N-CSR 1 b55018virtusoppstrust_merged.txt VIRTUS OPPORTUNITIES TRUST N-CSR 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 ------------------------------------------------------------------ (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 the Registrant 100 Pearl Street Hartford, CT 06103-4506 ------------------------------------------------------------------ (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, 2009 ------------------ 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 MUTUAL FUNDS LOGO) Virtus AlphaSector(SM) Allocation Fund (FORMERLY WEALTH GUARDIAN FUND) Virtus AlphaSector(SM) Rotation Fund (FORMERLY WEALTH BUILDER FUND) Virtus Alternatives Diversifier Fund Virtus Bond Fund Virtus CA Tax-Exempt Bond Fund Virtus Global Infrastructure Fund Virtus Global Opportunities Fund Virtus Global Real Estate Securities Fund Virtus Greater Asia ex Japan Opportunities Fund Virtus Greater European Opportunities Fund Virtus High Yield Fund Virtus International Real Estate Securities Fund Virtus Market Neutral Fund Virtus Multi-Sector Fixed Income Fund Virtus Senior Floating Rate Fund TRUST NAME: September 30, 2009 (GRAPHIC) VIRTUS OPPORTUNITIES TRUST (Eligible shareholders can sign up for eDelivery at Virtus.com NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE TABLE OF CONTENTS Message to Shareholders ................................................... 1 Disclosure of Fund Expenses ............................................... 2 Key Investment Terms and Footnote Legend .................................. 4
SCHEDULE FUND OF FUND SUMMARY INVESTMENTS ---- ------- ----------- Virtus AlphaSector(SM) Allocation Fund ("AlphaSector(SM) Allocation Fund," formerly "Virtus Wealth Guardian Fund") .......................................... 6 36 Virtus AlphaSector(SM) Rotation Fund ("AlphaSector(SM) Rotation Fund," formerly "Virtus Wealth Builder Fund") ........................................... 8 37 Virtus Alternatives Diversifier Fund ("Alternatives Diversifier Fund") .............. 10 38 Virtus Bond Fund ("Bond Fund") ...................................................... 12 39 Virtus CA Tax-Exempt Bond Fund ("CA Tax-Exempt Bond Fund") .......................... 14 43 Virtus Global Infrastructure Fund ("Global Infrastructure Fund") .................... 16 45 Virtus Global Opportunities Fund ("Global Opportunities Fund," formerly "Virtus Worldwide Strategies Fund") ..................................... 18 46 Virtus Global Real Estate Securities Fund ("Global Real Estate Securities Fund") .... 20 48 Virtus Greater Asia ex Japan Opportunities Fund ("Greater Asia ex Japan Opportunities Fund") ..................................... 22 50 Virtus Greater European Opportunities Fund ("Greater European Opportunities Fund") .. 24 52 Virtus High Yield Fund ("High Yield Fund") .......................................... 26 53 Virtus International Real Estate Securities Fund ("International Real Estate Securities Fund") .................................... 28 56 Virtus Market Neutral Fund ("Market Neutral Fund") .................................. 30 57* Virtus Multi-Sector Fixed Income Fund ("Multi-Sector Fixed Income Fund") ............ 32 60 Virtus Senior Floating Rate Fund ("Senior Floating Rate Fund") ...................... 34 67 Statements of Assets and Liabilities ................................................... 70 Statements of Operations ............................................................... 73 Statements of Changes in Net Assets .................................................... 76 Financial Highlights ................................................................... 82 Notes to Financial Statements .......................................................... 94 Report of Independent Registered Public Accounting Firm ................................ 109 Tax Information Notice ................................................................. 110 Consideration of Advisory and Subadvisory Agreements by the Board of Trustees .......... 111 Results of Shareholder Meetings ........................................................ 116 Fund Management Tables ................................................................. 117
* 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, 2009, 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 Dear Fellow Shareholders of Virtus Mutual Funds: (PHOTO OF GEORGE R. AYLWARD) Investors who were calmed by the positive news from the financial markets in the second quarter of 2009 may have had a reason to regain some of their enthusiasm during the third quarter. There were numerous signs pointing to an end to the recession: gross domestic product grew by an annualized 3.5 percent, matching its average growth rate of the last 80 years; a measure of stability appeared in the housing market; consumer confidence inched up; and better-than-expected profits and rosier outlooks were reported by many corporations. The capital markets continued their recovery during the quarter, with most major stock market indices up by double digits for the quarter. The S&P 500(R) Index was up 15.6 percent in the quarter and in late September was at its highest level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8 percent in the third quarter, and as of September 30 had improved by 13.5 percent for the year. These figures are even more encouraging when compared with market lows in early March and the double-digit losses both indices recorded during the first quarter of the year. Bonds also participated in the third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12 percent. Although the Federal Open Market Committee acknowledged that "economic activity has picked up following its severe downturn," these recent gains should not unleash any 1990s-style market "exuberance." The strength and timing of a full recovery is yet to be realized. Unemployment rates that probably have not peaked remain a drag on consumer spending, and with an expected slowdown of the government's monetary and fiscal stimulus, some economists speculate that the growth from the second and third quarter may not be sustainable into next year. These factors suggest this is an important time to rely on the experience of your personal financial adviser and the investment professionals who manage your assets in the Virtus Mutual Funds. We encourage you to carefully consider the commentary of our investment professionals on the following pages and meet with your adviser to review your portfolio and, when appropriate, adjust it to fit your current investment objectives and your tolerance for risk. Our wide range of equity, fixed income, and alternative investments allow you to allocate your assets and design a portfolio tailored to your individual needs. Information about your investments is always available on our website, www.virtus.com, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will do our very best to meet your expectations. On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 1, 2009 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US AT www.virtus.com OR CALL OUR SHAREOWNER SERVICES GROUP, TOLL FREE, AT 1-800-243-1574. 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 VIRTUS OPPORTUNITIES TRUST (FORMERLY PHOENIX OPPORTUNITIES TRUST) DISCLOSURE OF FUND EXPENSES FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009 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 (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 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 the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying table 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 table 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 table 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 table 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, 2009 September 30, 2009 Ratio Period* ------------- ------------------ ---------- ------------- ALPHASECTOR(SM) ALLOCATION FUND++ ACTUAL Class A $1,000.00 $1,241.50 0.68% $ 3.82 Class C 1,000.00 1,237.60 1.43 8.02 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,021.62 0.68 3.45 Class C 1,000.00 1,017.81 1.43 7.26 ALPHASECTOR(SM) ROTATION FUND++ ACTUAL Class A $1,000.00 $1,281.40 0.61% $ 3.49 Class C 1,000.00 1,277.00 1.36 7.76 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,021.97 0.61 3.10 Class C 1,000.00 1,018.17 1.36 6.90 ALTERNATIVES DIVERSIFIER FUND ACTUAL Class A $1,000.00 $1,253.20 0.28% $ 1.58 Class C 1,000.00 1,250.10 1.03 5.81 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,023.65 0.28 1.42 Class C 1,000.00 1,019.84 1.03 5.23 BOND FUND ACTUAL Class A $1,000.00 $1,108.70 0.85% $ 4.49 Class B 1,000.00 1,104.70 1.57 8.28 Class C 1,000.00 1,104.40 1.58 8.34 Class I 1,000.00 1,110.20 0.57 3.02 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.75 0.85 4.32 Class B 1,000.00 1,017.10 1.57 7.97 Class C 1,000.00 1,017.05 1.58 8.02 Class I 1,000.00 1,022.18 0.57 2.89 CA TAX-EXEMPT BOND FUND ACTUAL Class A $1,000.00 $1,099.10 0.85% $ 4.47 Class I 1,000.00 1,100.60 0.60 3.16 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.75 0.85 4.32 Class I 1,000.00 1,022.02 0.60 3.05 GLOBAL INFRASTRUCTURE FUND ACTUAL Class A $1,000.00 $1,246.60 1.37% $ 7.72 Class C 1,000.00 1,242.60 2.12 11.92 Class I 1,000.00 1,248.40 1.12 6.31 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.12 1.37 6.95 Class C 1,000.00 1,014.31 2.12 10.76 Class I 1,000.00 1,019.38 1.12 5.69 GLOBAL OPPORTUNITIES FUND ACTUAL Class A $1,000.00 $1,272.90 1.81% $10.31 Class B 1,000.00 1,268.50 2.55 14.50 Class C 1,000.00 1,267.50 2.56 14.55 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,015.88 1.81 9.19 Class B 1,000.00 1,012.12 2.55 12.95 Class C 1,000.00 1,012.07 2.56 13.00
2 VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009 EXPENSE TABLE
Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During April 1, 2009 September 30, 2009 Ratio Period* ------------- ------------------ ---------- ------------- GLOBAL REAL ESTATE SECURITIES FUND ACTUAL Class A $1,000.00 $1,663.30 1.40% $ 9.35 Class C 1,000.00 1,657.60 2.15 14.32 Class I 1,000.00 1,666.10 1.15 7.69 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.96 1.40 7.11 Class C 1,000.00 1,014.16 2.15 10.91 Class I 1,000.00 1,019.23 1.15 5.84 GREATER ASIA EX JAPAN OPPORTUNITIES FUND+ ACTUAL Class A $1,000.00 $1,301.00 1.80% $ 9.08 Class C 1,000.00 1,296.00 2.55 12.83 Class I 1,000.00 1,302.00 1.55 7.97 HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION) Class A 1,000.00 1,013.94 1.80 7.98 Class C 1,000.00 1,010.62 2.55 11.30 Class I 1,000.00 1,015.05 1.55 6.87 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,015.93 1.80 9.14 Class C 1,000.00 1,012.12 2.55 12.95 Class I 1,000.00 1,017.20 1.55 7.87 GREATER EUROPEAN OPPORTUNITIES FUND+ ACTUAL Class A $1,000.00 $1,297.00 1.45% $ 7.30 Class C 1,000.00 1,293.00 2.20 11.06 Class I 1,000.00 1,298.00 1.20 6.04 HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION) Class A 1,000.00 1,015.49 1.45 6.43 Class C 1,000.00 1,012.17 2.20 9.75 Class I 1,000.00 1,016.60 1.20 5.32 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.71 1.45 7.36 Class C 1,000.00 1,013.90 2.20 11.17 Class I 1,000.00 1,018.98 1.20 6.09 HIGH YIELD FUND ACTUAL Class A $1,000.00 $1,209.40 1.35% $ 7.48 Class B 1,000.00 1,206.20 2.10 11.61 Class C 1,000.00 1,208.00 2.10 11.62 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.22 1.35 6.85 Class B 1,000.00 1,014.41 2.10 10.66 Class C 1,000.00 1,014.41 2.10 10.66 INTERNATIONAL REAL ESTATE SECURITIES FUND ACTUAL Class A $1,000.00 $1,643.60 1.50% $ 9.94 Class C 1,000.00 1,639.40 2.25 14.89 Class I 1,000.00 1,643.60 1.25 7.24 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.46 1.50 7.61 Class C 1,000.00 1,013.65 2.25 11.42 Class I 1,000.00 1,018.72 1.25 6.35
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During April 1, 2009 September 30, 2009 Ratio Period* ------------- ------------------ ---------- ------------- MARKET NEUTRAL FUND ACTUAL Class A $1,000.00 $1,020.40 3.97% $20.11 Class B 1,000.00 1,016.20 5.32 26.89 Class C 1,000.00 1,017.30 5.14 25.99 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,004.92 3.97 20.15 Class B 1,000.00 998.06 5.32 27.01 Class C 1,000.00 998.98 5.14 26.09 MULTI-SECTOR FIXED INCOME FUND ACTUAL Class A $1,000.00 $1,295.00 1.12% $ 6.44 Class B 1,000.00 1,290.50 1.86 10.68 Class C 1,000.00 1,291.20 1.87 10.74 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.38 1.12 5.69 Class B 1,000.00 1,015.63 1.86 9.44 Class C 1,000.00 1,015.58 1.87 9.49 SENIOR FLOATING RATE FUND ACTUAL Class A $1,000.00 $1,217.60 1.20% $ 6.67 Class C 1,000.00 1,213.20 1.95 9.46 Class I 1,000.00 1,217.90 0.95 5.28 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.98 1.20 6.09 Class C 1,000.00 1,015.17 1.95 9.90 Class I 1,000.00 1,020.25 0.95 4.82
* Expenses are equal to the relevant Funds' annualized expense ratio which includes waived fees, reimbursed expenses, dividends and interest 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 365 days to reflect the one-half year period. + Inception date is April 21, 2009. 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 (160) expenses were accrued, then divided by 365 to reflect the period since inception. For Funds which may invest in other 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. ++ If extraordinary expenses were excluded, actual and hypothetical expenses paid would be as follows:
ACTUAL HYPOTHETICAL EXPENSES EXPENSES PAID PAID -------- ------------ AlphaSector(SM) Allocation Fund Class A $3.26 $2.94 Class C 7.46 6.75 AlphaSector(SM) Rotation Fund Class A 2.86 2.54 Class C 7.14 6.35
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. 3 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS ADR (AMERICAN DEPOSITARY RECEIPT) Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. ALPHASECTOR(SM) ALLOCATION FUND COMPOSITE INDEX Effective September 29, 2009, the allocation is 75% S&P 500(R) Index and 25% Barclays Capital U.S. Aggregate Bond Index. For the period of October 1, 2008 to September 28, 2009, the composite index consisted of 60% S&P 500(R) Index and 40% Barclays Capital U.S. Aggregate Bond Index. ALPHASECTOR(SM) ROTATION FUND COMPOSITE INDEX Effective September 29, 2009, the index allocation is 70% S&P 500(R) Index and 30% Barclays Capital U.S. Aggregate Bond Index. For the period of October 1, 2008 to September 28, 2009, the composite index consisted of 80% S&P 500(R) Index and 20% Barclays Capital U.S. Aggregate Bond Index. BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX The Barclays Capital California Municipal Bond Index measures long term investment grade, tax-exempt and fixed rate bonds issued in California. The index is calculated on a total return basis. BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX Barclays Capital High Yield Bond 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 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 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. FTSE EPRA NAREIT DEVELOPED RENTAL EX US INDEX The FTSE EPRA NAREIT Developed Rental ex US Index is a free-float market capitalization-weighted index measuring international real estate securities, which meet minimum size, liquidity and investment focus criteria. The index is a sub-set of the FTSE EPRA NAREIT Investment Focus Index Series, which separates the existing constituents into both Rental and Non-Rental Indices. A company is classified as Rental if the rental revenue from properties is greater than or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the latest published financial statement. The index is calculated on a total return basis with dividends reinvested. FTSE EPRA NAREIT DEVELOPED RENTAL INDEX The FTSE EPRA NAREIT Developed Rental Index is a free-float market capitalization-weighted index measuring global real estate securities, which meet minimum size, liquidity and investment focus criteria. The index is a sub-set of the FTSE EPRA NAREIT Investment Focus Index Series, which separates the existing constituents into both Rental and Non-Rental Indices. A company is classified as Rental if the rental revenue from properties is greater than or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the latest published financial statement. The index is calculated on a total return basis with dividends reinvested. 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. 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. 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. MSCI AC FAR EAST EX JAPAN INDEX (NET) The MSCI AC (All Country) Far East ex Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the Far East, excluding Japan. As of March 2008, the MSCI AC Far East ex Japan Index consisted of the following 9 developed and emerging market country indices: China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. MSCI EAFE(R) INDEX 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 EUROPE INDEX (NET) The MSCI Europe Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. 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. MSCI WORLD INFRASTRUCTURE SECTOR CAPPED INDEX MSCI World Infrastructure Sector Capped Index is a market capitalization weighted index that measures performance of global infrastructure companies by capturing broad and diversified opportunities across telecommunication, utilities, 4 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) 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. 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 U.S. LEVERAGED LOAN INDEX The S&P/LSTA U.S. Leveraged Loan 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. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major U.S. exchange such as the NYSE. 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. FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2009, see the Federal Income Tax Information Note 13 in the Notes to Financial Statements. (2) Non-income producing. (3) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (4) 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. See the table below.
Market Value ($ reported in % of Fund thousands) Net Assets ---- -------------- ---------- Bond Fund $11,447 5.1% High Yield Fund 14,875 16.0% Multi-Sector Fixed Income Fund 36,608 20.7% Senior Floating Rate Fund 3,521 6.3%
(5) Regulation S security. Security is offered and sold outside of the United States; therefore, it is exempt from registration with the SEC under rules 903 and 904 of the Securities Act of 1933. (6) Illiquid security. (7) Escrowed to maturity. (8) Security valued at fair value as determined in good faith by or under the direction of the Trustees. This security is disclosed as a level 3 security in the disclosure table located after the Schedule of Investments. (9) At September 30, 2009, the concentration of the Fund's investments by state or territory determined as a percentage of net assets is as follows: California 97.1%. At September 30, 2009, 65.0% 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: FGIC 41.5%, NATL-RE 28.7%, AMBAC 12.8%, FSA 10.2%, and GNMA 10.2%. (10) All or a portion segregated as collateral. (11) Affiliated Fund. (12) Security in default. (13) Shares traded on NYSE. (14) Shares traded on Toronto exchange. (15) Illiquid and restricted. See Note 7 in the Notes to Financial Statements. 5 TICKER SYMBOLS: Class A: PSWAX Class C: PSWCX ALPHASECTOR(SM) ALLOCATION FUND - ALPHASECTOR(SM) ALLOCATION FUND (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, 2009, the Fund's Class A shares at NAV returned 1.33%; Class C shares returned 0.59%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%; the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 10.56%; and the AlphaSector(SM) Allocation Fund Composite Index, the Fund's style-specific benchmark, returned 0.59%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The S&P 500(R) Index declined precipitously after the collapse of Lehman and continued to trade lower until early March of 2009. The twelve month period of September 30, 2008 to September 30, 2009 is marked by two distinct periods: the big bear move and the big bull move. For the entire period, the market was down slightly, so as a snapshot it would appear not much happened, but that belies the brutality of the move downward, followed by the power of the move up. During the period from late September 2008 until early March 2009 all assets with any perceived risk, be it corporate bonds, commodities, REITs, stocks, were all sold by investors in a classic "elephant through a key hole" way, thus the volatility and magnitude of the move was nothing short of stunning. Finally, some slightly better than expected economic data, and ultimately the end of selling pressure, helped the market find footing in early March. The easy Fed policy combined with massive fiscal spending from the Federal Government helped fuel a bull move that remains in place. As of September 30, 2009 the market had almost recouped its one year loss. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Overall, any asset that did not explicitly have the "full faith and credit" of the U.S. Government went down in value. As a diversified fund of funds, the Wealth Guardian Fund, now the Virtus Alpha-Sector(SM) Allocation Fund, was similarly affected by the dramatic sell-off across asset classes. Even non-Treasury bonds, generally seen as less "risky" than stocks, had a terrible time during the early half of the reporting period, but similar to stocks in the latter half, have recovered sharply. Stocks, regardless of market capitalization, growth or value, also were a tale of two distinct moves: the big bear and then the recovery. As a result, the Fund performed very similarly to its index for most of the time period. LACK OF LIQUIDITY IN AN ETF COULD RESULT IN ITS VALUE BEING MORE VOLATILE THAN THE UNDERLYING PORTFOLIO OF SECURITIES. SECTOR ETFS ARE SUBJECT TO SECTOR RISKS AND NON-DIVERSIFICATION RISKS, WHICH MAY RESULT IN GREATER PRICE FLUCTUATIONS THAN THE OVERALL MARKET. BECAUSE THE FUND INVESTS IN ETFS, IT INDIRECTLY BEARS ITS PROPORTIONATE SHARE OF THE OPERATING EXPENSES OF THE UNDERLYING FUNDS. INDIRECTLY, THE FUND IS SUBJECT TO ALL RISKS ASSOCIATED WITH THE UNDERLYING ETFS. THE GUARANTEE ON U.S. GOVERNMENT SECURITIES APPLIES ONLY TO THE UNDERLYING SECURITIES OF THE FUND'S PORTFOLIO, AND NOT TO THE VALUE OF THE FUND'S SHARES. CREDIT RISK REFERS TO THE POSSIBILITY THAT AN ISSUER OF A SECURITY WILL NOT BE ABLE TO MAKE PRINCIPAL AND INTEREST PAYMENTS IN A TIMELY MANNER. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. THE PRINCIPAL ON MORTGAGE- OR ASSET-BACKED SECURITIES MAY NORMALLY BE PREPAID AT ANY TIME, WHICH WILL REDUCE THE YIELD AND MARKET VALUE OF THESE SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 6 ALPHASECTOR(SM) ALLOCATION FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 year 5 years to 9/30/09 Date ------ ------- ---------- --------- CLASS A SHARES AT NAV(2) 1.33% 2.11% 3.45% 8/01/03 CLASS A SHARES AT POP(3, 4) -4.49 0.90 2.46 8/01/03 CLASS C SHARES AT NAV(2) 0.59 1.34 2.68 8/01/03 CLASS C SHARES WITH CDSC(4) 0.59 1.34 2.68 8/01/03 S&P 500(R) INDEX -6.91 1.01 3.28 8/01/03 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 5.31 8/01/03 ALPHASECTOR(SM) ALLOCATION FUND COMPOSITE INDEX 0.59 2.94 4.36 8/01/03
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.14%, NET 1.05%; C SHARES: GROSS 1.89%, NET 1.80%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 10/1/09. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on August 1, 2003 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
AlphaSector(SM) Virtus AlphaSector(SM) Virtus AlphaSector(SM) Allocation Barclays Capital U.S. Allocation Fund Class A Allocation Fund Class C Linked Benchmark S&P 500(R) Index Aggregate Bond Index ----------------------- ----------------------- ---------------- ---------------- --------------------- 8/1/2003 9425 10000 10000 10000 10000 9/30/2003 9604 10170 10252 10191 10338 9/30/2004 10469 11011 11256 11603 10718 9/30/2005 11299 11798 12211 13024 11018 9/29/2006 12112 12551 13180 14430 11422 9/28/2007 13641 14032 14747 16802 12009 9/30/2008 11466 11703 12935 13109 12447 9/30/2009 11618 11772 13011 12204 13761
ASSET ALLOCATION The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Exchange-Traded Funds 75% Domestic Fixed Income Funds 25 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 7 TICKER SYMBOLS: Class A: PWBAX Class C: PWBCX ALPHASECTOR(SM) ROTATION FUND - ALPHASECTOR(SM) ROTATION FUND (THE "FUND") is diversified and has an investment objective of seeking long-term capital appreciation. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned -2.81%; Class C shares returned -3.41%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%; the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 10.56%; and the AlphaSector(SM) Rotation Fund Composite Index, the Fund's style-specific benchmark, returned -2.80%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The S&P 500(R) Index declined precipitously after the collapse of Lehman and continued to trade lower until early March of 2009. The twelve month period of September 30, 2008 to September 30, 2009 is marked by two distinct periods: the big bear move and the big bull move. For the entire period, the market was down slightly, so as a snapshot it would appear not much happened, but that belies the brutality of the move downward, followed by the power of the move up. During the period from late September 2008 until early March 2009 all assets with any perceived risk, be it corporate bonds, commodities, REITs, stocks, were all sold by investors in a classic "elephant through a key hole" way, thus the volatility and magnitude of the move was nothing short of stunning. Finally, some slightly better than expected economic data, and ultimately the end of selling pressure, helped the market find footing in early March. The easy Fed policy combined with massive fiscal spending from the Federal Government helped fuel a bull move that remains in place. As of September 30, 2009 the market had almost recouped its one year loss. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Overall, any asset that did not explicitly have the "full faith and credit" of the U.S. Government went down in value. As a diversified fund of funds, the Wealth Builder Fund, now the Virtus Alpha-Sector(SM) Rotation Fund, was similarly affected by the dramatic sell-off across asset classes. REITs and Stocks, regardless of market capitalization, growth or value, also were a tale of two distinct moves: the big bear and then the recovery. As a result, the Fund performed very similarly to its index for most of the time period. LACK OF LIQUIDITY IN AN ETF COULD RESULT IN ITS VALUE BEING MORE VOLATILE THAN THE UNDERLYING PORTFOLIO OF SECURITIES. SECTOR ETFS ARE SUBJECT TO SECTOR RISKS AND NON-DIVERSIFICATION RISKS, WHICH MAY RESULT IN GREATER PRICE FLUCTUATIONS THAN THE OVERALL MARKET. BECAUSE THE FUND INVESTS IN ETFS, IT INDIRECTLY BEARS ITS PROPORTIONATE SHARE OF THE OPERATING EXPENSES OF THE UNDERLYING FUNDS. INDIRECTLY, THE FUND IS SUBJECT TO ALL RISKS ASSOCIATED WITH THE UNDERLYING ETFS. THE GUARANTEE ON U.S. GOVERNMENT SECURITIES APPLIES ONLY TO THE UNDERLYING SECURITIES OF THE FUND'S PORTFOLIO, AND NOT TO THE VALUE OF THE FUND'S SHARES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 8 ALPHASECTOR(SM) ROTATION FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 year 5 years to 9/30/09 Date ------ ------- ---------- --------- CLASS A SHARES AT NAV(2) -2.81% 1.56% 3.09% 8/01/03 CLASS A SHARES AT POP(3, 4) -8.40 0.36 2.11 8/01/03 CLASS C SHARES AT NAV(2) -3.41 0.82 2.35 8/01/03 CLASS C SHARES WITH CDSC(4) -3.41 0.82 2.35 8/01/03 S&P 500(R) INDEX -6.91 1.01 3.28 8/01/03 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 5.31 8/01/03 ALPHASECTOR(SM) ROTATION FUND COMPOSITE INDEX -2.80 2.08 3.91 8/01/03
FUND EXPENSE RATIOS(5): A SHARES: 1.18%; C SHARES: 1.93%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 10/1/09. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on August 1, 2003 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
AlphaSector(SM) Virtus AlphaSector(SM) Virtus AlphaSector(SM) Barclays Capital U.S. Rotation Rotation Fund Class A Rotation Fund Class C S&P 500(R) Index Aggregate Bond Index Linked Benchmark ---------------------- ---------------------- ---------------- --------------------- ---------------- 8/1/2003 9425 10000 10000 10000 10000 9/30/2003 9538 10100 10191 10338 10221 9/30/2004 10528 11074 11603 10718 11431 9/30/2005 11576 12084 13024 11018 12616 9/29/2006 12603 13063 14430 11422 13797 9/28/2007 14567 14999 16802 12009 15751 9/30/2008 11702 11946 13109 12447 13038 9/30/2009 11374 11538 12204 13761 12672
ASSET ALLOCATION The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Exchange-Traded Funds 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 9 TICKER SYMBOLS: Class A: PDPAX Class C: PDPCX ALTERNATIVES DIVERSIFIER FUND - ALTERNATIVES DIVERSIFIER FUND (THE "FUND") is diversified and has an investment objective of long-term capital appreciation. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned -10.00%; Class C shares returned -10.55%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - A year ago September, the US stock market was in the midst of the worst down-turn since the 1930's. The last leg down in the S&P 500 pushed the index from 1166 at the close September 30, 2008, to 676 at the low on March 9, 2009. Subsequently the market recovered dramatically to end September 30, 2009 at 1057, a substantial rally to be sure. The sell-off during the fall of 2008 and into the winter of 2009, caused virtually all asset classes, with the exception of Treasury notes, bills and bonds, to become highly correlated. In other words, they all dropped dramatically in value. Whether an investor was in stocks, real estate, commodities, credit product or basically anything, it went down in value as there was a liquidation of every and all assets that had any perceived risk. By March, most of the forced liquidations had occurred, and there were some signs that an economic recovery could occur. At that point the market turned higher, and much the same as we experienced a melt-down in prices, now investors are scrambling to get back into the market and recover earlier losses. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The increase in correlations across virtually all asset classes caused the fund to perform very similarly to the stock market. While over time the individual investments in the funds and ETFs specific to the Diversifier have a relatively low correlation to the stock market, the correlation patterns do not work out all the time. The fund's investment in REITs, commodities and commodity stocks all went down along side the market during the sell-off. As the broad market recovered, these asset classes did as well, thus the fund has made up a chunk of its losses. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. CONCENTRATING INVESTMENTS IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, PROPERTY VALUE CHANGES AND MANAGEMENT SKILL. THE FUND'S USE OF ASSET CLASS ALLOCATIONS DOES NOT ASSURE OR GUARANTEE BETTER PERFORMANCE AND CANNOT ELIMINATE THE RISK OF INVESTMENT LOSS. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THE APPLICABLE RISK DISCLOSURE FOR EACH OF THE UNDERLYING VIRTUS MUTUAL FUNDS, WHICH CAN BE FOUND IN THE CURRENT PROSPECTUS. LACK OF LIQUIDITY IN AN ETF COULD RESULT IN ITS VALUE BEING MORE VOLATILE THAN THE UNDERLYING PORTFOLIO OF SECURITIES. SECTOR ETFS ARE SUBJECT TO SECTOR RISKS AND NON-DIVERSIFICATION RISKS, WHICH MAY RESULT IN GREATER PRICE FLUCTUATIONS THAN THE OVERALL MARKET. BECAUSE THE FUND INVESTS IN ETFS, IT INDIRECTLY BEARS ITS PROPORTIONATE SHARE OF THE OPERATING EXPENSES OF THE UNDERLYING FUNDS. INDIRECTLY, THE FUND IS SUBJECT TO ALL RISKS ASSOCIATED WITH THE UNDERLYING ETFS. INVESTING IN FUNDS THAT USE LEVERAGE, SHORT SELLING, FUTURES, OPTIONS AND/OR DERIVATIVES MAY EXPOSE THE FUND TO ADDITIONAL RISKS. COMMODITY OR COMMODITY-RELATED EQUITY PRICES MAY FLUCTUATE WIDELY OVER SHORT TIME PERIODS. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 10 ALTERNATIVES DIVERSIFIER FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 year to 9/30/09 Date ------ ---------- --------- CLASS A SHARES AT NAV(2) -10.00% -0.16% 11/30/05 CLASS A SHARES AT POP(3, 4) -15.17 -1.69 11/30/05 CLASS C SHARES AT NAV(2) -10.55 -0.89 11/30/05 CLASS C SHARES WITH CDSC(4) -10.55 -0.89 11/30/05 S&P 500(R) INDEX -6.91 -2.20 11/30/05
FUND EXPENSE RATIOS(5): A SHARES: GROSS 0.75%, NET 0.45%; C SHARES: GROSS 1.50%, NET 1.20%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 10/1/09. 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 This chart assumes an initial investment of $10,000 made on November 30, 2005 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Alternatives Virtu Diversifier Fund Diversifier Fund S&P 500(R) Class A Class C Index ------------------- ---------------- ---------- 11/30/2005 9425 10000 10000 9/29/2006 10059 10606 10855 9/28/2007 11431 11965 12640 9/30/2008 10409 10803 9862 9/30/2009 9368 9663 9181
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Exchange-Traded Funds 33% Domestic Equity Funds 30 Foreign Equity Funds 27 Fixed Income Funds 10 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 11 TICKER SYMBOLS: Class A: SAVAX Class B: SAVBX Class C: SAVCX Class I: SAVYX BOND FUND - BOND FUND (THE "FUND") is diversified and has an investment objective of high total return from both current income and capital appreciation. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned 13.12%, Class B shares returned 12.23%, Class C Shares returned 12.19% and Class I shares returned 13.34%. 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 10.56%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The global credit emergency produced a worldwide recession in 2009 as quarterly U.S. GDP plummeted by -5.4% and -6.4% in Q4 08 and Q1 09 respectively. Massive monetary stimulus began to revive the economy in Q2 09, with GDP rebounding to positive territory by the end the September quarter. - The markets reflected these two extremes over the course of the fiscal year. Risk markets, especially corporate credit, sold off violently in the first half of the fiscal year. This pattern reversed completely in March 2009, as corporate bonds, both investment grade and high yield, enjoyed explosive returns. - The risk rally left government guaranteed and government related debt without sponsorship, limiting the performance of these defensive market sectors. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - While exposure to corporate credit had a negative impact on performance during the first six months of the fiscal year, the Fund avoided any corporate defaults and virtually eliminated exposure to the plummeting commercial real estate. Underweights to risk free Treasuries and agency MBS inhibited returns during this period. - An increase in high yield exposure, combined with the initiation of a CMBS overweight, contributed the most to the Fund's performance during the last two quarters of the fiscal year. The high yield component of the portfolio returned 39% for the half-year, while high grade corporate bonds generated a 22% total return during the period. - The Fund's underweight to U.S. Treasuries, and agency mortgage backed securities was a positive during the back half of the year, as these sectors languished. - Over the full year, a credit overweight, nimble trading of CMBS and MBS, and an underweight to U.S. Treasuries produced roughly 200 basis points of excess return over the benchmark. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. THE PRINCIPAL ON MORTGAGE- OR ASSET-BACKED SECURITIES MAY NORMALLY BE PREPAID AT ANY TIME, WHICH WILL REDUCE THE YIELD AND MARKET VALUE OF THESE SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 12 BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
1 year 5 years 10 years ------ ------- -------- CLASS A SHARES AT NAV(2) 13.12% 4.38% 5.52% CLASS A SHARES AT POP(3) 7.75 3.37 5.01 CLASS B SHARES AT NAV(2) 12.23 3.59 4.73 CLASS B SHARES WITH CDSC(4) 8.23 3.59 4.73 CLASS C SHARES AT NAV(2) 12.19 3.60 4.74 CLASS C SHARES WITH CDSC(4) 12.19 3.60 4.74 CLASS I SHARES AT NAV 13.34 4.66 5.82 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 6.30
FUND EXPENSE RATIOS(5): A SHARES: 1.12%; B SHARES: 1.87%; C SHARES: 1.87%; I SHARES: 0.87%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 5/29/09. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B, Class C, and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Barclays Capital Virtus Bond Virtus Bond Virtus Bond Virtus Bond U.S. Aggregate Fund Class A Fund Class B Fund Class C Fund Class I Bond Index ------------ ------------ ------------ ------------ ---------------- 9/30/1999 9525 10000 10000 10000 10000 9/29/2000 10081 10506 10512 10617 10699 9/28/2001 11043 11417 11422 11662 12085 9/30/2002 11650 11968 11973 12355 13124 9/30/2003 12615 12858 12861 13414 13834 9/30/2004 13161 13313 13316 14024 14343 9/30/2005 13443 13493 13496 14365 14744 9/30/2006 13915 13871 13873 14917 15285 9/30/2007 14484 14323 14324 15561 16070 9/29/2008 14413 14147 14161 15536 16657 9/28/2009 16305 15877 15888 17608 18415
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Corporate Bonds 40% Financials 17% Telecommunication Services 5 Consumer Staples 4 Consumer Discretionary 3 All other sectors 11 Mortgage-Backed Securities 36 U.S. Government Securities 17 Municipal Bonds 1 Other (includes short-term investments) 6 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 13 TICKER SYMBOLS: Class A: CTESX CA TAX-EXEMPT BOND FUND Class I: CTXEX - CA TAX-EXEMPT BOND FUND (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, 2009, the Fund's Class A shares at NAV returned 12.31% and Class I shares returned 12.50%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 10.56%; the Barclays Capital California Municipal Bond Index, the Fund's style-specific benchmark, returned 14.35%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The municipal bond market is staging a rebound so far in 2009 after suffering through one of the most challenging periods since the Great Depression. Increased retail investment, solid price performance, helpful government intervention, and a thaw in the market for new issuances are the main areas of improvement experienced so far this year. Through the first nine months of 2009, retail open-end municipal bond funds have experienced record inflows and individual purchases municipal bonds have been extremely strong as investors look to the municipal bond market for principal protection and income exempt from taxes. The market has also been buoyed by the Build America Bond (BAB) program. BABs allow issuers an alternative to the tax-exempt market for the financing of infrastructure development. BABs issues are taxable municipal bonds, but the issuer receives a 35% subsidy for the cost of interest from the Federal Government. So, after factoring in the 35% interest cost subsidy to the issuer, the cost of capital for deals issued to date has been well below what the issuers would have paid in the tax-exempt marketplace. The general effect of this program has been an overall improvement in the price of most high quality municipal bonds, due in part from the decline in the supply of traditional tax-exempt issuance now being issued as BABs. Despite this lower amount of traditional tax-exempt new issuance through the first nine months of 2009 compared to the same period last year, market technicals are healthy as investors are more willing to own municipal bonds and issuers are finding the cost of capital to be acceptable compared to late 2008. However, growing concerns surrounding the fiscal challenges facing all municipalities could derail these areas of improvement, especially if economic conditions worsen or fail to improve in the near term. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The Fund's high quality focus hurt relative performance through the first nine months of 2009 as lower quality bonds bounced off their extreme lows at the start of the year. Investors are more comfortable owning municipal bonds and are beginning to venture into the single-A and BBB rated issues in some areas of the market as overall interest rates have declined and investors are searching for higher yields. This trend has impacted performance so far in 2009. This performance from lower quality issues is not a major fundamental improvement, but instead a reversal of the very poor technical conditions that existed for much of 2008. While the Fund's absolute returns are solidly positive, it could not keep pace with the improvement in prices of lower quality bonds. While the Fund's exposure to healthcare and tobacco securities have performed very well through the first nine months of the year, our overall focus on higher quality bonds will generally result in less exposure to these riskier sectors than our peers. The Fund did benefit from purchases of high quality zero-coupon bonds during the year. While mostly out of favor for the first half of the year, this structure has experienced solid price appreciation during the past three months as investor selling has subsided and relative spreads are attracting market participants. A FUND THAT CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE WILL BE MORE SUSCEPTIBLE TO FACTORS ADVERSELY AFFECTING ISSUERS LOCATED IN THAT STATE THAN WOULD A MORE GEOGRAPHICALLY DIVERSE PORTFOLIO OF SECURITIES. A PORTION OF INCOME MAY BE SUBJECT TO SOME STATE AND/OR LOCAL TAXES AND, FOR CERTAIN INVESTORS, A PORTION MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX. INVESTING IN MUNICIPAL BONDS INVOLVES MARKET RISK AND CREDIT RISK. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 14 CA TAX-EXEMPT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 year 5 years 10 years to 9/30/09 Date ------ ------- -------- ---------- --------- CLASS A SHARES AT NAV(2) 12.31% 3.76% 4.87% -- -- CLASS A SHARES AT POP(3, 4) 6.97 2.76 4.36 -- -- CLASS I SHARES AT NAV 12.50 -- -- 4.15% 9/29/06 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 6.30 6.40 9/29/06 BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX 14.35 4.72 5.69 4.64 9/29/06
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.01%, NET 0.85%; I SHARES: GROSS 0.76%, NET 0.60%. 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 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 3/2/09. 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 This chart assumes an initial investment of $10,000 made on September 30, 1999 for Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus CA Barclays Capital Barclays Tax-Exempt California Capital Bond Municipal U.S. Aggregate Fund Class A Bond Index Bond Index ------------ ---------------- -------------- 9/30/1999 9525 10000 10000 9/29/2000 10171 10708 10699 9/28/2001 11120 11755 12085 9/30/2002 12169 12770 13123 9/30/2003 12323 13081 13834 9/30/2004 12753 13811 14343 9/30/2005 13145 14509 14744 9/29/2006 13679 15177 15285 9/28/2007 13929 15628 16070 9/30/2008 13659 15213 16656 9/30/2009 15340 17395 18415
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Pre-Refunded 27% General Obligation 19 General Revenue 19 Medical Revenue 8 Water & Sewer Revenue 8 Development Revenue 6 Education Revenue 3 Other (includes short-term investments) 10 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 15 TICKER SYMBOLS: Class A: PGUAX Class C: PGUCX GLOBAL INFRASTRUCTURE FUND Class I: PGIUX - GLOBAL INFRASTRUCTURE FUND (THE "FUND") is diversified and has an investment objective of seeking both capital appreciation and current income. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned -4.76%; Class C shares returned -5.49%; Class I shares returned -4.54%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%; MSCI World Infrastructure Sector Capped Index, the Fund's style-specific benchmark appropriate for comparison, returned -2.24%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - Extreme volatility defined the market during the Fund's fiscal year ended September 30, 2009. In the first half of the fiscal year, markets were quite difficult. Communications and utilities showed their traditional defensiveness, outperforming the broader market. The energy and transportation sectors reflected concerns about economic weakness. - The strong market rally that began in March 2009 continued throughout the second half of the fiscal year ended September 30, 2009. Sector rotation to higher beta names hurt the Fund's performance relative to the broader market, as our defensive stance over the last six months was unhelpful. Sectors geared to an economic recovery did well (i.e., transportation and energy), while the defensiveness of utilities were out of favor. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The difficult relative performance of the last fiscal quarter resulted in underperformance versus the benchmark for the full year ended September 30, 2009. Stock selection in the communications and utilities sectors contributed to the Fund's relative underperformance, as the Fund maintained a defensive posture through most of the powerful rally that began in March 2009. However, stock selection in the transportation sector combined with an overweight position in the second half of the fiscal year was a positive contributor to performance. - Looking at regional contributions, stock selection in the Fund's North American holdings was a detractor to relative performance, as a result of the defensive stance in communications and utilities. The Fund's underweight in Asia continued to contribute to relative performance. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. INFRASTRUCTURE RELATED ENTITIES ARE SUBJECT TO FACTORS THAT MAY ADVERSELY AFFECT THEIR BUSINESS INCLUDING GOVERNMENT POLICIES AND REGULATION. INVESTING IN FUNDS THAT USE LEVERAGE, SHORT SELLING, FUTURES, OPTIONS AND/OR DERIVATIVES MAY EXPOSE THE FUND TO ADDITIONAL RISKS. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE 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 Key Investment Terms and Footnote Legend starting on page 4. 16 GLOBAL INFRASTRUCTURE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 year to 9/30/09 Date ------ ---------- --------- CLASS A SHARES AT NAV(2) -4.76% 4.42% 12/30/04 CLASS A SHARES AT POP(3, 4) -10.24 3.12 12/30/04 CLASS C SHARES AT NAV(2) -5.49 3.64 12/30/04 CLASS C SHARES WITH CDSC(4) -5.49 3.64 12/30/04 CLASS I SHARES AT NAV -4.54 -16.58 6/6/08 S&P 500(R) INDEX -6.91 NOTE 5 NOTE 5 MSCI WORLD INFRASTRUCTURE SECTOR CAPPED INDEX -2.24 NOTE 6 NOTE 6
FUND EXPENSE RATIOS(7): A SHARES: 1.22%; C SHARES: 1.97%, I SHARES: 0.97%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS -0.76% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND -15.32% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 5.40% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND -16.19% FOR CLASS I (SINCE 6/6/08). (7) PER PROSPECTUS EFFECTIVE 3/2/09. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on December 30, 2004 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Virtus MSCI World Global Global Infrastructure Infrastructure Infrastructure S&P 500(R) Sector Capped Fund Class A Fund Class C Index Index ------------ ------------- ---------- ------------- 12/30/2004 9425 10000 10000 10000 9/30/2005 10378 10959 10291 11567 9/29/2006 11381 11911 11401 12702 9/28/2007 14405 14964 13276 15986 9/30/2008 12153 12543 10358 13131 9/30/2009 11574 11855 9643 12837
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Telecommunication Services 34% Utilities 30 Energy 15 Industrials 15 Other (includes short-term investments) 6 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 17 TICKER SYMBOLS: Class A: NWWOX Class B: WWOBX GLOBAL OPPORTUNITIES FUND Class C: WWOCX - GLOBAL OPPORTUNITIES FUND (THE "FUND") is diversified and has an investment objective of capital appreciation. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned -13.53%, Class B shares returned -14.10%, and Class C Shares returned -14.16%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%, and the MSCI World(SM) Index (Net), the Fund's style-specific benchmark appropriate for comparison, returned -2.29%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The risk rally persisted throughout most of the Fund's fiscal year. - Late in fiscal period, there were signs that riskier investments might be losing their appeal. If this proves out, higher quality names may benefit. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Overall the valuation gap affected performance negatively during the period. The market's infatuation with lower quality, more cyclical names should diminish. - During the past twelve months, the Fund's exposure to the Consumer Staples sector has increased. The sector made a strong positive contribution to relative performance during the period. - The Fund continues to limit exposure to financial companies, which hurt relative performance. Sector specific issues, including lack of clarity, poor transparency, a changing regulatory framework, and questionable ability to drive earnings, informed our decisions in this sector. - The Fund's out-of-index position in India hurt relative performance during the period, although our holdings in the country made attractive contributions to absolute performance. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE 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 Key Investment Terms and Footnote Legend starting on page 4. 18 GLOBAL OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
1 year 5 years 10 years ------ ------- -------- CLASS A SHARES AT NAV(2) -13.53% 0.27% -0.31% CLASS A SHARES AT POP(3, 4) -18.50 -0.91 -0.90 CLASS B SHARES AT NAV(2) -14.10 -0.43 -1.03 CLASS B SHARES WITH CDSC(4) -17.50 -0.43 -1.03 CLASS C SHARES AT NAV(2) -14.16 -0.46 -1.05 CLASS C SHARES WITH CDSC(4) -14.16 -0.46 -1.05 S&P 500(R) INDEX -6.91 1.01 -0.15 MSCI WORLD(SM) INDEX (NET) -2.29 3.51 0.92
FUND EXPENSE RATIOS(5): A SHARES: 1.65%, B SHARES: 2.40%, C SHARES: 2.40%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Global Virtus Global Virtus Global Opportunities Opportunities Opportunities S&P 500(R) MSCI World Fund Class A Fund Class B Fund Class C Index Index (Net) ------------- ------------- ------------- ---------- ----------- 9/30/1999 9425 10000 10000 10000 10000 9/29/2000 10784 11364 11367 11337 10816 9/28/2001 7766 8113 8121 8317 7772 9/30/2002 6526 6778 6783 6614 6281 9/30/2003 7864 8091 8086 8229 7876 9/30/2004 9016 9212 9211 9370 9223 9/30/2005 10839 10993 10983 10517 10969 9/29/2006 12556 12643 12638 11653 12524 9/28/2007 15208 15195 15188 13568 15166 9/30/2008 10569 10495 10487 10586 11216 9/30/2009 9139 9016 9002 9855 10959
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Consumer Staples 42% Health Care 19 Information Technology 10 Utilities 7 Consumer Discretionary 4 Energy 4 Financials 4 Other (includes short-term investments) 10 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 19 TICKER SYMBOLS: Class A: VGSAX Class C: VGSCX GLOBAL REAL ESTATE SECURITIES FUND Class I: VGISX - GLOBAL REAL ESTATE SECURITIES FUND (THE "FUND") is non-diversified and has a primary investment objective of long-term capital appreciation and a secondary investment objective of income. - For the fiscal period March 2, 2009 (inception date) through September 30, 2009, the Fund's Class A shares at NAV returned 83.30%*; Class C shares returned 82.50%*; Class I shares returned 83.60%*. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 52.89%*, and the FTSE EPRA/NAREIT Developed Rental Index, the Fund's style-specific benchmark appropriate for comparison, returned 89.33%*. * Returns less than one 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The Fund will complete its first full fiscal year in 2010. The first half of the fiscal year was characterized by a rapidly deteriorating global economy on the back of a credit crisis that originated in debt markets for single-family home loans and spread to every area of the debt capital markets. Thus, leverage became a very dirty word and global real estate fundamentals took a back seat to balance sheet capacity and access to liquidity. Given that global real estate companies by their nature have above average leverage relative to the broader global equity markets and rely on a functioning debt capital market to run their business, global real estate securities were one of the largest casualties of the worsening credit crisis and resultant rise in risk premiums and debt capital costs during the fourth quarter of 2008 and first quarter of 2009. - During the second half of the fiscal year the market had its gaze affixed upon the beauty of "green-shoots" or those early signs of recovery that began to spring-up post two very dismal quarters of global economic performance. Consistent with this view, risk premiums contracted substantially, creating an environment that favored higher risk asset classes (e.g. emerging market equities, small cap equities, etc...) and the more market sensitive or higher beta securities within these asset classes. Thus, those securities that only as recently as the first quarter of 2009 would have been considered weeds in need of removal, became sweet smelling roses within your portfolio. As this more optimistic reading of the landscape became firmly rooted, global real estate equity markets blossomed; posting one of their strongest six months of total return performance on record. Many global real estate companies took advantage of this ebullience by issuing new equity to help reposition their balance sheets. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The Fund will complete its first full fiscal year in 2010. The March 2009 inception date for the Fund basically coincided with the bottom in the global real estate equity markets and the broader global equities markets. Accordingly, the since inception total returns for the Fund have been significant and ahead of the broader equity markets. However, the since inception total returns have lagged the Fund's benchmark largely due to the performance in the first three and a half months of the less than seven month period being evaluated here. During the abbreviated period, the Fund maintained an average overweight allocation to the U.S. which helped, while the security selection within the U.S. tied to our GARP (growth-at-a-reasonable-price) style detracted as it did in some other countries. On an ex-U.S. basis, the Fund was on average collectively underweight the other countries. The largest negative impact on Fund performance relative to its benchmark was the Fund's residual cash position that averaged roughly 2.75% since inception. Australia, the U.S., the U.K., and Japan were the greatest detractors of performance on a country basis. The negative impact from Australia was largely driven by stock selection and to a lesser extent allocation. For the U.K., the negative impact was balanced between stock selection and allocation, and for Japan the negative impact was driven by stock selection and partially offset by a benefit in allocation. Of the contributing countries, Belgium's lack of allocation by the Fund helped the most followed by Canada, for both allocation and selection, and Italy due its lack of allocation. - Going forward, with the return of liquidity to the debt capital markets and better positioned balance sheets among the publicly traded global real estate companies, we are poised to move into the next phase of the real estate capital market cycle. No longer will the primary focus be on selling assets or issuing equity to repair broken balance sheets, but rather on returning to the more virtuous cycle of raising capital to make acquisitions at positive spreads to underlying cost of capital and growing cash flow per share and ultimately dividends. - As long-term investors in global real estate equities, with an emphasis on growth-at-a-reasonable-price, we anxiously await the emergence of this cycle. However, patience will be required; though the capital markets appear to be cooperative, the expected sellers of assets, namely, the Banks and other over-leveraged owners of real estate assets, have been slow to come to the table. This speaks to the much heard phrases today of "kicking the can down the road" and "extend and pretend." Regardless, given the sheer volume of real estate transactions that took place during the years 2005 - 2007 at peak prices utilizing high levels of low-cost leverage, we are confident opportunities will emerge that the better positioned public real estate companies will be prepared to capitalize on in this environment. CONCENTRATING INVESTMENTS IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, PROPERTY VALUE CHANGES AND MANAGEMENT SKILL. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. A NON-DIVERSIFIED FUND MAY BE MORE SUSCEPTIBLE TO ANY SINGLE ECONOMIC, POLITICAL OR REGULATORY EVENT AFFECTING AN ISSUER THAN IS A DIVERSIFIED FUND. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 20 GLOBAL REAL ESTATE SECURITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception to 9/30/09 Date ---------- --------- CLASS A SHARES AT NAV(2) 83.30% 3/02/09 CLASS A SHARES AT POP(3, 4) 72.76 3/02/09 CLASS C SHARES AT NAV(2) 82.50 3/02/09 CLASS C SHARES WITH CDSC(4) 81.50 3/02/09 CLASS I SHARES AT NAV 83.60 3/02/09 S&P 500(R) INDEX 52.89 3/02/09 FTSE EPRA NAREIT DEVELOPED RENTAL INDEX 89.33 3/02/09
FUND EXPENSE RATIOS(5): A SHARES: GROSS 3.08%, NET 1.40%; C SHARES: GROSS 3.83%, NET 2.15%; CLASS I SHARES: GROSS 2.83%, NET 1.15%. 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 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. NET EXPENSE: EXPENSES REDUCED BY CONTRACTUAL FEE WAIVER IN EFFECT THROUGH 3/31/10. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF CONTRACTUAL FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on March 2, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Global Virtus Global Virtus Global Real Estate Real Estate Real Estate FTSE EPRA/NAREIT Securities Fund Securities Fund Securities Fund S&P 500(R) Developed Class A Class C Class I Index Rental Index --------------- --------------- --------------- ---------- ---------------- 3/2/2009 9425 10000 10000 10000 10000 9/30/2009 17276 18150 18360 15289 18933
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Retail REITs 35% Office REITs 19 Specialized REITs 12 Diversified REITs 10 Real Estate Operating Companies 8 Residential REITs 8 Industrial REITs 5 Other (includes short-term investments) 3 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 21 TICKER SYMBOLS: Class A: VGAAX Class C: VGACX Class I: VGAIX GREATER ASIA EX JAPAN OPPORTUNITIES FUND - GREATER ASIA EX JAPAN OPPORTUNITIES FUND (THE "FUND") is diversified and has an investment objective to seek long-term capital appreciation. - For the fiscal period April 21, 2009 (inception date) through September 30, 2009, the Fund's Class A shares at NAV returned 30.10%*; Class C shares returned 29.60%*; Class I shares returned 30.20%*. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 23.27%*, and the MSCI AC Far East ex Japan Index (net), the Fund's style-specific benchmark, returned 39.82%*. * Returns less than one 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 MARKET PERFORM DURING THE FUND'S FISCAL PERIOD? - The risk rally persisted throughout most of the Fund's fiscal period. - Late in the fiscal period, there were signs that riskier investments might be losing their appeal. If this proves out, higher quality names may benefit. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL PERIOD? - Overall the valuation gap affected performance negatively during the period. The market's infatuation with lower quality, more cyclical names should diminish. - During most of the period, the top performing sectors were generally highly cyclical. As always, these are sectors in which we have few holdings because it is difficult to find companies that meet our strict investment criteria. Information Technology, Industrial, and Materials sectors made the largest negative contributions to relative performance. - The Fund's relative underexposure to Chinese names and strong stock selection, led to a positive contribution to relative performance for the fiscal period. - Indian companies comprise about one-quarter of the Fund. During the period, these out-of-index investments hurt relative performance. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 22 GREATER ASIA EX JAPAN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/09
Inception Inception to 9/30/09 Date ---------- --------- CLASS A SHARES AT NAV(2) 30.10% 4/21/09 CLASS A SHARES AT POP(3, 4) 22.62 4/21/09 CLASS C SHARES AT NAV(2) 29.60 4/21/09 CLASS C SHARES WITH CDSC(4) 28.60 4/21/09 CLASS I SHARES AT NAV 30.20 4/21/09 S&P 500(R) INDEX 23.27 4/21/09 MSCI AC FAR EAST EX JAPAN INDEX (NET) 39.82 4/21/09
FUND EXPENSE RATIOS(5): A SHARES: GROSS 2.33%, NET 1.80%; C SHARES: GROSS 3.08%, NET 2.55%; CLASS I SHARES: GROSS 2.08%, NET 1.55%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. NET EXPENSE: EXPENSES REDUCED BY A CONTRACTUAL FEE WAIVER THROUGH 3/31/10. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF CONTRACTUAL FEE WAIVER. GROWTH OF $10,000 For period ended 9/30 This chart assumes an initial investment of $10,000 made on April 21, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Greater Asia ex Greater Asia ex Greater Asia ex MSCI AC Far Japan Opportunities Japan Opportunities Japan Opportunities S&P 500(R) East ex Japan Fund Class A Fund Class C Fund Class I Index Index (net) ------------------- ------------------- ------------------- ---------- ------------- 4/21/2009 9425 10000 10000 10000 10000 9/30/2009 12262 12860 13020 12327 13982
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Consumer Staples 22% Industrials 12 Financials 11 Utilities 9 Telecommunication Services 6 Consumer Discretionary 4 Energy 3 Other (includes short-term investments) 30 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 23 TICKER SYMBOLS: Class A: VGEAX Class C: VGECX Class I: VGEIX GREATER EUROPEAN OPPORTUNITIES FUND - GREATER EUROPEAN OPPORTUNITIES FUND (THE "FUND") is diversified and has an investment objective to seek long-term capital appreciation. - For the fiscal period April 21, 2009 (inception date) through September 30, 2009, the Fund's Class A shares at NAV returned 29.70%*; Class C shares returned 29.30%*; Class I shares returned 29.80%*. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 25.34%* and the MSCI Europe Index (net), the Fund's style-specific benchmark, returned 44.02%*. * Returns less than one 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 MARKET PERFORM DURING THE FUND'S FISCAL PERIOD? - The risk rally persisted throughout most of the Fund's fiscal period. - Late in fiscal period, there were signs that riskier investments might be losing their appeal. If this proves out, higher quality names may benefit. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL PERIOD? - Our philosophy and management approach generally do not deliver relative outperformance during periods when lower quality shares are in favor. - Although the U.K. made an attractive contribution to absolute performance during the period, it hurt relative performance the most. Shares of higher quality companies benefited less than lower quality names during the risk rally. - The performance of Consumer Staples names was roughly in line with the index, but our overweight relative to the index hurt relative performance. - The Financial sector was the top performer in the index during the end of the fiscal period. We continued to limit our exposure to financial companies, which hurt relative performance. Sector specific issues, including lack of clarity, poor transparency, a changing regulatory framework, and questionable ability to drive earnings, informed our decisions. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 24 GREATER EUROPEAN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/09
Inception Inception to 9/30/09 Date ---------- --------- CLASS A SHARES AT NAV(2) 29.70% 4/21/09 CLASS A SHARES AT POP(3, 4) 22.24 4/21/09 CLASS C SHARES AT NAV(2) 29.30 4/21/09 CLASS C SHARES WITH CDSC(4) 28.30 4/21/09 CLASS I SHARES AT NAV 29.80 4/21/09 S&P 500(R) INDEX 25.34 4/21/09 MSCI EUROPE INDEX (NET) 44.02 4/21/09
FUND EXPENSE RATIOS(5): A SHARES: GROSS 2.05%, NET 1.45%; C SHARES: GROSS 2.80%, NET 2.20%; CLASS I SHARES: GROSS 1.80%, NET 1.20%. 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. NET EXPENSE: EXPENSES REDUCED BY A CONTRACTUAL FEE WAIVER UNTIL 3/31/10. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF CONTRACTUAL FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on April 21, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Greater Great Greater European European European MSCI Opportunities Opportunities Opportunities S&P 500(R) Europe Fund Class A Fund Class C Fund Class I Index Index (net) ------------- ------------- ------------- ---------- ----------- 9-Apr 9425 10000 10000 10000 10000 9-Sep 12224 12830 12980 12534 14402
ASSET ALLOCATION The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Consumer Staples 39% Health Care 19 Utilities 10 Industrials 8 Energy 7 Financials 7 Information Technology 4 Other (includes short-term investments) 6 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 25 TICKER SYMBOLS: Class A: PHCHX Class B: PHCCX HIGH YIELD FUND Class C: PGHCX - HIGH YIELD FUND (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, 2009, the Fund's Class A shares at NAV returned 7.02%, Class B shares returned 6.13%, and Class C Shares returned 6.36%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 10.56%, and the Barclays Capital High Yield Bond 2% Issuer Cap Index, the Fund's style-specific index appropriate for comparison, returned 22.51%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - After one of the worst performance quarters in high yield history, the high yield market rebounded significantly over the last nine months as investors had a sizeable risk appetite especially in low rated assets. - Double C and below rated assets generated a 96.84% return during the relevant time period while Single B rated assets (the funds average rating) only generated a 13.25% return. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Underweight Low Quality - As a high quality high yield manager we primarily focus on double and single B credits. We are significantly underweight in the lowest rated and lowest quality parts of the index. The CCC part of the index returned +17.32 for the 12 months ending 9/30/09. The CC and below part of the index returned 96.84% for the same timeframe. These two rating categories represent over 30% of the index. - During the fourth quarter of 2008 and the first quarter of 2009, we significantly raised our cash balances as we took a firm wide strategic view that a weakening economy would increase defaults and drive high yield prices lower, thereby dictating higher than average cash holdings in the portfolio. We were raising and carrying high cash balances as other market participants shook off any/all concerns about the economy and began to buy anything with yield (irrespective of rating). - Cyclical/Consumer Dependent Industries - With the collapse of the financial and commodity markets at the end of 2008 and the poor economic outlook for the US economy in 2009/2010, we made a decision to underweight highly cyclical and consumer dependent industries. During 2009, many of these industries (e.g. Commodity Chemical, Paper, Airlines, Casinos, and Autos) rallied significantly as market participants invested cash inflows into any bond they could buy. - Fallen Angel Financials - Several fallen angel financial companies (e.g. AIG, CIT) that became distressed in 2008/early 2009 and were on the verge of insolvency, rose significantly in 2009. We have very little exposure to fallen angel financials in the high yield fund as they don't meet our high quality focus. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 26 HIGH YIELD FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
1 year 5 years 10 years ------ ------- -------- CLASS A SHARES AT NAV(2) 7.02% 2.25% 1.84% CLASS A SHARES AT POP(3, 4) 1.94 1.26 1.34 CLASS B SHARES AT NAV(2) 6.13 1.48 1.07 CLASS B SHARES WITH CDSC(4) 2.24 1.48 1.07 CLASS C SHARES AT NAV(2) 6.36 1.52 1.08 CLASS C SHARES WITH CDSC(4) 6.36 1.52 1.08 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 6.30 BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX 22.51 6.16 6.40
FUND EXPENSE RATIOS(5): A SHARES: 1.34%, B SHARES: 2.09%, C SHARES: 2.09%. 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% WITHIN 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 3/2/09. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Barclays Capital Virtus Virtus Virtus U.S. High Yield Barclays Capital High Yield High Yield High Yield 2% Issuer Capped U.S. Aggregate Fund Class A Fund Class B Fund Class C Bond Index Bond Index ------------ ------------ ------------ ---------------- ---------------- 9/30/1999 9525 10000 10000 10000 10000 9/29/2000 9689 10090 10090 10095 10699 9/28/2001 8205 8489 8477 9548 12085 9/30/2002 7905 8117 8103 9466 13123 9/30/2003 9407 9585 9583 12255 13834 9/30/2004 10222 10330 10324 13790 14343 9/30/2005 10763 10783 10775 14698 14744 9/29/2006 11289 11233 11223 15761 15285 9/28/2007 12145 11985 11995 16961 16070 9/30/2008 10676 10477 10469 15179 16657 9/30/2009 11425 11119 11135 18596 18415
ASSET ALLOCATION The following table presents asset allocations within certain sectors as a percentage of total investments as of September 30, 2009. Corporate Bonds 94% Consumer Discretionary 34% Telecommunication Services 15 Consumer Staples 11 Industrials 9 Financials 7 All other sectors 18 Other (includes short-term investments) 6 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 27 TICKER SYMBOLS: Class A: PXRAX Class C: PXRCX Class I: PXRIX INTERNATIONAL REAL ESTATE SECURITIES FUND - INTERNATIONAL REAL ESTATE SECURITIES FUND (THE "FUND") is non-diversified and has a primary investment objective of long-term capital appreciation and a secondary investment objective of income. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned -5.59%; Class C shares returned -6.30%; Class I shares returned -5.43%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%, and the FTSE EPRA NAREIT Global ex U.S. Rental Index, the Fund's style-specific benchmark appropriate for comparison, returned -7.25%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The first half of the Fund's fiscal year was characterized by a rapidly deteriorating global economy on the back of a credit crisis that originated in debt markets for single-family home loans and spread to every area of the debt capital markets. Thus, leverage became a very dirty word and global real estate fundamentals took a back seat to balance sheet capacity and access to liquidity. Given that global real estate companies by their nature have above average leverage relative to the broader global equity markets and rely on a functioning debt capital market to run their business, global real estate securities were one of the largest casualties of the worsening credit crisis and resultant rise in risk premiums and debt capital costs during the fourth quarter of 2008 and first quarter of 2009. - During the second half of the Fund's fiscal year the market had its gaze affixed upon the beauty of "green-shoots" or those early signs of recovery that began to spring-up post two very dismal quarters of global economic performance. Consistent with this view, risk premiums contracted substantially, creating an environment that favored higher risk asset classes (e.g. emerging market equities, small cap equities, etc...) and the more market sensitive or higher beta securities within these asset classes. Thus, those securities that only as recently as the first quarter of 2009 would have been considered weeds in need of removal, became sweet smelling roses within your portfolio. As this more optimistic reading of the landscape became firmly rooted, global real estate equity markets blossomed; posting one of their strongest six months of total return performance on record. Many global real estate companies took advantage of this ebullience by issuing new equity to help reposition their balance sheets. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Despite the negative absolute return posted by the Fund during the fiscal year, the Fund has been successful in out-performing its benchmark and the broader U.S. equity market. Superior relative performance to the Fund's benchmark was driven by both security selection and country allocation. Security selection within Australia, Finland and Singapore helped performance, while security selection within Germany and the U.K. hurt performance. Country allocation with respect to Hong Kong and Austria helped performance, while country allocation to the U.K. hurt performance. By adhering to our investment process, philosophy and style, we believe we can continue to perform well relative to our benchmark. - Going forward, with the return of liquidity to the debt capital markets and better positioned balance sheets among the publicly traded global real estate companies, we are poised to move into the next phase of the real estate capital market cycle. No longer will the primary focus be on selling assets or issuing equity to repair broken balance sheets, but rather on returning to the more virtuous cycle of raising capital to make acquisitions at positive spreads to underlying cost of capital and growing cash flow per share and ultimately dividends. - As long-term investors in global real estate equities, with an emphasis on growth-at-a-reasonable-price, we anxiously await the emergence of this cycle. However, patience will be required; though the capital markets appear to be cooperative, the expected sellers of assets, namely, the Banks and other over-leveraged owners of real estate assets, have been slow to come to the table. This speaks to the much heard phrases today of "kicking the can down the road" and "extend and pretend." Regardless, given the sheer volume of real estate transactions that took place during the years 2005 - 2007 at peak prices utilizing high levels of low-cost leverage, we are confident opportunities will emerge that the better positioned public real estate companies will be prepared to capitalize on in this environment. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. A NON-DIVERSIFIED FUND MAY BE MORE SUSCEPTIBLE TO ANY SINGLE ECONOMIC, POLITICAL OR REGULATORY EVENT AFFECTING AN ISSUER THAN IS A DIVERSIFIED FUND. CONCENTRATING INVESTMENTS IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, PROPERTY VALUE CHANGES AND MANAGEMENT SKILL. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 28 INTERNATIONAL REAL ESTATE SECURITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 Year to 9/30/09 Date ------ ---------- --------- CLASS A SHARES AT NAV(2) -5.59% -19.56% 10/01/07 CLASS A SHARES AT POP(3, 4) -11.02 -21.91 10/01/07 CLASS C SHARES AT NAV(2) -6.30 -20.23 10/01/07 CLASS C SHARES WITH CDSC(4) -6.30 -20.23 10/01/07 CLASS I SHARES AT NAV -5.43 -19.40 10/01/07 S&P 500(R) INDEX -6.91 -15.34 10/01/07 FTSE EPRA NAREIT GLOBAL EX U.S. RENTAL INDEX -7.25 -22.44 10/01/07
FUND EXPENSE RATIOS(5): A SHARES: GROSS 2.11%, NET 1.50%; C SHARES: GROSS 2.86%, NET 2.25%; CLASS I SHARES: GROSS 1.86%, 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER SINCE 2/1/09, PRIOR TO THAT THE WAIVER WAS CONTRACTUAL. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF FEE WAIVERS. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on October 1, 2007 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus International Virtus International Real Virtus International Real FTSE EPRA/NAREIT Real Estate Securities Estate Securities Fund Estate Securities Fund S&P 500(R) Global ex U.S. Fund Class A Class C Class I Index Rental Index ---------------------- ------------------------- ------------------------- ---------- ---------------- 10/1/2007 9425 10000 10000 10000 10000 9/30/2008 6460 6791 6868 7700 6486 9/30/2009 6099 6363 6496 7168 6016
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Retail REITs 46% Office REITs 17 Real Estate Operating Companies 17 Diversified REITs 11 Industrial REITs 7 Specialized REITs 1 Residential REITs 1 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 29 TICKER SYMBOLS: Class A: EMNAX Class B: EMNBX Class C: EMNCX MARKET NEUTRAL FUND - MARKET NEUTRAL FUND (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, 2009, the Fund's Class A shares at NAV returned 7.03%, Class B shares returned 6.23% and Class C shares returned 6.26%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%, and the Citigroup 90-Day Treasury Bills Index, which is the Fund's style-specific index appropriate for comparison, returned 0.39%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The year ended September 2009 brought us through the brunt of the worst global recession since the 1930's and into its initial recovery phase. As the fiscal year began, the tentacles of the credit crisis had swept across the global landscape and spread to every industrial sector. All countries, from the major world powers to smaller players, felt its impact to varying degrees. Global markets declined as bad news regarding employment, consumer spending, and the extent of the damage to the world financial system accumulated. - Meanwhile a growing list of Governments worked with industry leaders to contain the damage. Economic stimulus--from historic interest rate cuts to government spending, company bailouts, and targeted spending incentives--helped to alleviate the extent of the damage and to restore confidence in markets. Ultimately growing confidence in policy stimulus and less devastating economic news led to the beginning of a recovery in global equities. By the end of the fiscal year, improving corporate earnings, combined with encouraging economic news, drove global equity indices to levels not seen since the fourth quarter of 2008. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - Equity markets declined precipitously during the first 6 months of the fiscal year. The S&P 500 lost 30.5% while the Russell 2000 declined 37.2%. In the second half, signs of global recovery lifted those indices by 34.0% and 44.0% respectively. In the face of this historic market volatility, the Multi-Alpha Market Neutral portfolio gained 3.3% in the first half and 6.7% in the second. In theory, this is how market neutral portfolios should behave. In reality, the proportions of the crisis we faced during the past year brought significant challenges even for hedged investors. As a result, our performance during this period stands out relative to peers. - Of course, market neutral portfolios do not require rising equity markets to generate positive returns, but any strategy based on investment fundamentals will produce better results when markets are driven by rational decisions. Recovery in the markets created investment opportunities--just as the decline had. However, both events brought periods when the market eschewed common sense investing principles. On the way down even truly hedged strategies, such as market neutral, were buffeted in the face of selling and short-covering driven by massive liquidation brought on by de-leveraging, margin covering, cash constraints, and fear. Likewise, in the initial recovery phase cheap, largely low-quality stocks lead the way. Each situation presented its challenges, but patient investors were rewarded. - Our performance was driven by strong stock selection. The bulk of our value-added came from investments in Financials, Consumer Discretionary, Information Technology, and Consumer Staples. In Financials, short positions lead performance. In Consumer Discretionary and Information Technology moving toward companies with good balance sheets that would better weather the storm in the first half, and rotating toward those that would lead in recovery delivered solid results from both long and short positions. Our stock selection in Health Care, Energy, and Utilities detracted from returns. In Health Care we were hurt by short positions among the equipment companies, largely by companies we considered to be over-valued relative to their growth prospects whose stock prices continued to run nonetheless. Conversely, we had some disappointments from companies we liked in Life Sciences. Energy stocks were volatile on commodity price spikes in both directions as investors shifted between panic and fear with regard to the economic prospects. Against this backdrop, more investments went against us than in our favor on both sides of the portfolio. Overall, our long portfolio rose 4.8% during the period, while our shorts returned -5.5%. - All of the teams that contribute to Multi-Alpha Market Neutral added value during the year ended September 30, 2009 with the exception of the International Core team, whose stock selections declined roughly 1% during the period. This team manages one of the more quantitatively-driven strategies at The Boston Company; and thus they were more vulnerable to some of the vagaries of quantitative model performance during this period. Fortunately, their process incorporates a significant fundamental element as well, which lifted their returns during the period. Our contrarian-leaning SMID-Cap Opportunistic team lead performance during the period, followed by the Core Research Team and U.S. Large Cap Core. INVESTMENTS IN SHORT POSITIONS HAVE ADDITIONAL RISK THAT LONG POSITIONS DO NOT. IN THEORY, THE RISK OF LOSS ON A SHORT POSITION IS UNLIMITED. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. LACK OF LIQUIDITY IN AN ETF COULD RESULT IN ITS VALUE BEING MORE VOLATILE THAN THE UNDERLYING PORTFOLIO OF SECURITIES. SECTOR ETFS ARE SUBJECT TO SECTOR RISKS AND NON-DIVERSIFICATION RISKS, WHICH MAY RESULT IN GREATER PRICE FLUCTUATIONS THAN THE OVERALL MARKET. BECAUSE THE FUND INVESTS IN ETFS, IT INDIRECTLY BEARS ITS PROPORTIONATE SHARE OF THE OPERATING EXPENSES OF THE UNDERLYING FUNDS. INDIRECTLY, THE FUND IS SUBJECT TO ALL RISKS ASSOCIATED WITH THE UNDERLYING ETFS. INVESTING IN FUNDS THAT USE LEVERAGE, SHORT SELLING, FUTURES, OPTIONS AND/OR DERIVATIVES MAY EXPOSE THE FUND TO ADDITIONAL RISKS. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 30 MARKET NEUTRAL FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 09/30/09
1 year 5 years 10 years ------ ------- -------- CLASS A SHARES AT NAV(2) 7.03% -1.21% 0.96% CLASS A SHARES AT POP(3, 4) 0.88 -2.37 0.36 CLASS B SHARES AT NAV(2) 6.23 -1.93 0.23 CLASS B SHARES WITH CDSC(4) 2.23 -2.12 0.23 CLASS C SHARES AT NAV(2) 6.26 -1.91 0.24 CLASS C SHARES WITH CDSC(4) 6.26 -1.91 0.24 S&P 500(R) INDEX -6.91 1.01 -0.15 CITIGROUP 90-DAY TREASURY BILLS INDEX 0.39 2.96 2.96
FUND EXPENSE RATIOS(5): A SHARES: GROSS 4.34% (WHICH INCLUDES 2.23% OF DIVIDENDS ON SHORT SALES), NET 4.00% (WHICH INCLUDES 2.23% OF DIVIDENDS ON SHORT SALES); B SHARES: GROSS 5.09% (WHICH INCLUDES 2.23% OF DIVIDENDS ON SHORT SALES), NET 4.75% (WHICH INCLUDES 2.23% OF DIVIDENDS ON SHORT SALES); C SHARES: GROSS 5.09% (WHICH INCLUDES 2.23% OF DIVIDENDS ON SHORT SALES), NET 4.75% (WHICH INCLUDES 2.23% 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% WITHIN 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 10/1/09. 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 This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Citigroup Virtus Market Virtus Market Virtus Market 90-Day Neutral Fund Neutral Fund Neutral Fund S&P 500(R) Treasury Class A Class B Class C Index Bills ------------- ------------- ------------- ---------- --------- 9/30/1999 9425 10000 10000 10000 10000 9/29/2000 9056 9545 9542 11337 10562 9/28/2001 10313 10792 10793 8317 11094 9/30/2002 12066 12534 12529 6614 11313 9/30/2003 10857 11201 11199 8229 11451 9/30/2004 11019 11281 11279 9370 11570 9/30/2005 11333 11529 11529 10517 11861 9/29/2006 10714 10813 10809 11653 12384 9/28/2007 10236 10254 10257 13568 13004 9/30/2008 9687 9635 9637 10586 13336 9/30/2009 10368 10235 10240 9855 13387
Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments as of September 30, 2009.
