-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MXOryref+4QogHzNMznq06ZlaaMDlvlcQzOHbUx/yWIFi2Bsgj8GCdP/y1WPQNG+ Zld3XcTO8bx0i+27fVgXsQ== 0000950123-10-056181.txt : 20100607 0000950123-10-056181.hdr.sgml : 20100607 20100607105544 ACCESSION NUMBER: 0000950123-10-056181 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100331 FILED AS OF DATE: 20100607 DATE AS OF CHANGE: 20100607 EFFECTIVENESS DATE: 20100607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRTUS OPPORTUNITIES TRUST CENTRAL INDEX KEY: 0001005020 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07455 FILM NUMBER: 10880596 BUSINESS ADDRESS: STREET 1: 101 MUNSON STREET CITY: GREENFIELD STATE: MA ZIP: 01301 BUSINESS PHONE: 800-243-1574 MAIL ADDRESS: STREET 1: 100 PEARL STREET CITY: HARTFORD STATE: CT ZIP: 06103 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX OPPORTUNITIES TRUST DATE OF NAME CHANGE: 20060127 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX SENECA FUNDS DATE OF NAME CHANGE: 19990122 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FUNDS DATE OF NAME CHANGE: 19951218 0001005020 S000001336 VIRTUS BOND FUND C000003572 CLASS A SAVAX C000003573 CLASS B SAVBX C000003574 CLASS C SAVCX C000003575 CLASS I SAVYX 0001005020 S000018001 VIRTUS CA TAX-EXEMPT BOND FUND C000049899 Class A CTESX C000049900 Class I CTXEX 0001005020 S000018002 VIRTUS REAL ESTATE SECURITIES FUND C000049901 Class A PHRAX C000049902 Class B PHRBX C000049903 Class C PHRCX C000049904 Class I PHRIX 0001005020 S000018005 VIRTUS HIGH YIELD FUND C000049911 Class B PHCCX C000049912 Class C PGHCX C000049913 Class A PHCHX 0001005020 S000018007 VIRTUS MULTI-SECTOR FIXED INCOME FUND C000049915 Class A NAMFX C000049916 Class B NBMFX C000049917 Class C NCMFX C000081781 Class I VMFIX 0001005020 S000018008 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND C000049918 Class A NARAX C000049919 Class B PBARX C000049920 Class C PSTCX C000049921 Class T PMSTX C000066828 Class I Shares PIMSX 0001005020 S000018009 VIRTUS GLOBAL INFRASTRUCTURE FUND C000049922 Class A PGUAX C000049923 Class C PGUCX C000066829 Class I Shares PGIUX 0001005020 S000018010 VIRTUS MARKET NEUTRAL FUND C000049924 Class A EMNAX C000049925 Class B EMNBX C000049926 Class C EMNCX C000081782 Class I 0001005020 S000018969 VIRTUS FOREIGN OPPORTUNITIES FUND C000052519 Class A JVIAX C000052520 Class C JVICX C000052521 Class I JVXIX 0001005020 S000018970 VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND C000052522 Class A PXRAX C000052523 Class C PXRCX C000052524 Class I PXRIX 0001005020 S000018972 VIRTUS GLOBAL OPPORTUNITIES FUND C000052528 Class A NWWOX C000052529 Class B WWOBX C000052530 Class C WWOCX 0001005020 S000018974 VIRTUS ALPHASECTOR ROTATION FUND C000052533 Class A PWBAX C000052534 Class C PWBCX C000081783 Class I 0001005020 S000018975 VIRTUS ALPHASECTOR ALLOCATION FUND C000052535 Class A PSWAX C000052536 Class C PSWCX C000081784 Class I 0001005020 S000018976 VIRTUS ALTERNATIVES DIVERSIFIER FUND C000052537 Class A PDPAX C000052538 Class C PDPCX C000081785 Class I 0001005020 S000020772 VIRTUS SENIOR FLOATING RATE FUND C000058006 Class A PSFRX C000058007 Class C PFSRX C000058008 Class I PSFIX 0001005020 S000025108 Virtus Global Real Estate Securities Fund C000074732 Class A VGSAX C000074733 Class C VGSCX C000074734 Class I VGISX 0001005020 S000025109 Virtus Greater Asia ex Japan Opportunities Fund C000074735 Class A VGAAX C000074736 Class C VGACX C000074737 Class I VGAIX 0001005020 S000025110 Virtus Greater European Opportunities Fund C000074738 Class A VGEAX C000074739 Class C VGECX C000074740 Class I VGEIX N-CSRS 1 b56689virtusoppstrust_ncsrs.txt VIRTUS OPPORTUNITIES TRUST N-CSRS 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 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: March 31, 2010 -------------- 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. SEMIANNUAL REPORT (VIRTUS MUTUAL FUNDS LOGO) - ------------------------------------------------------------------------------------------------------------------------------------ Virtus AlphaSector(SM) Allocation Fund Virtus AlphaSector(SM) Rotation 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: March 31, 2010 Eligible VIRTUS OPPORTUNITIES TRUST 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 Portfolio Holdings Summary Weightings ......................................................................................... 6 Schedules of Investments Virtus AlphaSector(SM) Allocation Fund ("AlphaSector(SM) Allocation Fund") ................................................. 8 Virtus AlphaSector(SM) Rotation Fund ("AlphaSector(SM) Rotation Fund") ..................................................... 9 Virtus Alternatives Diversifier Fund ("Alternatives Diversifier Fund") ..................................................... 10 Virtus Bond Fund ("Bond Fund") ............................................................................................. 11 Virtus CA Tax-Exempt Bond Fund ("CA Tax-Exempt Bond Fund") ................................................................. 15 Virtus Global Infrastructure Fund ("Global Infrastructure Fund") ........................................................... 18 Virtus Global Opportunities Fund ("Global Opportunities Fund") ............................................................. 19 Virtus Global Real Estate Securities Fund ("Global Real Estate Securities Fund") ........................................... 21 Virtus Greater Asia ex Japan Opportunities Fund ("Greater Asia ex Japan Opportunities Fund") ............................................................................ 23 Virtus Greater European Opportunities Fund ("Greater European Opportunities Fund") ......................................... 25 Virtus High Yield Fund ("High Yield Fund") ................................................................................. 27 Virtus International Real Estate Securities Fund ("International Real Estate Securities Fund") ........................................................................... 30 Virtus Market Neutral Fund ("Market Neutral Fund")* ........................................................................ 31 Virtus Multi-Sector Fixed Income Fund ("Multi-Sector Fixed Income Fund") ................................................... 35 Virtus Senior Floating Rate Fund ("Senior Floating Rate Fund") ............................................................. 43 Statements of Assets and Liabilities .......................................................................................... 48 Statements of Operations ...................................................................................................... 51 Statements of Changes in Net Assets ........................................................................................... 54 Financial Highlights .......................................................................................................... 60 Notes to Financial Statements ................................................................................................. 74 Consideration of Advisory and Sub-advisory Agreements by the Board of Trustees ................................................ 92 * 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 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 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: The first quarter of 2010 gave investors a taste of the kind of volatility that could be in store for some time. The quarter began with a 9 percent correction in the S&P 500(R) Index from mid-January to early February 5, followed by a resumption of 2009's bull market. The major indices were up more than 4 percent for the quarter and by the end of March, both the Dow Jones Industrial Average(SM) and the S&P 500 Index were up more than 65 percent from their lows on March 9, 2009. Surprisingly robust consumer spending and corporate earnings continued to support the transition of the U.S. economy out of recession toward modest growth. Unfortunately, there are some dark clouds on the horizon that may temper investors' optimism. The economy must navigate the long term impact of the unprecedented government spending to revive the global economy. Significant headwinds remain for investors, as evidenced by the current underperformance of the Chinese equity market, the solvency crisis in the Eurozone and persistently high unemployment rates in the U.S. and abroad. We believe this volatility is a reminder that investors should rely on the discipline and focus of professional investment managers and financial advisors. Ask your financial advisor to review your portfolio to ensure it reflects your current investment objectives, your tolerance for risk, and your long-term financial goals. As your advisor reviews your portfolio, we hope you will consider the wide range of equity, fixed income and alternative funds that Virtus offers. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our affiliated managers and subadvisers, we look forward to continuing to serve all your investment needs. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds MAY 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 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 DISCLOSURE OF FUND EXPENSES FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 (UNAUDITED) We believe it is important for you to understand the impact EXPENSE TABLE of costs on your investment. All mutual funds have operating ---------------------------------------------------------------- expenses. As a shareholder of a Virtus Opportunities Trust Fund Beginning Ending (each, a "Fund") you may incur two types of costs: (1) Account Account Expenses transaction costs, including sales charges on purchases of Class Value Value Annualized Paid A shares and contingent deferred sales charges on Class C October March 31, Expense During shares; and (2) ongoing costs, including investment advisory 1, 2009 2010 Ratio Period* fees; distribution and service fees; and other expenses. Class I ---------------------------------------------------------------- shares are sold without sales charges. These examples are ALPHASECTOR(SM) ALLOCATION FUND intended to help you understand your ongoing costs (in dollars) ACTUAL of investing in the Fund and to compare these costs with the Class A $1,000.00 $1,090.80 1.04% $ 5.42 ongoing costs of investing in other mutual funds. These examples Class C 1,000.00 1,087.00 1.79 9.31 are based on an investment of $1,000 invested at the beginning Class I(1) 1,000.00 1,112.70 0.84 4.42 of the period and held for the entire six-month period. The HYPOTHETICAL (5% RETURN BEFORE EXPENSES) following Expense Table illustrates your fund's costs in two Class A 1,000.00 1,019.68 1.04 5.25 ways. Class C 1,000.00 1,015.89 1.79 9.04 Class I(1) 1,000.00 1,020.74 0.84 4.24 ACTUAL EXPENSES ---------------------------------------------------------------- ALPHASECTOR(SM) ROTATION FUND The first section of the accompanying table provides ---------------------------------------------------------------- information about actual account values and actual expenses. You ACTUAL may use the information in this section, together with the Class A $1,000.00 $1,108.10 1.03% $ 5.41 amount you invested, to estimate the expenses that you paid over Class C 1,000.00 1,103.00 1.78 9.33 the period. Simply divide your account value by $1,000 (for Class I(1) 1,000.00 1,137.20 0.79 4.21 example, an $8,600 account value divided by $1,000 = 8.6), then HYPOTHETICAL (5% RETURN BEFORE EXPENSES) multiply the result by the number given for your Fund under the Class A 1,000.00 1,019.73 1.03 5.20 heading "Expenses Paid During Period" to estimate the expenses Class C 1,000.00 1,015.94 1.78 8.99 you paid on your account during the period. Class I(1) 1,000.00 1,020.99 0.79 3.99 ---------------------------------------------------------------- HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES ALTERNATIVES DIVERSIFIER FUND ---------------------------------------------------------------- The second section of the accompanying table provides ACTUAL information about hypothetical account values and hypothetical Class A $1,000.00 $1,054.10 0.45% $ 2.30 expenses based on the Fund's actual expense ratio and an assumed Class C 1,000.00 1,049.60 1.20 6.13 rate of return of 5% per year before expenses, which is not your Class I(1) 1,000.00 1,074.00 0.20 1.03 Fund's actual return. The hypothetical account values and HYPOTHETICAL (5% RETURN BEFORE EXPENSES) expenses may not be used to estimate the actual ending account Class A 1,000.00 1,022.66 0.45 2.27 balance or expenses you paid for the period. You may use this Class C 1,000.00 1,018.87 1.20 6.06 information to compare the ongoing costs of investing in your Class I(1) 1,000.00 1,023.92 0.20 1.01 Fund and other funds. To do so, compare these 5% hypothetical ---------------------------------------------------------------- examples with the 5% hypothetical examples that appear in the BOND FUND shareholder reports of the other funds. ---------------------------------------------------------------- ACTUAL Please note that the expenses shown in the accompanying Class A $1,000.00 $1,037.50 0.83% $ 4.22 table are meant to highlight your ongoing costs only and do not Class B 1,000.00 1,034.30 1.58 8.01 reflect any transactional costs, such as sales charges or Class C 1,000.00 1,034.20 1.58 8.01 contingent deferred sales charges. Therefore, the second section Class I 1,000.00 1,039.20 0.58 2.95 of the accompanying table is useful in comparing ongoing costs HYPOTHETICAL (5% RETURN BEFORE EXPENSES) only, and will not help you determine the relative total costs Class A 1,000.00 1,020.74 0.83 4.19 of owning different funds. In addition, if these transactional Class B 1,000.00 1,016.95 1.58 7.98 costs were included, your costs would have been higher. The Class C 1,000.00 1,016.95 1.58 7.98 calculations assume no shares were bought or sold during the Class I 1,000.00 1,022.00 0.58 2.93 period. Your actual costs may have been higher or lower, ---------------------------------------------------------------- depending on the amount of your investment and the timing of any CA TAX-EXEMPT BOND FUND purchases or redemptions. ---------------------------------------------------------------- ACTUAL Class A $1,000.00 $ 989.30 0.85% $ 4.22 Class I 1,000.00 990.50 0.60 2.98 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.64 0.85 4.29 Class I 1,000.00 1,021.90 0.60 3.03 ---------------------------------------------------------------- GLOBAL INFRASTRUCTURE FUND ---------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,051.10 1.31% $ 6.70 Class C 1,000.00 1,047.30 2.06 10.51 Class I 1,000.00 1,053.30 1.07 5.48 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.32 1.31 6.61 Class C 1,000.00 1,014.53 2.06 10.40 Class I 1,000.00 1,019.53 1.07 5.40 ---------------------------------------------------------------- 2
VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES (CONTINUED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 (UNAUDITED) EXPENSE TABLE EXPENSE TABLE - ---------------------------------------------------------------- ---------------------------------------------------------------- Beginning Ending Beginning Ending Account Account Expense Account Account Expenses Value Value Annualized Paid Value Value Annualized Paid October March 31, Expenses During October March 31, Expense During 1, 2009 2010 Ratio Period* 1, 2009 2010 Ratio Period* - ---------------------------------------------------------------- ---------------------------------------------------------------- GLOBAL OPPORTUNITIES FUND MARKET NEUTRAL FUND - ---------------------------------------------------------------- ---------------------------------------------------------------- ACTUAL ACTUAL Class A $1,000.00 $1,130.90 1.60% $ 8.50 Class A $1,000.00 $1,007.60 3.46% $17.32 Class B 1,000.00 1,125.50 2.35 12.45 Class B 1,000.00 1,003.00 4.36 21.77 Class C 1,000.00 1,124.50 2.35 12.45 Class C 1,000.00 1,003.00 4.42 22.07 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I(1) 1,000.00 1,008.60 3.52 17.63 Class A 1,000.00 1,016.85 1.60 8.08 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class B 1,000.00 1,013.07 2.35 11.86 Class A 1,000.00 1,007.46 3.46 17.47 Class C 1,000.00 1,013.07 2.35 11.86 Class B 1,000.00 1,002.92 4.36 22.01 - ---------------------------------------------------------------- Class C 1,000.00 1,002.62 4.42 22.31 GLOBAL REAL ESTATE SECURITIES FUND Class I(1) 1,000.00 1,007.26 3.52 17.77 - ---------------------------------------------------------------- ---------------------------------------------------------------- ACTUAL MULTI-SECTOR FIXED INCOME FUND Class A $1,000.00 $1,107.60 1.40% $ 7.36 ---------------------------------------------------------------- Class C 1,000.00 1,103.60 2.15 11.28 ACTUAL Class I 1,000.00 1,109.30 1.15 6.05 Class A $1,000.00 $1,085.40 1.13% $ 5.88 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class B 1,000.00 1,081.50 1.88 9.76 Class A 1,000.00 1,017.86 1.40 7.07 Class C 1,000.00 1,081.90 1.88 9.76 Class C 1,000.00 1,014.08 2.15 10.85 Class I(1) 1,000.00 1,087.70 0.88 4.58 Class I 1,000.00 1,019.12 1.15 5.81 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) - ---------------------------------------------------------------- Class A 1,000.00 1,019.23 1.13 5.70 GREATER ASIA EX JAPAN OPPORTUNITIES FUND Class B 1,000.00 1,015.44 1.88 9.49 - ---------------------------------------------------------------- Class C 1,000.00 1,015.44 1.88 9.49 ACTUAL Class I(1) 1,000.00 1,020.49 0.88 4.44 Class A $1,000.00 $1,104.20 1.80% $ 9.44 ---------------------------------------------------------------- Class C 1,000.00 1,100.70 2.55 13.36 SENIOR FLOATING RATE FUND Class I 1,000.00 1,106.00 1.55 8.14 ---------------------------------------------------------------- HYPOTHETICAL (5% RETURN BEFORE EXPENSES) ACTUAL Class A 1,000.00 1,015.84 1.80 9.09 Class A $1,000.00 $1,062.40 1.20% $ 6.17 Class C 1,000.00 1,012.06 2.55 12.87 Class C 1,000.00 1,059.40 1.95 10.01 Class I 1,000.00 1,017.10 1.55 7.83 Class I 1,000.00 1,064.90 0.95 4.89 - ---------------------------------------------------------------- HYPOTHETICAL (5% RETURN BEFORE EXPENSES) GREATER EUROPEAN OPPORTUNITIES FUND Class A 1,000.00 1,018.87 1.20 6.06 - ---------------------------------------------------------------- Class C 1,000.00 1,015.09 1.95 9.84 ACTUAL Class I 1,000.00 1,020.13 0.95 4.80 Class A $1,000.00 $1,076.90 1.45% $ 7.51 Class C 1,000.00 1,072.40 2.20 11.37 * Expenses are equal to the relevant Funds' annualized Class I 1,000.00 1,078.70 1.20 6.22 expense ratio which includes waived fees, reimbursed HYPOTHETICAL (5% RETURN BEFORE EXPENSES) expenses, dividends and interest on short sales, if Class A 1,000.00 1,017.61 1.45 7.32 applicable, multiplied by the average account value over Class C 1,000.00 1,013.82 2.20 11.11 the period, multiplied by the number of days (182) expenses Class I 1,000.00 1,018.87 1.20 6.06 were accrued in the most recent fiscal half-year, then - ---------------------------------------------------------------- divided by 365 days to reflect the one-half year period. HIGH YIELD FUND - ---------------------------------------------------------------- For Funds which may invest in other funds, the annualized ACTUAL expense ratios noted above do not reflect fees and expenses Class A $1,000.00 $1,079.60 1.32% $ 6.84 associated with the underlying funds. If such fees and Class B 1,000.00 1,075.00 2.07 10.71 expenses had been included, the expenses would have been Class C 1,000.00 1,074.40 2.07 10.71 higher. HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.27 1.32 6.66 You can find more information about the Funds' expenses in Class B 1,000.00 1,014.48 2.07 10.45 the Financial Statements section that follows. For Class C 1,000.00 1,014.48 2.07 10.45 additional information on operating expenses and other - ---------------------------------------------------------------- shareholder costs, refer to the prospectus. INTERNATIONAL REAL ESTATE SECURITIES FUND - ---------------------------------------------------------------- (1) Inception date of the class is October 1, 2009. Number of ACTUAL days expenses were accrued is 181. Class A $1,000.00 $1,020.90 1.50% $ 7.56 Class C 1,000.00 1,017.40 2.25 11.32 Class I 1,000.00 1,022.80 1.25 6.30 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.36 1.50 7.57 Class C 1,000.00 1,013.57 2.25 11.36 Class I 1,000.00 1,018.62 1.25 6.31 - ---------------------------------------------------------------- 3
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS REIT (REAL ESTATE INVESTMENT TRUST) ADR (AMERICAN DEPOSITARY RECEIPT) A publicly traded company that owns, develops and operates income-producing real estate such as apartments, office Represents shares of foreign companies traded in U.S. dollars on buildings, hotels, shopping centers and other commercial U.S. exchanges that are held by a U.S. bank or a trust. Foreign properties. companies use ADRs in order to make it easier for Americans to buy their shares. SHORT POSITION ("SHORT") EXCHANGE-TRADED FUNDS (ETF) Stock shares that an investor has sold without actually owning (by borrowing the certificates from a broker) in anticipation of Portfolios of stocks or bonds that track a specific market a decline in the stock value by a certain date. If the price index. falls, the investor buys the shares at the lower rate and makes a profit on the difference. It the price rises, the investor FUND OF FUNDS must buy at the higher price and sustains a loss. A mutual fund that invests in the shares of other open-end SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) mutual funds according to an established asset allocation model, resulting in a diversified portfolio of asset classes and An ADR which is issued with the cooperation of the company whose investment strategies appropriate for pursuit of the overall stock will underlie the ADR. Sponsored ADRs generally carry the investment objective. same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major ISHARES U.S. exchange such as the NYSE. Represents shares of an open-end Exchange-Traded Fund. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS LONG POSITION ("LONG") Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed Ownership of a security, giving the investor the right to delivery transactions involve a commitment by a Fund to purchase transfer ownership to someone else, the right to receive income or sell a security at a future date, ordinarily up to 90 days paid by the security, and the right to any profits or losses as later. When-issued or forward commitments enable a Fund to lock the security's value changes. in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future PIK (PAYMENT-IN-KIND SECURITY) changes in interest rates. A bond which pays interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock. 4
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at March 31, 2010, 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 Fund ($ reported in thousands) % of Net Assets ---- ------------------------- --------------- Bond Fund $15,944 8.1% High Yield Fund 23,391 25.6% Multi-Sector Fixed Income Fund 48,804 22.8% Senior Floating Rate Fund 10,021 7.9% (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 March 31, 2010, the concentration of the Fund's investments by state or territory determined as a percentage of net assets is as follows: California 97.9%. At March 31, 2010, 74.5% 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: NATL-RE 28.6%, AMBAC 12.6%, and AGM 10.7%. (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. (16) When issued security. (17) Amount is less than $500. 5
VIRTUS OPPORTUNITIES TRUST PORTFOLIO HOLDINGS SUMMARY WEIGHTINGS MARCH 31, 2010 (UNAUDITED) For each Fund, the following tables present portfolio holdings within certain sectors or countries and as a percentage of total investments attributable to each sector. ALPHASECTOR(SM) ALLOCATION FUND ALPHASECTOR(SM) ROTATION FUND ------------------------------- ----------------------------- Exchange-Traded Funds 74% Exchange-Traded Funds 99% Domestic Fixed Income Funds 25 Other (includes short-term investments) 1 Other (includes short-term investments) 1 --- --- Total 100% Total 100% === === ALTERNATIVES DIVERSIFIER FUND BOND FUND ----------------------------- --------- Exchange-Traded Funds 35% Corporate Bonds 49% Domestic Equity Funds 30 Financials 23% Foreign Equity Funds 25 Telecommunication Services 5 Fixed Income Funds 10 Consumer Discretionary 4 --- Energy 4 Total 100% All other sectors 13 === Mortgage-Backed Securities 37 U.S. Government Securities 12 Municipal Securities 1 Other (includes short-term investments) 1 --- Total 100% === CA TAX-EXEMPT BOND FUND GLOBAL INFRASTRUCTURE FUND ----------------------- -------------------------- Pre-Refunded 30% Telecommunication Services 31% General Revenue 17 Utilities 30 General Obligation 16 Energy 19 Medical Revenue 9 Industrials 16 Water & Sewer Revenue 8 Consumer Discretionary 2 Development Revenue 6 Other (includes short-term investments) 2 Education Revenue 3 --- Other (includes short-term investments) 11 Total 100% --- === Total 100% === GLOBAL OPPORTUNITIES FUND GLOBAL REAL ESTATE SECURITIES FUND ------------------------- ---------------------------------- Consumer Staples 42% Information Technology 18 Retail REITs 31% Health Care 14 Office REITs 17 Financials 11 Specialized REITs 15 Industrials 7 Diversified REITs 13 Consumer Discretionary 4 Residential REITs 10 Energy 3 Real Estate Operating Companies 8 Other (includes short-term investments) 1 Industrial REITs 4 --- Other (includes short-term investments) 2 Total 100% --- === Total 100% === 6
VIRTUS OPPORTUNITIES TRUST PORTFOLIO HOLDINGS SUMMARY WEIGHTINGS (CONTINUED) MARCH 31, 2010 (UNAUDITED) GREATER ASIA EX JAPAN OPPORTUNITIES FUND GREATER EUROPEAN OPPORTUNITIES FUND ---------------------------------------- ----------------------------------- Consumer Staples 26% Consumer Staples 35% Industrials 22 Health Care 21 Financials 18 Industrials 10 Utilities 8 Financials 9 Consumer Discretionary 5 Utilities 9 Energy 4 Consumer Discretionary 5 Materials 4 Energy 5 Other (includes short-term investments) 13 Other (includes short-term investments) 6 --- --- Total 100% Total 100% === === HIGH YIELD FUND INTERNATIONAL REAL ESTATE SECURITIES FUND --------------- ----------------------------------------- Consumer Discretionary 28% Retail REITs 39% Telecommunication Services 18 Diversified REITs 18 Financials 11 Real Estate Operating Companies 17 Consumer Staples 10 Office REITs 16 Industrials 10 Industrial REITs 7 Energy 7 Specialized REITs 1 Other (includes short-term investments) 16 Other (includes short-term investments) 2 --- --- Total 100% Total 100% === === MARKET NEUTRAL FUND MULTI-SECTOR FIXED INCOME FUND ------------------- ------------------------------ Long Short Corporate Bonds 56% Positions Positions Loan Agreements 14 --------- --------- Foreign Government Securities 13 Consumer Discretionary 22% 22% Mortgage-Backed Securities 12 Information Technology 16 14 Asset-Backed Securities 2 Health Care 13 13 Other (includes short-term investments) 3 Consumer Staples 12 13 --- Industrials 12 13 Total 100% Financials 7 8 === Energy 5 5 Other (includes short-term investments) 13 12 --- --- Total 100% 100% === === SENIOR FLOATING RATE FUND ------------------------- Consumer Discretionary 26% Information Technology 12 Industrials 11 Materials 9 Financials 7 Health Care 7 Energy 5 Other (includes short-term investments) 23 --- Total 100% === 7
VIRTUS ALPHASECTOR(SM) ALLOCATION FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE --------- --------- --------- --------- MUTUAL FUNDS--24.7% SHORT-TERM INVESTMENTS--1.1% FIXED INCOME FUNDS--24.7% MONEY MARKET MUTUAL FUNDS--1.1% Virtus Bond Fund BlackRock Liquidity Funds Class I(11) 882,339 $ 9,582 TempFund Portfolio - - ------------------------------------------ Institutional Shares TOTAL MUTUAL FUNDS (seven-day effective (IDENTIFIED COST $9,251) 9,582 yield 0.119%) 439,221 $ 439 - ------------------------------------------ ------------------------------------------ TOTAL SHORT-TERM INVESTMENTS EXCHANGE-TRADED FUNDS--74.5% (IDENTIFIED COST $439) 439 Consumer Discretionary ------------------------------------------ Select Sector SPDR TOTAL INVESTMENTS--100.3% Fund 98,375 3,231 (IDENTIFIED COST $36,055) 38,882(1) Consumer Staples Select Other assets and Sector SPDR Fund 114,560 3,197 liabilities, net--(0.3)% (118) Energy Select Sector --------- SPDR Fund 55,570 3,196 NET ASSETS--100.0% $ 38,764 Financial Select Sector ========= SPDR Fund 202,955 3,241 ABBREVIATION: Health Care Select Sector SPDR Fund 98,735 3,167 SPDR S&P Depositary Receipt Industrial Select Sector SPDR Fund 103,215 3,224 Materials Select Sector SPDR Fund 95,510 3,236 Technology Select Sector SPDR Fund 139,515 3,221 Utilities Select Sector SPDR Fund 106,235 3,148 - ------------------------------------------ TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $26,365) 28,861 - ------------------------------------------ TOTAL LONG-TERM INVESTMENTS--99.2% (IDENTIFIED COST $35,616) 38,443 - ------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Value Level 1 - at Quoted March 31, 2010 Prices -------------- --------- Equity Securities: Exchange-Traded Funds $28,861 $28,861 Mutual Funds 9,582 9,582 Short-Term Investments 439 439 ------- ------- Total Investments $38,882 $38,882 ======= ======= There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 8
