (0.04) 4.73 3.57(4) 179,222 1.36(3) 4.66(3) 57(4) 11/1/05-10/31/06 (0.19) 0.04 4.77 5.07 205,385 1.28 4.48 93 11/1/04-10/31/05 (0.20) (0.14) 4.73 1.15 295,926 1.26 3.98 83 11/1/03-10/31/04 (0.20) 0.06 4.87 5.59 238,854 1.27 3.92 95 11/1/02-10/31/03(5) (0.20) 0.23 4.81 9.60 163,436 1.33 4.02 135 CLASS T 10/1/07-9/30/08 $(0.23) $(0.49) $4.23 (5.78)% $ 141,131 1.83% 4.79% 83% 11/1/06-9/30/07 (0.19) (0.04) 4.72 3.11(4) 155,450 1.86(3) 4.17(3) 57(4) 11/1/05-10/31/06 (0.17) 0.03 4.76 4.34 153,395 1.79 3.98 93 11/1/04-10/31/05 (0.17) (0.13) 4.73 0.84 195,830 1.76 3.48 83 11/1/03-10/31/04 (0.18) 0.06 4.86 5.05 120,145 1.78 3.40 95 6/2/03 (inception) -10/31/03(6) (0.07) (0.02) 4.80 1.10 26,646 1.90 3.06 135 CLASS I 6/6/08 (inception) -9/30/08 $(0.09) $(0.32) $4.21 (5.11)%(4) $ 95 0.89%(3) 5.85%(3) 83%(4)
See Notes to Financial Statements 33 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2008 1. ORGANIZATION Effective October 1, 2008, the Phoenix Funds became Virtus Mutual Funds, and all of the Funds were renamed to reflect the new Virtus name. On October 20, 2008, the Trusts' names were also updated to reflect the new name. Virtus Opportunities Trust, formerly the Phoenix Opportunities Trust (the "Trust"), is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. As of the date of this report, eighteen funds are offered for sale, of which the Multi-Sector Short Term Bond Fund (the "Fund") is reported in this annual report. The Fund's investment objective is outlined in the Fund Summary Page. The Fund offers Class A shares, Class B shares, Class C shares, Class T shares and Class I shares. Class A shares are sold with a front-end sales charge of up to 2.25%. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge may be imposed 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 of the month preceding the month the purchase was made. The Class B shares are sold with a contingent deferred sales charge which declines from 2% to zero depending on the period of time the shares are held. Class C shares are sold without a sales charge. Class T shares of the Fund are sold with a 1% contingent deferred sales charge, if applicable, if redeemed within one year of purchase. Class I shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class I shares bear no distribution and/or service expenses. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service, which utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities in determining value. Due to excessive volatility in the current market (please 34 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 see note on Market Conditions - Note 13), valuations developed through pricing techniques may materially vary from the actual amounts realized upon sale of the securities. As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. Certain foreign common stocks may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in these foreign markets. In these cases, information from an external vendor may be utilized to adjust closing market prices of certain foreign common stocks to reflect their fair value. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Certain securities held by the Fund were valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. At September 30, 2008, the total value of these securities was not a material percentage of the net assets of the Fund. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The 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. FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Each of the Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. 35 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income distributions are recorded daily. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more appropriately made. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. FOREIGN SECURITY COUNTRY DETERMINATION: A combination of the following criteria is used to assign the countries of risk listed in the schedule of investments: country of incorporation, actual building address, primary exchange on which the security is traded and country in which the greatest percentage of company revenue is generated. H. FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by each Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, the Fund records a realized gain or loss equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. 36 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: The Fund may engage in when-issued or delayed delivery transactions. 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. J. 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. Currently, the Fund only holds assignment loans. K. CREDIT LINKED NOTES: The Fund may invest in credit linked notes which are usually issued by a special purpose vehicle that is selling credit protection through a credit default swap. The performance of the notes is linked to the performance of the underlying reference obligation. The special purpose vehicle invests the proceeds from the notes to cover its contingent obligation. Credit linked notes may also have risks with default by the referenced obligation, currency and/or interest rates. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ reported in thousands except as noted) On February 7, 2008, the Phoenix Companies, Inc. ("PNX") announced its intention to spin off various subsidiaries constituting its asset management business to PNX's shareholders. Once spun off from PNX, the company holding the asset management subsidiaries, Virtus Investment Partners, Inc. ("Virtus"), will become an independent public company. The spinoff is expected to occur at a date later in the year based on regulatory approval. In preparation for this spinoff, certain of the asset management subsidiaries have changed their names to reflect the Virtus brand, including the Funds' adviser, Phoenix Investment Counsel, Inc., which is now known as Virtus Investment Advisers, Inc. (the "Adviser"). As compensation for its services to the Trust, the Adviser, an indirect wholly-owned subsidiary of PNX, is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund. 1ST $1+ - $2 $2+ $1 BILLION BILLION BILLION --------------- ------------ -------------- 0.55% 0.50% 0.45% 37 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser Goodwin Capital Advisers, Inc. ("Goodwin"), an indirect wholly-owned subsidiary of PNX. As distributor of the Fund's shares, Phoenix Equity Planning Corporation ("PEPCO"), an indirect wholly-owned subsidiary of PNX, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2008, as follows: CLASS A CLASS A CLASS B CLASS C CLASS T NET SELLING DEFERRED DEFERRED DEFERRED DEFERRED COMMISSIONS SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES ----------- ------------- ------------- ------------- ------------- $33 $63 $14 $--(1) $48 (1) Amount is less than $500 (not reported in thousands). The Fund pays PEPCO distribution and/or service fees at the following annual rates as a percentage of the average daily net assets of each respective class: CLASS A CLASS B CLASS C CLASS T --------- --------- --------- --------- 0.25% 0.75% 0.50% 1.00% There are no distribution and/or service fees for Class I. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. PEPCO serves as the Administrator to the Fund. For its services, which include financial agent services, PEPCO receives an administration fee at an annual rate of 0.09% of the first $5 billion, 0.08% on the next $10 billion, and 0.07% over $15 billion of the average net assets across all non-money market Virtus Mutual Funds and certain other affiliated funds. For the period ended September 30, 2008, the Fund incurred administration fees totaling $1,534. PEPCO serves as the Trust's transfer agent. For the period ended September 30, 2008, transfer agent fees were $2,784 as reported in the Statement of Operations. At September 30, 2008, PNX and its affiliates, the retirement plans of PNX and its affiliates and Virtus affiliated Funds held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE --------- --------- Class A shares 935,796 $3,940 Class I shares 22,540 95 Until March 1, 2007, the Trust provided a deferred compensation plan to its Trustees who were not Officers of Virtus. Under the deferred compensation plan, Trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the Trustees. Investments in such Virtus Mutual Funds are included in "Other assets" on the Statements of Assets and Liabilities at September 30, 2008. 38 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 A. 4. PURCHASES AND SALES OF SECURITIES ($ reported in thousands) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities and agency securities, forward currency contracts, and short-term securities) during the period ended September 30, 2008, were as follows: --------------------------- PURCHASES SALES ----------- -------- $1,046,946 $975,675 Purchases and sales of long-term U.S. Government and agency securities for the Fund during the period ended September 30, 2008, were as follows: --------------------------- PURCHASES SALES ----------- -------- $569,075 $493,126 5. CAPITAL SHARE TRANSACTIONS (reported in thousands) Transactions in shares of capital stock, for the periods ended as indicated below, were as follows:
-------------------- -------------------- --------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------- -------- ------- --------- -------- --------- - ----------------------------- -------------------- -------------------- --------------------- MULTI-SECTOR 10/1/07 - 11/1/06 - 11/1/05 - SHORT TERM BOND FUND 9/30/08 9/30/07 10/31/06 - ----------------------------- -------------------- -------------------- --------------------- CLASS A Sale of shares 129,159 $589,875 145,165 $ 686,127 151,778 $ 713,454 Reinvestment of distributions 15,751 71,290 10,182 48,092 7,325 34,423 Shares repurchased (123,302) (559,008) (73,905) (348,877) (109,181) (511,744) -------- -------- ------- --------- -------- --------- Net increase / (decrease) 21,608 $102,157 81,442 $ 385,342 49,922 $ 236,133 ======== ======== ======= ========= ======== ========= CLASS B Sale of shares 780 $ 3,555 920 $ 4,328 1,291 $ 6,045 Reinvestment of distributions 155 699 164 771 170 797 Shares repurchased (1,729) (7,857) (2,388) (11,227) (2,609) (12,208) -------- -------- ------- --------- -------- --------- Net increase / (decrease) (794) $ (3,603) (1,304) $ (6,128) (1,148) $ (5,366) ======== ======== ======= ========= ======== ========= CLASS C Sale of shares 11,320 $ 51,784 7,252 $ 34,538 11,032 $ 52,248 Reinvestment of distributions 1,573 7,168 1,316 6,263 1,522 7,207 Shares repurchased (12,640) (57,956) (13,717) (65,374) (32,038) (151,593) -------- -------- ------- --------- -------- --------- Net increase / (decrease) 253 $ 996 (5,149) $ (24,573) (19,484) $ (92,138) ======== ======== ======= ========= ======== ========= CLASS T Sale of shares 10,502 $ 48,131 9,696 $ 46,121 8,658 $ 40,931 Reinvestment of distributions 1,042 4,789 925 4,398 816 3,858 Shares repurchased (11,130) (50,716) (9,901) (47,054) (18,719) (88,443) -------- -------- ------- --------- -------- --------- Net increase / (decrease) 414 $ 2,204 720 $ 3,465 (9,245) $ (43,654) ======== ======== ======= ========= ======== ========= CLASS I(1) Sale of shares 22 $ 100 Reinvestment of distributions 1 2 Shares repurchased -- -- -------- -------- Net increase / (decrease) 23 $ 102 ======== ======== (1) Inception date 6/6/08.