Long Short Positions Positions --------- --------- Consumer Discretionary 20% 21% Information Technology 16 16 Health Care 13 12 Consumer Staples 12 14 Industrials 10 13 Energy/Materials 10 10 Financials 9 9 Other (includes short-term investments) 10 5 --- --- Total 100% 100% === ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 31 TICKER SYMBOLS: Class A: NAMFX Class B: NBMFX Class C: NCMFX MULTI-SECTOR FIXED INCOME FUND - MULTI-SECTOR FIXED INCOME FUND (THE "FUND") is diversified and has an investment objective to maximize current income while preserving capital. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned 17.34%, Class B shares returned 16.47%, and Class C Shares returned 16.59%. 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 10.56%. 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 BOND MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? - The broad US fixed income market, as represented by the Barclays Capital Aggregate Bond Index returned 10.56% for the fiscal year ended September 30, 2009. - In the first 3 meetings of the fiscal year (one of which was an unscheduled inter-meeting) the Federal Reserve cut the federal funds rate 1.75% from 2.00% to 0.25%. The Federal Reserve indicated that the additional rate cuts were necessary in response to the intensification of the financial crisis that increased the downside risk to growth and that inflationary pressures had started to moderate. In the remaining meetings during the fiscal year the Federal Reserve left rates unchanged citing concerns of downside risks to growth and near term economic weakness. However, citing in the last 3 meetings that the rate of economic contraction had slowed. - 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, 2009 can be broken down into two distinct sub-sections; the 4th quarter of 2008 and the first three quarters of 2009. The credit markets during the 4th quarter of 2008 were extraordinarily volatile. This was primarily due to fear surrounding the subprime mortgage market and its resulting contagion. During 2008 and even more in the 4th quarter, 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 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 spread sectors during this time period. - During the first three quarters of 2009 the economy continued to show signs of weakening with rising unemployment, a deteriorating housing market, and declining retail sales and consumer confidence. While still at recessionary levels, the pace of the economic decline has slowed and in the 3rd quarter began to show signs of stabilizing with a modest improvement in the economic statistics. While economic conditions remain weak the improvement during the 3rd quarter coupled with better than expected 2nd quarter earnings gave market participants evidence that we may have turned the corner and will start seeing positive growth by the end of 2009. The implementation of numerous government programs announced during the first quarter such as PPIP, TALF, expanded quantitative easing via the Federal Reserve Bank's purchase of up to $1.75 trillion long dated U.S. Treasuries, agency debt, and agency MBS, coupled with the FASB decision to alter rules regarding mark to market accounting continue to help improve sentiment in all fixed income markets and inject liquidity into the system. The flight to quality over the past 18 months has reversed with US Treasuries being outperformed by nearly all spread sectors during this period. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The significant outperformance of fixed income spread sectors relative to U.S. Treasuries and agency debentures was the key driver of the funds' strong performance for the fiscal year. The Fund benefited from its overweight to spread product and lack of exposure to U.S. Treasuries and agency debentures; two factors that hurt performance in fiscal year ending 9/30/08. - Among fixed income sectors, the fund's overweight to corporate high yield (including high yield bank loans), emerging markets debt, non-U.S. Dollar bonds, commercial mortgage backed securities, and corporate high quality were all significant positive contributors to performance for the fiscal year. - The fund's allocation to non-agency residential mortgage backed securities detracted the most from performance during the fiscal year. The underperformance took place during the 4th quarter of 2008; this sector has performed well so far in 2009. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 32 MULTI-SECTOR FIXED INCOME FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
1 year 5 years 10 years ------ ------- -------- CLASS A SHARES AT NAV(2) 17.34% 4.44% 6.23% CLASS A SHARES AT POP(3, 4) 11.76 3.43 5.71 CLASS B SHARES AT NAV(2) 16.47 3.67 5.44 CLASS B SHARES WITH CDSC(4) 12.47 3.67 5.44 CLASS C SHARES AT NAV(2) 16.59 3.68 5.45 CLASS C SHARES WITH CDSC(4) 16.59 3.68 5.45 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 6.30 FUND EXPENSE RATIOS(5): A SHARES: 1.15%, B SHARES: 1.90%, C SHARES: 1.90%.
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 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Virtus Virtus Multi-Sector Multi-Sector Multi-Sector Barclays Capital Fixed Income Fixed Income Fixed Income U.S. Aggregate Fund Class A Fund Class B Fund Class C Bond Index ------------ ------------ ------------ ---------------- 9/30/1999 9525 10000 10000 10000 9/29/2000 10164 10587 10585 10699 9/28/2001 10229 10575 10583 12085 9/30/2002 11007 11296 11301 13123 9/30/2003 12820 13054 13065 13834 9/30/2004 14045 14200 14205 14343 9/30/2005 14709 14765 14767 14744 9/29/2006 15467 15399 15401 15285 9/28/2007 16425 16248 16255 16070 9/30/2008 14872 14598 14597 16657 9/30/2009 17450 17003 17019 18415
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Corporate Bonds 55% Foreign Government Securities 18 Loan Agreements 13 Mortgage-Backed Securities 10 Asset-Backed Securities 2 Other (includes short-term investments) 2 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 33 TICKER SYMBOLS: Class A: PSFRX Class C: PFSRX SENIOR FLOATING RATE FUND Class I: PSFIX - SENIOR FLOATING RATE FUND (THE "FUND") is diversified and has an investment objective of high total return from both current income and capital appreciation. - For the fiscal year ended September 30, 2009, the Fund's Class A shares at NAV returned 11.74%; Class C shares returned 10.94%; Class I shares returned 11.94%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed index, returned 10.56%, and the S&P/LSTA Leveraged Loan Index, the Fund's style-specific benchmark, returned 12.59%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - The U.S. Leveraged Loan Market, as represented by the S&P/LSTA Leveraged Loan Index returned 12.59% for the fiscal year ended September 30, 2009. However, the loan market returns for the Fund's fiscal year can clearly be separated into two time periods; the 4th quarter of 2008, returning -22.94%, and the first three quarters of 2009, returning 46.11%. - During the first quarter of the Fund's fiscal year the loan market was 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 rising unemployment, a deteriorating housing market, and unprecedented stress to the financial system, resulting in a severe lack of liquidity and uncertainty in the loan market. - The loan market experienced significant improvement and had positive returns during last three quarters of the Fund's fiscal year due to attractive valuations, an improvement in the credit markets, stabilization in the economy, lack of supply of bank loans, and an increased demand for non-U.S. Treasury assets by investors. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - The overall positive returns in the U.S. Leveraged Loan Market positively impacted the Fund, achieving positive returns for the fiscal year. Similar to the overall U.S. leveraged loan market, the Fund's returns can be distinctly broken up into two time periods; the 4th quarter of 2008, returning -16.54% and the first three quarters of 2009, returning 33.88%. - The higher quality focus of the fund relative to the index contributed its slight underperformance after expenses as lower quality out-performed for the fiscal year. - Although slightly underperforming its index, the Fund performed well versus both its Lipper and Morningstar peer groups; ranking in the top decile in both. INVESTING IN FUNDS THAT USE LEVERAGE, SHORT SELLING, FUTURES, OPTIONS AND/OR DERIVATIVES MAY EXPOSE THE FUND TO ADDITIONAL RISKS. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 34 SENIOR FLOATING RATE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09
Inception Inception 1 Year to 9/30/09 Date ------ ---------- --------- CLASS A SHARES AT NAV(2) 11.74% 5.53% 1/31/08 CLASS A SHARES AT POP(3,4) 6.43 2.49 1/31/08 CLASS C SHARES AT NAV(2) 10.94 4.76 1/31/08 CLASS C SHARES WITH CDSC(4) 10.94 4.76 1/31/08 CLASS I SHARES AT NAV 11.94 5.74 1/31/08 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.55 1/31/08 S&P/LSTA LEVERAGED LOAN INDEX 12.59 4.17 1/31/08
FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.80%, NET 1.20%; C SHARES: GROSS 2.55%, NET 1.95%; I SHARES: GROSS 1.55%, 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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) PER PROSPECTUS EFFECTIVE 3/2/09. NET EXPENSE: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER IN EFFECT SINCE 2/1/09, PRIOR TO THAT THE WAIVER WAS CONTRACTUAL. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF FEE WAIVERS. GROWTH OF $10,000 For periods ended 9/30 This chart assumes an initial investment of $10,000 made on January 31, 2008 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH)
Virtus Senior Virtus Senior Virtus Senior S&P/LSTA Barclays Capital Floating Rate Floating Rate Floating Rate Leveraged U.S. Aggregate Fund Class A Fund Class C Fund Class I Loan Index Bond Index -------------- ------------- ------------- ---------- ---------------- 1/31/2008 9525 10000 10000 10000 10000 9/30/2008 9324 9741 9804 9507 9897 9/30/2009 10418 10806 10974 10704 10942
Asset Allocation The following table presents asset allocations within certain sectors and as a percentage of total investments as of September 30, 2009. Consumer Discretionary 27% Materials 16 Industrials 10 Health Care 9 Information Technology 9 Telecommunication Services 8 Energy 5 Other (includes short-term investments) 16 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 4. 35 VIRTUS ALPHASECTOR(SM) ALLOCATION FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE ------- ------- MUTUAL FUNDS--24.9% FIXED INCOME FUNDS--24.9% Virtus Bond Fund Class I(11) 832,554 $ 8,891 ------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $8,708) 8,891 ------- EXCHANGE-TRADED FUNDS--75.6% Consumer Discretionary Select Sector SPDR Fund 122,220 3,357 Consumer Staples Select Sector SPDR Fund 135,410 3,448 Energy Select Sector SPDR Fund 66,770 3,600 Financial Select Sector SPDR Fund 219,950 3,286 Health Care Select Sector SPDR Fund 118,490 3,397 Industrial Select Sector SPDR Fund 125,040 3,294 Materials Select Sector SPDR Fund 105,780 3,269 Utilities Select Sector SPDR Fund 115,060 3,375 ------- TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $27,238) 27,026 ------- TOTAL LONG-TERM INVESTMENTS--100.5% (IDENTIFIED COST $35,946) 35,917 -------
SHARES VALUE ------- ------- SHORT-TERM INVESTMENTS--0.4% MONEY MARKET MUTUAL FUNDS--0.4% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 130,656 $ 131 ------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $131) 131 ------- TOTAL INVESTMENTS--100.9% (IDENTIFIED COST $36,077) 36,048(1) Other assets and liabilities, net--(0.9)% (324) ------- NET ASSETS--100.0% $35,724 =======
The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Value Level 1 - at Quoted September 30, 2009 Prices ------------------ --------- Equity Securities: Exchange-Traded Funds $27,026 $27,026 Mutual Funds 8,891 8,891 Short-Term Investments 131 131 ------- ------- Total Investments $36,048 $36,048 ======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 36 VIRTUS ALPHASECTOR(SM) ROTATION FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------- -------- EXCHANGE-TRADED FUNDS--101.2% Consumer Discretionary Select Sector SPDR Fund 355,800 $ 9,774 Consumer Staples Select Sector SPDR Fund 396,000 10,082 Energy Select Sector SPDR Fund 194,000 10,461 Financial Select Sector SPDR Fund 643,500 9,614 Health Care Select Sector SPDR Fund 346,500 9,934 Industrial Select Sector SPDR Fund 365,500 9,627 Materials Select Sector SPDR Fund 305,000 9,424 Utilities Select Sector SPDR Fund 336,600 9,873 -------- TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $79,408) 78,789 -------- TOTAL LONG-TERM INVESTMENTS--101.2% (IDENTIFIED COST $79,408) 78,789 --------
SHARES VALUE --------- -------- SHORT-TERM INVESTMENTS--0.0% MONEY MARKET MUTUAL FUNDS--0.0% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 20,008 $ 20 -------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $20) 20 -------- TOTAL INVESTMENTS--101.2% (IDENTIFIED COST $79,428) 78,809(1) Other assets and liabilities, net--(1.2)% (969) -------- NET ASSETS--100.0% $ 77,840 ========
The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Value Level 1 - at Quoted September 30, 2009 Prices ------------------ --------- Equity Securities: Exchange-Traded Funds $78,789 $78,789 Short-Term Investments 20 20 ------- ------- Total Investments $78,809 $78,809 ======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 37 VIRTUS ALTERNATIVES DIVERSIFIER FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------- -------- MUTUAL FUNDS--66.9% EQUITY FUNDS(11)--56.8% Virtus Global Infrastructure Fund Class A 4,150,785 $ 41,383 Virtus International Real Estate Securities Fund Class A 5,072,645 30,436 Virtus Market Neutral Fund Class A(2) 4,761,077 49,991 Virtus Real Estate Securities Fund Class A 1,517,112 30,661 -------- 152,471 -------- FIXED INCOME FUNDS(11)--10.1% Virtus Senior Floating Rate Fund Class A 2,744,457 27,088 -------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $190,848) 179,559 --------------------------------------------------------------------------------
SHARES VALUE --------- -------- EXCHANGE-TRADED FUNDS--33.0% iShares S&P North American Natural Resources Sector Index Fund 852,211 $ 27,654 PowerShares DB Commodity Index Tracking Fund(2) 1,565,200 34,528 PowerShares DB G10 Currency Harvest Fund(2) 1,150,982 26,473 -------- -------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $101,629) 88,655 -------------------------------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS--99.9% (IDENTIFIED COST $292,477) 268,214 -------------------------------------------------------------------------------- TOTAL INVESTMENTS--99.9% (IDENTIFIED COST $292,477) 268,214(1) Other assets and liabilities, net--0.1% 341 -------- NET ASSETS--100.0% $268,555 ========
The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Value Level 1 - at Quoted September 30, 2009 Prices ------------------ --------- Equity Securities: Mutual Funds $179,559 $179,559 Exchange-Traded Funds 88,655 88,655 -------- -------- Total Investments $268,214 $268,214 ======== ========
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 38 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--17.3% U.S. Treasury Bond 3.500%, 2/15/39 $ 9,580 $ 8,679 U.S. Treasury Note 0.875%, 4/30/11 11,405 11,436 2.625%, 6/30/14 8,475 8,626 4.750%, 8/15/17 3,320 3,700 3.125%, 5/15/19 6,345 6,243 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $37,680) 38,684 --------------- MUNICIPAL BONDS--0.6% MICHIGAN--0.1% City of Flat Rock Finance Authority Taxable Series A 6.750%, 10/1/16 95 102 Tobacco Settlement Finance Authority Taxable Series 06-A 7.309%, 6/1/34 175 140 --------------- 242 --------------- RHODE ISLAND--0.5% City of Woonsocket Pension Funding Taxable (FSA Insured) 5.660%, 7/15/13 1,000 1,069 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $1,300) 1,311 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS--0.0% FHLMC 7.500%, 4/1/14 27 30 7.000%, 4/1/16 24 27 --------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (IDENTIFIED COST $51) 57 --------------- MORTGAGE-BACKED SECURITIES--36.6% AGENCY--30.3% FHLMC 7.000%, 1/1/33 222 243 6.000%, 10/1/34 482 511 5.000%, 1/1/35 1,104 1,146 5.000%, 7/1/35 4,613 4,784 5.000%, 12/1/35 4,105 4,257 FNMA 7.000%, 5/1/14 17 19 6.000%, 10/1/14 245 263 8.000%, 1/1/15 5 5 6.500%, 6/1/16 180 194 6.000%, 7/1/17 81 87 5.500%, 9/1/17 212 227 4.500%, 12/1/18 1,337 1,387 4.500%, 3/1/20 215 223 5.000%, 4/1/20 311 329 4.500%, 5/1/20 573 594 4.000%, 6/1/20 350 357 4.500%, 11/1/20 1,957 2,029 5.000%, 8/1/21 198 209 6.454%, 3/25/29(3) 2,266 2,508 6.000%, 5/1/29 185 198
PAR VALUE VALUE --------------- --------------- AGENCY--(CONTINUED) 6.500%, 7/1/29 $ 290 $ 313 6.500%, 5/1/30 7 7 7.500%, 3/1/31 135 152 7.000%, 7/1/31 84 93 7.000%, 9/1/31 148 164 6.500%, 2/1/32 308 333 6.500%, 3/1/32 142 153 5.500%, 4/1/33 173 182 5.000%, 5/1/33 1,805 1,874 5.500%, 6/1/33 1,214 1,277 5.500%, 7/1/33 1,190 1,252 5.000%, 9/1/33 297 308 6.000%, 11/1/34 2,459 2,613 5.500%, 5/1/35 3,154 3,303 5.000%, 7/1/35 250 259 5.500%, 12/1/35 263 276 5.500%, 3/1/36 603 633 5.500%, 4/1/36 423 444 6.390%, 5/25/36 1,170 1,268 6.000%, 6/1/36 328 349 5.500%, 9/1/36 2,195 2,306 6.000%, 9/1/36 346 367 5.500%, 11/1/36 434 455 6.000%, 3/1/37 517 546 6.000%, 9/1/37 50 53 6.000%, 10/1/37 464 491 6.000%, 1/1/38 126 133 5.000%, 2/1/38 979 1,013 6.000%, 2/1/38 122 129 6.000%, 2/1/38 54 57 6.000%, 2/1/38 182 192 6.000%, 2/1/38 254 268 5.000%, 3/1/38 619 640 6.000%, 3/1/38 851 900 6.500%, 3/1/38 7,542 8,125 5.000%, 4/1/38 1,205 1,247 6.000%, 5/1/38 266 281 5.500%, 6/1/38 833 872 6.000%, 7/1/38 4,640 4,902 5.500%, 8/1/38 1,802 1,888 6.000%, 8/1/38 296 312 6.000%, 8/1/38 633 669 6.000%, 8/1/38 2,202 2,326 6.000%, 8/1/38 180 190 5.000%, 12/1/38 1,019 1,054 5.000%, 12/1/38 529 547 FNMA REMICs 03-42, HC 4.500%, 12/25/17 483 502 GNMA 8.500%, 11/15/22 1 1 6.500%, 9/15/28 145 157 7.500%, 9/15/29 144 162 5.000%, 7/15/33 1,727 1,800 6.000%, 6/15/34 292 311 --------------- 67,719 --------------- NON-AGENCY--6.3% American Tower Trust 07-1A, AFX 144A 5.420%, 4/15/37(4) 190 188
PAR VALUE VALUE --------------- --------------- NON-AGENCY--(CONTINUED) Banc of America Commercial Mortgage, Inc. 05-1, A4 5.141%, 11/10/42(3) $ 290 $ 291 06-1, A4 5.372%, 9/10/45(3) 995 919 07-1, A4 5.451%, 1/15/49 1,980 1,751 08-1, A4 6.354%, 2/10/51(3) 1,105 1,001 Bear Stearns Commercial Mortgage Securities 06-PW12, A4 5.903%, 9/11/38(3) 765 743 Credit Suisse Mortgage Capital Certificates 06-C1, A4 5.609%, 2/15/39(3) 935 883 Crown Castle Towers LLC 05-1A, AFX 144A 4.643%, 6/15/35(4) 450 450 DLJ Mortgage Acceptance Corp. 96-I, (Principal Only) 144A 0.000%, 9/18/11(4)(15) 4 4 GS Mortgage Securities Corp. II 05-GG4, A3 4.607%, 7/10/39 2,510 2,386 07-GG10, A4 5.999%, 8/10/45(3) 475 393 JPMorgan Chase Commercial Mortgage Securities Corp. 06-CB17, A4 5.429%, 12/12/43 995 920 Lehman Brothers - UBS Commercial Mortgage Trust 04-C7, A6 4.786%, 10/15/29(3) 1,000 938 07-C6, A2 5.845%, 7/15/40 360 360 Morgan Stanley Capital I 06-T23, A4 5.984%, 8/12/41(3) 970 951 05-IQ9, A3 4.540%, 7/15/56 645 640 Paine Webber Mortgage Acceptance Corp. 99-C1, D 7.150%, 6/15/32(3) 190 190 SBA Commercial Mortgage Backed Securities Trust 06-1A, B 144A 5.451%, 11/15/36(4) 140 139 Wachovia Bank Commercial Mortgage Trust 05-C19, A5 4.661%, 5/15/44 590 596 Wells Fargo Mortgage Backed Securities Trust 05-AR4, 2A1 4.514%, 4/25/35(3) 178 163 --------------- 13,906 --------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $79,262) 81,625 ---------------
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 39 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- ASSET-BACKED SECURITIES--0.5% AmeriCredit Automobile Receivables Trust 05-AX, A4 3.930%, 10/6/11 $ 563 $ 569 06-BG, A3 5.210%, 10/6/11 3 3 Capital Auto Receivables Asset Trust Series 06-2, A3A 4.980%, 5/15/11 37 37 Capital One Auto Finance Trust 07-B, A3A 5.030%, 4/15/12 204 207 Carmax Auto Owner Trust 07-2, A3 5.230%, 12/15/11 212 216 Ford Credit Auto Owner Trust 07-A, A3B 0.273%, 8/15/11(3) 193 193 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $1,212) 1,225 --------------- CORPORATE BONDS--40.7% CONSUMER DISCRETIONARY--3.5% Affinion Group, Inc. 10.125%, 10/15/13 560 578 American Real Estate Partners LP 7.125%, 2/15/13 650 626 Comcast Corp. 5.700%, 5/15/18 645 678 5.700%, 7/1/19 980 1,035 COX Communications, Inc. 144A 6.250%, 6/1/18(4) 140 149 Echostar DBS Corp. 7.125%, 2/1/16 530 529 Hasbro, Inc. 6.300%, 9/15/17 135 141 Mediacom Broadband LLC/Mediacom Broadband Corp. 8.500%, 10/15/15 640 650 Nebraska Book Co., Inc. 144A 10.000%, 12/1/11(4) 1,125 1,122 Time Warner Cable, Inc. 6.750%, 7/1/18 130 144 8.250%, 4/1/19 720 870 United Artists Theatre Circuit, Inc. Series BD-1 9.300%, 7/1/15(6)(8) 25 23 Viacom, Inc. 6.250%, 4/30/16 70 75 WMG Holdings Corp. 0.000%, 12/15/14(3) 1,165 1,127 --------------- 7,747 --------------- CONSUMER STAPLES--3.7% Alliance One International, Inc. 144A 10.000%, 7/15/16(4) 725 752 Altria Group, Inc. 9.250%, 8/6/19 495 605 ASG Consolidated LLC/ ASG Finance, Inc. 11.500%, 11/1/11(3) 740 721
PAR VALUE VALUE --------------- --------------- CONSUMER STAPLES--(CONTINUED) Costco Wholesale Corp. 5.500%, 3/15/17 $ 420 $ 459 CVS Caremark Corp. 6.125%, 9/15/39 395 402 Delhaize Group 6.500%, 6/15/17 725 789 Dole Food Co., Inc. 7.250%, 6/15/10 445 447 Kraft Foods, Inc. 5.625%, 11/1/11 1,045 1,112 6.125%, 8/23/18 345 366 PepsiCo, Inc. 7.900%, 11/1/18 350 442 Philip Morris International, Inc. 6.875%, 3/17/14 275 314 5.650%, 5/16/18 825 878 Procter & Gamble Co. 4.600%, 1/15/14 350 376 Reynolds American, Inc. 6.750%, 6/15/17 95 99 Safeway, Inc. 6.500%, 3/1/11 375 399 --------------- 8,161 --------------- ENERGY--3.4% Buckeye Partners LP 5.125%, 7/1/17 200 198 Chesapeake Energy Corp. 7.250%, 12/15/18 245 233 Enbridge Energy Partners LP 5.875%, 12/15/16 350 365 Encana Corp. 6.500%, 5/15/19 235 261 Encore Acquisition Co. 6.000%, 7/15/15 310 282 Energy Transfer Partners LP 8.500%, 4/15/14 755 872 5.950%, 2/1/15 135 142 6.700%, 7/1/18 570 610 Enterprise Products Operating LLC 6.300%, 9/15/17 100 108 EOG Resources, Inc. 6.875%, 10/1/18 360 424 Halliburton Co. 6.150%, 9/15/19 95 106 Kinder Morgan Energy Partners LP 5.850%, 9/15/12 415 447 6.000%, 2/1/17 135 141 9.000%, 2/1/19 500 606 Petroleos Mexicanos 144A 4.875%, 3/15/15(4) 390 385 Petropower I Funding Trust 144A 7.360%, 2/15/14(4) 87 87 Plains All American Pipeline LP/PAA Finance Corp. 4.250%, 9/1/12 215 221 Talisman Energy, Inc. 7.750%, 6/1/19 465 547 TransCanada Pipelines Ltd. 7.125%, 1/15/19 230 271 6.350%, 5/15/67(3) 300 263
PAR VALUE VALUE --------------- --------------- ENERGY--(CONTINUED) Williams Cos., Inc. (The) 7.125%, 9/1/11 $ 125 $ 132 XTO Energy, Inc. 5.900%, 8/1/12 735 794 --------------- 7,495 --------------- FINANCIALS--17.8% Aflac, Inc. 8.500%, 5/15/19 30 36 American Express Co. 7.250%, 5/20/14 795 893 American Express Credit Corp. 5.875%, 5/2/13 140 148 American General Finance Corp. 4.000%, 3/15/11 450 387 5.750%, 9/15/16 490 341 Bank of America Corp. 6.500%, 8/1/16 195 205 5.750%, 8/15/16 715 704 5.490%, 3/15/19 300 280 Bank of New York/Mellon Corp. (The) 4.950%, 11/1/12 115 125 Barclays Bank plc 5.200%, 7/10/14 430 454 Series 1, 5.000%, 9/22/16 350 354 144A 6.050%, 12/4/17(4) 125 126 144A 10.179%, 6/12/21(4) 560 736 Bear Stearns Cos., Inc. LLC (The) 7.250%, 2/1/18 785 897 Capital One Financial Corp. 5.700%, 9/15/11 620 648 7.375%, 5/23/14 365 407 6.150%, 9/1/16 625 614 5.250%, 2/21/17 70 68 Chubb Corp. 6.375%, 3/29/67(3) 420 378 Citigroup, Inc. 5.500%, 8/27/12 90 93 5.000%, 9/15/14 1,745 1,661 4.875%, 5/7/15 280 262 5.500%, 2/15/17 95 88 Countrywide Financial Corp. 6.250%, 5/15/16 65 65 Countrywide Home Loan, Inc. Series L 4.000%, 3/22/11 615 625 Credit Suisse First Boston 6.000%, 2/15/18 630 660 Credit Suisse Guernsey Ltd. 5.860%, 11/15/49(3) 815 619 Credit Suisse USA, Inc. 5.850%, 8/16/16 135 145 ERP Operating LP 5.375%, 8/1/16 640 631 Export-Import Bank of Korea 5.500%, 10/17/12 135 142 Ford Motor Credit Co. LLC 7.500%, 8/1/12 625 600
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 40 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) General Electric Capital Corp. 3.500%, 8/13/12 $ 1,910 $ 1,934 6.750%, 3/15/32 500 510 6.875%, 1/10/39 1,130 1,184 Genworth Global Funding Trusts 5.125%, 3/15/11 925 923 Goldman Sachs Group, Inc. (The) 5.125%, 1/15/15 160 167 6.150%, 4/1/18 140 147 7.500%, 2/15/19 430 492 HSBC Finance Corp. 8.000%, 7/15/10 300 314 ICICI Bank Ltd. RegS 5.750%, 11/16/10(5) 105 107 International Lease Finance Corp. 4.750%, 1/13/12 225 191 JPMorgan Chase & Co. 5.750%, 1/2/13 1,020 1,089 4.650%, 6/1/14 650 678 5.125%, 9/15/14 155 161 5.250%, 5/1/15 85 87 Series 1, 7.900%, 4/29/49(3) 395 379 Lincoln National Corp. 5.650%, 8/27/12 1,195 1,239 Macquarie Group Ltd. 144A 7.300%, 8/1/14(4) 870 929 Merrill Lynch & Co., Inc. 6.875%, 4/25/18 695 731 6.110%, 1/29/37 150 143 MetLife, Inc. 6.750%, 6/1/16 210 234 Metropolitan Life Global Funding I 144A 2.875%, 9/17/12(4) 980 976 Morgan Stanley 6.000%, 4/28/15 115 122 5.375%, 10/15/15 250 258 6.625%, 4/1/18 615 650 7.300%, 5/13/19 100 110 Northern Trust Corp. 5.500%, 8/15/13 75 82 PNC Bank NA 4.875%, 9/21/17 155 148 Protective Life Secured Trust 4.000%, 4/1/11 1,670 1,659 Prudential Financial, Inc. 3.625%, 9/17/12 820 825 6.200%, 1/15/15 505 534 7.375%, 6/15/19 520 580 8.875%, 6/15/38(3) 605 593 Rabobank Nederland NV 144A 11.000%, 12/31/49(3)(4) 425 521 Resona Bank Ltd. 144A 5.850%, 9/29/49(3)(4) 985 852 Royal Bank of Scotland Group plc Series 1, 9.118%, 3/31/10 960 888 5.050%, 1/8/15 1,010 906 Santander Issuances S.A Unipersonal 144A 5.911%, 6/20/16(4) 1,085 1,076 Simon Property Group LP 6.750%, 5/15/14 1,090 1,169
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) State Street Corp. 4.300%, 5/30/14 $ 190 $ 200 SunTrust Banks, Inc. 5.250%, 11/5/12 135 139 UDR, Inc. 5.250%, 1/15/15 150 144 Wachovia Corp. 4.875%, 2/15/14 200 204 5.750%, 2/1/18 570 603 WEA Finance LLC/WCI Finance LLC 144A 5.700%, 10/1/16(4) 1,065 1,032 Wells Fargo Capital XIII 7.700%, 3/26/13(3) 460 405 Westfield Capital Corp. Ltd./Westfield Finance Authority 144A 5.125%, 11/15/14(4) 150 146 --------------- 39,853 --------------- HEALTH CARE--1.6% Abbott Laboratories 5.125%, 4/1/19 475 503 Express Scripts, Inc. 5.250%, 6/15/12 775 823 7.250%, 6/15/19 245 288 Johnson & Johnson 5.150%, 7/15/18 800 873 Pfizer, Inc. 4.450%, 3/15/12 625 664 Quest Diagnostics, Inc. 6.400%, 7/1/17 435 473 --------------- 3,624 --------------- INDUSTRIALS--1.1% Allied Waste North America, Inc. 7.250%, 3/15/15 545 569 American Airlines, Inc. 99-1 7.024%, 10/15/09 365 364 DI Finance/DynCorp International, Inc. Series B 9.500%, 2/15/13 555 569 Hutchison Whampoa Ltd. 144A 5.750%, 9/11/19(4) 435 438 ITT Corp. 6.125%, 5/1/19 480 520 --------------- 2,460 --------------- INFORMATION TECHNOLOGY--0.8% Fiserv, Inc. 6.125%, 11/20/12 920 997 Intuit, Inc. 5.750%, 3/15/17 430 450 L-3 Communications Corp. 144A 5.200%, 10/15/19(4) 210 210 Xerox Corp. 6.750%, 2/1/17 170 180 --------------- 1,837 --------------- MATERIALS--1.3% Anglo American Capital plc 144A 9.375%, 4/8/19(4) 105 128
PAR VALUE VALUE --------------- --------------- MATERIALS--(CONTINUED) Dow Chemical Co. (The) 6.000%, 10/1/12 $ 1,050 $ 1,118 5.900%, 2/15/15 970 996 Freeport-McMoRan Copper & Gold, Inc. 8.375%, 4/1/17 275 292 Holcim U.S. Finance S.a.r.l. & Cie S.C.S. 144A 6.000%, 12/30/19(4) 435 440 --------------- 2,974 --------------- TELECOMMUNICATION SERVICES--4.9% Alltel Corp. 7.000%, 7/1/12 350 390 AT&T, Inc. 6.250%, 3/15/11 400 426 5.875%, 2/1/12 130 141 5.625%, 6/15/16 130 140 5.800%, 2/15/19 1,070 1,145 Embarq Corp. 6.738%, 6/1/13 65 70 France Telecom SA 4.375%, 7/8/14 355 372 Global Crossing Ltd. 144A 12.000%, 9/15/15(4) 105 111 Qwest Corp. 7.875%, 9/1/11 65 67 8.875%, 3/15/12 385 405 Sprint Capital Corp. 8.375%, 3/15/12 1,645 1,707 Telecom Italia Capital SA 5.250%, 10/1/15 215 223 6.999%, 6/4/18 95 105 7.175%, 6/18/19 615 686 Telefonica Emisiones S.A. 5.984%, 6/20/11 1,080 1,151 Telefonica Emisiones SAU 5.877%, 7/15/19 745 809 Verizon Communications, Inc. 4.900%, 9/15/15 130 137 5.500%, 4/1/17 70 75 6.350%, 4/1/19 960 1,060 Virgin Media Finance plc 8.750%, 4/15/14 610 625 West Corp. 9.500%, 10/15/14 700 690 Windstream Corp. 7.000%, 3/15/19 435 409 --------------- 10,944 --------------- UTILITIES--2.6% Appalachian Power Co. 5.550%, 4/1/11 810 846 Atmos Energy Corp. 6.350%, 6/15/17 465 504 Dominion Resources, Inc. 8.875%, 1/15/19 180 228 FirstEnergy Solutions Corp. 144A 6.050%, 8/15/21(4) 435 450 Florida Power Corp. 6.650%, 7/15/11 520 562 Georgia Power Co. 6.000%, 11/1/13 335 375
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 41 VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- UTILITIES--(CONTINUED) Nevada Power Co. Series O 6.500%, 5/15/18 $ 730 $ 797 Northeast Utilities 5.650%, 6/1/13 140 145 Pacific Gas & Electric Co. 8.250%, 10/15/18 650 826 Sempra Energy 6.500%, 6/1/16 40 44 South Carolina Electric & Gas Co. 6.500%, 11/1/18 310 358 Virginia Electric & Power Co. Series A 5.400%, 1/15/16 645 687 --------------- 5,822 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $86,357) 90,917 --------------- TOTAL LONG-TERM INVESTMENTS--95.7% (IDENTIFIED COST $205,862) 213,819 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--5.2% MONEY MARKET MUTUAL FUNDS--5.2% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 11,556,397 $ 11,556 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $11,556) 11,556 --------------- TOTAL INVESTMENTS--100.9% (IDENTIFIED COST $217,418) 225,375(1) Other Assets and Liabilities--(0.9)% (2,048) --------------- NET ASSETS--100.0% $ 223,327 =============== COUNTRY WEIGHTINGS as of September 30, 2009+ United States 94% United Kingdom 2 Australia 1 Canada 1 Spain 1 Other 1 --------------- Total 100% ===============
+ % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Level 3 - Total Market Level 1 - Significant Significant Value at Quoted Observable Unobservable September 30, 2009 Prices Inputs Inputs ------------------ --------- ----------- ------------ Debt Securities: U.S. Government Securities $ 38,684 $ -- $ 38,684 $ -- Municipal Securities 1,311 -- 1,311 -- U.S. Government Agency Obligations 57 -- 57 -- Mortgage-Backed Securities 81,625 -- 81,486 139 Asset-Backed Securities 1,225 -- 1,225 -- Corporate Debt 90,917 -- 90,808 109 Equity Securities: Short-Term Investments 11,556 11,556 -- -- -------- ------- -------- ---- Total Investments $225,375 $11,556 $213,571 $248 ======== ======= ======== ====
The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value:
Mortgage-Backed ($ reported in thousands) Total Securities Corporate Debt ----- --------------- -------------- BALANCE AS OF SEPTEMBER 30, 2008: $529 $ 11 $ 518 Accrued discount (premium) (1) 1 (2) Realized gain (loss)(1) (1) (1) -- Change in unrealized appreciation (depreciation)(1) 248 3 245 Net purchases (sales) (13) (10) (3) Transfers in and/or out of Level 3(2) (514) 135 (649) ---- ---- ----- BALANCE AS OF SEPTEMBER 30, 2009: $248 $139 $ 109 ==== ==== =====
(1) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (2) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2009, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. Certain level 3 security valuations have been determined based on availability of only a single broker source, which may or may not be a principal market maker. Other level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 42 VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MUNICIPAL TAX-EXEMPT BONDS(9) --97.1% DEVELOPMENT REVENUE--6.0% Hercules Redevelopment Agency Tax-Allocation (AMBAC Insured) 5.000%, 8/1/29 $ 500 $ 461 Ontario Redevelopment Financing Authority, Project No. 1 (NATL-RE Insured) 6.900%, 8/1/10 70 72 5.250%, 8/1/13 500 521 San Diego Redevelopment Agency, Center City Series B (AMBAC Insured) 5.350%, 9/1/24 1,000 1,001 Series A (AMBAC Insured) 4.750%, 9/1/30 500 487 Santa Clara Redevelopment Agency Tax Allocation (NATL-RE Insured) 5.000%, 6/1/22 1,000 1,006 --------------- 3,548 --------------- EDUCATION REVENUE--3.4% North City West School Facilities Financing Authority, Series B (AMBAC Insured) 5.250%, 9/1/19 1,000 1,041 Sweetwater Unified High School District, Public Financing Authority, Series A (FSA Insured) 5.000%, 9/1/29 1,000 1,001 --------------- 2,042 --------------- GENERAL OBLIGATION--18.8% Antelope Valley Union High School District, Series A (NATL-RE Insured) 5.000%, 2/1/27 1,000 1,034 Brea & Olinda Unified School District, Series A (NATL-RE, FGIC Insured) 6.000%, 8/1/15 150 180 Butte-Glenn Community College District, Series A (NATL-RE Insured) 5.500%, 8/1/19 1,000 1,083 California State 5.250%, 6/1/16 65 65 5.500%, 3/1/26 500 539 5.000%, 12/1/37 250 251 California State Veterans Bonds, Series BG 5.150%, 12/1/14 895 898 Series CC 4.500%, 12/1/37 330 294 Gilroy Unified School District (NATL-RE, FGIC Insured) 5.000%, 8/1/27 500 520 Grossmont-Cuyamaca Community College District Election of 2002 Series A (NATL-RE Insured) 5.000%, 8/1/19 40 43
PAR VALUE VALUE --------------- --------------- GENERAL OBLIGATION--(CONTINUED) Los Angeles Unified School District Series C (FSA Insured) 5.000%, 7/1/24 $ 500 $ 546 Los Angeles Unified School District, Series A-1 (NATL-RE Insured) 4.500%, 1/1/28 500 496 New Haven Unified School District (Assured Guaranteed) 0.000%, 8/1/33 1,500 366 Norwalk-La Mirada Unified School District Election of 2002 Series D (FSA Insured) 0.000%, 8/1/33 1,500 388 Placer Union High School District (FSA Insured) 0.000%, 8/1/32 1,500 396 Rancho Santiago Community College District (FSA Insured) 0.000%, 9/1/27 1,200 524 San Rafael Elementary School District, Election of 2002-B (NATL-RE, FGIC Insured) 0.000%, 8/1/26 1,000 459 Santa Ana Unified School District (NATL-RE, FGIC Insured) 5.700%, 8/1/22 400 413 Santa Clara Unified School District (NATL-RE, FGIC Insured) 5.500%, 7/1/20 1,000 1,032 Walnut Valley Unified School District, Series A (NATL-RE Insured) 0.000%, 8/1/19 3,095 1,655 --------------- 11,182 --------------- GENERAL REVENUE--18.4% Anaheim Public Financing Authority, Series C (FSA Insured) 6.000%, 9/1/16 1,600 1,847 Golden State Tobacco Securitization Corp., Series A-1 5.125%, 6/1/47 1,500 1,126 5.750%, 6/1/47 1,000 833 Los Angeles County Public Works Financing Authority, Series A (FSA Insured) 5.500%, 10/1/18 420 479 Pomona, Certificates of Participation (AMBAC Insured) 5.500%, 6/1/28 1,365 1,468 San Diego County, Certificates of Participation (AMBAC Insured) 5.250%, 11/1/15 960 1,037 San Jose Financing Authority, Series F (NATL-RE Insured) 5.000%, 9/1/15 1,000 1,060
PAR VALUE VALUE --------------- --------------- GENERAL REVENUE--(CONTINUED) South Bay Regional Public Communications Authority (ACA Insured) 4.750%, 1/1/31 $ 635 $ 490 South Coast Air Quality Management Corp. (AMBAC Insured) 6.000%, 8/1/11 1,000 1,037 State Public Works Board of the State of California Department of Health Services, Richmond Lab Series B (XLCA Insured) 5.000%, 11/1/17 460 487 Highway Patrol Series C 5.250%, 11/1/20 500 508 Department of General Services Buildings 8 & 9 Series A 6.125%, 4/1/29 500 539 --------------- 10,911 --------------- HIGHER EDUCATION REVENUE--1.8% University of California, Series G (NATL-RE, FGIC Insured) 4.750%, 5/15/35 525 533 Series B 4.750%, 5/15/38 500 505 --------------- 1,038 --------------- MEDICAL REVENUE--8.0% California Health Facilities Financing Authority, Stanford Hospital and Clinics Series A 5.000%, 11/15/14 250 265 Cedars-Sinai Medical Center 5.000%, 11/15/34 500 486 Providence Health & Services Series C 6.500%, 10/1/38 300 340 California State Public Works Board, Department of Mental Health Series A 5.500%, 6/1/16 1,000 1,086 California Statewide Communities Development Authority, Kaiser Permanente, Series B 5.000%, 3/1/41 500 499 Sutter Health, Series B 5.625%, 8/15/42 1,000 1,016 St. Joseph Health System (FGIC Insured) 5.750%, 7/1/47 500 522 San Joaquin General Hospital Project, Certificates of Participation (NATL-RE Insured) 5.250%, 9/1/12 100 101 Santa Clara County Financing Authority, Series A (AMBAC Insured) 7.750%, 11/15/11 400 455 --------------- 4,770 ---------------
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 43 VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MUNICIPAL UTILITY DISTRICT REVENUE--1.7% East Bay Municipal Utility District (NATL-RE Insured) 5.000%, 6/1/35 $ 500 $ 528 Sacramento Municipal Utilities District, Financing Authority (NATL-RE Insured) 4.750%, 7/1/26 500 489 --------------- 1,017 --------------- NATURAL GAS REVENUE--1.2% Roseville Natural Gas Financing Authority 5.000%, 2/15/24 750 734 --------------- POWER REVENUE--2.3% Northern California Power Agency, Hydroelectric Project No. 1 Series A (NATL-RE Insured) 5.000%, 7/1/15 1,000 1,006 Hydroelectric Project No. 1 Series A (NATL-RE Insured) 5.200%, 7/1/32 330 332 --------------- 1,338 --------------- PRE-REFUNDED--26.5% Contra Costa County Home Mortgage (GNMA Collateralized) 7.500%, 5/1/14(7) 500 628 Cypress Single Family Residential Mortgage, Series B (Private Mortgage Insurance) 7.250%, 1/1/12 200 228 Duarte Redevelopment Agency Single Family Mortgage, Series A (FNMA Collateralized) 6.875%, 11/1/11(7) 300 339 Grossmont-Cuyamaca Community College District Election of 2002 Series A Pre-refunded 8/1/13 @100 (NATL-RE Insured) 5.000%, 8/1/19 210 240 Huntington Park Redevelopment Agency Single Family Residential Mortgage, Series A (FHA/VA/PRIV MTGS Insured) 8.000%, 12/1/19(7) 2,400 3,491
PAR VALUE VALUE --------------- --------------- PRE-REFUNDED--(CONTINUED) Los Angeles Harbor Department 7.600%, 10/1/18(7) $ 840 $ 1,050 M-S-R Public Power Agency San Juan Project, Series D (NATL-RE Insured) 6.750%, 7/1/20(7) 1,640 2,009 Northern California Power Agency, Hydroelectric Project No. 1 Series A Pre-refunded 7/1/21 @ 100 (AMBAC Insured) 7.500%, 7/1/23 195 273 Riverside County Redevelopment Agency, Pre-refunded 10/01/11 @ 102 (AMBAC Insured) 5.250%, 10/1/17 250 278 Riverside County Single Family(7) Series B (GNMA Collateralized) 8.625%, 5/1/16(7) 1,000 1,342 Series A (GNMA Collateralized) 7.800%, 5/1/21(7) 4,000 5,639 Stockton Housing Facility, O'Connor Woods Project Series A Pre-refunded 9/20/17 @ 100 (GNMA Collateralized) 5.600%, 3/20/28 200 204 --------------- 15,721 --------------- TRANSPORTATION REVENUE--0.8% Alameda Corridor Transportation Authority, Series A (NATL-RE Insured) 5.125%, 10/1/16 150 152 5.125%, 10/1/17 125 126 San Francisco Bay Area Rapid Transit District 5.250%, 7/1/17 180 181 --------------- 459 --------------- WATER & SEWER REVENUE--8.2% California Statewide Communities Development Authority, Anheuser-Busch Project 4.800%, 9/1/46 1,000 869 Delta Diablo Sanitation District, Certificates of Participation (NATL-RE Insured) 0.000%, 12/1/16 1,070 727
PAR VALUE VALUE --------------- --------------- WATER & SEWER REVENUE--(CONTINUED) El Dorado Irrigation District, Certificates of Participation, Series A (NATL-RE, FGIC Insured) 5.250%, 3/1/16 $ 365 $ 395 Modesto Wastewater, Series A (FSA Insured) 5.000%, 11/1/19 245 268 Mountain View Shoreline Regional Park Community, Series A (NATL-RE Insured) 5.500%, 8/1/21 1,000 1,001 Redlands Financing Authority, Series A (FSA Insured) 5.000%, 9/1/17 1,000 1,021 Sweetwater Water Authority (AMBAC Insured) 5.250%, 4/1/10 40 40 Westlands Water District, Certificates of Participation (NATL-RE Insured) 5.250%, 9/1/14 500 545 --------------- 4,866 --------------- TOTAL MUNICIPAL TAX-EXEMPT BONDS (IDENTIFIED COST $54,782) 57,626 --------------- TOTAL LONG-TERM INVESTMENTS--97.1% (IDENTIFIED COST $54,782) 57,626 --------------- SHORT-TERM INVESTMENTS--2.1%
SHARES --------------- MONEY MARKET MUTUAL FUNDS--2.1% State Street Institutional Tax Free Money Market Fund (seven-day effective yield 0.130%) 1,225,307 1,225 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,225) 1,225 --------------- TOTAL INVESTMENTS--99.2% (IDENTIFIED COST $56,007) 58,851(1) Other assets and liabilities, net--0.8% 501 --------------- NET ASSETS--100.0% $ 59,352 ===============
The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable September 30, 2009 Prices Inputs ------------------ --------- ----------- Debt Securities: Municipal Securities $57,626 $ -- $57,626 Equity Securities: Short-Term Investments 1,225 1,225 -- ------- ------ ------- Total Investments $58,851 $1,225 $57,626 ======= ====== =======
There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 44 VIRTUS GLOBAL INFRASTRUCTURE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--97.8% ENERGY--15.3% Enbridge, Inc. (Canada) 117,250 $ 4,549 Spectra Energy Corp. (United States) 132,520 2,510 TransCanada Corp. (Canada) 124,880 3,874 Williams Cos., Inc. (The) (United States) 104,070 1,860 --------------- 12,793 --------------- INDUSTRIALS--15.6% Abertis Infraestructuras S.A. (Spain) 123,363 2,800 Atlantia S.p.A. (Italy) 113,220 2,745 Brisa Auto-Estradas de Portugal SA (Portugal) 160,030 1,576 Fraport AG Frankfurt Airport Services Worldwide (Germany) 28,090 1,494 Koninklijke Vopak NV (Netherlands)(2) 22,490 1,460 Transurban Group (Australia) 502,800 1,819 Vinci SA (France) 21,070 1,192 --------------- 13,086 --------------- TELECOMMUNICATION SERVICES--35.1% American Tower Corp. (United States)(2) 36,240 1,319 AT&T, Inc. (United States) 193,620 5,230 CenturyTel, Inc. (United States) 34,840 1,171 Chunghwa Telecom Co., Ltd. ADR (Taiwan) 43,981 793 Crown Castle International Corp. (United States)(2) 44,600 1,399 France Telecom SA Sponsored ADR (France) 61,030 1,643 KDDI Corp. (Japan) 219 1,234 Koninklijke KPN N.V. (Netherlands) 118,360 1,963 Nippon Telegraph & Telephone Corp. Sponsored ADR (Japan) 40,130 924 Rogers Communications, Inc. Class B (Canada) 37,430 1,057 Singapore Telecommunications Ltd. (Singapore) 470,400 1,085
SHARES VALUE --------------- --------------- TELECOMMUNICATION SERVICES--(CONTINUED) Telefonica S.A. Sponsored ADR (Spain) 32,570 $ 2,700 TELUS Corp. (Canada) 27,980 903 Verizon Communications, Inc. (United States) 91,320 2,764 Vodafone Group plc Sponsored ADR (United Kingdom) 162,970 3,667 Windstream Corp. (United States) 149,130 1,511 --------------- 29,363 --------------- UTILITIES--31.8% CenterPoint Energy, Inc. (United States) 73,100 909 CMS Energy Corp. (United States) 62,380 836 DTE Energy Co. (United States) 25,200 886 E.ON AG (Germany) 71,470 3,031 EDP Renovaveis SA (Spain)(2) 115,360 1,269 Exelon Corp. (United States) 14,500 720 FirstEnergy Corp. (United States) 25,880 1,183 FPL Group, Inc. (United States) 31,020 1,713 GDF Suez (France) 40,937 1,818 Iberdrola S.A. (Spain) 151,480 1,486 National Grid plc (United Kingdom) 71,630 691 Northeast Utilities (United States) 25,490 605 Northwest Natural Gas Co. (United States) 18,730 780 NSTAR (United States) 24,990 795 NV Energy, Inc. (United States) 70,860 821 Public Service Enterprise Group, Inc. (United States) 42,790 1,345 Questar Corp. (United States) 11,960 449 RWE AG (Germany) 12,600 1,170 Scottish & Southern Energy plc (United Kingdom) 55,790 1,046 Sempra Energy (United States) 30,990 1,544
SHARES VALUE --------------- --------------- UTILITIES--(CONTINUED) Southern Co. (The) (United States) 25,740 $ 815 Tokyo Electric Power Co., Inc. (The) (Japan) 36,000 944 Wisconsin Energy Corp. (United States) 19,080 862 Xcel Energy, Inc. (United States) 43,390 835 --------------- 26,553 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $86,157) 81,795 --------------- TOTAL LONG-TERM INVESTMENTS--97.8% (IDENTIFIED COST $86,157) 81,795 --------------- SHORT-TERM INVESTMENTS--6.4% MONEY MARKET MUTUAL FUNDS--6.4% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 5,313,126 5,313 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $5,313) 5,313 --------------- TOTAL INVESTMENTS--104.2% (IDENTIFIED COST $91,470) 87,108(1) Other assets and liabilities, net--(4.2)% (3,527) --------------- NET ASSETS--100.0% $ 83,581 ===============
COUNTRY WEIGHTINGS as of September 30, 2009+ United States 44% Canada 12 Spain 9 Germany 7 United Kingdom 6 France 5 Netherlands 4 Other 13 --- Total 100% ===
+ % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Value at Level 1 - September 30, Quoted 2009 Prices ------------- --------- Equity Securities: Common Stocks $81,795 $81,795 Short-Term Investments 5,313 5,313 ------- ------- Total Investments $87,108 $87,108 ======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 45 VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--92.2% CONSUMER DISCRETIONARY--3.9% AutoZone, Inc.(2) 3,800 $ 556 McDonald's Corp. 28,634 1,634 Norstar Founders Group Ltd.(2)(6)(8) 272,000 0 --------------- 2,190 --------------- CONSUMER STAPLES--42.2% Altria Group, Inc. 45,575 812 British American Tobacco plc 93,871 2,945 Coca-Cola Co. (The) 36,092 1,938 Colgate-Palmolive Co. 10,079 769 Costco Wholesale Corp. 17,800 1,005 Diageo plc 44,713 686 Imperial Tobacco Group plc 84,260 2,435 Mead Johnson Nutrition Co. Class A 55,876 2,521 Nestle S.A. Registered Shares 34,723 1,480 Philip Morris International, Inc. 77,400 3,772 Reckitt Benckiser Group plc 34,845 1,703 Shoppers Drug Mart Corp. 15,912 653 Tesco plc 147,850 944 Wal-Mart Stores, Inc. 18,770 921 Woolworths Ltd. 37,866 977 --------------- 23,561 --------------- ENERGY--3.6% BG Group plc 41,500 721 Core Laboratories N.V. 12,642 1,303 --------------- 2,024 --------------- FINANCIALS--3.6% Bank of New York Mellon Corp. (The) 19,100 554 Deutsche Boerse AG 6,400 523 Progressive Corp. (The)(2) 57,126 947 --------------- 2,024 --------------- HEALTH CARE--18.9% Abbott Laboratories 51,657 2,555 Bard (C.R.), Inc. 9,507 747 Baxter International, Inc. 13,800 787 Becton, Dickinson & Co. 13,700 956 Celgene Corp.(2) 17,300 967 Johnson & Johnson 8,919 543 Novartis AG Registered Shares 14,670 734 Novo Nordisk A/S Class B 15,218 953 Roche Holding AG Registered Shares 7,007 1,133 Synthes, Inc. 4,600 554 Techne Corp. 9,543 597 --------------- 10,526 ---------------
SHARES VALUE --------------- --------------- INDUSTRIALS--3.5% Capita Group plc/The 48,575 $ 561 De La Rue plc 28,709 412 L-3 Communications Holdings, Inc. 5,689 457 Robinson (C.H.) Worldwide, Inc. 9,000 519 --------------- 1,949 --------------- INFORMATION TECHNOLOGY--9.8% Cognizant Technology Solutions Corp. Class A(2) 15,100 584 Companhia Brasileira de Meios de Pagamento 59,100 585 Google, Inc.(2) 3,732 1,851 Nintendo Co. Ltd. 19,791 625 Redecard SA 53,649 829 Visa, Inc. Class A 13,956 964 --------------- 5,438 --------------- UTILITIES--6.7% Companhia Energetica de Minas Gerais - Gemig ADR 45,592 693 CPFL Energia SA ADR 11,035 596 Enagas S.A. 56,153 1,175 Red Electrica Corp. S.A. 16,696 854 Terna Rete Elettrica Nazionale S.p.A. 107,900 421 --------------- 3,739 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $43,345) 51,451 --------------- WARRANTS--6.3% Deutsche Bank AG - HDFC Bank Ltd. Exercise price $0.001 USD exp. 1/24/17(2) 20,100 690 HSBC Bank plc - Hindustan Unilever Ltd. Exercise price $0.001 USD exp. 4/11/18(2) 47,603 260 HSBC Bank plc - Nestle India Ltd. Exercise price $0.001 USD exp. 11/19/18(2) 13,100 618 HSBC Bank plc - ITC Ltd. Exercise price $0.001 USD exp. 2/20/18(2) 136,900 663 HSBC Bank plc - Housing Development Finance Corp. Exercise price $0.001 USD exp. 2/20/18(2) 16,200 939 JPMorgan International - Housing Development Financial Corp. Exercise price $0.001 USD exp. 5/7/14(2) 6,500 377 --------------- TOTAL WARRANTS (IDENTIFIED COST $2,525) 3,547 ---------------
SHARES VALUE --------------- --------------- EQUITY-LINKED CERTIFICATES--1.2% CLSA Financial Products Ltd. - Cipla Ltd. Strike price $0.001 USD exp. 5/23/11(2) 113,478 $ 660 --------------- TOTAL EQUITY-LINKED CERTIFICATES (IDENTIFIED COST $490) 660 --------------- TOTAL LONG-TERM INVESTMENTS--99.7% (IDENTIFIED COST $46,360) 55,658 --------------- SHORT-TERM INVESTMENTS--0.7% MONEY MARKET MUTUAL FUNDS--0.7% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 369,904 370 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $370) 370 --------------- TOTAL INVESTMENTS--100.4% (IDENTIFIED COST $46,730) 56,028(1) Other assets and liabilities, net--(0.4)% (239) --------------- NET ASSETS--100.0% $ 55,789 ===============