VIRTUS ALPHASECTOR(SM) ROTATION FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE --------- --------- --------- --------- EXCHANGE-TRADED FUNDS--97.8% SHORT-TERM INVESTMENTS--0.9% Consumer Discretionary Select Sector MONEY MARKET MUTUAL FUNDS--0.9% SPDR Fund 1,023,120 $ 33,599 BlackRock Liquidity Funds Consumer Staples TempFund Select Sector Portfolio - SPDR Fund 1,192,267 33,276 Institutional Energy Select Sector Shares SPDR Fund 578,720 33,288 (seven-day Financial Select effective Sector SPDR Fund 2,110,945 33,712 yield 0.119%) 2,846,416 $ 2,846 Health Care Select ------------------------------------------ Sector SPDR Fund 1,028,212 32,985 TOTAL SHORT-TERM INVESTMENTS Industrial Select (IDENTIFIED COST $2,846) 2,846 Sector SPDR Fund 1,075,067 33,575 ------------------------------------------ Materials Select TOTAL INVESTMENTS--98.7% Sector SPDR Fund 994,982 33,710 (IDENTIFIED COST $287,046) 303,322(1) Technology Select Other assets and Sector SPDR Fund 1,453,248 33,556 liabilities, Utilities Select net--1.3% 4,129 Sector SPDR Fund 1,106,139 32,775 --------- - ------------------------------------------ NET ASSETS--100.0% $ 307,451 TOTAL EXCHANGE-TRADED FUNDS ========= (IDENTIFIED COST $284,200) 300,476 - ------------------------------------------ ABBREVIATION: TOTAL LONG-TERM INVESTMENTS--97.8% (IDENTIFIED COST $284,200) 300,476 SPDR S&P Depositary Receipt - ------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Value Level 1 - at Quoted March 31, 2010 Prices -------------- --------- Equity Securities: Exchange-Traded Funds $300,476 $300,476 Short-Term Investments 2,846 2,846 -------- -------- Total Investments $303,322 $303,322 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 9
VIRTUS ALTERNATIVES DIVERSIFIER FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE --------- --------- --------- --------- MUTUAL FUNDS(11)--64.9% SHORT-TERM INVESTMENTS--0.2% EQUITY FUNDS--54.9% MONEY MARKET MUTUAL FUNDS--0.2% Virtus Global BlackRock Liquidity Infrastructure Funds Fund Class I 3,818,650 $ 39,561 TempFund Virtus International Portfolio - Real Estate Institutional Securities Fund Shares Class I 4,617,717 25,952 (seven-day Virtus Market Neutral effective Fund Class I(2) 4,871,405 51,539 yield 0.119%) 450,099 $ 450 Virtus Real Estate ------------------------------------------ Securities Class I 1,134,984 27,228 TOTAL SHORT-TERM INVESTMENTS --------- (IDENTIFIED COST $450) 450 144,280 ------------------------------------------ ========= TOTAL INVESTMENTS--99.9% (IDENTIFIED COST $270,010) 262,197(1) FIXED INCOME FUNDS--10.0% Other assets and Virtus Senior Floating liabilities, net--0.1% 334 Rate Fund Class I 2,635,423 26,222 --------- - ------------------------------------------ NET ASSETS--100.0% $ 262,531 TOTAL MUTUAL FUNDS ========= (IDENTIFIED COST $171,277) 170,502 - ------------------------------------------ EXCHANGE-TRADED FUNDS--34.8% iShares S&P North American Natural Resources Sector Index Fund 752,400 25,913 PowerShares DB Commodity Index Tracking Fund(2) 1,664,130 39,140 PowerShares DB G10 Currency Harvest Fund(2) 1,110,282 26,192 - ------------------------------------------ TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $98,283) 91,245 - ------------------------------------------ TOTAL LONG-TERM INVESTMENTS--99.7% (IDENTIFIED COST $269,560) 261,747 - ------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Value Level 1 - at Quoted March 31, 2010 Prices -------------- --------- Equity Securities: Mutual Funds $170,502 $170,502 Exchange-Traded Funds 91,245 91,245 Short-Term Investments 450 450 -------- -------- Total Investments $262,197 $262,197 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 10
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- U.S. GOVERNMENT SECURITIES--11.9% AGENCY--CONTINUED NON-AGENCY--CONTINUED U.S. Treasury Bond 6.500%, 3/1/32 $ 128 $ 141 Credit Suisse Mortgage 3.500%, 2/15/39 $11,305 $ 9,148 5.500%, 4/1/33 156 166 Capital Certificates U.S. Treasury Note 5.000%, 5/1/33 1,745 1,810 06-C1, A3 5.549%, 1.000%, 12/31/11 485 486 5.500%, 6/1/33 1,163 1,234 2/15/39 $ 100 $ 104 2.625%, 6/30/14 480 487 5.500%, 7/1/33 1,116 1,184 06-C4, A3 5.467%, 3.250%, 12/31/16 4,905 4,911 5.000%, 9/1/33 272 282 9/15/39 2,080 1,998 4.750%, 8/15/17 555 607 6.000%, 11/1/34 2,185 2,358 06-C5, A3 5.311%, 3.625%, 2/15/20 7,830 7,697 5.500%, 5/1/35 2,802 2,956 12/15/39 440 415 - ------------------------------------------ 5.500%, 12/1/35 246 259 DLJ Mortgage Acceptance TOTAL U.S. GOVERNMENT SECURITIES 5.500%, 3/1/36 544 575 Corp (IDENTIFIED COST $23,410) 23,336 5.500%, 4/1/36 404 426 96-I, (Principal - ------------------------------------------ 6.390%, 5/25/36 1,109 1,191 Only) 144A 6.000%, 6/1/36 295 317 0.000%, MUNICIPAL BONDS--0.6% 5.500%, 9/1/36 1,993 2,111 9/18/11 (4)(15) 2 2 6.000%, 9/1/36 280 299 Greenwich Capital MICHIGAN--0.1% 5.500%, 11/1/36 382 403 Commercial Funding City of Flat Rock 6.000%, 3/1/37 448 477 Corp. 07-GG9, A4 Finance Authority 6.000%, 9/1/37 50 53 5.444%, 3/10/39 2,100 2,042 Taxable Series A, 6.000%, 10/1/37 386 411 Lehman Brothers - UBS 6.750%, 10/1/16 95 100 6.000%, 1/1/38 122 130 Commercial Mortgage --------- 6.000%, 2/1/38 48 51 Trust 06-C7, A3 6.000%, 2/1/38 144 154 5.347%, 11/15/38 1,955 1,962 RHODE ISLAND--0.5% 6.000%, 2/1/38 194 207 Morgan Stanley Capital I City of Woonsocket 6.000%, 2/1/38 121 129 04-T15, A3 5.030%, Pension Funding 6.000%, 3/1/38 822 874 6/13/41 490 508 Taxable (AGM Insured) 6.500%, 3/1/38 6,678 7,362 06-T23, A4 5.811%, 5.660%, 7/15/13 1,000 1,067 5.500%, 4/1/38 408 430 8/12/41 1,030 1,090 - ------------------------------------------ 6.000%, 5/1/38 224 239 07-T27, A4 5.649%, TOTAL MUNICIPAL BONDS 5.500%, 6/1/38 738 778 6/11/42 1,050 1,086 (IDENTIFIED COST $1,130) 1,167 6.000%, 7/1/38 4,321 4,595 05-IQ9, A3 4.540%, - ------------------------------------------ 5.500%, 8/1/38 1,640 1,730 7/15/56 645 647 6.000%, 8/1/38 294 313 Paine Webber Mortgage MORTGAGE-BACKED SECURITIES--36.4% 6.000%, 8/1/38 607 645 Acceptance Corp. 6.000%, 8/1/38 1,897 2,017 99-C1, D AGENCY--27.7% 6.000%, 8/1/38 152 162 7.150%, 6/15/32 96 96 FHLMC FNMA REMICs 03-42, HC SBA Commercial Mortgage- 7.500%, 4/1/14 21 23 4.500%, 12/25/17 409 427 Backed Securities 7.000%, 4/1/16 22 25 GNMA Trust 06-1A, B 144A 7.000%, 1/1/33 194 218 8.500%, 11/15/22 1 1 5.451%, 11/15/36 (4) 140 145 6.000%, 10/1/34 426 462 6.500%, 9/15/28 143 157 Wachovia Bank Commercial 5.000%, 1/1/35 1,044 1,085 7.500%, 9/15/29 142 160 Mortgage Trust 5.000%, 7/1/35 4,128 4,274 5.000%, 7/15/33 1,513 1,585 05-C19, A5 FHLMC REMICs 6.000%, 6/15/34 262 282 4.661%, 5/15/44 3,145 3,234 JA-2777 --------- 07-C34, A3 4.500%, 11/15/17 352 365 54,304 5.678%, 5/15/46 810 780 CH-2904 --------- ---------- 4.500%, 4/15/19 1,048 1,094 17,022 FNMA NON-AGENCY--8.7% ------------------------------------------- 7.000%, 5/1/14 14 16 American Tower TOTAL MORTGAGE-BACKED SECURITIES 6.000%, 10/1/14 212 229 Trust 07-1A, (IDENTIFIED COST $67,955) 71,326 8.000%, 1/1/15 4 4 AFX 144A ------------------------------------------- 6.500%, 6/1/16 153 166 5.420%, 4/15/37 (4) 190 201 ASSET-BACKED SECURITIES--0.1% 6.000%, 7/1/17 73 79 Banc of America Capital Auto Receivables 5.500%, 9/1/17 183 197 Commercial Mortgage, Asset Trust 4.500%, 12/1/18 1,154 1,198 Inc. Series 06-2, A3A 4.500%, 3/1/20 191 199 05-1, A4 5.039%, 4.980%, 5/15/11 12 13 5.000%, 4/1/20 297 316 11/10/42 290 300 Carmax Auto Owner Trust 4.500%, 5/1/20 526 547 04-6, A5 4.811%, 07-2, A3 4.000%, 6/1/20 319 324 12/10/42 385 394 5.230%, 12/15/11 104 105 4.500%, 11/1/20 1,751 1,818 08-1, A4 6.182%, ------------------------------------------- 5.000%, 8/1/21 132 139 2/10/51 1,105 1,108 TOTAL ASSET-BACKED SECURITIES 6.454%, 3/25/29 1,129 1,250 Bear Stearns Commercial (IDENTIFIED COST $116) 118 6.000%, 5/1/29 168 183 Mortgage Securities ------------------------------------------- 6.500%, 7/1/29 283 313 04-T16, A6 6.500%, 5/1/30 6 7 4.750%, 2/13/46 215 219 CORPORATE BONDS--48.6% 7.500%, 3/1/31 127 144 Commercial Mortgage 7.000%, 7/1/31 80 90 Pass-Through CONSUMER DISCRETIONARY--4.5% 7.000%, 9/1/31 135 152 Certificates Affinion Group, Inc. 6.500%, 2/1/32 277 306 05-C6, A4 5.168%, 10.125%, 10/15/13 560 577 6/10/44 315 331 Avis Budget Car Rental 07-C9, A4 6.010%, LLC/ 12/10/49 360 360 Avis Budget Finance, Inc. 7.625%, 5/15/14 610 607 Comcast Corp. 5.700%, 7/1/19 980 1,023 COX Communications, Inc. 144A 6.250%, 6/1/18 (4) 140 149 Echostar DBS Corp. 7.125%, 2/1/16 530 543 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 11
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- CONSUMER ENERGY--CONTINUED FINANCIALS--CONTINUED DISCRETIONARY--CONTINUED Energy Transfer Partners Credit Suisse First Fortune Brands, Inc. LP Boston 3.000%, 6/1/12 $ 910 $ 912 8.500%, 4/15/14 $ 755 $ 878 6.000%, 2/15/18 $ 630 $ 667 Hasbro, Inc. 5.950%, 2/1/15 135 147 Credit Suisse Guernsey 6.300%, 9/15/17 135 144 6.700%, 7/1/18 570 623 Ltd. Nebraska Book Co., Inc. Enterprise Products 5.860%, 12/31/49(3) 815 764 10.000%, 12/1/11 1,125 1,167 Operating LLC Credit Suisse USA, Inc. Scientific Games 6.300%, 9/15/17 100 110 5.850%, 8/16/16 135 146 International, EOG Resources, Inc. CVS Pass-Through Trust Inc. 144A 6.875%, 10/1/18 360 415 144A 9.250%, 6/15/19 (4) 235 251 Halliburton Co. 7.507%, 1/10/32 (4) 319 355 Time Warner Cable, Inc. 6.150%, 9/15/19 95 106 Export-Import Bank of 3.500%, 2/1/15 145 145 Harvest Operations Corp. Korea 6.750%, 7/1/18 130 145 7.875%, 10/15/11 915 933 5.500%, 10/17/12 135 144 5.000%, 2/1/20 815 804 Kinder Morgan Energy Ford Motor Credit Co. United Artists Theatre Partners LP LLC Circuit, 5.850%, 9/15/12 415 451 7.500%, 8/1/12 625 648 Inc. Series BD-1, 6.000%, 2/1/17 135 145 General Electric Capital 9.300%, 7/1/15 (6)(8) 23 21 9.000%, 2/1/19 500 624 Corp. UPC Germany GmbH 144A Petroleos Mexicanos 144A 2.800%, 1/8/13 1,340 1,356 8.125%, 12/1/17 (4) 1,120 1,161 4.875%, 3/15/15 (4) 390 401 5.500%, 1/8/20 1,130 1,153 Valassis Communications, Petropower I Funding 6.750%, 3/15/32 500 529 Inc. Trust 144A Genworth Global Funding 8.250%, 3/1/15 565 583 7.360%, 2/15/14 (4) 79 78 Trusts WMG Holdings Corp. Plains All American 5.125%, 3/15/11 925 951 9.500%, 12/15/14(3) 485 491 Pipeline LP/ GMAC, Inc. --------- PAA Finance Corp. 0.000%, 6/15/15 590 381 8,723 4.250%, 9/1/12 215 223 Household Finance Co. --------- Shell International 8.000%, 7/15/10 300 306 CONSUMER STAPLES--3.7% Finance BV Icahn Enterprises Alliance One 4.375%, 3/25/20 960 952 LP/Icahn International, Inc. 5.500%, 3/25/40 965 946 Enterprises Finance 144A TransCanada Pipelines Corp. 144A 10.000%, 7/15/16 (4) 725 761 Ltd. 8.000%, 1/15/18 (4) 1,305 1,264 Altria Group, Inc. 6.350%, 5/15/67(3) 300 285 ICICI Bank Ltd. RegS 9.250%, 8/6/19 495 601 --------- 5.750%, 11/16/10 (5) 105 107 Anheuser-Busch Inbev 8,146 ING Capital Funding Worldwide, Inc. --------- Trust III 3.000%, 10/15/12 900 924 FINANCIALS--22.6% 8.439%, 12/31/49(3) 1,060 1,007 ASG Consolidated LLC/ AFLAC, Inc. International Lease ASG Finance, Inc. 8.500%, 5/15/19 30 36 Finance Corp. 11.500%, 11/1/11(3) 740 747 American Express Co. 144A 8.625%, B&G Foods, Inc. 7.250%, 5/20/14 795 901 9/15/15(4) 100 102 7.625%, 1/15/18 110 112 American Express Credit 144A 8.750%, Delhaize Group Corp. 3/15/17(4) 460 472 6.500%, 6/15/17 725 801 5.875%, 5/2/13 140 152 JPMorgan Chase & Co. Kraft Foods, Inc. Bank of America Corp. 5.750%, 1/2/13 1,020 1,107 5.625%, 11/1/11 1,045 1,110 5.750%, 8/15/16 960 983 5.125%, 9/15/14 860 909 2.625%, 5/8/13 360 363 5.750%, 12/1/17 960 984 3.700%, 1/20/15 620 624 6.125%, 2/1/18 535 586 Bank of New York/Mellon Series 1, Philip Morris Corp. (The) 7.900%, 12/31/49(3) 395 421 International, Inc. 4.950%, 11/1/12 115 125 Lincoln National Corp. 6.875%, 3/17/14 275 315 Barclays Bank plc 5.650%, 8/27/12 1,195 1,269 Procter & Gamble Co. Series 1, Macquarie Group Ltd. 4.600%, 1/15/14 350 376 5.000%, 9/22/16 985 1,012 144A Reynolds American, Inc. 144A 10.179%, 7.300%, 8/1/14 (4) 870 971 6.750%, 6/15/17 95 102 6/12/21(4) 560 731 MetLife, Inc. Safeway, Inc. Bear Stearns Cos., Inc. 6.750%, 6/1/16 210 235 6.500%, 3/1/11 375 393 LLC (The) Metropolitan Life Global --------- 7.250%, 2/1/18 785 907 Funding I 144A 7,191 Capital One Capital VI 2.875%, 9/17/12 (4) 980 996 --------- 8.875%, 5/15/40 320 349 Morgan Stanley ENERGY--4.2% Capital One Financial 6.000%, 4/28/15 615 659 Buckeye Partners LP Corp. 6.625%, 4/1/18 1,215 1,296 5.125%, 7/1/17 200 201 5.700%, 9/15/11 620 648 Northern Trust Corp. Chesapeake Energy Corp. 7.375%, 5/23/14 365 417 5.500%, 8/15/13 75 83 7.250%, 12/15/18 245 246 6.150%, 9/1/16 625 648 PNC Bank NA Enbridge Energy Partners 5.250%, 2/21/17 70 72 4.875%, 9/21/17 155 154 LP Chubb Corp. Protective Life Secured 5.875%, 12/15/16 350 382 6.375%, 3/29/67(3) 420 423 Trust Citigroup, Inc. 4.000%, 4/1/11 1,670 1,708 5.500%, 8/27/12 90 95 Prudential Financial, 5.000%, 9/15/14 1,745 1,743 Inc. 4.875%, 5/7/15 280 276 3.625%, 9/17/12 820 843 6.200%, 1/15/15 505 551 7.375%, 6/15/19 520 596 8.875%, 6/15/38(3) 605 679 Rabobank Nederland NV 144A 11.000%, 12/15/49 (3)(4) 425 547 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 12
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- FINANCIALS--CONTINUED INFORMATION TECHNOLOGY--1.2% UTILITIES--3.2% Regions Financial Corp. Fiserv, Inc. Appalachian Power Co. 0.455%, 6/26/12(3) $ 1,935 $ 1,769 6.125%, 11/20/12 $ 920 $ 1,001 5.550%, 4/1/11 $ 810 $ 841 Resona Bank Ltd. 144A Intuit, Inc. Atmos Energy Corp. 5.850%, 5.750%, 3/15/17 430 454 6.350%, 6/15/17 465 500 9/29/49 (3)(4) 985 930 Viasat, Inc. 144A CMS Energy Corp. Royal Bank of Scotland 8.875%, 9/15/16 (4) 105 108 6.250%, 2/1/20 760 755 Group plc Xerox Corp. Dominion Resources, Inc. 6.400%, 10/21/19 490 490 4.250%, 2/15/15 680 686 8.875%, 1/15/19 180 227 Santander Issuances S.A. 6.750%, 2/1/17 170 188 FirstEnergy Solutions Unipersonal 144A --------- Corp. 5.911%, 6/20/16 (4) 1,085 1,098 2,437 6.050%, 8/15/21 435 436 Simon Property Group LP --------- Florida Power Corp. 6.750%, 5/15/14 1,090 1,193 MATERIALS--1.6% 6.650%, 7/15/11 520 554 State Street Corp. Ball Corp. Georgia Power Co. 4.300%, 5/30/14 190 201 6.750%, 9/15/20 245 250 6.000%, 11/1/13 335 377 SunTrust Banks, Inc. Boise Paper Holdings Nevada Power Co. 5.250%, 11/5/12 310 327 LLC/ Series O Teachers Insurance & Boise Finance Co. 6.500%, 5/15/18 730 798 Annuity Association 144A Pacific Gas & Electric of America 144A 8.000%, 4/1/20 (4) 60 60 Co. 6.850%, 12/16/39 (4) 480 521 Dow Chemical Co. (The) 8.250%, 10/15/18 650 793 UBS Preferred Funding 6.000%, 10/1/12 1,050 1,143 Sempra Energy Trust I 5.900%, 2/15/15 970 1,050 6.500%, 6/1/16 40 45 8.622%, 10/29/49(3) 600 594 Holcim U.S. Finance South Carolina Electric UDR, Inc. S.a.r.l. & & Gas Co. 5.250%, 1/15/15 150 149 Cie S.C.S. 144A 6.500%, 11/1/18 310 352 Wachovia Corp. 6.000%, 12/30/19 (4) 435 452 Virginia Electric & 4.875%, 2/15/14 200 207 Huntsman International Power Co. 5.750%, 2/1/18 570 606 LLC Series A WEA Finance LLC/WCI 144A 8.625%, 5.400%, 1/15/16 645 694 Finance LLC 144A 3/15/20 (4) 110 111 --------- 5.700%, 10/1/16 (4) 1,065 1,095 Solutia, Inc. 6,372 Wells Fargo Capital XIII 7.875%, 3/15/20 160 163 ------------------------------------------ 7.700%, 3/26/13(3) 460 475 --------- TOTAL CORPORATE BONDS Westfield Capital Corp. 3,229 (IDENTIFIED COST $90,150) 95,227 Ltd./ --------- ------------------------------------------- Westfield Finance TELECOMMUNICATION SERVICES--4.6% TOTAL LONG-TERM INVESTMENTS--97.6% Authority Alltel Corp. (IDENTIFIED COST $182,761) 191,174 144A 5.125%, 7.000%, 7/1/12 350 389 ------------------------------------------- 11/15/14 (4) 150 154 France Telecom SA --------- 4.375%, 7/8/14 355 374 SHARES 44,311 GCI, Inc. 144A -------- --------- 8.625%, 11/15/19 (4) 375 384 SHORT-TERM INVESTMENTS--1.8% HEALTH CARE--1.4% Global Crossing Ltd. Boston Scientific Corp. 144A MONEY MARKET MUTUAL FUNDS--1.8% 6.000%, 1/15/20 445 421 12.000%, 9/15/15 (4) 550 613 BlackRock Liquidity Express Scripts, Inc. NII Capital Corp. 144A Funds 5.250%, 6/15/12 775 826 8.875%, 12/15/19 (4) 910 946 TempFund Portfolio - 7.250%, 6/15/19 245 284 Qwest Corp. Institutional Shares Novartis Capital Corp. 7.875%, 9/1/11 1,055 1,118 (seven-day effective 1.900%, 4/24/13 135 135 SBC Communications yield 0.119%) 3,548,643 3,549 Pfizer, Inc. 5.875%, 2/1/12 130 140 ------------------------------------------- 4.450%, 3/15/12 625 662 Sprint Capital Corp. TOTAL SHORT-TERM INVESTMENTS Thermo Fisher 8.375%, 3/15/12 1,045 1,092 (IDENTIFIED COST $3,549) 3,549 Scientific, Inc. Telecom Italia Capital ------------------------------------------- 144A 2.150%, SA TOTAL INVESTMENTS--99.4% 12/28/12 (4) 435 434 5.250%, 10/1/15 215 220 (IDENTIFIED --------- 6.999%, 6/4/18 95 103 COST $186,310) 194,723(1) 2,762 7.175%, 6/18/19 615 664 Other Assets and --------- Telefonica Emisiones SAU Liabilities--0.6% 1,150 INDUSTRIALS--1.6% 5.984%, 6/20/11 1,080 1,135 ---------- Corrections Corp. of 5.877%, 7/15/19 745 798 NET ASSETS--100.0% $ 195,873 America Virgin Media Finance plc ========== 7.750%, 6/1/17 1,020 1,071 8.750%, 4/15/14 128 132 DI Finance/DynCorp 8.375%, 10/15/19 415 429 International, Inc. Windstream Corp. Series B 7.000%, 3/15/19 435 408 9.500%, 2/15/13 555 565 --------- Hutchison Whampoa 8,945 International Ltd. --------- 144A 5.750%, 9/11/19 (4) 435 451 Travelport LLC 9.875%, 9/1/14 975 1,024 --------- 3,111 --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 13