39 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 6. 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 a Fund's ability to repatriate such amounts. High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. 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. 7. ILLIQUID AND RESTRICTED SECURITIES ($ reported in thousands) Investments shall be considered illiquid if they cannot be disposed of in seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining illiquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are footnoted as such at the end of the Fund's Schedule of Investments where applicable. Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933. Generally, 144A securities are excluded from this category, except where defined as illiquid. At September 30, 2008, the Fund held the following illiquid and restricted securities:
ACQUISITION ACQUISITION MARKET VALUE % OF NET ASSETS DATE COST AT 9/30/08 AT 9/30/08 ----------- ----------- ------------ --------------- Home Equity Asset Trust 06-7, A 144A 6.000% due 2/25/37 10/11/06 $2,183 $ 11 0.0% MASTR Alternative Net Interest Margin 06-6, N1 144A 4.429% due 9/26/46 8/3/06 1,222 1 0.0 MASTR Alternative Net Interest Margin 05-CW1A, N1 144A 6.750% due 12/26/35 11/18/05 441 17 0.0 MASTR Resecuritization Trust 05-6, 4C1, N2 144A 6.429% due 4/26/45 1/12/06 3,250 325 0.0
40 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 8. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 9. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by The Phoenix Companies, Inc. and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. In February 2005, the NASD notified PNX that it was asserting violations of trade reporting rules by a subsidiary. PNX responded to the NASD allegations in May 2005. Thereafter, in January 2007, the NASD notified PNX that the matter was being referred for potential violations and possible action. On May 3, 2007, the NASD accepted a letter of acceptance, waiver and consent submitted by the subsidiary to resolve this matter. Without admitting or denying the NASD's findings, in accordance with the terms of the letter the subsidiary agreed to a censure, to pay a fine of $8,000 and to revise its supervisory procedures. The Company does not believe that the outcome of this matter will be material to these financial statements. 10. RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures. The Fund will be adopting SFAS 157 effective with the December 31, 2008 quarterly reporting of the schedule of investments. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161") was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Management is currently evaluating the impact of FAS 161 on financial statement disclosures, if any. 41 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 11. FEDERAL INCOME TAX INFORMATION ($ reported in thousands) The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: Expiration Year ---------------------------------- 2014 2016 Total ------ ------ -------- $5,307 $575 $5,882 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. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2008, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL LOSS LOSS DEFERRED RECOGNIZED ---------- ------------ $27,119 $-- The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $5,607 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 12. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ reported in thousands) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Fund. As of September 30, 2008, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON SHARES OF UNDISTRIBUTED ACCUMULATED BENEFICIAL NET INVESTMENT NET REALIZED INTEREST INCOME (LOSS) GAIN (LOSS) ------------ -------------- ------------ $430 $7,494 $(7,924) 42 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 13. MARKET CONDITIONS Recent events in the financial sector have resulted in an unusually high degree of volatility in the financial markets and the net asset value of many mutual funds, including the Fund. Such events include, but are not limited to, the seizure of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation by U.S. banking regulators, the bankruptcy filing of Lehman Brothers and sale of Merrill Lynch to Bank of America, and the government bailout of AIG. These companies represent financial institutions with which the Fund conducts business and/or whose securities are or may be held within the Fund. The potential investment of the Fund's investments in these issuers, and the financial sector in general, as reflected in the Fund's schedule of investments, exposes investors to the negative (or positive) performance resulting from these and other events. 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers [LOGO OMITTED] To the Board of Trustees of Virtus Opportunities Trust and Shareholders of Virtus Multi-Sector Short Term Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Multi-Sector Short Term Bond Fund (formerly Phoenix Multi-Sector Short Term Bond Fund, hereafter referred to as the "Fund"), a series of Virtus Opportunities Trust (formerly Phoenix Opportunities Trust), at September 30, 2008, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts November 18, 2008 44 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND TAX INFORMATION NOTICE (UNAUDITED) SEPTEMBER 30, 2008 - -------------------------------------------------------------------------------- For the fiscal year ended September 30, 2008, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG ------- ------- -------- 0% 0% $0 - -------------------------------------------------------------------------------- 45 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2008 is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 56 Prospect Street, Hartford, CT 06115-0480. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES
INDEPENDENT TRUSTEES - ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management (commodities business) (2007- YOB: 1939 present). Partner, Stonington Partners, Inc. (private equity firm) (2001-2007). Elected: 1993 Director/Trustee, Evergreen Funds (88 portfolios). 50 Funds - ----------------------------------------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (private bank) YOB: 1951 (1982-2006). Elected: 2001 52 Funds - ----------------------------------------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) (1994-present). Chairman, YOB: 1946 Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services) Elected: 1993 (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust 50 Funds (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. - ----------------------------------------------------------------------------------------------------------------- Richard E. Segerson Managing Director, Northway Management Company (1998-present). YOB: 1946 Elected: 1998 50 Funds - ----------------------------------------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). Mr. Verdonck is also a director YOB: 1942 of several non-U.S. companies. Elected: 2004 50 Funds - -----------------------------------------------------------------------------------------------------------------
46 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
- ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- George R. Aylward(1) Senior Executive Vice President and President, Asset Management (2007-present), YOB: 1964 Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Elected: 2006 Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. 52 Funds Director and President (2006-present), Chief Operating Officer (2004-2006), Vice President, Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. 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). - ----------------------------------------------------------------------------------------------------------------- Philip R. McLoughlin(2) Partner, Cross Pond Partners, LLC (2006-Present). Director, Argo Group YOB: 1946 International Holdings Ltd. (insurance), World Trust Fund and KBC Asset Elected: 1993 Management, Ltd. 70 Funds - -----------------------------------------------------------------------------------------------------------------
(1) 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. (2) Mr. McLoughlin is treated as an "interested person," as defined in the Investment Company Act of 1940, because of his participation in certain retirement plans maintained by Virtus Investment Partners, Inc. and/or its affiliates. 47 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------- POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ----------------------------------------------------------------------------------------------------------------- Nancy G. Curtiss Senior Vice President since Vice President, Head of Asset Management YOB: 1952 2006. Operations (2007-present), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Assistant Treasurer (2001-present), Phoenix Equity Planning Corporation. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). - ----------------------------------------------------------------------------------------------------------------- Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna c/o Zweig-DiMenna Chief Compliance Officer since Associates LLC (1989-present). Vice President, Associates, LLC 2004. The Zweig Total Return Fund, Inc. (2004-present). 900 Third Avenue Vice President, The Zweig Fund, Inc. (2004- New York, NY 10022 present). President and Director of Watermark YOB: 1945 Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). - ----------------------------------------------------------------------------------------------------------------- W. Patrick Bradley Chief Financial Officer and Vice President, Fund Administration (2007- YOB: 1972 Treasurer since 2005. 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. Senior Manager, Audit, Deloitte & Touche, LLP (1999-2004). - ----------------------------------------------------------------------------------------------------------------- Kevin J. Carr Vice President, Vice President, Counsel and Secretary, Virtus YOB: 1954 Chief Legal Officer, Investment Partners, Inc. and/or certain of its Counsel and subsidiaries (since 2008). Vice President and Secretary since 2005. 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). - -----------------------------------------------------------------------------------------------------------------
48 VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES George R. Aylward Leroy Keith, Jr. Philip R. McLoughlin, Chairman Geraldine M. McNamara James M. Oates Richard E. Segerson Ferdinand L.J. Verdonck OFFICERS George R. Aylward, President Nancy G. Curtiss, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 56 Prospect Street Hartford, CT 06115-0480 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 TRANSFER AGENT Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110-1707 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site VIRTUS.COM - -------------------------------------------------------------------------------- IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. - -------------------------------------------------------------------------------- THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. --------------- PRSRT STD [LOGO OMITTED] U.S. POSTAGE VIRTUS PAID MUTUAL FUNDS LANCASTER, PA PERMIT 1793 --------------- c/o State Street Bank and Trust Company P.O. Box 8301 Boston, MA 02266-8301 For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM. 8010 10-08 ANNUAL REPORT [LOGO OMITTED] VIRTUS MUTUAL FUNDS - -------------------------------------------------------------------------------- Virtus Real Estate Securities Fund - -------------------------------------------------------------------------------- WOULDN'T YOU RATHER HAVE THIS DOCUMENT E-MAILED TO YOU? TRUST NAME: ELIGIBLE SHAREHOLDERS CAN VIRTUS OPPORTUNITIES SIGN UP FOR E-DELIVERY TRUST September 30, 2008 AT VIRTUS.COM NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE TABLE OF CONTENTS VIRTUS REAL ESTATE SECURITIES FUND* ("Real Estate Securities Fund," formerly Phoenix Real Estate Securities Fund) Message to Shareholders..................................................... 1 Glossary.................................................................... 3 Disclosure of Fund Expenses................................................. 4 Fund Summary................................................................ 6 Schedule of Investments..................................................... 