COUNTRY WEIGHTINGS as of September 30, 2009+ United States 42% United Kingdom 22 Switzerland 14 Brazil 5 India 3 Spain 3 Netherlands 2 Other 9 --- Total 100% ===
+ % of total investments as of September 30, 2009. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 46 VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 FOREIGN CURRENCIES: CHF Swiss Francs EUR European Currency Unit GBP United Kingdom Pound Sterling USD United States Dollar At September 30, 2009, the Fund had entered into forward currency contracts as follows (reported in thousands):
Unrealized Contracts In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) --------- ----------- ---------- ----- -------------- CHF 602 USD 585 3/29/10 $ 582 $ 3 EUR 303 USD 443 3/29/10 443 --# GBP 960 USD 1,543 3/29/10 1,534 9 --- $12 ===
# Amount is less than $500. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Value Level 2 - Level 3 - at Level 1 - Significant Significant September Quoted Observable Unobservable ASSETS 30, 2009 Prices Inputs Inputs ------ ----------- --------- ----------- ------------ Equity Securities: Common Stocks $51,451 $51,451 $ -- $--++ Warrants 3,547 -- 3,547 -- Equity-Linked Certificates 660 -- 660 -- Short-Term Investments 370 370 -- -- ------- ------- ------ --- Total Investments $56,028 $51,821 $4,207 $-- ------- ------- ------ --- Forward Currency Contracts $ 12 $ -- $ 12 $--
++ Level 3 common stock valued at zero at the beginning and end of the period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 47 VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--97.6% DIVERSIFIED REITS--10.5% BGP Holdings(8) 13,566 $ 0 British Land Co. plc 4,471 34 Canadian Real Estate Investment Trust 325 8 Cominar Real Estate Investment Trust 650 12 Dexus Property Group 34,140 25 Duke Realty Corp. 1,125 13 First Capital Realty, Inc. 140 3 Fonciere Des Regions 100 12 Gecina SA 90 11 Kenedix Realty Investment Corp. 2 7 Liberty Property Trust 570 19 Vornado Realty Trust 967 62 --------------- 206 --------------- INDUSTRIAL REITS--4.7% AMB Property Corp. 775 18 Ascendas Real Estate Investment Trust 17,000 23 EastGroup Properties, Inc. 100 4 Goodman Group 49,000 29 ProLogis 281 3 SEGRO plc 2,630 15 --------------- 92 --------------- OFFICE REITS--18.8% Alexandria Real Estate Equities, Inc. 345 19 Allied Properties Real Estate Investment Trust 200 3 BioMed Realty Trust, Inc. 650 9 Boston Properties, Inc. 648 42 CapitaCommercial Trust 11,000 8 Champion REIT 33,000 14 Commonwealth Property Office Fund 8,500 7 Corporate Office Properties Trust 313 12 Derwent London plc 750 15 Digital Realty Trust, Inc. 1,010 46 Douglas Emmett, Inc. 276 3 Great Portland Estates plc 2,371 10 Highwoods Properties, Inc. 470 15 ING Office Fund 19,908 10 Japan Prime Realty Investment Corp. 5 12 Japan Real Estate Investment Corp. 3 25 Mack-Cali Realty Corp. 564 18 Nippon Building Fund, Inc. 3 27 Nomura Real Estate Office Fund, Inc. 2 13 ORIX JREIT, Inc. 3 16 SL Green Realty Corp. 591 26 Societe Immobiliere de Location Pour L'industrie Et Le Commerce 150 19 --------------- 369 ---------------
SHARES VALUE --------------- --------------- REAL ESTATE OPERATING COMPANIES--8.2% AEON Mall Co. Ltd. 800 $ 17 Brookfield Properties Corp. 355(13) 4 Brookfield Properties Corp. 1,600(14) 18 Castellum AB 2,025 20 Citycon Oyj 3,200 14 Deutsche Euroshop AG 250 9 Fabege AB 900 5 GAGFAH S.A. 500 5 Hongkong Land Holdings Ltd. 10,500 46 Multiplan Empreendimentos Imobiliarios SA 575 9 PSP Swiss Property AG(2) 250 14 --------------- 161 --------------- RESIDENTIAL REITS--7.7% American Campus Communities, Inc. 195 5 Apartment Investment & Management Co. Class A 672 10 AvalonBay Communities, Inc. 380 28 Boardwalk Real Estate Investment Trust 56 2 BRE Properties, Inc. 262 8 Equity Lifestyle Properties, Inc. 119 5 Equity Residential 1,506 46 Essex Property Trust, Inc. 140 11 Home Properties, Inc. 253 11 UDR, Inc. 1,574 25 --------------- 151 --------------- RETAIL REITS--35.4% CapitaMall Trust 13,300 18 CBL & Associates Properties, Inc. 1,684 16 CFS Retail Property Trust 11,200 20 Corio N.V. 370 26 Eurocommercial Properties N.V. 335 13 Federal Realty Investments Trust 298 18 Hammerson plc 3,600 23 Kimco Realty Corp. 2,628 34 Klepierre 665 26 Land Securities Group plc 4,375 44 Liberty International plc 1,901 15 Link (The) 13,305 29 Macerich Co. (The) 665 20 National Retail Properties, Inc. 190 4 Regency Centers Corp. 223 8 RioCan Real Estate Investment Trust 1,607 27 Simon Property Group, Inc. 1,487 103 Tanger Factory Outlet Centers 455 17 Taubman Centers, Inc. 215 8 Unibail-Rodamco 428 89 Westfield Group 11,200 137 --------------- 695 ---------------
SHARES VALUE --------------- --------------- SPECIALIZED REITS--12.3% Big Yellow Group plc(2) 1,100 $ 7 Entertainment Properties Trust 240 8 Extra Space Storage, Inc. 1,220 13 Health Care REIT, Inc. 828 34 Host Hotels & Resorts, Inc. 2,560 30 HPC, Inc. 1,329 38 LaSalle Hotel Properties 385 8 Nationwide Health Properties, Inc. 695 21 Public Storage 595 45 Sunstone Hotel Investors, Inc.(2) 523 4 U-Store-It Trust 311 2 Ventas, Inc. 828 32 --------------- 242 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $1,185) 1,916 --------------- TOTAL LONG-TERM INVESTMENTS--97.6% (IDENTIFIED COST $1,185) 1,916 --------------- SHORT-TERM INVESTMENTS--3.3% MONEY MARKET MUTUAL FUNDS--3.3% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 64,961 65 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $65) 65 --------------- TOTAL INVESTMENTS--100.9% (IDENTIFIED COST $ 1,250) 1,981(1) Other assets and liabilities, net--(0.9)% (18) --------------- NET ASSETS--100.0% $ 1,963 ===============
COUNTRY WEIGHTINGS as of September 30, 2009+ United States 50% Australia 12 France 8 United Kingdom 8 Japan 6 Canada 4 Hong Kong 4 Other 8 --- Total 100% ===
+ % of total investments as of September 30, 2009. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 48 VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2009 Prices Inputs ------------------ --------- ------------ Equity Securities: Common Stocks $1,916 $1,916 $--++ Short-Term Investments 65 65 -- ------ ------ --- Total Investments $1,981 $1,981 $--++ ====== ====== ===
There are no Level 2 (significant observable inputs) priced securities. ++ Level 3 Common Stock transferred in at zero and valued at zero at the end of the period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 49 VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--75.4% CONSUMER DISCRETIONARY--4.1% BEC World plc 94,800 $ 64 Berjaya Sports Toto Bhd(10) 13,600 17 Billabong International Ltd. 8,800 93 Genting Malaysia Bhd 80,600 64 Kangwon Land, Inc. 2,320 34 --------------- 272 --------------- CONSUMER STAPLES--22.4% AmorePacific Corp. 170 122 British American Tobacco Bhd(10) 9,200 117 Coca-Cola Amatil Ltd. 18,400 159 Dairy Farm International Holdings Ltd. 13,000 78 Guinness Anchor Bhd 24,700 49 Hengan International Group Co., Ltd. 31,100 188 KT&G Corp. 1,750 106 LG Household & Health Care Ltd. 350 78 Nestle Malaysia Bhd 6,800 68 Thai Beverage plc 394,300 70 Unilever Indonesia Tbk PT 107,300 119 Want Want China Holdings Ltd. 109,500 65 Woolworths Ltd. 10,900 281 --------------- 1,500 --------------- ENERGY--3.3% CNOOC Ltd. 35,800 48 PTT Exploration & Production plc 38,100 165 Yingde Gases Group Co., Ltd. 11,000 10 --------------- 223 --------------- FINANCIALS--11.5% HDFC Bank Ltd. ADR 3,065 363 Public Bank Bhd 29,000 85 QBE Insurance Group Ltd. 8,226 175 Samsung Fire & Marine Insurance Co., Ltd. 720 147 --------------- 770 --------------- HEALTH CARE--1.3% Yuhan Corp. 550 89 --------------- INDUSTRIALS--11.9% Beijing Enterprises Holdings Ltd. 33,600 178 Jardine Matheson Holdings Ltd. 2,600 79 Jardine Strategic Holdings Ltd. 2,800 48 PLUS Expressways Bhd 65,700 63 S1 Corp. 896 40 Singapore Airport Terminal Services Ltd. 39,400 63 Singapore Post Ltd. 167,900 110 Singapore Technologies Engineering Ltd. 39,100 76
SHARES VALUE --------------- --------------- INDUSTRIALS--(CONTINUED) SMRT Corp. Ltd. 66,000 $ 79 Taiwan Secom Co., Ltd. 38,000 60 --------------- 796 --------------- INFORMATION TECHNOLOGY--2.9% NetEase.Com, Inc. ADR(2) 2,700 123 NHN Corp.(2) 460 68 --------------- 191 --------------- MATERIALS--2.7% AMVIG Holdings Ltd. 132,104 55 Semen Gresik (Persero) Tbk PT 190,400 124 --------------- 179 --------------- TELECOMMUNICATION SERVICES--6.2% Philippine Long Distance Telephone Co. Sponsored ADR 2,860 147 Singapore Telecommunications Ltd. 29,000 67 Telekomunikasi Indonesia Tbk PT 151,800 136 Telstra Corp. Ltd. 23,000 66 --------------- 416 --------------- UTILITIES--9.1% Cheung Kong Infrastructure Holdings Ltd. 19,600 70 CLP Holdings Ltd. 7,500 51 HongKong Electric Holdings Ltd. 22,600 124 Tanjong plc 59,300 257 Xinao Gas Holdings Ltd. 54,000 107 --------------- 609 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $4,112) 5,045 --------------- WARRANTS--10.6% HSBC Bank plc - Sun Pharmaceutical Industries Ltd. Exercise price $0.001 USD exp. 10/24/18(2) 2,000 59 HSBC Bank plc - Cipla Ltd. Exercise price $0.001 USD exp. 12/17/18(2) 600 3 HSBC Bank plc - Hindustan Unilever Ltd. Exercise price $0.001 USD exp. 4/11/18(2) 20,700 113 HSBC Bank plc - Nestle India Ltd. Exercise price $0.001 USD exp. 11/19/18(2) 4,300 203 JPMorgan International - Housing Development Financial Corp. Exercise price $0.001 USD exp. 5/7/14(2) 5,500 319 Macquarie Bank Ltd. - Marico Ltd. Exercise price $0.0001 USD exp. 2/18/13(2) 7,700 14 --------------- TOTAL WARRANTS (IDENTIFIED COST $ 506) 711 ---------------
SHARES VALUE --------------- --------------- EQUITY-LINKED CERTIFICATES--10.9% CLSA Financial Products Ltd. - Bharat Heavy Electricals Ltd. Strike price $0.001 USD exp. 7/20/10(2) 2,100 $ 102 CLSA Financial Products Ltd. - Bharti-Tele Ventures Strike price $0.001 USD exp. 5/31/10(2) 8,000 70 CLSA Financial Products Ltd. - Dabur India Ltd. Strike price $0.001 USD exp. 1/18/12(2) 19,300 57 CLSA Financial Products Ltd. - Hero Honda Motors Ltd. Strike price $0.001 USD exp. 6/9/10(2) 1,900 66 CLSA Financial Products Ltd. - ITC Ltd. Strike price $0.001 USD exp. 5/5/10(2) 45,700 221 CLSA Financial Products Ltd. - Jain Irrigation Systems Ltd. Strike price $0.001 USD exp. 8/15/11(2) 4,600 75 CLSA Financial Products Ltd. - Jammu & Kashmir Bank Ltd. Strike price $0.001 USD exp. 7/8/10(2) 8,900 108 CLSA Financial Products Ltd. - Mahindra & Mahindra Financial Services Strike price $0.001 USD exp. 2/23/11(2) 7,100 34 --------------- TOTAL EQUITY-LINKED CERTIFICATES (IDENTIFIED COST $535) 733 --------------- MUTUAL FUNDS--1.2% Macquarie Korea Infrastructure Fund 18,110 79 --------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $70) 79 --------------- TOTAL LONG-TERM INVESTMENTS--98.1% (IDENTIFIED COST $5,223) 6,568 --------------- SHORT-TERM INVESTMENTS--2.1% MONEY MARKET MUTUAL FUNDS--2.1% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 139,744 140 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $140) 140 --------------- TOTAL INVESTMENTS--100.2% (IDENTIFIED COST $5,363) 6,708(1) Other assets and liabilities, net--(0.2)% (17) --------------- NET ASSETS--100.0% $ 6,691 ===============
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 50 VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) COUNTRY WEIGHTINGS as of September 30, 2009+ India 24% Australia 12 China 11 Malaysia 11 Korea 8 Hong Kong 7 Singapore 6 Other (includes short-term investments) 21 --- Total 100% ===
+ % of total investments as of September 30, 2009. At September 30, 2009, the Fund had entered into forward currency contracts as follows (reported in thousands):
Unrealized Contracts In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) --------- ----------- ---------- ----- -------------- AUD 218 USD 185 3/29/10 $189 $(4) ===
FOREIGN CURRENCIES: AUD Australian Dollar USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Value Level 1 - Significant at Quoted Observable September 30, 2009 Prices Inputs ------------------ --------- ----------- ASSETS Equity Securities: Common Stocks $5,045 $5,045 $ -- Warrants 711 -- 711 Equity-Linked Certificates 733 -- 733 Mutual Funds 79 79 Short-Term Investments 140 140 -- ------ ------ ------ Total Investments $6,708 $5,264 $1,444 ====== ====== ====== LIABILITIES Forward Currency Contracts $ (4) $ -- $ (4)
There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 51 VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--98.7% CONSUMER DISCRETIONARY--3.0% OPAP SA 4,903 $ 127 SES SA 3,189 72 --------------- 199 --------------- CONSUMER STAPLES--39.1% British American Tobacco plc 12,379 388 Cadbury plc 13,026 167 Colruyt SA 328 77 Diageo plc 11,808 181 Imperial Tobacco Group plc 12,050 348 Lindt & Spruengli AG 23 56 Nestle S.A. Registered Shares 7,922 337 Philip Morris International, Inc. 7,337 358 Reckitt Benckiser Group plc 5,113 250 Tesco plc 40,240 257 Unilever N.V. 4,982 144 --------------- 2,563 --------------- ENERGY--7.0% BG Group plc 5,082 88 Core Laboratories N.V. 2,169 224 Total SA 2,531 150 --------------- 462 --------------- FINANCIALS--6.8% Deutsche Boerse AG 1,834 150 HSBC Holdings plc 2,929 33 Muenchener Rueckversicherungs-Gesellschaft AG Registered Shares 1,032 165 Reinet Investments SCA(2) 7,186 101 --------------- 449 ---------------
SHARES VALUE --------------- --------------- HEALTH CARE--19.5% Cie Generale D'optique Essilor International SA 3,379 $ 192 Covidien plc 2,400 104 Fresenius Medical Care AG & Co KGaA 4,636 231 Novartis AG Registered Shares 3,172 159 Novo Nordisk A/S Class B 3,205 201 Roche Holding AG Registered Shares 1,733 280 Synthes, Inc. 937 113 --------------- 1,280 --------------- INDUSTRIALS--7.7% Bureau Veritas SA 1,590 89 Capita Group plc/The 13,841 160 De La Rue plc 6,271 90 G4S plc 26,300 93 Siemens AG Registered Shares 755 70 --------------- 502 --------------- INFORMATION TECHNOLOGY--3.9% Indra Sistemas SA 3,990 100 Xchanging plc 44,081 155 --------------- 255 --------------- MATERIALS--1.4% Air Liquide SA 778 89 --------------- UTILITIES--10.3% Enagas S.A. 8,708 182 Red Electrica Corp. S.A. 3,967 203 RWE AG 1,113 103 Scottish & Southern Energy plc 5,195 98 Terna Rete Elettrica Nazionale S.p.A. 23,948 93 --------------- 679 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $ 5,110) 6,478 --------------- TOTAL LONG-TERM INVESTMENTS--98.7% (IDENTIFIED COST $5,110) 6,478 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--1.6% MONEY MARKET MUTUAL FUNDS--1.6% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 105,026 $ 105 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $105) 105 --------------- TOTAL INVESTMENTS--100.3% (IDENTIFIED COST $5,215) 6,583(1) Other assets and liabilities, net--(0.3)% (21) --------------- NET ASSETS--100.0% $ 6,562 ===============
COUNTRY WEIGHTINGS as of September 30, 2009+ United Kingdom 35% Switzerland 20 Germany 11 France 8 Spain 7 Netherlands 6 United States 3 Other 10 --- Total 100% ===
+ % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Value Level 1 - at Quoted September 30, 2009 Prices ------------------ --------- Equity Securities: Common Stocks $6,478 $6,478 Short-Term Investments 105 105 ------ ------ Total Investments $6,583 $6,583 ====== ======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 52 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- CORPORATE BONDS--92.4% CONSUMER DISCRETIONARY--30.3% Affinion Group, Inc. 10.125%, 10/15/13 $ 645 $ 666 11.500%, 10/15/15 1,555 1,606 AMC Entertainment, Inc. 8.000%, 3/1/14 1,255 1,217 American Real Estate Partners LP 8.125%, 6/1/12 1,515 1,502 7.125%, 2/15/13 480 462 Caesars Entertainment, Inc. 7.875%, 3/15/10 900 904 Cinemark USA, Inc. 144A 8.625%, 6/15/19(4) 685 712 CSC Holdings, Inc. 144A 8.625%, 2/15/19(4) 2,050 2,178 Dollar General Corp. PIK Interest Capitalization 11.875%, 7/15/17 780 881 Dollarama Group LP 8.875%, 8/15/12 760 781 Echostar DBS Corp. 6.625%, 10/1/14 410 400 7.125%, 2/1/16 780 778 Education Management LLC/Education Management Finance Corp. 10.250%, 6/1/16 555 619 Goodyear Tire & Rubber Co. (The) 5.010%, 12/1/09(3) 15 15 10.500%, 5/15/16 1,210 1,319 Intelsat Corp. 9.250%, 8/15/14 1,285 1,324 Jostens IH Corp. 7.625%, 10/1/12 900 906 Levi Strauss & Co. 8.875%, 4/1/16 755 768 Mediacom Broadband LLC/Mediacom Broadband Corp. 8.500%, 10/15/15 1,130 1,147 Peninsula Gaming LLC 144A 10.750%, 8/15/17(4) 910 919 Sally Holdings LLC/Sally Capital, Inc. 10.500%, 11/15/16 720 754 Scientific Games International, Inc. 144A 9.250%, 6/15/19(4) 1,355 1,416 Service Corp. International 7.625%, 10/1/18 1,000 1,012 Speedway Motorsports, Inc. 6.750%, 6/1/13 1,110 1,102 144A 8.750%, 6/1/16(4) 315 329 Susser Holdings LLC/Susser Finance Corp. 10.625%, 12/15/13 765 794 United Artists Theatre Circuit, Inc. Series BE-9 9.300%, 7/1/15(6)(8) 11 10 Series AW-0, 9.300%, 7/1/15(6)(8) 2 1 Series BD-1 9.300%, 7/1/15(6)(8) 321 291 Series 95-A 9.300%, 7/1/15(6)(8) 298 270
PAR VALUE VALUE --------------- --------------- CONSUMER DISCRETIONARY--(CONTINUED) Valassis Communications, Inc. 8.250%, 3/1/15 $ 1,005 $ 906 Videotron Ltee 9.125%, 4/15/18 1,490 1,620 WMG Holdings Corp. 0.000%, 12/15/14(3) 640 619 --------------- 28,228 --------------- CONSUMER STAPLES--10.5% Alliance One International, Inc. 144A 10.000%, 7/15/16(4) 1,365 1,416 ASG Consolidated LLC/ASG Finance, Inc. 11.500%, 11/1/11(3) 1,000 975 Constellation Brands, Inc. 7.250%, 9/1/16 1,185 1,185 Del Monte Corp. 144A 7.500%, 10/15/19(4) 65 66 Dole Food Co., Inc. 8.750%, 7/15/13 65 65 144A 13.875%, 3/15/14(4) 825 972 144A 8.000%, 10/1/16(4) 340 343 Ingles Markets, Inc. 8.875%, 5/15/17 1,200 1,236 Jarden Corp. 7.500%, 5/1/17 1,235 1,207 Pantry, Inc. (The) 7.750%, 2/15/14 895 839 Stater Brothers Holdings, Inc. 7.750%, 4/15/15 565 551 SUPERVALU, Inc. 8.000%, 5/1/16 930 967 --------------- 9,822 --------------- ENERGY--6.3% Chesapeake Energy Corp. 9.500%, 2/15/15 285 301 6.625%, 1/15/16 1,240 1,178 El Paso Corp. 6.875%, 6/15/14 665 655 8.250%, 2/15/16 515 530 Encore Acquisition Co. 6.000%, 7/15/15 1,045 951 Pioneer Natural Resources Co. 6.650%, 3/15/17 100 96 6.875%, 5/1/18 930 892 Plains Exploration & Production Co. 7.000%, 3/15/17 715 685 7.625%, 6/1/18 540 532 --------------- 5,820 --------------- FINANCIALS--7.4% Ford Motor Credit Co. LLC 7.500%, 8/1/12 2,020 1,941 Fresenius US Finance II, Inc. 144A 9.000%, 7/15/15(4) 1,580 1,730 GMAC, Inc. 144A 6.750%, 12/1/14(4) 1,230 1,058
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) Host Hotels & Resorts LP Series O 6.375%, 3/15/15 $ 1,220 $ 1,162 NBC Acquisition Corp. 11.000%, 3/15/13(3) 1,185 693 Royal Bank of Scotland Group plc Series 1, 9.118%, 3/31/10 185 171 Ventas Realty LP/Ventas Capital Corp. Series 1 6.500%, 6/1/16 155 151 --------------- 6,906 --------------- HEALTH CARE--4.7% Bio-Rad Laboratories, Inc. 144A 8.000%, 9/15/16(4) 330 343 Community Health Systems, Inc. 8.875%, 7/15/15 1,205 1,238 HCA, Inc. 9.250%, 11/15/16 2,000 2,072 144A 8.500%, 4/15/19(4) 690 725 --------------- 4,378 --------------- INDUSTRIALS--8.9% ARAMARK Corp. 8.500%, 2/1/15 725 735 Biomet, Inc. 11.625%, 10/15/17 2,120 2,321 Casella Waste Systems, Inc. 9.750%, 2/1/13 1,200 1,116 Corrections Corp. of America 7.750%, 6/1/17 610 633 DI Finance/DynCorp International, Inc. Series B 9.500%, 2/15/13 2,000 2,050 L-3 Communications Corp. 5.875%, 1/15/15 1,430 1,430 --------------- 8,285 --------------- INFORMATION TECHNOLOGY--5.5% Dycom Industries, Inc. 8.125%, 10/15/15 985 901 Inmarsat Finance plc 7.625%, 6/30/12 480 483 Jabil Circuit, Inc. 7.750%, 7/15/16 295 301 Lender Processing Services, Inc. 8.125%, 7/1/16 1,085 1,134 SunGard Data Systems, Inc. 9.125%, 8/15/13 1,255 1,274 10.250%, 8/15/15 985 1,010 --------------- 5,103 --------------- MATERIALS--1.7% Freeport-McMoRan Copper & Gold, Inc. 8.375%, 4/1/17 1,480 1,574 ---------------
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 53 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- TELECOMMUNICATION SERVICES--14.9% Cincinnati Bell, Inc. 8.375%, 1/15/14 $ 880 $ 889 Citizens Communications Corp. 7.125%, 3/15/19 1,115 1,056 Frontier Communications Corp. 8.125%, 10/1/18 595 602 Global Crossing Ltd. 144A 12.000%, 9/15/15(4) 1,050 1,108 Hughes Network Systems LLC/Hughes Network Systems Finance Corp. 9.500%, 4/15/14 1,770 1,788 Paetec Holding Corp. 9.500%, 7/15/15 30 27 144A 8.875%, 6/30/17(4) 680 680 Poland Telecom Finance BV Series B 14.000%, 12/1/09(6)(9)(8)(15) 4,942 62 Qwest Corp. 8.875%, 3/15/12 615 647 144A 8.375%, 5/1/16(4) 175 181 6.500%, 6/1/17 735 691 Sprint Capital Corp. 8.375%, 3/15/12 890 923 Stratos Global Corp. 9.875%, 2/15/13 615 643 Virgin Media Finance plc Series 8.750%, 4/15/14 2,045 2,096 West Corp. 9.500%, 10/15/14 1,135 1,118 Windstream Corp. 7.000%, 3/15/19 1,475 1,387 --------------- 13,898 ---------------
PAR VALUE VALUE --------------- --------------- UTILITIES--2.2% Ferrellgas Partners LP 144A 9.125%, 10/1/17(4) $ 675 $ 699 NRG Energy, Inc. 7.375%, 1/15/17 1,395 1,353 --------------- 2,052 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $85,370) 86,066 --------------- LOAN AGREEMENTS--2.7% CONSUMER DISCRETIONARY--2.7% Education Management LLC/Education Management Finance Corp. Tranche C 2.375%, 6/1/13(3) 1,253 1,198 KAR Holdings, Inc. Tranche 2.550%, 10/21/13(3) 700 675 Rental Services Corp. Tranche 3.848%, 11/30/13(3) 680 605 --------------- TOTAL LOAN AGREEMENTS (IDENTIFIED COST $2,010) 2,478 --------------- COMMON STOCKS--0.0%
SHARES --------------- INDUSTRIALS--0.0% ACG Holdings, Inc.(6)(8)(15) 76 0 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $358) 0 --------------- TOTAL LONG-TERM INVESTMENTS--95.1% (IDENTIFIED COST $87,738) 88,544 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--2.9% MONEY MARKET MUTUAL FUNDS--2.9% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 2,727,866 $ 2,728 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $2,728) 2,728 --------------- TOTAL INVESTMENTS--98.0% (IDENTIFIED COST $90,466) 91,272(1) Other Assets and Liabilities--2.0% 1,892 --------------- NET ASSETS--100.0% $ 93,164 ===============
COUNTRY WEIGHTINGS as of September 30, 2009+ United States 94% United Kingdom 3 Canada 2 Bermuda 1 --- Total 100% ===
+ % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2009 Prices Inputs Inputs ------------------ --------- ----------- ------------ Debt Securities: Corporate Debt $88,544 $ -- $87,910 $634 Equity Securities: Common Stock -- -- -- -- Short-Term Investments 2,728 2,728 -- -- ------- ------ ------- ---- Total Investments $91,272 $2,728 $87,910 $634 ======= ====== ======= ====
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 54 VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: ($ reported in thousands)
Corporate Common Total Debt Stock ----- --------- ------ BALANCE AS OF SEPTEMBER 30, 2008: $ 772 $708 $ 64 Accrued discounts (premiums) 3 3 -- Realized gain (loss)(1) 103 -- 103 Change in unrealized appreciation (depreciation)(1) (66) (2) (64) Net purchases (sales) (178) (75) (103) Transfers in and/or out of Level 3(2) -- -- -- ----- ---- ---- BALANCE AS OF SEPTEMBER 30, 2009: $ 634 $634 $ --(3) ===== ==== ====
(1) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (2) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2009, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (3) LEVEL 3 COMMON STOCK HAS AN ENDING VALUE OF ZERO. Certain level 3 security valuations have been determined based on availability of only a single broker source, which may or may not be a principal market maker. Other level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 55 VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--97.1% DIVERSIFIED REITS--10.4% BGP Holdings(8) 588,920 $ 0 British Land Co. plc 123,375 937 Canadian Real Estate Investment Trust 10,175 245 Cominar Real Estate Investment Trust 18,150 330 Dexus Property Group 1,151,415 858 First Capital Realty, Inc. 5,000 90 Fonciere Des Regions 4,045 471 Gecina SA 2,085 249 Kenedix Realty Investment Corp. 58 218 --------------- 3,398 --------------- INDUSTRIAL REITS--7.1% Ascendas Real Estate Investment Trust 548,000 751 Goodman Group 1,675,280 983 SEGRO plc 101,757 597 --------------- 2,331 --------------- OFFICE REITS--16.7% Allied Properties Real Estate Investment Trust 10,400 161 CapitaCommercial Trust 453,000 334 Champion REIT 1,197,000 499 Commonwealth Property Office Fund 194,416 163 Derwent London plc 23,846 465 Great Portland Estates plc 79,118 335 ING Office Fund 640,650 317 Japan Prime Realty Investment Corp. 168 408 Japan Real Estate Investment Corp. 80 654 Nippon Building Fund, Inc. 93 830 Nomura Real Estate Office Fund, Inc. 48 319 ORIX JREIT, Inc. 96 497 Societe Immobiliere de Location Pour L'industrie Et Le Commerce 3,712 479 --------------- 5,461 ---------------
SHARES VALUE --------------- --------------- REAL ESTATE OPERATING COMPANIES--16.6% AEON Mall Co. Ltd. 18,600 $ 387 Brookfield Properties Corp.(13) 8,645 97 Brookfield Properties Corp.(14) 69,150 784 Castellum AB 64,666 626 Citycon Oyj 99,166 421 Deutsche Euroshop AG 9,018 316 Fabege AB 27,009 159 GAGFAH S.A. 14,351 159 Hongkong Land Holdings Ltd. 332,500 1,446 Multiplan Empreendimentos Imobiliarios SA 19,558 306 PSP Swiss Property AG(2) 8,196 475 Safestore Holdings Ltd. plc 96,319 233 --------------- 5,409 --------------- RESIDENTIAL REITS--0.6% Boardwalk Real Estate Investment Trust 5,360 193 --------------- RETAIL REITS--45.1% CapitaMall Trust 379,800 499 CFS Retail Property Trust 333,252 591 Corio N.V. 11,676 805 Eurocommercial Properties N.V. 11,812 468 Hammerson plc 110,609 697 Klepierre 20,078 796 Land Securities Group plc 142,173 1,420 Liberty International plc 59,864 459 Link (The) 476,642 1,049 RioCan Real Estate Investment Trust 42,600 716 Unibail-Rodamco 14,380 2,987 Westfield Group 345,173 4,233 --------------- 14,720 --------------- SPECIALIZED REITS--0.6% Big Yellow Group plc(2) 33,841 203 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $28,585) 31,715 --------------- TOTAL LONG-TERM INVESTMENTS--97.1% (IDENTIFIED COST $28,585) 31,715 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--0.3% MONEY MARKET MUTUAL FUNDS--0.3% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 98,517 $ 99 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $99) 99 --------------- TOTAL INVESTMENTS--97.4% (IDENTIFIED COST $28,684) 31,814(1) Other assets and liabilities, net--2.6% 848 --------------- NET ASSETS--100.0% $ 32,662 ===============
COUNTRY WEIGHTINGS as of September 30, 2009*+ Australia 23% United Kingdom 17 France 16 Japan 10 Hong Kong 9 Canada 8 Singapore 5 Other 12 --- Total 100% ===
* FOREIGN SECURITY COUNTRY DETERMINATION: A combination of the following criteria is used to assign the countries of risk listed in the table shown above. Country of incorporation, actual building address, primary exchange on which security is traded and country in which the greatest percentage of company revenue is generated. + % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2009 Prices Inputs ------------------ --------- ------------ Equity Securities: Common Stocks $31,715 $31,715 $--++ Short-Term Investments 99 99 -- ------- ------- --- Total Investments $31,814 $31,814 $--++ ======= ======= ===
There are no Level 2 (significant observable inputs) priced securities. ++ Level 3 Common Stock transferred in at zero and valued at zero at the end of the period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 56 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--96.5% CONSUMER DISCRETIONARY--20.4% Abercrombie & Fitch Co. Class A 14,930 $ 491 AnnTaylor Stores Corp.(2) 46,600 741 Autoliv, Inc. 25,700 864 Brink's Home Security Holdings, Inc.(2) 9,390 289 Drew Industries, Inc.(2) 16,890 366 Electrolux AB Series B(2) 40,700 931 Ethan Allen Interiors, Inc. 24,630 406 Gap, Inc. (The) 22,760 487 Home Depot, Inc. (The) 11,100 296 Kohl's Corp.(2) 9,420 537 LVMH Moet Hennessy Louis Vuitton S.A. 7,170 721 Newell Rubbermaid, Inc. 30,620 480 News Corp. Class A 63,050 756 Nordstrom, Inc. 17,630 538 OfficeMax, Inc.(2) 117,120 1,473 Omnicom Group, Inc. 15,720 581 Reed Elsevier NV 23,920 270 Rent-A-Center, Inc.(2) 17,530 331 Saks, Inc.(2) 47,950 327 Staples, Inc. 32,780 761 Target Corp. 20,210 943 Thomas Cook Group plc 129,740 482 Timberland Co. (The)Class A(2) 18,850 262 Time Warner, Inc. 14,333 413 Tractor Supply Co.(2) 9,450 458 True Religion Apparel, Inc.(2) 20,960 544 Whirlpool Corp. 3,630 254 Williams-Sonoma, Inc. 37,758 764 WPP plc 74,430 639 --------------- 16,405 --------------- CONSUMER STAPLES--12.3% Altria Group, Inc. 22,780 406 BJ's Wholesale Club, Inc.(2) 21,640 784 Cadbury plc Sponsored ADR 9,896 507 Carlsberg A/S 8,550 619 Coca-Cola Enterprises, Inc. 55,090 1,179 Corn Products International, Inc. 12,380 353 CVS Caremark Corp. 14,370 514 Estee Lauder Cos., Inc. (The)Class A 3,440 128 Fomento Economico Mexicano S.A.B. de C.V. Sponsored ADR 12,740 485 Imperial Tobacco Group plc 16,740 484 Kroger Co. (The) 16,590 342 Metro AG 12,150 687 Nestle S.A. Registered Shares 15,500 660 PepsiCo, Inc. 14,550 853 Philip Morris International, Inc. 10,210 498 Ralcorp Holdings, Inc.(2) 7,880 461 Whole Foods Market, Inc.(2) 31,422 958 --------------- 9,918 ---------------
SHARES VALUE --------------- --------------- ENERGY--5.0% Anadarko Petroleum Corp. 12,460 $ 782 Halliburton Co. 11,750 319 Hess Corp. 3,240 173 LUKOIL O.A.O Sponsored ADR 5,980 328 Noble Corp. 16,570 629 Occidental Petroleum Corp. 3,680 288 Range Resources Corp. 13,920 687 XTO Energy, Inc. 10,480 433 Yanzhou Coal Mining Co. Ltd. Sponsored ADR 28,820 416 --------------- 4,055 --------------- FINANCIALS--9.4% ACE Ltd.(2) 6,370 340 AON Corp. 8,390 341 Arch Capital Group Ltd.(2) 7,250 490 City National Corp. 17,060 664 Fidelity National Financial, Inc. Class A 27,050 408 First American Corp. 23,020 745 Genworth Financial, Inc. Class A 35,720 427 Huntington Bancshares, Inc. 102,130 481 Investment Technology Group, Inc.(2) 22,576 630 LaSalle Hotel Properties 16,420 323 Legg Mason, Inc. 26,870 834 MFA Financials, Inc. 53,010 422 National Penn Bancshares, Inc. 31,360 192 Piper Jaffray Cos.(2) 7,700 367 SunTrust Banks, Inc. 21,460 484 Washington Federal, Inc. 27,150 458 --------------- 7,606 --------------- HEALTH CARE--13.9% Alcon, Inc. 1,530 212 Alexion Pharmaceuticals, Inc.(2) 5,960 265 Amedisys, Inc.(2) 8,730 381 AmerisourceBergen Corp. 6,710 150 Amgen, Inc.(2) 5,490 331 Astellas Pharma, Inc. 14,120 580 Boston Scientific Corp.(2) 12,040 127 Cerner Corp.(2) 2,810 210 Covidien plc 24,620 1,065 Emergency Medical Services Corp.(2) 1,380 64 Emergent Biosolutions, Inc.(2) 29,460 520 Facet Biotech Corp.(2) 25,450 440 Gilead Sciences, Inc.(2) 6,420 299 Hospira, Inc.(2) 23,680 1,056 Human Genome Sciences, Inc.(2) 10,890 205 Inverness Medical Innovations, Inc.(2) 3,220 125 Ipsen SA 11,020 604 King Pharmaceuticals, Inc.(2) 77,990 840 Life Technologies Corp.(2) 4,620 215 MAP Pharmaceuticals, Inc.(2) 12,110 127 McKesson Corp. 2,990 178
SHARES VALUE --------------- --------------- HEALTH CARE--(CONTINUED) Medco Health Solutions, Inc.(2) 2,620 $ 145 Medicines Co. (The)(2) 43,210 476 Mednax, Inc.(2) 3,950 217 Merck & Co., Inc. 4,680 148 PerkinElmer, Inc. 2,390 46 Pfizer, Inc. 10,590 175 Roche Holding AG Sponsored ADR 3,900 158 Schein (Henry), Inc.(2) 4,710 259 St. Jude Medical, Inc.(2) 4,580 179 United Therapeutics Corp.(2) 1,270 62 Universal Health Services, Inc. Class B 6,710 416 Vertex Pharmaceuticals, Inc.(2) 18,860 715 Zimmer Holdings, Inc.(2) 3,950 211 --------------- 11,201 --------------- INDUSTRIALS--10.0% Actuant Corp. Class A 35,920 577 Altra Holdings, Inc.(2) 52,294 585 BAE Systems plc 45,240 252 Brink's Co. (The) 12,060 325 Cummins, Inc. 8,860 397 Curtiss-Wright Corp. 14,350 490 Delta Air Lines, Inc.(2) 44,050 395 FedEx Corp. 5,890 443 Hutchison Whampoa Ltd. 16,500 594 IDEX Corp. 7,710 215 JetBlue Airways Corp.(2) 61,820 370 Kennametal, Inc. 23,380 575 McDermott International, Inc.(2) 11,200 283 Nippon Express Co., Ltd. 65,000 264 Old Dominion Freight Line, Inc.(2) 12,580 383 Steelcase, Inc. Class A 68,530 426 Timken Co. (The) 20,350 477 TNT N.V. 17,690 475 Toro Co. (The) 8,360 332 Tyco International Ltd. 6,930 239 --------------- 8,097 --------------- INFORMATION TECHNOLOGY--16.1% Amphenol Corp. Class A 12,710 479 Apple, Inc.(2) 2,350 436 Atheros Communications, Inc.(2) 1,640 43 Broadcom Corp.(2) 21,080 647 Cisco Systems, Inc.(2) 61,440 1,446 Cybersource Corp.(2) 2,610 43 Emulex Corp.(2) 26,660 274 Forrester Research, Inc.(2) 15,450 412 Fujitsu Ltd. 66,570 435 HON HAI Precision Industry Co. Ltd. 71,820 575 Juniper Networks, Inc.(2) 14,100 381 LSI Corp.(2) 37,560 206 Maxim Integrated Products, Inc. 23,590 428 Motorola, Inc. 134,780 1,158 Murata Manufacturing Co., Ltd. 5,600 266
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 57 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- INFORMATION TECHNOLOGY--(CONTINUED) NetApp, Inc.(2) 16,890 $ 451 Quest Software, Inc.(2) 17,250 291 Research In Motion Ltd.(2) 15,870 1,072 Rovi Corp.(2) 11,940 401 Sybase, Inc.(2) 21,050 819 Teradata Corp.(2) 12,046 331 Teradyne, Inc.(2) 44,310 410 Tyco Electronics Ltd. 25,800 575 Vishay Intertechnology, Inc.(2) 79,490 628 Western Digital Corp.(2) 21,190 774 --------------- 12,981 --------------- MATERIALS--5.0% Du Pont (E.I.) de Nemours & Co. 14,960 481 Freeport-McMoRan Copper & Gold, Inc. 5,440 373 Impala Platinum Holdings Ltd. Sponsored ADR 10,800 256 International Paper Co. 14,140 314 Pacific Metals Co., Ltd. 81,860 621 Packaging Corp. of America 42,940 876 Salzgitter AG 7,510 720 Tokyo Ohka Kogyo Co., Ltd. 17,090 385 --------------- 4,026 --------------- TELECOMMUNICATION SERVICES--1.5% America Movil S.A.B. de C.V. ADR Series L 5,690 249 Leap Wireless International, Inc.(2) 11,930 233 NTELOS Holdings Corp. 30,400 537 Telefonica Moviles S.A.(7)(8)(15) 1,400 0 Vivo Participacoes SA ADR 7,070 179 --------------- 1,198 --------------- UTILITIES--2.9% Cia Paranaense de Energia ADR 25,590 451 FPL Group, Inc. 4,750 262 Great Plains Energy, Inc. 31,580 567 PNM Resources, Inc. 40,600 474 Portland General Electric Co. 28,330 559 --------------- 2,313 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $61,597) 77,800 --------------- TOTAL LONG-TERM INVESTMENTS--96.5% (IDENTIFIED COST $61,597) 77,800 --------------- SHORT-TERM INVESTMENTS--6.6% MONEY MARKET MUTUAL FUNDS--6.6% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 5,343,404 5,343 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $5,343) 5,343 ---------------
SHARES VALUE --------------- --------------- TOTAL INVESTMENTS--103.1% (IDENTIFIED COST $66,940) $ 83,143(1) SECURITIES SOLD SHORT--(95.4)% (PROCEEDS ($71,494)) (76,896) Other assets and liabilities, net--92.2% 74,371 --------------- NET ASSETS--100.0% $ 80,618 =============== SECURITIES SOLD SHORT--95.4% COMMON STOCKS SOLD SHORT--(95.4)% CONSUMER DISCRETIONARY--(20.5)% Advance Auto Parts, Inc. (10,640) (418) Aeropostale, Inc. (10,750) (467) BorgWarner, Inc. (27,850) (843) Comcast Corp. Class A (25,140) (425) Darden Restaurants, Inc. (11,130) (380) Family Dollar Stores, Inc. (25,120) (663) Hermes International (4,190) (618) Husqvarna AB (107,260) (745) Intercontinental Hotels Group plc (55,240) (717) ITV plc (1,359,250) (959) Jarden Corp. (15,780) (443) LKQ Corp. (59,269) (1,099) McDonald's Corp. (8,770) (500) NIKE, Inc. Class B (10,090) (653) O'Reilly Automotive, Inc. (26,090) (943) Panera Bread Co. (8,330) (458) Penney (J.C.) Co., Inc. (23,610) (797) Sonic Corp. (90,700) (1,003) Starwood Hotels & Resorts Worldwide, Inc. (12,180) (402) Tim Hortons, Inc. (17,270) (489) TJX Cos., Inc. (The) (10,920) (406) Urban Outfitters, Inc. (13,850) (418) Walt Disney Co. (The) (39,450) (1,083) Wolters Kluwer N.V. (12,780) (273) Wynn Resorts Ltd. (18,360) (1,302) --------------- (16,504) --------------- CONSUMER STAPLES--(13.4)% Brown-Forman Corp. Class B (16,745) (807) Casino Guichard Perrachon SA (8,730) (692) Chattem, Inc. (12,700) (843) Church & Dwight Co., Inc. (12,880) (731) Constellation Brands, Inc. Class A (19,760) (299) Flowers Foods, Inc. (42,930) (1,129) Green Mountain Coffee, Inc. (15,890) (1,173) Groupe Danone S.A. (7,760) (468) Hain Celestial Group, Inc. (The) (33,490) (642) Hormel Foods Corp. (7,880) (280) Lindt & Spruengli AG (310) (753) McCormick & Co., Inc. (9,290) (315) Pernod-Ricard SA (7,350) (584) Reynolds American, Inc. (9,340) (416) Smucker (J.M.) Co. (The) (12,296) (652) TreeHouse Foods, Inc. (15,800) (564) Wal-Mart de Mexico S.A.B. de C.V. Sponsored ADR (12,690) (440) --------------- (10,788) ---------------
SHARES VALUE --------------- --------------- ENERGY--(4.3)% BJ Services Co. (32,630) $ (634) CNOOC Ltd. ADR (2,270) (307) Nabors Industries Ltd. (20,490) (428) Oceaneering International, Inc. (10,360) (588) Sunoco, Inc. (25,780) (733) Tesoro Corp. (29,360) (440) Valero Energy Corp. (18,750) (364) --------------- (3,494) --------------- FINANCIALS--(9.0)% BB&T Corp. (26,660) (726) Chubb Corp. (The) (8,750) (441) Federated Investors, Inc. Class B (31,320) (826) HCC Insurance Holdings, Inc. (45,120) (1,234) KeyCorp (65,650) (427) People's United Financial, Inc. (28,230) (439) Prosperity Bancshares, Inc. (38,200) (1,329) Valley National Bancorp (53,760) (661) Westamerica Bancorp (23,080) (1,200) --------------- (7,283) --------------- HEALTH CARE--(11.4)% Allergan, Inc. (4,520) (257) AMAG Pharmaceuticals, Inc. (6,620) (289) American Medical Systems Holdings, Inc. (29,040) (491) AstraZeneca plc Sponsored ADR (5,980) (269) Bard (C.R.), Inc. (12,040) (947) Becton, Dickinson & Co. (9,240) (645) Cadence Pharmaceuticals, Inc. (45,900) (508) Cardinal Health, Inc. (11,910) (319) Dionex Corp. (8,970) (583) Eisai Co., Ltd. (17,350) (653) Eli Lilly & Co. (11,730) (387) Gen-Probe, Inc. (5,380) (223) GlaxoSmithKline plc Sponsored ADR (10,430) (412) Haemonetics Corp. (5,400) (303) Healthways, Inc. (23,780) (364) Hologic, Inc. (10,400) (170) Landauer, Inc. (9,550) (525) Lundbeck (H) A/S (32,790) (680) Patterson Cos., Inc. (11,750) (320) Stryker Corp. (4,150) (189) Takeda Pharmaceutical Co., Ltd. (11,500) (479) Techne Corp. (2,405) (150) --------------- (9,163) --------------- INDUSTRIALS--(12.1)% Baldor Electric Co. (56,690) (1,550) Briggs & Stratton Corp. (21,630) (420) Deere & Co. (14,410) (619) First Solar, Inc. (7,426) (1,135) GATX Corp. (23,220) (649) Graco, Inc. (16,230) (452) Healthcare Services Group, Inc. (46,560) (855) ITT Corp. (10,630) (554)
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 58 VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- INDUSTRIALS--(CONTINUED) Odakyu Electric Railway Co., Ltd. (44,940) $ (406) Rolls-Royce Group plc (34,160) (257) Southwest Airlines Co. (41,420) (398) Stericycle, Inc. (8,450) (409) Trinity Industries, Inc. (41,320) (710) United Stationers, Inc. (5,620) (268) Wabtec Corp. (20,870) (783) Yamato Holdings Co. Ltd. (17,000) (279) --------------- (9,744) --------------- INFORMATION TECHNOLOGY--(14.8)% Adobe Systems, Inc. (12,480) (412) Amdocs Ltd. (6,480) (174) Automatic Data Processing, Inc. (4,390) (173) Corning, Inc. (40,440) (619) Infosys Technologies Ltd. Sponsored ADR (11,150) (541) Intuit, Inc. (15,240) (434) Linear Technology Corp. (14,800) (409) Marvell Technology Group Ltd. (13,420) (217) McAfee, Inc. (9,910) (434) National Instruments Corp. (16,020) (443) Nokia Oyj Sponsored ADR (28,320) (414) Palm, Inc. (43,620) (760) Paychex, Inc. (12,510) (364) QLogic Corp. (54,780) (942) QUALCOMM, Inc. (28,540) (1,284) Salesforce.com, Inc. (10,070) (573) SAP AG Sponsored ADR (11,610) (567) Sigma Designs, Inc. (38,430) (558) TDK Corp. (4,300) (249) Telefonaktiebolaget LM Ericsson Class B (46,460) (467) Telefonaktiebolaget LM Ericsson Sponsored ADR (150,020) (1,503) TeleTech Holdings, Inc. (23,700) (404) --------------- (11,941) ---------------
SHARES VALUE --------------- --------------- MATERIALS--(5.1)% Aluminum Corp. of China Ltd. ADR (13,100) $ (359) Anglo Platinum Ltd. ADR (3,900) (346) Compass Minerals International, Inc. (9,160) (564) Kobe Steel Ltd. (390,980) (684) OJI Paper Co., Ltd. (88,980) (402) Sensient Technologies Corp. (29,640) (823) Sigma-Aldrich Corp. (3,320) (179) Toray Industries, Inc. (51,370) (311) Weyerhaeuser Co. (11,860) (435) --------------- (4,103) --------------- TELECOMMUNICATION SERVICES--(2.0)% China Mobile Ltd. Sponsored ADR (12,020) (590) General Communication, Inc. Class A (61,810) (424) Telefonos de Mexico S.A.B. de C.V. ADR Series L (16,190) (283) Verizon Communications, Inc. (10,640) (322) --------------- (1,619) --------------- UTILITIES--(2.8)% DPL, Inc. (26,220) (685) Huaneng Power International, Inc. Sponsored ADR (4,890) (130) NSTAR (8,120) (258) Piedmont Natural Gas Co., Inc. (9,140) (219) RRI Energy, Inc. (103,920) (742) Tractebel Energia SA Sponsored ADR (18,960) (223) --------------- (2,257) --------------- TOTAL COMMON STOCKS SOLD SHORT--(95.4)% (PROCEEDS ($71,494)) (76,896) --------------- TOTAL SECURITIES SOLD SHORT--(95.4)% (PROCEEDS ($71,494)) (76,896)(1) ---------------
COUNTRY WEIGHTINGS - LONG as of September 30, 2009+ United States 76% Japan 4 Sweden 4 United Kingdom 4 France 3 China 2 Switzerland 1 Other 6 --- Total 100% ===
COUNTRY WEIGHTINGS - SHORT as of September 30, 2009+ United States 96% Canada 1 Finland 1 Germany 1 India 1 --- Total 100% ===
+ % of total investments as of September 30, 2009. The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2009 Prices Inputs ------------------ --------- ------------ ASSETS TABLE Equity Securities: Common Stocks $ 77,800 $ 77,800 $--(1) Short-Term Investments 5,343 5,343 -- -------- -------- --- Total Investments $ 83,143 $ 83,143 $-- ======== ======== === LIABILITIES TABLE Equity Securities: Common Stocks Sold Short $(76,896) $(76,896) $-- -------- -------- --- Total Liabilities $(76,896) $(76,896) $-- ======== ======== ===
There are no Level 2 (significant observable inputs) priced securities. (1) Level 3 Common Stocks have a beginning and ending value of $0. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 59 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MUNICIPAL BONDS--0.3% MICHIGAN--0.1% Tobacco Settlement Finance Authority Taxable Series 06-A 7.309%, 6/1/34 $ 165 $ 132 --------------- SOUTH DAKOTA--0.1% Educational Enhancement Funding Corp. Taxable Series 02-A 6.720%, 6/1/25 219 188 --------------- VIRGINIA--0.1% Tobacco Settlement Financing Corp. Taxable Series 07-A1 6.706%, 6/1/46 345 247 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $695) 567 --------------- FOREIGN GOVERNMENT SECURITIES--17.7% Bolivarian Republic of Venezuela 8.500%, 10/8/14 1,010 904 9.250%, 9/15/27 460 373 9.375%, 1/13/34 950 736 Commonwealth of Australia Series 121, 5.250%, 8/15/10 4,560(AUD) 4,068 Commonwealth of Canada 2.750%, 12/1/10 4,326(CAD) 4,139 Commonwealth of New Zealand Series 1111, 6.000%, 11/15/11 3,417(NZD) 2,559 Federal Republic of Germany Series 147, 2.500%, 10/8/10 1,305(EUR) 1,944 Federative Republic of Brazil 12.500%, 1/5/16 1,625(BRL) 1,018 12.500%, 1/5/22 1,125(BRL) 705 10.250%, 1/10/28 1,300(BRL) 712 Kingdom of Norway 6.000%, 5/16/11 10,355(NOK) 1,884 5.000%, 5/15/15 5,785(NOK) 1,065 Kingdom of Sweden Series 1048, 4.000%, 12/1/09 3,775(SEK) 545 Series 1045, 5.250%, 3/15/11 2,800(SEK) 427 Republic of Argentina PIK Interest Capitalization 8.280%, 12/31/33 5,313 3,613 Series GDP 0.000%, 12/15/35(3) 3,200 229 Republic of Colombia 12.000%, 10/22/15 1,200,000(COP) 740 Republic of Indonesia Series FR-23, 11.000%, 12/15/12 6,200,000(IDR) 683 Series FR-30, 10.750%, 5/15/16 3,500,000(IDR) 389 RegS 6.625%, 2/17/37(5) 765 749 Republic of Korea Series 1112, 4.750%, 12/10/11 775,000(KRW) 663
PAR VALUE VALUE --------------- --------------- Republic of Poland Series 0414, 5.750%, 4/25/14 2,300(PLZ) $ 803 6.375%, 7/15/19 $ 285 322 Republic of Trinidad and Tobago RegS 9.875%, 10/1/09(5) 135 135 Republic of Turkey 0.000%, 2/2/11 1,000(TRY) 606 7.500%, 7/14/17 400 443 Republic of Ukraine RegS 7.650%, 6/11/13(5) 500 456 144A 6.580%, 11/21/16(4) 250 196 Russian Federation RegS 7.500%, 3/31/30(3) 141 153 --------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $28,212) 31,259 --------------- MORTGAGE-BACKED SECURITIES--9.5% NON-AGENCY--9.5% American Tower Trust 07-1A, C 144A 5.615%, 4/15/37(4) 750 728 Bear Stearns Commercial Mortgage Securities 06-PW12, A4 5.903%, 9/11/38(3) 790 769 06-PW14, A4 5.201%, 12/11/38 350 325 05-PW10, A4 5.405%, 12/11/40(3) 950 936 05-T20, A4A 5.298%, 10/12/42(3) 600 594 07-PW18, A4 5.700%, 6/11/50 750 666 07-PW18, AM 6.084%, 6/11/50(3) 725 496 Citigroup-Deutsche Bank Commercial Mortgage Trust 05-CD1, AM 5.399%, 7/15/44(3) 610 520 07-CD4, A4 5.322%, 12/11/49 475 398 Credit Suisse First Boston Mortgage Securities Corp. 04-C5, A3 4.499%, 11/15/37 825 795 Credit Suisse Mortgage Capital Certificates 06-C1, A3 5.711%, 2/15/39(3) 300 296 Crown Castle Towers LLC 05-1A, B 144A 4.878%, 6/15/35(4) 500 500 GE Capital Commercial Mortgage Corp. 03-C1, C 4.975%, 1/10/38(3) 595 567 GMAC Commercial Mortgage Securities, Inc. 04-C2, A3 5.134%, 8/10/38 450 459 Greenwich Capital Commercial Funding Corp. 04-GG1, A7 5.317%, 6/10/36(3) 550 557
PAR VALUE VALUE --------------- --------------- NON-AGENCY--(CONTINUED) GS Mortgage Securities Corp. II 07-GG10, A4 5.999%, 8/10/45(3) $ 915 $ 759 JPMorgan Chase Commercial Mortgage Securities Corp. 06-LDP7, A4 6.065%, 4/15/45(3) 1,000 932 06-LDP9, A3 5.336%, 5/15/47 700 602 07-LD12, A4 5.882%, 2/15/51(3) 750 639 Lehman Brothers - UBS Commercial Mortgage Trust 07-C2, H 144A 6.192%, 2/15/40(3)(4) 850 149 05-C3, AM 4.794%, 7/15/40 350 298 07-C7, A3 5.866%, 9/15/45(3) 600 531 Merrill Lynch Mortgage Trust 06-C1, AM 5.840%, 5/12/39(3) 715 542 Merrill Lynch-Countrywide Commercial Mortgage Trust 06-4, A3 5.172%, 12/12/49(3) 650 549 Morgan Stanley Capital I 05-HQ5, A3 5.007%, 1/14/42 200 202 06-IQ12, A4 5.332%, 12/15/43 700 628 Residential Accredit Loans, Inc. 02-QS12, B1 6.250%, 9/25/32 352 90 Timberstar Trust 06-1A, C 144A 5.884%, 10/15/36(4) 1,000 890 Wachovia Bank Commercial Mortgage Trust 07-C30, A5 5.342%, 12/15/43 410 313 07-C33, A4 6.100%, 2/15/51(3) 550 454 Wells Fargo Mortgage Backed Securities Trust 06-AR10, 5A3 5.592%, 7/25/36(3) 953 705 --------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $17,052) 16,889 --------------- ASSET-BACKED SECURITIES--2.0% Bombardier Capital Mortgage Securitization Corp. 99-A, A3 5.980%, 1/15/18(3) 791 568 Carmax Auto Owner Trust 07-2, B 5.370%, 3/15/13 350 339 Conseco Finance Securitizations Corp. 01-3, A4 6.910%, 5/1/33(3) 739 630 Dunkin Securitization 06-1, M1 144A 8.285%, 6/20/31(4) 690 566 FMAC Loan Receivables Trust 98-CA, A2 144A 6.660%, 9/15/20(4) 59 54
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 60 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- Harley-Davidson Motorcycle Trust 07-2, C 5.410%, 8/15/15 $ 1,075 $ 920 IndyMac Manufactured Housing Contract 98-1, A3 6.370%, 9/25/28 582 402 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $3,968) 3,479 --------------- CORPORATE BONDS--55.4% CONSUMER DISCRETIONARY--6.8% Affinia Group, Inc. 144A 10.750%, 8/15/16(4) 240 259 Ameristar Casinos, Inc. 144A 9.250%, 6/1/14(4) 60 63 Arcos Dorados SA 144A 7.500%, 10/1/19(4) 375 374 AutoZone, Inc. 5.750%, 1/15/15 350 373 Best Buy Co., Inc. 6.750%, 7/15/13 385 413 Blockbuster, Inc. 144A 11.750%, 10/1/14(4) 475 455 Brunswick Corp. 11.750%, 8/15/13 600 625 COX Communications, Inc. 144A 8.375%, 3/1/39(4) 350 433 DigitalGlobe, Inc. 144A 10.500%, 5/1/14(4) 65 69 DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 6.375%, 6/15/15 600 611 Echostar DBS Corp. 6.625%, 10/1/14 600 585 Ford Motor Credit Co. LLC 8.000%, 6/1/14 400 385 Harrah's Operating Co., Inc. 144A 11.250%, 6/1/17(4) 425 431 Hasbro, Inc. 6.300%, 9/15/17 275 288 Hyatt Hotels Corp. 144A 5.750%, 8/15/15(4) 100 102 International Game Technology 7.500%, 6/15/19 580 644 Landry's Restaurants, Inc. 14.000%, 8/15/11 380 383 Limited Brands, Inc. 144A 8.500%, 6/15/19(4) 450 472 Mediacom LLC/Mediacom Capital Corp. 144A 9.125%, 8/15/19(4) 750 774 MGM MIRAGE 144A 11.125%, 11/15/17(4) 225 247 Mobile Mini, Inc. 6.875%, 5/1/15 350 321 Nebraska Book Co., Inc. 144A 10.000%, 12/1/11(4) 500 499 Pokagon Gaming Authority 144A 10.375%, 6/15/14(4) 117 122 QVC, Inc. 144A 7.500%, 10/1/19(4) 520 523 River Rock Entertainment Authority (The) 9.750%, 11/1/11 250 231