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) ABBREVIATIONS: COUNTRY WEIGHTINGS as of 3/31/10+ ---------------------------------------------------------------- AGM Assured Guaranty Municipal Corp. United States (includes short-term investments) 91% Australia 1 FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") Canada 1 Germany 1 FNMA Federal National Mortgage Association ("Fannie Mae") Netherlands 1 Spain 1 GNMA Government National Mortgage Association ("Ginnie Mae") United Kingdom 1 Other 3 REMIC Real Estate Mortgage Investment Conduit ---------------------------------------------------------------- Total 100% SBA Small Business Administration ---------------------------------------------------------------- + % of total investments as of March 31, 2010 ---------------------------------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ Debt Securities: U.S. Government Securities $ 23,336 $ -- $ 23,336 $-- Municipal Securities 1,167 -- 1,167 -- Mortgage-Backed Securities 71,326 -- 71,326 -- Asset-Backed Securities 118 -- 118 -- Corporate Debt 95,227 -- 95,206 21 Equity Securities: Short-Term Investments 3,549 3,549 -- -- -------- ------ -------- --- Total Investments $194,723 $3,549 $191,153 $21 ======== ====== ======== === The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: Mortgage-Backed ($ reported in thousands) Total Securities Corporate Debt ----- --------------- -------------- BALANCE AS OF SEPTEMBER 30, 2009: $ 248 $ 139 $ 109 Accrued discount (premium)(a) --(e) --(e) --(e) Realized gain (loss)(b) -- -- -- Change in unrealized appreciation 15 6 9 (depreciation)(b) Net purchases (sales)(c) (20) -- (20) Transfers in and/or out of Level 3(d) (222) (145) (77) ----- ----- ----- BALANCE AS OF MARCH 31, 2010: $ 21 $ -- $ 21 ===== ===== ===== (A) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (B) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (C) INCLUDES PAYDOWNS. (D) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF MARCH 31, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD (E) AMOUNT IS LESS THAN $500. Level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 14
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- --------- MUNICIPAL TAX-EXEMPT BONDS(9)--97.9% GENERAL OBLIGATION--CONTINUED GENERAL REVENUE--CONTINUED Los Angeles Unified Department of General DEVELOPMENT REVENUE--5.8% School District, Services Buildings 8 Hercules Redevelopment Series A-1 & 9 Series A Agency Tax-Allocation (NATL-RE Insured) 6.125%, 4/1/29 $ 500 $ 518 (AMBAC Insured) 4.500%, 1/1/28 $ 500 $ 472 Various Capital Projects 5.000%, 8/1/29 $ 500 $ 387 New Haven Unified Series G-1 Ontario Redevelopment School District 5.750%, 10/1/30 500 500 Financing Authority (Assured Guaranteed) --------- (NATL-RE Insured) 0.000%, 8/1/33 1,500 352 9,674 6.900%, 8/1/10 70 71 Norwalk-La Mirada --------- 5.250%, 8/1/13 500 516 Unified School San Diego Redevelopment District Series D HIGHER EDUCATION REVENUE--2.6% Agency (AMBAC (AGM Insured) University of California Insured) 0.000%, 8/1/33 1,500 352 Series D (NATL-RE, Series B 5.350%, Placer Union High School FGIC Insured) 9/1/24 1,000 990 District (AGM 5.000%, 5/15/28 500 513 Series A 4.750%, Insured) Series G 9/1/30 500 442 0.000%, 8/1/32 1,500 372 (NATL-RE, FGIC Santa Clara Rancho Santiago Insured) Redevelopment Community College 4.750%, 5/15/35 525 504 Agency District (AGM Series B Tax Allocation Insured) 4.750%, 5/15/38 500 485 (NATL-RE Insured) 0.000%, 9/1/27 1,200 421 --------- 5.000%, 6/1/22 1,000 975 San Rafael Elementary 1,502 --------- School District --------- 3,381 (NATL-RE, FGIC --------- Insured) MEDICAL REVENUE--8.9% 0.000%, 8/1/26 1,000 429 California Health EDUCATION REVENUE--3.4% Walnut Valley Unified Facilities North City West School School District, Financing Authority, Facilities Financing Series A Stanford Hospital and Authority, Series B (NATL-RE Insured) Clinics (AMBAC Insured) 0.000%, 8/1/19 3,095 1,676 Series A 5.250%, 9/1/19 1,000 990 --------- 5.000%, 11/15/14 250 268 Sweetwater Unified High 9,367 Cedars-Sinai Medical School District, --------- Center Public Financing 5.000%, 11/15/34 500 477 Authority, Series A GENERAL REVENUE--16.7% Providence Health & (AGM Insured) Anaheim Public Financing Services 5.000%, 9/1/29 1,000 966 Authority, Series C Series C --------- (AGM Insured) 6.500%, 10/1/38 300 334 1,956 6.000%, 9/1/16 1,600 1,798 Kaiser Permanente --------- Golden State Tobacco Series A Securitization Corp., 5.250%, 4/1/39 500 489 GENERAL OBLIGATION--16.2% Series A-1 California State Public Antelope Valley Union 5.125%, 6/1/47 1,250 795 Works Board, High School District, 5.750%, 6/1/47 1,000 704 Department of Mental Series A Los Angeles County Health Series A (NATL-RE Insured) Public Works 5.500%, 6/1/16 1,000 1,053 5.000%, 2/1/27 1,000 1,005 Financing Authority, California Statewide Brea Olinda Unified Series A (AGM Communities School District, Insured) Development Series A 5.500%, 10/1/18 390 434 Authority, (NATL-RE, FGIC Pomona, Certificates of Kaiser Permanente, Insured) Participation Series B 6.000%, 8/1/15 150 175 (AMBAC Insured) 5.000%, 3/1/41 500 466 Butte-Glenn Community 5.500%, 6/1/28 1,365 1,437 Sutter Health, Series B College District, San Diego County, 5.625%, 8/15/42 1,000 1,001 Series A Certificates of St. Joseph Health System (NATL-RE Insured) Participation (AMBAC (FGIC Insured) 5.500%, 8/1/19 1,000 1,056 Insured) 5.750%, 7/1/47 500 513 California State 5.250%, 11/1/15 960 1,011 San Joaquin General 5.250%, 6/1/16 65 65 South Bay Regional Hospital Project, 5.500%, 3/1/26 500 513 Public Communications Certificates of 5.000%, 12/1/37 250 234 Authority Participation California State (ACA Insured) (NATL-RE Insured) Veterans Bonds, 4.750%, 1/1/31 635 484 5.250%, 9/1/12 100 101 Series BG South Coast Air Quality Santa Clara County 5.150%, 12/1/14 895 898 Management District Financing Authority, Series CC Building Corp. (AMBAC Series A 4.500%, 12/1/37 330 273 Insured) (AMBAC Insured) Gilroy Unified School 6.000%, 8/1/11 1,000 1,021 7.750%, 11/15/11 400 442 District State Public Works Board --------- (NATL-RE, FGIC of the State of 5,144 Insured) California Department --------- 5.000%, 8/1/27 500 505 of Health Services, MUNICIPAL UTILITY DISTRICT REVENUE--1.7% Grossmont-Cuyamaca Richmond Lab Series B East Bay Municipal Community College (XLCA Insured) Utility District District Election of 5.000%, 11/1/17 460 471 (NATL-RE Insured) 2002 Series A Highway Patrol Series C 5.000%, 6/1/35 500 516 (NATL-RE Insured) 5.250%, 11/1/20 500 501 Sacramento Municipal 5.000%, 8/1/19 40 42 Utilities District Los Angeles Unified Financing Authority School District (NATL-RE Insured) Series C (AGM Insured) 4.750%, 7/1/26 500 464 5.000%, 7/1/24 500 527 --------- 980 --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 15
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR VALUE VALUE VALUE VALUE SHARES VALUE ------- --------- ------- --------- ------- --------- NATURAL GAS REVENUE--1.3% PRE-REFUNDED--CONTINUED SHORT-TERM INVESTMENTS--2.1% Roseville Natural Gas Stockton Housing Financing Authority Facility, MONEY MARKET MUTUAL FUNDS--2.1% 5.000%, 2/15/24 $ 750 $ 729 Series A Pre-refunded BlackRock Liquidity --------- 9/20/17 @ 100 Funds (GNMA Collateralized) TempFund Portfolio - POWER REVENUE--0.6% 5.600%, 3/20/28 $ 195 $ 199 Institutional Shares Northern California --------- (seven-day effective Power Agency, 17,153 yield 0.119%) 1,231,181 $ 1,231 Hydroelectric Project --------- ------------------------------------------ No.1 TOTAL SHORT-TERM INVESTMENTS Series A (NATL-RE TRANSPORTATION REVENUE--2.6% (IDENTIFIED COST $1,231) 1,231 Insured) Alameda Corridor ------------------------------------------ 5.200%, 7/1/32 330 329 Transportation TOTAL INVESTMENTS--100.0% --------- Authority, Series A (IDENTIFIED COST $56,675) 57,789(1) (NATL-RE Insured) PRE-REFUNDED--29.7% 5.125%, 10/1/16 150 152 Other assets and Contra Costa County Home 5.125%, 10/1/17 125 127 liabilities, net--0.0% (4) Mortgage (GNMA Bay Area Toll Authority, --------- Collateralized) San Fransisco Bay NET ASSETS--100.0% $ 57,785 7.500%, 5/1/14 (7) 500 614 Area Series F-1 ========= Cypress Single Family 5.125%, 4/1/39 500 515 Residential Mortgage, Los Angeles ABBREVIATIONS: Series B (Private International Airport Mortgage Insurance) Series A ACA American Capital Access Financial 7.250%, 1/1/12 (7) 200 222 5.000%, 5/15/40(16) 500 501 Guarantee Corp. Duarte Redevelopment San Francisco Bay Area Agency Single Family Rapid Transit AGM Assured Guaranty Municipal Corp. Mortgage, Series A District (FNMA Collateralized) 5.250%, 7/1/17 180 181 AMBAC American Municipal Bond Assurance 6.875%, 11/1/11 (7) 300 329 --------- Corporation Grossmont-Cuyamaca 1,476 Community College --------- FGIC Financial Guaranty Insurance District Election Company of 2002 WATER & SEWER REVENUE--8.4% Series A Pre-refunded California Statewide FHA Federal Housing Authority 8/1/13 @100 (NATL-RE Communities Insured) Development FNMA Federal National Mortgage 5.000%, 8/1/19 210 236 Authority, Association ("Fannie Mae") Huntington Park Anheuser-Busch Project Redevelopment Agency 4.800%, 9/1/46 1,000 850 GNMA Government National Mortgage Single Family Delta Diablo Sanitation Association ("Ginnie Mae") Residential Mortgage, District, Series A Certificates of NATL-RE National Public Finance Guarantee (FHA/VA/PRIV MTGS Participation Corp., formerly Municipal Bond Insured) (NATL-RE Insured) Insurance Association 8.000%, 12/1/19 (7) 2,400 3,352 0.000%, 12/1/16 1,070 768 Los Angeles Harbor El Dorado Irrigation XLCA XL Capital Assurance Department District, 7.600%, 10/1/18(7) 780 946 Certificates of M-S-R Public Power Participation, Agency Series A (NATL-RE, San Juan Project, FGIC Insured) Series D 5.250%, 3/1/16 365 389 (NATL-RE Insured) Modesto Wastewater, 6.750%, 7/1/20 (7) 1,640 1,949 Series A (AGM Northern California Insured) Power Agency, 5.000%, 11/1/19 245 260 Hydroelectric Project Mountain View Shoreline No.1 Series A Regional Park Pre-refunded 7/1/10 Community, Series A @100 (NATL-RE Insured) (NATL-RE Insured) 5.500%, 8/1/21 1,000 1,001 5.000%, 7/1/15 1,000 1,011 Redlands Financing Pre-refunded 7/1/21 Authority, Series A @ 100 (AGM Insured) (AMBAC Insured) 5.000%, 9/1/17 1,000 1,022 7.500%, 7/1/23 195 262 Sweetwater Water Riverside County Authority Redevelopment Agency, (AMBAC Insured) Pre-refunded 10/01/11 5.250%, 4/1/10 40 40 @ 102 (AMBAC Insured) Westlands Water 5.250%, 10/1/17 250 272 District, Riverside County Single Certificates of Family Participation Series B (GNMA (NATL-RE Insured) Collateralized) 5.250%, 9/1/14 500 537 8.625%, 5/1/16(7) 1,000 1,308 --------- Series A (GNMA 4,867 Collateralized) ------------------------------------------ 7.800%, 5/1/21(7) 4,000 5,430 TOTAL MUNICIPAL TAX-EXEMPT BONDS Santa Clara Unified (IDENTIFIED COST $55,444) 56,558 School District ------------------------------------------ Pre-refunded 7/1/10 TOTAL LONG-TERM INVESTMENTS--97.9% @101 (IDENTIFIED COST $55,444) 56,558 (NATL-RE, FGIC ------------------------------------------ Insured) 5.500%, 7/1/20 1,000 1,023 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 16
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31,2010 (UNAUDITED) ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Market Level 1 - Significant Value at Quoted Observable March 31, 2010 Prices Inputs -------------- --------- ----------- Debt Securities: Municipal Securities $56,558 $ -- $56,558 Equity Securities: Short-Term Investments 1,231 1,231 -- ------- ------ ------- Total Investments $57,789 $1,231 $56,558 ======= ====== ======= There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 17
VIRTUS GLOBAL INFRASTRUCTURE FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- --------- ------- --------- ------- --------- COMMON STOCKS--98.1% TELECOMMUNICATION SERVICES--CONTINUED UTILITIES--CONTINUED Rogers Communications, Red Electrica Corp. S.A. CONSUMER DISCRETIONARY--1.5% Inc. Class B (Canada) 37,430 $ 1,278 (Spain) 16,080 $ 863 SES SA (Luxembourg) 51,350 $ 1,296 Singapore RWE AG (Germany) 12,600 1,116 --------- Telecommunications Scottish & Southern Ltd. (Singapore) 470,400 1,066 Energy plc ENERGY--19.1% Telefonica S.A. (United Kingdom) 36,200 605 Enbridge, Inc. (Canada) 112,470 5,371 Sponsored ADR (Spain) 32,570 2,316 Sempra Energy Spectra Energy Corp. TELUS Corp. (Canada) 41,330 1,538 (United States) 29,360 1,465 (United States) 142,850 3,218 Verizon Communications, Southern Co. (The) TransCanada Corp. Inc. (United States) 76,720 2,380 (United States) 25,740 853 (Canada) 124,880 4,591 Vodafone Group plc Tokyo Electric Power Williams Cos., Inc. Sponsored ADR Co., Inc. (The) (The) (United States) 156,940 3,625 (United Kingdom) 162,970 3,796 (Japan) 36,000 960 --------- Windstream Corp. Wisconsin Energy Corp. 16,805 (United States) 149,130 1,624 (United States) 19,080 943 --------- --------- Xcel Energy, Inc. 27,550 (United States) 43,390 920 INDUSTRIALS--16.4% --------- --------- Abertis Infraestructuras 26,332 S.A. (Spain) 123,363 2,374 UTILITIES--29.9% ------------------------------------------ Atlantia S.p.A. (Italy) 113,220 2,643 American Water Works TOTAL COMMON STOCKS Brisa Auto-Estradas de Co., Inc. (IDENTIFIED COST $85,889) 86,431 Portugal SA (United States) 38,170 831 ------------------------------------------ (Portugal) 160,030 1,357 CenterPoint Energy, Inc. TOTAL LONG-TERM INVESTMENTS--98.1% Ferrovial SA (Spain) 35,160 342 (United States) 60,700 872 (IDENTIFIED COST $85,889) 86,431 Fraport AG Frankfurt Centrica plc ------------------------------------------ Airport Services (United Kingdom) 193,540 863 Worldwide (Germany) 28,090 1,479 CMS Energy Corp. SHORT-TERM INVESTMENTS--1.8% Hamburger Hafen Und (United States) 56,720 877 Logistik AG (Germany) 23,970 910 DTE Energy Co. MONEY MARKET MUTUAL FUNDS--1.8% Koninklijke Vopak NV (United States) 25,200 1,124 Dreyfus Cash Management (Netherlands) 22,490 1,771 E.ON AG (Germany) 55,350 2,043 Fund - Institutional Transurban Group Energias de Portugal SA Shares (seven-day (Australia) 502,800 2,330 (Portugal) 234,550 932 effective yield Vinci SA (France) 21,070 1,242 Entergy Corp. 0.070%) 1,573,196 1,573 --------- (United States) 13,110 1,066 ------------------------------------------ 14,448 FirstEnergy Corp. TOTAL SHORT-TERM INVESTMENTS --------- (United States) 25,880 1,012 (IDENTIFIED COST $1,573) 1,573 FPL Group, Inc. ------------------------------------------ TELECOMMUNICATION SERVICES--31.2% (United States) 31,020 1,499 TOTAL INVESTMENTS--99.9% American Tower Corp. ITC Holdings Corp. (IDENTIFIED COST $87,462) 88,004(1) Class A (United (United States) 16,650 916 States) (2) 42,240 1,800 Northeast Utilities Other assets and AT&T, Inc. (United States) 25,490 704 liabilities, net--0.1% 131 (United States) 163,120 4,215 Northwest Natural Gas Co. --------- CenturyTel, Inc. (United States) 18,730 873 NET ASSETS--100.0% $ 88,135 (United States) 34,840 1,235 NSTAR (United States) 24,990 885 ========= Crown Castle NV Energy, Inc. International Corp. (United States) 63,560 784 COUNTRY WEIGHTINGS as of 3/31/10+ (United States)(2) 44,600 1,705 ONEOK, Inc. ------------------------------------------ France Telecom SA (United States) 16,230 741 United States (includes short-term Sponsored ADR (France) 61,030 1,467 Public Service investments) 46% KDDI Corp. (Japan) 219 1,134 Enterprise Group, Canada 15 Koninklijke KPN N.V. Inc. (United States) 42,790 1,263 Spain 7 (Netherlands) 72,760 1,153 Questar Corp. Germany 6 Nippon Telegraph & (United States) 30,600 1,322 United Kingdom 6 Telephone Corp. Japan 3 Sponsored ADR (Japan) 40,130 843 Netherlands 3 Other 14 ------------------------------------------ Total 100% ------------------------------------------ + % of total investments as of March 31, 2010 ------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Market Level 1 - Value at Quoted March 31, 2010 Prices -------------- --------- Equity Securities: Common Stocks $86,431 $86,431 Short-Term Investments 1,573 1,573 ------- ------- Total Investments $88,004 $88,004 ======= ======= There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 18
VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- --------- ------- --------- ------- --------- COMMON STOCKS--82.2% INFORMATION TECHNOLOGY--18.0% SHORT-TERM INVESTMENTS--1.2% Apple, Inc.(2) 11,300 $ 2,655 CONSUMER DISCRETIONARY--4.1% Cognizant Technology MONEY MARKET MUTUAL FUNDS--1.2% McDonald's Corp. 37,254 $ 2,486 Solutions Corp. Dreyfus Cash Management Norstar Founders Class A(2) 29,205 1,489 Fund - Institutional Group Ltd.(2)(6)(8) 272,000 0 Google, Inc. Class A(2) 3,713 2,105 Shares (seven-day --------- MasterCard, Inc. Class A 6,100 1,549 effective yield 2,486 Redecard SA 72,109 1,334 0.070%) 756,357 $ 756 --------- Visa, Inc. Class A 20,166 1,836 ------------------------------------------ --------- TOTAL SHORT-TERM INVESTMENTS CONSUMER STAPLES--39.8% 10,968 (IDENTIFIED COST $756) 756 Altria Group, Inc. 43,090 884 ------------------------------------------ ------------------------------------------ British American Tobacco TOTAL COMMON STOCKS plc 167,880 5,787 (IDENTIFIED COST $40,187) 50,112 TOTAL INVESTMENTS--99.6% Coca-Cola Co. (The) 48,462 2,666 ------------------------------------------ (IDENTIFIED COST $48,279) 60,712(1) Costco Wholesale Corp. 13,490 806 Imperial Tobacco Group EQUITY-LINKED INSTRUMENTS--16.2% Other assets and liabilities, plc 81,778 2,494 CLSA Financial Products net--0.4% 237 Mead Johnson Nutrition Ltd. - Bharat Heavy --------- Co. Class A 35,176 1,830 Electricals Ltd. NET ASSETS--100.0% $ 60,949 Nestle S.A. Registered Strike price $0.001 ========= Shares 32,903 1,685 USD exp. 7/20/10 22,800 1,214 Philip Morris CLSA Financial Products COUNTRY WEIGHTINGS as of 3/31/10+ International, Inc. 91,110 4,752 Ltd. - Cipla Ltd. ------------------------------------------ Reckitt Benckiser Group Strike price $0.001 United States (includes short-term plc 24,924 1,368 USD exp. 5/23/11 110,458 833 investments) 43% Tesco plc 141,537 935 CLSA Financial Products United Kingdom 23 Woolworths Ltd. 41,026 1,054 Ltd. - HDFC Bank Ltd. Switzerland 12 --------- Class A Strike price India 9 24,261 .000001 Indian Rupee Luxembourg 4 --------- exp. 6/28/10 22,200 956 Brazil 3 CLSA Financial Products Canada 3 ENERGY--2.8% Ltd. - Hero Honda Other 3 Canadian Natural Motors Ltd. ------------------------------------------ Resources Ltd. 23,200 1,717 Strike price $0.001 Total 100% --------- USD exp. 6/9/10 25,700 1,113 ------------------------------------------ Deutsche Bank AG - HDFC + % of total investments as of FINANCIALS--2.1% Bank Ltd. March 31, 2010 Cetip SA-Balcao Exercise price $0.001 ------------------------------------------ Organizado de Ativos USD exp. 1/24/17(2) 51,775 2,212 e Derivativos 60,700 496 HSBC Bank plc - Housing Chubb Corp. (The) 15,500 804 Development Finance --------- Corp. Exercise price 1,300 $0.001 USD exp. --------- 2/20/18(2) 26,300 1,592 HSBC Bank plc - Nestle HEALTH CARE--12.4% India Ltd. Abbott Laboratories 48,932 2,578 Exercise price $0.001 Baxter International, USD exp. 11/19/18(2) 12,720 757 Inc. 13,115 763 HSBC Bank plc - ITC Ltd. Becton, Dickinson & Co. 13,015 1,025 Exercise price $0.001 Celgene Corp.(2) 16,290 1,009 USD exp. 2/20/18(2) 132,435 776 Novo Nordisk A/S Class B 14,423 1,119 JPMorgan International - Roche Holding AG Housing Development Registered Shares 6,662 1,081 Financial Corp. --------- Exercise price $0.001 7,575 USD exp. 5/7/14 6,460 391 --------- ------------------------------------------ TOTAL EQUITY-LINKED INSTRUMENTS INDUSTRIALS--3.0% (IDENTIFIED COST $7,336) 9,844 Capita Group plc/The 95,719 1,099 ------------------------------------------ Robinson (C.H.) TOTAL LONG-TERM INVESTMENTS--98.4% Worldwide, Inc.(10) 12,645 706 (IDENTIFIED COST $47,523) 59,956 --------- ------------------------------------------ 1,805 --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 19
VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) At March 31, 2010, 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 203 USD 181 6/10/10 $ 185 $ (4) CHF 288 USD 276 6/10/10 273 3 CHF 516 USD 505 6/10/10 490 15 GBP 3,844 USD 5,718 9/27/10 5,834 (115) ------ $(101) ====== FOREIGN CURRENCIES: AUD Australian Dollar CHF Swiss Franc GBP United Kingdom Pound Sterling USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 ASSETS TABLE March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $50,112 $50,112 $ -- $ 0++ Equity-Linked Instruments 9,844 -- 9,844 -- Short-Term Investments 756 756 -- -- ------- ------- ------ ---- Total Investments $60,712 $50,868 $9,844 $ 0++ ======= ======= ====== ==== OTHER FINANCIAL INSTRUMENTS: Forward Currency Contracts+ $ 18 $ -- $ 18 $ -- ======= ======= ====== ==== LIABILITIES TABLE OTHER FINANCIAL INSTRUMENTS: Forward Currency Contracts+ $ (119) $ -- $ (119) $ -- ======= ======= ====== ==== + Valued at the unrealized appreciation (depreciation) on the investment. ++ 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 20
VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- COMMON STOCKS--97.0% OFFICE REITS--CONTINUED SPECIALIZED REITS--14.8% Societe Immobiliere de Big Yellow Group DIVERSIFIED REITS--12.5% Location Pour plc(2) 2,530 $ 13 BGP Holdings L'industrie Entertainment plc(2)(6)(8) 13,566 $ 0 Et Le Commerce 160 $ 20 Properties Trust 313 13 British Land Co. plc 4,850 35 ------- Extra Space Storage, Canadian Real Estate 444 Inc. 2,085 26 Investment Trust 700 19 ------- HCP, Inc. 1,749 58 Cominar Real Estate Health Care REIT, Inc. 818 37 Investment Trust 650 12 REAL ESTATE OPERATING COMPANIES--8.2% Host Hotels & Resorts, Dexus Property Group 41,140 31 AEON Mall Co. Ltd. 950 20 Inc. 4,633 68 First Capital Realty, Brookfield Properties LaSalle Hotel Inc. 600 13 Corp. 355(13) 6 Properties 980 23 Fonciere Des Regions 180 20 Brookfield Properties Nationwide Health Gecina SA 80 9 Corp. 2,225(14) 34 Properties, Inc. 885 31 GPT Group 44,500 24 Castellum AB 2,625 26 Public Storage 790 73 Kenedix Realty Citycon Oyj 4,200 17 Ventas, Inc. 1,088 51 Investment Corp. 4 11 Fabege AB 900 6 ------- Land Securities Group GAGFAH S.A. 475 4 393 plc 5,175 53 Hongkong Land Holdings ---------------------------------------- Liberty Property Trust 863 29 Ltd. 11,900 60 TOTAL COMMON STOCKS Vornado Realty Trust 995 75 Multiplan (IDENTIFIED COST $1,666) 2,574 ------- Empreendimentos ---------------------------------------- 331 Imobiliarios SA 815 14 ------- PSP Swiss Property WARRANTS--0.0% AG(2) 260 17 INDUSTRIAL REITS--4.4% Safestore Holdings plc 5,976 13 DIVERSIFIED REITS--0.0% AMB Property Corp. 691 19 ------- Fonciere Des Regions Ascendas Real Estate 217 Exercise Investment Trust 18,700 26 ------- price 65.00 EUR EastGroup Properties, exp. 12/31/10(2) 100 --(17) Inc. 170 6 RESIDENTIAL REITS--9.5% ---------------------------------------- Goodman Group 60,000 36 American Campus TOTAL WARRANTS ProLogis 451 6 Communities, Inc. 195 5 (IDENTIFIED COST $0) --(17) SEGRO plc 4,905 24 Apartment Investment & ---------------------------------------- ------- Management Co. TOTAL LONG-TERM INVESTMENTS--97.0% 117 Class A 855 16 (IDENTIFIED COST $1,666) 2,574 ------- AvalonBay Communities, ---------------------------------------- Inc. 470 41 SHORT-TERM INVESTMENTS--2.3% OFFICE REITS--16.7% Boardwalk Real Estate Alexandria Real Estate Investment Trust 256 10 MONEY MARKET MUTUAL FUNDS--2.3% Equities, Inc. 295 20 BRE Properties, Inc. 482 17 Dreyfus Cash Allied Properties Real Equity Lifestyle Management Fund - Estate Investment Properties, Inc. 289 16 Institutional Trust 400 8 Equity Residential 2,161 85 Shares (seven-day BioMed Realty Trust, Essex Property Trust, effective Inc. 1,140 19 Inc. 294 26 yield 0.070%) 60,276 60 Boston Properties, Home Properties, Inc. 273 13 ---------------------------------------- Inc. 858 65 UDR, Inc. 1,294 23 TOTAL SHORT-TERM INVESTMENTS CapitaCommercial Trust 14,000 11 ------- (IDENTIFIED COST $60) 60 Champion Reit 35,418 17 252 ---------------------------------------- Commonwealth Property ------- TOTAL INVESTMENTS--99.3% Office Fund 4,500 4 (IDENTIFIED COST $1,726) 2,634(1) Corporate Office RETAIL REITS--30.9% Other assets and Properties Trust 373 15 CapitaMall Trust 14,300 18 liabilities, net--0.7% 19 Derwent London plc 950 20 CFS Retail Property ------- Digital Realty Trust, Trust 11,200 19 NET ASSETS--100.0% $ 2,653 Inc. 1,040 56 Corio N.V. 640 43 ======= Douglas Emmett, Inc. 176 3 Developers Diversified Duke Realty Corp. 805 10 Realty Corp. 1,219 15 ABBREVIATION: Great Portland Estates Eurocommercial plc 3,496 17 Properties N.V. 460 19 REIT Real Estate Investment Trust Highwoods Properties, Federal Realty Inc. 615 19 Investments Trust 398 29 ING Office Fund 38,608 21 Hammerson plc 4,295 26 COUNTRY WEIGHTINGS as of 3/31/10+ Japan Prime Realty Kimco Realty Corp. 2,993 47 ---------------------------------------- Investment Corp. 6 13 Klepierre 825 32 United States (includes short-term Japan Real Estate Liberty International investments) 53% Investment Corp. 3 25 plc 2,386 18 Australia 11 Mack-Cali Realty Corp. 674 24 Link (The) 16,405 40 United Kingdom 8 Nippon Building Fund, Macerich Co. (The) 808 31 France 7 Inc. 2 17 National Retail Canada 5 Nomura Real Estate Properties, Inc. 497 11 Japan 4 Office Fund, Inc. 3 17 Regency Centers Corp. 144 5 Bermuda 2 ORIX JREIT, Inc. 1 4 RioCan Real Estate Other 10 SL Green Realty Corp. 331 19 Investment Trust 1,707 31 ---------------------------------------- Simon Property Group, Total 100% Inc. 1,716 144 ---------------------------------------- Tanger Factory Outlet + % of total investments as of March Centers 505 22 31, 2010 Taubman Centers, Inc. 120 5 ---------------------------------------- Unibail-Rodamco 528 107 Weingarten Realty Investors 740 16 Westfield Group 12,800 142 ------- 820 ------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 21
VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ Equity Securities: Common Stocks $2,574 $2,574 $-- $ 0++ Warrants --+ -- --+ -- Short-Term Investments 60 60 -- -- ------ ------ --- --- Total Investments $2,634 $2,634 $--+ $ 0++ ====== ====== === === + Amount is less than $500. ++ Level 3 Common Stock valued at zero at the beginning and end of the period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 22
VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- COMMON STOCKS--74.1% HEALTH CARE--1.1% EQUITY-LINKED INSTRUMENTS--CONTINUED Yuhan Corp. 567 $ 86 CLSA Financial CONSUMER DISCRETIONARY--4.8% --------- Products Ltd. - BEC World plc 54,700 $ 42 Bharat Heavy Berjaya Sports Toto INDUSTRIALS--10.4% Electricals Ltd. Bhd 27,100 37 Beijing Enterprises Strike price $0.001 Genting Malaysia Bhd 79,500 70 Holdings Ltd. 31,100 216 USD exp. 7/20/10 2,100 $ 112 Kangwon Land, Inc. 7,860 118 Jardine Matheson CLSA Financial MegaStudy Co. Ltd. 170 28 Holdings Ltd. 3,300 110 Products Ltd. - Super Cheap Auto Group Jardine Strategic Dabur India Ltd. Ltd 8,930 44 Holdings Ltd. 2,800 54 Strike price $0.001 Woongjin Thinkbig Co., Keells (John) Holdings USD exp. 1/18/12 19,100 68 Ltd 1,920 43 plc 37,700 61 CLSA Financial --------- PLUS Expressways Bhd 56,000 58 Products Ltd. - 382 Singapore Airport Hero Honda Motors --------- Terminal Ltd. Strike Services Ltd. 38,400 73 price $0.001 CONSUMER STAPLES--23.4% Singapore Post Ltd. 125,800 94 USD exp. 6/9/10 1,900 82 AmorePacific Corp. 54 39 SMRT Corp. Ltd. 59,500 87 CLSA Financial British American Taiwan Secom Co., Ltd. 44,000 70 Products Ltd. - Tobacco Bhd 9,100 123 --------- ITC Ltd. Ceylon Tobacco Co. 823 Strike price $0.001 Ltd 36,000 79 --------- USD exp. 5/5/10(2) 50,000 293 Coca-Cola Amatil Ltd. 18,971 196 CLSA Financial Dairy Farm INFORMATION TECHNOLOGY--3.1% Products Ltd. - International HTC Corp. 5,000 58 Jain Irrigation Holdings Ltd. 12,900 85 NetEase.Com, Inc. Systems Ltd. Distilleries Co. of ADR(2) 2,700 96 Strike price $0.001 Sri Lanka Ltd. 98,000 101 NHN Corp.(2) 600 96 USD exp. 8/15/11 4,600 98 Godrej Consumer --------- CLSA Financial Products Ltd. 12,400 72 250 Products Ltd. - Guinness Anchor Bhd 32,000 68 --------- Jammu & Kashmir Hengan International Bank Ltd. Group Co., Ltd. 28,000 209 MATERIALS--4.4% Strike price $0.001 LG Household & Health AMVIG Holdings Ltd. 81,604 38 USD exp. 7/8/10 8,800 134 Care Ltd. 350 94 Engro Corp., Ltd. 8,600 21 CLSA Financial Nestle Malaysia Bhd 6,800 71 Fauji Fertilizer Co., Products Ltd. - Nestle Pakistan Ltd 3,102 47 Ltd. 43,400 57 Lupin Ltd. Pakistan Tobacco Co. Semen Gresik (Persero) Strike price $0.001 Ltd 50,618 70 Tbk PT 249,300 200 USD exp. 6/7/10 1,400 50 Thai Beverage plc 388,300 82 Yingde Gases Group CLSA Financial Unilever Indonesia Co., Ltd.(2) 32,270 35 Products Ltd. - Tbk PT 105,700 141 --------- Mahindra & Mahindra Unilever Pakistan 351 Financial Services Ltd 1,100 45 --------- Strike price $0.001 Want Want China USD exp. 2/23/11 7,100 59 Holdings Ltd. 107,900 77 TELECOMMUNICATION SERVICES--3.5% CLSA Financial Woolworths Ltd. 10,000 257 Philippine Long Products Ltd. - --------- Distance Yes Bank Ltd. 1,856 Telephone Co. Strike price $0.001 --------- Sponsored ADR 2,760 147 USD exp. 6/29/12 5,700 33 Telekomunikasi HSBC Bank plc - ENERGY--4.1% Indonesia Cipla Ltd. China Shenhua Energy Tbk PT 149,600 132 Exercise price Co. Ltd. --------- $0.001 USD Class H 4,500 20 279 exp. 12/17/18 9,200 69 CNOOC Ltd. 71,596 118 --------- HSBC Bank plc - Nestle Oil & Gas Development India Ltd. Co., Ltd. 12,800 20 UTILITIES--8.0% Exercise price PetroChina Co. Ltd. Cheung Kong $0.001 USD Class H 45,600 53 Infrastructure exp. 11/19/18 4,300 256 PTT Exploration & Holdings Ltd. 4,240 16 HSBC Bank plc - Sun Production plc 26,000 118 CLP Holdings Ltd. 7,500 54 Pharmaceutical --------- HongKong Electric Industries Ltd. 329 Holdings Exercise price --------- Ltd. 22,100 131 $0.001 USD FINANCIALS--11.3% Tanjong plc 66,100 364 exp. 10/24/18(2) 2,300 92 Bank Rakyat Indonesia 112,600 102 Xinao Gas Holdings JPMorgan International Commercial Bank of Ltd. 27,600 70 - Housing Ceylon plc 22,700 40 --------- Development Gruh Finance Ltd. 11,500 56 635 Financial Corp. Hatton National Bank ------------------------------------------ Exercise price plc 9,960 17 TOTAL COMMON STOCKS $0.001 USD HDFC Bank Ltd. ADR(10) 2,965 413 (IDENTIFIED COST $4,642) 5,888 exp. 5/7/14 5,300 321 QBE Insurance Group ------------------------------------------ Macquarie Bank Ltd. - Ltd 8,126 155 Marico Ltd. Samsung Fire & Marine EQUITY-LINKED INSTRUMENTS--22.1% Exercise price Insurance Co., CLSA Financial $0.0001 USD Ltd.(2) 710 114 Products Ltd. - exp. 2/18/13 14,000 34 --------- Bharat Electron. ------------------------------------------ 897 Strike price TOTAL EQUITY-LINKED INSTRUMENTS --------- $0.001 USD (IDENTIFIED COST $1,073) 1,753 exp. 7/12/15 1,067 52 ------------------------------------------ For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 23
VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE --------- --------- --------- --------- EXCHANGE-TRADED FUNDS--1.2% SHORT-TERM INVESTMENTS--4.6% ABBREVIATION: Ultrashort Ftse Xinhua MONEY MARKET MUTUAL FUNDS--4.6% China 25 Proshares 12,570 $ 99 Dreyfus Cash ADR American Depositary Receipt - ------------------------------------------ Management Fund - TOTAL EXCHANGE-TRADED FUNDS Institutional COUNTRY WEIGHTINGS as of 3/31/10+ (IDENTIFIED COST $111) 99 Shares (seven-day ------------------------------------------ - ------------------------------------------ effective India 26% yield 0.070%) 362,274 $ 362 China 11 MUTUAL FUNDS--0.6% ------------------------------------------ Malaysia 10 Macquarie Korea Australia 9 Infrastructure Fund 10,810 46 TOTAL SHORT-TERM INVESTMENTS Indonesia 7 - ------------------------------------------ (IDENTIFIED COST $362) 362 United States (includes TOTAL MUTUAL FUNDS ------------------------------------------ short-term investments) 7 (IDENTIFIED COST $42) 46 Korea 6 - ------------------------------------------ TOTAL INVESTMENTS--102.6% Other 24 TOTAL LONG-TERM INVESTMENTS--98.0% (IDENTIFIED COST $6,230) 8,148(1) ------------------------------------------ (IDENTIFIED COST $5,868) 7,786 Other assets and Total 100% - ------------------------------------------ liabilities, net--(2.6)% (204) ------------------------------------------ --------- + % of total investments as of March 31, NET ASSETS--100.0% $ 7,944 2010 ========= ------------------------------------------ At March 31, 2010, the Fund had entered into forward currency contracts as follows (reported in thousands): Contracts In Exchange Settlement Appreciation to Sell for Date Value (Depreciation) --------- ----------- ---------- ----- -------------- AUD 390 USD 338 8/03/10 $353 $(15) ===== ==== FOREIGN CURRENCIES: AUD Australian Dollar The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Value Level 1 - Significant at Quoted Observable ASSETS March 31, 2010 Prices Inputs -------------- --------- ----------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $5,888 $5,888 $ -- Equity-Linked Instruments 1,753 -- 1,753 Exchange-Traded Funds 99 99 -- Mutual Funds 46 46 -- Short-Term Investments 362 362 -- ------ ------ ------ Total Investments $8,148 $6,395 $1,753 ====== ====== ====== LIABILITIES Forward Currency Contracts+ $ (15) $ -- $ (15) There are no Level 3 (significant unobservable inputs) priced securities. + Valued at the unrealized appreciation (depreciation) on the investment. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 24
VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- COMMON STOCKS--96.2% HEALTH CARE--20.3% SHORT-TERM INVESTMENTS--1.6% Cie Generale D'optique CONSUMER DISCRETIONARY--4.4% Essilor MONEY MARKET MUTUAL FUNDS--1.6% Domino's Pizza plc 21,848 $ 112 International SA 3,080 $ 197 Dreyfus Cash Pearson plc 7,100 112 Covidien plc 3,102 156 Management SES SA 3,625 91 Fresenius Medical Care Fund - --------- AG & Co KGaA 3,111 175 Institutional 315 Novartis AG Registered Shares (seven-day --------- Shares 3,256 176 effective Novo Nordisk A/S yield 0.070%) 118,427 $ 118 CONSUMER STAPLES--34.5% Class B 3,793 294 ------------------------------------------ British American Roche Holding AG TOTAL SHORT-TERM INVESTMENTS Tobacco plc 10,046 346 Registered (IDENTIFIED COST $118) 118 Colruyt SA 486 120 Shares(10) 1,813 294 ------------------------------------------ Diageo plc 12,279 206 Synthes, Inc. 1,384 173 TOTAL INVESTMENTS--97.8% Imperial Tobacco Group --------- (IDENTIFIED COST $5,569) 7,067(1) plc 10,682 326 1,465 Other assets and Lindt & Spruengli AG 28 66 --------- liabilities, net--2.2% 158 Nestle S.A. Registered --------- Shares 7,091 363 INDUSTRIALS--9.9% NET ASSETS--100.0% $ 7,225 Philip Morris Bureau Veritas SA 2,558 136 ========= International, Inc. 7,080 369 Capita Group plc/The 18,596 214 Reckitt Benckiser De La Rue plc 7,547 106 COUNTRY WEIGHTINGS as of 3/31/10+ Group plc 5,200 286 G4S plc 39,405 156 ------------------------------------------ Tesco plc 41,291 273 Vossloh AG 986 105 United Kingdom 36% Unilever N.V. 4,456 135 --------- Switzerland 15 --------- 717 Germany 10 2,490 --------- France 9 --------- United States (includes short-term INFORMATION TECHNOLOGY--3.0% investments) 7 ENERGY--5.1% Indra Sistemas SA 4,693 96 Spain 6 BG Group plc 2,857 49 Xchanging plc 42,110 124 Denmark 4 Core Laboratories N.V. 1,099 144 --------- Other 13 Total SA 3,083 179 220 ------------------------------------------ --------- --------- Total 100% 372 ------------------------------------------ --------- MATERIALS--1.6% + % of total investments as of March 31, Air Liquide SA 944 113 2010 FINANCIALS--8.5% --------- ------------------------------------------ Amlin plc 21,220 125 Deutsche Boerse AG 2,196 163 UTILITIES--8.9% Muenchener Enagas S.A. 6,908 151 Rueckversicherungs- Red Electrica Corp. Gesellschaft AG S.A. 2,717 146 Registered Shares 1,202 195 RWE AG 1,132 100 Reinet Investments Scottish & Southern SCA(2) 8,036 130 Energy plc 5,899 98 --------- Terna Rete Elettrica 613 Nazionale S.p.A. 34,322 149 --------- --------- 644 ------------------------------------------ TOTAL COMMON STOCKS (IDENTIFIED COST $5,451) 6,949 ------------------------------------------ TOTAL LONG-TERM INVESTMENTS--96.2% (IDENTIFIED COST $5,451) 6,949 ------------------------------------------ For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 25
VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) At March 31, 2010, 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) - --------- ----------- ---------- ----- -------------- GBP 416 USD 681 5/04/10 $631 $ 50 CHF 135 USD 132 6/10/10 128 4 CHF 132 USD 123 6/10/10 125 (2) EUR 388 USD 531 6/10/10 524 7 EUR 214 USD 315 6/10/10 289 26 EUR 199 USD 284 6/10/10 269 15 GBP 96 USD 150 5/04/10 146 4 EUR 439 USD 594 6/10/10 593 1 ---- $105 ==== FOREIGN CURRENCIES: CHF Swiss Franc EUR European Currency Unit GBP United Kingdom Pound Sterling The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Value Level 1 - Significant at Quoted Observable ASSETS TABLE March 31, 2010 Prices Inputs -------------- --------- ----------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $ 6,949 $6,949 $ -- Short-Term Investments 118 118 -- ------- ------ ----- Total Investments $ 7,067 $7,067 $ -- ======= ====== ===== OTHER FINANCIAL INSTRUMENTS: Forward Currency Contracts+ $ 107 $ -- $ 107 ======= ====== ===== LIABILITIES TABLE OTHER FINANCIAL INSTRUMENTS: Forward Currency Contracts+ $ (2) $ -- $ (2) ======= ====== ===== There are no Level 3 (significant unobservable inputs) priced securities. + Valued at the unrealized appreciation (depreciation) on the investment. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 26
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- --------- CORPORATE BONDS--98.7% CONSUMER DISCRETIONARY--CONTINUED ENERGY--CONTINUED United Artists Theatre Linn Energy LLC/Linn CONSUMER DISCRETIONARY--27.5% Circuit, Inc. Energy Finance Corp. Affinion Group, Inc. Series BD-1 144A 10.125%, 10/15/13 $ 645 $ 664 9.300%, 7/1/15(6)(8) $ 301 $ 277 8.625%, 4/15/20 (4) $ 350 $ 351 11.500%, 10/15/15 1,555 1,602 Series AW-0 Pioneer Natural AMC Entertainment, Inc. 9.300%, 7/1/15(6)(8) 1 1 Resources Co. 8.000%, 3/1/14 1,255 1,269 Series BE-9 6.650%, 3/15/17 100 101 AutoNation, Inc. 9.300%, 7/1/15(6)(8) 11 10 6.875%, 5/1/18 930 934 6.750%, 4/15/18 105 103 Series 95-A Plains Exploration & Avis Budget Car Rental 9.300%, 7/1/15(6)(8) 279 257 Production Co. LLC/Avis Budget UPC Germany GmbH 7.000%, 3/15/17 715 708 Finance, Inc. 144A 8.125%, 7.625%, 6/1/18 540 548 7.625%, 5/15/14 925 920 12/1/17 (4) 835 865 SandRidge Energy, Inc. Bon-Ton Stores, Inc. Valassis Communications, 144A (The) Inc. 8.750%, 1/15/20 (4) 855 838 10.250%, 3/15/14 775 760 8.250%, 3/1/15 1,180 1,218 --------- Cengage Learning Videotron Ltee 6,180 Acquisitions, Inc. 9.125%, 4/15/18 1,490 1,663 --------- 144A 13.250%, 7/15/15 WMG Holdings Corp. (3)(4) 750 731 9.500%, 12/15/14(3) 660 668 FINANCIALS--10.5% Cinemark USA, Inc. --------- CEDC Finance Corp 8.625%, 6/15/19 685 725 25,144 International, Inc. CSC Holdings, Inc. --------- 144A 144A 8.625%, 2/15/19 9.125%, 12/1/16 (4) 690 731 (4) 1,045 1,150 CONSUMER STAPLES--10.1% CIT Group, Inc. Dollar General Corp. PIK Ingles Markets, Inc. 7.000%, 5/1/17 1,035 957 Interest 8.875%, 5/15/17 1,200 1,260 CNG Holdings, Inc. 144A Capitalization Alliance One 12.250%, 2/15/15 (4) 510 497 11.875%, 7/15/17 536 627 International, Inc. Ford Motor Credit Co. Echostar DBS Corp. 144A 10.000%, LLC 6.625%, 10/1/14 410 414 7/15/16 (4) 1,365 1,433 7.500%, 8/1/12 1,435 1,487 Education Management LLC/ ASG Consolidated LLC/ASG GMAC, Inc. Education Management Finance, Inc. 0.000%, 6/15/15 1,320 851 Finance Corp. 11.500%, 11/1/11(3) 1,000 1,010 Host Hotels & Resorts LP 10.250%, 6/1/16 82 90 B&G Foods, Inc. Series O Goodyear Tire & Rubber 7.625%, 1/15/18 300 306 6.375%, 3/15/15 200 200 Co. (The) Bumble Bee Foods LLC Icahn Enterprises 10.500%, 5/15/16 1,210 1,313 144A 7.750%, LP/Icahn Enterprises Hanesbrands, Inc. 12/15/15 (4) 340 345 Finance Corp. 8.000%, 12/15/16 305 317 Constellation Brands, 144A 8.000%, 1/15/18 Intelsat Corp. Inc. (4) 2,205 2,136 9.250%, 8/15/14 1,285 1,324 7.250%, 9/1/16 805 831 ING Capital Funding Jarden Corp. Cott Beverages, Inc. Trust III 7.500%, 5/1/17 925 942 144A 8.375%, 8.439%, 12/31/49(3) 435 413 Levi Strauss & Co. 11/15/17 (4) 340 352 International Lease 8.875%, 4/1/16 755 793 Dole Food Co., Inc. Finance Corp. Mediacom Broadband LLC/ 8.750%, 7/15/13 65 68 144A 8.625%, Mediacom Broadband 144A 8.000%, 9/15/15(4) 45 46 Corp. 10/1/16(4) 340 350 144A 8.750%, 8.500%, 10/15/15 50 51 Pantry, Inc. (The) 3/15/17(4) 730 749 Nebraska Book Co., Inc. 7.750%, 2/15/14 895 873 NBC Acquisition Corp. 10.000%, 12/1/11 50 52 Stater Brothers 11.000%, 3/15/13(3) 1,185 1,070 Peninsula Gaming LLC Holdings, Inc. UBS Preferred Funding 144A 10.750%, 7.750%, 4/15/15 565 574 Trust I 8/15/17 (4) 910 874 SUPERVALU, Inc. 8.622%, 10/29/49(3) 245 243 Sally Holdings LLC/Sally 8.000%, 5/1/16 930 946 Ventas Realty LP/Ventas Capital, Inc. Tops Markets LLC Capital Corp. 10.500%, 11/15/16 720 788 144A 10.125%, Series 1 Scientific Games 10/15/15 (4) 840 878 6.500%, 6/1/16 155 158 International, Inc. --------- --------- Series 9,226 9,538 9.250%, 6/15/19 1,495 1,589 --------- --------- Service Corp. ENERGY--6.8% International Atlas Pipeline Partners HEALTH CARE--4.1% 7.625%, 10/1/18 600 611 LP Community Health 8.000%, 11/15/21 305 310 8.125%, 12/15/15 1,205 1,169 Systems, Inc. Sirius XM Radio, Inc. Chesapeake Energy Corp. 8.875%, 7/15/15 1,205 1,250 144A 8.750%, 4/1/15 9.500%, 2/15/15 285 312 DaVita, Inc. (4) 250 250 6.625%, 1/15/16 315 310 7.250%, 3/15/15 700 718 Speedway Motorsports, Comstock Resources, Inc. HCA, Inc. Inc. 8.375%, 10/15/17 5 5 9.250%, 11/15/16 1,405 1,497 6.750%, 6/1/13 1,110 1,116 Crosstex Energy/Crosstex 144A 8.500%, Susser Holdings Energy Finance Corp. 4/15/19(4) 290 313 LLC/Susser 144A --------- Finance Corp. 8.875%, 2/15/18 (4) 340 352 3,778 10.625%, 12/15/13 765 800 El Paso Corp. --------- 8.250%, 2/15/16 515 552 INDUSTRIALS--10.5% ARAMARK Corp. 8.500%, 2/1/15 725 745 Biomet, Inc. 11.625%, 10/15/17 2,120 2,385 Casella Waste Systems, Inc. 9.750%, 2/1/13 1,200 1,206 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 27
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- --------- INDUSTRIALS--CONTINUED TELECOMMUNICATION SERVICES--18.3% LOAN AGREEMENTS--0.5% Corrections Corp. of Cincinnati Bell, Inc. America 8.250%, 10/15/17 $ 590 $ 600 INDUSTRIALS--0.5% 7.750%, 6/1/17 $ 610 $ 641 8.750%, 3/15/18 295 299 Rental Services Corp. DI Finance/DynCorp Crown Castle Tranche International, Inc. International Corp. 3.775%, 11/30/13 $ 485 $ 470 Series B 7.125%, 11/1/19 65 66 ------------------------------------------ 9.500%, 2/15/13 1,950 1,984 Frontier Communications TOTAL LOAN AGREEMENTS Dycom Industries, Inc. Corp. (IDENTIFIED COST $393) 470 8.125%, 10/15/15 985 921 8.125%, 10/1/18 595 598 ------------------------------------------ Goodman Global Group, GCI, Inc. 144A Inc. 8.625%, 11/15/19 (4) 1,640 1,679 SHARES 144A 0.000%, Global Crossing Ltd. ------- 12/15/14 (4) 675 398 144A Travelport LLC 12.000%, 9/15/15 (4) 1,200 1,338 COMMON STOCKS--0.0% 9.875%, 9/1/14 1,280 1,344 Hughes Network Systems --------- LLC/ INDUSTRIALS--0.0% 9,624 Hughes Network ACG Holdings, --------- Systems Finance Corp. Inc.(6)(8)(15) 76 0 9.500%, 4/15/14 1,770 1,827 ------------------------------------------ INFORMATION TECHNOLOGY--4.3% ITC Deltacom, Inc. 144A TOTAL COMMON STOCKS Advanced Micro Devices, 10.500%, 4/1/16 (4) 680 681 (IDENTIFIED COST $358) 0 Inc. Nextel Communications, ------------------------------------------ 144A 8.125%, Inc. Series C TOTAL LONG-TERM INVESTMENTS--99.2% 12/15/17 (4) 675 699 5.950%, 3/15/14 750 703 (IDENTIFIED COST $89,735) 90,594 Jabil Circuit, Inc. NII Capital Corp. 144A ------------------------------------------ 7.750%, 7/15/16 295 312 8.875%, 12/15/19 (4) 2,165 2,252 Lender Processing PAETEC Holding Corp. SHORT-TERM INVESTMENTS--0.1% Services, Inc. 9.500%, 7/15/15 1,085 1,104 8.125%, 7/1/16 1,085 1,169 Poland Telecom Finance MONEY MARKET MUTUAL FUNDS--0.1% SunGard Data Systems, BV Series B BlackRock Liquidity Inc. 14.000%, Funds 9.125%, 8/15/13 655 675 12/1/07 (6)(8)(12) 4,942 62 TempFund Portfolio - 10.250%, 8/15/15 985 1,040 Stratos Global Corp. Institutional Shares Viasat, Inc. 144A 9.875%, 2/15/13 615 652 (seven-day effective 8.875%, 9/15/16 (4) 45 46 Virgin Media Finance plc yield 0.119%) 50,897 51 --------- Series ------------------------------------------ 3,941 8.750%, 4/15/14 430 442 TOTAL SHORT-TERM INVESTMENTS --------- 8.375%, 10/15/19 695 718 (IDENTIFIED COST $51) 51 West Corp. 9.500%, ------------------------------------------ MATERIALS--4.7% 10/15/14 920 950 TOTAL INVESTMENTS--99.3% Ball Corp. Wind Acquisition (IDENTIFIED COST $89,786) 90,645(1) 6.750%, 9/15/20 445 455 Holdings Finance Other Assets and Boise Paper Holdings S.p.A. 144A Liabilities--0.7% 639 LLC/ 12.250%, 7/15/17 (4) 1,350 1,343 --------- Boise Finance Co. Windstream Corp. NET ASSETS--100.0% $ 91,284 144A 9.000%, 7.000%, 3/15/19 1,475 1,383 ========= 11/1/17(4) 345 364 --------- 144A 8.000%, 16,697 ABBREVIATION: 4/1/20(4) 315 317 --------- Cascades, Inc. 144A PIK Payment-in-Kind Security 7.875%, 1/15/20 (4) 70 71 UTILITIES--1.9% Exopack Holding Corp. Ferrellgas Partners LP COUNTRY WEIGHTINGS as of 3/31/10+ 11.250%, 2/1/14 725 760 144A 9.125%, ------------------------------------------ Freeport-McMoRan Copper 10/1/17(4) 675 710 United States (includes short-term & Gold, Inc. 8.625%, 6/15/20 290 290 investments) 92% 8.375%, 4/1/17 625 695 NRG Energy, Inc. Bermuda 2 Huntsman International 7.375%, 1/15/17 695 690 Canada 2 LLC --------- Italy 2 7.875%, 11/15/14 490 497 1,690 Germany 1 144A 8.625%, ------------------------------------------ United Kingdom 1 3/15/20(4) 250 252 TOTAL CORPORATE BONDS ------------------------------------------ Solutia, Inc. (IDENTIFIED COST $88,984) 90,124 Total 100% 7.875%, 3/15/20 880 895 ------------------------------------------ ------------------------------------------ --------- + % of total investments as of March 31, 4,306 2010 --------- ------------------------------------------ For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 28