9 Statement of Assets and Liabilities......................................... 11 Statement of Operations..................................................... 12 Statement of Changes in Net Assets.......................................... 13 Financial Highlights........................................................ 14 Notes to Financial Statements............................................... 16 Report of Independent Registered Public Accounting Firm..................... 23 Fund Management Tables...................................................... 25 * PLEASE SEE NOTES 1 AND 3 IN THE NOTES TO FINANCIAL STATEMENTS FOR MORE INFORMATION ON THE NAME CHANGE. - -------------------------------------------------------------------------------- PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2008, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the fund 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. - -------------------------------------------------------------------------------- This report is not authorized for distribution to prospective investors in the Virtus Real Estate Securities Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS [PHOTO OMITTED] Fellow Shareholders of Virtus Mutual Funds: The third quarter of 2008 likely will be remembered as a time of extremes in the global financial markets. There was historic volatility in all the major markets, the collapse of well-known financial firms, and unprecedented government interventions into the economy. The scope of events that occurred in the past quarter was truly extraordinary. There was the U.S. government's takeover of Fannie Mae and Freddie Mac; a federal line of credit for the insurer, AIG; the seizure of Washington Mutual and sale to JPMorgan Chase; and the proposed $700 billion taxpayer rescue of the financial sector, which was approved in early October. The quarter also saw the end of the investment banking model with the merger of Merrill Lynch and Bank of America, the collapse of Lehman Brothers, and the decisions by Goldman Sachs and Morgan Stanley to convert to traditional banking institutions. This global turmoil was reflected in the major market indices. More than half (37 of 64) of the Dow Jones Industrial Average's third-quarter trading days had wide positive or negative swings of greater than 100 points. For the quarter, the Dow was down 3.7 percent (16.5 percent year-to-date), the S&P 500 stock index was down 8.4 percent (19.3 percent year-to-date); and EAFE was off 20.5 percent (28.9 percent for the year). At the start of the fourth quarter, governments around the world demonstrated their resolve to actively pursue solutions to this financial upheaval. Among the responses from the U.S. government is the Department of the Treasury's Temporary Money Market Fund Guarantee Program. While officials and economists believe the government interventions will bring stability to the financial markets, few will predict a timeline for recovery. This is a period when investors should pay particular attention to their accounts - and rely on the discipline and focus of professional investment managers and financial advisors. The extraordinary activity of the past several months may tempt some investors to react inappropriately to market events and deviate from their well-considered, long-term financial plans. We believe that during periods of unusual market volatility, discipline is the key for the investor, the financial advisor, and the professional money manager. We encourage you to consult with a financial advisor to review your holdings and to ensure they continue to reflect your current investment objectives and your tolerance for risk. Virtus Mutual Funds offer a wide range of equity, fixed income and money market funds, and we hope you will consider our investment choices when you and your financial advisor review your portfolio allocations. 1 On a much different note, we began the fourth quarter with the rebranding of our company in preparation for our spin-off as an independent, publicly traded company. Our company is now Virtus Investment Partners, the PhoenixFunds are now the Virtus Mutual Funds, and the investment adviser to the funds is now Virtus Investment Advisers. As you will notice throughout this report, the individual funds have incorporated the "Virtus" name. For your convenience, all mutual fund ticker symbols remain unchanged. I encourage you to visit our new website, WWW.VIRTUS.COM, to learn more about our company and our services for investors, and to access information about your account. Customer service is also available at 800-243-1574. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our partner companies and subadvisers, I want to thank you for entrusting your assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds OCTOBER 2008 PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 2 GLOSSARY FTSE NAREIT EQUITY REITS INDEX The FTSE NAREIT Equity REITs Index is a free-float market capitalization-weighted index measuring equity tax-qualified real estate investment trusts, which meet minimum size and liquidity criteria, that are 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. 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(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. THE INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 3 VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 - SEPTEMBER 30, 2008 We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Real Estate Securities Fund, you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class B and Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class I shares are sold without a sales charge and do not incur distribution and service fees. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Real Estate Securities Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your Fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower depending on the amount of your investments and timing of any purchases or redemptions. 4 VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2008 - SEPTEMBER 30, 2008 EXPENSE TABLE - -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2008 September 30, 2008 Ratio Period* - -------------------------------------------------------------------------------- REAL ESTATE SECURITIES FUND - -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,012.40 1.44% $ 7.24 Class B 1,000.00 1,008.20 2.19 10.99 Class C 1,000.00 1,008.50 2.19 11.00 Class I 1,000.00 1,013.40 1.15 5.79 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.71 1.44 7.29 Class B 1,000.00 1,013.91 2.19 11.09 Class C 1,000.00 1,013.91 2.19 11.09 Class I 1,000.00 1,019.18 1.15 5.82 * Expenses are equal to the Fund's annualized expense ratio, which is net of waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 5 TICKER SYMBOLS: VIRTUS REAL ESTATE SECURITIES FUND Class A: PHRAX Class B: PHRBX Class C: PHRCX Class I: PHRIX [ ] VIRTUS REAL ESTATE SECURITIES FUND ("Real Estate Securities Fund" or the "Fund") is non-diversified and has an investment objective to seek capital appreciation and income with approximately equal emphasis. THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS OBJECTIVE. [ ] For the fiscal year ended September 30, 2008, the Fund's Class A shares returned (9.94)%, Class B shares returned (10.65)%, Class C shares returned (10.63)% and Class I shares returned (9.71)%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned (21.98)%, and the FTSE NAREIT Equity REITs Index, the Fund's style-specific index appropriate for comparison, returned (11.14)%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The market environment has been extremely challenging as a result of the well documented credit crisis that has afflicted global investment markets since the summer of 2007. This challenging environment is well reflected in the negative returns that have been posted by the S&P 500 and to a lesser extent, the Fund as detailed above. [ ] We believe the divergence in performance relative to the S&P 500 can partly be explained by the under-performance of U.S. real estate equities in 2007 relative to the S&P 500. Additionally, we believe U.S. real estate equities have benefited relative to the S&P 500 as a result of the more aggressive accommodative monetary policy stance taken by the U.S. Federal Reserve thus far in 2008 and the duration of the contractual cash flows and resulting dividends driven by their leases in a diverse mix of thirteen property sectors. The last time the Federal Reserve was aggressively lowering the Fed Funds target was in 2001. U.S. real estate equities relatively out-performed other U.S. equity classes in 2001. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] Despite the negative absolute returns posted by the Fund during its fiscal year, the Fund was successful in out-performing its benchmark. We believe this out-performance is rooted in our philosophy, style and process, which has been in-place and successfully executed upon for our U.S. real estate equities strategy for more than a decade. More specifically, we believe our out-performance relative to our benchmark has been driven by superior stock selection, which has allowed us to avoid many of the value-traps and land mines relative to the benchmark that have been present in this challenging environment. [ ] Going forward, we expect the landscape for investing in real estate equities to remain challenging until the efforts of the Federal Reserve and its central bank peers along with the efforts of the U.S. Treasury and its peers demonstrate the global credit market freeze is thawing, the unsecured debt markets open, global bank failures cease, LIBOR returns closer to its historical proximity to the Fed Funds target, and the depth and duration of the much anticipated global recession are better understood. [ ] The best value investment opportunities materialize when fear and uncertainty rule the day and where a level-headed mindset is absent in market moves, in spite of what underlying market fundamentals would warrant. And that's where we are today. 6 VIRTUS REAL ESTATE SECURITIES FUND (CONTINUED) INVESTING IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, CHANGES IN THE VALUE OF PROPERTIES REITS OWN, DEPENDENCY ON MANAGEMENT SKILLS, ECONOMIC IMPACT ON THE INDUSTRY AND RISKS SIMILAR TO THOSE LINKED TO SMALL-COMPANY INVESTING. INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE VOLATILE TO ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE ISSUER THAN WOULD BE THE CASE IF THE FUNDS WERE MORE BROADLY DIVERSIFIED. SECTOR WEIGHTINGS as of 9/30/08* - -------------------------------------------- Office 20% - -------------------------------------------- Regional Malls 15% - -------------------------------------------- Apartments 14% - -------------------------------------------- Health Care 14% - -------------------------------------------- Shopping Centers 12% - -------------------------------------------- Self Storage 6% - -------------------------------------------- Diversified 5% - -------------------------------------------- Other (includes short-term investments) 14% - -------------------------------------------- * % of total investments as of September 30, 2008. 7
AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/08 - ------------------------------------------------------------------------------------------ Inception 1 5 10 to Inception Year Years Years 9/30/08 Date - ------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) (9.94)% 14.61% 14.58% -- -- - ------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3,4) (15.12) 13.27 13.91 -- -- - ------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) (10.65) 13.75 13.73 -- -- - ------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) (14.07) 13.75 13.73 -- -- - ------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) (10.63) 13.77 -- 14.37% 7/25/03 - ------------------------------------------------------------------------------------------ CLASS C SHARES AT CDSC(4) (10.63) 13.77 -- 14.37 7/25/03 - ------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV (9.71) -- -- (8.06) 12/29/06 - ------------------------------------------------------------------------------------------ S&P 500(R) INDEX (21.98) 5.17 3.06 NOTE 5 NOTE 5 - ------------------------------------------------------------------------------------------ FTSE NAREIT EQUITY REITS INDEX (11.14) 13.46 12.49 NOTE 6 NOTE 6 - ------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(7): I SHARES: 1.14%; A SHARES: 1.39%, B SHARES: 2.14%, C SHARES: 2.14%.