PAR VALUE VALUE --------------- --------------- CONSUMER DISCRETIONARY--(CONTINUED) Royal Caribbean Cruises Ltd. 6.875%, 12/1/13 $ 1,250 $ 1,172 Scientific Games Corp. 144A 7.875%, 6/15/16(4) 55 55 Scientific Games International, Inc. 144A 9.250%, 6/15/19(4) 170 178 Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC 144A 2.799%, 3/15/14(3)(4) 75 61 Seneca Gaming Corp. Series B 7.250%, 5/1/12 19 18 Staples, Inc. 9.750%, 1/15/14 110 132 Station Casinos, Inc. 6.875%, 3/1/16(12) 750 30 Viacom, Inc. 6.250%, 4/30/16 375 405 Videotron Ltee 6.375%, 12/15/15 180 173 9.125%, 4/15/18 82 89 --------------- 11,995 --------------- CONSUMER STAPLES--2.6% Bunge Limited Finance Corp. 8.500%, 6/15/19 250 289 Constellation Brands, Inc. 8.375%, 12/15/14 165 173 Georgia-Pacific LLC 144A 7.125%, 1/15/17(4) 875 859 Great Atlantic & Pacific Tea Co. 144A 11.375%, 8/1/15(4) 250 254 Reynolds American, Inc. 7.300%, 7/15/15 500 522 7.625%, 6/1/16 375 402 Smithfield Foods, Inc. 144A 10.000%, 7/15/14(4) 600 633 UST, Inc. 5.750%, 3/1/18 500 483 Yankee Acquisition Corp. Series B, 8.500%, 2/15/15 400 378 9.750%, 2/15/17 535 493 --------------- 4,486 --------------- ENERGY--7.2% Anadarko Petroleum Corp. 8.700%, 3/15/19 500 599 Buckeye Partners LP 6.050%, 1/15/18 225 235 Cenovus Energy, Inc. 144A 5.700%, 10/15/19(4) 115 118 Denbury Resources, Inc. 7.500%, 12/15/15 510 509 Enterprise Products Operating LLC 5.250%, 1/31/20 575 576 Gaz Capital SA 144A 8.146%, 4/11/18(4) 100 106
PAR VALUE VALUE --------------- --------------- ENERGY--(CONTINUED) Gazprom International SA 144A 7.201%, 2/1/20(4) $ 696 $ 721 Gazprom OAO (Gaz Capital SA) 144A 6.212%, 11/22/16(4) 935 902 6.510%, 3/7/22(4) 315 290 Helix Energy Solutions Group, Inc. 144A 9.500%, 1/15/16(4) 200 201 KazMunaiGaz Finance Sub BV 144A 9.125%, 7/2/18(4) 400 436 Kinder Morgan Energy Partners LP 6.850%, 2/15/20 230 252 Kinder Morgan Finance Co. 5.700%, 1/5/16 400 383 Korea National Oil Corp. 144A 5.375%, 7/30/14(4) 225 231 Nexen, Inc. 6.200%, 7/30/19 400 416 Noble Energy, Inc. 8.250%, 3/1/19 450 544 Petro-Canada 6.050%, 5/15/18 140 147 PetroHawk Energy Corp. 144A 10.500%, 8/1/14(4) 475 513 Petroleos de Venezuela S.A. 5.250%, 4/12/17 950 584 Petropower I Funding Trust 144A 7.360%, 2/15/14(4) 506 505 Pride International, Inc. 8.500%, 6/15/19 330 365 Questar Market Resources, Inc. 6.800%, 3/1/20 600 619 Seacor Holdings, Inc. 7.375%, 10/1/19 600 604 Smith International, Inc. 9.750%, 3/15/19 200 247 Swift Energy Co. 7.625%, 7/15/11 500 500 TengizChevroil Finance Co. S.A.R.L. 144A 6.124%, 11/15/14(4) 786 778 Tesoro Corp. 6.500%, 6/1/17 480 437 Weatherford International Ltd. 9.625%, 3/1/19 318 399 Western Refining, Inc. 144A 11.250%, 6/15/17(4) 600 570 --------------- 12,787 --------------- FINANCIALS--18.8% ABH Financial Ltd. (Alfa Markets Ltd.) 144A 8.200%, 6/25/12(4) 150 145 Aflac, Inc. 8.500%, 5/15/19 150 179 Alfa Invest Ltd. 144A 9.250%, 6/24/13(4) 350 344 Allstate Corp. 6.125%, 5/15/37(3) 680 558
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 61 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) American Express Credit Corp. Series C, 7.300%, 8/20/13 $ 450 $ 499 5.125%, 8/25/14 135 140 Assurant, Inc. 5.625%, 2/15/14 345 355 Atlantic Finance Ltd. 144A 8.750%, 5/27/14(4) 450 481 AvalonBay Communities, Inc. 6.100%, 3/15/20 375 387 Bank of America Corp. 5.420%, 3/15/17 700 670 Series K, 8.000%, 12/29/49(3) 375 334 Barclays Bank plc 6.750%, 5/22/19 330 370 Bear Stearns Cos., Inc. LLC (The) 7.250%, 2/1/18 700 801 Blackstone Holdings Finance Co. LLC 144A 6.625%, 8/15/19(4) 385 391 Brandywine Operating Partnership LP 7.500%, 5/15/15 500 501 Capital One Capital V 10.250%, 8/15/39 450 498 China Properties Group Ltd. 144A 9.125%, 5/4/14(4) 500 372 Chubb Corp. 6.375%, 3/29/67(3) 680 622 Citigroup, Inc. 5.000%, 9/15/14 365 348 4.875%, 5/7/15 1,100 1,029 Deutsche Bank Financial LLC 5.375%, 3/2/15 165 168 Export-Import Bank of Korea 8.125%, 1/21/14 180 206 5.875%, 1/14/15 275 291 Fifth Third Bancorp 6.250%, 5/1/13 200 206 First Tennessee Bank N.A. 0.590%, 2/14/11(3) 325 301 4.625%, 5/15/13 450 389 Ford Motor Credit Co. LLC 7.875%, 6/15/10 385 387 8.625%, 11/1/10 395 400 9.875%, 8/10/11 345 350 7.500%, 8/1/12 100 96 8.700%, 10/1/14 125 123 Glencore Funding LLC 144A 6.000%, 4/15/14(4) 1,000 960 GMAC, Inc. 144A 7.250%, 3/2/11(4) 633 616 6.875%, 9/15/11(4) 253 242 6.000%, 12/15/11(4) 633 592 Goldman Sachs Group, Inc. (The) 5.950%, 1/18/18 300 312 7.500%, 2/15/19 365 418 HBOS plc 144A 6.750%, 5/21/18(4) 115 103
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) Health Care REIT, Inc. 5.875%, 5/15/15 $ 1,000 $ 952 Hertz Corp. (The) 8.875%, 1/1/14 350 355 10.500%, 1/1/16 100 104 Host Hotels & Resorts LP 144A 9.000%, 5/15/17(4) 125 133 ICICI Bank Ltd. 144A 6.375%, 4/30/22(3)(4) 375 308 International Lease Finance Corp. 5.300%, 5/1/12 625 526 Jefferies Group, Inc. 8.500%, 7/15/19 500 530 JPMorgan Chase & Co. 6.300%, 4/23/19 525 574 Series 1, 7.900%, 12/31/49(3) 247 238 Kazkommerts International BV RegS 8.000%, 11/3/15(5) 250 205 KeyBank NA 4.950%, 9/15/15 500 458 Kimco Realty Corp. 6.875%, 10/1/19 550 563 Kookmin Bank 144A 7.250%, 5/14/14(4) 300 332 Korea Development Bank 5.300%, 1/17/13 187 195 Lincoln National Corp. 8.750%, 7/1/19 300 347 Macquarie Group Ltd. 144A 7.625%, 8/13/19(4) 500 537 Merrill Lynch & Co., Inc. 6.110%, 1/29/37 500 477 MetLife, Inc. 6.750%, 6/1/16 72 80 Metropolitan Life Global Funding I 144A 5.125%, 6/10/14(4) 100 105 Morgan Stanley 6.000%, 5/13/14 165 176 144A 10.090%, 5/3/17(4) 1,000(BRL) 508 Northern Trust Co. (The) 6.500%, 8/15/18 350 400 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670%, 3/5/14(4) 390 380 Petroplus Finance Ltd. 144A 6.750%, 5/1/14(4) 375 353 PNC Financial Services Group, Inc. 8.250%, 5/29/49(3) 350 334 PNC Funding Corp. 5.625%, 2/1/17 300 296 Principal Financial Group, Inc. 8.875%, 5/15/19 850 1,020 Prologis 7.625%, 8/15/14 500 511 6.625%, 5/15/18 185 171 Realty Income Corp. 6.750%, 8/15/19 425 415 Resona Bank Ltd. 144A 5.850%, 9/29/49(3)(4) 750 650
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) Russian Agricultural Bank OJSC (RSHB Capital SA) 144A 9.000%, 6/11/14(4) $ 100 $ 110 6.299%, 5/15/17(4) 380 365 SLM Corp. 5.450%, 4/25/11 300 283 8.450%, 6/15/18 500 399 Sovereign Bank 8.750%, 5/30/18 400 462 TNK-BP Finance SA 144A 7.500%, 3/13/13(4) 325 329 UNUM Group 7.125%, 9/30/16 129 131 UOB Cayman Ltd. 144A 5.796%, 12/29/49(3)(4) 500 464 Wachovia Bank NA 5.000%, 8/15/15 250 241 WEA Finance LLC/WT Finance Australia 144A 6.750%, 9/2/19(4) 1,000 1,013 Willis North America, Inc. 7.000%, 9/29/19 500 515 Woori Bank 144A 6.125%, 5/3/16(3)(4) 1,000 975 XL Capital Ltd. 5.250%, 9/15/14 350 344 Zions Bancorp. 7.750%, 9/23/14 225 202 --------------- 33,250 --------------- HEALTH CARE--1.4% Fisher Scientific International, Inc. 6.750%, 8/15/14 600 622 Psychiatric Solutions, Inc. Series 1, 7.750%, 7/15/15 375 364 Quest Diagnostics, Inc. 6.400%, 7/1/17 450 490 Select Medical Corp. 7.625%, 2/1/15 425 400 U.S. Oncology, Inc. 144A 9.125%, 8/15/17(4) 300 317 Valeant Pharmaceuticals International 144A 8.375%, 6/15/16(4) 35 35 Viant Holdings, Inc. 144A 10.125%, 7/15/17(4) 295 282 --------------- 2,510 --------------- INDUSTRIALS--5.1% American Airlines, Inc. 01-1, 6.977%, 5/23/21 730 584 Continental Airlines, Inc. 98-1A, 6.648%, 3/15/19 373 351 Delta Air Lines, Inc. 00-A1, 7.379%, 11/18/11 257 253 DRS Technologies, Inc. 6.625%, 2/1/16 500 492 Equifax, Inc. 6.300%, 7/1/17 1,000 999
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 62 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- INDUSTRIALS--(CONTINUED) Esco Corp. 144A 8.625%, 12/15/13(4) $ 600 $ 591 General Cable Corp. 7.125%, 4/1/17 500 493 Global Aviation Holdings Ltd. 144A 14.000%, 8/15/13(4) 800 797 Hutchison Whampoa Ltd. 144A 5.750%, 9/11/19(4) 460 465 L-3 Communications Corp. 7.625%, 6/15/12 200 203 Series B, 6.375%, 10/15/15 250 254 Malaysia International Shipping Corp. Capital Ltd. 144A 6.125%, 7/1/14(4) 750 812 Moog, Inc. 7.250%, 6/15/18 100 97 Owens Corning, Inc. 6.500%, 12/1/16 595 581 Republic Services, Inc. 144A 5.500%, 9/15/19(4) 600 619 RSC Equipment Rental, Inc. 144A 10.000%, 7/15/17(4) 78 84 Smiths Group plc 144A 7.200%, 5/15/19(4) 150 163 Toledo Edison Co. (The) 7.250%, 5/1/20 130 153 United Airlines, Inc. 00-2A, 7.032%, 10/1/10 262 259 United Rentals North America, Inc. 6.500%, 2/15/12 440 443 144A 10.875%, 6/15/16(4) 198 213 USG Corp. 144A 9.750%, 8/1/14(4) 100 105 --------------- 9,011 --------------- INFORMATION TECHNOLOGY--2.0% Agilent Technologies, Inc. 5.500%, 9/14/15 205 211 Broadridge Financial Solutions, Inc. 6.125%, 6/1/17 525 453 Corning, Inc. 6.625%, 5/15/19 77 84 Intuit, Inc. 5.750%, 3/15/17 265 278 Jabil Circuit, Inc. 8.250%, 3/15/18 600 612 National Semiconductor Corp. 6.600%, 6/15/17 400 396 Seagate Technology HDD Holdings, Inc. 6.375%, 10/1/11 280 281 SunGard Data Systems, Inc. 9.125%, 8/15/13 574 583 Tyco Electronic Group SA 6.000%, 10/1/12 125 132 Xerox Corp. 8.250%, 5/15/14 56 64 6.750%, 2/1/17 350 371 --------------- 3,465 ---------------
PAR VALUE VALUE --------------- --------------- MATERIALS--6.9% Agrium, Inc. 6.750%, 1/15/19 $ 320 $ 347 Allegheny Technologies, Inc. 9.375%, 6/1/19 590 669 Anglo American Capital plc 144A 9.375%, 4/8/19(4) 120 146 ArcelorMittal 9.000%, 2/15/15 150 173 6.125%, 6/1/18 280 276 Ball Corp. 7.125%, 9/1/16 1,000 1,025 Bemis Co., Inc. 6.800%, 8/1/19 120 134 Building Materials Corp. of America 7.750%, 8/1/14 390 377 Celulosa Arauco y Constitucion SA 144A 7.250%, 7/29/19(4) 350 387 Commercial Metals Co. 7.350%, 8/15/18 730 772 CRH America, Inc. 5.300%, 10/15/13 200 207 8.125%, 7/15/18 650 732 Domtar Corp. 5.375%, 12/1/13 388 376 7.125%, 8/15/15 322 317 Dow Chemical Co. (The) 8.550%, 5/15/19 800 901 Holcim U.S. Finance S.a.r.l. & Cie S.C.S. 144A 6.000%, 12/30/19(4) 500 507 Ineos Group Holdings plc 144A 8.500%, 2/15/16(4) 500 240 International Paper Co. 9.375%, 5/15/19 508 596 Nalco Co. 8.875%, 11/15/13 180 186 Norske Skog Canada Ltd. 7.375%, 3/1/14 750 401 Nova Chemicals Corp. 4.538%, 11/15/13(3) 1,125 999 Plastipak Holdings, Inc. 144A 8.500%, 12/15/15(4) 500 508 Steel Dynamics, Inc. 7.375%, 11/1/12 225 228 Vale Overseas Ltd. 5.625%, 9/15/19 550 562 Vedanta Resources plc 144A 9.500%, 7/18/18(4) 375 371 Verso Paper Holdings LLC/Verso Paper, Inc. 144A 11.500%, 7/1/14(4) 300 309 Series B, 11.375%, 8/1/16 750 474 --------------- 12,220 --------------- TELECOMMUNICATION SERVICES--3.0% Axtel SAB de C.V. 144A 9.000%, 9/22/19(4) 200 204 Cincinnati Bell, Inc. 8.250%, 10/15/17 180 177
PAR VALUE VALUE --------------- --------------- TELECOMMUNICATION SERVICES--(CONTINUED) Cricket Communications, Inc. 144A 7.750%, 5/15/16(4) $ 150 $ 153 Frontier Communications Corp. 8.125%, 10/1/18 275 278 Nextel Communications, Inc. Series E 6.875%, 10/31/13 175 163 Series D 7.375%, 8/1/15 650 587 OJSC Vimpel Communications (UBS Luxembourg SA) 144A 8.375%, 10/22/11(4) 500 531 Qwest Corp. 144A 8.375%, 5/1/16(4) 200 208 6.500%, 6/1/17 215 203 Telecom Italia Capital SA 6.999%, 6/4/18 350 388 7.175%, 6/18/19 500 559 Virgin Media Finance plc Series 1, 9.500%, 8/15/16 410 434 Wind Acquisition Finance SA 144A 11.750%, 7/15/17(4) 350 396 Windstream Corp. 8.625%, 8/1/16 500 514 144A 7.875%, 11/1/17(4) 230 230 7.000%, 3/15/19 250 235 --------------- 5,260 --------------- UTILITIES--1.6% Allegheny Energy Supply Co. LLC 144A 8.250%, 4/15/12(4) 145 160 AmeriGas Partners LP 7.250%, 5/20/15 500 490 Centrais Eletricas Brasileiras SA 144A 6.875%, 7/30/19(4) 100 108 Israel Electric Corp. Ltd. 144A 7.250%, 1/15/19(4) 200 214 Korea Electric Power Corp. 144A 5.500%, 7/21/14(4) 380 398 Majapahit Holding BV 144A 7.250%, 6/28/17(4) 725 743 Midwest Generation LLC Series B 8.560%, 1/2/16 121 123 Northeast Utilities 5.650%, 6/1/13 270 279 Sempra Energy 6.500%, 6/1/16 155 172 Texas Competitive Electric Holdings Co. LLC Series A 10.250%, 11/1/15 200 145 --------------- 2,832 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $95,852) 97,816 ---------------
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 63 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- CONVERTIBLE BONDS--0.3% HEALTH CARE--0.2% Par Pharmaceutical Cos., Inc. Cv. 2.875%, 9/30/10 $ 300 $ 294 --------------- MATERIALS--0.1% Vale Capital Ltd. Series RIO Cv. 5.500%, 6/15/10 4 184 --------------- TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $487) 478 --------------- LOAN AGREEMENTS(3)--13.4% CONSUMER DISCRETIONARY--5.2% AMF Bowling Worldwide, Inc. Tranche B, 3.047%, 5/17/13 511 436 Cengage Learning Acquisitions, Inc. Tranche 2.775%, 7/5/14 796 723 Ceridian Corp. Tranche 3.286%, 11/8/14 945 838 Charter Communications Operating LLC Tranche B, 6.250%, 3/6/14 731 691 Ford Motor Co. Tranche B, 3.477%, 12/16/13 366 326 Getty Images, Inc. Tranche B, 6.250%, 7/2/15 470 474 Harrah's Operating Co., Inc. Tranche B-2, 3.504%, 1/28/15 346 282 HBI Branded Apparel Ltd., Inc. Tranche 4.254%, 3/5/14 200 192 Intelsat Jackson Holding Ltd. Tranche 0.000%, 2/1/14 575 517 Isle of Capri Casinos, Inc. Tranche B-DD, 2.035%, 11/25/13 75 70 Tranche A-DD, 2.348%, 11/25/13 66 62 Tranche 2.348%, 11/25/13 187 176 Lamar Media Corp. Tranche F, 5.500%, 3/31/14 124 124 Landry's Restaurant, Inc. Tranche 9.500%, 3/19/11 194 195 Mark IV Industries, Inc. Tranche 7.112%, 5/4/10(12) 555 264 9.921%, 12/19/11(12) 173 5 Mediacom Illinois LLC Tranche D, 5.500%, 3/31/17 285 286 Neiman-Marcus Group, Inc. (The) Tranche 2.303%, 4/6/13 1,213 1,056
PAR VALUE VALUE --------------- --------------- CONSUMER DISCRETIONARY--(CONTINUED) Nielsen Finance LLC/Nielsen Finance Co. Tranche A, 2.288%, 8/9/13 $ 362 $ 342 Tranche B, 4.038%, 5/1/16 207 196 PTI Group, Inc. Tranche 9.250%, 2/28/13 160 149 Totes Isotoner Corp. Tranche 6.322%, 1/16/14 500 113 Transaction Network Services, Inc. Tranche 8.250%, 3/28/14 481 490 Univision Communications, Inc. Tranche B, 2.523%, 9/29/14 1,085 921 VWR Funding, Inc. Tranche T-1, 2.785%, 6/29/14 314 293 --------------- 9,221 --------------- CONSUMER STAPLES--0.2% Wrigley (WM) Jr. Co. Tranche B, 6.500%, 10/6/14 257 262 --------------- ENERGY--0.4% ATP Oil & Gas Corp. Tranche B-2, 9.000%, 1/15/11 142 132 Tranche B-1, 8.500%, 7/15/14 540 498 Western Refining, Inc. Tranche 8.250%, 5/30/14 140 139 --------------- 769 --------------- FINANCIALS--0.3% Hertz Corp. Tranche B, 2.055%, 12/21/12 232 221 Letter of Credit 2.359%, 12/21/12 50 47 Pinnacle Foods Finance LLC/Pinnacle Food Finance Corp. Tranche B, 3.031%, 4/2/14 224 211 --------------- 479 --------------- HEALTH CARE--0.8% Bausch & Lomb, Inc. Tranche DD, 3.354%, 4/24/15 95 91 Tranche B, 3.848%, 4/24/15 390 373 HCA, Inc. Tranche A-1, 2.348%, 11/17/13 82 77 Tranche B-1, 2.848%, 11/17/13 322 305
PAR VALUE VALUE --------------- --------------- HEALTH CARE--(CONTINUED) Health Management Associates, Inc. Tranche B, 2.348%, 2/28/14 $ 183 $ 172 Psychiatric Solutions, Inc. Tranche A, 2.054%, 7/1/12 173 167 Select Medical Corp. Tranche B-1, 4.874%, 8/22/14 274 268 --------------- 1,453 --------------- INDUSTRIALS--1.0% Harland Clarke Holdings Corp. Tranche B, 2.941%, 6/30/14 996 840 ServiceMaster Co. (The) Tranche T-1-DD, 2.790%, 7/24/14 99 88 Tranche B, 2.880%, 7/24/14 992 889 --------------- 1,817 --------------- INFORMATION TECHNOLOGY--2.1% Avaya, Inc. Tranche B, 0.000%, 10/26/14 750 607 CommScope, Inc. Tranche B, 3.409%, 12/27/14 425 417 Dresser, Inc. Tranche B, 3.104%, 5/4/14 180 169 PIK Loan 6.031%, 5/4/15 734 641 First Data Corp. Tranche B-3, 3.057%, 9/24/14 629 542 Tranche B-1, 3.057%, 9/24/14 394 340 Freescale Semiconductor, Inc. Tranche 2.053%, 12/1/13 494 397 Reynolds & Reynolds Co. (The) Tranche F-L 2.285%, 10/24/12 718 633 --------------- 3,746 --------------- MATERIALS--1.9% Anchor Glass Container Corp. Tranche B, 6.750%, 6/20/14 316 314 Ashland, Inc. Tranche B, 7.650%, 5/13/14 228 234 Berry Plastics Group, Inc. Tranche C, 2.297%, 4/3/15 761 676 Boise Paper Holdings LLC Tranche 9.250%, 2/22/15 668 666 Building Materials Corp. of America Tranche B, 6.094%, 9/15/14 360 317
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 64 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MATERIALS--(CONTINUED) Georgia Gulf Corp. Tranche B, 0.000%, 10/3/13 $ 475 $ 469 JohnsonDiversey, Inc. Tranche B, 4.791%, 12/16/11 118 116 Nalco Co. Tranche B, 6.500%, 5/13/16 119 122 Solutia, Inc. Tranche 7.250%, 2/28/14 398 404 --------------- 3,318 --------------- TELECOMMUNICATION SERVICES--0.6% Level 3 Communications, Inc. Tranche A, 2.756%, 3/13/14 525 467 Tranche B, 11.500%, 3/13/14 130 138 nTelos, Inc. Tranche 5.750%, 8/7/15 438 441 --------------- 1,046 --------------- UTILITIES--0.9% Calpine Corp. Tranche 3.475%, 3/29/14 347 319 NRG Energy, Inc. Tranche B, 2.131%, 2/1/13 268 254 Letter of Credit 2.348%, 2/1/13 699 664 Texas Competitive Electric Holdings Co. LLC Tranche B-2, 3.781%, 10/10/14 260 207 Tranche B-3, 3.781%, 10/10/14 138 110 --------------- 1,554 --------------- TOTAL LOAN AGREEMENTS (IDENTIFIED COST $23,694) 23,665 ---------------
SHARES VALUE --------------- --------------- PREFERRED STOCK--0.1% FINANCIALS--0.1% FNMA Pfd. 8.250%(3) 38,000 $ 62 Preferred Blocker, Inc. (GMAC) Pfd. 144A 7.000%(2)(4) 321 187 --------------- TOTAL PREFERRED STOCK (IDENTIFIED COST $757) 249 --------------- COMMON STOCKS--0.0% TELECOMMUNICATION SERVICES--0.0% AT&T Latin America Corp. Class A(2)(6)(8) 137,550 0 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $605) 0 --------------- TOTAL LONG-TERM INVESTMENTS--98.7% (IDENTIFIED COST $171,322) 174,402 --------------- SHORT-TERM INVESTMENTS--1.3% MONEY MARKET MUTUAL FUNDS--1.3% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 2,273,308 2,273 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $2,273) 2,273 --------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $173,595) 176,675(1) Other Assets and Liabilities--0.0% (57) --------------- NET ASSETS--100.0% $ 176,618 =============== COUNTRY WEIGHTINGS as of September 30, 2009+ United States 68% Canada 4 Australia 3 Argentina 2 Russia 2 South Korea 2 United Kingdom 2 Other 17 --------------- Total 100% ---------------
+ % of total investments as of September 30, 2009. FOREIGN CURRENCIES: AUD Australian Dollar BRL Brazilian Real CAD Canadian Dollar COP Colombian Peso EUR Euro IDR Indonesian Rupiah KRW Korean Won NOK Norwegian Krone NZD New Zealand Dollar PLZ Polish Zloty SEK Swedish Krona TRY Turkish Lira The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2009 Prices Inputs Inputs ------------------ --------- ----------- ------------ Debt Securities: Municipal Securities $ 567 $ -- $ 567 $ -- Foreign Government Securities 31,259 -- 31,259 -- Mortgage-Backed Securities 16,889 -- 15,999 890 Asset-Backed Securities 3,479 -- 3,425 54 Corporate Debt 121,959 -- 121,305 654 Equity Securities: Preferred Stocks 249 249 -- -- Common Stocks -- -- -- --++ Short-Term Investments 2,273 2,273 -- -- -------- ------ -------- ------ Total Investments $176,675 $2,522 $172,555 $1,598 ======== ====== ======== ======
++ Level 3 Common Stocks have a beginning and ending value of $0. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 65 VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: ($ reported in thousands)
Mortgage-Backed Asset-Backed Corporate Debt Total Securities Securities Securities Common Stock ------- --------------- ------------ -------------- ------------ BALANCE AS OF SEPTEMBER 30, 2008: $ 4,005 $ 2,210 $ 153 $1,642 $ --(3) Accrued discounts (premiums) 49 44 (1) 6 -- Realized gain (loss)(1) (1,346) (1,139) (80) -- (127) Change in unrealized appreciation (depreciation)(1) 1,235 758 92 258 127 Net purchases (sales) (796) (256) (110) (430) -- Transfers in and/or out of level 3(2) (1,549) (727) -- (822) -- ------- ------- ----- ------ ----- BALANCE AS OF SEPTEMBER 30, 2009: $ 1,598 $ 890 $ 54 $ 654 $ --(3) ======= ======= ===== ====== =====
(1) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (2) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2009, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (3) LEVEL 3 COMMON STOCKS HAVE A BEGINNING AND ENDING VALUE OF $0. Certain level 3 security valuations have been determined based on availability of only a single broker source, which may or may not be a principal market maker. Other level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 66 VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- ASSET-BACKED SECURITIES--0.2% Harley-Davidson Motorcycle Trust 07-2, C 5.410%, 8/15/15 $ 170 $ 145 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $126) 145 --------------- CORPORATE BONDS--12.5% CONSUMER DISCRETIONARY--3.0% Affinia Group, Inc. 144A 10.750%, 8/15/16 (4) 260 281 Blockbuster, Inc. 144A 11.750%, 10/1/14 (4) 550 527 Harrah's Operating Co., Inc. 144A 11.250%, 6/1/17 (4) 140 142 Landry's Restaurants, Inc. 14.000%, 8/15/11 215 217 MGM MIRAGE 144A 10.375%, 5/15/14 (4) 47 50 Nebraska Book Co., Inc. 144A 10.000%, 12/1/11 (4) 500 499 --------------- 1,716 --------------- CONSUMER STAPLES--1.3% Smithfield Foods, Inc. 144A 10.000%, 7/15/14 (4) 400 422 Yankee Acquisition Corp. Series B, 8.500%, 2/15/15 300 284 --------------- 706 --------------- ENERGY--0.5% Western Refining, Inc. 144A 10.750%, 6/15/14 (3)(4) 325 310 --------------- FINANCIALS--0.4% Ford Motor Credit Co. LLC 7.500%, 8/1/12 100 96 8.700%, 10/1/14 140 137 --------------- 233 --------------- HEALTH CARE--0.2% Select Medical Corp. 7.625%, 2/1/15 100 94 --------------- INDUSTRIALS--1.8% Delta Air Lines, Inc. 00-A1, 7.379%, 5/18/10 481 474 Global Aviation Holdings Ltd. 144A 14.000%, 8/15/13 (4) 430 428 RSC Equipment Rental, Inc. 144A 10.000%, 7/15/17 (4) 94 102 --------------- 1,004 --------------- MATERIALS--3.5% Nova Chemicals Corp. 4.538%, 11/15/13(3) 1,235 1,096 Verso Paper Holdings LLC/Verso Paper, Inc. 144A 11.500%, 7/1/14 (4) 525 541 Series B, 4.230%, 8/1/14 (3) 500 312 --------------- 1,949 ---------------
PAR VALUE VALUE --------------- --------------- TELECOMMUNICATION SERVICES--1.8% Cricket Communications, Inc. 144A 7.750%, 5/15/16 (4) $ 215 $ 219 Level 3 Financing, Inc. 4.601%, 2/15/15 (3) 400 288 Virgin Media Finance plc Series 1, 9.500%, 8/15/16 455 481 --------------- 988 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $6,654) 7,000 --------------- LOAN AGREEMENTS(3)--86.0% CONSUMER DISCRETIONARY--25.5% Building Materials Holding Corp. of America Tranche 3.063%, 2/22/14 249 229 Cengage Learning Acquisitions, Inc. Tranche 2.775%, 7/5/14 906 822 Ceridian Corp. Tranche 3.341%, 11/8/14 1,165 1,033 Charter Communications Operating LLC Tranche B, 6.250%, 3/6/14 447 422 CSC Holdings, Inc. Tranche B-2, 2.113%, 3/29/16 1,112 1,098 Emmis Operating Co. Tranche B, 4.348%, 11/1/13 400 287 Ford Motor Co. Tranche B, 3.380%, 12/16/13 554 494 Getty Images, Inc. Tranche B, 6.250%, 7/2/15 616 621 Hanesbrands, Inc. Tranche B, 5.138%, 9/5/13 855 860 Harrah's Operating Co., Inc. Tranche B-2, 3.504%, 1/28/15 530 432 Tranche B-4, 9.500%, 10/31/16 300 297 HBI Branded Apparel Ltd., Inc. Tranche 4.254%, 3/5/14 150 144 Intelsat Jackson Holding Ltd. Tranche 0.000%, 2/1/14 1,000 899 Intelstat Corp. Tranche B2-A, 2.800%, 1/3/14 190 182 Tranche B2-B, 2.800%, 1/3/14 190 182 Tranche B2-C, 2.800%, 1/3/14 190 182 Isle of Capri Casinos, Inc. Tranche B-DD, 2.055%, 11/25/13 159 150 Tranche A-DD, 2.659%, 11/25/13 140 132 Tranche 2.659%, 11/25/13 397 374 Landry's Restaurant, Inc. Tranche 9.500%, 3/9/11 916 921
PAR VALUE VALUE --------------- --------------- CONSUMER DISCRETIONARY--(CONTINUED) Las Vegas Sands LLC Tranche I-DD, 0.393%, 5/23/14 $ 29 $ 25 Tranche B, 0.393%, 5/23/14 146 122 Mediacom Illinois LLC Tranche D, 5.500%, 3/31/17 350 351 Neiman-Marcus Group, Inc. (The) Tranche 2.357%, 4/6/13 1,235 1,075 Nielsen Finance LLC/Nielsen Finance Co. Tranche A, 2.276%, 8/9/13 293 277 Tranche B, 4.026%, 5/1/16 610 577 PTI Group, Inc. Tranche 9.250%, 2/28/13 80 74 Transaction Network Services, Inc. Tranche 8.250%, 3/28/14 635 647 Univision Communications, Inc. Tranche B, 2.523%, 9/29/14 1,025 870 VML U.S. Finance LLC Tranche B, 5.880%, 5/25/13 300 287 VWR Funding, Inc. Tranche T-1, 2.794%, 6/29/14 249 233 --------------- 14,299 --------------- CONSUMER STAPLES--3.1% Wrigley (WM) Jr. Co. Tranche B, 6.500%, 10/6/14 1,194 1,217 Yankee Candle Co., Inc. Tranche B, 2.280%, 2/6/14 554 528 --------------- 1,745 --------------- ENERGY--4.8% ATP Oil & Gas Corp. Tranche B-2, 9.000%, 1/15/11 189 174 Tranche B-1, 8.500%, 7/15/14 717 662 Helix Energy Solutions Group, Inc. Tranche B, 2.500%, 7/1/13 641 615 Hercules Offshore, Inc. Tranche B, 6.436%, 7/11/13 600 588 Venoco, Inc. Tranche 4.244%, 9/20/11 500 428 Western Refining, Inc. Tranche 8.250%, 5/30/14 236 234 --------------- 2,701 --------------- FINANCIALS--3.0% Hertz Corp. Tranche B, 2.070%, 12/21/12 627 595 Letter of Credit 2.977%, 12/21/12 115 109
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 67 VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- FINANCIALS--(CONTINUED) Nuveen Investments, Inc. Tranche B, 7.270%, 11/13/14 $ 325 $ 282 Pinnacle Foods Finance LLC/Pinnacle Food Finance Corp. Tranche B, 3.033%, 4/2/14 299 281 Sungard Data Systems, Inc. Tranche A, 2.015%, 2/28/14 23 21 Vanguard Health Holdings Co., II LLC Tranche 2.544%, 9/23/11 404 396 --------------- 1,684 --------------- HEALTH CARE--9.3% Bausch & Lomb, Inc. Tranche DD, 3.351%, 4/24/15 95 91 Tranche B, 3.848%, 4/24/15 390 373 Community Health Systems, Inc. Tranche DD, 2.535%, 7/25/14 60 56 Tranche B, 2.630%, 7/25/14 1,177 1,109 CRC Health Corp. Tranche 2.348%, 2/6/13 500 440 HCA, Inc. Tranche A-1, 2.659%, 11/17/12 973 913 Health Management Associates, Inc. Tranche B, 2.348%, 2/28/14 319 301 HealthSouth Corp. Tranche 2.568%, 3/10/13 996 960 Psychiatric Solutions, Inc. Tranche A, 2.050%, 7/1/12 829 801 Select Medical Corp. Tranche B-1, 4.874%, 8/22/14 219 214 --------------- 5,258 --------------- INDUSTRIALS--8.7% ARAMARK Corp. Letter of Credit 2.246%, 1/26/14 51 47 Tranche 2.473%, 1/26/14 774 724 Harland Clarke Holdings Corp. Tranche B, 2.995%, 6/30/14 824 694 Manitowoc Co., Inc. (The) Tranche B, 7.500%, 4/14/14 1,449 1,378 Reynolds & Reynolds Co. (The) Tranche 5.785%, 10/24/13 550 433
PAR VALUE VALUE --------------- --------------- INDUSTRIALS--(CONTINUED) ServiceMaster Co. (The) Tranche T-1-DD, 2.790%, 7/24/14 $ 89 $ 80 Tranche B, 2.872%, 7/24/14 893 800 Sungard Data Systems, Inc. Tranche B, 3.924%, 2/28/16 493 482 TransDigm, Inc. Tranche 2.371%, 6/23/13 270 262 --------------- 4,900 --------------- INFORMATION TECHNOLOGY--9.1% Avaya, Inc. Tranche B, 0.502%, 10/26/14 850 688 CommScope, Inc. Tranche B, 3.098%, 12/27/14 593 582 Dresser, Inc. Tranche B, 3.104%, 5/4/14 250 235 PIK Loan 6.068%, 5/4/15 900 786 First Data Corp. Tranche B-3, 3.039%, 9/24/14 1,418 1,221 Freescale Semiconductor, Inc. Tranche 2.053%, 12/1/13 663 533 Reynolds & Reynolds Co. (The) Tranche F-L 2.285%, 10/24/12 1,205 1,063 --------------- 5,108 --------------- MATERIALS--12.7% Anchor Glass Container Corp. Tranche B, 6.750%, 6/20/14 238 237 Ashland, Inc. Tranche B, 7.650%, 5/13/14 632 648 Berry Plastics Group, Inc. Tranche C, 2.319%, 4/3/15 1,254 1,114 Boise Paper Holdings LLC Tranche B, 5.750%, 2/22/14 631 643 Tranche 9.250%, 2/22/15 253 252 Building Materials Corp. of America Tranche B, 6.094%, 9/15/14 405 357 Celanese Holdings LLC Tranche 2.643%, 4/2/14 439 416 Georgia Gulf Corp. Tranche B, 7.284%, 10/3/13 550 543 Georgia-Pacific LLC Tranche B-1, 2.376%, 12/20/12 312 301 Tranche C, 0.284%, 12/23/14 172 172
PAR VALUE VALUE --------------- --------------- MATERIALS--(CONTINUED) Huntsman TLC Tranche 2.505%, 6/25/13 $ 1,000 $ 931 Ineos Holdings Ltd. Tranche B-2, 0.000%, 12/16/13 175 147 Tranche C-2, 0.000%, 12/16/14 175 148 JohnsonDiversey, Inc. Tranche DD, 2.750%, 12/16/10 76 75 Tranche B, 2.483%, 12/16/11 335 329 Solutia, Inc. Tranche 7.250%, 2/28/14 786 799 --------------- 7,112 --------------- TELECOMMUNICATION SERVICES--6.3% Level 3 Communications, Inc. Tranche A, 2.816%, 3/13/14 950 845 Tranche B, 11.500%, 3/13/14 70 74 MetroPCS Wireless, Inc. Tranche B, 2.797%, 11/3/13 413 396 nTelos, Inc. Tranche 5.750%, 8/7/15 984 990 Time Warner Telecom Holdings, Inc. Tranche B, 2.123%, 1/7/13 1,265 1,224 --------------- 3,529 --------------- UTILITIES--3.5% Calpine Corp. Tranche 3.475%, 3/29/14 397 365 NRG Energy, Inc. Tranche B, 2.131%, 2/1/13 569 541 Letter of Credit 2.348%, 2/1/13 306 290 Texas Competitive Electric Holdings Co. LLC Tranche B-3, 3.781%, 10/10/14 957 764 --------------- 1,960 --------------- TOTAL LOAN AGREEMENTS (IDENTIFIED COST $44,301) 48,296 --------------- TOTAL LONG-TERM INVESTMENTS--98.7% (IDENTIFIED COST $51,081) 55,441 ---------------
For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 68 VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--5.9% MONEY MARKET MUTUAL FUNDS--5.9% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 3,283,579 $ 3,284 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $3,284) 3,284 --------------- TOTAL INVESTMENTS--104.6% (IDENTIFIED COST $54,365) 58,725(1) Other Assets and Liabilities--(4.6)% (2,604) --------------- NET ASSETS--100.0% $ 56,121 ===============
The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2009 Prices Inputs Inputs ------------------ --------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: Asset-Backed Securities $ 145 $ -- $ 145 $-- Corporate Debt 55,296 -- 55,222 74 Equity Securities: Short-Term Investments 3,284 3,284 -- -- ------- ------ ------- --- Total Investments $58,725 $3,284 $55,367 $74 ======= ====== ======= ===
The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: ($ reported in thousands)
Total Corporate Debt -------- -------------- BALANCE AS OF SEPTEMBER 30, 2008: $ 688 $ 688 Accrued discounts (premiums) 13 13 Realized gain (loss)(1) 3 3 Change in unrealized appreciation (depreciation)(1) 81 81 Net purchases (sales) 360 360 Transfers in and/or out of Level 3(2) (1,071) (1,071) -------- ------- BALANCE AS OF SEPTEMBER 30, 2009: $ 74 $ 74 ======== =======
(1) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (2) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2009, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. Certain level 3 security valuations have been determined based on availability of only a single broker source, which may or may not be a principal market maker. Other level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 69 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2009 (Amounts reported in thousands except shares and per share amounts)
ALPHASECTOR(SM) ALPHASECTOR(SM) ALTERNATIVES CA TAX- ALLOCATION ROTATION DIVERSIFIER EXEMPT FUND FUND FUND BOND FUND BOND FUND ---------------- ---------------- ------------ ----------- ---------- ASSETS Investment in securities at value(1) ......................... $ 27,157 $ 78,809 $ 88,655 $ 225,375 $ 58,851 Investments in affiliated funds at value(2) ................ 8,891 -- 179,559 -- -- Receivables Investment securities sold ....... 30,304 78,711 800 3,649 -- Fund shares sold ................. --(3) 6 1,202 9,040 --(3) Receivable from adviser .......... -- -- 47 -- -- Dividends and interest receivable .................... 14 17 --(3) 2,040 779 Prepaid expenses .................... 18 22 23 32 14 ---------- ---------- ----------- ----------- ---------- Total assets ............... 66,384 157,565 270,286 240,136 59,644 ---------- ---------- ----------- ----------- ---------- LIABILITIES Cash overdraft ...................... -- -- 305 -- -- Payables Fund shares repurchased .......... 6 210 1,198 11,496 117 Investment securities purchased .. 30,599 79,408 -- 5,081 -- Dividend distributions ........... -- -- -- -- 109 Investment advisory fee .......... 3 6 -- 64 14 Distribution and service fees .... 10 25 80 26 7 Administration fee ............... 3 5 18 16 4 Transfer agent fees and expenses ...................... 6 21 82 36 4 Trustees' fee and expenses ....... 1 1 4 3 1 Professional fee ................. 18 21 24 45 29 Other accrued expenses ........... 14 28 20 42 7 ---------- ---------- ----------- ----------- ---------- Total liabilities .......... 30,660 79,725 1,731 16,809 292 ---------- ---------- ----------- ----------- ---------- NET ASSETS .......................... $ 35,724 $ 77,840 $ 268,555 $ 223,327 $ 59,352 ========== ========== =========== =========== ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ........... $ 42,302 $ 96,871 $ 365,331 $ 241,696 $ 56,686 Accumulated undistributed net investment income (loss) ...... 238 328 1,804 82 51 Accumulated undistributed net realized gain (loss) .......... (6,787) (18,740) (74,317) (26,408) (229) Net unrealized appreciation (depreciation) on investments ................... (29) (619) (24,263) 7,957 2,844 ---------- ---------- ----------- ----------- ---------- NET ASSETS .......................... $ 35,724 $ 77,840 $ 268,555 $ 223,327 $ 59,352 ========== ========== =========== =========== ========== CLASS A Net asset value (net assets/shares outstanding) per share ........... $ 9.56 $ 9.34 $ 9.43 $ 10.57 $ 12.29 Maximum offering price per share NAV/(1-4.75%) .................... $ -- $ -- $ -- $ 11.10 $ 12.90 Maximum offering price per share NAV/(1-5.75%) .................... $ 10.14 $ 9.91 $ 10.01 $ -- $ -- Shares of beneficial interest outstanding, unlimited authorization .................... 1,986,732 4,036,802 17,753,868 6,267,743 2,745,044 Net Assets .......................... $ 18,989 $ 37,722 $ 167,472 $ 66,232 $ 33,728 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ........................ $ -- $ -- $ -- $ 10.34 $ -- Shares of beneficial interest outstanding, unlimited authorization .................... -- -- -- 407,335 -- Net Assets .......................... $ -- $ -- $ -- $ 4,212 $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 9.54 $ 9.29 $ 9.34 $ 10.37 $ -- Shares of beneficial interest outstanding, unlimited authorization .................... 1,754,461 4,319,813 10,824,707 776,077 -- Net Assets .......................... $ 16,735 $ 40,118 $ 101,083 $ 8,048 $ -- CLASS I Net asset value (net assets/shares outstanding) and offering price per share ........................ $ -- $ -- $ -- $ 10.68 $ 12.28 Shares of beneficial interest outstanding, unlimited authorization .................... -- -- -- 13,564,856 2,087,056 Net Assets .......................... $ -- $ -- $ -- $ 144,835 $ 25,624 (1) Investment in securities at cost ............................ $ 27,369 $ 79,428 $ 101,629 $ 217,418 $ 56,007 (2) Investments in affiliated funds at cost ......................... 8,708 -- 190,848 -- -- (3) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements 70 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2009 (Amounts reported in thousands except shares and per share amounts)
GLOBAL GREATER ASIA GREATER GLOBAL GLOBAL REAL ESTATE EX JAPAN EUROPEAN INFRASTRUCTURE OPPORTUNITIES SECURITIES OPPORTUNITIES OPPORTUNITIES FUND FUND FUND FUND FUND -------------- ------------- ----------- ------------- ------------- ASSETS Investment in securities at value(1) ......................... $ 87,108 $ 56,028 $ 1,981 $ 6,708 $ 6,583 Foreign currency at value (2) ....... -- 2 --(3) 7 -- Receivables Investment securities sold ....... -- -- 16 3 -- Fund shares sold ................. 415 2 1 -- -- Receivable from adviser .......... -- -- -- 1 1 Dividends and interest receivable .................... 197 165 6 14 14 Tax reclaims ..................... 34 54 --(3) --(3) 5 Net unrealized appreciation on forward currency contracts ....... -- 12 -- -- -- Prepaid expenses .................... 17 18 26 24 23 ---------- ---------- ------- -------- -------- Total assets ............... 87,771 56,281 2,030 6,757 6,626 ---------- ---------- ------- -------- -------- LIABILITIES Payables Fund shares repurchased .......... 4,061 101 -- -- -- Investment securities purchased .. -- 275 23 28 40 Foreign capital gain taxes payable ....................... -- -- -- 9 -- Investment advisory fee .......... 46 38 14 -- -- Distribution and service fees .... 21 13 1 1 1 Administration fee ............... 5 4 --(3) --(3) --(3) Transfer agent fees and expenses ...................... 15 21 --(3) 2 3 Trustees' fee and expenses ....... 1 1 --(3) --(3) --(3) Professional fee ................. 29 29 28 18 18 Net unrealized depreciation on forward currency contracts ....... -- -- -- 4 -- Other accrued expenses .............. 12 10 1 4 2 ---------- ---------- ------- -------- -------- Total liabilities .......... 4,190 492 67 66 64 ---------- ---------- ------- -------- -------- NET ASSETS .......................... $ 83,581 $ 55,789 $ 1,963 $ 6,691 $ 6,562 ========== ========== ======= ======== ======== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ........... $ 98,088 $ 80,425 $ 1,108 $ 5,164 $ 5,068 Accumulated undistributed net investment income (loss) ...... 161 528 42 69 46 Accumulated undistributed net realized gain (loss) .......... (10,308) (34,474) 82 125 80 Net unrealized appreciation (depreciation) on investments ................... (4,360) 9,310 731 1,333 1,368 ---------- ---------- ------- -------- -------- NET ASSETS .......................... $ 83,581 $ 55,789 $ 1,963 $ 6,691 $ 6,562 ========== ========== ======= ======== ======== CLASS A Net asset value (net assets/shares outstanding) per share ........... $ 9.97 $ 6.67 $ 18.33 $ 13.01 $ 12.97 Maximum offering price per share NAV/(1-4.75%) ................. $ -- $ -- $ -- $ -- $ -- Maximum offering price per share NAV/(1-5.75%) ................. $ 10.58 $ 7.08 $ 19.45 $ 13.80 $ 13.76 Shares of beneficial interest outstanding, unlimited authorization .................... 7,729,111 8,041,793 86,521 494,489 480,816 Net Assets .......................... $ 77,049 $ 53,644 $ 1,586 $ 6,431 $ 6,236 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ........................ $ -- $ 6.00 $ -- $ -- $ -- Shares of beneficial interest outstanding, unlimited authorization .................... -- 228,261 -- -- -- Net Assets .......................... $ -- $ 1,369 $ -- $ -- $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 9.95 $ 5.97 $ 18.25 $ 12.96 $ 12.93 Shares of beneficial interest outstanding, unlimited authorization .................... 622,194 130,018 10,619 10,010 15,141 Net Assets .......................... $ 6,188 $ 776 $ 194 $ 130 $ 196 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 9.96 $ -- $ 18.36 $ 13.02 $ 12.98 Shares of beneficial interest outstanding, unlimited authorization .................... 34,541 -- 10,000 10,010 10,010 Net Assets .......................... $ 344 $ -- $ 183 $ 130 $ 130 (1) Investment in securities at cost ............................. $ 91,470 $ 46,730 $ 1,250 $ 5,363 $ 5,215 (2) Foreign currency at cost ........ -- 2 --(3) 7 -- (3) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements 71 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2009 (Amounts reported in thousands except shares and per share amounts)
INTERNATIONAL MULTI-SECTOR SENIOR HIGH YIELD REAL ESTATE MARKET FIXED INCOME FLOATING RATE FUND SECURITIES FUND NEUTRAL FUND FUND FUND ----------- --------------- ------------ ------------ ------------- ASSETS Investment in securities at value(1) ......................... $ 91,272 $ 31,814 $ 83,143 $ 176,675 $ 58,725 Foreign currency at value (2) ....... -- -- 11 -- -- Cash ................................ 17 -- -- 796 1,516 Deposits with broker for securities sold short ....................... -- -- 80,308 -- -- Receivables Investment securities sold ....... 1,736 5,225 8,392 788 1,352 Fund shares sold ................. 54 -- 250 907 186 Dividends and interest receivable 1,913 140 72 2,566 199 Tax reclaims ..................... -- 22 9 -- -- Prepaid expenses .................... 18 23 20 23 3 ----------- ---------- ---------- ----------- ---------- Total assets ............... 95,010 37,224 172,205 181,755 61,981 ----------- ---------- ---------- ----------- ---------- LIABILITIES Securities sold short at value(3) ... -- -- 76,896 -- -- Payables Fund shares repurchased .......... 94 4,060 7,322 291 144 Investment securities purchased .. 1,597 429 7,045 4,265 5,618 Dividend distributions ........... -- -- -- 334 -- Dividends on short sales ......... -- -- 157 -- -- Investment advisory fee .......... 49 27 82 77 33 Distribution and service fees .... 21 8 21 68 13 Administration fee ............... 6 2 6 11 4 Transfer agent fees and expenses . 30 1 10 28 2 Trustees' fee and expenses ....... 1 --(4) 1 2 1 Professional fee ................. 35 28 35 34 33 Other accrued expenses ........... 13 7 12 27 12 ----------- ---------- ---------- ----------- ---------- Total liabilities .......... 1,846 4,562 91,587 5,137 5,860 ----------- ---------- ---------- ----------- ---------- NET ASSETS .......................... $ 93,164 $ 32,662 $ 80,618 $ 176,618 $ 56,121 =========== ========== ========== =========== ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ........... $ 215,806 $ 53,658 $ 99,187 $ 198,099 $ 50,928 Accumulated undistributed net investment income (loss) ...... 122 207 (3) 223 -- Accumulated undistributed net realized gain (loss) .......... (123,570) (24,367) (29,367) (24,807) 833 Net unrealized appreciation (depreciation) on investments ................... 806 3,164 16,203 3,103 4,360 Net unrealized appreciation (depreciation) on securities sold short .................... -- -- (5,402) -- -- ----------- ---------- ---------- ----------- ---------- NET ASSETS .......................... $ 93,164 $ 32,662 $ 80,618 $ 176,618 $ 56,121 =========== ========== ========== =========== ========== CLASS A Net asset value (net assets/shares outstanding) per share ........... $ 3.89 $ 6.00 $ 10.50 $ 9.96 $ 9.87 Maximum offering price per share NAV/(1-4.75%) .................... $ 4.08 $ -- $ -- $ 10.46 $ 10.36 Maximum offering price per share NAV/(1-5.75%) .................... $ -- $ 6.37 $ 11.14 $ -- $ -- Shares of beneficial interest outstanding, unlimited authorization .................... 23,261,363 5,363,568 7,117,284 12,246,492 5,370,685 Net Assets .......................... $ 90,560 $ 32,178 $ 74,749 $ 121,968 $ 52,987 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 3.82 $ -- $ 10.06 $ 9.95 $ -- Shares of beneficial interest outstanding, unlimited authorization .................... 266,518 -- 142,671 1,334,874 -- Net Assets .......................... $ 1,019 $ -- $ 1,435 $ 13,276 $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 3.85 $ 6.00 $ 10.02 $ 10.02 $ 9.87 Shares of beneficial interest outstanding, unlimited authorization .................... 411,741 68,800 442,637 4,130,265 277,701 Net Assets .......................... $ 1,585 $ 413 $ 4,434 $ 41,374 $ 2,740 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ........................ $ -- $ 5.99 $ -- $ -- $ 9.86 Shares of beneficial interest outstanding, unlimited authorization .................... -- 11,807 -- -- 39,917 Net Assets .......................... $ -- $ 71 $ -- $ -- $ 394 (1) Investment in securities at cost $ 90,466 $ 28,684 $ 66,940 $ 173,595 $ 54,365 (2) Foreign currency at cost ........ -- -- 11 -- -- (3) Proceeds from securities sold short ........................... -- -- 71,494 -- -- (4) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements 72 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands)
ALPHASECTOR(SM) ALPHASECTOR(SM) ALTERNATIVES CA TAX-EXEMPT ALLOCATION FUND ROTATION FUND DIVERSIFIER FUND BOND FUND BOND FUND --------------- --------------- ---------------- --------- ------------- INVESTMENT INCOME Dividends ................................. $ 238 $ 278 $ 349 $ 40 $ 8 Income distributions received from affiliated funds ....................... 908 1,497 4,730 -- -- Interest .................................. -- -- -- 9,220 2,858 ------- -------- -------- ------- ------ Total investment income ................ 1,146 1,775 5,079 9,260 2,866 ------- -------- -------- ------- ------ EXPENSES Investment advisory fees .................. 35 73 264 872 260 Service fees, Class A ..................... -- -- 136 101 82 Distribution and service fees, Class B .... -- -- -- 42 -- Distribution and service fees, Class C .... 124 289 810 51 -- Administration fees ....................... 30 62 230 156 50 Transfer agent fee and expenses ........... 40 144 548 144 31 Custodian fees ............................ 2 3 13 28 6 Printing fees and expenses ................ 29 53 104 26 14 Professional fees ......................... 35 56 23 41 43 Registration fees ......................... 25 33 55 46 23 Trustees' fee and expenses ................ 4 8 27 18 6 Excise tax expense ........................ -- -- 19 -- -- Miscellaneous expenses .................... 6 32 39 29 10 ------- -------- -------- ------- ------ Total expenses ......................... 330 753 2,268 1,554 525 Less expenses reimbursed by investment adviser ................................ -- -- (775) (281) (96) ------- -------- -------- ------- ------ Net expenses ........................... 330 753 1,493 1,273 429 ------- -------- -------- ------- ------ NET INVESTMENT INCOME (LOSS) .............. 816 1,022 3,586 7,987 2,437 ------- -------- -------- ------- ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ... 171 464 (17,103) (2,547) (140) Net realized gain (loss) on investments from affiliated funds .................. (6,533) (18,260) (41,527) -- -- Capital gain distributions from affiliated funds ....................... 8 33 354 -- -- Net change in unrealized appreciation (depreciation) on investments .......... (212) 4,647 (10,349) 17,869 4,403 Net change in unrealized appreciation (depreciation) on investments from affiliated funds ....................... 4,830 8,832 8,168 -- -- ------- -------- -------- ------- ------ NET GAIN (LOSS) ON INVESTMENTS ............... (1,736) (4,284) (60,457) 15,322 4,263 ------- -------- -------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. $ (920) $ (3,262) $(56,871) $23,309 $6,700 ======= ======== ======== ======= ======
(1) Amount is less than $500 (not reported in thousands) See Notes to Financial Statements 73 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands)
GREATER ASIA GREATER GLOBAL GLOBAL GLOBAL EX JAPAN EUROPEAN INFRASTRUCTURE OPPORTUNITIES REAL ESTATE OPPORTUNITIES OPPORTUNITIES FUND FUND SECURITIES FUND FUND FUND -------------- ------------- --------------- ------------- ------------- INVESTMENT INCOME Dividends ................................. $ 3,514 $ 1,632 $ 44 $ 101 $ 109 Interest .................................. 1 --(1) 1 -- --(1) Security lending .......................... -- 14 -- -- -- Foreign taxes withheld .................... (234) (36) (3) (6) (10) -------- -------- ---- ------ ------ Total investment income ................ 3,281 1,610 42 95 99 -------- -------- ---- ------ ------ EXPENSES Investment advisory fees .................. 443 453 7 26 22 Service fees, Class A ..................... 161 128 2 6 6 Distribution and service fees, Class B .... -- 14 -- -- -- Distribution and service fees, Class C .... 35 8 1 1 1 Administration fees ....................... 58 45 1 2 2 Transfer agent fee and expenses ........... 95 143 --(1) 3 3 Custodian fees ............................ 25 79 6 11 5 Printing fees and expenses ................ 20 29 3 2 2 Professional fees ......................... 31 58 35 22 26 Registration fees ......................... 44 36 21 23 23 Trustees' fee and expenses ................ 7 6 --(1) --(1) --(1) Miscellaneous expenses .................... 12 11 2 2 3 -------- -------- ---- ------ ------ Total expenses ......................... 931 1,010 78 98 93 Less expenses reimbursed by investment adviser ................................ (13) -- (66) (51) (55) -------- -------- ---- ------ ------ Net expenses ........................... 918 1,010 12 47 38 -------- -------- ---- ------ ------ NET INVESTMENT INCOME (LOSS) .............. 2,363 600 30 48 61 -------- -------- ---- ------ ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ... (10,236) (30,988) 93 162 120 Net realized gain (loss) on foreign currency transactions .................. 1 (988) 1 (16) (55) Net change in unrealized appreciation (depreciation) on investments .......... 6,294 19,610 731 1,345 1,368 Net change in unrealized appreciation (depreciation) on foreign currency translation ............................ 5 30 -- (12) -- -------- -------- ---- ------ ------ NET GAIN (LOSS) ON INVESTMENTS ............... (3,936) (12,336) 825 1,479 1,433 -------- -------- ---- ------ ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................. $ (1,573) $(11,736) $855 $1,527 $1,494 ======== ======== ==== ====== ======