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ Debt Securities: Corporate Debt $90,594 $-- $89,987 $607 Equity Securities: Common Stock 0 -- -- 0(e) Short-Term Investments 51 51 -- -- ------- --- ------- ---- Total Investments $90,645 $51 $89,987 $607 ======= === ======= ==== The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: ($ reported in thousands) Corporate Debt -------------- BALANCE AS OF SEPTEMBER 30, 2009: $634 Accrued discounts (premiums)(a) 2 Realized gain (loss)(b) -- Change in unrealized appreciation (depreciation)(b) 10 Net purchases (sales)(c) (39) Transfers in and/or out of Level 3(d) -- ---- BALANCE AS OF MARCH 31, 2010: $607 ==== (A) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (B) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (C) INCLUDES PAYDOWNS. (D) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF MARCH 31, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (E) LEVEL 3 COMMON STOCK HAS A BEGINNING AND ENDING VALUE OF ZERO. Level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 29
VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- COMMON STOCKS--98.3% OFFICE REITS--CONTINUED WARRANTS--0.0% ORIX JREIT, Inc. 46 $ 208 Fonciere Des Regions DIVERSIFIED REITS--18.2% Societe Immobiliere de Exercise price BGP Holdings Location Pour 65.00 EUR plc(2)(6)(8) 588,920 $ 0 L'industrie Et Le exp. 12/31/10(2) 3,885 $ 5 British Land Co. plc 108,575 793 Commerce 3,407 430 ------------------------------------------ Canadian Real Estate --------- TOTAL WARRANTS Investment Trust 15,720 428 4,402 (IDENTIFIED COST $2) 5 Cominar Real Estate --------- ------------------------------------------ Investment Trust 15,200 288 TOTAL LONG-TERM INVESTMENTS--98.3% Dexus Property Group 924,415 687 REAL ESTATE OPERATING COMPANIES--16.9% (IDENTIFIED COST $23,834) 27,922 First Capital Realty, AEON Mall Co. Ltd. 22,250 469 ------------------------------------------ Inc. 13,975 305 Brookfield Properties Fonciere Des Regions 3,755 413 Corp. 57,650 888 SHORT-TERM INVESTMENTS--1.2% Gecina SA 1,335 148 Castellum AB 48,666 490 GPT Group 1,214,500 641 Citycon Oyj 86,566 345 MONEY MARKET MUTUAL FUNDS--1.2% Kenedix Realty Fabege AB 21,179 143 Dreyfus Cash Investment Corp. 107 287 GAGFAH S.A. 11,676 105 Management Fund - Land Securities Group Hongkong Land Holdings Institutional plc 116,173 1,195 Ltd. 275,100 1,395 Shares (seven-day --------- Multiplan effective 5,185 Empreendimentos yield 0.070%) 339,326 339 --------- Imobiliarios SA 16,878 283 ------------------------------------------ PSP Swiss Property TOTAL SHORT-TERM INVESTMENTS INDUSTRIAL REITS--6.8% AG(2) 6,001 385 (IDENTIFIED COST $339) 339 Ascendas Real Estate Safestore Holdings plc 132,176 289 ------------------------------------------ Investment Trust 439,300 603 --------- TOTAL INVESTMENTS--99.5% Goodman Group 1,373,280 825 4,792 (IDENTIFIED COST $24,173) 28,261(1) SEGRO plc 101,757 493 --------- Other assets and --------- liabilities, net--0.5% 144 1,921 RESIDENTIAL REITS--0.9% --------- --------- Boardwalk Real Estate NET ASSETS--100.0% $ 28,405 Investment Trust 6,460 256 ========= OFFICE REITS--15.5% --------- Allied Properties Real ABBREVIATION: Estate Investment RETAIL REITS--39.0% Trust 7,595 152 CapitaMall Trust 336,800 426 REIT Real Estate Investment Trust CapitaCommercial Trust 361,000 279 CFS Retail Property Champion Reit 753,576 360 Trust 226,252 389 COUNTRY WEIGHTINGS as of 3/31/10+ Commonwealth Property Corio N.V. 13,596 908 ------------------------------------------ Office Fund 81,416 68 Eurocommercial Australia 22% Derwent London plc 21,246 440 Properties N.V. 10,472 421 United Kingdom 17 Great Portland Estates Hammerson plc 92,309 551 France 15 plc 76,918 367 Klepierre 18,288 718 Canada 11 ING Office Fund 828,950 445 Liberty International Japan 9 Japan Prime Realty plc 53,964 413 Bermuda 5 Investment Corp. 145 323 Link (The) 363,542 896 Singapore 5 Japan Real Estate RioCan Real Estate Other 16 Investment Corp. 58 494 Investment Trust 37,550 683 ------------------------------------------ Nippon Building Fund, Unibail-Rodamco 11,865 2,404 Total 100% Inc. 56 482 Westfield Group 294,673 3,261 ------------------------------------------ Nomura Real Estate --------- + % of total investments as of March 31, Office Fund, Inc. 63 354 11,070 2010 --------- ------------------------------------------ SPECIALIZED REITS--1.0% Big Yellow Group plc(2) 56,361 291 ------------------------------------------ TOTAL COMMON STOCKS (IDENTIFIED COST $23,832) 27,917 ------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ Equity Securities: Common Stocks $27,917 $27,917 $-- $ 0++ Warrants 5 -- 5 -- Short-Term Investments 339 339 -- -- ------- ------- --- --- Total Investments $28,261 $28,256 $ 5 $ 0 ======= ======= === === ++ 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 30
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- COMMON STOCKS--95.4% ENERGY--5.0% HEALTH CARE--CONTINUED Anadarko Petroleum King Pharmaceuticals, CONSUMER DISCRETIONARY--21.4% Corp.(10) 4,090 $ 298 Inc.(2)(10) 55,340 $ 651 Abercrombie & Fitch Cameron International Lincare Holdings, Co. Class A(10) 35,490 $ 1,620 Corp.(2) 13,040 559 Inc.(2) 4,380 197 AnnTaylor Stores Concho Resources, MAP Pharmaceuticals, Corp.(2)(10) 39,330 814 Inc.(2)(10) 15,550 783 Inc.(2)(10) 9,030 144 Autoliv, Inc.(2)(10) 17,770 916 Dockwise Ltd.(2) 8,850 215 Mednax, Inc.(2)(10) 2,640 154 Central European Media Ensco International Merck & Co., Inc.(10) 4,570 171 Enterprises Ltd.(2) 16,810 493 plc Sponsored ADR 14,210 636 Myriad Genetics, Denway Motors Ltd. 1,202,000 639 EOG Resources, Inc. 2,580 240 Inc.(2) 5,770 139 Dick's Sporting Goods, Halliburton Co.(10) 7,280 219 Omnicare, Inc. 7,450 211 Inc.(2) 16,300 426 LUKOIL OAO Sponsored Omnicell, Inc.(2) 43,410 609 Drew Industries, ADR(10) 5,980 339 PerkinElmer, Inc.(10) 2,390 57 Inc.(2)(10) 16,890 372 Newfield Exploration Pfizer, Inc.(10) 11,040 189 Electrolux AB Series B 40,700 930 Co.(2) 2,910 152 Pharmasset, Inc.(2) 5,220 140 Esprit Holdings Ltd. 34,300 271 Occidental Petroleum Salix Pharmaceuticals Ethan Allen Interiors, Corp.(10) 3,310 280 Ltd.(2)(10) 9,670 360 Inc.(10) 24,630 508 Southwestern Energy Sanofi-Aventis SA 8,270 617 Foschini Ltd. Co.(2) 8,870 361 Thermo Fisher Sponsored ADR(10) 16,120 294 Suncor Energy, Inc. 9,250 301 Scientific, Home Depot, Inc. Yanzhou Coal Mining Inc.(2)(10) 4,730 243 (The)(10) 36,820 1,191 Co., Ltd. United Therapeutics Johnson Controls, Inc. 10,180 336 Sponsored ADR(10) 15,390 371 Corp.(2)(10) 1,270 70 LVMH Moet Hennessy --------- Universal Health Louis Vuitton S.A. 7,170 838 4,754 Services, Inc. Macy's, Inc. 22,490 490 --------- Class B(10) 23,320 818 Newell Rubbermaid, Vertex Inc.(10) 42,730 650 FINANCIALS--7.1% Pharmaceuticals, News Corp. Class A(10) 77,700 1,120 Arch Capital Group Inc.(2)(10) 3,470 142 Nordstrom, Inc.(10) 14,280 583 Ltd.(2)(10) 7,250 553 Warner Chilcott plc(2) 9,340 239 OfficeMax, Inc.(2)(10) 62,870 1,032 City National WellPoint, Inc.(2) 1,510 97 Saks, Inc.(2)(10) 60,680 522 Corp.(10) 17,060 921 Zimmer Holdings, Sodexo 4,550 272 Fidelity National Inc.(2)(10) 4,350 258 Stanley Black & Financial, Inc. --------- Decker, Inc.(10) 11,700 672 Class A(10) 51,050 757 12,096 Staples, Inc.(10) 36,060 843 First American --------- Target Corp.(10) 18,820 990 Corp.(10) 23,020 779 Thomas Cook Group plc 129,740 531 First Midwest Bancorp, INDUSTRIALS--12.1% Tiffany & Co. 10,450 496 Inc. 27,700 375 Alberts Industries NV 5,744 92 Timberland Co. (The) Huntington Bancshares, Actuant Corp. Class A(2)(10) 32,730 698 Inc. 141,150 758 Class A(10) 45,450 889 Wet Seal, Inc. (The) Investment Technology Altra Holdings, Class A(2) 160,140 762 Group, Inc.(2)(10) 31,086 519 Inc.(2)(10) 66,174 909 Williams-Sonoma, MFA Financial, BAE Systems plc 88,238 497 Inc.(10) 43,068 1,132 Inc.(10) 53,010 390 FedEx Corp.(10) 5,400 504 --------- Muenchener Finmeccanica SpA 46,510 621 20,441 Rueckversicherungs- FTI Consulting, --------- Gesellschaft AG Inc.(2) 12,420 488 Registered Shares 2,600 422 Harbin Power Equipment CONSUMER STAPLES--11.9% National Penn Co., Ltd. 444,000 367 BJ's Wholesale Club, Bancshares, Hino Motors Ltd. 117,000 494 Inc.(2)(10) 21,640 800 Inc.(10) 49,610 342 Hutchison Whampoa Ltd. Clorox Co. (The)(10) 15,910 1,020 Piper Jaffray ADR(10) 16,500 602 Coca-Cola Enterprises, Cos.(2)(10) 7,700 310 IDEX Corp.(10) 7,710 255 Inc.(10) 14,440 399 TD Ameritrade Holding Kennametal, Inc.(10) 29,580 832 CVS Caremark Corp.(10) 13,480 493 Corp.(2) 33,040 630 Lennox International, Diageo plc 14,810 249 --------- Inc. 8,730 387 Energizer Holdings, 6,756 McDermott Inc.(2)(10) 4,690 294 --------- International, Estee Lauder Cos., Inc.(2)(10) 14,180 382 Inc. (The) HEALTH CARE--12.7% Navistar International Class A(10) 3,440 223 Alexion Corp.(2) 16,100 720 Imperial Tobacco Group Pharmaceuticals, Old Dominion Freight plc 16,740 511 Inc.(2)(10) 5,800 315 Line, Inc.(2)(10) 15,920 532 Kao Corp. 19,000 482 Amedisys, Inc.(2)(10) 11,050 610 Schneider Electric SA 4,220 495 Kirin Brewery Co., AmerisourceBergen Snap-On, Inc.(10) 5,360 232 Ltd. 30,000 443 Corp.(10) 7,130 206 Steelcase, Inc. Kraft Foods, Inc. Amgen, Inc.(2)(10) 3,210 192 Class A(10) 68,530 443 Class A 11,260 340 Amylin Teledyne Technologies, Kroger Co. (The)(10) 35,370 766 Pharmaceuticals, Inc.(2)(10) 4,727 195 Metro AG 12,150 721 Inc.(2) 6,020 135 Timken Co. (The)(10) 25,760 773 Molson Coors Brewing Celgene Corp.(2)(10) 2,700 167 TNT N.V. 17,690 507 Co. Class B 6,990 294 CIGNA Corp.(10) 3,920 143 Tyco International Nestle S.A. Registered Cooper Companies, Inc. 16,900 657 Ltd.(10) 9,640 369 Shares 15,500 794 Covidien plc(10) 19,700 991 --------- PepsiCo, Inc.(10) 20,840 1,379 Dendreon Corp.(2) 8,430 307 11,585 Philip Morris Emergency Medical --------- International, Services Corp. Inc.(10) 7,900 412 Class A(2)(10) 1,380 78 INFORMATION TECHNOLOGY--15.6% Unilever N.V. 19,220 581 Emergent Biosolutions, Akamai Technologies, Whole Foods Market, Inc.(2)(10) 29,090 488 Inc.(2) 9,210 289 Inc.(2)(10) 31,422 1,136 Express Scripts, Amphenol Corp. --------- Inc.(2) 1,910 194 Class A(10) 11,300 477 11,337 Genzyme Corp.(2) 3,640 189 AOL, Inc.(2)(10) 11,267 285 --------- Hologic, Inc.(2) 27,240 505 Hospira, Inc.(2)(10) 12,870 729 Human Genome Sciences, Inc.(2)(10) 7,250 219 Incyte Corp., Ltd.(2) 17,260 241 InterMune, Inc.(2) 5,030 224 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 31
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- INFORMATION TECHNOLOGY--CONTINUED UTILITIES--3.0% CONSUMER DISCRETIONARY--CONTINUED AU Optronics Corp. Ameren Corp. 24,680 $ 643 O'Reilly Automotive, Sponsored ADR 36,560 $ 414 Companhia Paranaense Inc. (22,770)$ (950) Broadcom Corp. de Energia Panera Bread Co. Class A(10) 14,020 465 Sponsored ADR(10) 16,460 337 Class A (16,740) (1,280) Cybersource Great Plains Energy, Penney (J.C.) Co., Corp.(2)(10) 2,610 46 Inc.(10) 39,970 742 Inc. (40,070) (1,289) Dolby Laboratories, PNM Resources, Polo Ralph Lauren Inc. Class A(2) 5,240 307 Inc.(10) 51,370 644 Corp. (7,850) (668) EMC Corp.(2) 53,680 968 Portland General Ross Stores, Inc. (18,680) (999) Emulex Corp.(2)(10) 33,740 448 Electric Co.(10) 25,780 498 Starwood Hotels & Equinix, Inc.(2)(10) 5,620 547 -------- Resorts Worldwide, Fujitsu Ltd. 112,570 737 2,864 Inc. (17,500) (816) Google, Inc. ----------------------------------------- Thor Industries, Inc. (27,880) (842) Class A(2) 1,000 567 TOTAL COMMON STOCKS Tim Hortons, Inc. (20,560) (670) Hewlett-Packard (IDENTIFIED COST $74,289) 91,121 Urban Outfitters, Inc. (32,790) (1,247) Co.(10) 5,700 303 ----------------------------------------- Woolworths Holdings Hitachi Ltd.(2) 131,000 489 Ltd. GDR (10,650) (327) Informatica TOTAL LONG-TERM INVESTMENTS--95.4% --------- Corp.(2)(10) 27,200 731 (IDENTIFIED COST $74,289) 91,121 (20,273) LSI Corp.(2)(10) 37,560 230 ----------------------------------------- --------- Maxim Integrated Products, Inc.(10) 29,860 579 SHORT-TERM INVESTMENTS--2.8% CONSUMER STAPLES--(12.4)% Motorola, Inc.(2)(10) 133,990 941 MONEY MARKET MUTUAL FUNDS--2.8% Asahi Breweries Ltd. (25,800) (484) Oracle Corp. 26,630 684 BlackRock Liquidity Avon Products, Inc. (22,880) (775) QUALCOMM, Inc. 5,110 215 Funds Brown-Forman Corp. Quest Software, TempFund Class B (8,515) (506) Inc.(2)(10) 18,250 325 Portfolio - Carrefour SA (14,470) (697) Research In Motion Institutional Coca-Cola Co. (The) (8,620) (474) Ltd.(2)(10) 15,230 1,126 Shares Constellation Brands, Rovi Corp.(2)(10) 15,110 561 (seven-day Inc. Class A (31,690) (521) Siliconware Precision effective Flowers Foods, Inc. (65,040) (1,609) Industries Co. yield 0.119%) 2,665,149 2,665 General Mills, Inc. (6,230) (441) Sponsored ADR 72,000 433 ----------------------------------------- Green Mountain Coffee, Sybase, Inc.(2)(10) 28,020 1,306 Inc. (15,890) (1,539) Synopsys, Inc.(2) 19,690 441 TOTAL SHORT-TERM INVESTMENTS Hain Celestial Group, Teradata Corp.(2)(10) 11,643 336 (IDENTIFIED COST $2,665) 2,665 Inc. (The) (36,310) (630) Tyco Electronics ----------------------------------------- Heinz (H.J.) Co. (10,610) (484) Ltd.(10) 22,970 631 Hormel Foods Corp. (10,920) (459) --------- TOTAL INVESTMENTS--98.2% L'Oreal SA (6,250) (657) 14,881 (IDENTIFIED COST $76,954) 93,786(1) Lindt & Spruengli AG (310) (734) --------- SECURITIES SOLD SHORT--(96.5)% Pernod-Ricard SA (7,497) (637) (PROCEEDS ($83,170)) (92,181) SABMiller plc (8,570) (251) MATERIALS--3.5% Other assets and Shiseido Co., Ltd. (21,100) (458) Atlas Iron Ltd.(2) 134,240 302 liabilities, net--98.3% 93,910 Smucker (J.M.) Impala Platinum --------- Co. (The) (7,636) (460) Holdings Ltd. NET ASSETS--100.0% 95,515 --------- Sponsored ADR(10) 10,800 315 ========= (11,816) Kaneka Corp. 66,000 428 --------- Packaging Corp. of SECURITIES SOLD SHORT--96.5% America(10) 42,940 1,057 ENERGY--(4.9)% Pactiv Corp.(2) 28,770 724 COMMON STOCKS SOLD SHORT--(96.5)% AMEC plc (39,950) (484) Steel Dynamics, Inc. 14,390 251 Baker Hughes, Inc. (20,330) (952) Tokyo Ohka Kogyo Co., CONSUMER DISCRETIONARY--(21.2)% Berry Petroleum Co. Ltd. 17,090 318 Advance Auto Parts, Class A (22,410) (631) --------- Inc. (22,310) (935) Cenovus Energy, Inc. (10,980) (288) 3,395 Compass Group plc (35,370) (282) Comstock Resources, --------- Crew (J.) Group, Inc. (20,880) (958) Inc. (4,600) (146) Dongfeng Motor Group Devon Energy Corp. (3,680) (237) TELECOMMUNICATION SERVICES--3.1% Co., Ltd. (462,000) (751) Exxon Mobil Corp. (3,550) (238) AT&T, Inc. 12,730 329 DreamWorks Animation Goodrich Petroleum Frontier SKG, Inc. Class A (14,060) (554) Corp. (20,790) (325) Communications Family Dollar Stores, Oceaneering Corp. 104,360 776 Inc. (39,190) (1,435) International, Inc. (13,070) (830) Leap Wireless Garmin Ltd. (17,010) (655) PetroChina Co., International, Genuine Parts Co. (17,040) (720) Ltd. ADR (2,820) (331) Inc.(2)(10) 15,100 247 Grupo Televisa SA Range Resources Corp. (5,100) (239) MTN Group Ltd. Sponsored ADR (24,420) (513) --------- Sponsored ADR 29,420 455 Hermes International (4,190) (582) (4,701) Tele Norte Leste Husqvarna AB (107,260) (780) --------- Participacoes SA ADR 24,820 438 Intercontinental Telefonica Moviles Hotels Group plc (55,240) (865) FINANCIALS--(7.8)% S.A.(6)(8)(10) 1,400 0 Li & Fung Ltd. (60,000) (295) BB&T Corp. (14,900) (483) Turkcell Iletisim LKQ Corp. (42,729) (867) FirstMerit Corp. (18,150) (391) Hizmetleri A.S. ADR 18,020 271 Lululemon Athletica, Hannover Vivo Participacoes Inc. (23,920) (993) Rueckversicherung SA ADR(10) 18,290 496 AG Registered --------- Shares (8,480) (419) 3,012 MSCI, Inc. Class A (31,210) (1,127) --------- People's United Financial, Inc. (60,930) (953) For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 32