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CLASS B SHARES DECLINE FROM 5% TO 1% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 4.99% FOR CLASS C (SINCE 7/25/03) AND (8.75)% FOR CLASS I (SINCE 12/29/06). (6) INDEX PERFORMANCE IS 13.82% FOR CLASS C (SINCE 7/25/03) AND (8.36)% FOR CLASS I (SINCE 12/29/06). (7) PER PROSPECTUS EFFECTIVE 1/31/08. GROWTH OF $10,000 for periods ended 9/30 - -------------------------------------------------------------------------------- [GRAPH OMITTED] PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:
FTSE NAREIT Share Class A(1)(3)(4) Share Class B(1)(4) Equity REITs Index S&P 500(R) Index 9/30/98 $ 9,425 $10,000 $10,000 $10,000 9/30/99 9,183 9,675 9,354 12,773 9/29/00 12,259 12,825 11,282 14,480 9/28/01 13,168 13,667 12,698 10,624 9/30/02 14,794 15,242 13,783 8,448 9/30/03 18,590 19,007 17,260 10,511 9/30/04 23,569 23,918 21,672 11,969 9/30/05 30,063 30,287 27,583 13,434 9/29/06 39,065 39,051 34,556 14,884 9/28/07 40,828 40,517 36,517 17,331 9/30/08 36,769 36,204 32,450 13,522
For information regarding the indexes, see the glossary section on page 3. 8 VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- DOMESTIC COMMON STOCKS--96.9% REAL ESTATE INVESTMENT TRUSTS--96.9% DIVERSIFIED--5.0% Vornado Realty Trust 587,707 $ 53,452 - -------------------------------------------------------------------------- TOTAL DIVERSIFIED 53,452 - -------------------------------------------------------------------------- HEALTH CARE--14.1% HCP, Inc. 1,277,402 51,262 Health Care REIT, Inc. 882,030 46,950 Nationwide Health Properties, Inc. 176,260 6,342 Ventas, Inc. 939,716 46,441 - -------------------------------------------------------------------------- TOTAL HEALTH CARE 150,995 - -------------------------------------------------------------------------- INDUSTRIAL/OFFICE--23.9% INDUSTRIAL--4.3% AMB Property Corp. 223,699 10,134 Prologis 882,857 36,435 ---------- 46,569 ---------- OFFICE--19.6% Alexandria Real Estate Equities, Inc. 405,369 45,604 Boston Properties, Inc. 464,093 43,467 Corporate Office Properties Trust 705,624 28,472 Digital Realty Trust, Inc. 1,187,463 56,108 Douglas Emmett, Inc. 913,370 21,071 SL Green Realty Corp. 247,598 16,044 ---------- 210,766 - -------------------------------------------------------------------------- TOTAL INDUSTRIAL/OFFICE 257,335 - -------------------------------------------------------------------------- LODGING/RESORTS--3.8% DiamondRock Hospitality Co. 826,915 7,525 Host Hotels & Resorts, Inc. 2,099,075 27,897 LaSalle Hotel Properties 127,416 2,971 Sunstone Hotel Investors, Inc. 202,977 2,740 - -------------------------------------------------------------------------- TOTAL LODGING/RESORTS 41,133 - -------------------------------------------------------------------------- SHARES VALUE ---------- ---------- RESIDENTIAL--14.3% APARTMENTS--14.3% AvalonBay Communities, Inc. 353,086 $ 34,751 BRE Properties, Inc. 440,550 21,587 Equity Residential 889,949 39,523 Essex Property Trust, Inc. 281,122 33,265 UDR, Inc. 958,257 25,058 - -------------------------------------------------------------------------- TOTAL RESIDENTIAL 154,184 - -------------------------------------------------------------------------- RETAIL--27.4% REGIONAL MALLS--15.3% General Growth Properties, Inc. 1,342,129 20,266 Macerich Co. (The) 803,851 51,165 Simon Property Group, Inc. 957,005 92,830 ---------- 164,261 ---------- SHOPPING CENTERS--12.1% Developers Diversified Realty Corp. 750,573 23,786 Federal Realty Investment Trust 415,900 35,601 Kimco Realty Corp. 767,802 28,363 Regency Centers Corp. 193,121 12,879 Tanger Factory Outlet Centers, Inc. 676,900 29,641 ---------- 130,270 - -------------------------------------------------------------------------- TOTAL RETAIL 294,531 - -------------------------------------------------------------------------- SELF STORAGE--5.7% Extra Space Storage, Inc. 1,303,969 20,029 Public Storage, Inc. 417,163 41,303 - -------------------------------------------------------------------------- TOTAL SELF STORAGE 61,332 - -------------------------------------------------------------------------- See Notes to Financial Statements 9 VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2008 ($ reported in thousands) SHARES VALUE ---------- ---------- SPECIALTY--2.7% Entertainment Properties Trust 338,402 $ 18,518 Plum Creek Timber Co., Inc. 212,541 10,597 - -------------------------------------------------------------------------- TOTAL SPECIALTY 29,115 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- TOTAL DOMESTIC COMMON STOCKS (IDENTIFIED COST $802,419) 1,042,077 - -------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--96.9% (IDENTIFIED COST $802,419) 1,042,077 - -------------------------------------------------------------------------- SHARES VALUE ---------- ---------- SHORT-TERM INVESTMENTS--3.3% MONEY MARKET MUTUAL FUNDS--3.3% State Street Institutional Liquid Reserves Fund (2.456% seven-day effective yield) 35,362,787 $ 35,363 - -------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $35,363) 35,363 - -------------------------------------------------------------------------- TOTAL INVESTMENTS--100.2% (IDENTIFIED COST $837,782) 1,077,440(a) Other assets and liabilities, net--(0.2)% (2,565) ---------- NET ASSETS--100.0% $1,074,875 ========== FOOTNOTE LEGEND: (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $261,393 and gross depreciation of $29,485 for federal income tax purposes. At September 30, 2008, the aggregate cost of securities for federal income tax purposes was $845,532. See Notes to Financial Statements 10 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2008 (Amounts reported in thousands except per share amounts)
ASSETS Investment securities at value(1) ................................................... $1,077,440 Receivables Investment securities sold ....................................................... 4,347 Fund shares sold ................................................................. 5,010 Dividends ........................................................................ 3,579 Interest ......................................................................... 83 Prepaid expenses .................................................................... 78 Other assets ........................................................................ 61 ---------- Total assets ................................................................... 1,090,598 ---------- LIABILITIES Payables Fund shares repurchased .......................................................... 11,377 Investment securities purchased .................................................. 2,544 Investment advisory fees ......................................................... 662 Distribution and service fees .................................................... 269 Administration fees .............................................................. 67 Transfer agent fees and expenses ................................................. 588 Trustees' fees and expenses ...................................................... 8 Professional fees ................................................................ 38 Other accrued expenses ........................................................... 109 Trustee deferred compensation plan ............................................... 61 ---------- Total liabilities .............................................................. 15,723 ---------- NET ASSETS .......................................................................... $1,074,875 ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................................... $ 843,598 Accumulated undistributed net investment income (loss) .............................. (6) Accumulated undistributed net realized gain (loss) .................................. (8,375) Net unrealized appreciation (depreciation) .......................................... 239,658 ---------- NET ASSETS .......................................................................... $1,074,875 ========== CLASS A Net asset value per share (net assets/shares outstanding) ........................... $29.19 Offering price per share $29.19/(1-5.75%) ........................................... $30.97 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 29,536 Net Assets .......................................................................... $ 862,062 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ........ $28.85 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 1,226 Net Assets .......................................................................... $ 35,376 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ........ $29.17 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 2,444 Net Assets .......................................................................... $ 71,278 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ........ $29.17 Shares of beneficial interest outstanding, no par value, unlimited authorization .... 3,639 Net Assets .......................................................................... $ 106,159 (1) Investment securities at cost .................................................. $ 837,782
See Notes to Financial Statements 11 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2008 ($ reported in thousands)