(1) Amount is less than $500 (not reported in thousands) See Notes to Financial Statements 74 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands)
INTERNATIONAL MARKET MULTI-SECTOR SENIOR HIGH YIELD REAL ESTATE NEUTRAL FIXED INCOME FLOATING RATE FUND SECURITIES FUND FUND FUND FUND ---------- --------------- -------- ------------ ------------- INVESTMENT INCOME Dividends ................................. $ 64 $ 2,497 $ 1,392 $ 41 $ 25 Interest .................................. 8,477 2 60 9,330 2,333 Security lending .......................... 5 -- -- -- -- Foreign taxes withheld .................... -- (229) (12) (10) -- -------- -------- -------- ------- ------ Total investment income ................ 8,546 2,270 1,440 9,361 2,358 -------- -------- -------- ------- ------ EXPENSES Investment advisory fees .................. 542 366 1,277 642 197 Service fees, Class A ..................... 203 91 198 204 79 Distribution and service fees, Class B .... 10 -- 15 114 -- Distribution and service fees, Class C .... 12 3 43 237 9 Administration fees ....................... 71 32 74 98 28 Transfer agent fee and expenses ........... 194 12 67 154 12 Custodian fees ............................ 11 18 47 30 7 Printing fees and expenses ................ 22 11 25 28 8 Professional fees ......................... 35 32 38 36 35 Registration fees ......................... 35 36 33 35 54 Trustees' fee and expenses ................ 8 --(1) 9 11 3 Miscellaneous expenses .................... 16 7 15 26 10 -------- -------- -------- ------- ------ Total expenses ......................... 1,159 608 1,841 1,615 442 Dividends on short sales .................. -- -- 1,429 -- -- Prime broker interest expense on short sales .................................. -- -- 505 -- -- Less expenses reimbursed by investment adviser ................................ -- (57) (292) -- (42) -------- -------- -------- ------- ------ Net expenses ........................... 1,159 551 3,483 1,615 400 -------- -------- -------- ------- ------ NET INVESTMENT INCOME (LOSS) .............. 7,387 1,719 (2,043) 7,746 1,958 -------- -------- -------- ------- ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ... (18,245) (23,480) (27,964) (9,599) 923 Net realized gain (loss) on securities sold short ............................. -- -- 27,181 -- -- Net realized gain (loss) on foreign currency transactions .................. -- (23) (12) 71 -- Net change in unrealized appreciation (depreciation) on investments .......... 16,375 11,747 24,123 24,579 5,291 Net change in unrealized appreciation (depreciation) on securities sold short ................................. -- -- (15,595) -- -- Net change in unrealized appreciation (depreciation) on foreign currency translation ............................ -- 35 57 (6) -- -------- -------- -------- ------- ------ NET GAIN (LOSS) ON INVESTMENTS ............... (1,870) (11,721) 7,790 15,045 6,214 -------- -------- -------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. $ 5,517 $(10,002) $ 5,747 $22,791 $8,172 ======== ======== ======== ======= ======
(1) Amount is less than $500 (not reported in thousands) See Notes to Financial Statements 75 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS ($ Reported in thousands)
ALPHASECTOR(SM) ALPHASECTOR(SM) ALLOCATION FUND ROTATION FUND ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ........ $ 816 $ 1,109 $ 1,022 $ 1,329 Net realized gain (loss) ............ (6,354) 799 (17,763) 3,310 Net change in unrealized appreciation (depreciation) ...... 4,618 (11,257) 13,479 (29,159) ------- -------- -------- --------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ (920) (9,349) (3,262) (24,520) ------- -------- -------- --------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ...... (590) (655) (670) (1,078) Net investment income, Class B ...... -- -- -- -- Net investment income, Class C ...... (387) (467) (424) (909) Net investment income, Class I ...... -- -- -- -- Net realized short-term gains, Class A .......................... -- (27) -- (98) Net realized short-term gains, Class C .......................... -- (28) -- (127) Net realized long-term gains, Class A .......................... (76) (228) (558) (671) Net realized long-term gains, Class C .......................... (69) (237) (625) (864) Net realized long-term gains, Class I .......................... -- -- -- -- ------- -------- -------- --------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (1,122) (1,642) (2,277) (3,747) ------- -------- -------- --------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ............ (3,417) (825) (1,731) (4,741) Change in net assets from share transactions, Class B ............ -- -- -- -- Change in net assets from share transactions, Class C ............ (4,112) (4,951) (6,293) (11,433) Change in net assets from share transactions, Class I ............ -- -- -- -- ------- -------- -------- --------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .......... (7,529) (5,776) (8,024) (16,174) ------- -------- -------- --------- CAPITAL CONTRIBUTIONS Fair Funds settlement(2) ............ -- -- -- -- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS ........................... (9,571) (16,767) (13,563) (44,441) NET ASSETS Beginning of period ................. 45,295 62,062 91,403 135,844 ------- -------- -------- --------- END OF PERIOD ....................... $35,724 $ 45,295 $ 77,840 $ 91,403 ======= ======== ======== ========= Accumulated undistributed net investment income (loss) at end of period .................... $ 238 $ 397 $ 328 $ 374
(1) Amount is less than $500 (not reported in thousands) (2) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 76
ALTERNATIVES DIVERSIFIER FUND BOND FUND CA TAX-EXEMPT BOND FUND ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 2009 2008 ------------- ------------- ------------- ------------- ------------- ------------- $ 3,586 $ 1,680 $ 7,987 $ 5,126 $ 2,437 $ 2,629 (58,276) (11,467) (2,547) (3,840) (140) 95 (2,181) (31,590) 17,869 (4,696) 4,403 (3,791) --------- --------- -------- -------- -------- ------- (56,871) (41,377) 23,309 (3,410) 6,700 (1,067) --------- --------- -------- -------- -------- ------- (2,270) (2,102) (1,659) (1,186) (1,359) (1,423) -- -- (149) (152) -- -- (546) (621) (179) (87) -- -- -- -- (5,993) (3,747) (1,097) (1,183) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (21) -- -- -- -- -- -- -- -- -- -- -- (15) -- --------- --------- -------- -------- -------- ------- (2,816) (2,723) (7,980) (5,172) (2,492) (2,606) --------- --------- -------- -------- -------- ------- (58,940) 186,633 38,228 (4,000) (2,877) (2,878) -- -- (197) (19) -- -- (18,076) 84,762 4,714 1,445 -- -- -- -- (7,351) 96,774 (4,081) 1,270 --------- --------- -------- -------- -------- ------- (77,016) 271,395 35,394 94,200 (6,958) (1,608) --------- --------- -------- -------- -------- ------- -- -- 37 -- 12 -- --------- --------- -------- -------- -------- ------- (136,703) 227,295 50,760 85,618 (2,738) (5,281) 405,258 177,963 172,567 86,949 62,090 67,371 --------- --------- -------- -------- -------- ------- $ 268,555 $ 405,258 $223,327 $172,567 $ 59,352 $62,090 ========= ========= ======== ======== ======== ======= $ 1,804 $ 416 $ 82 $ 50 $ 51 $ 58
See Notes to Financial Statements 77 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
GLOBAL INFRASTRUCTURE FUND GLOBAL OPPORTUNITIES FUND ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ........ $ 2,363 $ 1,638 $ 600 $ 1,327 Net realized gain (loss) ............ (10,235) 750 (31,976) (1,893) Net change in unrealized appreciation (depreciation) ................... 6,299 (16,286) 19,640 (34,463) -------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ (1,573) (13,898) (11,736) (35,029) -------- -------- -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ...... (2,172) (1,528) (729) (880) Net investment income, Class B ...... -- -- (16) (8) Net investment income, Class C ...... (103) (32) (9) (4) Net investment income, Class I ...... (8) (1) -- -- Net realized short-term gains, Class A .......................... -- (243) -- (23) Net realized short-term gains, Class B .......................... -- -- -- (1) Net realized short-term gains, Class C .......................... -- (8) -- --(1) Net realized long-term gains, Class A .......................... (448) (2,039) -- (2,150) Net realized long-term gains, Class B .......................... -- -- -- (93) Net realized long-term gains, Class C .......................... (12) (65) -- (38) Net realized long-term gains, Class I .......................... (1) -- -- -- -------- -------- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (2,744) (3,916) (754) (3,197) -------- -------- -------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ............ 6,209 35,041 (7,674) (7,662) Change in net assets from share transactions, Class B ............ -- -- (572) (1,263) Change in net assets from share transactions, Class C ............ 3,849 372 (163) (103) Change in net assets from share transactions, Class I ............ 238 101 -- -- -------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .......... 10,296 35,514 (8,409) (9,028) -------- -------- -------- -------- CAPITAL CONTRIBUTIONS Fair Funds settlement(2) ............ -- -- 157 -- -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ........................... 5,979 17,700 (20,742) (47,254) NET ASSETS Beginning of period ................. 77,602 59,902 76,531 123,785 -------- -------- -------- -------- END OF PERIOD ....................... $ 83,581 $ 77,602 $ 55,789 $ 76,531 ======== ======== ======== ======== Accumulated undistributed net investment income (loss) at end of period ........................... $ 161 $ 80 $ 528 $ 647
(1) Amount is less than $500 (not reported in thousands) (2) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 78
GLOBAL REAL ESTATE GREATER ASIA EX JAPAN GREATER EUROPEAN SECURITIES FUND OPPORTUNITIES FUND OPPORTUNITIES FUND FROM FROM FROM INCEPTION INCEPTION INCEPTION MARCH 2, 2009 TO APRIL 21, 2009 TO APRIL 21, 2009 TO SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2009 2009 ------------------ --------------------- ------------------ $ 30 $ 48 $ 61 94 146 65 731 1,333 1,368 ------ ------ ------ 855 1,527 1,494 ------ ------ ------ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------ ------ ------ -- -- -- ------ ------ ------ 899 4,964 4,809 -- -- -- 109 100 159 100 100 100 ------ ------ ------ 1,108 5,164 5,068 ------ ------ ------ -- -- -- ------ ------ ------ 1,963 6,691 6,562 -- -- -- ------ ------ ------ $1,963 $6,691 $6,562 ====== ====== ====== $ 42 $ 69 $ 46
See Notes to Financial Statements 79 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
INTERNATIONAL REAL ESTATE HIGH YIELD FUND SECURITIES FUND ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................. $ 7,387 $ 8,463 $ 1,719 $ 562 Net realized gain (loss) ..................................... (18,245) (12,778) (23,503) (707) Net change in unrealized appreciation (depreciation) ......... 16,375 (9,575) 11,782 (8,618) -------- -------- -------- ------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .. 5,517 (13,890) (10,002) (8,763) -------- -------- -------- ------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ............................... (7,268) (8,449) (1,995) (214) Net investment income, Class B ............................... (81) (130) -- -- Net investment income, Class C ............................... (102) (123) (15) (3) Net investment income, Class I ............................... -- -- (3) (2) Net realized short-term gains, Class A ....................... -- -- -- -- Net realized short-term gains, Class C ....................... -- -- -- -- Net realized short-term gains, Class I ....................... -- -- -- -- -------- -------- -------- ------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (7,451) (8,702) (2,013) (219) -------- -------- -------- ------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ........ (524) (10,410) (16,660) 69,745 Change in net assets from share transactions, Class B ........ (271) (882) -- -- Change in net assets from share transactions, Class C ........ 155 (256) 212 252 Change in net assets from share transactions, Class I ........ -- -- 8 102 -------- -------- -------- ------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .... (640) (11,548) (16,440) 70,099 -------- -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS ........................ (2,574) (34,140) (28,455) 61,117 NET ASSETS Beginning of period .......................................... 95,738 129,878 61,117 -- -------- -------- -------- ------- END OF period ................................................ $ 93,164 $ 95,738 $ 32,662 $61,117 ======== ======== ======== ======= Accumulated undistributed net investment income (loss) at end of period .......................................... $ 122 $ 78 $ 207 $ 330
(1) Amount is less than $500 (not reported in thousands) See Notes to Financial Statements 80
MULTI-SECTOR MARKET NEUTRAL FUND FIXED INCOME FUND SENIOR FLOATING RATE FUND ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 2009 2008 ------------- ------------- ------------- ------------- ------------- ------------- $ (2,043) $ (840) $ 7,746 $ 8,759 $ 1,958 $ 632 (795) (2,266) (9,528) (111) 923 (29) 8,585 (3,159) 24,573 (21,652) 5,291 (931) -------- -------- -------- --------- ------- ------- 5,747 (6,265) 22,791 (13,004) 8,172 (328) -------- -------- -------- --------- ------- ------- -- (914) (6,623) (6,796) (1,919) (587) -- (20) (854) (782) -- -- -- (51) (1,656) (1,112) (51) (8) -- -- -- -- (18) (9) -- -- -- -- (56) -- -- -- -- -- (2) -- -- -- -- -- (1) -- -------- -------- -------- --------- ------- ------- -- (985) (9,133) (8,690) (2,047) (604) -------- -------- -------- --------- ------- ------- (50,048) 71,472 25,286 (8,269) 32,707 15,246 (336) (836) 169 (75) -- -- (793) (1,806) 19,964 (761) 2,212 379 -- -- -- -- 137 247 -------- -------- -------- --------- ------- ------- (51,177) 68,830 45,419 (9,105) 35,056 15,872 -------- -------- -------- --------- ------- ------- (45,430) 61,580 59,077 (30,799) 41,181 14,940 126,048 64,468 117,541 148,340 14,940 -- -------- -------- -------- --------- ------- ------- $ 80,618 $126,048 $176,618 $ 117,541 $56,121 $14,940 ======== ======== ======== ========= ======= ======= $ (3) $ (23) $ 223 $ 1,687 $ -- $ 28
See Notes to Financial Statements 81 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET CAPITAL GAIN ASSET NET DISTRIBUTIONS NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT RECEIVED FROM REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME AFFILIATED UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS) FUNDS GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS --------- ---------- ------------- ------------ ---------- ---------- ------------- ------------- ALPHASECTOR(SM) ALLOCATION FUND CLASS A 10/1/08 to 9/30/09 $ 9.78 0.23(2) -- (0.15) 0.08 (0.27) (0.03) (0.30) 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) CLASS C 10/1/08 to 9/30/09 $ 9.75 0.16(2) -- (0.14) 0.02 (0.20) (0.03) (0.23) 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) ALPHASECTOR(SM) ROTATION FUND CLASS A 10/1/08 to 9/30/09 $ 9.95 0.15(2) -- (0.48) (0.33) (0.15) (0.13) (0.28) 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) CLASS C 10/1/08 to 9/30/09 $ 9.88 0.08(2) -- (0.45) (0.37) (0.09) (0.13) (0.22) 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) ALTERNATIVES DIVERSIFIER FUND CLASS A 10/1/08 to 9/30/09 $10.62 0.13(2) 0.01 (1.22) (1.08) (0.11) -- (0.11) 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 10/1/08 to 9/30/09 $10.50 0.07(2) 0.01 (1.19) (1.11) (0.05) -- (0.05) 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)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 82
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 (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 --------- ------ --------- -------------- ------------ ------------------ ----------- --------- (0.22) $ 9.56 1.33% $ 18,989 0.59% 0.59% 2.71% 111% (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 (0.21) $ 9.54 0.59% $ 16,735 1.34% 1.34% 1.92% 111% (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 (0.61) $ 9.34 (2.81)% $ 37,722 0.64% 0.64% 1.80% 131% (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 (0.59) $ 9.29 (3.41)% $ 40,118 1.38% 1.38% 1.03% 131% (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 (1.19) $ 9.43 (10.00)% $167,472 0.29% 0.58% 1.62% 20% (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) (1.16) $ 9.34 (10.55)% $101,083 1.04% 1.33% 0.91% 20% (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)
See Notes to Financial Statements 83 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET CHANGE IN BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL NET ASSET OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE --------- ---------- ------------ ---------- ---------- ------------- ------------- --------- BOND FUND CLASS A 10/1/08 to 9/30/09 $ 9.75 0.42 0.82 1.24 (0.42) -- (0.42) 0.82 10/1/07 to 9/30/08 10.21 0.42 (0.45) (0.03) (0.43) -- (0.43) (0.46) 10/1/06 to 9/30/07 10.27 0.44 (0.05) 0.39 (0.45) -- (0.45) (0.06) 10/1/05 to 9/30/06 10.46 0.43 (0.06) 0.37 (0.41) (0.15) (0.56) (0.19) 10/1/04 to 9/30/05 10.63 0.34 (0.11) 0.23 (0.34) (0.06) (0.40) (0.17) CLASS B 10/1/08 to 9/30/09 $ 9.55 0.34 0.80 1.14 (0.35) -- (0.35) 0.79 10/1/07 to 9/30/08 10.01 0.33 (0.43) (0.10) (0.36) -- (0.36) (0.46) 10/1/06 to 9/30/07 10.07 0.35 (0.04) 0.31 (0.37) -- (0.37) (0.06) 10/1/05 to 9/30/06 10.28 0.34 (0.06) 0.28 (0.34) (0.15) (0.49) (0.21) 10/1/04 to 9/30/05 10.44 0.25 (0.09) 0.16 (0.26) (0.06) (0.32) (0.16) CLASS C 10/1/08 to 9/30/09 $ 9.58 0.34 0.80 1.14 (0.35) -- (0.35) 0.79 10/1/07 to 9/30/08 10.04 0.31 (0.41) (0.10) (0.36) -- (0.36) (0.46) 10/1/06 to 9/30/07 10.09 0.35 (0.03) 0.32 (0.37) -- (0.37) (0.05) 10/1/05 to 9/30/06 10.30 0.34 (0.06) 0.28 (0.34) (0.15) (0.49) (0.21) 10/1/04 to 9/30/05 10.46 0.25 (0.09) 0.16 (0.26) (0.06) (0.32) (0.16) CLASS I 10/1/08 to 9/30/09 $ 9.86 0.45 0.83 1.28 (0.46) -- (0.46) 0.82 10/1/07 to 9/30/08 10.32 0.53 (0.54) (0.01) (0.45) -- (0.45) (0.46) 10/1/06 to 9/30/07 10.36 0.46 (0.02) 0.44 (0.48) -- (0.48) (0.04) 10/1/05 to 9/30/06 10.56 0.47 (0.08) 0.39 (0.44) (0.15) (0.59) (0.20) 10/1/04 to 9/30/05 10.73 0.37 (0.11) 0.26 (0.37) (0.06) (0.43) (0.17) CA TAX-EXEMPT BOND FUND CLASS A 10/1/08 to 9/30/09 $11.41 0.47 0.90 1.37 (0.48) (0.01) (0.49) 0.88 10/1/07 to 9/30/08 12.09 0.46 (0.68) (0.22) (0.46) -- (0.46) (0.68) 5/1/07 to 9/30/07 12.26 0.19 (0.17) 0.02 (0.18) (0.01) (0.19) (0.17) 5/1/06 to 4/30/07 12.19 0.47 0.18 0.65 (0.48) (0.10) (0.58) 0.07 5/1/05 to 4/30/06 12.71 0.49 (0.39) 0.10 (0.49) (0.13) (0.62) (0.52) 5/1/04 to 4/30/05 12.49 0.48 0.30 0.78 (0.47) (0.09) (0.56) 0.22 CLASS I 10/1/08 to 9/30/09 $11.41 0.50 0.88 1.38 (0.50) (0.01) (0.51) 0.87 10/1/07 to 9/30/08 12.08 0.49 (0.67) (0.18) (0.49) -- (0.49) (0.67) 5/1/07 to 9/30/07 12.25 0.20 (0.17) 0.03 (0.19) (0.01) (0.20) (0.17) 9/29/06(6) to 4/30/07 12.43 0.28 (0.06) 0.22 (0.30) (0.10) (0.40) (0.18) GLOBAL INFRASTRUCTURE FUND CLASS A 10/1/08 to 9/30/09 $10.91 0.31 (0.87) (0.56) (0.30) (0.08) (0.38) (0.94) 10/1/07 to 9/30/08 13.70 0.31 (2.31) (2.00) (0.28) (0.51) (0.79) (2.79) 5/1/07 to 9/30/07 13.66 0.18 0.23 0.41 (0.23) (0.14) (0.37) 0.04 5/1/06 to 4/30/07 10.60 0.44 3.03 3.47 (0.41) -- (0.41) 3.06 5/1/05 to 4/30/06 10.13 0.42 0.44 0.86 (0.39) -- (0.39) 0.47 12/30/04(6) to 4/30/05 10.00 0.13 0.08 0.21 (0.08) -- (0.08) 0.13
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 84
RATIO OF GROSS RATIO OF EXPENSES NET NET NET RATIO OF NET TO AVERAGE INVESTMENT ASSET ASSETS, OPERATING NET ASSETS INCOME VALUE, END OF EXPENSES TO (BEFORE (LOSS) TO PORTFOLIO END OF TOTAL PERIOD AVERAGE NET WAIVERS AND AVERAGE NET TURNOVER PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS RATE ------ --------- -------------- ------------ ------------------ ----------- --------- $10.57 13.12% $ 66,232 0.85% 1.01% 4.15% 274% 9.75 (0.49) 23,823 1.12(7) 1.17 4.10 325 10.21 4.09 29,077 1.12 1.12 4.25 266 10.27 3.51 28,022 1.11 1.15 4.21 275 10.46 2.14 29,501 1.15 1.19 3.20 221 $10.34 12.23% $ 4,212 1.59% 1.75% 3.52% 274% 9.55 (1.23) 4,075 1.87(7) 1.92 3.35 325 10.01 3.26 4,294 1.87 1.87 3.49 266 10.07 2.80 5,459 1.88 2.30 3.43 275 10.28 1.36 6,706 1.90 2.30 2.45 221 $10.37 12.19% $ 8,048 1.59% 1.75% 3.43% 274% 9.58 (1.14) 2,839 1.86(7) 1.92 3.33 325 10.04 3.25 1,534 1.87 1.87 3.50 266 10.09 2.79 1,401 1.88 3.44 3.41 275 10.30 1.35 2,038 1.90 2.90 2.44 221 $10.68 13.34% $144,835 0.59% 0.75% 4.52% 274% 9.86 (0.16) 141,830 0.76(7) 0.85 4.38 325 10.32 4.32 52,044 0.87 0.87 4.49 266 10.36 3.84 63,156 0.82 0.82 4.59 275 10.56 2.44 30,126 0.89 0.89 3.45 221 $12.29 12.31% $ 33,728 0.85% 1.02% 4.10% 8% 11.41 (1.94) 34,197 0.85 1.01 3.82 10 12.09 0.18(4) 39,094 0.88(3) 1.05(3) 3.74(3) 4(4) 12.26 5.40 42,243 0.87 1.10 3.81 19 12.19 0.71 46,214 1.02(7) 1.28 3.89 8 12.71 6.48 53,113 1.19 1.19 3.78 11 $12.28 12.50% $ 25,624 0.60% 0.77% 4.35% 8% 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) $ 9.97 (4.76)% $ 77,049 1.31% 1.33% 3.50% 46% 10.91 (15.63) 75,664 1.15 1.22 2.39 60 13.70 3.02(4) 57,938 1.19(3) 1.25(3) 3.23(3) 29(4) 13.66 33.74 51,190 1.17 1.40 3.64 21 10.60 8.66 14,298 1.15 2.72 4.06 40 10.13 2.09(4) 6,163 1.15(3) 5.59(3) 3.81(3) 17(4)
See Notes to Financial Statements 85 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET CHANGE IN BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL NET ASSET OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE --------- ---------- ------------ ---------- ---------- ------------- ------------- --------- GLOBAL INFRASTRUCTURE FUND (CONTINUED) CLASS C 10/1/08 to 9/30/09 $10.89 0.26 (0.89) (0.63) (0.23) (0.08) (0.31) (0.94) 10/1/07 to 9/30/08 13.66 0.23 (2.31) (2.08) (0.18) (0.51) (0.69) (2.77) 5/1/07 to 9/30/07 13.62 0.14 0.22 0.36 (0.18) (0.14) (0.32) 0.04 5/1/06 to 4/30/07 10.57 0.37 3.01 3.38 (0.33) -- (0.33) 3.05 5/1/05 to 4/30/06 10.12 0.35 0.43 0.78 (0.33) -- (0.33) 0.45 12/30/04(6) to 4/30/05 10.00 0.12 0.07 0.19 (0.07) -- (0.07) 0.12 CLASS I 10/1/08 to 9/30/09 $10.90 0.34 (0.87) (0.53) (0.33) (0.08) (0.41) (0.94) 6/6/08(6) to 9/30/08 13.41 0.07 (2.40) (2.33) (0.18) -- (0.18) (2.51) GLOBAL OPPORTUNITIES FUND CLASS A 10/1/08 to 9/30/09 $ 7.82 0.07 (1.14) (1.07) (0.08) -- (0.08) (1.15) 10/1/07 to 9/30/08 11.59 0.13 (3.59) (3.46) (0.09) (0.22) (0.31) (3.77) 7/1/07 to 9/30/07 12.15 0.02 0.20 0.22 (0.08) (0.70) (0.78) (0.56) 7/1/06 to 6/30/07 9.86 0.11 2.30 2.41 (0.12) -- (0.12) 2.29 7/1/05 to 6/30/06 8.38 0.07 1.51 1.58 (0.10) -- (0.10) 1.48 7/1/04 to 6/30/05 7.72 0.08 0.68 0.76 (0.10) -- (0.10) 0.66 CLASS B 10/1/08 to 9/30/09 $ 7.06 0.02 (1.02) (1.00) (0.06) -- (0.06) (1.06) 10/1/07 to 9/30/08 10.48 0.04 (3.22) (3.18) (0.02) (0.22) (0.24) (3.42) 7/1/07 to 9/30/07 11.04 --(5) 0.18 0.18 (0.04) (0.70) (0.74) (0.56) 7/1/06 to 6/30/07 8.98 0.02 2.10 2.12 (0.06) -- (0.06) 2.06 7/1/05 to 6/30/06 7.65 --(5) 1.37 1.37 (0.04) -- (0.04) 1.33 7/1/04 to 6/30/05 7.05 0.02 0.63 0.65 (0.05) -- (0.05) 0.60 CLASS C 10/1/08 to 9/30/09 $ 7.03 0.02 (1.02) (1.00) (0.06) -- (0.06) (1.06) 10/1/07 to 9/30/08 10.44 0.05 (3.22) (3.17) (0.02) (0.22) (0.24) (3.41) 7/1/07 to 9/30/07 11.01 --(5) 0.17 0.17 (0.04) (0.70) (0.74) (0.57) 7/1/06 to 6/30/07 8.95 0.02 2.10 2.12 (0.06) -- (0.06) 2.06 7/1/05 to 6/30/06 7.62 --(5) 1.37 1.37 (0.04) -- (0.04) 1.33 7/1/04 to 6/30/05 7.03 0.02 0.62 0.64 (0.05) -- (0.05) 0.59 GLOBAL REAL ESTATE SECURITIES FUND CLASS A 3/2/09(6) to 9/30/09 $10.00 0.30 8.03 8.33 -- -- -- 8.33 CLASS C 3/2/09(6) to 9/30/09 $10.00 0.24 8.01 8.25 -- -- -- 8.25 CLASS I 3/2/09(6) to 9/30/09 $10.00 0.32 8.04 8.36 -- -- -- 8.36 GREATER ASIA EX JAPAN OPPORTUNITIES FUND CLASS A 4/21/09(6) to 9/30/09 $10.00 0.10 2.91 3.01 -- -- -- 3.01 CLASS C 4/21/09(6) to 9/30/09 $10.00 0.06 2.90 2.96 -- -- -- 2.96 CLASS I 4/21/09(6) to 9/30/09 $10.00 0.11 2.91 3.02 -- -- -- 3.02
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 86
RATIO OF GROSS RATIO OF EXPENSES NET NET NET RATIO OF NET TO AVERAGE INVESTMENT ASSET ASSETS, OPERATING NET ASSETS INCOME VALUE, END OF EXPENSES TO (BEFORE (LOSS) TO PORTFOLIO END OF TOTAL PERIOD AVERAGE NET WAIVERS AND AVERAGE NET TURNOVER PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS RATE ------ ---------- -------------- ------------ ------------------ ----------- --------- $ 9.95 (5.49)% $ 6,188 2.09% 2.10% 2.85% 46% 10.89 (16.18) 1,856 1.90 1.97 1.72 60 13.66 2.72(4) 1,964 1.95(3) 2.00(3) 2.47(3) 29(4) 13.62 32.55 1,769 1.91 2.19 3.11 21 10.57 7.87 1,108 1.90 3.54 3.38 40 10.12 1.88(4) 330 1.90(3) 8.16(3) 3.58(3) 17(4) $ 9.96 (4.54)% $ 344 1.09% 1.10% 3.80% 46% 10.90 (17.51)(4) 82 0.90(3) 1.01(3) 1.83(3) 60(4) $ 6.67 (13.53)% $ 53,644 1.86% 1.86% 1.16% 168% 7.82 (30.50) 73,003 1.65 1.65 1.31 62 11.59 1.93(4) 116,983 1.60(3) 1.60(3) 0.59(3) 15(4) 12.15 24.61 117,709 1.61 1.64 1.01 74 9.86 18.90 102,783 1.60 1.70 0.76 124 8.38 9.80 100,469 1.57 1.57 0.97 49 $ 6.00 (14.10)% $ 1,369 2.61% 2.61% 0.35% 168% 7.06 (30.93) 2,379 2.39 2.39 0.49 62 10.48 1.65(4) 4,945 2.35(3) 2.35(3) (0.15)(3) 15(4) 11.04 23.76 5,074 2.36 2.39 0.22 74 8.98 17.92 5,395 2.35 2.45 0.01 124 7.65 9.14 5,096 2.32 2.32 0.23 49 $ 5.97 (14.16)% $ 776 2.62% 2.62% 0.37% 168% 7.03 (30.95) 1,149 2.40 2.40 0.55 62 10.44 1.67(4) 1,857 2.35(3) 2.35(3) (0.15)(3) 15(4) 11.01 23.74 1,838 2.36 2.38 0.23 74 8.95 17.99 2,826 2.35 2.45 (0.03) 124 7.62 9.03 2,876 2.32 2.32 0.22 49 $18.33 83.30%(4) $ 1,586 1.40%(3) 9.62%(3) 3.68%(3) 29%(4) $18.25 82.50%(4) $ 194 2.15%(3) 10.45%(3) 2.94%(3) 29%(4) $18.36 83.60%(4) $ 183 1.15%(3) 6.04%(3) 3.93%(3) 29%(4) $13.01 30.10%(4) $ 6,431 1.80%(3) 3.78%(3) 1.88%(3) 26%(4) $12.96 29.60%(4) $ 130 2.55%(3) 4.54%(3) 1.12%(3) 26%(4) $13.02 30.20%(4) $ 130 1.55%(3) 3.54%(3) 2.11%(3) 26%(4)
See Notes to Financial Statements 87 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET CHANGE IN BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL NET ASSET OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE --------- ---------- ------------ ---------- ---------- ------------- ------------- --------- GREATER EUROPEAN OPPORTUNITIES FUND CLASS A 4/21/09(6) to 9/30/09 $10.00 0.12 2.85 2.97 -- -- -- 2.97 CLASS C 4/21/09(6) to 9/30/09 $10.00 0.07 2.86 2.93 -- -- -- 2.93 CLASS I 4/21/09(6) to 9/30/09 $10.00 0.14 2.84 2.98 -- -- -- 2.98 HIGH YIELD FUND CLASS A 10/1/08 to 9/30/09 $ 3.98 0.31 (0.08) 0.23 (0.32) -- (0.32) (0.09) 10/1/07 to 9/30/08 4.89 0.34 (0.90) (0.56) (0.35) -- (0.35) (0.91) 11/1/06 to 9/30/07 4.91 0.30 (0.01) 0.29 (0.31) -- (0.31) (0.02) 11/1/05 to 10/31/06 4.88 0.31 0.05 0.36 (0.33) -- (0.33) 0.03 11/1/04 to 10/31/05 5.11 0.31 (0.19) 0.12 (0.35) -- (0.35) (0.23) 11/1/03 to 10/31/04 5.02 0.33 0.11 0.44 (0.35) -- (0.35) 0.09 CLASS B 10/1/08 to 9/30/09 $ 3.92 0.28 (0.09) 0.19 (0.29) -- (0.29) (0.10) 10/1/07 to 9/30/08 4.81 0.30 (0.88) (0.58) (0.31) -- (0.31) (0.89) 11/1/06 to 9/30/07 4.84 0.26 (0.01) 0.25 (0.28) -- (0.28) (0.03) 11/1/05 to 10/31/06 4.81 0.26 0.06 0.32 (0.29) -- (0.29) 0.03 11/1/04 to 10/31/05 5.05 0.27 (0.20) 0.07 (0.31) -- (0.31) (0.24) 11/1/03 to 10/31/04 4.96 0.29 0.11 0.40 (0.31) -- (0.31) 0.09 CLASS C 10/1/08 to 9/30/09 $ 3.94 0.28 (0.08) 0.20 (0.29) -- (0.29) (0.09) 10/1/07 to 9/30/08 4.84 0.30 (0.89) (0.59) (0.31) -- (0.31) (0.90) 11/1/06 to 9/30/07 4.87 0.26 (0.01) 0.25 (0.28) -- (0.28) (0.03) 11/1/05 to 10/31/06 4.84 0.27 0.05 0.32 (0.29) -- (0.29) 0.03 11/1/04 to 10/31/05 5.07 0.27 (0.19) 0.08 (0.31) -- (0.31) (0.23) 11/1/03 to 10/31/04 4.99 0.29 0.10 0.39 (0.31) -- (0.31) 0.08 INTERNATIONAL REAL ESTATE SECURITIES FUND CLASS A 10/1/08 to 9/30/09 $ 6.72 0.21 (0.66) (0.45) (0.27) -- (0.27) (0.72) 10/1/07(6) to 9/30/08 10.00 0.21 (3.32) (3.11) (0.17) -- (0.17) (3.28) CLASS C 10/1/08 to 9/30/09 $ 6.70 0.19 (0.67) (0.48) (0.22) -- (0.22) (0.70) 10/1/07(6) to 9/30/08 10.00 0.20 (3.38) (3.18) (0.12) -- (0.12) (3.30) CLASS I 10/1/08 to 9/30/09 $ 6.72 0.23 (0.67) (0.44) (0.29) -- (0.29) (0.73) 10/1/07(6) to 9/30/08 10.00 0.25 (3.35) (3.10) (0.18) -- (0.18) (3.28)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 88
RATIO OF GROSS RATIO OF EXPENSES NET NET NET RATIO OF NET TO AVERAGE INVESTMENT ASSET ASSETS, OPERATING NET ASSETS INCOME VALUE, END OF EXPENSES TO (BEFORE (LOSS) TO PORTFOLIO END OF TOTAL PERIOD AVERAGE NET WAIVERS AND AVERAGE NET TURNOVER PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS RATE ------ ---------- -------------- ------------ ------------------ ----------- --------- $12.97 29.70%(4) $ 6,236 1.45%(3) 3.60%(3) 2.38%(3) 14%(4) $12.93 29.30%(4) $ 196 2.20%(3) 4.27%(3) 1.31%(3) 14%(4) $12.98 29.80%(4) $ 130 1.20%(3) 3.34%(3) 2.63%(3) 14%(4) $ 3.89 7.02% $ 90,560 1.37% 1.37% 8.88% 134% 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 $ 3.82 6.13% $ 1,019 2.12% 2.12% 8.21% 134% 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 $ 3.85 6.36% $ 1,585 2.12% 2.12% 8.06% 134% 3.94 (12.72) 1,465 2.09 2.09 6.66 100 4.84 5.20(4) 2,081 2.14(3) 2.14(3) 5.89(3) 102(4) 4.87 6.80 1,585 2.12 2.12 5.48 161 4.84 1.66 1,758 2.11 2.11 5.48 59 5.07 8.14 1,990 2.07 2.07 5.87 99 $ 6.00 (5.59)% $ 32,178 1.50% 1.66% 4.71% 54% 6.72 (31.46) 60,907 1.50 2.11 2.74 8 $ 6.00 (6.30)% $ 413 2.25% 2.40% 4.21% 54% 6.70 (32.09) 141 2.23 3.00 2.52 8 $ 5.99 (5.43)% $ 71 1.25% 1.41% 4.87% 54% 6.72 (31.32) 69 1.24 2.16 3.00 8
See Notes to Financial Statements 89 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 10/1/08 to 9/30/09 $ 9.81 (0.01) 0.70 0.69 -- -- 0.69 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 CLASS B 10/1/08 to 9/30/09 $ 9.47 (0.08) 0.67 0.59 -- -- 0.59 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 CLASS C 10/1/08 to 9/30/09 $ 9.43 (0.07) 0.66 0.59 -- -- 0.59 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
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 --------- ---------- ------------ ---------- ---------- ------------- ------------- MULTI-SECTOR FIXED INCOME FUND CLASS A 10/1/08 to 9/30/09 $ 9.23 0.59 0.85 1.44 (0.71) -- (0.71) 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) CLASS B 10/1/08 to 9/30/09 $ 9.22 0.53 0.84 1.37 (0.64) -- (0.64) 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 (0.02) 0.46 (0.45) -- (0.45) 11/1/05 to 10/31/06 10.61 0.51 0.22 0.73 (0.47) -- (0.47) 11/1/04 to 10/31/05 11.13 0.50 (0.40) 0.10 (0.62) -- (0.62) 11/1/03 to 10/31/04 10.82 0.61 0.33 0.94 (0.63) -- (0.63)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 90
RATIO OF RATIO OF EXPENSES RATIO OF EXPENSES (EXCLUDING EXPENSES (INCLUDING DIVIDENDS (INCLUDING DIVIDENDS AND INTEREST DIVIDENDS AND INTEREST ON SHORT SALES AND INTEREST ON SHORT SALES RATIO OF NET NET AFTER ON SHORT SALES BEFORE NET INVESTMENT ASSET ASSETS, EXPENSE AFTER EXPENSE EXPENSE INCOME VALUE, END OF REIMBURSEMENT)(8) REIMBURSEMENT)(8) REIMBURSEMENT)(8) (LOSS) TO PORTFOLIO END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TO AVERAGE AVERAGE NET TURNOVER PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS NET ASSETS NET ASSETS ASSETS RATE ------ --------- -------------- ----------------- ----------------- ----------------- -------------- --------- $10.50 7.03% $ 74,749 1.77% 4.04% 4.23% (0.08)% 253% 9.81 (5.36) 119,387 1.81 3.49 3.84 (0.85) 285 10.53 (3.86)(4) 54,630 1.91(3) 3.56(3) 3.95(3) 1.45(3) 394(4) 11.19 (5.81) 89,054 2.19 3.63 3.63 1.04 285 11.87 3.13 111,133 2.20 3.65 3.65 (0.26) 177 11.51 1.05 70,892 2.21 3.42 3.42 (1.45) 175 $10.06 6.23% $ 1,435 2.52% 4.83% 5.02% (0.79)% 253% 9.47 (6.04) 1,678 2.55 4.19 4.55 (1.19) 285 10.17 (4.64)(4) 2,651 2.67(3) 4.22(3) 4.63(3) 0.82(3) 394(4) 10.80 (6.41) 4,338 2.91 4.39 4.39 0.22 285 11.55 2.39 7,859 2.90 4.36 4.36 (1.14) 177 11.28 0.36 12,290 2.91 4.11 4.11 (2.15) 175 $10.02 6.26% $ 4,434 2.52% 4.84% 5.03% (0.77)% 253% 9.43 (6.04) 4,983 2.55 4.19 4.55 (1.21) 285 10.12 (4.57)(4) 7,187 2.68(3) 4.27(3) 4.68(3) 0.76(3) 394(4) 10.75 (6.44) 18,377 2.92 4.41 4.41 0.19 285 11.49 2.41 40,584 2.90 4.35 4.35 (0.97) 177 11.22 0.36 25,779 2.91 4.12 4.12 (2.15) 175
RATIO OF NET NET RATIO OF RATIO OF NET ASSET ASSETS, NET GROSS INVESTMENT CHANGE IN VALUE, END OF EXPENSES TO EXPENSES INCOME PORTFOLIO NET ASSET END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TO AVERAGE TURNOVER VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) NET ASSETS(8) NET ASSETS RATE --------- ------ --------- -------------- ----------- ------------- ---------- --------- 0.73 $ 9.96 17.34% $121,968 1.16% 1.16% 6.90% 85% (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 0.73 $ 9.95 16.47% $ 13,276 1.91% 1.91% 6.18% 85% (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
See Notes to Financial Statements 91 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET ASSET NET NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT REALIZED AND FROM FROM NET FROM NET CHANGE IN BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL NET ASSET OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS VALUE --------- ---------- ------------ ---------- ---------- ------------- ------------- --------- MULTI-SECTOR FIXED INCOME FUND (CONTINUED) CLASS C 10/1/08 to 9/30/09 $ 9.27 0.52 0.87 1.39 (0.64) -- (0.64) 0.75 10/1/07 to 9/30/08 10.94 0.61 (1.68) (1.07) (0.60) -- (0.60) (1.67) 11/1/06 to 9/30/07 10.93 0.48 (0.02) 0.46 (0.45) -- (0.45) 0.01 11/1/05 to 10/31/06 10.67 0.51 0.22 0.73 (0.47) -- (0.47) 0.26 11/1/04 to 10/31/05 11.18 0.51 (0.40) 0.11 (0.62) -- (0.62) (0.51) 11/1/03 to 10/31/04 10.87 0.61 0.33 0.94 (0.63) -- (0.63) 0.31 SENIOR FLOATING RATE FUND CLASS A 10/1/08 to 9/30/09 $ 9.41 0.54 0.47 1.01 (0.55) --(5) (0.55) 0.46 1/31/08(6) to 9/30/08 10.00 0.41 (0.61) (0.20) (0.39) -- (0.39) (0.59) CLASS C 10/1/08 to 9/30/09 $ 9.41 0.44 0.51 0.95 (0.49) --(5) (0.49) 0.46 1/31/08(6) to 9/30/08 10.00 0.37 (0.61) (0.24) (0.35) -- (0.35) (0.59) CLASS I 10/1/08 to 9/30/09 $ 9.41 0.58 0.45 1.03 (0.58) --(5) (0.58) 0.45 1/31/08(6) to 9/30/08 10.00 0.43 (0.61) (0.18) (0.41) -- (0.41) (0.59)
FOOTNOTE LEGEND (1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Computed using average shares outstanding. (3) Annualized. (4) Not annualized. (5) Amount is less than $0.005. (6) Inception date. (7) Represents blended net expense ratio. (8) The Funds will also indirectly bear their prorated share of expenses of the underlying funds in which they invest in. 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. See Notes to Financial Statements 92
RATIO OF NET NET RATIO OF RATIO OF NET ASSET ASSETS, NET GROSS INVESTMENT VALUE, END OF EXPENSES TO EXPENSES INCOME PORTFOLIO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TO AVERAGE TURNOVER PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) NET ASSETS(8) NET ASSETS RATE ------ --------- -------------- ----------- ------------- ---------- --------- $10.02 16.59% $41,374 1.90% 1.90% 5.93% 85% 9.27 (10.20) 16,828 1.90 1.90 5.80 91 10.94 4.22(4) 20,677 1.94(3) 1.94(3) 4.81(3) 92(4) 10.93 7.00 17,222 1.91 1.91 4.77 96 10.67 0.99 15,175 1.95 1.95 4.62 136 11.18 8.95 10,941 1.93 1.93 5.56 156 $ 9.87 11.74% $52,987 1.20% 1.33% 6.00% 63% 9.41 (2.12)(4) 14,349 1.20(3) 1.80(3) 6.25(3) 27(4) $ 9.87 10.94% $ 2,740 1.95% 2.05% 4.82% 63% 9.41 (2.59)(4) 359 1.95(3) 2.57(3) 5.58(3) 27(4) $ 9.86 11.94% $ 394 0.95% 1.13% 6.54% 63% 9.41 (1.96)(4) 232 0.95(3) 1.56(3) 6.51(3) 27(4)
See Notes to Financial Statements 93 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2009 1. ORGANIZATION Virtus 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 Fund's investment objective is outlined on the respective Fund's summary page. The Funds offer the following classes of shares for sale:
CLASS A CLASS B CLASS C CLASS I SHARES SHARES SHARES SHARES ------- ------- ------- ------- AlphaSector(SM) Allocation Fund ............. X -- X -- AlphaSector(SM) Rotation Fund ............... X -- X -- Alternatives Diversifier Fund ............... X -- X -- Bond Fund ................................... X X X X CA Tax-Exempt Bond Fund ..................... X -- -- X Global Infrastructure Fund .................. X -- X X Global Opportunities Fund ................... X X X -- Global Real Estate Securities Fund .......... X -- X X Greater Asia ex Japan Opportunities Fund .... X -- X X Greater European Opportunities Fund ......... X -- X X High Yield Fund ............................. X X X -- International Real Estate Securities Fund ... X -- X X Market Neutral Fund ......................... X X X -- Multi-Sector Fixed Income Fund .............. X X X -- Senior Floating Rate Fund ................... X -- X X
Class A shares of the Bond Fund, CA Tax-Exempt Bond Fund, High Yield Fund, Multi-Sector Fixed Income Fund and Senior Floating Rate Fund are sold with a front-end sales charge of up to 4.75% with some exceptions. Class A shares of the remaining Funds are sold with a front-end sales charge of up to 5.75% with some exceptions. Generally, Class A shares are not subject to any charges by the Funds when redeemed; however, a 1% contingent deferred sales charge ("CDSC") 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 (see Note 15). 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 and those differences could be significant. 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 continued volatility in the current market, 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. 94 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. Investments in underlying funds are valued at each fund's closing net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time). Short-term investments having a maturity of 60 days or less are valued at amortized cost which approximates market. The Funds utilize a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 -- prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A summary of the inputs used to value the Funds' net assets by each major security type is disclosed at the end of the Schedule of Investments for each Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 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. 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 each Fund's tax positions and has concluded that no provision for income tax is required in any Fund's 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 prior three fiscal years remains 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 and the Multi-Sector Fixed Income Fund income distributions are declared and recorded daily and distributed monthly. 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 of the funds indirectly bear the pro-rata expenses of the underlying mutual funds in which certain funds invest. 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. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures on derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the 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. Summarized below are the specific types of derivative instruments used by the Funds. FORWARD CURRENCY CONTRACTS: 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 in the Statement of Operations. 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. 95 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 This is presented in the Statement of Operations as net realized gain (loss) from foreign currency transactions. Funds 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. The Funds also, from time to time, hedge the currency exposure of foreign denominated securities, held in the portfolio, back to U.S. dollars during perceived times of U.S. dollar strength. This is done in order to protect U.S. dollar value of the portfolio. 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. WARRANTS AND RIGHTS: Certain Funds hold warrants and rights acquired either through a direct purchase, including as part of private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Fund until exercised, sold or expired. Equity-linked warrants are purchased in order to own local exposure to certain countries in which the Funds are not locally registered. Warrants and rights are valued at fair value in accordance with the Board of Trustees' approved fair valuation procedures. The following is a summary of the Funds' derivative instrument holdings categorized by primary risk exposure as of September 30, 2009 ($ reported in thousands):
TOTAL VALUE ----------------------------- GREATER ASIA GLOBAL EX JAPAN OPPORTUNITIES OPPORTUNITIES FUND FUND ------------- ------------- Foreign exchange contracts(1) $ 12 $ (4) Equity contracts(2) 3,547 711
For open derivative instruments as of September 30, 2009, see the Schedules of Investments, which is also indicative of activity for the year ended September 30, 2009. REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS
MULTI- GREATER ASIA GREATER SECTOR GLOBAL EX JAPAN EUROPEAN FIXED OPPORTUNITIES OPPORTUNITIES OPPORTUNITIES INCOME FUND FUND FUND FUND ------------- ------------- ------------- ------ Foreign exchange contracts(3) $(850) $(18) $(40) $108
GLOBAL INTERNATIONAL REAL GREATER ASIA REAL GLOBAL ESTATE EX JAPAN ESTATE MARKET OPPORTUNITIES SECURITIES OPPORTUNITIES SECURITIES NEUTRAL FUND FUND FUND FUND FUND ------------- ---------- ------------- ------------- ------- Equity contracts(4) $139 $1 $26 $(733) $(10)
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS
MULTI- GREATER ASIA SECTOR GLOBAL EX JAPAN FIXED OPPORTUNITIES OPPORTUNITIES INCOME FUND FUND FUND ------------- ------------- ------ Foreign exchange contracts(5) $ 12 $ --(4) $ (31) Equity contracts(6) 1,022 205 --
(1) Located within Net unrealized appreciation (depreciation) on forward currency contracts on the Statement of Assets and Liabilities. (2) Located within Investment in Securities at value on the Statement of Assets and Liabilities. (3) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (4) Located within Net realized gain (loss) on investments on the Statement of Operations. (5) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. (6) Located within Net change in unrealized appreciation (depreciation) on investments on the Statement of Operations. H. 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. I. 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. J. 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. K. 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 an unlimited loss, and if the price declines during the period, the Fund will realize a limited gain. 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, 2009, the value of securities sold short in the Market Neutral Fund amounted to $76,895 (reported in thousands) against which collateral of $158,108 (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 96 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. In accordance with the terms of its prime brokerage agreements, the Market Neutral Fund may receive rebate income or be charged a fee on borrowed securities. Such income or fee is calculated on a daily basis based upon the market value of each borrowed security and a variable rate that is dependent upon the availability of such security. The Fund records these prime broker charges on a net basis as interest income or interest expense. For the year ended September 30, 2009, the Fund had net charges of $505 (reported in thousands) on borrowed securities. Such amounts are included in prime broker interest expense on the statement of operations. L. SECURITY LENDING: Certain Funds may loan securities to qualified brokers through an agreement with State Street Bank and Trust Company ("State Street"). Under the terms of agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash and securities issued by the U.S. Government. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by State Street for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At September 30, 2009, the Funds had no securities on loan. M. REPURCHASE AGREEMENTS: Certain Funds may invest in repurchase agreements. A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited. At September 30, 2009, the Funds had no open repurchase agreements. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) At the close of business December 31, 2008, Virtus Investment Partners, Inc. ("Virtus") spun off from The Phoenix Companies, Inc. ("PNX"), into an independent publicly traded company which through its affiliates provides asset management and related services to individuals and institutions. Virtus Investment Advisers, Inc. ("VIA," the "Adviser," formerly known as Phoenix Investment Counsel, Inc.) and VP Distributors, Inc. ("VP Distributors," formerly known as Phoenix Equity Planning Corporation) are indirect wholly-owned subsidiaries of Virtus. Due to the spin-off, the asset management subsidiaries have changed their names to reflect the Virtus brand. As compensation for its services to the Trust, the Adviser, an indirect wholly-owned subsidiary of Virtus, 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+ $1 BILLION $2 BILLION BILLION ---------- ------------- ------- CA Tax-Exempt Bond Fund....................... 0.45% 0.40% 0.35% Global Infrastructure Fund.................... 0.65 0.60 0.55 Global Opportunities Fund..................... 0.85 0.80 0.75 Global Real Estate Securities Fund............ 0.85 0.80 0.75 High Yield Fund............................... 0.65 0.60 0.55 International Real Estate Securities Fund....................................... 1.00 0.95 0.90 Multi-Sector Fixed Income Fund................ 0.55 0.50 0.45 Senior Floating Rate Fund..................... 0.60 0.55 0.50
1ST OVER $1 BILLION $1 BILLION ---------- ---------- AlphaSector(SM) Allocation Fund +#............ 0.45%** 0.40%** AlphaSector(SM) Rotation Fund +#.............. 0.45 0.40 Greater Asia ex Japan Opportunities Fund............................ 1.00 0.95 Greater European Opportunities Fund............................ 0.85 0.80
For the Funds shown below the individual rates are as follows: Alternatives Diversifier Fund.............. 0.10% Bond Fund.................................. 0.45++ Market Neutral Fund........................ 1.50*
* The Adviser has voluntarily agreed to waive 0.15% of its management fee. The adviser may discontinue the voluntary fee waiver and or cap at any time. The current net fee is 1.35%. ** Effective September 29, 2009, the Adviser has voluntarily agreed to waive 0.09% of its management fee associated with the Fund's fixed income portfolio. + For the period of October 1, 2008 to September 28, 2009, the rate was 0.10%. # Effective September 29, 2009. ++ Effective May 29, 2009, prior to that the rate was 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 below percentages of the average daily net asset values for the following funds. The Adviser may discontinue these voluntary expense caps at any time.
CLASS A CLASS B CLASS C CLASS I ------- ------- ------- ------- Alternatives Diversifier Fund (2)............ 0.20% -- 0.20% -- Bond Fund.................................... 0.85 1.60% 1.60 0.60% CA Tax-Exempt Bond Fund...................... 0.85 -- -- 0.60 International Real Estate Securities Fund...................................... 1.50 -- 2.25 1.25 Market Neutral Fund (1)...................... 1.77 2.52 2.52 -- Senior Floating Rate Fund.................... 1.20 -- 1.95 0.95
(1) Excluding dividends and interest on short sales. (2) Excluding 12b-1 fees and acquired fund fees and expenses. 97 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30,2009 Effective December 15, 2008, the Adviser discontinued the voluntary expense cap for the Global Infrastructure Fund. The Adviser has contractually agreed to limit the Funds listed below total operating expenses (excluding interest, taxes, and extraordinary expenses) through March 31, 2010 so that such expenses do not exceed the following percentages of the average daily net asset values:
CLASS A CLASS C CLASS I ------- ------- ------- Global Real Estate Securities Fund .......................... 1.40% 2.15% 1.15% Greater Asia ex Japan Opportunities Fund ............ 1.80 2.55 1.55 Greater European Opportunities Fund ............ 1.45 2.20 1.20
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, 2009 may be recaptured by the fiscal year ending:
EXPIRATION DATE --------------------------- 2010 2011 2012 TOTAL ---- ---- ---- ------ AlphaSector(SM) Allocation Fund.............. $12 $137 $ -- $ 149 AlphaSector(SM) Rotation Fund................ 29 274 -- 303 Alternatives Diversifier Fund................ 36 571 775 1,382 Bond Fund.................................... -- 95 281 376 CA Tax-Exempt Bond Fund...................... 7 109 96 212 Global Infrastructure Fund................... 8 51 13 72 Global Real Estate Securities Fund........... -- -- 66 66 Greater Asia ex Japan Opportunities Fund...................................... -- -- 51 51 Greater European Opportunities Fund...................................... -- -- 55 55 International Real Estate Securities Fund........................... -- 126 57 183 Market Neutral Fund.......................... 10 191 164 365 Senior Floating Rate Fund.................... -- 61 42 103
The Adviser manages the Funds' investment program and general operations of the Funds, including oversight of the Funds' subadvisers. The subadvisers manage the investments of the Funds, except as noted, for which they are paid a fee by the Adviser. The subadvisers with respect to the Funds they manage are as follows:
FUND SUBADVISER ---- -------------- AlphaSector(SM) Allocation Fund F-Squared(6) AlphaSector(SM) Rotation Fund F-Squared(6) Bond Fund SCM(4) Global Infrastructure Fund DPIM(2) Global Opportunities Fund Vontobel(5)(7) Global Real Estate Securities Fund DPIM(2) Greater Asia ex Japan Opportunities Fund Vontobel(5) Greater European Opportunities Fund Vontobel(5) High Yield Fund SCM(4) International Real Estate Securities Fund DPIM(2) Market Neutral Fund TBCAM(1) Multi-Sector Fixed Income Fund Goodwin(3) Senior Floating Rate Fund Goodwin(3)
(1) Boston Company Asset Management LLC (The) (2) Duff & Phelps Investment Management Co.** (3) Goodwin Capital Advisers, Inc. (4) SCM Advisors** (5) Vontobel Asset Management, Inc. (6) F-Squared Investments, Inc. ("F-Squared"), effective September 29, 2009. For the period of October 1, 2008 to September 28, 2009 VIA managed the fund's investments. Currently, F-Squared provides VIA with a proposed asset allocation among ETFs. Trading for the funds' is conducted by VIA based on F-Squared's recommendations. (7) Effective January 28, 2009. For the period of October 1, 2008 to January 27, 2009, the Fund's subadviser's were Acadian Asset Management LLC and New Star Institutional Management Limited. ** DPIM AND SCM ARE INDIRECT, WHOLLY-OWNED SUBSIDIARIES OF VIRTUS. As distributor of each Fund's shares, VP Distributors, an indirect wholly-owned subsidiary of Virtus, has advised the Funds that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2009, as follows:
CLASS A CLASS A CLASS B CLASS C NET DEFERRED DEFERRED DEFERRED SELLING SALES SALES SALES COMMISSIONS CHARGES CHARGES CHARGES ----------- -------- -------- -------- AlphaSector(SM) Allocation Fund.. $ 3 $-- $-- $ 1 AlphaSector(SM) Rotation Fund.... 9 -- -- 4 Alternatives Diversifier Fund.... 60 -- -- 114 Bond Fund........................ 2 -- 3 1 CA Tax-Exempt Bond Fund.......... 3 -- -- -- Global Infrastructure Fund....... 29 -- -- 3 Global Opportunities Fund........ 1 -- 5 --(1) Global Real Estate Securities Fund.......................... --(1) -- -- -- Greater European Opportunities Fund.......................... -- -- -- --(1) High Yield Fund.................. 5 -- 4 --(1) International Real Estate Securities Fund............... --(1) -- -- -- Market Neutral Fund.............. 3 -- 3 1 Multi-Sector Fixed Income Fund.......................... 24 1 30 19 Senior Floating Rate Fund........ 18 -- -- 1
(1) Amount is less than $500 (not reported in thousands). 98 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 In addition, each Fund pays VP Distributors 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 ------- ------- ------- AlphaSector(SM) Allocation Fund(1)......... none -- 0.75% AlphaSector(SM) Rotation Fund(1)........... none -- 0.75 Alternatives Diversifier Fund.............. 0.10% -- 0.85 Bond Fund.................................. 0.25 1.00% 1.00 CA Tax-Exempt Bond Fund.................... 0.25 -- -- Global Infrastructure Fund................. 0.25 -- 1.00 Global Opportunities Fund.................. 0.25 1.00 1.00 Global Real Estate Securities Fund......................... 0.25 -- 1.00 Greater Asia ex Japan Opportunities Fund...................... 0.25 -- 1.00 Greater European Opportunities Fund...................... 0.25 -- 1.00 High Yield Fund............................ 0.25 1.00 1.00 International Real Estate Securities Fund......................... 0.25 -- 1.00 Market Neutral 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
There are no distribution and/or service fees for Class I. (1) As of September 29, 2009, the distribution fees for AlphaSector(SM) Allocation Fund and AlphaSector(SM) Rotation Fund were as follows:
CLASS A CLASS B CLASS C ------- ------- -------- 0.25% -- 1.00%
To avoid duplication of distribution and/or service fees, each class of shares of the AlphaSector(SM) Allocation Fund, AlphaSector(SM) Rotation Fund and Alternatives Diversifier Fund 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. Because these funds now invest in ETFs, the funds will now bear their proportionate share of any distribution and shareholder servicing fees of the ETFs. 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. VP Distributors serves as the Administrator to the Trust. For the period ended September 30, 2009, the funds incurred administration fees totaling $939. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2009, transfer agent fees were $1,590 as reported in the Statements of Operations. At September 30, 2009, Virtus and its affiliates, Harris Bankcorp (a minority investor in Virtus) and its affiliates, and the retirement plans of Virtus and its affiliates held shares of the funds which may be redeemed at any time that aggregated the following:
AGGREGATE NET ASSET SHARES VALUE --------- --------- Bond Fund, Class I ........................ 570,772 $6,096 Global Real Estate Securities Fund, Class A ........................ 80,000 1,466 Class C ........................ 10,000 182 Class I ........................ 10,000 184 Greater Asian ex Japan Opportunities Fund, Class A ........................ 10 --(1) Class C ........................ 10 --(1) Class I ........................ 10 --(1)
AGGREGATE NET ASSET SHARES VALUE --------- --------- Greater European Opportunities Fund, Class A ........................ 10 $ --(1) Class C ........................ 10 --(1) Class I ........................ 10 --(1) International Real Estate Securities Fund, Class A ........................ 212,297 1,274 Class C ........................ 10,605 64 Class I ........................ 10,844 65
(1) Amount is less than $500 (not reported in thousands). Until March 1, 2007, the Trust provided a deferred compensation plan to its trustees who were not officers of Virtus. Under the deferred compensation plan, trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the trustees. At September 30, 2009, all deferred amounts were paid to Trustees. 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities (excluding U.S. Government securities and agency securities, forward currency contracts, futures and short-term securities) during the period ended September 30, 2009, were as follows:
NON-GOVERNMENT -------------------- PURCHASES SALES --------- -------- AlphaSector(SM) Allocation Fund ...... $ 39,118 $ 46,822 AlphaSector(SM) Rotation Fund ........ 97,726 112,965 Alternatives Diversifier Fund ........ 53,019 125,768 Bond Fund ............................ 136,236 123,501 CA Tax-Exempt Bond Fund .............. 4,281 11,173 Global Infrastructure Fund ........... 40,523 31,691 Global Opportunities Fund ............ 90,308 98,595 Global Real Estate Securities Fund ... 1,494 398 Greater Asia ex Japan Opportunities Fund ................ 6,370 1,313 Greater European Opportunities Fund .. 5,769 804 High Yield Fund ...................... 105,803 103,128 International Real Estate Securities Fund ................... 19,380 28,815 Market Neutral Fund .................. 182,126 215,470 Multi-Sector Fixed Income Fund ....... 126,112 71,953 Senior Floating Rate Fund ............ 54,074 19,826
PURCHASES SHORT TO COVER SALES SHORTS -------- --------- Market Neutral Fund .................. $208,862 $233,224
Purchases and sales of long term U.S. Government and agency securities for the Funds during the period ended September 30, 2009, were as follows:
GOVERNMENT --------------------- PURCHASES SALES --------- -------- Bond Fund ............................ $339,198 $377,142 High Yield Fund ...................... 917 922 Multi-Sector Fixed Income Fund ....... 17,376 28,224
99 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 ------- --------- ------ -------- Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------- ----------------- ALPHASECTOR(SM) ALLOCATION FUND CLASS A Sale of shares 248 $ 2,071 523 $ 6,027 Reinvestment of distributions 71 582 69 790 Shares repurchased (720) (6,070) (680) (7,642) ------- --------- ------ -------- Net increase/(decrease) (401) $ (3,417) (88) $ (825) ======= ========= ====== ======== CLASS C Sale of shares 94 $ 772 152 $ 1,729 Reinvestment of distributions 27 220 22 260 Shares repurchased (616) (5,104) (623) (6,940) ------- --------- ------ -------- Net increase/(decrease) (495) $ (4,112) (449) $ (4,951) ======= ========= ====== ======== ALPHASECTOR(SM) ROTATION FUND CLASS A Sale of shares 336 $ 2,733 489 $ 5,817 Reinvestment of distributions 132 1,049 162 2,002 Plan of Reorganization (See Note 11) 673 4,920 -- -- Shares repurchased (1,267) (10,433) (1,067) (12,560) ------- --------- ------ -------- Net increase/(decrease) (126) $ (1,731) (416) $ (4,741) ======= ========= ====== ======== CLASS C Sale of shares 291 $ 2,307 224 $ 2,504 Reinvestment of distributions 63 495 218 2,741 Plan of Reorganization (See Note 11) 326 2,368 -- -- Shares repurchased (1,421) (11,463) (1,441) (16,678) ------- --------- ------ -------- Net increase/(decrease) (741) $ (6,293) (999) $(11,433) ======= ========= ====== ======== ALTERNATIVES DIVERSIFIER FUND CLASS A Sale of shares 9,545 $ 79,842 20,960 $244,592 Reinvestment of distributions 208 1,695 136 1,627 Shares repurchased (17,177) (140,477) (5,205) (59,586) ------- --------- ------ -------- Net increase/(decrease) (7,424) $ (58,940) 15,891 $186,633 ======= ========= ====== ======== CLASS C Sale of shares 2,585 $ 21,666 8,893 $103,128 Reinvestment of distributions 40 318 45 528 Shares repurchased (4,935) (40,060) (1,644) (18,894) ------- --------- ------ -------- Net increase/(decrease) (2,310) $ (18,076) 7,294 $ 84,762 ======= ========= ====== ========
100 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT ------- --------- ------ -------- Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------- ------------------ BOND FUND CLASS A Sale of shares 799 $ 7,932 339 $ 3,490 Reinvestment of distributions 136 1,365 111 1,127 Plan of Reorganization (See Note 11) 5,242 52,917 125 1,283 Shares repurchased (2,352) (23,986) (979) (9,900) ------ -------- ------ -------- Net increase/(decrease) 3,825 $ 38,228 (404) $ (4,000) ====== ======== ====== ======== CLASS B Sale of shares 105 $ 1,008 95 $ 955 Reinvestment of distributions 8 79 10 103 Plan of Reorganization (See Note 11) 95 940 -- -- Shares repurchased (227) (2,224) (107) (1,077) ------ -------- ------ -------- Net increase/(decrease) (19) $ (197) (2) $ (19) ====== ======== ====== ======== CLASS C Sale of shares 463 $ 4,507 288 $ 2,901 Reinvestment of distributions 14 137 6 62 Plan of Reorganization (See Note 11) 201 1,994 40 402 Shares repurchased (199) (1,924) (191) (1,920) ------ -------- ------ -------- Net increase/(decrease) 479 $ 4,714 143 $ 1,445 ====== ======== ====== ======== CLASS I Sale of shares 1,802 $ 18,627 400 $ 4,110 Reinvestment of distributions 533 5,339 290 2,946 Plan of Reorganization (See Note 11) -- -- 12,554 129,630 Shares repurchased (3,159) (31,317) (3,900) (39,912) ------ -------- ------ -------- Net increase/(decrease) (824) $ (7,351) 9,344 $ 96,774 ====== ======== ====== ======== CA TAX-EXEMPT BOND FUND CLASS A Sale of shares 84 $ 955 44 $ 528 Reinvestment of distributions 69 792 68 814 Shares repurchased (403) (4,624) (350) (4,220) ------ -------- ------ -------- Net increase/(decrease) (250) $ (2,877) (238) $ (2,878) ====== ======== ====== ======== CLASS I Sale of shares 417 $ 4,764 549 $ 6,638 Reinvestment of distributions 32 363 37 443 Shares repurchased (807) (9,208) (481) (5,811) ------ -------- ------ -------- Net increase/(decrease) (358) $ (4,081) 105 $ 1,270 ====== ======== ====== ======== GLOBAL INFRASTRUCTURE FUND CLASS A Sale of shares 3,481 $ 30,659 3,531 $ 46,054 Reinvestment of distributions 275 2,518 282 3,775 Shares repurchased (2,961) (26,968) (1,110) (14,788) ------ -------- ------ -------- Net increase/(decrease) 795 $ 6,209 2,703 $ 35,041 ====== ======== ====== ======== CLASS C Sale of shares 547 $ 4,742 44 $ 586 Reinvestment of distributions 8 74 7 98 Shares repurchased (103) (967) (25) (312) ------ -------- ------ -------- Net increase/(decrease) 452 $ 3,849 26 $ 372 ====== ======== ====== ======== CLASS I Sale of shares 36 $ 317 8 $ 100 Reinvestment of distributions 1 9 --(1) 1 Shares repurchased (10) (88) -- -- ------ -------- ------ -------- Net increase/(decrease) 27 $ 238 8 $ 101 ====== ======== ====== ========
101 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT ------ ------- ------ -------- Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ GLOBAL OPPORTUNITIES FUND CLASS A Sale of shares 253 $ 1,470 215 $ 2,248 Reinvestment of distributions 110 642 267 2,785 Shares repurchased (1,652) (9,786) (1,248) (12,695) ------ ------- ------ -------- Net increase/(decrease) (1,289) $(7,674) (766) $ (7,662) ====== ======= ====== ======== CLASS B Sale of shares 59 $ 314 49 $ 476 Reinvestment of distributions 3 15 10 95 Shares repurchased (170) (901) (194) (1,834) ------ ------- ------ -------- Net increase/(decrease) (108) $ (572) (135) $ (1,263) ====== ======= ====== ======== CLASS C Sale of shares 20 $ 103 35 $ 331 Reinvestment of distributions 1 7 3 36 Shares repurchased (55) (273) (53) (470) ------ ------- ------ -------- Net increase/(decrease) (34) $ (163) (15) $ (103) ====== ======= ====== ======== GLOBAL REAL ESTATE SECURITIES FUND(1) CLASS A Sale of shares 87 $ 906 Reinvestment of distributions -- -- Shares repurchased --(3) (7) ------ ------- Net increase/(decrease) 87 $ 899 ====== ======= CLASS C Sale of shares 11 $ 109 ------ ------- Net increase/(decrease) 11 $ 109 ====== ======= CLASS I Sale of shares 10 $ 104 Shares repurchased --(3) (4) ------ ------- Net increase/(decrease) 10 $ 100 ====== ======= GREATER ASIA EX JAPAN OPPORTUNITIES FUND(2) CLASS A Sale of shares 496 $ 4,977 Reinvestment of distributions -- -- Shares repurchased (1) (13) ------ ------- Net increase/(decrease) 495 $ 4,964 ====== ======= CLASS C Sale of shares 10 $ 100 ------ ------- Net increase/(decrease) 10 $ 100 ====== ======= CLASS I Sale of shares 10 $ 100 ------ ------- Net increase/(decrease) 10 $ 100 ====== =======
(1) Inception date of the Fund is March 2, 2009. (2) Inception date of the Fund is April 21, 2009. (3) Amount less than 500. 102 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ GREATER EUROPEAN OPPORTUNITIES FUND(2) CLASS A Sale of shares 481 $ 4,809 Reinvestment of distributions -- -- Shares repurchased -- -- ------ -------- Net increase/(decrease) 481 $ 4,809 ====== ======== CLASS C Sale of shares 15 $ 159 Shares repurchased --(3) --(3) ------ -------- Net increase/(decrease) 15 $ 159 ====== ======== CLASS I Sale of shares 10 $ 100 ------ -------- Net increase/(decrease) 10 $ 100 ====== ======== HIGH YIELD FUND CLASS A Sale of shares 2,754 $ 9,302 1,283 $ 5,881 Reinvestment of distributions 1,398 4,860 1,217 5,496 Shares repurchased (4,232) (14,686) (4,763) (21,787) ------ -------- ------ -------- Net increase/(decrease) (80) $ (524) (2,263) $(10,410) ====== ======== ====== ======== CLASS B Sale of shares 49 $ 177 108 $ 483 Reinvestment of distributions 14 48 16 72 Shares repurchased (145) (496) (314) (1,437) ------ -------- ------ -------- Net increase/(decrease) (82) $ (271) (190) $ (882) ====== ======== ====== ======== CLASS C Sale of shares 160 $ 564 104 $ 473 Reinvestment of distributions 17 59 15 66 Shares repurchased (137) (468) (177) (795) ------ -------- ------ -------- Net increase/(decrease) 40 $ 155 (58) $ (256) ====== ======== ====== ======== INTERNATIONAL REAL ESTATE SECURITIES FUND CLASS A Sale of shares 1,367 $ 5,970 9,133 $ 70,334 Reinvestment of distributions 420 1,993 25 213 Shares repurchased (5,485) (24,623) (97) (802) ------ -------- ------ -------- Net increase/(decrease) (3,698) $(16,660) 9,061 $ 69,745 ====== ======== ====== ======== CLASS C Sale of shares 92 $ 428 94 $ 794 Reinvestment of distributions 3 13 --(3) 2 Shares repurchased (47) (229) (73) (544) ------ -------- ------ -------- Net increase/(decrease) 48 $ 212 21 $ 252 ====== ======== ====== ======== CLASS I Sale of shares 1 $ 5 10 $ 100 Reinvestment of distributions 1 3 --(3) 2 ------ -------- ------ -------- Net increase/(decrease) 2 $ 8 10 $ 102 ====== ======== ====== ========
103 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009
SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ MARKET NEUTRAL FUND CLASS A Sale of shares 3,947 $ 40,379 9,220 $ 93,882 Reinvestment of distributions -- -- 86 895 Shares repurchased (8,995) (90,427) (2,328) (23,305) ------ -------- ------ -------- Net increase/(decrease) (5,048) $(50,048) 6,978 $ 71,472 ====== ======== ====== ======== CLASS B Sale of shares 31 $ 302 11 $ 118 Reinvestment of distributions -- -- 2 18 Shares repurchased (65) (638) (97) (972) ------ -------- ------ -------- Net increase/(decrease) (34) $ (336) (84) $ (836) ====== ======== ====== ======== CLASS C Sale of shares 137 $ 1,345 51 $ 508 Reinvestment of distributions -- -- 5 45 Shares repurchased (223) (2,138) (237) (2,359) ------ -------- ------ -------- Net increase/(decrease) (86) $ (793) (181) $ (1,806) ====== ======== ====== ======== MULTI-SECTOR FIXED INCOME FUND CLASS A Sale of shares 5,597 $ 49,548 1,048 $ 11,016 Reinvestment of distributions 514 4,358 426 4,391 Shares repurchased (3,479) (28,620) (2,274) (23,676) ------ -------- ------ -------- Net increase/(decrease) 2,632 $ 25,286 (800) $ (8,269) ====== ======== ====== ======== CLASS B Sale of shares 258 $ 2,120 171 $ 1,781 Reinvestment of distributions 54 453 43 446 Shares repurchased (276) (2,404) (222) (2,302) ------ -------- ------ -------- Net increase/(decrease) 36 $ 169 (8) $ (75) ====== ======== ====== ======== CLASS C Sale of shares 3,161 $ 27,293 473 $ 4,959 Reinvestment of distributions 96 830 67 698 Shares repurchased (942) (8,159) (616) (6,418) ------ -------- ------ -------- Net increase/(decrease) 2,315 $ 19,964 (76) $ (761) ====== ======== ====== ======== SENIOR FLOATING RATE FUND CLASS A Sale of shares 3,998 $ 34,119 1,466 $ 14,660 Reinvestment of distributions 205 1,836 59 586 Shares repurchased (357) (3,248) -- -- ------ -------- ------ -------- Net increase/(decrease) 3,846 $ 32,707 1,525 $ 15,246 ====== ======== ====== ======== CLASS C Sale of shares 249 $ 2,289 37 $ 371 Reinvestment of distributions 4 38 1 8 Shares repurchased (13) (115) -- -- ------ -------- ------ -------- Net increase/(decrease) 240 $ 2,212 38 $ 379 ====== ======== ====== ======== CLASS I Sale of shares 40 $ 365 24 $ 238 Reinvestment of distributions 2 18 1 9 Shares repurchased (27) (246) -- -- ------ -------- ------ -------- Net increase/(decrease) 15 $ 137 25 $ 247 ====== ======== ====== ========
104 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 6. 10% SHAREHOLDERS As of September 30, 2009, 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 ----------- -------- AlphaSector(SM) Allocation Fund ............. 21% 1 AlphaSector(SM) Rotation Fund ............... 26 1 Alternatives Diversifier Fund ............... 23 2 Bond Fund ................................... 31 1 CA Tax-Exempt Bond Fund ..................... 29 2 Global Infrastructure Fund .................. 50 1* Global Real Estate Securities Fund .......... 75 1* Greater Asia ex Japan Opportunities Fund .... 93 1 Greater European Opportunities Fund ......... 95 1 International Real Estate Securities Fund ... 93 1* Market Neutral Fund ......................... 79 2* Multi-Sector Fixed Income Fund .............. 14 1 Senior Floating Rate Fund ................... 77 2*
* Includes affiliated shareholder accounts. The Alternatives Diversifier Fund does not invest in the underlying funds for the purpose of exercising management or control; however, investments made by the Fund within each of its principal investment strategies may represent a significant portion of an underlying fund's net assets. At September 30, 2009, the Fund was the owner of record of approximately 93% of the International Real Estate Securities Fund, 62% of the Market Neutral Fund, 50% of the Global Infrastructure Fund, and 48% of the Senior Floating Rate Fund. 7. ILLIQUID AND RESTRICTED SECURITIES ($ REPORTED IN THOUSANDS) Investments shall be considered illiquid if they cannot be disposed of within seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining liquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are 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, 2009, the Funds held the following illiquid and restricted securities:
% OF MARKET NET VALUE ASSETS ACQUISITION ACQUISITION AT AT DATE COST 9/30/09 9/30/09 ----------- ----------- ------- ------- Bond Fund DLJ Mortgage Acceptance Corp. 96-M, 1 (Principal Only) 144A 0.000%, 9/18/11 4/28/04 $ 4 $ 4 0.0%
% OF MARKET NET VALUE ASSETS ACQUISITION ACQUISITION AT AT DATE COST 9/30/09 9/30/09 ----------- ----------- ------- ------- High Yield Fund Poland Telecom Finance BV Series B 14%, 12/1/07 11/24/97 $5,000 $62 0.0% ACG Holdings, Inc. 12/4/93 358 0 0.0% Market Neutral Fund Telefonica Moviles S.A. 12/20/01 0 0 0.0%
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, 2009, certain Funds held securities issued by various companies in specific sectors or countries as detailed below:
PERCENTAGE OF TOTAL FUND SECTOR INVESTMENTS ---- -------------------------- ----------- Global Infrastructure Telecommunication Services 34% Fund Utilities 30 Global Opportunities Fund Consumer Staples 42 Greater European Opportunities Fund Consumer Staples 39
105 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 Virtus (The Phoenix Companies, Inc.) and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 11. PLANS OF REORGANIZATION (All amounts except for per share amounts are reported in thousands) On May 29, 2009, the Bond Fund acquired all of the net assets of the Virtus Core Bond Fund ("Core Bond Fund") of the Virtus Opportunities Trust pursuant to an Agreement and Plan of Reorganization approved by the Core Bond Fund's Board of Trustees on March 30, 2009. The acquisition was accomplished by a tax-free exchange of 5,242 Class A shares, 95 Class B shares, and 201 Class C shares of the Bond Fund outstanding on May 29, 2009, (valued at $52,917, $940 and $1,994, respectively) for 6,851 Class A shares, 123 Class B shares, and 259 Class C shares of the Core Bond Fund outstanding on May 29, 2009. The Core Bond Fund had net assets on that date of $55,851 including $3,274 of net depreciation, which were combined with those of the Bond Fund. The aggregate net assets of Bond Fund immediately after the merger were $221,885 (which included Class I net assets of $131,924 which were not included in the exchange).The shareholders of each Class of the Core Bond Fund received for each share owned approximately 0.76, 0.77 and 0.78 share, respectively, of Class A, Class B, and Class C shares of the Bond Fund. On November 21, 2008, the AlphaSector(SM) Rotation Fund (formerly the Wealth Builder Fund) acquired all of the net assets of the Virtus Wealth Accumulator Fund ("Wealth Accumulator Fund") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees of the Virtus Opportunities Trust on August 20, 2008. The acquisition was accomplished by a tax-free exchange of 673 Class A shares and 326 Class C shares of the AlphaSector(SM) Rotation Fund outstanding on November 21, 2008 (valued at $4,920 and $2,368, respectively) for 773 Class A shares and 376 Class C shares of the Wealth Accumulator Fund outstanding on November 21, 2008. The Wealth Accumulator Fund had net assets on that date of $7,288 including $5,266 of net depreciation, which were combined with those of the Fund. The aggregate net assets of the Fund immediately after the merger were $70,731. The shareholders of the Wealth Accumulator Fund received for each share owned approximately 0.87 and 0.87, respectively, of Class A and Class C shares of the same class of the AlphaSector(SM) Rotation Fund. 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 (n/k/a Virtus Insight Trust) pursuant to an Agreement and Plan of Reorganization approved by the Insight Bond Fund's Board of Trustees on November 14, 2007. 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 $202,610. The shareholders of each Class of the Insight Bond Fund received for each share owned approximately 0.92, 0.93 and 0.95 share, respectively, of Class I, Class A, and Class C shares of the Bond Fund. 12. EXEMPTIVE ORDER On June 5, 2006, the SEC issued an order under Section 12(d) (1) (J) of the Investment Company Act ("1940 Act") granting an exemption from Sections 12(d) (1) (A) and (B) of the 1940 Act and under Sections 6(c) and 17(b) of the 1940 Act granting an exemption from Section 17(a) of the 1940 Act, which permits the Trust to invest in other affiliated and unaffiliated funds, including exchange-traded funds. 13. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2009, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the funds were as follows:
NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION FUND TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ---- -------- ------------ -------------- -------------- AlphaSector(SM) Allocation Fund ............ $ 36,218 $ 42 $ (212) $ (170) AlphaSector(SM) Rotation Fund .............. 79,428 -- (619) (619) Alternatives Diversifier Fund .............. 300,335 30,635 (62,756) (32,121) Bond Fund .................................. 218,206 8,283 (1,114) 7,169 CA Tax-Exempt Bond ......................... 56,007 3,863 (1,019) 2,844 Global Infrastructure Fund ................. 92,270 2,510 (7,672) (5,162) Global Opportunities Fund .................. 46,990 9,194 (156) 9,038 Global Real Estate Securities Fund ......... 1,396 586 (1) 585 Greater Asia ex Japan Opportunities Fund ... 5,363 1,395 (50) 1,345 Greater European Opportunities Fund ........ 5,242 1,352 (11) 1,341 High Yield Fund ............................ 90,799 6,042 (5,569) 473 International Real Estate Securities Fund .. 35,775 3,859 (7,820) (3,961) Market Neutral Fund (Long positions) ....... 71,107 12,517 (481) 12,036 Market Neutral Fund (Short positions) ...... (72,356) 4,051 (8,591) (4,540) Multi-Sector Fixed Income Fund ............. 173,747 11,298 (8,370) 2,928 Senior Floating Rate Fund .................. 54,365 4,459 (99) 4,360
106 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 The Funds have capital loss carryovers which may be used to offset future capital gains, as follows:
EXPIRATION YEAR ---------------------------------------------------------------------------------- 2010 2011 2012 2013 2014 2015 2016 2017 TOTAL ------- ------- ----- ------ ------ ------ ------ ------- -------- AlphaSector(SM) Allocation Fund ......................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 402 $ 402 AlphaSector(SM) Rotation Fund ... -- -- -- -- -- -- 223 687 910 Alternatives Diversifier Fund ... -- -- -- -- -- 443 1,961 2,258 4,662 Bond Fund ....................... -- 6,017 274 6,243 41 4,355 1,080 3,798 21,808 Global Infrastructure Fund ...... -- -- -- -- -- -- -- 1,264 1,264 Global Opportunities Fund ....... -- -- -- -- -- -- -- 8,384 8,384 High Yield Fund ................. 70,135 21,887 -- -- 143 -- -- 17,034 109,199 International Real Estate ....... Securities Fund .............. -- -- -- -- -- -- -- 231 231 Market Neutral Fund ............. -- 9,854 -- -- 7,527 6,744 24 -- 24,149 Multi-Sector Fixed Income Fund .. 13,774 -- -- -- -- -- -- 1,960 15,734
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. For the period ended September 30, 2009, the Funds utilized losses deferred in prior years against current year capital gains as follows: CA Tax-Exempt Bond Fund $ 41 Market Neutral Fund 668 Senior Floating Rate Fund 29
The following Funds had capital loss carryovers which expired in 2009: Bond Fund $ 3,167 High Yield Fund 66,603 Multi-Sector Fixed Income Fund 7,667
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, 2009, the Funds deferred and recognized post-October losses as follows:
CAPITAL CAPITAL CURRENCY CURRENCY LOSS LOSS LOSS LOSS DEFERRED RECOGNIZED DEFERRED RECOGNIZED -------- ---------- -------- ---------- AlphaSector(SM) Allocation Fund.. $ 6,243 $ -- $-- $-- AlphaSector(SM) Rotation Fund.... 17,830 23 -- -- Alternatives Diversifier Fund.... 61,797 -- -- -- Bond Fund........................ 3,812 5,351 -- -- CA Tax-Exempt Bond Fund.......... 229 11 -- -- Global Infrastructure Fund....... 8,244 -- -- 4 Global Opportunities Fund........ 25,819 2,272 91 -- High Yield Fund.................. 14,140 12,696 -- -- International Real Estate Securities Fund............... 19,197 231 18 17 Market Neutral Fund.............. 188 1,808 4 17 Multi-Sector Fixed Income Fund... 8,922 1,639 51 -- Senior Floating Rate Fund........ 327 -- -- --
107 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 ------------- ------------- ------------- AlphaSector(SM) Allocation Fund ...... $ 238 $-- $-- AlphaSector(SM) Rotation Fund ........ 328 -- -- Alternatives Diversifier Fund ........ 1,803 -- -- Bond Fund ............................ 82 -- -- CA Tax-Exempt Bond Fund .............. -- -- 51 Global Infrastructure Fund ........... 161 -- -- Global Opportunities Fund ............ 619 -- -- Global Real Estate Securities Fund ... 267 3 -- Greater Asia ex Japan Opportunities Fund .............................. 190 -- -- Greater European Opportunities Fund .. 153 -- -- High Yield Fund ...................... 121 -- -- International Real Estate Securities Fund ................... 2,376 -- -- Market Neutral Fund .................. -- -- -- Multi-Sector Fixed Income Fund ....... 275 -- -- Senior Floating Rate Fund ............ 1,160 -- --
For the period ended September 30, 2009, the CA Tax-Exempt Bond Fund distributed $2,442 of exempt interest dividends. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 14. RECLASSIFICATION OF CAPITAL ACCOUNTS For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2009, the Funds recorded reclassifications to increase (decrease) the accounts as listed below ($ reported in thousands):
CAPITAL PAID IN ON ACCUMULATED UNDISTRIBUTED SHARES OF NET NET BENEFICIAL REALIZED INVESTMENT INTEREST GAIN (LOSS) INCOME (LOSS) ------------ ----------- ------------- AlphaSector(SM) Allocation Fund $ --(1) $ (2) $ 2 AlphaSector(SM) Rotation Fund 308 (334) 26 Alternatives Diversifier Fund 217 (835) 618 Bond Fund 8,836 (8,861) 25 CA Tax-Exempt Bond Fund (12) -- 12 Global Infrastructure Fund (1) --(1) (1) 1 Global Opportunities Fund (158) 123 35 Global Real Estate Securities Fund -- (12) 12 Greater Asia ex Japan Opportunities Fund -- (21) 21 Greater European Opportunities Fund -- 15 (15) High Yield Fund (66,592) 66,484 108 International Real Estate Securities Fund (1) (170) 171 Market Neutral Fund (2,044) (19) 2,063 Multi-Sector Fixed Income Fund (7,792) 7,869 (77) Senior Floating Rate Fund -- (2) 2
(1) Amount is less than $500. 15. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through November 20, 2009, the date the financial statements were available for issuance, and has determined that the following subsequent events require recognition or disclosure in the financial statements. As of October 1, 2009, Virtus AlphaSector(SM) Allocation Fund, Virtus AlphaSector SM Rotation Fund, Virtus Alternatives Diversifier Fund, Virtus Market Neutral Fund, and Virtus Multi-Sector Fixed Income Fund began offering Class I Shares, in addition to the Class A Shares, Class B Shares (Virtus Market Neutral and Virtus Multi-Sector Fixed Income Funds only), and Class C Shares already offered. Class I shares are sold primarily to Institutional Investors. For more information regarding the purchase of Class I shares, please refer to the Fund's current prospectus. Effective on December 1, 2009 (the "Closing Date"), Class B Shares of the Virtus Mutual Funds will no longer be available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to each Fund's prospectus). 108 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 AlphaSector Allocation(SM) Fund (formerly Virtus Wealth Guardian Fund), Virtus AlphaSector(SM) Rotation Fund (formerly Virtus Wealth Builder Fund), Virtus Alternatives Diversifier Fund, Virtus Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus Global Infrastructure Fund, Virtus Global Opportunities Fund (formerly Virtus Worldwide Strategies Fund), Virtus Global Real Estate Securities Fund, Virtus Greater Asia ex Japan Opportunities Fund, Virtus Greater European Opportunities Fund, Virtus High Yield Fund, Virtus International Real Estate Securities Fund, Virtus Multi-Sector Fixed Income Fund and Virtus Senior Floating Rate Fund and the schedule of investments and securities sold short of Virtus Market Neutral Fund, fifteen series of Virtus Opportunities Trust, (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, 2009 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, 2009 by correspondence with the custodian, brokers and underlying funds' transfer agent, provide a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS LLP) Philadelphia, Pennsylvania November 20, 2009 109 VIRTUS OPPORTUNITIES TRUST TAX INFORMATION NOTICE SEPTEMBER 30,2009 (UNAUDITED) For the fiscal year ended September 30, 2009, 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 ---- --- --- ---- AlphaSector(SM) Allocation Fund 28% 18% $-- AlphaSector(SM) Rotation Fund 67 42 -- Alternatives Diversifier Fund 70 33 -- Bond Fund -- -- -- CA Tax-Exempt Bond -- -- 37 Global Infrastructure Fund 100 58 -- Global Opportunities Fund 100 83 -- Global Real Estate Securities Fund 6 -- 3 Greater Asia ex Japan Opportunities Fund 19 -- -- Greater European Opportunities Fund 65 5 -- High Yield Fund -- -- -- International Real Estate Securities Fund 32 -- -- Market Neutral Fund -- -- -- Multi-Sector Fixed Income Fund -- -- -- Senior Floating Rate Fund -- -- --
For the period ended September 30, 2009, the Funds are disclosing the following information pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder ($ reported in thousands).
FOREIGN SOURCE FOREIGN TAXES INCOME PAID ON FOREIGN RECOGNIZED SOURCE INCOME -------------- --------------- Global Infrastructure Fund $2,015 $254 Global Opportunities Fund 944 121 Global Real Estate Securities Fund 28 3 Greater Asia ex Japan Opportunities Fund 87 6 Greater European Opportunities Fund 100 10 International Real Estate Securities Fund 2,487 241
For federal income tax purposes, 99% of the income dividends paid by the CA Tax-Exempt Fund qualify as exempt-interest dividends. 110 CONSIDERATION OF AMENDMENT TO FEE SCHEDULE OF INVESTMENT ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT FOR VIRTUS ALPHASECTOR(SM) ALLOCATION FUND (F/K/A VIRTUS WEALTH GUARDIAN FUND) AND VIRTUS ALPHASECTOR(SM) ROTATION FUND (F/K/A VIRTUS WEALTH BUILDER FUND) (EACH, A "FUND" AND COLLECTIVELY,THE "FUNDS") BY THE BOARD OF TRUSTEES The Board of Trustees of Virtus Opportunities Trust (the "Trust") (the "Board"), is responsible for determining whether to approve the entering into and continuation of each investment advisory and subadvisory agreement for the Trust, including for the Fund. At a meeting held on June 3-4, 2009, the Board, including a majority of the Trustees who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940, considered and approved an amendment to the fee schedule to the investment advisory agreement between the Trust and Virtus Investment Advisers, Inc. ("VIA" or the "Adviser") for each Fund (the "Advisory Agreement") and a subadvisory agreement with F-Squared Investments, Inc. ("F-Squared" or the "Subadviser") for each Fund (the "Subadvisory Agreement"), as further discussed below. In approving the Advisory Agreement for the Adviser for each Fund and the Subadvisory Agreement for each Fund, the Board determined that such actions were in the best interests of each Fund, and its shareholders. With respect to the Virtus AlphaSector Allocation Fund, the Subadvisory Agreement was approved by the Board at the June 3-4, 2009 meeting, as permitted under a Manager-of-Managers Exemptive Order issued by the Securities and Exchange Commission (the "Order"). Shareholder approval was not required because of the Order. With respect to the Virtus AlphaSector Rotation Fund, the Subadvisory Agreement was initially approved by the Board and recommended to shareholders for approval, and subsequently approved by shareholders of that Fund at a reconvened shareholder meeting held on September 17, 2009. The Subadvisory Agreement then became effective on September 29, 2009. In reaching their decisions, the Board requested and evaluated information provided by the Adviser and F-Squared which, in the Board's view constituted information necessary for the Board to form a judgment as to whether approval of the Advisory Agreement and the Subadvisory Agreement was in the best interests of the Funds and their shareholders. The Board considered all the criteria separately with respect to each Fund and its shareholders. Prior to making its final decision, the Board met privately with their independent counsel to discuss the information provided. BASIS FOR THE BOARD'S RECOMMENDATION RELATIVE TO THE SUBADVISORY AGREEMENT. In their deliberations, the Trustees did not identify any particular information that was all-important or controlling, and each Trustee attributed different weights to the various factors. In recommending that shareholders approve the proposal, the Trustees considered various factors, including: - the nature, extent and quality of the services to be provided by the Subadviser. The Trustees reviewed biographical information of the management staff of the Subadviser who would be providing services under the Subadvisory Agreement and noted the breadth and depth of experience of the team leaders, including that each of the three principals of the firm had over two decades of relative experience in key areas. The Trustees noted that the Subadviser had managed investments using its proprietary strategy since 2001, and that it currently managed approximately $80 million in assets. The Trustees also noted that the Subadviser employed a team-managed approach and was highly reliant on objective, quantitative models, rather than on any particular individual; - the rate of the investment subadvisory fee that would be paid by VIA (and not the Funds) under the Subadvisory Agreement, and the advisory fee paid by each Fund, in light of the reduction in the total fund operating expenses anticipated after the Subadviser was engaged. The Board of Trustees considered the fact that the increase in the proposed advisory fee rate was expected to be more than offset by the reduction in total fund operating expenses; - the historical investment returns of the Index as published by the Subadviser, which not only outperformed the broad market indexes, like the S&P 500(R) Index, but provided a positive return at certain times when the market indexes provided negative returns; and - the fact that there are no other tangible benefits to the Subadviser in providing investment advisory services to each Fund, other than the fees to be earned under the Subadvisory Agreement (although there may be certain intangible benefits gained to the extent that serving the Fund could enhance the Subadviser's reputation in the marketplace and therefore enable the Subadviser to attract additional client relationships). In considering the profitability to the Subadviser of its relationship with each Fund, the Board noted that the fees under the Subadvisory Agreement were to be paid by VIA out of the advisory fees that it receives under the Advisory Agreement. For this reason, the profitability to the Subadviser of its relationship with each Fund was not a material factor in the Board's deliberations at this time. For similar reasons, the Board did not consider the potential economies of scale in the Subadviser's management of each Fund to be a material factor in its consideration at this time. Based on all the foregoing considerations, the Board concluded that the proposed Subadvisory Agreement was favorable for each Fund and its shareholders because shareholders could benefit from management of each Fund's assets based on the investment recommendations of the Subadviser. BASIS FOR THE BOARD'S RECOMMENDATION RELATIVE TO THE AMENDMENT TO THE FEE SCHEDULE OF THE ADVISORY AGREEMENT. In evaluating and approving the proposal, the Board of Trustees requested and evaluated information provided by VIA which, in the Trustees' view, constituted information necessary for the Trustees to form a judgment as to whether the Advisory Agreement and specifically, implementation of the proposed fee schedule increases, would be in the best interests of each Fund and its shareholders. In evaluating and approving the proposal, the Trustees considered various factors, including: - that the rate of the investment advisory fees and other expenses that would be paid by the Funds under the amended fee schedule as compared to those of representative comparable funds managed by other investment advisers. The Board of Trustees noted in particular that for each Fund, the proposed new investment advisory fee and total operating expenses would be reasonable because it was within the range of contractual advisory fee rates at comparable asset levels for representative comparable funds, as indicated in material prepared for the Board of Trustees by VIA based on information contained in various publicly available documents. Specifically, for each Fund, the proposed new fee and total operating expenses were below the median of advisory fees and operating expenses for comparable funds; - the nature and quality of investment advisory services that would be provided by VIA to the Funds under the proposed structure, as compared with the nature and quality of investment advisory services provided by VIA to the Funds under the current structure. As part of its efforts to improve each Fund's performance and better manage their risk profile, VIA would incur higher expenses due to its more active management role, including increased trading responsibilities expected for the Funds, while the Funds were expected to realize substantially lower total operating expenses; 111 CONSIDERATION OF AMENDMENT TO FEE SCHEDULE OF INVESTMENT ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT FOR VIRTUS ALPHASECTOR(SM) ALLOCATION FUND (F/K/A VIRTUS WEALTH GUARDIAN FUND) AND VIRTUS ALPHASECTOR(SM) ROTATION FUND (F/K/A VIRTUS WEALTH BUILDER FUND) (EACH, A "FUND" AND COLLECTIVELY,THE "FUNDS") BY THE BOARD OF TRUSTEES (CONTINUED) - that the profitability to VIA under the proposed higher advisory fee was not expected to be materially different from profitability under the current structure, as the higher advisory fees would be offset by the commitment to pay the subadvisory fee as well as increased active management, trading and other responsibilities and expenses that would be required from VIA due to the investment strategy of the new Subadviser; - other benefits to VIA in providing investment advisory services to the Funds, both under the current fee schedules and the proposed new fee schedules; and - possible economies of scale to be achieved through the reduction in operating expenses as assets grow while managing the Funds under the proposed new fee schedules. In considering the proposal, the Board of Trustees concluded that the proposed fee increases should: (i) over the long-term, enable VIA to continue to provide high-quality investment advisory services to the Funds at reasonable and competitive fee rates; and (ii) enable VIA to provide investment advisory services to the Funds at levels consistent with the increased demands of the current marketplace, while engaging high quality subadvisers with consistent investment performance. The Board of Trustees concluded that the proposed fee increases were on balance more favorable for shareholders due to the expected realization by the Funds of substantially lower overall fund operating expenses. 112 CONSIDERATION OF SUBADVISORY AGREEMENT FOR VIRTUS GLOBAL OPPORTUNITIES FUND (THE "FUND") BY THE BOARD OF TRUSTEES The Board, including a majority of the independent Trustees, last renewed the investment advisory agreement (the "Advisory Agreement") between Virtus Investment Advisers, Inc. (the "Adviser") and the Fund, and the investment subadvisory agreement between the Adviser and each of Acadian Asset Management, Inc. ("Acadian") and New Star Institutional Managers Limited ("New Star"), at a meeting held on November 18-20, 2008. The Board noted, however, that although both Acadian and New Star were being reapproved as the current subadvisers, Management was proposing that Vontobel Asset Management, Inc. ("Vontobel") be appointed as the new subadviser to the Fund, and enter into a new subadvisory agreement (the "Subadvisory Agreement") which, as approved by the Board, and as permitted under a Manager-of-Managers Exemptive Order issued by the Securities and Exchange Commission, became effective in late January, 2009. The Board noted Management's representations that the Fund would benefit from Vontobel's management evidenced by the performance history of similar global equity strategies to the Fund. In evaluating the proposal to appoint Vontobel, the Board requested and evaluated information provided by the Adviser and Vontobel which, in the Board's view, constituted information necessary for the Board to form a judgment as to whether the subadviser change would be in the best interests of the Fund and its shareholders. Prior to making its final decision, the Board met privately with their independent counsel to discuss the information provided. In their deliberations, the Trustees did not identify any particular information that was all-important or controlling, and each Trustee attributed different weights to the various factors. The Trustees considered various factors, including: 1) the nature, extent and quality of the services to be provided by Vontobel, including Vontobel's investment approach and the breadth and depth of experience of the investment team; 2) the rate of the investment subadvisory fee that would be paid by the Adviser (and not the Fund) under the Subadvisory Agreement, and the advisory fee paid by the Fund, the advisory fee remaining the same at this time, from the fees paid under the previous Advisory Agreement; and 3) the performance of a composite of all discretionary private accounts managed by Vontobel with substantially similar investment objectives, strategies and policies as the Fund. In considering the profitability of Vontobel's relationship with the Fund, while the Board noted that the fees under the Subadvisory Agreement were paid by the Adviser out of the advisory fees that it receives under the Advisory Agreement, the Board acknowledged that the subadvisory fees to be paid would be paid by VIA and not by the Fund. The Board noted that the subadvisory fees appeared to be reasonable in light of the quality of services to be rendered by the Subadviser. The Board did not separately review profitability information for the Subadviser, noting that the subadvisory fees are paid by the Adviser rather than by the Fund. In considering the Subadvisory Agreement, the Board also considered the existence of any economies of scale and whether they would be passed along to the Fund's shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the Subadviser level. Based on all the foregoing reasons, the Board concluded that the proposed Subadvisory Agreement was favorable for shareholders because shareholders could benefit from management of the Fund's assets by the global equities investment team at Vontobel. 113 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND AND VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND (EACH, A "FUND") BY THE BOARD OF TRUSTEES The Board of Trustees of Virtus Opportunities Trust (the "Trust"), along with the Boards of Trustees of the other trusts in the Virtus family of funds (collectively, the "Board"), is responsible for determining whether to approve the entering into and continuation of each investment advisory and subadvisory agreement (each, an "Agreement") for the Virtus Mutual Funds. At a meeting held on November 18-20, 2008, the Board, including a majority of the Trustees who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940, considered and approved each Agreement for each Fund, as further discussed below. In approving each Agreement, the Board determined that the retention of the adviser and subadviser was in the best interests of each Fund and its shareholders. In reaching their decisions, the Board considered information for other Virtus Mutual Funds furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the approval review process. During the approval review process, the Board received assistance and advice from and met separately with independent legal counsel. The Board's determination contemplated a number of factors that the Trustees believed to be relevant. Some of the factors that the Board considered are described below, although the Trustees did not identify any particular information or factor as controlling, but, instead, the Board considered the Agreements in the totality of the circumstances. Each individual Trustee may have evaluated the information presented differently, giving different weights to different factors. NATURE, EXTENT AND QUALITY OF SERVICES. Each Fund would be managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of each Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and for making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. Therefore, in considering the Agreement with VIA as adviser the Trustees considered VIA's existing process for supervising and managing the other Virtus Mutual Fund subadvisers, including (a) VIA's ability to select and monitor the subadvisers; (b) VIA's ability to provide the services necessary to monitor the subadvisers' compliance with the Funds' respective investment objectives, policies and restrictions as well as provide other oversight activities; and (c) VIA's ability and willingness to identify instances in which a subadviser should be replaced and to carry out the required changes. The Trustees also considered: (d) the experience, capability and integrity of VIA's management and other personnel; (e) the financial position of VIA; (f) the quality of VIA's own regulatory and legal compliance policies, procedures and systems; (g) the nature, extent and quality of administrative and other services provided by VIA to the Virtus Mutual Funds; and (h) VIA's supervision of the Virtus Mutual Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Virtus Mutual Fund shareholders as a result of being part of the Virtus family of funds, including the right to exchange investments between the same class of Virtus Mutual Funds without a sales charge, the ability to reinvest Virtus Mutual Fund dividends into other Virtus Mutual Funds and the right to combine holdings in other Virtus Mutual Funds to obtain a reduced sales charge. With respect to the subadvisory Agreement, the Board noted that Vontobel Asset Management, Inc. (the "Subadviser") provided information with respect to portfolio management, compliance with each Fund's investment policies and procedures, and compliance with applicable securities laws and assurances thereof. In considering the approval of the subadvisory Agreement, the Board considered the Subadviser's investment management process, including (a) the experience, capability and integrity of the Subadviser's management and other personnel committed by the Subadviser to manage each Fund; (b) the financial position of the Subadviser; (c) the quality and commitment of the Subadviser's regulatory and legal compliance policies, procedures and systems and (d) the Subadviser's brokerage and trading practices. After considering all of the information provided to them, the Trustees concluded that the nature, extent and quality of the services provided by VIA and the Subadviser were reasonable and beneficial to each Fund and its shareholders. INVESTMENT PERFORMANCE. Because each Fund had not commenced operations, the Board could not evaluate prior investment performance for each Fund. The Board reviewed and was satisfied with the Subadviser's investment approach and the investment performance of the Subadviser's composite of accounts with substantially similar investment objectives, strategies and policies for each of the Funds. PROFITABILITY. The Board also considered the level of profits to be realized by VIA and its affiliates in connection with the operation of each Fund, noting VIA's intention to cap each Fund's total expenses during the startup phase. The Board noted that the profitability appeared reasonable and concluded that the profitability to VIA from each Fund was reasonable in light of the quality of all services rendered to each Fund by VIA and its affiliates and the expense caps to be implemented. The Board did not separately review profitability information for the Subadviser, noting that the subadvisory fees are paid by VIA rather than by each Fund. MANAGEMENT FEES AND TOTAL EXPENSES. In evaluating the management fees and total expenses of each Fund, the Board reviewed information provided by VIA and comparisons to other funds in each Fund's peer group. As noted above, the Board also noted the reimbursements that would be provided to each Fund in order to limit the total expenses incurred by each Fund and its shareholders. Based upon the information presented by VIA, the Trustees determined that the management fees charged by VIA and the total expenses of each Fund were reasonable. The Board acknowledged that the subadvisory fees to be paid would be paid by VIA and not by each Fund. The Board noted that the subadvisory fees appeared to be reasonable in light of the quality of services to be rendered by the Subadviser. 114 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND AND VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND (EACH, A "FUND") BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE. The Board noted that the management fees for each Fund included breakpoints based on assets under management, and reimbursements which would also be in place for each Fund. The Board determined that VIA and each Fund likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and shareholders of each Fund would have an opportunity to benefit from these economies of scale. In considering the subadvisory Agreement, the Board also considered the existence of any economies of scale and whether they would be passed along to each Fund's shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the Subadviser level. After considering the information presented, the Board ultimately concluded that it should approve the Agreements. 115 RESULTS OF SHAREHOLDER MEETING VIRTUS OPPORTUNITIES TRUST AUGUST 20, 2009 (UNAUDITED) At a special meeting of shareholders of Virtus AlphaSector(SM) Allocation Fund (formerly known as Virtus Wealth Guardian Fund) (the "Fund"), a series of Virtus Opportunities Trust, held on August 20, 2009, shareholders voted on the following proposal: NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN ------------- ---------- ----------- To approve an amendment to the fee schedule of the Investment Advisory Agreement between Virtus Opportunities Trust, on behalf of the Fund and VIA ............................ 1,896,723.298 60,385.275 185,228.959
Shareholders of the Fund voted to approve the above proposal. MATTER SUBMITTED TO A VOTE OF SHAREHOLDERS VIRTUS OPPORTUNITIES TRUST AUGUST 20, 2009 SEPTEMBER 3, 2009 SEPTEMBER 17, 2009 (UNAUDITED) A special meeting of shareholders of Virtus AlphaSector(SM) Rotation Fund (formerly known as Virtus Wealth Builder Fund), a series of Virtus Opportunities Trust (the "Fund") was held on August 20, 2009 to vote on proposals to 1) approve a Subadvisory Agreement between Virtus Investment Advisers, Inc. ("VIA") and F-Squared Investments, Inc. (the "Subadviser"); 2) to approve an amendment to the fee schedule of the Investment Advisory Agreement between Virtus Opportunities Trust (the "Trust"), on behalf of the Fund and VIA, and 3) to approve a proposal to permit VIA to hire and replace subadvisers or to modify subadvisory agreements without shareholder approval. The special meeting was adjourned until September 3, 2009, and then September 17, 2009, and then September 25, 2009 due to insufficient votes to pass the proposal. RESULTS OF SHAREHOLDER MEETING VIRTUS OPPORTUNITIES TRUST SEPTEMBER 25, 2009 (UNAUDITED) At a reconvened special meeting of shareholders of Virtus AlphaSector(SM) Rotation Fund, a series of Virtus Opportunities Trust, held on September 25, 2009, shareholders voted on the following proposals: NUMBER OF ELIGIBLE SHARES VOTED:
FOR AGAINST ABSTAIN ------------- ----------- ----------- To approve a Subadvisory Agreement between Virtus Investment Advisers, Inc. ("VIA"), and F-Squared Investments, Inc ................. 3,704,699.284 327,365.149 476,780.697 To approve an amendment to the fee schedule of the Investment Advisory Agreement between Virtus Opportunities Trust, on behalf of the Fund and VIA ..................... 3,622,264.962 405,061.826 481,518.342 To approve a proposal to permit VIA to hire and replace subadvisers or to modify subadvisory agreements without shareholder approval ....................................... 3,536,212.462 533,363.449 449,269.219
Shareholders of the Fund voted to approve the first two above proposals. Shareholders of the Fund did not approve the third proposal noted above. 116 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2009, 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 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES
NAME, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE ---------------- -------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management (commodities business) YOB: 1939 (2007-present). Partner, Stonington Partners, Inc. (private equity firm) Elected: 1993 (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios). 46 Funds Philip R. McLoughlin Partner, Cross Pond Partners, LLC (2006-Present). Director, World Trust YOB: 1946 Fund. Chairman and Trustee, The Phoenix Edge Series Fund. Director, DTF Elected: 1993 Tax-Free Income Fund, Inc., Duff & Phelps Utility and Corporate Bond 49 Funds Trust, Inc. and DNP Select Income Fund, Inc. Managing Director, SeaCap, Asset Management Fund I L.P. Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (private bank) YOB: 1951 (1982-2006). Director, DTF Tax-Free Income Fund, Inc., Duff & Phelps Elected: 2001 Utility and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. 49 Funds James M. Oates Managing Director, Wydown Group (consulting firm) (1994-present). YOB: 1946 Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) Elected: 1993 (financial services) (1997-2006). Director, Stifel Financial. Chairman and 46 Funds 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 (1998-present). YOB: 1946 Elected: 1998 46 Funds Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). Mr. Verdonck is also a YOB: 1942 director of several non-U.S. companies. Elected: 2004 46 Funds
INTERESTED TRUSTEE The individual 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, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(S) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE ---------------- -------------------------------------------------------------------------- George R. Aylward(1) Director, President and Chief Executive Officer (since 2008), Director and YOB: 1964 President (2006-2008), Chief Operating Officer (2004-2006), Vice Elected: 2006 President, Finance (2001-2002), Virtus Investment Partners, Inc. and/or 48 Funds certain of its sub- sidiaries. Various senior officer and directorship positions with Virtus affiliates (2005-present). Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005-2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present).
(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. 117 FUND MANAGEMENT TABLES (CONTINUED) (UNAUDITED) 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 Executive Vice President, Head of Operations (since YOB: 1952 since 2006. 2009), Senior Vice President, Operations (2008-2009), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or cer- tain of its subsidiaries. Ms. Curtiss is Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). Assistant Treasurer (2001- 2009), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Francis G. Waltman Senior Vice President Executive Vice President, Head of Product YOB: 1962 since 2008. Management (since 2009), Senior Vice President, Asset Management Product Development (2008-2009), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (2008-present), Director and Senior President (2006-2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (since 2008). Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates c/o Zweig-DiMenna Chief Compliance Officer LLC (1989-present). Vice President, and Chief Associates, LLC since 2004. Compliance Officer, The Zweig Total Return Fund, 900 Third Avenue Inc. (2004- present). Vice President, and Chief New York, NY 10022 Compliance Officer, The Zweig Fund, Inc. (2004- YOB: 1945 present). President and Director of Watermark Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). W. Patrick Bradley Chief Financial Officer and Senior Vice President, Fund Administration (since YOB: 1972 Treasurer since 2005. 2009), Vice President, Fund Administration (2007-2009), 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. Kevin J. Carr Vice President, Chief Legal Senior Vice President, Counsel and Secretary YOB: 1954 Officer, Counsel and Secretary (2008-present) and Vice President (2008-2009), since 2005. Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Vice President and Counsel, Phoenix Life Insurance Company. 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).
118 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 Francis G. Waltman, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 100 Pearl Street Hartford, CT 06103-4506 PRINCIPAL UNDERWRITER VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 TRANSFER AGENT VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIAN PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19155-3111 State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 2001 Market Street Philadelphia, PA 19103-7042 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser 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. (VIRTUS MUTUAL FUNDS LOGO) PRSRT STD U.S. POSTAGE PAID 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. 8008 11-09 ANNUAL REPORT [GRAPHIC OMITTED] VIRTUS MUTUAL FUNDS ================================================================================ Virtus Foreign Opportunities Fund ================================================================================ TRUST NAME: September 30, 2009 [Graphic Omitted] VIRTUS Eligible OPPORTUNITIES shareholders can TRUST sign up for eDelivery at Virtus.com NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE TABLE OF CONTENTS VIRTUS FOREIGN OPPORTUNITIES FUND ("Foreign Opportunities Fund") Message to Shareholders................................................... 1 Key Investment Terms and Footnote Legend.................................. 3 Disclosure of Fund Expenses............................................... 4 Fund Summary.............................................................. 6 Schedule of Investments................................................... 8 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................... 25 Tax Information Notice.................................................... 26 Fund Management Tables.................................................... 27 -------------------------------------------------------------------------------- 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, 2009, 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, the Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS [PHOTO OMITTED] Dear Fellow Shareholders of Virtus Mutual Funds: Investors who were calmed by the positive news from the financial markets in the second quarter of 2009 may have had a reason to regain some of their enthusiasm during the third quarter. There were numerous signs pointing to an end to the recession: gross domestic product grew by an annualized 3.5 percent, matching its average growth rate of the last 80 years; a measure of stability appeared in the housing market; consumer confidence inched up; and better-than-expected profits and rosier outlooks were reported by many corporations. The capital markets continued their recovery during the quarter, with most major stock market indices up by double digits for the quarter. The S&P 500(R) Index was up 15.6 percent in the quarter and in late September was at its highest level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8 percent in the third quarter, and as of September 30 had improved by 13.5 percent for the year. These figures are even more encouraging when compared with market lows in early March and the double-digit losses both indices recorded during the first quarter of the year. Bonds also participated in the third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12 percent. Although the Federal Open Market Committee acknowledged that "economic activity has picked up following its severe downturn," these recent gains should not unleash any 1990s-style market "exuberance." The strength and timing of a full recovery is yet to be realized. Unemployment rates that probably have not peaked remain a drag on consumer spending, and with an expected slowdown of the government's monetary and fiscal stimulus, some economists speculate that the growth from the second and third quarter may not be sustainable into next year. These factors suggest this is an important time to rely on the experience of your personal financial adviser and the investment professionals who manage your assets in the Virtus Mutual Funds. We encourage you to carefully consider the commentary of our investment professionals on the following pages and meet with your adviser to review your portfolio and, when appropriate, adjust it to fit your current investment objectives and your tolerance for risk. Our wide range of equity, fixed income, and alternative investments allow you to allocate your assets and design a portfolio tailored to your individual needs. Information about your investments is always available on our website, WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will do our very best to meet your expectations. 1 On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 1, 2009 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICES GROUP, TOLL FREE, AT 1-800-243-1574. 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 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS ADR (AMERICAN DEPOSITARY RECEIPT) Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a U.S. bank or trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. 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. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major U.S. exchange such as 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. FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2009, see Note 10 Federal Income Tax Information in the Notes to Financial Statements. 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 FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009 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 (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 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 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 table 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 table 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 table 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 table 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, 2009 TO SEPTEMBER 30, 2009 EXPENSE TABLE -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2009 September 30, 2009 Ratio Period* -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,345.10 1.47% $ 8.64 Class C 1,000.00 1,339.60 2.22 13.02 Class I 1,000.00 1,347.00 1.23 7.24 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.61 1.47 7.46 Class C 1,000.00 1,013.80 2.22 11.27 Class I 1,000.00 1,018.83 1.23 6.24 * 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 365 days to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. 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 FOREIGN OPPORTUNITIES FUND Class A: JVIAX Class C: JVICX Class I: JVXIX [ ] FOREIGN OPPORTUNITIES FUND (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, 2009, the Fund's Class A shares at NAV returned -4.41%, Class C shares returned -5.18% and Class I shares returned -4.03%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91% and the MSCI EAFE(R) Index (Net), the Fund's style-specific index appropriate for comparison, returned 3.23%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The risk rally persisted throughout most of the Fund's fiscal year. [ ] Late in the fiscal period, there were signs that riskier investments might be losing their appeal. If this proves out, higher quality names may benefit. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] Our philosophy and management approach generally do not deliver relative outperformance during periods when lower quality shares are in favor. [ ] The Fund was significantly overweight in consumer staples, as companies in this sector continued to meet our investment criteria. The sector made a strong positive contribution to relative performance during the period. [ ] The Fund continues to limit exposure to financial companies, which hurt relative performance. Sector specific issues, including lack of clarity, poor transparency, a changing regulatory framework, and questionable ability to drive earnings, informed our decisions in this sector. [ ] The Fund's out-of-index position in India hurt relative performance during the end of the period, although our holdings in the country made attractive contributions to absolute performance. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. --------------------------------------------------- Asset Allocations ----------------- The following table presents the portfolio holdings within certain sectors as a percentage of total investments at September 30, 2009. Consumer Staples 40% Health Care 16 Financials 13 Utilities 12 Energy 8 Industrials 4 Information Technology 3 Other (includes short-term investments) 4 --- Total 100% === --------------------------------------------------- 6 VIRTUS FOREIGN OPPORTUNITIES FUND (CONTINUED)
AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09 ----------------------------------------------------------------------------------------- Inception 1 5 10 to Inception Year Years Years 9/30/09 Date ----------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) -4.41% 7.63% 3.70% -- -- ----------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) -9.91 (6.37) (3.09) -- -- ----------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) -5.18 6.82 -- 8.70% 10/10/03 ----------------------------------------------------------------------------------------- CLASS C SHARES WITH CDSC(4) -5.18 (6.82) -- (8.70) 10/10/03 ----------------------------------------------------------------------------------------- CLASS I SHARES AT NAV -4.03 -- -- -2.03 5/15/06 ----------------------------------------------------------------------------------------- S&P 500(R) INDEX -6.91 (1.01) -0.15 NOTE 5 NOTE 5 ----------------------------------------------------------------------------------------- MSCI EAFE(R) INDEX (NET) 3.23 6.07 2.54 NOTE 6 NOTE 6 ----------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES: 1.39%; C SHARES: 2.14%; I SHARES: 1.14%. 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 CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 2.72% FOR CLASS C (SINCE 10/10/03) AND -3.74% FOR CLASS I (SINCE 5/15/06). (6) INDEX PERFORMANCE IS 7.50% FOR CLASS C (SINCE 10/10/03) AND -3.32% FOR CLASS I (SINCE 5/15/06). (7) PER PROSPECTUS EFFECTIVE 3/2/09. GROWTH OF $10,000 for periods ended 9/30 ----------------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on September 30, 1999 for Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. [GRAPH OMITTED] PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS: Virtus Foreign Opportunities MSCI EAFE(R) S&P 500(R) Fund Class A(1)(3)(4) Index (net) Index 9/30/99 $ 9,425 $10,000 $10,000 9/29/00 10,588 10,317 11,337 9/28/01 6,904 7,361 8,317 9/30/02 6,393 6,218 6,614 9/30/03 7,647 7,835 8,229 9/30/04 9,382 9,565 9,370 9/30/05 12,272 12,033 10,517 9/29/06 15,269 14,338 11,653 9/28/07 19,285 17,903 13,568 9/30/08 14,179 12,442 10,586 9/30/09 13,554 12,845 9,855 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend section on page 3.
7 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands) SHARES VALUE ---------- ---------- PREFERRED STOCKS--2.0% CONSUMER STAPLES--1.1% Companhia de Bebidas das Americas ADR Pfd. 3.650% 151,128 $ 12,432 UTILITIES--0.9% AES Tiete SA Pfd. 10.860% 874,531 9,922 ---------------------------------------------------------------------------- TOTAL PREFERRED STOCK (IDENTIFIED COST $14,317) 22,354 ---------------------------------------------------------------------------- COMMON STOCKS--95.6% CONSUMER STAPLES--39.1% British American Tobacco plc 1,842,522 57,803 Cadbury plc 1,580,891 20,288 Coca-Cola Amatil Ltd. 972,933 8,420 Colruyt SA 42,244 9,928 Diageo plc 1,211,481 18,587 Hindustan Unilever Ltd. 2,670,240 14,577 Imperial Tobacco Group plc 1,729,574 49,976 ITC Ltd. 3,443,089 16,680 Lindt & Spruengli AG 2,562 6,220 Nestle India Ltd. 146,488 6,912 Nestle S.A. Registered Shares 1,004,200 42,792 Philip Morris International, Inc. 1,079,869 52,633 Reckitt Benckiser Group plc 694,817 33,957 Shoppers Drug Mart Corp. 400,514 16,437 Souza Cruz SA 603,611 21,479 Tesco plc 5,345,280 34,136 Woolworths Ltd. 1,222,437 31,544 ---------- 442,369 ---------- ENERGY--7.8% BG Group plc 881,137 15,307 Canadian Natural Resources Ltd. 174,981 11,739 Core Laboratories N.V. 346,568 35,728 Total SA 416,438 24,745 ---------- 87,519 ---------- SHARES VALUE ---------- ---------- FINANCIALS--13.8% Deutsche Boerse AG 111,957 $ 9,150 HDFC Bank Ltd. 1,402,450 48,119 Housing Development Finance Corp. 822,594 47,701 HSBC Holdings plc 491,564 5,625 Muenchener Rueckversicherungs- Gesellschaft AG Registered Shares 68,957 11,002 Power Corp. of Canada 406,800 11,125 QBE Insurance Group Ltd. 1,085,651 23,044 ---------- 155,766 ---------- HEALTH CARE--16.0% Cie Generale D'optique Essilor International SA 387,554 22,087 Cipla Ltd. 2,214,547 12,885 Covidien plc 382,426 16,544 Fresenius Medical Care AG & Co KGaA 118,316 5,892 Novartis AG Registered Shares 577,006 28,870 Novo Nordisk A/S Class B 532,396 33,333 Roche Holding AG Registered Shares 278,660 45,040 Synthes, Inc. 131,987 15,908 ---------- 180,559 ---------- INDUSTRIALS--4.0% Bharat Heavy Electricals Ltd. 170,236 8,242 Capita Group plc/The 1,502,163 17,345 De La Rue plc 830,040 11,912 Secom Co. Ltd. 162,200 8,167 ---------- 45,666 ---------- INFORMATION TECHNOLOGY--3.4% Companhia Brasileira de Meios de Pagamento 1,244,000 12,324 Nintendo Co. Ltd. 42,600 10,915 Redecard SA 972,360 15,033 ---------- 38,272 ---------- See Notes to Financial Statements 8 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) SHARES VALUE ---------- ---------- UTILITIES--11.5% Companhia Energetica de Minas Gerais 768,028 $ 11,618 CPFL Energia SA 557,600 10,084 Enagas S.A. 1,690,139 35,319 Red Electrica Corp. S.A. 507,600 25,976 RWE AG 154,880 14,385 Scottish & Southern Energy plc 860,343 16,128 Terna Rete Elettrica Nazionale S.p.A. 4,310,600 16,811 ---------- 130,321 ---------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $953,422) 1,080,472 ---------------------------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS--97.6% (IDENTIFIED COST $967,739) 1,102,826 ---------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--4.1% MONEY MARKET MUTUAL FUNDS--4.1% State Street Institutional Liquid Reserves Fund -- Institutional Shares (seven-day effective yield 0.260%) 46,865,246 46,865 ---------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $46,865) 46,865 ---------------------------------------------------------------------------- TOTAL INVESTMENTS--101.7% (IDENTIFIED COST $1,014,604) 1,149,691(1) Other assets and liabilities, net--(1.7)% (19,507) ---------- NET ASSETS--100.0% $1,130,184 ========== ABBREVIATIONS: ADR American Depositary Receipt FOREIGN CURRENCIES: CHF Swiss Franc EUR European Currency Unit GBP British Pound Sterling COUNTRY WEIGHTINGS as of September 30, 2009+ --------------------------------------------------------- United Kingdom 24% Switzerland 17 India 14 Brazil 8 United States (includes short-term investments) 6 Australia 5 Spain 5 Other 21 --------------------------------------------------------- Total 100% --------------------------------------------------------- +% of total investments as of September 30, 2009 At September 30, 2009, the Fund had entered into forward currency contracts as follows (amounts reported in thousands): Unrealized Contracts In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) ------------ ----------- ---------- ----------- -------------- CHF 21,374 USD 20,756 3/29/10 $20,659 $ 97 EUR 17,786 USD 26,027 3/29/10 26,017 10 GBP 25,885 USD 41,594 3/29/10 41,354 240 ---- $347 ==== Refer to Key Investment Terms and Footnote Legend on page 3. See Notes to Financial Statements 9 VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Value Level 2 -- at Level 1 -- Significant September 30, Quoted Observable 2009 Prices Inputs ------------- ---------- ----------- ASSETS TABLE Equity Securities: Common Stocks $1,080,472 $1,080,472 $ -- Preferred Stocks 22,354 22,354 -- Short-Term Investments 46,865 46,865 -- ---------- ---------- ---- Total Investments $1,149,691 $1,149,691 $ -- ========== ========== ==== Other Financial Instruments: Assets: Forward Currency Contracts $ 347 $ -- $347 ========== ========== ==== There are no Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend on page 3. See Notes to Financial Statements 10 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2009 (Amounts reported in thousands except shares and per share amounts) ASSETS Investment securities at value(1)............................ $ 1,149,691 Foreign currency at value(2)................................. 1,239 Receivables Investment securities sold................................ 695 Fund shares sold.......................................... 6,923 Dividends and interest receivable......................... 3,524 Tax reclaims.............................................. 1,395 Net unrealized appreciation on forward currency contracts.... 347 Prepaid expenses............................................. 119 ----------- Total assets........................................... 1,163,933 ----------- LIABILITIES Payables Fund shares repurchased................................... 22,033 Investment securities purchased .......................... 6,216 Foreign capital gain taxes payable........................ 4,032 Investment advisory fee................................... 767 Distribution and service fees............................. 164 Administration fee........................................ 69 Transfer agent fees and expenses.......................... 230 Trustees' fee and expenses................................ 14 Professional fee.......................................... 33 Other accrued expenses ................................... 191 ----------- Total liabilities...................................... 33,749 ----------- NET ASSETS................................................... $ 1,130,184 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest............. $ 1,382,118 Accumulated undistributed net investment income (loss)....... 12,245 Accumulated undistributed net realized gain (loss)........... (395,838) Net unrealized appreciation (depreciation) on investments.... 131,659 ----------- NET ASSETS................................................... $ 1,130,184 =========== CLASS A Net asset value (net assets/shares outstanding) per share.... $19.40 Maximum offering price per share $19.40/(1-5.75%)............ $20.58 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................ 26,025,210 Net Assets................................................... $ 505,009 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ............................. $19.21 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................ 3,654,220 Net Assets................................................... $ 70,201 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ............................. $19.45 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................ 28,540,645 Net Assets................................................... $ 554,974 (1) Investment in securities at cost ........................ $ 1,014,604 (2) Foreign currency at cost ................................ 1,139 See Notes to Financial Statements 11 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands) INVESTMENT INCOME Dividends.................................................... $ 33,781 Interest..................................................... 19 Security lending............................................. 29 Foreign taxes withheld....................................... (1,922) ---------- Total investment income................................ 31,907 ---------- EXPENSES Investment advisory fees..................................... 7,525 Service fees, Class A........................................ 1,132 Distribution and service fees, Class C....................... 668 Administration fees.......................................... 747 Transfer agent fee and expenses ............................. 1,380 Custodian fees............................................... 663 Printing fees and expenses................................... 139 Professional fees............................................ 60 Registration fees............................................ 119 Trustees' fee and expenses .................................. 90 Miscellaneous expenses....................................... 168 ---------- Total expenses............................................... 12,691 ---------- NET INVESTMENT INCOME (LOSS)................................. 19,216 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments...................... (281,696) Net realized gain (loss) on foreign currency transactions.... 5,366 Net change in unrealized appreciation (depreciation) on investments ........................................... 209,689 Net change in unrealized appreciation (depreciation) on foreign currency translation ............................. (2,772) ---------- NET GAIN (LOSS) ON INVESTMENTS............................... (69,413) ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ (50,197) ========== See Notes to Financial Statements 12 VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands)
Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ FROM OPERATIONS Net investment income (loss) ................................ $ 19,216 $ 10,197 Net realized gain (loss) .................................... (276,330) (97,223) Net change in unrealized appreciation (depreciation) ........ 206,917 (299,345) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... (50,197) (386,371) ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A .............................. (5,015) (4,273) Net investment income, Class C .............................. -- (216) Net investment income, Class I .............................. (4,811) (3,178) Net realized short-term gains, Class A ...................... (259) (6,704) Net realized short-term gains, Class C ...................... (40) (1,119) Net realized short-term gains, Class I ...................... (184) (4,041) Net realized long-term gains, Class A ....................... -- (5,433) Net realized long-term gains, Class C ....................... -- (907) Net realized long-term gains, Class I ....................... -- (3,275) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ...... (10,309) (29,146) ---------- ---------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (11,828 and 15,249 shares, respectively) ............... 191,967 403,457 Class C (724 and 1,782 shares, respectively) ................... 11,630 47,916 Class I (17,113 and 8,230 shares, respectively) ................ 289,001 206,483 REINVESTMENT OF DISTRIBUTIONS Class A (293 and 514 shares, respectively) ..................... 4,739 14,391 Class C (2 and 51 shares, respectively) ........................ 29 1,421 Class I (249 and 285 shares, respectively) ..................... 4,026 7,970 PLANS OF REORGANIZATION (SEE NOTE 9) Class A (0 and 2,807 shares, respectively) ..................... -- 62,246 Class C (0 and 68 shares, respectively) ........................ -- 1,495 Class I (0 and 0 shares, respectively) ......................... -- -- SHARES REPURCHASED Class A (16,329 and 11,701 shares, respectively) ............... (265,401) (290,186) Class C (1,783 and 963 shares, respectively) ................... (28,718) (23,872) Class I (8,248 and 4,187 shares, respectively) ................. (133,887) (105,982) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ...... 73,386 325,339 CAPITAL CONTRIBUTIONS Fair Funds settlement(1) .................................... 931 -- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ....................... 13,811 (90,178) NET ASSETS Beginning of period ......................................... 1,116,373 1,206,551 ---------- ---------- END OF PERIOD ............................................... $1,130,184 $1,116,373 ========== ========== Accumulated undistributed net investment income (loss) at end of period ............................................ $ 12,245 $ 5,790 (1) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements.