INVESTMENT INCOME Dividends ............................................................. $ 30,367 Interest .............................................................. 729 --------- Total investment income .......................................... 31,096 --------- EXPENSES Investment advisory fees .............................................. 8,017 Service fees, Class A ................................................. 2,317 Distribution and service fees, Class B ................................ 392 Distribution and service fees, Class C ................................ 772 Administration fees ................................................... 891 Transfer agent fees and expenses ...................................... 3,165 Printing fees and expenses ............................................ 327 Registration fees ..................................................... 121 Custodian fees ........................................................ 99 Trustees' fees and expenses ........................................... 86 Professional fees ..................................................... 58 Miscellaneous expenses ................................................ 126 --------- Total expenses ................................................... 16,371 Less expenses reimbursed by investment adviser ........................ (832) Custodian fees paid indirectly ........................................ (4) --------- Net expenses ..................................................... 15,535 --------- NET INVESTMENT INCOME (LOSS) .......................................... 15,561 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............................... 1,513 Net change in unrealized appreciation (depreciation) on investments ... (147,744) --------- NET GAIN (LOSS) ON INVESTMENTS ........................................ (146,231) --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ....... $(130,670) =========
See Notes to Financial Statements 12 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS ($ reported in thousands)
10/1/07 - 12/1/06 - 12/1/05 - 9/30/08 9/30/07 11/30/06 ---------- ---------- ---------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ......................... $ 15,561 $ 12,154 $ 9,175 Net realized gain (loss) ............................. 1,513 30,650 58,061 Net change in unrealized appreciation (depreciation) .................................... (147,744) (155,030) 315,898 ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................... (130,670) (112,226) 383,134 ---------- ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ....................... (14,408) (11,397) (10,315) Net investment income, Class B ....................... (328) (120) (310) Net investment income, Class C ....................... (626) (203) (359) Net investment income, Class I ....................... (722) (166) -- Net realized short-term gains, Class A ............... -- (9,631) (446) Net realized short-term gains, Class B ............... -- (525) (36) Net realized short-term gains, Class C ............... -- (844) (41) Net realized short-term gains, Class I ............... -- (6) -- Net realized long-term gains, Class A ................ (31,550) (41,285) (15,981) Net realized long-term gains, Class B ................ (1,385) (2,269) (1,290) Net realized long-term gains, Class C ................ (2,707) (3,617) (1,469) Net realized long-term gains, Class I ................ (712) -- -- ---------- ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................................... (52,438) (70,063) (30,247) ---------- ---------- ---------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ........................................... (115,457) 8,577 245,360 Change in net assets from share transactions, Class B ........................................... (7,503) (13,672) (7,487) Change in net assets from share transactions, Class C ........................................... (14,894) 1,408 17,731 Change in net assets from share transactions, Class I ........................................... 75,742 33,030 -- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................................ (62,112) 29,343 255,604 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ................ (245,220) (152,946) 608,491 NET ASSETS Beginning of period .................................. 1,320,095 1,473,041 864,550 ---------- ---------- ---------- END OF PERIOD ........................................ $1,074,875 $1,320,095 $1,473,041 ========== ========== ========== Accumulated undistributed net investment income (loss) at end of period .................................. $ (6) $ 461 $ 124
See Notes to Financial Statements 13 VIRTUS REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - --------------------------------------------------------------------------------------------------------------------------------- CLASS A 10/1/07 to 9/30/08 $34.10 $0.45 $(3.88) $(3.43) $(0.47) $(1.01) $(1.48) 12/1/06 to 9/30/07 38.18 0.32 (2.59) (2.27) (0.32) (1.49) (1.81) 12/1/05 to 11/30/06 28.15 0.30 10.73 11.03 (0.37) (0.63) (1.00) 12/1/04 to 11/30/05 25.46 0.43 4.08 4.51 (0.42) (1.40) (1.82) 12/1/03 to 11/30/04 20.09 0.44 5.60 6.04 (0.50) (0.17) (0.67) 12/1/02 to 11/30/03 15.59 0.62 4.62 5.24 (0.62) (0.12) (0.74) CLASS B 10/1/07 to 9/30/08 $33.72 $0.22 $(3.83) $(3.61) $(0.25) $(1.01) $(1.26) 12/1/06 to 9/30/07 37.74 0.10 (2.56) (2.46) (0.07) (1.49) (1.56) 12/1/05 to 11/30/06 27.86 0.07 10.59 10.66 (0.15) (0.63) (0.78) 12/1/04 to 11/30/05 25.21 0.23 4.05 4.28 (0.23) (1.40) (1.63) 12/1/03 to 11/30/04 19.91 0.27 5.54 5.81 (0.34) (0.17) (0.51) 12/1/02 to 11/30/03 15.46 0.48 4.59 5.07 (0.50) (0.12) (0.62) CLASS C 10/1/07 to 9/30/08 $34.07 $0.23 $(3.88) $(3.65) $(0.24) $(1.01) $(1.25) 12/1/06 to 9/30/07 38.11 0.10 (2.59) (2.49) (0.06) (1.49) (1.55) 12/1/05 to 11/30/06 28.12 0.06 10.71 10.77 (0.15) (0.63) (0.78) 12/1/04 to 11/30/05 25.43 0.25 4.07 4.32 (0.23) (1.40) (1.63) 12/1/03 to 11/30/04 20.07 0.26 5.61 5.87 (0.34) (0.17) (0.51) 7/25/03 (inception) to 11/30/03 17.90 0.19 2.13 2.32 (0.15) -- (0.15) CLASS I 10/1/07 to 9/30/08 $34.08 $0.62 $(3.98) $(3.36) $(0.54) $(1.01) $(1.55) 12/29/06 (inception) to 9/30/07 35.99 0.28 (1.87) (1.59) (0.31) (0.01) (0.32)
RATIO OF GROSS RATIO OF EXPENSES TO NET NET NET RATIO OF NET AVERAGE INVESTMENT CHANGE ASSET ASSETS, EXPENSES TO NET ASSETS INCOME IN NET VALUE, END OF AVERAGE (BEFORE (LOSS) TO PORTFOLIO ASSET END OF TOTAL PERIOD NET WAIVERS AND AVERAGE NET TURNOVER VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS REIMBURSEMENTS) ASSETS RATE - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/07 to 9/30/08 $(4.91) $29.19 (9.94)% $ 862,062 1.37%(5) 1.45% 1.51% 32% 12/1/06 to 9/30/07 (4.08) 34.10 (6.14)(4) 1,136,923 1.32(3) 1.39(3) 1.06(3) 25(4) 12/1/05 to 11/30/06 10.03 38.18 40.37 1,289,007 1.30 1.30 0.94 24 12/1/04 to 11/30/05 2.69 28.15 18.67 737,744 1.30 1.30 1.68 22 12/1/03 to 11/30/04 5.37 25.46 30.68 511,107 1.28 1.28 1.98 28 12/1/02 to 11/30/03 4.50 20.09 34.81 260,615 1.30 1.34 3.52 16 CLASS B 10/1/07 to 9/30/08 $(4.87) $28.85 (10.65)% $ 35,376 2.12%(5) 2.20% 0.76% 32% 12/1/06 to 9/30/07 (4.02) 33.72 (6.72)(4) 49,964 2.07(3) 2.13(3) 0.32(3) 25(4) 12/1/05 to 11/30/06 9.88 37.74 39.29 71,240 2.05 2.05 0.24 24 12/1/04 to 11/30/05 2.65 27.86 17.81 59,042 2.05 2.05 0.93 22 12/1/03 to 11/30/04 5.30 25.21 29.74 57,797 2.03 2.03 1.25 28 12/1/02 to 11/30/03 4.45 19.91 33.76 39,299 2.05 2.09 2.79 16 CLASS C 10/1/07 to 9/30/08 $(4.90) $29.17 (10.63)% $ 71,278 2.12%(5) 2.20% 0.76% 32% 12/1/06 to 9/30/07 (4.04) 34.07 (6.71)(4) 100,321 2.07(3) 2.14(3) 0.32(3) 25(4) 12/1/05 to 11/30/06 9.99 38.11 39.32 112,794 2.05 2.05 0.19 24 12/1/04 to 11/30/05 2.69 28.12 17.80 67,764 2.05 2.05 0.97 22 12/1/03 to 11/30/04 5.36 25.43 29.78 38,399 2.03 2.03 1.17 28 7/25/03 (inception) to 11/30/03 2.17 20.07 13.03(4) 4,785 2.05(3) 2.07(3) 2.88(3) 16(4) CLASS I 10/1/07 to 9/30/08 $(4.91) $29.17 (9.71)% $ 106,159 1.12%(5) 1.20% 2.11% 32% 12/29/06 (inception) to 9/30/07 (1.91) 34.08 (4.44)(4) 32,887 1.11(3) 1.23(3) 1.09(3) 25(4)
(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) Blended net expense ratio. See Note 3 in the Notes to Financial Statements. See Notes to Financial Statements 14 & 15 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2008 1. ORGANIZATION Effective October 1, 2008, the Phoenix Funds became Virtus Mutual Funds, and all of the Funds were renamed to reflect the new Virtus name. On October 20, 2008, the Trusts' names were also updated to reflect the new name. Virtus Opportunities Trust, formerly Phoenix Opportunities Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. As of the date of this report, eighteen funds are offered for sale, of which the Real Estate Securities Fund (the "Fund") is reported in this annual report. The Fund's investment objective is outlined in the Fund Summary Page. The Fund offers Class A shares, Class B shares, Class C shares and Class I shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge may be imposed 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. Class B shares are generally sold with a contingent deferred sales charge, which declines from 5% to zero depending on the period of time the shares are held. Class C shares are generally sold with a 1% contingent deferred sales charge, if applicable, if redeemed within one year of purchase. Class I shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class I bears no distribution and/or service expense. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service, which utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers, and various relationships between securities in determining value. As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. 16 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. Dividend income is recorded using management's estimate of the income included in distributions received from the REIT investments. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The 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. FASB Interpretation No. 48, ("FIN 48") Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Each of the Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. 