See Notes to Financial Statements 13 VIRTUS FOREIGN OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS 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) GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ------------------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/08 to 9/30/09 $20.54 0.34(4) (1.29) (0.95) (0.18) (0.01) (0.19) 10/1/07 to 9/30/08 28.58 0.20(4) (7.59) (7.39) (0.17) (0.48) (0.65) 3/1/07 to 9/30/07 25.00 0.22(4) 3.46 3.68 (0.06) (0.04) (0.10) 3/1/06 to 2/28/07 21.47 0.21(4) 4.08 4.29 (0.17) (0.59) (0.76) 3/1/05 to 2/28/06 19.02 0.17(4) 3.85 4.02 (0.22) (1.35) (1.57) 3/1/04 to 2/28/05 15.47 0.16 3.81 3.97 (0.16) (0.26) (0.42) CLASS C 10/1/08 to 9/30/09 $20.27 0.22(4) (1.27) (1.05) -- (0.01) (0.01) 10/1/07 to 9/30/08 28.31 0.01(4) (7.52) (7.51) (0.05) (0.48) (0.53) 3/1/07 to 9/30/07 24.85 0.10(4) 3.44 3.54 (0.04) (0.04) (0.08) 3/1/06 to 2/28/07 21.41 (0.01)(4) 4.11 4.10 (0.07) (0.59) (0.66) 3/1/05 to 2/28/06 19.11 (0.06)(4) 3.92 3.86 (0.21) (1.35) (1.56) 3/1/04 to 2/28/05 15.55 0.01 3.84 3.85 (0.03) (0.26) (0.29) CLASS I 10/1/08 to 9/30/09 $20.58 0.40(4) (1.28) (0.88) (0.24) (0.01) (0.25) 10/1/07 to 9/30/08 28.61 0.27(4) (7.61) (7.34) (0.21) (0.48) (0.69) 3/1/07 to 9/30/07 25.00 0.25(4) 3.47 3.72 (0.07) (0.04) (0.11) 5/15/06(9) to 2/28/07 22.54 0.13(4) 3.14 3.27 (0.22) (0.59) (0.81) RATIO OF NET NET NET EXPENSES PAYMENT CHANGE ASSET ASSETS, TO BY IN NET VALUE, END OF AVERAGE AFFILIATE/ ASSET END OF TOTAL PERIOD NET NON-AFFILIATE VALUE PERIOD RETURN(1) IN THOUSANDS) ASSETS ------------------------------------------------------------------------------------------------------------ CLASS A 10/1/08 to 9/30/09 -- (1.14) $19.40 (4.41)% $505,009 1.48% 10/1/07 to 9/30/08 -- (8.04) 20.54 (26.48) 620,952 1.37(8) 3/1/07 to 9/30/07 --(5)(7) 3.58 28.58 14.72(3) 667,719 1.36(2) 3/1/06 to 2/28/07 -- 3.53 25.00 20.39 360,822 1.37 3/1/05 to 2/28/06 -- 2.45 21.47 21.82 128,991 1.25 3/1/04 to 2/28/05 --(5)(6) 3.55 19.02 26.15 2,714 1.25 CLASS C 10/1/08 to 9/30/09 -- (1.06) $19.21 (5.18)% $ 70,201 2.23% 10/1/07 to 9/30/08 -- (8.04) 20.27 (27.04) 95,523 2.12(8) 3/1/07 to 9/30/07 --(5)(7) 3.46 28.31 14.24(3) 106,847 2.11(2) 3/1/06 to 2/28/07 -- 3.44 24.85 19.46 45,154 2.13 3/1/05 to 2/28/06 -- 2.30 21.41 20.96 6,019 2.00 3/1/04 to 2/28/05 --(5)(6) 3.56 19.11 25.21 39 2.00 CLASS I 10/1/08 to 9/30/09 -- (1.13) $19.45 (4.03)% $554,974 1.23% 10/1/07 to 9/30/08 -- (8.03) 20.58 (26.31) 399,898 1.12(8) 3/1/07 to 9/30/07 --(5)(7) 3.61 28.61 14.88(3) 431,985 1.11(2) 5/15/06(9) to 2/28/07 -- 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 10/1/08 to 9/30/09 1.48% 2.09% 63% 10/1/07 to 9/30/08 1.39 0.78 129 3/1/07 to 9/30/07 1.40(2) 1.44(2) 49(3) 3/1/06 to 2/28/07 1.43 0.88 57 3/1/05 to 2/28/06 1.62 0.85 52 3/1/04 to 2/28/05 2.10 1.50 32 CLASS C 10/1/08 to 9/30/09 2.23% 1.33% 63% 10/1/07 to 9/30/08 2.15 0.03 129 3/1/07 to 9/30/07 2.16(2) 0.64(2) 49(3) 3/1/06 to 2/28/07 2.17 (0.06) 57 3/1/05 to 2/28/06 2.35 (0.29) 52 3/1/04 to 2/28/05 2.86 0.76 32 CLASS I 10/1/08 to 9/30/09 1.23% 2.42% 63% 10/1/07 to 9/30/08 1.15 1.01 129 3/1/07 to 9/30/07 1.15(2) 1.59(2) 49(3) 5/15/06(9) to 2/28/07 1.17(2) 0.71(2) 57(3)
(1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Annualized. (3) Not annualized. (4) Computed using average shares outstanding. (5) Amount is less than $0.005. (6) Payment by affiliate. (7) Payment by non-affiliate. (8) Blended net expense ratio. (9) Inception date. See Notes to Financial Statements 14 and 15 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2009 1. ORGANIZATION Virtus 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 Virtus 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% with some exceptions. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions 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, 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 and those differences could be significant. 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 continued volatility in the current market, 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. 16 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. Investments in underlying funds are valued at each fund's closing net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time). Short-term investments having a maturity of 60 days or less are valued at amortized cost, which approximates market. The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 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. 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 each Fund's tax positions and has concluded that no provision for income tax is required in any Fund's financial statements. The Fund is 17 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 unaware 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 remains 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. 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 the date it is 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. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures on derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the 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. Summarized below are the specific types of derivative instruments used by the Fund. FORWARD CURRENCY CONTRACTS: 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 in the Statement of Operations. 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 18 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 and the value at the time it was closed or offset. This is presented in the Statement of Operations as net realized gain (loss) from foreign currency transactions. The Fund enters 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. The Fund also from time to time hedges the currency exposure of foreign denominated securities, held in the portfolio, back to U.S. dollars during perceived times of U.S. dollar strength. This is done in order to protect U.S. dollar value of the portfolio. 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. The following is a summary of the Fund's derivative instrument holdings categorized by primary risk exposure as of September 30, 2009 ($ reported in thousands): TOTAL VALUE ----------------- Foreign exchange contracts(1) $347 For open derivative instruments as of September 30, 2009, see the Schedule of Investments, which is also indicative of activity for the year ended September 30, 2009. REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ------------------------------------------------- TOTAL VALUE ----------------- Foreign exchange contracts(2) $5,366 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ---------------------------------------------------- TOTAL VALUE ----------------- Foreign exchange contracts(3) $388 (1) Located within Net unrealized appreciation on forward currency contracts on the Statement of Assets and Liabilities. (2) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (3) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. H. SECURITY LENDING: The Fund may loan securities to qualified brokers through an agreement with State Street Bank and Trust Company ("State Street"). 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 State Street for its services in connection with this securities lending program. Lending 19 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At September 30, 2009, the Fund had no securities on loan. I. 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. At September 30, 2009, the Fund did not hold Equity linked certificates. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) At the close of business December 31, 2008, Virtus Investment Partners, Inc. ("Virtus") spun off from The Phoenix Companies, Inc. ("PNX"), into an independent publicly traded company which through its affiliates provides asset management and related services to individuals and institutions. Virtus Investment Advisers, Inc. ("VIA," the "Adviser," formerly known as Phoenix Investment Counsel, Inc.) and VP Distributors, Inc. ("VP Distributors," formerly known as Phoenix Equity Planning Corporation) are indirect wholly-owned subsidiaries of Virtus. Due to the spin-off, the asset management subsidiaries have changed their names to reflect the Virtus brand. As compensation for its services to the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund. $2+ BILLION 1ST THROUGH $4+ $2 BILLION $4 BILLION BILLION ------------ ------------- --------- 0.85% 0.80% 0.75% The Adviser may recapture operating expenses waived or reimbursed under arrangements previously in effect, 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 any 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"). 20 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 As distributor of the Fund's shares, VP Distributors, Inc., an indirect wholly-owned subsidiary of Virtus, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2009, as follows: CLASS A CLASS A CLASS C NET SELLING DEFERRED DEFERRED COMMISSIONS SALES CHARGES SALES CHARGES ------------- --------------- --------------- $37 $1 $34 In addition, the Fund pays VP Distributors distribution and/or service fees at the annual rate of 0.25% for Class A shares, and 1.00% for Class C shares applied to the average daily net assets of each respective class. 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 CDSC, the CDSC schedule of the original shares purchased continues to apply. VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2009, the Fund incurred administration fees totaling $747. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2009, transfer agent fees were $1,380 as reported in the Statement of Operations. At September 30, 2009, Virtus and its affiliates, the retirement plans of Virtus and its affiliates held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE --------- --------- Class A shares........ 5,724 $ 111 Class I shares........ 1,832,870 35,649 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. 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, 2009, were as follows: PURCHASES SALES ------------- ------------ $631,056 $546,390 There were no purchases or sales of long-term U.S. Government and agency securities. 21 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 5. 10% SHAREHOLDERS As of September 30, 2009, 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 shareholders are not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- -------- 34% 2 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. 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, 2009, the Fund held securities issued by various companies in the consumer staples sector, representing 40% of the total investments of the Fund. 7. 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. 8. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus (and, prior to the spin-off described in Note 3, PNX) and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 9. 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 Virtus Opportunities Trust ("Opportunities Trust") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees of Opportunities Trust on June 4, 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, 22 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 unrealized depreciation, which were combined with those of the Foreign Opportunities Fund. The aggregate net assets of Foreign Opportunities Fund immediately after the merger were $1,242,947. The shareholders of each Class of the International Strategies Fund received for each share owned approximately 0.50 and 0.46 share, respectively, of Class A and Class C shares of the Foreign Opportunities Fund. 10. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2009, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows: NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ---------- -------------- -------------- ---------------- $1,034,145 $126,719 $(11,173) $115,546 The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: EXPIRATION YEAR ------------------------------------------ 2010 2017 TOTAL ---------- ---------- ----------- $379 $153,055 $153,434 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. The Fund's capital loss carryover may include losses acquired in connection with prior year mergers. Utilization of these capital loss carryovers is subject to annual limitations. The Fund had capital loss carryover of $1,299 which expired in 2009. 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, 2009, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL CURRENCY CURRENCY LOSS LOSS LOSS LOSS DEFERRED RECOGNIZED DEFERRED RECOGNIZED ---------- ------------ ---------- ------------ $222,516 $106,728 $3,446 $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 $15,690 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 23 VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 11. RECLASSIFICATIONS OF CAPITAL ACCOUNTS ($ 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, 2009, 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) -------------- ---------------- -------------- $(2,253) $(2,935) $5,188 12. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through November 20, 2009, the date the financial statements were available for issuance, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements. 24 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [GRAPHIC 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, a series of Virtus Opportunities Trust, at September 30, 2009, the results of its operations for the year then ended, and the changes in its net assets for each of the two years in the period then ended 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 audits 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania November 20, 2009 25 VIRTUS FOREIGN OPPORTUNITIES FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2009 (UNAUDITED) For the fiscal year ended September 30, 2009, 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 ------- ------- -------- 100% 30% $ -- For the fiscal year ended September 30, 2009, the Fund recognized $31,147 ($ reported in thousands), of foreign source income on which the Fund paid foreign taxes of $2,021 ($ 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. 26
FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2009 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 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------ NAME, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ENDED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------ 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). 46 Funds ------------------------------------------------------------------------------------------------------------------ Philip R. McLoughlin Partner, Cross Pond Partners, LLC (2006-Present). Director, World Trust Fund. YOB: 1946 Chairman and Trustee, The Phoenix Edge Series Fund. Director, DTF Tax-Free Elected: 1993 Income Fund, Inc., Duff & Phelps Utility and Corporate Bond Trust, Inc. and DNP 49 Funds Select Income Fund, Inc. Managing Director, SeaCap, Asset Management Fund I L.P. ------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (private bank) YOB: 1951 (1982-2006). Director, DTF Tax-Free Income Fund, Inc., Duff & Phelps Utility Elected: 2001 and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. 49 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 46 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 46 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 46 Funds ------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES The individual 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, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ENDED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------ George R. Aylward(1) Director, President and Chief Executive Officer (since 2008), Director and President YOB: 1964 (2006-2008), Chief Operating Officer (2004-2006), Vice President, Finance (2001- Elected: 2006 2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Various 48 Funds senior officer and directorship positions with Virtus affiliates (2005-present). Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005- 2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present). ------------------------------------------------------------------------------------------------------------------ (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.
27
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 Executive Vice President, Head of Operations YOB: 1952 since 2006. (since 2009), Senior Vice President, Operations (2008-2009), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). Assistant Treasurer (2001-2009), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). ------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product YOB: 1962 since 2008. Management (since 2009), Senior Vice President, Asset Management Product Development (2008- 2009), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (2008-present), Director and Senior President (2006-2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (since 2008). ------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna c/o Zweig-DiMenna Chief Compliance Officer Associates LLC (1989-present). Vice President, and Associates, LLC since 2004. Chief Compliance Officer, The Zweig Total Return 900 Third Avenue Fund, Inc. (2004-present). Vice President, and Chief New York, NY 10022 Compliance Officer, The Zweig Fund, Inc. (2004- YOB: 1945 present). President and Director of Watermark Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). ------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer Senior Vice President, Fund Administration (since YOB: 1972 and Treasurer since 2005. 2009), Vice President, Fund Administration (2007- 2009), 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. ------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Senior Vice President (since 2009), Counsel and YOB: 1954 Officer, Counsel and Secretary Secretary (2008-present) and Vice President since 2005. (2008-2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. 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). ------------------------------------------------------------------------------------------------------------------
28 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 Francis G. Waltman, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 100 Pearl Street Hartford, CT 06103-4506 PRINCIPAL UNDERWRITER VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 TRANSFER AGENT VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 2001 Market Street Philadelphia, PA 19103-7042 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser 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. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] ------------- VIRTUS PRSRT STD MUTUAL FUNDS U.S. POSTAGE PAID c/o State Street Bank and Trust Company LANCASTER, PA P.O. Box 8301 PERMIT 1793 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 8011 11-09 Annual Report VIRTUS MUTUAL FUNDS -------------------------------------------------------------------------------- Virtus Multi-Sector Short Term Bond Fund -------------------------------------------------------------------------------- TRUST NAME: September 30, 2009 [Graphic Omitted] Eligible VIRTUS shareholders can sign up for OPPORTUNITIES eDelivery at Virtus.com TRUST NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE TABLE OF CONTENTS VIRTUS MULTI-SECTOR SHORT TERM BOND FUND ("Multi-Sector Short Term Bond Fund") Message to Shareholders................................................... 1 Key Investment Terms and Footnote Legend.................................. 3 Disclosure of Fund Expenses............................................... 5 Fund Summary.............................................................. 7 Schedule of Investments................................................... 10 Statement of Assets and Liabilities....................................... 26 Statement of Operations................................................... 27 Statement of Changes in Net Assets........................................ 28 Financial Highlights...................................................... 30 Notes to Financial Statements............................................. 32 Report of Independent Registered Public Accounting Firm................... 41 Tax Information Notice.................................................... 42 Fund Management Tables.................................................... 43 -------------------------------------------------------------------------------- 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, 2009, 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 Dear Fellow Shareholders of Virtus Mutual Funds: [PHOTO OMITTED] Investors who were calmed by the positive news from the financial markets in the second quarter of 2009 may have had a reason to regain some of their enthusiasm during the third quarter. There were numerous signs pointing to an end to the recession: gross domestic product grew by an annualized 3.5 percent, matching its average growth rate of the last 80 years; a measure of stability appeared in the housing market; consumer confidence inched up; and better-than-expected profits and rosier outlooks were reported by many corporations. The capital markets continued their recovery during the quarter, with most major stock market indices up by double digits for the quarter. The S&P 500(R) Index was up 15.6 percent in the quarter and in late September was at its highest level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8 percent in the third quarter, and as of September 30 had improved by 13.5 percent for the year. These figures are even more encouraging when compared with market lows in early March and the double-digit losses both indices recorded during the first quarter of the year. Bonds also participated in the third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12 percent. Although the Federal Open Market Committee acknowledged that "economic activity has picked up following its severe downturn," these recent gains should not unleash any 1990s-style market "exuberance." The strength and timing of a full recovery is yet to be realized. Unemployment rates that probably have not peaked remain a drag on consumer spending, and with an expected slowdown of the government's monetary and fiscal stimulus, some economists speculate that the growth from the second and third quarter may not be sustainable into next year. These factors suggest this is an important time to rely on the experience of your personal financial adviser and the investment professionals who manage your assets in the Virtus Mutual Funds. We encourage you to carefully consider the commentary of our investment professionals on the following pages and meet with your adviser to review your portfolio and, when appropriate, adjust it to fit your current investment objectives and your tolerance for risk. Our wide range of equity, fixed income, and alternative investments allow you to allocate your assets and design a portfolio tailored to your individual needs. Information about your investments is always available on our website, WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will do our very best to meet your expectations. 1 On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 1, 2009 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICES GROUP, TOLL FREE, AT 1-800-243-1574. 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 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS BANK OF AMERICA MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX The Bank of America 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. BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. FEDERAL RESERVE (THE "FED") The central bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system. PIK (PAYMENT-IN-KIND SECURITY) A bond which pays some or all interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock. PPIP (PUBLIC-PRIVATE INVESTMENT PROGRAM) A plan designed to value and remove troubled assets from the balance sheet of troubled financial institutions in the U.S. Public-Private Investment Program consists mainly of two parts: a Legacy Loans Program and a Legacy Securities Program. The Legacy Loans Program uses FDIC guaranteed debt along with private equity to purchase troubled loans from banks. On the other hand, the Legacy Securities Program is designed to use funds from the Federal Reserve, Treasury and private investors to reignite the market for legacy securities. Legacy securities include certain mortgage-backed securities, asset-backed securities and other securitized assets that the government deems to be eligible for the program. 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. TALF (TERM ASSET-BACKED SECURITIES LOAN FACILITY) The TALF is intended to assist the credit markets in accommodating the credit needs of consumers and small businesses by facilitating the issuance of asset-backed securities (ABS) and improving the market conditions for ABS more generally. 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. 3 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2009, see Note 9 Federal Income Tax Information in the Notes to Financial Statements. (2) Amounts are less than $500 (not reported in thousands). (3) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (4) 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, 2009, these securities amounted to a value of $290,881 or 15.1% of net assets. (5) Regulation S security. Security is offered and sold outside of the United States; therefore, it is exempt from registration with the SEC under rules 903 and 904 of the Securities Act of 1933. (6) Illiquid security. (7) Illiquid and restricted security. For acquisition information, see Note 6 "Illiquid and Restricted Securities" in the Notes to Financial Statements. (8) Security in default. 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. 4 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009 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 and Class T shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class C shares are sold without a sales charge. 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 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 table 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 table 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 table 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 table 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. 5 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2009 TO SEPTEMBER 30, 2009 EXPENSE TABLE -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2009 September 30, 2009 Ratio Period* -------------------------------------------------------------------------------- MULTI-SECTOR SHORT TERM BOND FUND -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,213.00 1.09% $ 6.05 Class B 1,000.00 1,208.00 1.59 8.80 Class C 1,000.00 1,209.30 1.34 7.42 Class T 1,000.00 1,206.90 1.84 10.18 Class I 1,000.00 1,214.50 1.05 5.83 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.54 1.09 5.53 Class B 1,000.00 1,017.00 1.59 8.07 Class C 1,000.00 1,018.27 1.34 6.80 Class T 1,000.00 1,015.73 1.84 9.34 Class I 1,000.00 1,019.74 1.05 5.33 * 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 365 days to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. 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. 6 TICKER SYMBOLS: VIRTUS MULTI-SECTOR SHORT TERM BOND FUND Class A: NARAX Class B: PBARX Class C: PSTCX Class T: PMSTX Class I: PIMSX [ ] MULTI-SECTOR SHORT TERM BOND FUND (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, 2009, the Fund's Class A shares at NAV returned 14.91%; Class B shares returned 14.41%; Class C shares returned 14.75%; Class T shares returned 14.21%; and Class I shares returned 15.20%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 10.56%; and the Bank of America Merrill Lynch 1-2.99 Year Medium Quality Corporate Bonds Index, the Fund's style-specific index appropriate for comparison, returned 13.10%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. HOW DID THE BOND 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 10.56% for the fiscal year ended September 30, 2009. [ ] In the first 3 meetings of the fiscal year (one of which was an unscheduled inter-meeting) the Federal Reserve (the "Fed") cut the federal funds rate 1.75% from 2.00% to 0.25%. The Fed indicated that the additional rate cuts were necessary in response to the intensification of the financial crisis that increased the downside risk to growth and that inflationary pressures had started to moderate. In the remaining meetings during the fiscal year the Fed left rates unchanged citing concerns of downside risks to growth and near term economic weakness. However, the Fed cited in the last three meetings that the rate of economic contraction had slowed. [ ] 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, 2009 can be broken down into two distinct sub-sections; the 4th quarter of 2008 and the first three quarters of 2009. The credit markets during the 4th quarter of 2008 were extraordinarily volatile. This was primarily due to fear surrounding the subprime mortgage market and its resulting contagion. During 2008 and even more in the 4th quarter, 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 Fed 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 spread sectors during this time period. [ ] During the first three quarters of 2009 the economy continued to show signs of weakening with rising unemployment, a deteriorating housing market, and declining retail sales and consumer confidence. While still at recessionary levels, the pace of the economic decline has slowed and in the 3rd quarter began to show signs of stabilizing with a modest improvement in the economic statistics. While economic conditions remain weak the improvement during the 3rd quarter coupled with better than expected 2nd quarter earnings gave market participants evidence that we may have turned the corner and will start seeing positive growth by the end of 2009. The implementation of numerous government programs announced during the first quarter such as PPIP, TALF, expanded quantitative easing via the Federal Reserve Bank's purchase of up to $1.75 trillion long dated U.S. Treasuries, agency debt, and 7 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND (CONTINUED) agency Mortgage-backed Securities, coupled with the FASB decision to alter rules regarding mark to market accounting continue to help improve sentiment in all fixed income markets and inject liquidity into the system. The flight to quality over the past 18 months has reversed with U.S. Treasuries being outperformed by nearly all spread sectors during this period. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] The significant outperformance of fixed income spread sectors relative to U.S. Treasuries and agency debentures was the key driver of the funds' strong performance for the fiscal year. The Fund benefited from its overweight to spread product and lack of exposure to U.S. Treasuries and agency debentures; two factors that hurt performance in fiscal year ending September 30, 2008. [ ] Among fixed income sectors, the fund's overweight to bank loans, corporate high yield, non-U.S. Dollar bonds, commercial mortgage-backed securities, and corporate high quality were all significant positive contributors to performance for the fiscal year. [ ] The fund's allocation to non-agency residential mortgage-backed securities detracted the most from performance during the fiscal year. The underperformance took place during the 4th quarter of 2008; this sector has performed well so far in 2009. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. -------------------------------------------------------------------------------- Asset Allocations ----------------- The following table presents the portfolio holdings within certain sectors as a percentage of total investments as of September 30, 2009. Corporate Bonds 41% Mortgage-Backed Securities 20 Foreign Government Securities 17 Loan Agreements 12 Asset-Backed Securities 6 U.S. Government Securities 2 Other (includes short-term investments) 2 --- Total 100% === -------------------------------------------------------------------------------- 8 AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09 --------------------------------------------------------------------------------
1 5 10 Inception to Inception Year Years Years 9/30/09 Date -------------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) 14.91% 4.10% 5.63% -- -- -------------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) 12.33 3.63 5.39 -- -- -------------------------------------------------------------------------------------------------------- CLASS B SHARES AT NAV(2) 14.41 3.55 5.10 -- -- -------------------------------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) 12.91 3.55 5.10 -- -- -------------------------------------------------------------------------------------------------------- CLASS C SHARES AT NAV(2) 14.75 3.81 5.43 -- -- -------------------------------------------------------------------------------------------------------- CLASS T SHARES AT NAV(2) 14.21 3.30 -- 3.45% 6/2/03 -------------------------------------------------------------------------------------------------------- CLASS T SHARES WITH CDSC(4) 14.21 3.30 -- 3.45 6/2/03 -------------------------------------------------------------------------------------------------------- CLASS I SHARES AT NAV 15.20 -- -- 6.99 6/6/08 -------------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 10.56 5.13 6.30 NOTE 5 NOTE 5 -------------------------------------------------------------------------------------------------------- BANK OF AMERICA MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX 13.10 4.23 5.23 NOTE 6 NOTE 6 -------------------------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES 1.08%; B SHARES 1.58%; C SHARES 1.33%; T SHARES 1.83%; I SHARES 0.83%. --------------------------------------------------------------------------------------------------------
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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 4.60% FOR CLASS T (SINCE 6/2/03) AND 7.20% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 3.87% FOR CLASS T (SINCE 6/2/03) AND 5.08% FOR CLASS I (SINCE 6/6/08). (7) PER PROSPECTUS EFFECTIVE 1/31/09. GROWTH OF $10,000 for periods ended 9/30 -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A, Class B and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Bank of America Merrill Lynch Share Share Share Barclays Capital 1-2.99 Year Medium Class A Class B Class C U.S. Aggregate Quality Corporate (1)(3)(4) (1)(4) (1) Bond Index Bonds Index --------- ------- ------- ---------------- ------------------ 9/30/99 $ 9,775 $10,000 $10,000 $10,000 $10,000 9/29/00 10,395 10,586 10,609 10,699 10,637 9/28/01 11,232 11,359 11,459 12,085 11,774 9/30/02 12,001 12,077 12,210 13,124 12,306 9/30/03 13,202 13,225 13,422 13,834 13,242 9/30/04 13,838 13,821 14,086 14,343 13,541 9/30/05 14,248 14,160 14,464 14,744 13,749 9/29/06 14,813 14,619 14,995 15,285 14,325 9/28/07 15,510 15,234 15,624 16,070 15,054 9/30/08 14,724 14,385 14,799 16,657 14,724 9/30/09 16,920 16,458 16,982 18,415 16,654
For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend on page 3. 9 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- U.S. GOVERNMENT SECURITIES--1.6% U.S. Treasury Note 2.875%, 6/30/10 $ 1,000 $ 1,019 1.750%, 8/15/12 29,000 29,299 -------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $30,164) 30,318 -------------------------------------------------------------------------- MUNICIPAL BONDS--0.4% CONNECTICUT--0.1% Mashantucket Western Pequot Tribe Taxable Series A, 144A (NATL-RE Insured) 6.910%, 9/1/12(4) 2,515 1,907 ---------- NEW YORK--0.1% State Dormitory Authority 04-B 3.350%, 12/15/09 1,610 1,618 ---------- SOUTH DAKOTA--0.0% Educational Enhancement Funding Corp. Taxable Series 02-A 6.720%, 6/1/25 112 96 ---------- VIRGINIA--0.2% Tobacco Settlement Financing Corp. Taxable Series 07-A1 6.706%, 6/1/46 4,850 3,464 ---------- -------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $8,748) 7,085 -------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES--17.0% Bolivarian Republic of Venezuela RegS 5.375%, 8/7/10(5) 5,172 5,030 10.750%, 9/19/13 4,920 4,895 8.500%, 10/8/14 6,470 5,791 RegS 5.750%, 2/26/16(5) 13,110 9,701 RegS 7.000%, 12/1/18(5) 3,230 2,301 Commonwealth of Australia Series 121, 5.250%, 8/15/10 47,455 AUD 42,335 PAR VALUE VALUE ----------- ---------- Commonwealth of Canada 2.750%, 12/1/10 50,751 CAD $ 48,554 Commonwealth of New Zealand Series 1111, 6.000%, 11/15/11 35,535 NZD 26,597 Federal Republic of Germany Series 147, 2.500%, 10/8/10 15,840 EUR 23,592 Federative Republic of Brazil 7.875%, 3/7/15 $ 1,000 1,179 12.500%, 1/5/16 30,264 BRL 18,962 12.500%, 1/5/22 8,000 BRL 5,012 Kingdom of Norway 6.000%, 5/16/11 130,100 NOK 23,669 5.000%, 5/15/15 41,119 NOK 7,565 Kingdom of Sweden Series 1048, 4.000%, 12/1/09 53,835 SEK 7,768 Series 1045, 5.250%, 3/15/11 28,200 SEK 4,300 Republic of Argentina PIK Interest Capitalization 8.280%, 12/31/33 42,395 28,829 Series GDP 0.000%, 12/15/35(3) 44,890 3,210 Republic of Colombia 12.000%, 10/22/15 14,935,000 COP 9,211 Republic of Costa Rica 144A 6.548%, 3/20/14(4) 4,000 4,300 Republic of Indonesia Series FR-23, 11.000%, 12/15/12 80,600,000 IDR 8,883 Series FR-30, 10.750%, 5/15/16 40,550,000 IDR 4,505 Republic of Korea Series 1112, 4.750%, 12/10/11 9,050,000 KRW 7,738 Republic of Poland Series 0414, 5.750%, 4/25/14 23,825 PLZ 8,306 6.375%, 7/15/19 2,075 2,331 Republic of South Africa 6.875%, 5/27/19 660 736 Republic of Trinidad and Tobago RegS 9.875%, 10/1/09(5) 2,300 2,300 Republic of Turkey 0.000%, 2/2/11 13,000 TRY 7,861 See Notes to Financial Statements 10 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- Russian Federation RegS 8.250%, 3/31/10(5) $ 135 $ 139 RegS 7.500%, 3/31/30(3)(5) 1,880 2,033 -------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $302,914) 327,633 -------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES--20.1% AGENCY--5.8% FHLMC 6.000%, 8/1/34 1,537 1,633 FNMA 5.500%, 1/1/17 561 600 6.000%, 5/1/17 160 172 5.500%, 8/1/17 117 125 4.500%, 4/1/18 1,206 1,274 5.000%, 10/1/19 2,115 2,241 5.500%, 2/1/20 787 837 5.500%, 3/1/20 835 889 5.500%, 3/1/20 291 309 5.500%, 3/1/20 860 915 5.500%, 3/1/20 1,808 1,923 5.500%, 4/1/20 1,332 1,417 5.000%, 6/1/20 3,599 3,805 6.000%, 12/1/32 247 263 5.500%, 2/1/33 568 598 5.500%, 5/1/34 2,402 2,524 6.000%, 8/1/34 1,298 1,382 6.000%, 8/1/34 1,657 1,763 6.000%, 10/1/34 1,182 1,256 6.000%, 10/1/34 2,032 2,159 5.500%, 11/1/34 2,776 2,917 5.500%, 11/1/34 1,892 1,988 6.000%, 11/1/34 2,221 2,360 5.500%, 12/1/34 1,304 1,370 5.500%, 1/1/35 2,893 3,040 6.000%, 1/1/37 3,281 3,472 6.000%, 1/1/37 1,942 2,054 5.500%, 7/1/37 20 21 6.000%, 7/1/37 1,010 1,068 6.000%, 12/1/37 4,911 5,192 5.500%, 3/1/38 5,449 5,708 6.000%, 4/1/38 3,454 3,651 5.000%, 5/1/38 4,432 4,585 5.500%, 6/1/38 2,066 2,165 5.500%, 9/1/38 3,130 3,278 5.000%, 11/1/38 6,063 6,272 PAR VALUE VALUE ----------- ---------- AGENCY--CONTINUED 5.500%, 12/1/38 $ 4,515 $ 4,729 4.500%, 2/1/39 6,886 6,985 4.500%, 3/1/39 6,721 6,817 4.500%, 7/1/39 11,979 12,150 4.500%, 8/1/39 3,983 4,040 4.500%, 8/1/39 1,996 2,025 GNMA 6.500%, 7/15/31 43 47 6.500%, 8/15/31 122 132 6.500%, 11/15/31 88 95 6.500%, 2/15/32 27 30 6.500%, 4/15/32 124 133 6.500%, 4/15/32 131 141 ---------- 112,550 ---------- NON-AGENCY--14.3% American Tower Trust 07-1A, C 144A 5.615%, 4/15/37(4) 3,685 3,575 Banc of America Commercial Mortgage, Inc. 05-6, AM 5.351%, 9/10/47(3) 1,593 1,363 Bear Stearns Commercial Mortgage Securities 06-PW12, A4 5.903%, 9/11/38(3) 7,450 7,233 06-PW14, A4 5.201%, 12/11/38 1,500 1,391 05-PW10, A4 5.405%, 12/11/40(3) 11,300 11,107 07-PW18, A4 5.700%, 6/11/50 4,635 4,103 Citigroup-Deutsche Bank Commercial Mortgage Trust 05-CD1, A4 5.399%, 7/15/44(3) 5,000 4,931 05-CD1, AM 5.399%, 7/15/44(3) 6,410 5,447 07-CD4, A4 5.322%, 12/11/49 6,465 5,405 Countrywide Home Loan Mortgage Pass-Through Trust 02-34, B2 5.750%, 1/25/33(6) 1,333 1,004 02-36, B2 6.000%, 1/25/33(6) 1,355 1,035 See Notes to Financial Statements 11 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- NON-AGENCY--CONTINUED Credit Suisse First Boston Mortgage Securities Corp. 02-CKS4, B 5.333%, 11/15/36 $ 5,000 $ 4,930 04-C5, A3 4.499%, 11/15/37 1,270 1,223 Credit-Based Asset Servicing & Securitization LLC 05-CB6, A3 5.120%, 7/25/35(3) 2,521 2,086 Crown Castle Towers LLC 05-1A, AFX 144A 4.643%, 6/15/35(4) 8,000 8,000 05-1A, B 144A 4.878%, 6/15/35(4) 6,510 6,510 06-1A, C 144A 5.470%, 11/15/36(4) 5,000 4,975 First Plus Home Loan Trust 97-3, M2 7.520%, 11/10/23 25 23 GE Capital Commercial Mortgage Corp. 03-C1, C 4.975%, 1/10/38(3) 4,332 4,119 04-C3, A4 5.189%, 7/10/39(3) 3,500 3,551 GMAC Commercial Mortgage Securities, Inc. 04-C2, A3 5.134%, 8/10/38 1,200 1,222 04-C3, A4 4.547%, 12/10/41 4,820 4,801 Greenwich Capital Commercial Funding Corp. 04-GG1, A7 5.317%, 6/10/36(3) 7,950 8,044 GS Mortgage Securities Corp. II 07-EOP, G 144A 0.796%, 3/6/20(3)(4) 5,840 4,511 07-EOP, H 144A 0.894%, 3/6/20(3)(4) 1,850 1,417 07-GG10, A4 5.999%, 8/10/45(3) 10,550 8,719 GSR Mortgage Loan Trust 05-5F, 2A2 5.500%, 6/25/35 8,830 8,810 05-AR6, 3A1 4.558%, 9/25/35(3) 4,569 4,062 PAR VALUE VALUE ----------- ---------- NON-AGENCY--CONTINUED IndyMac Index Mortgage Loan Trust 07-AR2, B1 5.773%, 6/25/37(3) $ 4,732 $ 170 JPMorgan Chase Commercial Mortgage Securities Corp. 05-LDP5, AM 5.386%, 12/15/44(3) 1,752 1,502 06-LDP7, A4 6.065%, 4/15/45(3) 1,350 1,256 06-LDP9, A3 5.336%, 5/15/47 7,450 6,384 07-LD12, A4 5.882%, 2/15/51(3) 8,029 6,822 JPMorgan Mortgage Trust 06-A1, B1 5.340%, 2/25/36(3) 7,645 729 Lehman Brothers - UBS Commercial Mortgage Trust 06-C3, AM 5.712%, 3/15/39(3) 945 708 07-C2, A2 5.303%, 2/15/40 4,527 4,479 07-C2, A3 5.430%, 2/15/40 2,705 2,195 05-C3, AM 4.794%, 7/15/40 7,460 6,338 07-C6, A2 5.845%, 7/15/40 11,125 11,123 07-C7, A3 5.866%, 9/15/45(3) 8,800 7,766 Merrill Lynch Mortgage Investors, Inc. 06-3, 2A1 6.081%, 10/25/36(3) 4,029 3,460 Merrill Lynch Mortgage Trust 06-C1, AM 5.840%, 5/12/39(3) 7,205 5,445 04-KEY2, A3 4.615%, 8/12/39 4,000 3,844 Merrill Lynch-Countrywide Commercial Mortgage Trust 06-4, A3 5.172%, 12/12/49(3) 9,500 8,002 Morgan Stanley Capital I 06-IQ12, A4 5.332%, 12/15/43 8,000 7,162 07-IQ14, A4 5.692%, 4/15/49(3) 9,720 7,950 See Notes to Financial Statements 12 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- NON-AGENCY--CONTINUED Morgan Stanley Mortgage Loan Trust 05-5AR, 4A1 5.505%, 9/25/35(3) $ 1,933 $ 1,291 PNC Mortgage Acceptance Corp. 00-C2, A2 7.300%, 10/12/33 192 198 Prudential Securities Secured Financing Corp. 99-NRF1, F 144A 6.074%, 11/1/31(4) 5,000 4,973 Residential Funding Mortgage Securities I, Inc. 06-S4, A2 6.000%, 4/25/36 5,485 4,662 SBA Commercial Mortgage Backed Securities Trust 06-1A, A 144A 5.314%, 11/15/36(4) 7,450 7,413 06-1A, B 144A 5.451%, 11/15/36(4) 2,875 2,846 Timberstar Trust 06-1A, A 144A 5.668%, 10/15/36(4) 2,240 2,038 Wachovia Bank Commercial Mortgage Trust 04-C12, A2 5.001%, 7/15/41 10,030 10,184 07-C30, A5 5.342%, 12/15/43 6,935 5,277 05-C22, AM 5.489%, 12/15/44(3) 720 613 07-C33, A4 6.100%, 2/15/51(3) 8,940 7,361 Wachovia Mortgage Loan Trust LLC 06-A, B1 5.331%, 5/20/36(3) 3,421 305 Washington Mutual Mortgage Pass-Through Certificates 06-AR16, 1A1 5.565%, 12/25/36(3) 5,720 4,033 00-1, M3 2.496%, 1/25/40(3) 85 30 PAR VALUE VALUE ----------- ---------- NON-AGENCY--CONTINUED Wells Fargo Mortgage-Backed Securities Trust 04-R, 2A1 3.003%, 9/25/34(3) $ 3,366 $ 3,203 04-EE, 2A3 3.299%, 12/25/34(3) 1,672 1,238 06-AR2, B1 5.034%, 3/25/36(3) 13,907 1,451 06-AR10, 5A3 5.592%, 7/25/36(3) 12,521 9,239 ---------- 275,287 -------------------------------------------------------------------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $406,999) 387,837 -------------------------------------------------------------------------- ASSET-BACKED SECURITIES--6.3% American General Mortgage Loan Trust 06-1, A2 144A 5.750%, 12/25/35(3)(4) 4,914 4,856 Avis Budget Rental Car Funding AESOP LLC 09-2A, A 144A 5.680%, 2/20/14(4) 9,825 9,824 Banc of America Securities Auto Trust 06-G1, B 5.340%, 2/18/11 4,855 4,993 Bay View Auto Trust 05-LJ1, A4 4.090%, 5/25/12 1,338 1,335 Bayview Financial Acquisition Trust 06-B, 1A2 5.800%, 4/28/36(3) 3,871 3,456 Bombardier Capital Mortgage Securitization Corp. 99-A, A3 5.980%, 1/15/18(3) 2,677 1,914 Bosphorus Financial Services Ltd. 144A 2.240%, 2/15/12(3)(4) 1,250 1,101 Capital Auto Receivables Asset Trust 06-1, D 144A 7.160%, 1/15/13(4) 2,000 2,013 Carmax Auto Owner Trust 07-2, B 5.370%, 3/15/13 10,025 9,684 Chase Funding Mortgage Loan Asset-Backed Certificates 04-1,1A4 4.111%, 8/25/30 2,078 1,949 See Notes to Financial Statements 13 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- Citicorp Residential Mortgage Securities, Inc. 07-2, A4 6.538%, 6/25/37(3) $ 5,000 $ 4,121 Conseco Finance Securitizations Corp. 01-3, A4 6.910%, 5/1/33(3) 11,071 9,404 Daimler Chrysler Auto Trust 08-B, A4A 5.320%, 11/10/14 9,620 10,038 Dunkin Securitization 06-1, M1 144A 8.285%, 6/20/31(4) 6,345 5,205 FMAC Loan Receivables Trust 98-CA, A2 144A 6.660%, 9/15/20(4) 1,624 1,486 GMAC Mortgage Corp. Loan Trust 05-HE2, A3 4.622%, 11/25/35(3) 155 151 06-HE2, A3 6.320%, 5/25/36(3) 11,335 5,829 GreenTree Financial Corp. 08-MH1, A1 144A 7.000%, 4/25/38(3)(4) 3,722 3,787 Harley-Davidson Motorcycle Trust 06-3, B 5.430%, 11/15/14 1,340 1,347 07-2, C 5.410%, 8/15/15 11,000 9,383 Home Equity Asset Trust 144A Net Interest Margin 06-7, A 6.000%, 2/25/37(4) 2,119 --(2) Hyundai Auto Receivables Trust 06-A, D 5.520%, 11/15/12 433 436 IndyMac Manufactured Housing Contract 98-1, A3 6.370%, 9/25/28 2,010 1,383 Long Grove Collateral Loan Obligation Ltd. PIK Interest Capitalization 04-1A, C 144A 2.793%, 5/25/16(3)(4)(7) 1,626 222 04-1A, D 144A 7.411%, 5/25/16(3)(4)(7) 519 36 Merrill Auto Trust Securitization 07-1, B 5.790%, 12/15/13 3,476 3,381 PAR VALUE VALUE ----------- ---------- Renaissance Home Equity Loan Trust 05-3, AF4 5.140%, 11/25/35(3) $ 5,380 $ 3,973 Residential Funding Mortgage Securities II, Inc. 04-HI3, A5 5.480%, 6/25/34(3) 6,432 4,312 06-HI2, A3 5.790%, 2/25/36 1,510 969 07-HI1, A2 5.640%, 3/25/37 10,000 8,541 07-HSA3, AI2 5.890%, 6/25/37(3) 3,059 2,781 Vanderbuilt Acquisition Loan Trust 02-1, A3 5.700%, 9/7/23(3) 23 23 Wachovia Auto Loan Owner Trust 06-2A, E 144A 7.050%, 5/20/14(4) 5,000 4,344 -------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $139,497) 122,277 -------------------------------------------------------------------------- CORPORATE BONDS--41.1% CONSUMER DISCRETIONARY--3.3% Ameristar Casinos, Inc. 144A 9.250%, 6/1/14(4) 350 365 AutoZone, Inc. 5.750%, 1/15/15 4,420 4,706 Best Buy Co., Inc. 6.750%, 7/15/13 2,055 2,201 Brunswick Corp. 11.750%, 8/15/13 5,419 5,649 COX Communications, Inc. 4.625%, 6/1/13 5,620 5,838 Daimler Finance North America LLC 6.500%, 11/15/13 3,390 3,652 DigitalGlobe, Inc. 144A 10.500%, 5/1/14(4) 700 745 DIRECTV Holdings LLC/ DIRECTV Financing Co., Inc. 6.375%, 6/15/15 6,740 6,858 Ford Motor Credit Co. LLC 8.000%, 6/1/14 4,865 4,680 See Notes to Financial Statements 14 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- CONSUMER DISCRETIONARY--CONTINUED Harrah's Operating Co., Inc. 144A 11.250%, 6/1/17(4) $ 2,260 $ 2,294 Horton (D.R.), Inc. 4.875%, 1/15/10 2,500 2,503 Hyatt Hotels Corp. 144A 5.750%, 8/15/15(4) 900 918 International Game Technology 7.500%, 6/15/19 1,115 1,236 Landry's Restaurants, Inc. 14.000%, 8/15/11 3,115 3,142 MGM MIRAGE 144A 10.375%, 5/15/14(4) 160 172 Mobile Mini, Inc. 6.875%, 5/1/15 540 495 QVC, Inc. 144A 7.500%, 10/1/19(4) 2,710 2,727 Scientific Games Corp. 144A 7.875%, 6/15/16(4) 810 804 Scientific Games International, Inc. 144A 9.250%, 6/15/19(4) 1,570 1,641 Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC 144A 2.799%, 3/15/14(3)(4) 767 621 Seneca Gaming Corp. Series B 7.250%, 5/1/12 131 122 Staples, Inc. 9.750%, 1/15/14 905 1,087 Starwood Hotels & Resort Worldwide, Inc. 6.250%, 2/15/13 2,815 2,787 Time Warner Cable, Inc. 6.200%, 7/1/13 2,915 3,176 Time Warner, Inc. 6.875%, 5/1/12 1,500 1,651 Videotron Ltee 6.375%, 12/15/15 3,500 3,360 ---------- 63,430 ---------- CONSUMER STAPLES--1.3% Altria Group, Inc. 8.500%, 11/10/13 2,775 3,219 BAT International Finance plc 144A 9.500%, 11/15/18(4) 1,410 1,829 PAR VALUE VALUE ----------- ---------- CONSUMER STAPLES--CONTINUED Cargill, Inc. 144A 5.600%, 9/15/12(4) $ 4,845 $ 5,199 Georgia-Pacific LLC 144A 7.125%, 1/15/17(4) 3,525 3,463 Kroger Co. (The) 8.050%, 2/1/10 1,860 1,901 Tyson Foods, Inc. 10.500%, 3/1/14 940 1,069 Yankee Acquisition Corp. Series B, 8.500%, 2/15/15 7,915 7,480 ---------- 24,160 ---------- ENERGY--5.8% Anadarko Petroleum Corp. 8.700%, 3/15/19 3,550 4,245 Buckeye Partners LP 6.050%, 1/15/18 854 893 Canadian Natural Resources Ltd. 4.900%, 12/1/14 2,916 3,062 Cenovus Energy, Inc. 144A 4.500%, 9/15/14(4) 1,968 2,011 Denbury Resources, Inc. 7.500%, 12/15/15 4,952 4,940 Gaz Capital SA 144A 7.343%, 4/11/13(4) 2,000 2,123 Gazprom International SA 144A 7.201%, 2/1/20(4) 2,089 2,152 Gazprom OAO (Gaz Capital SA) 144A 6.212%, 11/22/16(4) 10,405 9,989 144A 6.510%, 3/7/22(4) 3,235 2,964 Halliburton Co. 5.500%, 10/15/10 1,225 1,278 Helix Energy Solutions Group, Inc. 144A 9.500%, 1/15/16(4) 692 695 KazMunaiGaz Finance Sub BV 144A 8.375%, 7/2/13(4) 3,900 4,153 Kinder Morgan Energy Partners LP 6.850%, 2/15/20 2,545 2,780 Knight, Inc. 6.500%, 9/1/12 3,545 3,660 See Notes to Financial Statements 15 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- ENERGY--CONTINUED Korea National Oil Corp. 144A 5.375%, 7/30/14(4) $ 4,345 $ 4,457 NAK Naftogaz Ukrainy (Standard Bank London Holdings plc) 8.125%, 9/30/09(8) 2,900 2,537 Noble Energy, Inc. 8.250%, 3/1/19 3,675 4,436 Pacific Energy Partners LP/ Pacific Energy Finance Corp. 7.125%, 6/15/14 2,900 3,003 Pemex Project Funding Master Trust 144A 1.599%, 6/15/10(3)(4) 1,500 1,492 Petro-Canada 6.050%, 5/15/18 1,200 1,257 PetroHawk Energy Corp. 144A 10.500%, 8/1/14(4) 3,885 4,196 Pride International, Inc. 8.500%, 6/15/19 4,065 4,471 Seacor Holdings, Inc. 7.375%, 10/1/19 2,200 2,210 Smith International, Inc. 9.750%, 3/15/19 2,755 3,399 Swift Energy Co. 7.625%, 7/15/11 4,875 4,875 Tesoro Corp. 6.250%, 11/1/12 4,340 4,275 Transcontinental Gas Pipe Line Corp. Series B 7.000%, 8/15/11 3,865 4,182 Weatherford International Ltd. 9.625%, 3/1/19 4,110 5,145 Western Refining, Inc. 144A 10.750%, 6/15/14(3)(4) 3,285 3,137 144A 11.250%, 6/15/17(4) 2,465 2,342 Williams Cos., Inc. (The) 7.125%, 9/1/11 2,500 2,652 XTO Energy, Inc. 5.900%, 8/1/12 1,980 2,138 5.750%, 12/15/13 5,910 6,384 ---------- 111,533 ---------- PAR VALUE VALUE ----------- ---------- FINANCIALS--16.7% Aflac, Inc. 8.500%, 5/15/19 $ 1,059 $ 1,262 Alfa Invest Ltd. 144A 9.250%, 6/24/13(4) 4,940 4,854 Allstate Corp. 6.125%, 5/15/37(3) 4,730 3,831 American Express Credit Corp. 5.875%, 5/2/13 4,805 5,095 Series C, 7.300%, 8/20/13 2,600 2,883 5.125%, 8/25/14 840 869 American Honda Finance Corp. 144A 6.700%, 10/1/13(4) 4,850 5,283 Assurant, Inc. 5.625%, 2/15/14 4,060 4,178 Atlantic Finance Ltd. 144A 8.750%, 5/27/14(4) 4,800 5,131 Avalonbay Communities, Inc. 5.700%, 3/15/17 2,950 3,013 Bank of America Corp. 7.400%, 1/15/11 3,815 4,006 4.750%, 8/15/13 3,000 3,040 5.420%, 3/15/17 3,700 3,535 Barclays Bank plc 5.200%, 7/10/14 4,110 4,341 6.750%, 5/22/19 4,130 4,619 Bear Stearns Cos., Inc. LLC (The) 7.250%, 2/1/18 4,365 4,985 Berkley (WR) Corp. 5.125%, 9/30/10 2,000 2,014 Brandywine Operating Partnership LP 7.500%, 5/15/15 4,305 4,307 Chubb Corp. 6.375%, 3/29/67(3) 4,730 4,257 CIT Group, Inc. 4.750%, 12/15/10 4,295 2,967 Citigroup, Inc. 5.000%, 9/15/14 3,200 3,045 4.875%, 5/7/15 15,710 14,673 CME Group, Inc. 5.400%, 8/1/13 2,450 2,648 Colonial Realty LP 4.800%, 4/1/11 1,442 1,400 Corporacion Andina de Fomento 5.200%, 5/21/13 1,000 1,040 See Notes to Financial Statements 16 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- FINANCIALS--CONTINUED Credit Suisse New York 5.000%, 5/15/13 $ 4,335 $ 4,588 Deutsche Bank Financial LLC 5.375%, 3/2/15 2,933 2,981 ERAC USA Finance Co. 144A 5.800%, 10/15/12(4) 805 835 Export-Import Bank of Korea 8.125%, 1/21/14 1,480 1,695 5.875%, 1/14/15 4,625 4,876 Fideicomiso Petacalco Trust 144A 10.160%, 12/23/09(4) 724 721 Fifth Third Bancorp 6.250%, 5/1/13 1,770 1,826 First Tennessee Bank N.A. 0.590%, 2/14/11(3) 4,575 4,232 4.625%, 5/15/13 2,220 1,917 Ford Motor Credit Co. LLC 9.875%, 8/10/11 3,480 3,531 3.260%, 1/13/12(3) 2,000 1,802 7.500%, 8/1/12 800 769 8.700%, 10/1/14 735 721 GMAC, Inc. 144A 6.875%, 9/15/11(4) 2,662 2,542 144A 6.750%, 12/1/14(4) 552 475 Goldman Sachs Group, Inc. (The) 5.350%, 1/15/16 3,225 3,331 5.950%, 1/18/18 2,759 2,862 7.500%, 2/15/19 2,451 2,803 HBOs plc 144A 6.750%, 5/21/18(4) 685 611 Hertz Corp. (The) 8.875%, 1/1/14 2,595 2,634 Host Hotels & Resorts LP 144A 9.000%, 5/15/17(4) 875 932 ICICI Bank Ltd. 144A 5.750%, 11/16/10(4) 4,775 4,864 International Lease Finance Corp. 4.750%, 1/13/12 1,120 950 5.300%, 5/1/12 5,375 4,518 Invesco Ltd. 4.500%, 12/15/09 2,750 2,759 JPMorgan Chase & Co. 5.750%, 1/2/13 4,945 5,278 6.300%, 4/23/19 3,550 3,876 Series 1, 7.900%, 4/29/49(3) 3,360 3,226 Kazkommerts International BV RegS 8.000%, 11/3/15(5) 1,000 820 PAR VALUE VALUE ----------- ---------- FINANCIALS--CONTINUED KeyBank NA 5.700%, 8/15/12 $ 1,800 $ 1,772 7.413%, 5/6/15 1,000 1,002 4.950%, 9/15/15 1,295 1,185 KeyCorp 6.500%, 5/14/13 2,925 2,994 Kimco Realty Corp. 4.820%, 8/15/11 1,945 1,965 Kookmin Bank 144A 7.250%, 5/14/14(4) 5,700 6,291 Korea Development Bank 5.300%, 1/17/13 1,113 1,156 Lincoln National Corp. 8.750%, 7/1/19 2,340 2,706 MassMutual Global Funding II 144A 3.500%, 3/15/10(4) 1,750 1,761 Merrill Lynch & Co., Inc. 6.150%, 4/25/13 3,925 4,153 MetLife, Inc. 6.750%, 6/1/16 910 1,016 Metropolitan Life Global Funding I 144A 5.125%, 6/10/14(4) 1,160 1,212 Morgan Stanley 6.000%, 5/13/14 1,970 2,097 144A 10.090%, 5/3/17(4) 10,525 BRL 5,347 National Australia Bank Ltd. 144A 5.350%, 6/12/13(4) 9,715 10,359 Nationwide Health Properties, Inc. 6.250%, 2/1/13 4,825 4,887 Northern Trust Corp. 5.500%, 8/15/13 2,775 3,042 Nuveen Investment, Inc. 144A 10.500%, 11/15/15(4) 800 696 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670%, 3/5/14(4) 5,715 5,561 Petroplus Finance Ltd. 144A 6.750%, 5/1/14(4) 2,715 2,555 Piper Jaffray Equipment Trust Securities 144A 6.000%, 9/10/11(4) 6,370 6,083 PNC Funding Corp. 5.400%, 6/10/14 4,708 5,058 5.625%, 2/1/17 3,130 3,080 Principal Financial Group, Inc. 7.875%, 5/15/14 2,595 2,868 See Notes to Financial Statements 17 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- FINANCIALS--CONTINUED Principal Life Global Funding I 144A 4.400%, 10/1/10(4) $ 1,500 $ 1,516 Prologis 7.625%, 8/15/14 5,275 5,391 6.625%, 5/15/18 1,110 1,025 Prudential Financial, Inc. 4.750%, 9/17/15 4,770 4,736 Russian Agricultural Bank OJSC (RSHB Capital SA) 144A 9.000%, 6/11/14(4) 780 855 144A 6.299%, 5/15/17(4) 2,905 2,774 Simon Property Group LP 4.600%, 6/15/10 3,825 3,863 5.600%, 9/1/11 2,775 2,889 SLM Corp. 0.000%, 2/1/10(3) 8,000 7,771 Textron Financial Corp. 5.125%, 11/1/10 3,865 3,867 TNK-BP Finance SA RegS 6.125%, 3/20/12(5) 4,210 4,231 144A 7.500%, 3/13/13(4) 1,750 1,774 Trustreet Properties, Inc. 7.500%, 4/1/15 1,215 1,296 UNUM Group 7.125%, 9/30/16 1,130 1,143 Wachovia Bank NA 5.000%, 8/15/15 2,600 2,507 Wachovia Corp. 5.300%, 10/15/11 4,870 5,160 WEA Finance LLC/ WT Finance Australia 144A 5.750%, 9/2/15(4) 5,425 5,460 Wells Fargo & Co. 4.375%, 1/31/13 800 826 Westpac Banking Corp. 4.200%, 2/27/15 4,920 5,001 Woori Bank 144A 7.000%, 2/2/15(4) 4,000 4,313 XL Capital Ltd. 5.250%, 9/15/14 4,335 4,255 Zions Bancorporation 7.750%, 9/23/14 1,880 1,683 ---------- 321,433 ---------- HEALTH CARE--0.8% CareFusion Corp. 144A 5.125%, 8/1/14(4) 2,940 3,068 PAR VALUE VALUE ----------- ---------- HEALTH CARE--CONTINUED Express Scripts, Inc. 6.250%, 6/15/14 $ 1,775 $ 1,951 Fisher Scientific International, Inc. 6.750%, 8/15/14 985 1,020 6.125%, 7/1/15 2,125 2,207 HCA, Inc. 9.125%, 11/15/14 1,739 1,800 Medco Health Solutions, Inc. 7.250%, 8/15/13 1,000 1,119 Select Medical Corp. 7.625%, 2/1/15 2,820 2,654 U.S. Oncology, Inc. 144A 9.125%, 8/15/17(4) 1,263 1,336 Valeant Pharmaceuticals International 144A 8.375%, 6/15/16(4) 417 425 ---------- 15,580 ---------- INDUSTRIALS--2.6% American Airlines, Inc. 99-1, 7.024%, 10/15/09 2,925 2,918 01-1, 6.977%, 5/23/21 8,373 6,699 Continental Airlines, Inc. 98-1A, 6.648%, 3/15/19 2,106 1,980 Delta Air Lines, Inc. 00-A1, 7.379%, 11/18/11 5,824 5,736 Esco Corp. 144A 8.625%, 12/15/13(4) 1,725 1,699 General Cable Corp. 2.972%, 4/1/15(3) 3,375 2,978 Hutchison Whampoa International Ltd. 144A 4.625%, 9/11/15(4) 3,900 3,871 Ingersoll-Rand Global Holdings Co. Ltd. 9.500%, 4/15/14 1,410 1,666 L-3 Communications Corp. 7.625%, 6/15/12 4,020 4,085 Series B, 6.375%, 10/15/15 925 939 Owens Corning, Inc. 6.500%, 12/1/16 3,150 3,078 Smiths Group plc 144A 7.200%, 5/15/19(4) 1,700 1,846 Steelcase, Inc. 6.500%, 8/15/11 2,825 2,832 Toledo Edison Co. (The) 7.250%, 5/1/20 1,360 1,602 See Notes to Financial Statements 18 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- INDUSTRIALS--CONTINUED Tyco International Finance SA 4.125%, 10/15/14 $ 1,000 $ 996 United Airlines, Inc. 00-2A, 7.032%, 10/1/10 1,379 1,362 United Rentals North America, Inc. 6.500%, 2/15/12 4,065 4,095 144A 10.875%, 6/15/16(4) 1,772 1,905 USG Corp. 144A 9.750%, 8/1/14(4) 701 736 ---------- 51,023 ---------- INFORMATION TECHNOLOGY--1.4% Agilent Technologies, Inc. 5.500%, 9/14/15 2,185 2,247 Corning, Inc. 6.625%, 5/15/19 850 930 Intuit, Inc. 5.750%, 3/15/17 1,334 1,395 National Semiconductor Corp. 6.600%, 6/15/17 3,330 3,296 NXP BV/NXP Funding LLC 3.259%, 10/15/13(3) 3,040 2,208 Seagate Technology HDD Holdings, Inc. 6.375%, 10/1/11 3,950 3,970 SunGard Data Systems, Inc. 9.125%, 8/15/13 5,426 5,507 Tyco Electronic Group SA 6.000%, 10/1/12 1,515 1,603 Xerox Corp. 5.650%, 5/15/13 4,345 4,521 8.250%, 5/15/14 444 505 ---------- 26,182 ---------- MATERIALS--4.9% Airgas, Inc. 4.500%, 9/15/14 1,512 1,539 Allegheny Technologies, Inc. 9.375%, 6/1/19 7,245 8,203 Anglo American Capital plc 144A 9.375%, 4/8/19(4) 1,950 2,369 ArcelorMittal 5.375%, 6/1/13 4,825 4,933 9.000%, 2/15/15 2,560 2,944 Barrick Gold Financeco LLC 6.125%, 9/15/13 4,500 4,946 PAR VALUE VALUE ----------- ---------- MATERIALS--CONTINUED Bemis Co., Inc. 5.650%, 8/1/14 $ 980 $ 1,040 Catalyst Paper Corp. Series D 8.625%, 6/15/11 4,000 2,780 Commercial Metals Co. 7.350%, 8/15/18 7,760 8,193 CRH America, Inc. 5.625%, 9/30/11 3,500 3,636 8.125%, 7/15/18 4,770 5,363 Domtar Corp. 5.375%, 12/1/13 2,625 2,540 7.125%, 8/15/15 2,185 2,152 Dow Chemical Co. (The) 7.600%, 5/15/14 2,950 3,263 5.900%, 2/15/15 2,950 3,028 Georgia Pacific Corp. LLC 7.700%, 6/15/15 4,820 4,892 International Paper Co. 9.375%, 5/15/19 5,330 6,241 Nalco Co. 8.875%, 11/15/13 1,630 1,683 Norske Skog Canada Ltd. 7.375%, 3/1/14 1,055 564 Nova Chemicals Corp. 4.538%, 11/15/13(3) 9,949 8,830 Rock-Tenn Co. 9.250%, 3/15/16 125 134 Sappi Pappier Holding AG 144A 6.750%, 6/15/12(4) 5,000 4,631 Steel Dynamics, Inc. 7.375%, 11/1/12 1,528 1,551 Vedanta Resources plc 144A 8.750%, 1/15/14(4) 3,400 3,409 Verso Paper Holdings LLC/ Verso Paper, Inc. 144A 11.500%, 7/1/14(4) 3,650 3,760 Series B, 4.233%, 8/1/14(3) 2,570 1,606 ---------- 94,230 ---------- TELECOMMUNICATION SERVICES--2.7% AT&T Corp. 7.300%, 11/15/11 3,015 3,340 Axtel S.A.B de C.V. 144A 9.000%, 9/22/19(4) 750 765 See Notes to Financial Statements 19 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- TELECOMMUNICATION SERVICES--CONTINUED Cincinnati Bell, Inc. 8.250%, 10/15/17 $ 1,760 $ 1,735 Cricket Communications, Inc. 144A 7.750%, 5/15/16(4) 965 984 Deutsche Telekom International Finance BV 8.500%, 6/15/10 1,000 1,048 Embarq Corp. 6.738%, 6/1/13 2,385 2,586 Nextel Communications, Inc. Series E 6.875%, 10/31/13 5,590 5,213 Series D 7.375%, 8/1/15 2,095 1,891 OJSC Vimpel Communications (VIP Finance Ireland Ltd.) 144A 8.375%, 4/30/13(4) 1,400 1,463 Qwest Capital Funding, Inc. 7.250%, 2/15/11 4,000 4,020 Qwest Corp. 7.875%, 9/1/11 5,220 5,383 Rogers Communications, Inc. 8.000%, 12/15/12 700 723 Telecom Italia Capital SA 6.175%, 6/18/14 4,900 5,315 Verizon Wireless Capital LLC 144A 3.750%, 5/20/11(4) 4,850 5,004 144A 5.550%, 2/1/14(4) 4,090 4,420 Virgin Media Finance plc Series 1, 9.500%, 8/15/16 2,575 2,723 Wind Acquisition Finance SA 144A 11.750%, 7/15/17(4) 2,450 2,774 Windstream Corp. 144A 7.875%, 11/1/17(4) 3,620 3,620 ---------- 53,007 ---------- PAR VALUE VALUE ----------- ---------- UTILITIES--1.6% Allegheny Energy Supply Co. LLC 144A 8.250%, 4/15/12(4) $ 1,860 $ 2,049 AmeriGas Partners LP 7.250%, 5/20/15 860 843 Enel Finance International S.A. 144A 3.875%, 10/7/14(4) 2,000 1,995 FPL Group Capital, Inc. 5.350%, 6/15/13 1,000 1,078 Israel Electric Corp. Ltd. 144A 7.250%, 1/15/19(4) 2,285 2,436 Korea Electric Power Corp. 144A 5.500%, 7/21/14(4) 3,420 3,578 Korea Gas Corp. 144A 6.000%, 7/15/14(4) 2,000 2,108 Majapahit Holding BV 144A 7.250%, 6/28/17(4) 1,550 1,589 Midwest Generation LLC Series B 8.560%, 1/2/16 1,594 1,618 NiSource Finance Corp. 7.875%, 11/15/10 3,440 3,619 Northeast Utilities 5.650%, 6/1/13 3,950 4,078 ONEOK Partners LP 5.900%, 4/1/12 980 1,032 PSE&G Energy Holdings Co. 8.500%, 6/15/11 2,250 2,394 Sempra Energy 6.500%, 6/1/16 1,760 1,945 Texas Competitive Electric Holdings Co. LLC Series A 10.250%, 11/1/15 1,390 1,008 ---------- 31,370 -------------------------------------------------------------------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $756,311) 791,948 -------------------------------------------------------------------------- See Notes to Financial Statements 20 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- CONVERTIBLE BONDS--0.1% HEALTH CARE--0.1% Par Pharmaceutical Cos., Inc. Cv. 2.875%, 9/30/10 $ 1,195 $ 1,171 ---------- ----------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $1,140) 1,171 ----------------------------------------------------------------------- LOAN AGREEMENTS(3)--12.1% CONSUMER DISCRETIONARY--4.5% AMF Bowling Worldwide, Inc. Tranche B, 3.047%, 5/17/13 1,966 1,677 Building Materials Holding Corp. Tranche B, 6.500%, 11/10/11(8) 3,063 975 Building Materials Holding Corp. of America Tranche 3.063%, 2/22/14 746 686 Cengage Learning Acquisitions, Inc. Tranche 2.775%, 7/5/14 7,104 6,447 Ceridian Corp. Tranche 3.447%, 11/8/14 6,650 5,899 Charter Communications Operating LLC Tranche B, 6.250%, 3/6/14 4,854 4,589 CSC Holdings, Inc. Tranche B-2, 2.113%, 3/29/16 4,071 4,020 Ford Motor Co. Tranche B, 3.477%, 12/16/13 4,515 4,024 Getty Images, Inc. Tranche B, 6.250%, 2/15/13 3,855 3,888 Hanesbrands, Inc. Tranche B, 5.301%, 9/5/13 923 928 Harrah's Operating Co., Inc. Tranche B-2, 3.504%, 1/28/15 1,577 1,286 Tranche B-4, 0.000%, 10/31/16 2,170 2,150 HBI Branded Apparel Ltd., Inc. Tranche 4.254%, 3/5/14 2,715 2,608 Intelsat Jackson Holding Ltd. Tranche 0.000%, 2/1/14 2,335 2,099 PAR VALUE VALUE ----------- ---------- CONSUMER DISCRETIONARY--CONTINUED Intelstat Corp. Tranche B2-A, 2.800%, 1/3/14 $ 1,689 $ 1,613 Tranche B2-B, 2.800%, 1/3/14 1,690 1,614 Tranche B2-C, 2.800%, 1/3/14 1,690 1,614 Isle of Capri Casinos, Inc. Tranche B-DD, 2.035%, 11/25/13 752 708 Tranche A-DD, 2.348%, 11/25/13 661 623 Tranche 2.348%, 11/25/13 1,879 1,770 Lamar Media Corp. Tranche F, 5.500%, 3/31/14 920 918 Landry's Restaurant, Inc. Tranche 9.500%, 3/19/11 2,914 2,929 Mediacom Illinois LLC Tranche D, 5.500%, 3/31/17 4,777 4,791 Neiman-Marcus Group, Inc. (The) Tranche 2.357%, 4/6/13 8,743 7,609 Nielsen Finance LLC/ Nielsen Finance Co. Tranche A, 2.288%, 8/9/13 3,432 3,244 Tranche B, 4.038%, 5/1/16 3,375 3,190 PTI Group, Inc. Tranche 9.250%, 2/28/13 1,435 1,335 Totes Isotoner Corp. Tranche B, 3.304%, 1/16/13 373 276 Transaction Network Services, Inc. Tranche 8.250%, 3/28/14 5,105 5,201 Univision Communications, Inc. Tranche B, 2.523%, 9/29/14 5,630 4,780 VWR Funding, Inc. Tranche T-1, 2.785%, 6/29/14 3,302 3,081 ---------- 86,572 ---------- See Notes to Financial Statements 21 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- CONSUMER STAPLES--0.1% Wrigley (WM) Jr. Co. Tranche B, 6.500%, 10/6/14 $ 2,823 $ 2,877 ---------- ENERGY--0.3% ATP Oil & Gas Corp. Tranche B-2, 8.500%, 1/15/11 1,135 1,047 Tranche B-1, 8.500%, 7/15/14 4,306 3,972 Western Refining, Inc. Tranche 8.250%, 5/30/14 1,305 1,295 ---------- 6,314 ---------- FINANCIALS--0.4% Hertz Corp. Tranche B, 2.063%, 12/21/12 2,392 2,270 Letter of Credit 2.359%, 12/21/12 479 454 Pinnacle Foods Finance LLC/ Pinnacle Food Finance Corp. Tranche B, 3.031%, 4/2/14 2,449 2,306 Vanguard Health Holdings Co., II LLC Tranche 2.535%, 9/23/11 2,249 2,204 ---------- 7,234 ---------- HEALTH CARE--0.7% HCA, Inc. Tranche A-1, 2.348%, 11/17/12 1,644 1,543 Tranche B-1, 2.848%, 11/17/13 2,151 2,036 Health Management Associates, Inc. Tranche B, 2.348%, 2/28/14 1,146 1,079 HealthSouth Corp. Tranche 2.568%, 3/10/13 3,623 3,495 Psychiatric Solutions, Inc. Tranche A, 2.057%, 7/1/12 4,485 4,332 PAR VALUE VALUE ----------- ---------- HEALTH CARE--CONTINUED Select Medical Corp. Tranche B-1, 4.874%, 8/22/14 $ 1,497 $ 1,463 ---------- 13,948 ---------- INDUSTRIALS--0.7% Harland Clarke Holdings Corp. Tranche B, 3.042%, 6/30/14 5,728 4,829 Reynolds & Reynolds Co. (The) Tranche 5.785%, 10/24/13 450 354 ServiceMaster Co. (The) Tranche T-1-DD, 2.790%, 7/24/14 746 668 Tranche B, 2.880%, 7/24/14 7,492 6,711 ---------- 12,562 ---------- INFORMATION TECHNOLOGY--1.4% Avaya, Inc. Tranche B, 0.000%, 10/26/14 4,740 3,840 CommScope, Inc. Tranche B, 3.409%, 12/27/14 2,168 2,126 Dresser, Inc. Tranche B, 3.104%, 5/4/14 2,405 2,263 PIK Loan 6.064%, 5/4/15 3,605 3,148 First Data Corp. Tranche B-2, 3.058%, 9/24/14 490 423 Tranche B-3, 3.058%, 9/24/14 6,864 5,911 Tranche B-1, 3.058%, 9/24/14 1,970 1,701 Freescale Semiconductor, Inc. Tranche 2.064%, 12/1/13 3,966 3,188 Reynolds & Reynolds Co. (The) Tranche F-L 2.394%, 10/24/12 5,588 4,927 ---------- 27,527 ---------- See Notes to Financial Statements 22 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) PAR VALUE VALUE ----------- ---------- MATERIALS--2.1% Anchor Glass Container Corp. Tranche B, 6.750%, 6/20/14 $ 4,112 $ 4,095 Ashland, Inc. Tranche B, 7.650%, 5/13/14 2,321 2,378 Berry Plastics Group, Inc. Tranche C, 2.309%, 4/3/15 8,721 7,748 Boise Paper Holdings LLC Tranche B, 5.750%, 2/22/14 4,133 4,212 Tranche 9.250%, 2/22/15 4,305 4,294 Building Materials Corp. of America Tranche B, 6.094%, 9/15/14 4,750 4,188 Huntsman International LLC Tranche B, 2.085%, 4/21/14 2,464 2,280 Ineos Holdings Ltd. Tranche B-2, 7.501%, 12/16/13 1,357 1,144 Tranche C-2, 8.001%, 12/16/14 1,357 1,148 JohnsonDiversey, Inc. Tranche DD, 3.184%, 12/16/10 53 52 Tranche B, 2.750%, 12/16/11 1,296 1,271 Nalco Co. Tranche B, 6.500%, 5/13/16 1,622 1,652 Solutia, Inc. Tranche 7.250%, 2/28/14 5,248 5,334 ---------- 39,796 ---------- TELECOMMUNICATION SERVICES--1.0% Level 3 Communications, Inc. Tranche A, 2.756%, 3/13/14 8,362 7,436 Tranche B, 11.500%, 3/13/14 1,044 1,109 PAR VALUE VALUE ----------- ---------- TELECOMMUNICATION SERVICES--CONTINUED MetroPCS Wireless, Inc. Tranche B, 2.656%, 11/3/13 $ 2,273 $ 2,181 nTelos, Inc. Tranche 5.750%, 8/7/15 5,324 5,356 Time Warner Telecom Holdings, Inc. Tranche B, 2.123%, 1/7/13 3,320 3,214 ---------- 19,296 ---------- UTILITIES--0.9% Calpine Corp. Tranche 3.475%, 3/29/14 4,079 3,747 NRG Energy, Inc. Tranche B, 2.131%, 2/1/13 7,107 6,750 Letter of Credit 2.348%, 2/1/13 2,863 2,719 Texas Competitive Electric Holdings Co. LLC Tranche B-2, 3.793%, 10/10/14 2,256 1,802 Tranche B-3, 3.793%, 10/10/14 4,005 3,200 ---------- 18,218 -------------------------------------------------------------------------- TOTAL LOAN AGREEMENTS (IDENTIFIED COST $229,066) 234,344 -------------------------------------------------------------------------- SHARES ----------- PREFERRED STOCK--0.0% FINANCIALS--0.0% Preferred Blocker, Inc. (GMAC) Pfd. 144A 7.000%(4) 702 408 ---------- -------------------------------------------------------------------------- TOTAL PREFERRED STOCK (IDENTIFIED COST $221) 408 -------------------------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS--98.7% (IDENTIFIED COST $1,875,060) 1,903,021 -------------------------------------------------------------------------- See Notes to Financial Statements 23 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) SHARES VALUE ----------- ---------- SHORT-TERM INVESTMENTS--1.1% MONEY MARKET MUTUAL FUNDS--1.1% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 21,199,149 $ 21,199 ---------- -------------------------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $21,199) 21,199 -------------------------------------------------------------------------- TOTAL INVESTMENTS--99.8% (IDENTIFIED COST $1,896,259) 1,924,220(1) Other Assets and Liabilities--0.2% 3,853 ---------- NET ASSETS--100.0% $1,928,073 ========== ABBREVIATIONS: FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") FNMA Federal National Mortgage Association ("Fannie Mae") GDP Gross Domestic Product GNMA Government National Mortgage Association ("Ginnie Mae") NATL National Public Finance Guarantee Corp. NATL-RE National Public Finance Corp. formerly Municipal Bond Insurance Association PIK Payment-in-Kind Security FOREIGN CURRENCIES: AUD Australian Dollar BRL Brazilian Real CAD Canadian Dollar COP Colombian Peso EUR Euro IDR Indonesian Rupiah KRW Korean Won NOK Norwegian Krone NZD New Zealand Dollar PLZ Polish Zloty SEK Swedish Krona TRY Turkish Lira COUNTRY WEIGHTINGS as of September 30, 2009+ ----------------------------------------------------- United States 73% Australia 3 Canada 3 Argentina 2 Russia 2 South Korea 2 Norway 1 Other 14 ----------------------------------------------------- Total 100% ----------------------------------------------------- + % of total investments as of September 30, 2009. Refer to Key Investment Terms and Footnote Legend on page 3. See Notes to Financial Statements 24 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements):