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, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately made. 17 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ reported in thousands except as noted) On February 7, 2008, the Phoenix Companies, Inc. ("PNX") announced its intention to spin off various subsidiaries constituting its asset management business to PNX's shareholders. Once spun off from PNX, the company holding the asset management subsidiaries, Virtus Investment Partners, Inc. ("Virtus"), will become an independent public company. The spinoff is expected to occur at a date later in the year based on regulatory approval. In preparation for this spinoff, certain of the asset management subsidiaries have changed their names to reflect the Virtus brand, including the Funds' adviser, Phoenix Investment Counsel, Inc., which is now known as Virtus Investment Advisers, Inc. (the "Adviser"). As compensation for its services to the Trust, the Adviser, an indirect wholly-owned subsidiary of PNX, is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund. 1ST $1+ BILLION $2+ $1 BILLION THROUGH $2 BILLION BILLION -------------- -------------------- ----------- 0.75% 0.70% 0.65% The Adviser contractually agreed to limit the Fund's operating expenses (excluding interest, taxes, and extraordinary expenses) through March 31, 2008 so that such expenses did not exceed 1.30% for Class A Shares, 2.05% for Class B Shares, 2.05% for Class C Shares and 1.05% for Class I Shares. The Adviser voluntarily continued the expense limitations, subsequent to March 31, 2008, but discontinued them effective May 1, 2008. Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under this arrangement, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. The Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with applicable expense limitations at the time the fees were waived. All or a portion of the following Adviser reimbursed expenses may be recaptured by the fiscal years ended as follows: EXPIRATION DATE ---------------------------------------- 2010 2011 TOTAL ----------- ----------- ----------- $251 $832 $1,083 The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser Duff & Phelps Investment Management Co. ("Duff & Phelps"). Duff & Phelps is an indirect, wholly-owned subsidiary of PNX. As distributor of the Fund's shares, Phoenix Equity Planning Corporation ("PEPCO"), an indirect wholly-owned subsidiary of PNX, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2008, as follows: CLASS A CLASS A CLASS B CLASS C NET SELLING DEFERRED DEFERRED DEFERRED COMMISSIONS SALES CHARGES SALES CHARGES SALES CHARGES --------------- ----------------- --------------- ----------------- $58 --(1) $98 $26 (1) Amount is less than $500 (not reported in thousands). 18 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 The Fund pays PEPCO distribution and/or service fees at the following annual rates as a percentage of the average daily net assets of each respective class: CLASS A CLASS B CLASS C ----------- ----------- ----------- 0.25% 1.00% 1.00% There are no distribution and/or service fees for Class I. Under certain circumstances, shares of certain Virtus Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a contingent deferred sales charge, the CDSC schedule of the original shares purchased continues to apply. PEPCO serves as the Administrator to the Fund. For its services, which include financial agent services, PEPCO receives an administration fee at an annual rate of 0.09% of the first $5 billion, 0.08% on the next $10 billion, and 0.07% over $15 billion of the average net assets across all non-money market Virtus Mutual Funds and certain other affiliated funds. For the period ended September 30, 2008, the Fund incurred administration fees totaling $891. PEPCO serves as the Trust's transfer agent. For the period ended September 30, 2008, transfer agent fees were $3,165 as reported in the Statement of Operations. At September 30, 2008, PNX and its affiliates, the retirement plans of PNX and its affiliates, and Virtus affiliated Funds held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE ----------- ------------- Class A........... 2,468,497 $72,055 Until March 1, 2007, the Trust provided a deferred compensation plan to its Trustees who were not Officers of Virtus. Under the deferred compensation plan, Trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the Trustees. Investments in such Virtus Mutual Funds are included in "Other assets" on the Statements of Assets and Liabilities at September 30, 2008. 4. PURCHASES AND SALES OF SECURITIES ($ reported in thousands) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities or agency securities and short-term securities) during the period ended September 30, 2008, were as follows: LONG-TERM ----------------------------- PURCHASES SALES ------------- ----------- $333,843 $401,131 There were no purchases or sales of long-term U.S. Government or agency securities. 19 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 5. CAPITAL SHARE TRANSACTIONS (reported in thousands) Transactions in shares of capital stock, for the periods ended as indicated below, were as follows:
------------------- ------------------- ------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------- --------- ------ --------- - ----------------------------- ------------------- ------------------- ------------------ REAL ESTATE 10/1/07 - 12/1/06 - 12/1/05 - SECURITIES FUND 9/30/08 9/30/07 11/30/06 - ----------------------------- ------------------- ------------------- ------------------ CLASS A Sale of shares 11,559 $ 339,354 14,072 $ 511,268 16,009 $ 514,058 Reinvestment of distributions 1,370 39,324 1,620 57,889 785 22,530 Shares repurchased (16,735) (494,135) (16,115) (560,580) (9,234) (291,228) ------- --------- ------- --------- ------ --------- Net increase / (decrease) (3,806) $(115,457) (423) $ 8,577 7,560 $ 245,360 ======= ========= ======= ========= ====== ========= CLASS B Sale of shares 122 $ 3,570 156 $ 5,740 265 $ 8,295 Reinvestment of distributions 47 1,347 76 2,681 43 1,193 Shares repurchased (425) (12,420) (637) (22,093) (540) (16,975) ------- --------- ------- --------- ------ --------- Net increase / (decrease) (256) $ (7,503) (405) $ (13,672) (232) $ (7,487) ======= ========= ======= ========= ====== ========= CLASS C Sale of shares 472 $ 13,975 928 $ 34,094 1,101 $ 35,276 Reinvestment of distributions 94 2,695 124 4,416 51 1,431 Shares repurchased (1,066) (31,564) (1,067) (37,102) (603) (18,976) ------- --------- ------- --------- ------ --------- Net increase / (decrease) (500) $ (14,894) (15) $ 1,408 549 $ 17,731 ======= ========= ======= ========= ====== ========= CLASS I(1) Sale of shares 3,444 $ 99,740 1,059 $ 36,256 -- $ -- Reinvestment of distributions 42 1,214 4 140 -- -- Shares repurchased (812) (25,212) (98) (3,366) -- -- ------- --------- ------- --------- ------ --------- Net increase / (decrease) 2,674 $ 75,742 965 $ 33,030 -- $ -- ======= ========= ======= ========= ====== =========
(1) Inception date of the class is 12/29/06. 20 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 6. 10% SHAREHOLDERS As of September 30, 2008, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the Fund as detailed below. The shareholder is not affiliated with PNX. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS --------------- ------------ 14% 1 7. CREDIT RISK AND ASSET CONCENTRATIONS 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. 8. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 9. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by The Phoenix Companies, Inc. and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. In February 2005, the NASD notified PNX that it was asserting violations of trade reporting rules by a subsidiary. PNX responded to the NASD allegations in May 2005. Thereafter, in January 2007, the NASD notified PNX that the matter was being referred for potential violations and possible action. On May 3, 2007, the NASD accepted a letter of acceptance, waiver and consent submitted by the subsidiary to resolve this matter. Without admitting or denying the NASD's findings, in accordance with the terms of the letter the subsidiary agreed to a censure, to pay a fine of $8,000 and to revise its supervisory procedures. The Company does not believe that the outcome of this matter will be material to these financial statements. 10. RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures. The Fund will be adopting SFAS 157 effective with the December 31, 2008 quarterly reporting of the schedule of investments. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161") was issued and is effective for 21 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 fiscal years and interim periods beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Management is currently evaluating the impact of FAS 161 on financial statement disclosures, if any. 11. FEDERAL INCOME TAX INFORMATION ($ reported in thousands) Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2008, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL LOSS LOSS DEFERRED RECOGNIZED ---------- ------------ $625 $ -- The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $0 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 12. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ reported in thousands) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2008, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON SHARES OF UNDISTRIBUTED ACCUMULATED BENEFICIAL NET INVESTMENT NET REALIZED INTEREST INCOME (LOSS) GAIN (LOSS) -------------- ---------------- -------------- $3,796 $56 $(3,852) 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [LOGO OMITTED] PricewaterhouseCoopers To the Board of Trustees of Virtus Opportunities Trust and Shareholders of: Virtus Real Estate Securities Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Real Estate Securities Fund (formerly Phoenix Real Estate Securities Fund, hereafter referred to as the "Fund"), a series of Virtus Opportunities Trust (formerly Phoenix Opportunities Trust), at September 30, 2008, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts November 18, 2008 23 VIRTUS REAL ESTATE SECURITIES FUND TAX INFORMATION NOTICE (UNAUDITED) SEPTEMBER 30, 2008 - -------------------------------------------------------------------------------- For the fiscal year ended September 30, 2008, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG --------- --------- ---------- 0% 0% $8,278 - -------------------------------------------------------------------------------- 24 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the trustees and officers of the Trust as of September 30, 2008 is set forth below. The statement of additional information (SAI) includes additional information about the trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 56 Prospect Street, Hartford, CT 06115-0480. There is no stated term of office for trustees of the Trust.
INDEPENDENT TRUSTEES - ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management (commodities business) (2007- YOB: 1939 present). Partner, Stonington Partners, Inc. (private equity firm) (2001-2007). Elected: 1993 Director/Trustee, Evergreen Funds (88 portfolios). 50 Funds - ----------------------------------------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (private bank) YOB: 1951 (1982-2006). Elected: 2001 52 Funds - ----------------------------------------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) (1994-present). Chairman, YOB: 1946 Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services) Elected: 1993 (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust 50 Funds (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. - ----------------------------------------------------------------------------------------------------------------- Richard E. Segerson Managing Director, Northway Management Company (1998-present). YOB: 1946 Elected: 1998 50 Funds - ----------------------------------------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). Mr. Verdonck is also a director YOB: 1942 of several non-U.S. companies. Elected: 2004 50 Funds - -----------------------------------------------------------------------------------------------------------------
25 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
- ----------------------------------------------------------------------------------------------------------------- NAME, ADDRESS, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN DIRECTORSHIPS OF OTHER PUBLIC COMPANIES - ----------------------------------------------------------------------------------------------------------------- George R. Aylward(1) Senior Executive Vice President and President, Asset Management (2007-present), YOB: 1964 Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Elected: 2006 Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. 52 Funds Director and President (2006-present), Chief Operating Officer (2004-2006), Vice President, Finance, (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. 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). - ----------------------------------------------------------------------------------------------------------------- Philip R. McLoughlin(2) Partner, Cross Pond Partners, LLC (2006-Present). Director, Argo Group YOB: 1946 International Holdings Ltd. (insurance), World Trust Fund and KBC Asset Elected: 1993 Management, Ltd. 70 Funds - -----------------------------------------------------------------------------------------------------------------
(1) 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. (2) Mr. McLoughlin is treated as an "interested person" as defined in the Investment Company Act of 1940, because of his participation in certain retirement plans maintained by Virtus Investment Partners, Inc. and/or its affiliates. 26 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------- POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ----------------------------------------------------------------------------------------------------------------- Nancy G. Curtiss Senior Vice President since Vice President, Head of Asset Management YOB: 1952 2006. Operations (2007-present), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Assistant Treasurer (2001-present), Phoenix Equity Planning Corporation. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). - ----------------------------------------------------------------------------------------------------------------- Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna c/o Zweig-DiMenna Chief Compliance Officer since Associates LLC (1989-present). Vice President, Associates, LLC 2004. The Zweig Total Return Fund, Inc. (2004-present). 900 Third Avenue Vice President, The Zweig Fund, Inc. (2004- New York, NY 10022 present). President and Director of Watermark YOB: 1945 Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). - ----------------------------------------------------------------------------------------------------------------- W. Patrick Bradley Chief Financial Officer and Vice President, Fund Administration (2007- YOB: 1972 Treasurer since 2005. 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. Senior Manager, Audit, Deloitte & Touche, LLP (1999-2004). - ----------------------------------------------------------------------------------------------------------------- Kevin J. Carr Vice President, Vice President, Counsel and Secretary, Virtus YOB: 1954 Chief Legal Officer, Investment Partners, Inc. and/or certain of its Counsel and subsidiaries (since 2008). Vice President and Secretary since 2005. 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). - -----------------------------------------------------------------------------------------------------------------
27 VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES George R. Aylward Leroy Keith, Jr. Philip R. McLoughlin, Chairman Geraldine M. McNamara James M. Oates Richard E. Segerson Ferdinand L.J. Verdonck OFFICERS George R. Aylward, President Nancy G. Curtiss, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 56 Prospect Street Hartford, CT 06115-0480 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 TRANSFER AGENT Phoenix Equity Planning Corporation One American Row Hartford, CT 06103-2899 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110-1707 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site VIRTUS.COM - -------------------------------------------------------------------------------- IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. - -------------------------------------------------------------------------------- THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. --------------- PRSRT STD [LOGO OMITTED] U.S. POSTAGE VIRTUS PAID MUTUAL FUNDS LANCASTER, PA PERMIT 1793 --------------- c/o State Street Bank and Trust Company P.O. Box 8301 Boston, MA 02266-8301 For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM. 8009 10-08 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics described in Item 2(b) of the instructions for completion of Form N-CSR. (d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of the instructions for completion of this Item. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has determined that the Registrant has an "audit committee financial expert" serving on its Audit Committee. (a)(2) James M. Oates has been determined by the Registrant to possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert." Mr. Oates is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. (a)(3) Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $400,150 for 2007 and $388,580 for 2008. AUDIT-RELATED FEES (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $10,800 for 2007 and $61,804 for 2008. Such audit-related fees were cross fund fees. TAX FEES (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $68,475 for 2007 and $103,925 for 2008. "Tax Fees" are those primarily associated with review of the Trust's tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust's financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund's federal income returns. ALL OTHER FEES (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2007 and $0 for 2008. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust) (the "Fund") Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. Audit, audit-related and tax compliance services provided to the Fund on an annual basis require specific pre-approval by the Board. As noted above, the Board must also approve other non-audit services provided to the Fund and those non-audit services provided to the Fund's Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund. Certain of these non-audit services that the Board believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent auditors may be approved by the Board without consideration on a specific case-by-case basis ("general pre-approval"). The Audit Committee has determined that James M. Oates, Chair of the Audit Committee, may provide pre-approval for such services that meet the above requirements in the event such approval is sought between regularly scheduled meetings. In any event, the Board is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) 100% for 2007 and 2008 (c) 100% for 2007 and 2008 (d) Not applicable for 2007 and 2008 (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $763,428 for 2007 and $1,516,768 for 2008. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. 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. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 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) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust) -------------------------------------------------------------------- By (Signature and Title)* /s/ George R. Aylward ------------------------------------------------------ George R. Aylward, President (principal executive officer) Date December 5, 2008 -------------------------------------------------------------------------- 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 December 5, 2008 -------------------------------------------------------------------------- By (Signature and Title)* /s/ W. Patrick Bradley ------------------------------------------------------ W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date December 4, 2008 -------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 g49153_ethics.txt CODE OF ETHICS EX-99.CODE ETH CODE OF ETHICS FOR CHIEF EXECUTIVE AND SENIOR FINANCIAL OFFICERS The Phoenix mutual funds(1) (each, and collectively, a "FUND") is committed to conducting business in accordance with applicable laws, rules and regulations and the highest standards of business ethics, and to full and accurate disclosure -- financial and otherwise -- in compliance with applicable law. This Code of Ethics, applicable to each Fund's Chief Executive Officer, President, Chief Financial Officer and Treasurer (or persons performing similar functions) (together, "SENIOR OFFICERS"), sets forth policies to guide you in the performance of your duties. As a Senior Officer, you must comply with applicable law. You also have a responsibility to conduct yourself in an honest and ethical manner. You have leadership responsibilities that include creating a culture of high ethical standards and a commitment to compliance, maintaining a work environment that encourages the internal reporting of compliance concerns and promptly addressing compliance concerns. This Code of Ethics recognizes that the Senior Officers are subject to certain conflicts of interest inherent in the operation of investment companies, because the Senior Officers (in addition to their role as senior officers of the Fund) currently or may in the future serve as officers or employees of a Phoenix investment adviser(2) (the "ADVISER"), Phoenix Investment Partners, Ltd., The Phoenix Companies, Inc. or other affiliates thereof (collectively, "PHOENIX") and as officers or trustees/directors of other registered investment companies and unregistered investment funds advised by Phoenix. This Code of Ethics also recognizes that certain laws and regulations applicable to, and certain policies and procedures adopted by, the Fund, the Adviser or Phoenix govern your conduct in connection with many of the conflict of interest situations that arise in connection with the operations of the Fund, including: - ---------- (1) Phoenix Funds (which include Phoenix Equity Series Fund, Phoenix Equity Trust, Phoenix-Goodwin California Tax-Exempt Bond Fund, Phoenix Institutional Mutual Funds, Phoenix Investment Trust 97, Phoenix Multi-Portfolio Fund, Phoenix Multi-Series Trust, Phoenix-Oakhurst Income & Growth Fund, Phoenix-Oakhurst Strategic