Total Level 2 - Level 3 - Value at Level 1 - Significant Significant September 30, Quoted Observable Unobservable 2009 Prices Inputs Inputs ------------- ---------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: U.S. Government Securities $ 30,318 $ -- $ 30,318 $ -- Municipal Securities 7,085 -- 7,085 -- Foreign Government Securities 327,633 -- 327,633 -- Mortgage-Backed Securities 387,837 -- 376,855 10,982 Asset-Backed Securities 122,277 -- 106,365 15,912 Corporate Debt 1,027,463 -- 1,017,508 9,955 Equity Securities: Preferred Stocks 408 408 -- -- Short-Term Investments 21,199 21,199 -- -- ---------- ------- ---------- ------- Total Investments $1,924,220 $21,607 $1,865,764 $36,849 ========== ======= ========== =======
The following is a reconciliation of assets of the Fund for Level 3 investments for which significant unobservable inputs were used to determine fair value:
Mortgage-Backed Asset-Backed Corporate Total Securities Securities Debt -------- --------------- ------------- -------- INVESTMENT IN SECURITIES: BALANCE AS OF SEPTEMBER 30, 2008: $ 47,713 $ 18,557 $11,462 $17,694 Accrued discounts/premiums 906 300 289 317 Realized gain (loss)(1) (24,276) (21,599) (2,778) 101 Change in unrealized appreciation (depreciation)(1) 17,141 13,423 3,132 586 Net purchases (sales) (16,630) (5,520) (4,683) (6,427) Transfers in and/or out of level 3(2) 11,995 5,821 8,490 (2,316) -------- -------- ------- ------- BALANCE AS OF SEPTEMBER 30, 2009 $ 36,849 $ 10,982 $15,912 $ 9,955 ======== ======== ======= =======
(1) Disclosed in the Statement of Operations under Net realized and unrealized gain (loss) on investments. (2) "Transfers in and/or out" represent the ending value as of September 30, 2009, for any investment security where a change in the pricing level occurred from the beginning to the end of the period. Certain level 3 security valuations have been determined based on availability of only a single broker source, which may or may not be a principal market maker. Other level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. See Notes to Financial Statements 25 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2009 (Amounts reported in thousands except shares and per share amounts) ASSETS Investment securities at value(1) .............................. $ 1,924,220 Receivables Investment securities sold .................................. 2,264 Fund shares sold ............................................ 17,508 Dividends and interest ...................................... 22,283 Prepaid expenses ............................................... 124 ------------ Total assets .............................................. 1,966,399 ------------ LIABILITIES Cash overdraft ................................................. 1,728 Payables Fund shares repurchased ..................................... 7,782 Investment securities purchased ............................. 26,757 Investment advisory fee ..................................... 801 Distribution and service fees ............................... 560 Administration fee .......................................... 117 Transfer agent fees and expenses ............................ 346 Trustees' fee and expenses .................................. 24 Professional fee ............................................ 42 Other accrued expenses ...................................... 169 ------------ Total liabilities ......................................... 38,326 ------------ NET ASSETS ..................................................... $ 1,928,073 ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ............... $ 2,034,051 Accumulated undistributed net investment income (loss) ......... 1,004 Accumulated undistributed net realized income (loss) ........... (134,672) Net unrealized appreciation (depreciation) ..................... 27,690 ------------ Net Assets ..................................................... $ 1,928,073 ============ CLASS A Net asset value per share (net assets/shares outstanding) ...... $4.54 Maximum offering price per share $4.54/(1-2.25%) ............... $4.64 Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................... 316,147,234 Net Assets ..................................................... $ 1,433,927 CLASS B Net asset value (net assets/shares outstanding) and offering price per share .............................................. $4.52 Shares of beneficial interest outstanding, no par value, unlimited authorization....................................... 2,823,968 Net Assets ..................................................... $ 12,753 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .............................................. $4.58 Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................... 52,733,361 Net Assets ..................................................... $ 241,339 CLASS T Net asset value (net assets/shares outstanding) and offering price per share .............................................. $4.57 Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................... 48,044,571 Net Assets ..................................................... $ 219,501 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .............................................. $4.54 Shares of beneficial interest outstanding, no par value, unlimited authorization ...................................... 4,524,334 Net Assets ..................................................... $ 20,553 (1) Investment in securities at cost ........................... $ 1,896,259 See Notes to Financial Statements 26 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands) INVESTMENT INCOME Interest ....................................................... $ 103,990 Dividends ...................................................... 155 Foreign taxes withheld ......................................... (112) --------- Total investment income ................................... 104,033 --------- EXPENSES Investment advisory fees ....................................... 7,897 Service fees, Class A .......................................... 2,913 Distribution and service fees, Class B ......................... 95 Distribution and service fees, Class C ......................... 777 Distribution and service fees, Class T ......................... 1,454 Administration fees ............................................ 1,251 Transfer agent fee and expenses ................................ 2,602 Custodian fees ................................................. 192 Printing fees and expenses ..................................... 220 Professional fees .............................................. 59 Registration fees .............................................. 133 Trustees' fee and expenses ..................................... 146 Miscellaneous expenses ......................................... 302 --------- Total expenses ............................................ 18,041 --------- NET INVESTMENT INCOME (LOSS) ................................... 85,992 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........................ (100,607) Net realized gain (loss) on foreign currency transactions ...... 1,068 Net change in unrealized appreciation (depreciation) on investments .................................................. 218,211 Net change in unrealized appreciation (depreciation) on foreign currency translations ................................ (402) --------- NET GAIN (LOSS) ON INVESTMENTS ................................. 118,270 --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................................... $ 204,262 ========= See Notes to Financial Statements 27 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands)
Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ FROM OPERATIONS Net investment income (loss).................................. $ 85,992 $ 99,148 Net realized gain (loss)...................................... (99,539) (19,066) Net change in unrealized appreciation (depreciation).......... 217,809 (174,134) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... 204,262 (94,052) ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A................................ (73,817) (85,143) Net investment income, Class B................................ (754) (1,010) Net investment income, Class C................................ (9,218) (9,300) Net investment income, Class T................................ (7,849) (7,637) Net investment income, Class I................................ (55) (2) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS..... (91,693) (103,092) ---------- ---------- FROM SHARE TRANSACTIONS: SALE OF SHARES Class A (141,615 and 129,159 shares, respectively)............ 580,327 589,875 Class B (508 and 780 shares, respectively).................... 2,073 3,555 Class C (25,625 and 11,320 shares, respectively).............. 109,150 51,784 Class T (25,531 and 10,502 shares, respectively).............. 106,114 48,131 Class I (4,545 and 22 shares, respectively)................... 20,355 100 REINVESTMENT OF DISTRIBUTIONS Class A (14,292 and 15,751 shares, respectively).............. 57,416 71,290 Class B (130 and 155 shares, respectively).................... 518 699 Class C (1,671 and 1,573 shares, respectively)................ 6,812 7,168 Class T (871 and 1,042 shares, respectively).................. 3,566 4,789 Class I (8 and 1 shares, respectively)........................ 32 2 SHARES REPURCHASED Class A (167,066 and 123,302 shares, respectively)............ (662,579) (559,008) Class B (1,612 and 1,729 shares, respectively)................ (6,391) (7,857) Class C (12,692 and 12,640 shares, respectively).............. (51,062) (57,956) Class T (11,685 and 11,130 shares, respectively).............. (46,913) (50,716) Class I (51 and 0 shares, respectively)....................... (202) -- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS... 119,216 101,856 ---------- ---------- CAPITAL CONTRIBUTIONS Fair Funds settlement(1).................................... 2 -- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS....................... 231,787 (95,288) NET ASSETS Beginning of period......................................... 1,696,286 1,791,574 ---------- ---------- END OF PERIOD .............................................. $1,928,073 $1,696,286 ========== ========== Accumulated undistributed net investment income (loss) at end of period............................................ $ 1,004 $ 5,170
(1) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 28 THIS PAGE INTENTIONALLY BLANK. VIRTUS MULTI-SECTOR SHORT TERM BOND FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET NET ASSET NET REALIZED TOTAL DIVIDENDS DISTRIBUTIONS CHANGE VALUE, INVESTMENT AND FROM FROM NET FROM NET IN NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED RETURN OF TOTAL ASSET OF PERIOD (LOSS) GAIN(LOSS) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS VALUE ---------------------------------------------------------------------------------------------------------------------------------- CLASS A 10/1/08 to 9/30/09 $4.21 0.24(2) 0.35 0.59 (0.26) -- -- (0.26) 0.33 10/1/07 to 9/30/08 4.70 0.25(2) (0.48) (0.23) (0.26) -- -- (0.26) (0.49) 11/1/06 to 9/30/07 4.74 0.21(2) (0.03) 0.18 (0.22) -- -- (0.22) (0.04) 11/1/05 to 10/31/06 4.70 0.22(2) 0.03 0.25 (0.21) -- -- (0.21) 0.04 11/1/04 to 10/31/05 4.83 0.20(2) (0.12) 0.08 (0.19) --(5) (0.02) (0.21) (0.13) 11/1/03 to 10/31/04 4.78 0.21 0.06 0.27 (0.22) -- -- (0.22) 0.05 CLASS B 10/1/08 to 9/30/09 $4.19 0.22(2) 0.35 0.57 (0.24) -- -- (0.24) 0.33 10/1/07 to 9/30/08 4.68 0.23(2) (0.48) (0.25) (0.24) -- -- (0.24) (0.49) 11/1/06 to 9/30/07 4.72 0.19(2) (0.03) 0.16 (0.20) -- -- (0.20) (0.04) 11/1/05 to 10/31/06 4.68 0.20(2) 0.02 0.22 (0.18) -- -- (0.18) 0.04 11/1/04 to 10/31/05 4.82 0.18(2) (0.14) 0.04 (0.16) --(5) (0.02) (0.18) (0.14) 11/1/03 to 10/31/04 4.77 0.19 0.05 0.24 (0.19) -- -- (0.19) 0.05 CLASS C 10/1/08 to 9/30/09 $4.24 0.23(2) 0.36 0.59 (0.25) -- -- (0.25) 0.34 10/1/07 to 9/30/08 4.73 0.24(2) (0.48) (0.24) (0.25) -- -- (0.25) (0.49) 11/1/06 to 9/30/07 4.77 0.20(2) (0.03) 0.17 (0.21) -- -- (0.21) (0.04) 11/1/05 to 10/31/06 4.73 0.21(2) 0.02 0.23 (0.19) -- -- (0.19) 0.04 11/1/04 to 10/31/05 4.87 0.19(2) (0.13) 0.06 (0.18) --(5) (0.02) (0.20) (0.14) 11/1/03 to 10/31/04 4.81 0.21 0.05 0.26 (0.20) -- -- (0.20) 0.06 CLASS T 10/1/08 to 9/30/09 $4.23 0.21(2) 0.36 0.57 (0.23) -- -- (0.23) 0.34 10/1/07 to 9/30/08 4.72 0.22(2) (0.48) (0.26) (0.23) -- -- (0.23) (0.49) 11/1/06 to 9/30/07 4.76 0.18(2) (0.03) 0.15 (0.19) -- -- (0.19) (0.04) 11/1/05 to 10/31/06 4.73 0.19(2) 0.01 0.20 (0.17) -- -- (0.17) 0.03 11/1/04 to 10/31/05 4.86 0.17(2) (0.13) 0.04 (0.15) --(5) (0.02) (0.17) (0.13) 11/1/03 to 10/31/04 4.80 0.18 0.06 0.24 (0.18) -- -- (0.18) 0.06 CLASS I 10/1/08 to 9/30/09 $4.21 0.28(2) 0.32 0.60 (0.27) -- -- (0.27) 0.33 6/6/08(6) to 9/30/08 4.53 0.08(2) (0.31) (0.23) (0.09) -- -- (0.09) (0.32) RATIO OF NET NET NET ASSET ASSETS, RATIO OF INVESTMENT VALUE, END OF EXPENSES TO INCOME TO PORTFOLIO END OF TOTAL PERIOD AVERAGE AVERAGE NET TURNOVER PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS ASSETS RATE ------------------------------------------------------------------------------------------------------------------------ CLASS A 10/1/08 to 9/30/09 $4.54 14.91% $1,433,927 1.12% 5.93% 88% 10/1/07 to 9/30/08 4.21 (5.07) 1,377,371 1.08 5.54 83 11/1/06 to 9/30/07 4.70 3.84(4) 1,435,415 1.11(3) 4.93(3) 57(4) 11/1/05 to 10/31/06 4.74 5.37 1,062,479 1.04 4.75 93 11/1/04 to 10/31/05 4.70 1.64 819,283 1.02 4.24 83 11/1/03 to 10/31/04 4.83 5.69 372,463 1.03 4.17 95 CLASS B 10/1/08 to 9/30/09 $4.52 14.41% $ 12,753 1.62% 5.47% 88% 10/1/07 to 9/30/08 4.19 (5.57) 15,919 1.57 5.03 83 11/1/06 to 9/30/07 4.68 3.38(4) 21,487 1.61(3) 4.40(3) 57(4) 11/1/05 to 10/31/06 4.72 4.64 27,845 1.54 4.24 93 11/1/04 to 10/31/05 4.68 1.12 33,003 1.51 3.72 83 11/1/03 to 10/31/04 4.82 5.16 33,325 1.52 3.68 95 CLASS C 10/1/08 to 9/30/09 $4.58 14.75% $ 241,339 1.36% 5.63% 88% 10/1/07 to 9/30/08 4.24 (5.28) 161,770 1.33 5.28 83 11/1/06 to 9/30/07 4.73 3.57(4) 179,222 1.36(3) 4.66(3) 57(4) 11/1/05 to 10/31/06 4.77 5.07 205,385 1.28 4.48 93 11/1/04 to 10/31/05 4.73 1.15 295,926 1.26 3.98 83 11/1/03 to 10/31/04 4.87 5.59 238,854 1.27 3.92 95 CLASS T 10/1/08 to 9/30/09 $4.57 14.21% $ 219,501 1.86% 5.11% 88% 10/1/07 to 9/30/08 4.23 (5.78) 141,131 1.83 4.79 83 11/1/06 to 9/30/07 4.72 3.11(4) 155,450 1.86(3) 4.17(3) 57(4) 11/1/05 to 10/31/06 4.76 4.34 153,395 1.79 3.98 93 11/1/04 to 10/31/05 4.73 0.84 195,830 1.76 3.48 83 11/1/03 to 10/31/04 4.86 5.05 120,145 1.78 3.40 95 CLASS I 10/1/08 to 9/30/09 $4.54 15.20% $ 20,553 1.03% 6.47% 88% 6/6/08(6) to 9/30/08 4.21 (5.11)(4) 95 0.89(3) 5.85(3) 83(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) Amount is less than $0.005. (6) Inception date. See Notes to Financial Statements 30 and 31 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2009 1. ORGANIZATION Virtus 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, 18 funds are offered for sale, of which the Virtus 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 ("CDSC") 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 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 (see Note 11). 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, 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 and those differences could be significant. 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 continued volatility in the current market, valuations developed through pricing techniques may materially vary from the actual amounts realized upon sale of the securities. 32 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. Investments in underlying funds are valued at each fund's closing net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time). Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 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. 33 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 each Fund's tax positions and has concluded that no provision for income tax is required in any Fund's financial statements. The Fund is unaware 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 prior three fiscal years remains subject to examination by the Internal Revenue Service. 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 the date it is 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. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures on derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the 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. Summarized below are the specific types of derivative instruments used by the Fund. FORWARD CURRENCY CONTRACTS: 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 in the Statement of Operations. 34 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. This is presented in the Statement of Operations as net realized gain (loss) from foreign currency transactions. The Fund enters 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. The Fund also from time to time hedges the currency exposure of foreign denominated securities, held in the portfolio, back to U.S. dollars during perceived times of U.S. dollar strength. This is done in order to protect U.S. dollar value of the portfolio. 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. The following is a summary of the Fund's derivative instrument holdings categorized by primary risk exposure as of September 30, 2009 ($ reported in thousands): REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ------------------------------------------------- TOTAL VALUE ----------- Foreign exchange contracts(1) $1,436 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS --------------------------------------------------- TOTAL VALUE ----------- Foreign exchange contracts(2) $(419) (1) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (2) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. There were no open forward currency contracts at September 30, 2009. H. 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. I. 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 35 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. J. 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) At the close of business December 31, 2008, Virtus Investment Partners, Inc. ("Virtus") spun off from The Phoenix Companies, Inc. ("PNX"), into an independent publicly traded company which through its affiliates provides asset management and related services to individuals and institutions. Virtus Investment Advisers, Inc. ("VIA," the "Adviser," formerly known as Phoenix Investment Counsel, Inc.) and VP Distributors, Inc. ("VP Distributors," formerly known as Phoenix Equity Planning Corporation) are indirect wholly-owned subsidiaries of Virtus. Due to the spin-off, the asset management subsidiaries have changed their names to reflect the Virtus brand. As compensation for its services to the Trust, the Adviser 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% 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"). As distributor of the Fund's shares, VP Distributors, Inc., an indirect wholly-owned, subsidiary of Virtus, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2009, 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 ---------------- ------------- ------------- ------------- ------------- $35 $15 $12 $1 $84
In addition, the Fund pays VP Distributors distribution and/or service fees at the annual rate of 0.25% for Class A shares, 0.75% for Class B shares, 0.50% for Class C shares, 36 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 and 1.00% for Class T shares applied to the average daily net assets of each respective class. 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 CDSC, the CDSC schedule of the original shares purchased continues to apply. VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2009, the Fund incurred administration fees totaling $1,251. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2009, transfer agent fees were $2,602 as reported in the Statement of Operations. At September 30, 2009, Virtus and its affiliates, the retirement plans of Virtus and its affiliates held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE --------- --------- Class I shares 24,079 $109 Until March 1, 2007, the Trust provided a deferred compensation plan to its trustees who were not officers of Virtus. Under the deferred compensation plan, trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the trustees. 4. PURCHASES AND SALES OF SECURITIES ($ 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, 2009, were as follows: PURCHASES SALES --------- -------- $1,288,751 $949,668 Purchases and sales of long-term U.S. Government and agency securities for the Fund during the period ended September 30, 2009, were as follows: PURCHASES SALES --------- -------- $186,939 $355,591 5. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. 37 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 6. ILLIQUID AND RESTRICTED SECURITIES ($ 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, 2009, the Fund held the following illiquid and restricted securities:
ACQUISITION ACQUISITION MARKET VALUE % OF NET ASSETS DATE COST AT 9/30/09 AT 9/30/09 ----------- ------------ ------------ --------------- Long Grove Collateral Loan Obligation Ltd. PIK Interest Capitalization 04-1A, C 144A 2.793%, 5/25/16 5/12/04 $1,613 $222 0.0% 04-1A, D 144A 7.411%, 5/25/16 5/12/04 511 36 0.0%
The Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus (and, prior to the spin-off described in Note 3, PNX) and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 38 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 9. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2009, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows: NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ---------- ------------ -------------- --------------- $1,896,983 $106,515 $(79,278) $27,237 The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: EXPIRATION YEAR ----------------------------------------------------- 2014 2016 2017 TOTAL ------ ---- ------- ------- $5,307 $575 $32,374 $38,256 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, 2009, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL LOSS LOSS DEFERRED RECOGNIZED -------- ---------- $95,721 $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 $1,032 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 10. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ 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, 2009, 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) --------------- -------------- ------------ $2 $1,535 $(1,537) 39 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through November 20, 2009, the date the financial statements were available for issuance, and has determined that the following subsequent events require recognition or disclosure in the financial statements. Effective on December 1, 2009 (the "Closing Date"), Class B Shares of the Virtus Mutual Funds will no longer be available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to each Fund's prospectus). 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [LOGO OMITTED] PRICEWATERHOUSECOOPERS 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, (hereafter referred to as the "Fund"), a series of Virtus Opportunities Trust, at September 30, 2009, 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, 2009 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania November 20, 2009 41 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2009 (UNAUDITED) For the fiscal year ended September 30, 2009, 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 42 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2009 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 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES -------------------------------------------------------------------------------- NAME, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ENDED AND DURING PAST 5 YEARS AND NUMBR OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management YOB: 1939 (commodities business) (2007-present). Partner, Elected: 1993 Stonington Partners, Inc. (private equity firm) 46 Funds (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios). -------------------------------------------------------------------------------- Philip R. McLoughlin Partner, Cross Pond Partners, LLC (2006-Present). YOB: 1946 Director, World Trust Fund. Chairman and Trustee, Elected: 1993 The Phoenix Edge Series Fund. Director, DTF 49 Funds Tax-Free Income Fund, Inc., Duff & Phelps Utility and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. Managing Director, SeaCap, Asset Management Fund I L.P. -------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of YOB: 1951 New York (private bank) (1982-2006). Director, DTF Elected: 2001 Tax-Free Income Fund, Inc., Duff & Phelps Utility 49 Funds and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. -------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) YOB: 1946 (1994-present). Chairman, Hudson Castle Group, Elected: 1993 Inc. (formerly IBEX Capital Markets, Inc.) 46 Funds (financial services) (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. -------------------------------------------------------------------------------- Richard E. Segerson Managing Director, Northway Management Company YOB: 1946 (1998-present). Elected: 1998 46 Funds -------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). YOB: 1942 Mr. Verdonck is also a director of several Elected: 2004 non-U.S. companies. 46 Funds -------------------------------------------------------------------------------- INTERESTED TRUSTEES The individual 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, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ENDED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------------------- George R. Aylward(1) Director, President and Chief Executive Officer YOB: 1964 (since 2008), Director and President (2006-2008), Elected: 2006 Chief Operating Officer (2004-2006), Vice 48 Funds President, Finance (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Various senior officer and directorship positions with Virtus affiliates (2005-present). Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005-2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present). . -------------------------------------------------------------------------------- (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. 43 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 Executive Vice President, Head of Operations (since 2009), Senior YOB: 1952 since 2006. Vice President, Operations (2008-2009), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). Assistant Treasurer (2001-2009), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (since 2009), YOB: 1962 since 2008. Senior Vice President, Asset Management Product Development (2008-2009), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (2008-present), Director and Senior President (2006-2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (since 2008). ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC c/o Zweig-DiMenna Chief Compliance Officer (1989-present). Vice President, and Chief Compliance Officer, The Associates, LLC since 2004. Zweig Total Return Fund, Inc. (2004-present). Vice President, and 900 Third Avenue Chief Compliance Officer, The Zweig Fund, Inc. (2004-present). New York, NY 10022 President and Director of Watermark Securities, Inc. (1991-present). YOB: 1945 Assistant Secretary, Gotham Advisors Inc. (1990-2005). ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer Senior Vice President, Fund Administration (since 2009), Vice YOB: 1972 and Treasurer since 2005. President, Fund Administration (2007-2009), 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. ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Senior Vice President (since 2009), Counsel and Secretary YOB: 1954 Officer, Counsel and Secretary (2008-present) and Vice President (2008-2009), Virtus Investment since 2005. Partners, Inc. and/or certain of its subsidiaries. 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). ------------------------------------------------------------------------------------------------------------------------------------
44 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 Francis G. Waltman, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 100 Pearl Street Hartford, CT 06103-4506 PRINCIPAL UNDERWRITER VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 TRANSFER AGENT VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIAN State Street Bank and Trust Company P.O. Box 5501 Boston, MA 02206-5501 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 2001 Market Street Philadelphia, PA 19103-7042 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser 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. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] ------------- VIRTUS PRSRT STD MUTUAL FUNDS U.S. POSTAGE PAID c/o State Street Bank and Trust Company LANCASTER, PA P.O. Box 8301 PERMIT 1793 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 11-09 ANNUAL REPORT [GRAPHIC OMITTED] VIRTUS MUTUAL FUNDS Virtus Real Estate Securities Fund -------------------------------------------------------------------------------- TRUST NAME: September 30, 2009 [Graphic Omitted] VIRTUS Eligible OPPORTUNITIES shareholders can TRUST sign up for eDelivery at Virtus.com NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE TABLE OF CONTENTS VIRTUS REAL ESTATE SECURITIES FUND ("Real Estate Securities Fund") Message to Shareholders.................................................. 1 Key Investment Terms and Footnote Legend................................. 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.................. 22 Tax Information Notice................................................... 23 Fund Management Tables................................................... 24 -------------------------------------------------------------------------------- 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, 2009, 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 Dear Fellow Shareholders of Virtus Mutual Funds: [PHOTO OMITTED] Investors who were calmed by the positive news from the financial markets in the second quarter of 2009 may have had a reason to regain some of their enthusiasm during the third quarter. There were numerous signs pointing to an end to the recession: gross domestic product grew by an annualized 3.5 percent, matching its average growth rate of the last 80 years; a measure of stability appeared in the housing market; consumer confidence inched up; and better-than-expected profits and rosier outlooks were reported by many corporations. The capital markets continued their recovery during the quarter, with most major stock market indices up by double digits for the quarter. The S&P 500(R) Index was up 15.6 percent in the quarter and in late September was at its highest level in nearly a year. The Dow Jones Industrial Average(SM) increased 15.8 percent in the third quarter, and as of September 30 had improved by 13.5 percent for the year. These figures are even more encouraging when compared with market lows in early March and the double-digit losses both indices recorded during the first quarter of the year. Bonds also participated in the third-quarter rally, with the Barclays Capital U.S. Aggregate Bond Index ahead by 3.74 percent and the Barclays Capital U.S. Municipal Bond Index up 7.12 percent. Although the Federal Open Market Committee acknowledged that "economic activity has picked up following its severe downturn," these recent gains should not unleash any 1990s-style market "exuberance." The strength and timing of a full recovery is yet to be realized. Unemployment rates that probably have not peaked remain a drag on consumer spending, and with an expected slowdown of the government's monetary and fiscal stimulus, some economists speculate that the growth from the second and third quarter may not be sustainable into next year. These factors suggest this is an important time to rely on the experience of your personal financial adviser and the investment professionals who manage your assets in the Virtus Mutual Funds. We encourage you to carefully consider the commentary of our investment professionals on the following pages and meet with your adviser to review your portfolio and, when appropriate, adjust it to fit your current investment objectives and your tolerance for risk. Our wide range of equity, fixed income, and alternative investments allow you to allocate your assets and design a portfolio tailored to your individual needs. Information about your investments is always available on our website, WWW.VIRTUS.COM, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will do our very best to meet your expectations. 1 On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 1, 2009 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 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS 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. FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2009, see Note 9 Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. 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, 2009 TO SEPTEMBER 30, 2009 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 (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 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 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 table 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 table 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 table 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 table 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, 2009 TO SEPTEMBER 30, 2009 EXPENSE TABLE -------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2009 September 30, 2009 Ratio Period* -------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,690.40 1.53% $10.32 Class B 1,000.00 1,682.50 2.28 15.33 Class C 1,000.00 1,682.70 2.28 15.33 Class I 1,000.00 1,692.20 1.27 8.57 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.30 1.53 7.77 Class B 1,000.00 1,013.50 2.28 11.57 Class C 1,000.00 1,013.50 2.28 11.57 Class I 1,000.00 1,018.62 1.27 6.45 * 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 365 to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. 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 [ ] REAL ESTATE SECURITIES FUND (the "Fund") is non-diversified and has an investment objective of 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, 2009, the Fund's Class A shares at NAV returned -28.61%, Class B shares returned -29.20%, Class C shares returned -29.17% and Class I shares returned -28.45%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned -6.91%, and the FTSE NAREIT Equity REITs Index, the Fund's style-specific index appropriate for comparison, returned -28.40%. 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 MARKET PERFORM DURING THE FUND'S FISCAL YEAR? [ ] The first half of the Fund's fiscal year was characterized by a rapidly deteriorating economy on the back of a credit crisis that originated in debt markets for single-family home loans and spread to every area of the debt capital markets. Thus, leverage became a very dirty word and real estate fundamentals took a back seat to balance sheet capacity and access to liquidity. Given that real estate companies by their nature have above average leverage relative to the broader equity markets and rely on a functioning debt capital market to run their business, real estate securities were one of the largest casualties of the worsening credit crisis and resultant rise in risk premiums and debt capital costs during the fourth quarter of 2008 and first quarter of 2009. [ ] During the second half of the Fund's fiscal year the market had its gaze affixed upon the beauty of "green-shoots" or those early signs of recovery that began to spring-up post two very dismal quarters of economic performance. Consistent with this view, risk premia contracted substantially, creating an environment that favored higher risk asset classes (e.g. emerging market equities, small cap equities, etc...) and the more market sensitive or higher beta securities within these asset classes. Thus, those securities that only as recently as the first quarter of 2009 would have been considered weeds in need of removal, became sweet smelling roses within your portfolio. As this more optimistic reading of the landscape became firmly rooted, real estate equity markets blossomed; posting one of their strongest six months of total return performance on record. Many real estate companies took advantage of this ebullience by issuing new equity to help reposition their balance sheets. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? [ ] During down periods of the fiscal year the Fund outperformed the benchmark and lagged during the high beta rallies, essentially tracking the benchmark overall for the fiscal year. [ ] Going forward, with the return of liquidity to the debt capital markets and better positioned balance sheets among the publicly traded real estate companies, we are poised to move into the next phase of the real estate capital market cycle. No longer will the primary focus be on selling assets or issuing equity to repair broken balance sheets, but rather on returning to the more virtuous cycle of raising capital to make acquisitions at positive spreads to underlying cost of capital and growing cash flow per share and ultimately dividends. 6 VIRTUS REAL ESTATE SECURITIES FUND (CONTINUED) [ ] As long-term investors in real estate equities, with an emphasis on growth-at-a-reasonable-price, we anxiously await the emergence of this cycle. However, patience will be required; though the capital markets appear to be cooperative, the expected sellers of assets, namely, the banks and other over-leveraged owners of real estate assets, have been slow to come to the table. This speaks to the much heard phrases today of "kicking the can down the road" and "extend and pretend." Regardless, given the sheer volume of real estate transactions that took place during the years 2005 - 2007 at peak prices utilizing high levels of low-cost leverage, we are confident opportunities will emerge that the better positioned public real estate companies will be prepared to capitalize on in this environment. CONCENTRATING INVESTMENTS IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, PROPERTY VALUE CHANGES AND MANAGEMENT SKILL. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. A NON-DIVERSIFIED FUND MAY BE MORE SUSCEPTIBLE TO ANY SINGLE ECONOMIC, POLITICAL OR REGULATORY EVENT AFFECTING AN ISSUER THAN A DIVERSIFIED FUND. -------------------------------------------------------------------------------- Asset Allocations ----------------- The following table presents asset allocations within certain sectors as a percentage of total investments at September 30, 2009. Apartments 15% Office 14 Regional Malls 14 Health Care 13 Shopping Centers 8 Self Storage 6 Diversified 6 Other (includes short-term investments) 24 --- Total 100% === -------------------------------------------------------------------------------- 7 AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/09 --------------------------------------------------------------------------------
Inception 1 5 10 to Inception Year Years Years 9/30/09 Date ------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV(2) -28.61% 2.18% 11.07% -- -- ------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3,4) -32.71 0.97 10.42 -- -- ------------------------------------------------------------------------------------------------- CLASS B SHARES AT NAV(2) -29.20 1.40 10.23 -- -- ------------------------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) -31.96 1.40 10.23 -- -- ------------------------------------------------------------------------------------------------- CLASS C SHARES at NAV(2) -29.17 1.42 -- 5.85% 7/25/03 ------------------------------------------------------------------------------------------------- CLASS C SHARES AT CDSC(4) -29.17 1.42 -- 5.85 7/25/03 ------------------------------------------------------------------------------------------------- CLASS I SHARES at NAV -28.45 -- -- -16.06 12/29/06 ------------------------------------------------------------------------------------------------- S&P (500)(R) INDEX -6.91 1.01 -0.15 NOTE 5 NOTE 5 ------------------------------------------------------------------------------------------------- FTSE NAREIT EQUITY REITS INDEX -28.40 1.40 9.52 NOTE 6 NOTE 6 ------------------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES: 1.45%, B SHARES: 2.20%, C SHARES: 2.20%, I SHARES: 1.20%.
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% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 2.97% FOR CLASS C (SINCE 7/25/03) AND -8.08% FOR CLASS I (SINCE 12/29/06). (6) INDEX PERFORMANCE IS 5.61% FOR CLASS C (SINCE 7/25/03) AND -16.21% FOR CLASS I (SINCE 12/29/06). (7) PER PROSPECTUS EFFECTIVE 3/2/09. GROWTH OF $10,000 for periods ended 9/30 -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on September 30, 1999, for Class A and Class B shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Share Share Class A Class B FTSE NAREIT S&P 500(R) (1)(3)(4) (1)(4) Equity REITs Index Index --------- ------- ------------------ ---------- 9/30/99 $ 9,425 $10,000 $10,000 $10,000 9/29/00 12,582 13,256 12,060 11,337 9/28/01 13,514 14,127 13,575 8,317 9/30/02 15,183 15,755 14,734 6,614 9/30/03 19,079 19,647 18,451 8,229 9/30/04 24,189 24,722 23,167 9,370 9/30/05 30,854 31,306 29,487 10,517 9/29/06 40,093 40,364 36,940 11,653 9/28/07 41,902 41,880 39,038 13,568 9/30/08 37,736 37,422 34,689 10,586 9/30/09 26,941 26,496 24,837 9,855 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend on page 3. 8 VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2009 ($ reported in thousands) SHARES VALUE ---------- -------- COMMON STOCKS--97.7% REAL ESTATE INVESTMENT TRUSTS--97.7% DIVERSIFIED--6.5% Vornado Realty Trust 823,412 $ 53,036 ------------------------------------------------------------------------------ TOTAL DIVERSIFIED 53,036 ------------------------------------------------------------------------------ HEALTH CARE--13.0% Health Care REIT, Inc. 717,219 29,851 HPC, Inc. 1,115,507 32,060 Nationwide Health Properties, Inc. 574,590 17,807 Ventas, Inc. 697,754 26,863 ------------------------------------------------------------------------------ TOTAL HEALTH CARE 106,581 ------------------------------------------------------------------------------ INDUSTRIAL/OFFICE--22.5% INDUSTRIAL--5.1% AMB Property Corp. 685,640 15,736 Eastgroup Properties, Inc. 82,280 3,145 Prologis 1,933,593 23,048 -------- 41,929 -------- MIXED--3.2% Duke Realty Corp. 890,342 10,693 Liberty Property Trust 473,880 15,415 -------- 26,108 -------- OFFICE--14.2% Alexandria Real Estate Equities, Inc. 275,548 14,976 BioMed Realty Trust, Inc. 528,894 7,299 Boston Properties, Inc. 528,743 34,659 Corporate Office Properties Trust 268,985 9,920 Douglas Emmett, Inc. 201,780 2,478 Highwoods Properties, Inc. 392,188 12,334 Mack-Cali Realty Corp. 451,266 14,589 SL Green Realty Corp. 457,211 20,049 -------- 116,304 -------- ------------------------------------------------------------------------------ TOTAL INDUSTRIAL/OFFICE 184,341 ------------------------------------------------------------------------------ SHARES VALUE ---------- -------- LODGING/RESORTS--4.3% Host Hotels & Resorts, Inc. 2,148,525 $ 25,288 LaSalle Hotel Properties 355,391 6,987 Sunstone Hotel Investors, Inc.(2) 361,946 2,570 ------------------------------------------------------------------------------ TOTAL LODGING/RESORTS 34,845 ------------------------------------------------------------------------------ RESIDENTIAL--15.2% APARTMENTS--14.8% American Campus Communities, Inc. 158,270 4,250 Apartment Investment & Management Co. Class A 539,936 7,964 AvalonBay Communities, Inc. 312,836 22,753 BRE Properties, Inc. 216,300 6,770 Equity Residential 1,256,029 38,560 Essex Property Trust, Inc. 122,952 9,785 Home Properties, Inc. 232,284 10,009 UDR, Inc. 1,342,344 21,128 -------- 121,219 -------- MANUFACTURED HOMES--0.4% Equity Lifestyle Properties, Inc. 74,352 3,181 ------------------------------------------------------------------------------ TOTAL RESIDENTIAL 124,400 ------------------------------------------------------------------------------ RETAIL--22.7% FREE STANDING--0.4% National Retail Properties, Inc. 160,716 3,451 REGIONAL MALLS--14.4% CBL & Associates Properties, Inc. 987,563 9,579 Macerich Co. (The) 550,310 16,691 Simon Property Group, Inc. 1,225,475 85,085 Taubman Centers, Inc. 183,850 6,633 -------- 117,988 -------- See Notes to Financial Statements 9 VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2009 ($ reported in thousands) SHARES VALUE ---------- -------- SHOPPING CENTERS--7.9% Federal Realty Investments Trust 250,920 $ 15,399 Kimco Realty Corp. 2,205,415 28,759 Regency Centers Corp. 170,290 6,309 Tanger Factory Outlet Centers 373,150 13,933 -------- 64,400 ------------------------------------------------------------------------------ TOTAL RETAIL 185,839 ------------------------------------------------------------------------------ SELF STORAGE--6.2% Extra Space Storage, Inc. 990,669 10,451 Public Storage 518,113 38,983 U-Store-It Trust 278,363 1,740 ------------------------------------------------------------------------------ TOTAL SELF STORAGE 51,174 ------------------------------------------------------------------------------ SPECIALTY--7.3% Digital Realty Trust, Inc. 843,701 38,565 Entertainment Properties Trust 219,677 7,500 Plum Creek Timber Co., Inc. 447,541 13,713 ------------------------------------------------------------------------------ TOTAL SPECIALTY 59,778 ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (IDENTIFIED COST $657,853) 799,994 ------------------------------------------------------------------------------ TOTAL LONG-TERM INVESTMENTS--97.7% (IDENTIFIED COST $657,853) 799,994 ------------------------------------------------------------------------------ SHARES VALUE ---------- -------- SHORT TERM INVESTMENTS--2.8% MONEY MARKET MUTUAL FUNDS--2.8% State Street Institutional Liquid Reserves Fund - Institutional Shares (seven-day effective yield 0.260%) 22,462,923 $ 22,463 ------------------------------------------------------------------------------ TOTAL SHORT TERM INVESTMENTS (IDENTIFIED COST $22,463) 22,463 ------------------------------------------------------------------------------ TOTAL INVESTMENTS--100.5% (IDENTIFIED COST $680,316) 822,457(1) Other assets and liabilities, net--(0.5)% (3,999) -------- NET ASSETS--100.0% $818,458 ======== The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Value at Level 1 - September 30, 2009 Quoted Prices ------------------ ------------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $799,994 $799,994 Short-Term Investments 22,463 22,463 -------- -------- Total Investments $822,457 $822,457 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend on page 3. See Notes to Financial Statements 10 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2009 (Reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) ......................... $ 822,457 Receivables Investment securities sold ................................ 2,265 Fund shares sold .......................................... 2,908 Dividends receivable ...................................... 1,983 Prepaid expenses ............................................. 62 ----------- Total assets ............................................ 829,675 ----------- LIABILITIES Payables Fund shares repurchased ................................... 6,003 Investment securities purchased ........................... 4,020 Investment advisory fee ................................... 493 Distribution and service fees ............................. 161 Administration fee ........................................ 43 Transfer agent fees and expenses .......................... 370 Trustees' fee and expenses ................................ 10 Professional fee .......................................... 30 Other accrued expenses .................................... 87 ----------- Total liabilities ....................................... 11,217 ----------- NET ASSETS ................................................... $ 818,458 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ............. $ 902,863 Accumulated undistributed net investment income (loss) ....... 241 Accumulated undistributed net realized gain (loss) ........... (226,787) Net unrealized appreciation (depreciation) on investments .... 142,141 ----------- NET ASSETS ................................................... $ 818,458 =========== CLASS A Net asset value (net assets/shares outstanding) per share .... $20.21 Maximum offering price per share $20.21/(1-5.75%) ............ $21.44 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................... 27,342,644 Net Assets ................................................... $ 552,518 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ................................... $19.95 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................... 884,426 Net Assets ................................................... $ 17,648 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ................................... $20.19 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................... 2,071,214 Net Assets ................................................... $ 41,818 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ................................... $20.19 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................... 10,226,736 Net Assets ................................................... $ 206,474 (1) Investment in securities at cost ......................... $ 680,316 See Notes to Financial Statements 11 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2009 (Reported in thousands) INVESTMENT INCOME Dividends .................................................... $ 27,585 --------- Total investment income ................................. 27,585 --------- EXPENSES Investment advisory fees ..................................... 4,655 Service fees, Class A ........................................ 1,166 Distribution and service fees, Class B ....................... 167 Distribution and service fees, Class C ....................... 355 Administration fees .......................................... 526 Transfer agent fee and expenses .............................. 2,502 Custodian fees ............................................... 61 Printing fees and expenses ................................... 193 Professional fees ............................................ 36 Registration fees ............................................ 125 Trustees' fee and expenses ................................... 64 Miscellaneous expenses ....................................... 112 --------- Total expenses .......................................... 9,962 --------- NET INVESTMENT INCOME (LOSS) ................................. 17,623 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ...................... (218,412) Net change in unrealized appreciation (depreciation) on investments ............................................ (97,517) --------- NET GAIN (LOSS) ON INVESTMENTS ............................... (315,929) --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(298,306) ========= See Notes to Financial Statements 12 VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands)
Year Ended Year Ended September 30, 2009 September 30, 2008 ------------------ ------------------ INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS Net investment income (loss) .............................. $ 17,623 $ 15,561 Net realized gain (loss) .................................. (218,412) 1,513 Net change in unrealized appreciation (depreciation) ...... (97,517) (147,744) ---------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .. (298,306) (130,670) ---------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ............................ (13,091) (14,408) Net investment income, Class B ............................ (348) (328) Net investment income, Class C ............................ (720) (626) Net investment income, Class I ............................ (3,219) (722) Net realized long-term gains, Class A ..................... -- (31,550) Net realized long-term gains, Class B ..................... -- (1,385) Net realized long-term gains, Class C ..................... -- (2,707) Net realized long-term gains, Class I ..................... -- (712) ---------- ----------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (17,378) (52,438) ---------- ----------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (13,818 and 11,559 shares, respectively) ............. 221,839 339,354 Class B (53 and 122 shares, respectively) .................... 888 3,570 Class C (418 and 472 shares, respectively) ................... 6,721 13,975 Class I (8,180 and 3,444 shares, respectively) ............... 135,413 99,740 REINVESTMENT OF DISTRIBUTIONS Class A (757 and 1,370 shares, respectively) ................. 11,294 39,324 Class B (20 and 47 shares, respectively) ..................... 282 1,347 Class C (40 and 94 shares, respectively) ..................... 585 2,695 Class I (187 and 42 shares, respectively) .................... 2,869 1,214 SHARES REPURCHASED Class A (16,768 and 16,735 shares, respectively) ............. (272,522) (494,135) Class B (415 and 425 shares, respectively) ................... (6,803) (12,420) Class C (831 and 1,066 shares, respectively) ................. (13,231) (31,564) Class I (1,779 and 812 shares, respectively) ................. (28,068) (25,212) ---------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS . 59,267 (62,112) ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ..................... (256,417) (245,220) NET ASSETS Beginning of period ....................................... 1,074,875 1,320,095 ---------- ----------- END OF PERIOD ............................................. $ 818,458 $ 1,074,875 ========== =========== Accumulated undistributed net investment income (loss) at end of period .......................................... $ 241 $ (6)
See Notes to Financial Statements 13 VIRTUS REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS 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 10/1/08 to 9/30/09 $29.19 0.47 (8.99) (8.52) (0.46) -- (0.46) 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) CLASS B 10/1/08 to 9/30/09 $28.85 0.35 (8.91) (8.56) (0.34) -- (0.34) 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) CLASS C 10/1/08 to 9/30/09 $29.17 0.35 (8.99) (8.64) (0.34) -- (0.34) 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) CLASS I 10/1/08 to 9/30/09 $29.17 0.49 (8.97) (8.48) (0.50) -- (0.50) 10/1/07 to 9/30/08 34.08 0.62 (3.98) (3.36) (0.54) (1.01) (1.55) 12/29/06(6) 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 10/1/08 to 9/30/09 (8.98) $20.21 (28.61)% $ 552,518 1.59% 1.59% 2.88% 48% 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 CLASS B 10/1/08 to 9/30/09 (8.90) $19.95 (29.20)% $ 17,648 2.34% 2.34% 2.16% 48% 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 CLASS C 10/1/08 to 9/30/09 (8.98) $20.19 (29.17)% $ 41,818 2.34% 2.34% 2.12% 48% 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 CLASS I 10/1/08 to 9/30/09 (8.98) $20.19 (28.45)% $ 206,474 1.32% 1.32% 3.00% 48% 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(6) 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. (6) Inception date.
See Notes to Financial Statements 14 and 15 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2009 1. ORGANIZATION Virtus 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 Virtus 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% with some exceptions. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions 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 (see Note 11). 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, 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 and those differences could be significant. 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, 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. 16 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 Investments in underlying funds are valued at each fund's closing net asset value determined as of the close of business of the New York Stock Exchange (generally 4:00 p.m. Eastern time). Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 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. 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 each Fund's tax positions and has concluded that no provision for income tax is required in any Fund's financial statements. The Fund is unaware 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 prior three fiscal years remains subject to examination by the Internal Revenue Service. 17 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) At the close of business December 31, 2008, Virtus Investment Partners, Inc. ("Virtus") spun off from The Phoenix Companies, Inc. ("PNX"), into an independent publicly traded company which through its affiliates provides asset management and related services to individuals and institutions. Virtus Investment Advisers, Inc. ("VIA," the "Adviser," formerly known as Phoenix Investment Counsel, Inc.) and VP Distributors, Inc. ("VP Distributors," formerly known as Phoenix Equity Planning Corporation) are indirect wholly-owned subsidiaries of Virtus. Due to the spin-off, the asset management subsidiaries have changed their names to reflect the Virtus brand. As compensation for its services to the Trust, the Adviser 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 may recapture operating expenses waived or reimbursed under arrangements previously in effect, 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 any 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 Virtus. 18 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 As distributor of the Fund's shares, VP Distributors, Inc., an indirect wholly-owned subsidiary of Virtus, has advised the Fund that it retained net selling commissions and deferred sales charges for the fiscal year (the "period") ended September 30, 2009, as follows: CLASS A CLASS B CLASS C NET SELLING DEFERRED DEFERRED DEFERRED COMMISSIONS SALES CHARGES SALES CHARGES SALES CHARGES ----------- ------------- ------------- ------------- $26 $1 $69 $12 In addition, the Fund pays VP Distributors distribution and/or service fees at the annual rate of 0.25% for Class A shares, 1.00% for Class B shares, and 1.00% for Class C shares applied to the average daily net assets of each respective class. 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. VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2009, the Fund incurred administration fees totaling $526. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2009, transfer agent fees were $2,502 as reported in the Statement of Operations. Until March 1, 2007, the Trust provided a deferred compensation plan to its trustees who were not officers of Virtus. Under the deferred compensation plan, trustees were able to elect to defer all or a portion of their compensation. Amounts deferred were retained by the Fund, and to the extent permitted by the 1940 Act, as amended, could have been invested in the shares of those Virtus Mutual Funds selected by the trustees. 4. PURCHASES AND SALES OF SECURITIES ($ 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, 2009, were as follows: LONG-TERM --------------------------------- PURCHASES SALES --------- -------- $386,888 $307,021 There were no purchases or sales of long-term U.S. Government or agency securities. 5. 10% SHAREHOLDERS As of September 30, 2009, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the Fund as detailed below. The shareholders are not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- -------- 30% 2 19 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 6. CREDIT RISK AND ASSET CONCENTRATIONS The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus (and, prior to the spin-off described in Note 3, PNX) and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 9. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2009, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows. NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) -------- ------------ -------------- -------------- $730,946 $105,298 $(13,787) $91,511 The Fund has capital loss carryovers which may be used to offset future capital gains as follows: 2017 TOTAL ------- ------- $34,344 $34,344 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, 2009, the Fund deferred and recognized post-October losses as follows: CAPITAL CAPITAL LOSS LOSS DEFERRED RECOGNIZED -------- ---------- $141,813 $625 20 VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2009 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 $241 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 10. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ 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, 2009, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON UNDISTRIBUTED ACCUMULATED SHARES OF NET INVESTMENT NET REALIZED BENEFICIAL INTEREST INCOME (LOSS) GAIN (LOSS) ------------------- -------------- ------------ $(2) $2 $ -- 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through November 20, 2009, the date the financial statements were available for issuance, and has determined that the following subsequent events require recognition or disclosure in the financial statements. Effective on December 1, 2009 (the "Closing Date"), Class B Shares of the Virtus Mutual Funds will no longer be available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to each Fund's prospectus). 21 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 (hereafter referred to as the "Fund"), a series of Virtus Opportunities Trust, at September 30, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania November 20, 2009 22 VIRTUS REAL ESTATE SECURITIES FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2009 (UNAUDITED) For the fiscal year ended September 30, 2009, 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% $ -- 23 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2009, 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 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES -------------------------------------------------------------------------------- NAME, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------------------- Leroy Keith, Jr. Managing Director, Almanac Capital Management YOB: 1939 (commodities business) (2007-present). Partner, Elected: 1993 Stonington Partners, Inc. (private equity firm) 46 Funds (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios). -------------------------------------------------------------------------------- Philip R. McLoughlin Partner, Cross Pond Partners, LLC (2006-Present). YOB: 1946 Director, World Trust Fund. Chairman and Trustee, Elected: 1993 The Phoenix Edge Series Fund. Director, DTF 49 Funds Tax-Free Income Fund, Inc., Duff & Phelps Utility and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. Managing Director, SeaCap, Asset Management Fund I L.P. -------------------------------------------------------------------------------- Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of YOB: 1951 New York (private bank) (1982-2006). Director, DTF Elected: 2001 Tax-Free Income Fund, Inc., Duff & Phelps Utility 49 Funds and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. -------------------------------------------------------------------------------- James M. Oates Managing Director, Wydown Group (consulting firm) YOB: 1946 (1994-present). Chairman, Hudson Castle Group, Elected: 1993 Inc. (formerly IBEX Capital Markets, Inc.) 46 Funds (financial services) (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. -------------------------------------------------------------------------------- Richard E. Segerson Managing Director, Northway Management Company YOB: 1946 (1998-present). Elected: 1998 46 Funds -------------------------------------------------------------------------------- Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). YOB: 1942 Mr. Verdonck is also a director of several Elected: 2004 non-U.S. companies. 46 Funds -------------------------------------------------------------------------------- INTERESTED TRUSTEE The individual 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, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------------------- George R. Aylward(1) Director, President and Chief Executive Officer YOB: 1964 (since 2008), Director and President (2006-2008), Elected: 2006 Chief Operating Officer (2004-2006), Vice 48 Funds President, Finance (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Various senior officer and directorship positions with Virtus affiliates (2005-present). Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005-2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present). -------------------------------------------------------------------------------- (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. 24 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 Executive Vice President, Head of Operations (since 2009), Senior Vice President YOB: 1952 since 2006. Operations (2008-2009), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Ms. Curtiss is also Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). Assistant Treasurer (2001-2009), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (since 2009), Senior Vice YOB: 1962 since 2008. President, Asset Management Product Development (2008-2009), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (2008-present), Director and Senior President (2006-2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (since 2008). ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC (1989-present). Vice c/o Zweig-DiMenna Chief Compliance Officer President, and Chief Compliance Officer, The Zweig Total Return Fund, Inc. Associates, LLC since 2004. (2004-present). Vice President, and Chief Compliance Officer, The Zweig Fund, 900 Third Avenue Inc. (2004-present). President and Director of Watermark Securities, Inc. New York, NY 10022 (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). YOB: 1945 ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer Senior Vice President, Fund Administration (since 2009), Vice President, Fund YOB: 1972 and Treasurer since Administration (2007-2009), Second Vice President, Fund Control & Tax 2005. (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. ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Senior Vice President (since 2009), Counsel and Secretary (2008-present) and Vice YOB: 1954 Legal Officer, Counsel President (2008-2009), Virtus Investment Partners, Inc. and/or certain of its and Secretary since subsidiaries. Vice President and Counsel, Phoenix Life Insurance Company 2005. (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). ------------------------------------------------------------------------------------------------------------------------------------
25 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 Francis G. Waltman, Senior Vice President Marc Baltuch, Vice President and Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel and Secretary INVESTMENT ADVISER Virtus Investment Advisers, Inc. 100 Pearl Street Hartford, CT 06103-4506 PRINCIPAL UNDERWRITER VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 TRANSFER AGENT VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIAN PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19155-3111 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 2001 Market Street Philadelphia, PA 19103-7042 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser 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. VIRTUS ------------- MUTUAL FUNDS PRSRT STD U.S. POSTAGE PAID c/o State Street Bank and Trust Company LANCASTER, PA P.O. Box 8301 PERMIT 1793 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 11-09 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 $388,580 for 2008 and $412,280 for 2009. 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 $61,804 for 2008 and $39,179 for 2009. 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 $103,925 for 2008 and $86,086 for 2009. "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 2008 and $0 for 2009. (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 (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 2008 and 2009 (c) 100% for 2008 and 2009 (d) Not applicable for 2008 and 2009 (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 $1,516,768 for 2008 and $818,945 for 2009. (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 -------------------------------------------------------------------- By (Signature and Title)* /s/ George R. Aylward ------------------------------------------------------- George R. Aylward, President (principal executive officer) Date December 4, 2009 ---------------------------------------------------------------------------- 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 4, 2009 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ W. Patrick Bradley ------------------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date December 4, 2009 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.