Allocation Fund, Phoenix Partners Select Funds, Phoenix Portfolios, Phoenix Series Fund, and Phoenix Strategic Equity Series Fund), the Phoenix Partners Funds (which includes Phoenix-Kayne Funds and Phoenix-Seneca Funds), The Phoenix Edge Series Fund ("PESF"); and, The Phoenix-Engemann Funds ("Engemann Funds"). (2) Phoenix Investment Counsel, Inc. ("PIC"), Duff & Phelps Investment Management Co. ("DPIM"), Engemann Asset Management ("EAM"), Euclid Advisors LLC ("EAL"), Kayne Anderson Rudnick Investment Management LLC ("KAR"), Phoenix Variable Advisors, Inc. ("PVA"), Seneca Capital Management, LLC ("SCM"), Phoenix/Zweig Advisers LLC ("PZA"). o the Investment Company Act of 1940, as amended, and the rules and regulation promulgated thereunder by the Securities and Exchange Commission (the "1940 ACT"); o the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder by the Securities and Exchange Commission (the "ADVISERS ACT"); o the Code of Ethics adopted by the Fund pursuant to Rule 17j-1(c) under the 1940 Act (collectively, the "FUND'S 1940 ACT CODE OF ETHICS"); o one or more codes of ethics adopted by the Adviser that have been reviewed and approved by those trustees (the "TRUSTEES") of the Fund that are not "interested persons" of the Fund (the "INDEPENDENT TRUSTEES") within the meaning of the 1940 Act (the "ADVISER'S 1940 ACT CODE OF ETHICS" and, together with the Fund's 1940 Act Code of Ethics, the "1940 ACT CODES OF ETHICS"); o the policies and procedures adopted by the Fund to address conflict of interest situations, such as procedures under Rule 10f-3 and Rule 17a-7 under the 1940 Act (collectively, the "FUND Policies"); and o each Adviser's general policies and procedures to address, among other things, conflict of interest situations and related matters (collectively, the "ADVISER POLICIES"). The provisions of the 1940 Act, the Advisers Act, the 1940 Act Codes of Ethics, the Fund Policies and the Adviser Policies are referred to herein collectively as the "ADDITIONAL CONFLICT RULES". This Code of Ethics is different from, and is intended to supplement, the Additional Conflict Rules. Accordingly, a violation of the Additional Conflict Rules by a Senior Officer is hereby deemed not to be a violation of this Code of Ethics, unless and until the Board of Trustees of the Fund (the "BOARD") shall determine that any such violation of the Additional Conflict Rules is also a violation of this Code of Ethics. SENIOR OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Senior Officer has a responsibility to the Fund to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Senior Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Additional Conflict Rules; o not withhold any relevant information; o comply with the laws, rules and regulations that govern the conduct of the Fund's operations and report any suspected violations thereof in accordance with the section below entitled "Compliance With Code Of Ethics"; and 2 o adhere to a high standard of business ethics. CONFLICTS OF INTEREST A conflict of interest for the purpose of this Code of Ethics occurs when your private interests interfere in any way, or even appear to interfere, with the interests of the Fund. Senior Officers are expected to use objective and unbiased standards when making decisions that affect the Fund, keeping in mind that Senior Officers are subject to certain inherent conflicts of interest because Senior Officers of a Fund also are or may be officers of the Adviser and other funds advised or serviced by Phoenix (as a result of which it is incumbent upon you to be familiar with and to seek to comply with the Additional Conflict Rules). You are required to conduct the business of the Fund in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and business relationships. When making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in a manner that creates or appears to create a conflict of interest with respect to the Fund where you are receiving a personal benefit, you should act in accordance with the letter and spirit of this Code of Ethics. If you are in doubt as to the application or interpretation of this Code of Ethics to you as a Senior Officer of the Fund, you should make full disclosure of all relevant facts and circumstances to the Chief Compliance Officer of the Fund (the "CHIEF COMPLIANCE OFFICER") and obtain the prior approval of the Chief Compliance Officer prior to taking or not taking action. Some conflict of interest situations that should always be approved by the Chief Compliance Officer, if material, include the following: o the receipt of any entertainment or non-nominal gift by the Senior Officer, or a member of his or her family, from any company with which the Fund has current or prospective business dealings (other than the Adviser or Phoenix), unless such entertainment or gift is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than the Adviser or Phoenix; or o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Senior Officer's employment by the Adviser or Phoenix, such as compensation or equity ownership. Nominal gifts in the aggregate may rise to create a conflict of interest. In the event that you are involved in any of these situations, you should immediately disclose 3 the situation to the Chief Compliance Officer and to Counsel for the independent trustees. The Chief Compliance Officer will disclose the situation to the full Board. DISCLOSURES It is the policy of the Fund to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission or a national securities exchange and in all other public communications made by the Fund. As a Senior Officer, you are required to promote compliance with this policy and to abide by the Fund's standards, policies and procedures designed to promote compliance with this policy. Each Senior Officer must: o familiarize himself or herself with the disclosure requirements applicable to the Fund as well as the business and financial operations of the Fund; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, including to the Trustees, the Fund's independent auditors, the Fund's counsel, counsel to the Independent Directors, governmental regulators or self-regulatory organizations. o not knowingly withhold, or cause others to withhold, facts about the Fund to others, including to other Trustees, the Fund's independent auditors, the Fund's counsel, counsel to the independent Trustees, governmental regulators or self-regulatory organizations. COMPLIANCE WITH CODE OF ETHICS If you know of or suspect a violation of this Code of Ethics or other laws, regulations, policies or procedures applicable to the Fund, you must report that information on a timely basis to the Chief Compliance Officer or report it anonymously by following the "whistle blower" policies adopted by the Fund from time to time. For the purposes hereof, the Fund has endorsed usage of the Phoenix confidential, 24-hour toll-free telephone help line at 1-800-813-8180 and shall require the Phoenix Chief Compliance Officer to promptly report any calls made to such number affecting a Fund. NO ONE WILL BE SUBJECT TO RETALIATION BECAUSE OF A GOOD FAITH REPORT OF A SUSPECTED VIOLATION. The Fund will follow these procedures in investigating and enforcing this Code of Ethics, and in reporting on this Code of Ethics: o the Chief Compliance Officer will take all appropriate action to investigate any actual or potential violations reported to him or her; o violations and potential violations will be reported to the applicable Fund Board after such investigation; 4 o if the Fund Board determines that a violation has occurred, it will take all appropriate disciplinary or preventive action; and o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification of the Securities and Exchange Commission or other appropriate law enforcement authorities. Senior Officers must make this Code of Ethics known to persons who might know of a potential conflict of interest, including the "whistle blower" policies adopted by the Fund from time to time. WAIVERS OF CODE OF ETHICS Except as otherwise provided in this Code of Ethics, the Chief Compliance Officer is responsible for applying this Code of Ethics to specific situations in which questions are presented to the Chief Compliance Officer and has the authority to interpret this Code of Ethics in any particular situation. The Chief Compliance Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported under this Code of Ethics. The Chief Compliance Officer is authorized to consult, as appropriate, with the chair of the Fund Board and with counsel to the Fund, the Adviser, Phoenix or the Independent Trustees, and is encouraged to do so. Each Fund Board, or any duly designated committee thereof, is responsible for granting waivers of this Code of Ethics, as appropriate. Any changes to or waivers of this Code of Ethics will, to the extent required, be disclosed on Form N-CSR, or otherwise, as provided by Securities and Exchange Commission rules. RECORDKEEPING The Fund will maintain and preserve for a period of not less than six (6) years from the date an action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Fund Board or to any appropriate Committee thereof: o that provided the basis for any amendment or waiver to this Code of Ethics; and o relating to any violation of this Code of Ethics and sanctions imposed for such violation, together with a written record of the approval or action taken by the Board. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code of Ethics shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code of Ethics, such matters shall not be 5 disclosed to anyone other than the Independent Trustees and their counsel, the Fund and its counsel, the Adviser and/or other Phoenix entity and its counsel and any other advisors, consultants or counsel retained by the Trustees, the Independent Trustees or any committee of the Board. AMENDMENTS This Code of Ethics may not be amended except in written form, which is specifically approved by a majority vote of the Trustees of each Fund, including a majority of the Independent Trustees. NO RIGHTS CREATED This Code of Ethics is a statement of certain fundamental principles, policies and procedures that govern each of the Senior Officers in the conduct of each Fund's business. It is not intended to and does not create any rights in any employee, investor, supplier, competitor, shareholder or any other person or entity. (Revised November 2004) 6 EX-99.CERT 3 g49153_302cert.txt 302 CERT CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, George R. Aylward, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 5, 2008 /s/ George R. Aylward ------------------------------------ ------------------------------ George R. Aylward, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, W. Patrick Bradley, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 4, 2008 /s/ W. Patrick Bradley ----------------------------------- ------------------------------------ W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) EX-99.906CERT 4 g49153_906cert.txt 906 CERT CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, George R. Aylward, President of Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust) (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: December 5, 2008 /s/ George R. Aylward ------------------------------- ---------------------------------- George R. Aylward, President (principal executive officer) I, W. Patrick Bradley, Chief Financial Officer and Treasurer of Virtus Opportunities Trust (formerly, Phoenix Opportunities Trust) (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: December 4, 2008 /s/ W. Patrick Bradley ------------------------------- ---------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----