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE --------- --------- --------- --------- --------- --------- FINANCIALS--CONTINUED INFORMATION TECHNOLOGY--(13.4)% UTILITIES--(3.0)% Prosperity Bancshares, Adobe Systems, Inc. (17,920) $ (634) Consolidated Edison, Inc. (38,200) $ (1,566) Advanced Semiconductor Inc. (15,000) $ (668) Trustmark Corp. (13,540) (331) Engineering, Inc. Dominion Resources, Valley National ADR (105,950) (480) Inc. (17,040) (700) Bancorp (53,760) (826) Amdocs Ltd. (7,190) (217) FPL Group, Inc. (9,350) (452) Westamerica Bancorp (23,080) (1,330) ANSYS, Inc. (9,950) (429) Huaneng Power -------- Automatic Data International, Inc. (7,426) Processing, Inc. (4,870) (217) Sponsored ADR (4,890) (114) -------- Corning, Inc. (34,150) (690) OGE Energy Corp. (18,230) (710) Intel Corp. (28,040) (624) Tractebel Energia SA HEALTH CARE--(13.0)% LG Display Co., Ltd. Sponsored ADR (18,960) (211) AMAG Pharmaceuticals, ADR (24,970) (442) --------- Inc. (6,070) (212) Linear Technology (2,855) AstraZeneca plc Corp. (21,250) (601) ----------------------------------------- Sponsored ADR (25,290) (1,131) McAfee, Inc. (14,230) (571) TOTAL COMMON STOCKS SOLD SHORT--(96.5)% Auxilium National Semiconductor (PROCEEDS ($83,170)) (92,181) Pharmaceuticals, Corp. (38,770) (560) ----------------------------------------- Inc. (9,230) (288) Nintendo Co., Ltd. (1,500) (502) TOTAL SECURITIES SOLD SHORT--(96.5)% Bard (C.R.), Inc. (6,420) (556) Nokia Oyj Sponsored (PROCEEDS ($83,170)) (92,181)(1) Becton, Dickinson & Co. (5,340) (420) ADR (21,860) (340) ----------------------------------------- CareFusion Corp. (18,670) (494) Palm, Inc. (104,990) (395) Charles River QLogic Corp. (43,160) (876) ABBREVIATION: Laboratories Salesforce.com, Inc. (12,710) (946) International, Inc. (8,470) (333) SAP AG Sponsored ADR (25,870) (1,246) ADR American Depositary Receipt Covance, Inc. (11,100) (681) Telefonaktiebolaget LM Coventry Health Care, Ericsson Class B (46,460) (490) COUNTRY WEIGHTINGS - LONG as of 3/31/10+ Inc. (13,040) (322) Telefonaktiebolaget LM ------------------------------------------ CSL Ltd. (14,400) (481) Ericsson Sponsored United States (includes short-term DENTSPLY ADR (107,320) (1,119) investments) 73% International, Inc. (6,810) (237) Texas Instruments, Japan 4 Eisai Co., Ltd. (17,350) (619) Inc. (19,830) (485) United Kingdom 3 Eli Lilly & Co. (8,110) (294) Western Digital Corp. (8,100) (316) Canada 2 Gen-Probe, Inc. (20,300) (1,015) Yahoo!, Inc. (37,510) (620) France 2 Haemonetics Corp. (8,390) (480) --------- Sweden 2 Healthways, Inc. (30,000) (482) (12,800) Switzerland 2 Intuitive Surgical, --------- Other 12 Inc. (1,940) (675) ------------------------------------------ Invacare Corp. (21,660) (575) MATERIALS--(5.0)% Total 100% Landauer, Inc. (12,050) (786) Alcoa, Inc. (52,440) (747) ------------------------------------------ Lundbeck (H) A/S (34,080) (642) Aluminum Corp. of Owens & Minor, Inc. (5,270) (245) China Ltd. ADR (13,100) (337) COUNTRY WEIGHTINGS - SHORT as of 3/31/10+ ResMed, Inc. (8,770) (558) Anglo Platinum Ltd. ------------------------------------------ Techne Corp. (8,665) (552) ADR (3,900) (400) United States 73% VCA Antech, Inc. (10,980) (308) NewMarket Corp. (6,960) (717) United Kingdom 5 -------- OJI Paper Co., Ltd. (88,980) (390) Japan 4 (12,386) Owens-Illinois, Inc. (7,230) (257) China 3 -------- OZ Minerals Ltd. (267,320) (281) France 3 Sensient Technologies Germany 2 INDUSTRIALS--(12.4)% Corp. (35,890) (1,043) Sweden 2 Baldor Electric Co. (62,630) (2,342) Sigma-Aldrich Corp. (2,790) (150) Other 8 Cobham plc (120,640) (471) Toray Industries, Inc. (80,370) (469) ------------------------------------------ Donaldson Co., Inc. (22,220) (1,003) --------- Total 100% Dongfang Electric (4,791) ------------------------------------------ Corp., Ltd. (73,600) (419) --------- + % of total investments as of March 31, First Solar, Inc. (8,133) (998) 2010 GATX Corp. (29,290) (839) TELECOMMUNICATION SERVICES--(3.4)% ------------------------------------------ Hitachi Construction China Mobile Ltd. Machinery Co., Ltd. (18,000) (425) Sponsored ADR (11,240) (541) Hunt (J.B.) Transport General Communication, Services, Inc. (23,850) (856) Inc. Class A (52,400) (302) Legrand SA (15,050) (475) Indosat Tbk PT ADR (14,740) (449) Regal-Beloit Corp. (12,280) (730) Mobile TeleSystems Rolls-Royce Group plc (84,346) (762) OJSC Sponsored ADR (5,520) (306) Stericycle, Inc. (4,080) (222) Telefonos de Mexico Trinity Industries, S.A.B. de C.V. ADR Inc. (52,120) (1,040) Series L ADR (37,150) (580) Wabtec Corp. (22,420) (944) tw telecom, Inc. (40,360) (733) Watsco, Inc. (6,380) (363) Verizon -------- Communications, (11,889) Inc. (10,740) (333) -------- --------- (3,244) --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 33
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 3 - Total Value Level 1 - Significant at Quoted Unobservable ASSETS TABLE March 31, 2010 Prices Inputs -------------- --------- ------------ Equity Securities: Common Stocks $ 91,121 $ 91,121 $--(1) Short-Term Investments 2,665 2,665 -- -------- -------- --- Total Investments $ 93,786 $ 93,786 $--(1) ======== ======== === LIABILITIES TABLE Equity Securities: Common Stocks Sold Short $(92,181) $(92,181) $-- -------- -------- --- Total Liabilities $(92,181) $(92,181) $-- ======== ======== === 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 34
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) (reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- MUNICIPAL BONDS--0.3% Republic of NON-AGENCY--CONTINUED Poland GS Mortgage Securities MICHIGAN--0.1% Series 0414, Corp. II Tobacco 5.750%, 07-GG10, A4 Settlement 4/25/14 2,300 PLN $ 828 5.805%, 8/10/45 (3) $ 915 $ 848 Finance 6.375%, JPMorgan Chase Authority 7/15/19 $ 285 312 Commercial Taxable Series Republic of South Mortgage Securities 06-A, Africa Corp. 7.309%, 6/1/34 $ 165 $ 132 Series R-201 05-LDP5, AM --------- 8.750%, 5.222%, 12/15/44(3) 950 886 SOUTH DAKOTA--0.1% 12/21/14 10,535 ZAR 1,487 06-LDP7, A4 Educational Republic of 5.875%, 4/15/45(3) 1,000 1,032 Enhancement Turkey 06-LDP9, A3 Funding Corp. 0.000%, 2/2/11 1,860 TRY 1,149 5.336%, 5/15/47 700 683 Taxable 6.750%, 07-LD12, A4 Series 02-A, 5/30/40 750 741 5.882%, 2/15/51(3) 750 733 6.720%, 6/1/25 218 192 Republic of Lehman Brothers - UBS --------- Ukraine Commercial Mortgage VIRGINIA--0.1% RegS 7.650%, Trust Tobacco 6/11/13(5) 500 511 07-C2, A3 Settlement RegS 6.580%, 5.430%, 2/15/40 1,100 1,059 Financing 11/21/16(5) 360 347 07-C2, H 144A Corp. 144A 6.580%, 5.990%, 2/15/40(3)(4) 850 92 Taxable Series 11/21/16(4) 250 239 05-C3, AM 07-A1, Russian 4.794%, 7/15/40 350 323 6.706%, 6/1/46 345 251 Federation 07-C6, A4 - ------------------------------------------ RegS 5.858%, 7/15/40(3) 700 688 TOTAL MUNICIPAL BONDS 7.500%, 07-C7, A3 (IDENTIFIED COST $695) 575 3/31/30 5.866%, 9/15/45(3) 600 591 - ------------------------------------------ (3)(5) 138 159 Lehman Brothers FOREIGN GOVERNMENT SECURITIES--13.1% ------------------------------------------ Commercial Conduit Bolivarian TOTAL FOREIGN GOVERNMENT SECURITIES Mortgage Trust Republic of (IDENTIFIED COST $24,759) 27,846 07-C3, A4 Venezuela ------------------------------------------ 5.950%, 7/15/44 (3) 500 483 8.500%, MORTGAGE-BACKED SECURITIES--12.5% Merrill Lynch Mortgage 10/8/14 1,210 1,059 Trust 06-C1, AM 9.250%, AGENCY--0.6% 5.656%, 5/12/39 (3) 715 620 9/15/27 1,035 815 FNMA 4.500%, 2/1/40 1,245 1,249 Merrill 9.375%, --------- Lynch-Countrywide 1/13/34 950 701 NON-AGENCY--11.9% Commercial Mortgage Commonwealth of American Tower Trust 06-4, A3 Australia Trust 5.172%, 12/12/49 (3) 650 629 Series 121, 07-1A, C 144A Morgan Stanley Capital I 5.250%, 5.615%, 05-HQ5, A3 8/15/10 2,897 AUD 2,667 4/15/37 (4) 750 789 5.007%, 1/14/42 200 206 Commonwealth of Bear Stearns 06-IQ12, A4 Canada Commercial 5.332%, 12/15/43 1,300 1,307 2.750%, Mortgage 07-IQ14, A4 12/1/10 2,339 CND 2,335 Securities 5.692%, 4/15/49(3) 820 752 Commonwealth of 06-PW12, A4 Residential Accredit New Zealand 5.719%, Loans, Inc. Series 1111, 9/11/38(3) 790 825 02-QS12, B1 6.000%, 06-PW14, A4 6.250%, 9/25/32 329 62 11/15/11 1,173 NZD 862 5.201%, Salomon Brothers Federative 12/11/38 350 350 Mortgage Securities Republic of 05-PW10, A4 VII, Inc. 01-C1, D Brazil 5.405%, 6.831%, 12/18/35 (3) 650 639 12.500%, 12/11/40(3) 950 973 Timberstar Trust 06-1A, 1/5/16 815 BRL 524 05-T20, A4A C 144A 12.500%, 5.150%, 5.884%, 10/15/36 (4) 1,000 990 1/5/22 1,125 BRL 742 10/12/42(3) 600 620 Wachovia Bank Commercial 10.250%, 07-PW18, A4 Mortgage Trust 1/10/28 2,895 BRL 1,652 5.700%, 04-C12, A4 Kingdom of Norway 6/11/50 750 724 5.239%, 7/15/41(3) 450 463 6.000%, 07-PW18, AM 07-C30, A5 5/16/11 6,580 NOK 1,152 6.084%, 5.342%, 12/15/43 410 356 5.000%, 6/11/50(3) 725 623 06-C29, A4 5/15/15 1,645 NOK 301 Citigroup- 5.308%, 11/15/48 1,000 993 Kingdom of Sweden Deutsche Bank 07-C33, A4 Series 1045, Commercial 5.902%, 2/15/51(3) 550 513 5.250%, Mortgage Trust 3/15/11 2,800 SEK 405 05-CD1, AM Republic of 5.225%, Argentina 7/15/44 610 553 PIK Interest 07-CD4, A4 Capitalization 5.322%, 8.280%, 12/11/49 475 460 12/31/33 4,467 3,372 Credit Suisse Series GDP First Boston 3.169%, Mortgage 12/15/35(3) 3,200 256 Securities Republic of Corp. Colombia 04-C5, A3 12.000%, 4.499%, 10/22/15 925,000 COP 588 11/15/37 825 835 Republic of Credit Suisse Indonesia Mortgage Series FR-23, Capital 11.000%, Certificates 12/15/12 6,200,000 IDR 737 06-C1, A3 Series FR-30, 5.549%, 10.750%, 2/15/39 (3) 650 674 5/15/16 7,000,000 IDR 856 GE Capital RegS Commercial 6.625%, Mortgage 2/17/37(5) 765 783 Corp. Republic of Korea 03-C1, C Series 1112, 4.975%, 4.750%, 1/10/38 (3) 595 592 12/10/11 1,902,500 KRW 1,719 GMAC Commercial Republic of Mortgage Lithuania 144A Securities, 7.375%, Inc. 04-C2, A3 2/11/20 (4) 500 547 5.134%, 8/10/38 450 461 Greenwich Capital Commercial Funding Corp. 04-GG1, A7 5.317%, 6/10/36 (3) 550 578 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 35
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- NON-AGENCY--CONTINUED CONSUMER DISCRETIONARY--CONTINUED CONSUMER STAPLES--2.2% Washington Mutual Ford Motor Credit Co. BFF International Ltd. Mortgage Pass Through LLC 144A Certificates 8.000%, 6/1/14 $ 400 $ 421 7.250%, 1/28/20 (4) $ 150 $ 153 05-AR10, 1A2 Garda World Security Bunge Limited Finance 4.791%, 9/25/35 $ 550 $ 455 Corp. 144A Corp. Wells Fargo 9.750%, 3/15/17 (4) 450 463 8.500%, 6/15/19 250 291 Mortgage-Backed Harrah's Operating Co., Constellation Brands, Securities Trust Inc. Inc. 06-AR10, 5A3 11.250%, 6/1/17 425 460 8.375%, 12/15/14 165 179 5.497%, 7/25/36 (3) 844 668 Hyatt Hotels Corp. 144A Great Atlantic & Pacific --------- 5.750%, 8/15/15 (4) 100 102 Tea Co. 144A 25,128 International Game 11.375%, 8/1/15 (4) 250 247 - ------------------------------------------ Technology Reynolds American, Inc. TOTAL MORTGAGE-BACKED SECURITIES 7.500%, 6/15/19 580 657 7.300%, 7/15/15 500 551 (IDENTIFIED COST $24,942) 26,377 Landry's Restaurants, 7.625%, 6/1/16 375 421 - ------------------------------------------ Inc. 144A Smithfield Foods, Inc. ASSET-BACKED SECURITIES--1.9% 11.625%, 12/1/15 (4) 334 361 144A Bombardier Capital Libbey Glass, Inc. 144A 10.000%, 7/15/14 (4) 600 672 Mortgage 10.000%, 2/15/15 (4) 50 53 Tyson Foods, Inc. Securitization Corp. McJunkin Red Man Corp. 7.850%, 4/1/16 650 702 99-A, A3 144A UST, Inc. 5.980%, 1/15/18 746 643 9.500%, 12/15/16 (4) 360 369 5.750%, 3/1/18 500 494 Carmax Auto Owner Trust Mediacom LLC/Mediacom Yankee Acquisition Corp. 07-2, B Capital Corp. 144A Series B, 8.500%, 5.370%, 3/15/13 350 362 9.125%, 8/15/19 (4) 750 777 2/15/15 400 414 Conseco Finance MGM MIRAGE Series B, 9.750%, Securitizations 7.625%, 1/15/17 400 335 2/15/17 535 555 Corp. 01-3, A4 144A 11.125%, ---------- 6.910%, 5/1/33 700 682 11/15/17(4) 225 254 4,679 Dunkin Securitization Mobile Mini, Inc. ---------- 06-1, M1 144A 6.875%, 5/1/15 350 328 ENERGY--6.3% 8.285%, 6/20/31 (4) 690 621 NCL Corp., Ltd. 144A Adaro Indonesia PT 144A FMAC Loan Receivables 11.750%, 11/15/16 (4) 500 546 7.625%, 10/22/19 (4) 435 454 Trust 98-CA, A2 144A Nebraska Book Co., Inc. Antero Resources Finance 6.660%, 9/15/20 (4) 17 17 10.000%, 12/1/11 500 519 Corp. 144A Harley-Davidson Pokagon Gaming Authority 9.375%, 12/1/17 (4) 250 259 Motorcycle 144A Coffeyville Resources Trust 07-2, C 10.375%, 6/15/14 (4) 117 123 LLC 144A 5.410%, 8/15/15 565 590 QVC, Inc. 144A 10.875%, 4/1/17 (4) 675 673 IHOP Franchising LLC 7.500%, 10/1/19 (4) 520 533 Denbury Resources, Inc. 07-3A 144A River Rock Entertainment 7.500%, 12/15/15 510 523 7.059%, 12/20/37 (4) 800 764 Authority (The) Expro Finance Luxembourg IndyMac Manufactured 9.750%, 11/1/11 250 232 SCA 144A Housing Contract Royal Caribbean Cruises 8.500%, 12/15/16 (4) 750 761 98-1, A3 Ltd. Gazprom International SA 6.370%, 9/25/28 550 379 6.875%, 12/1/13 1,250 1,269 144A - ------------------------------------------ Scientific Games Corp. 7.201%, 2/1/20 (4) 638 678 TOTAL ASSET-BACKED SECURITIES 144A Gazprom OAO (Gaz Capital (IDENTIFIED COST $4,215) 4,058 7.875%, 6/15/16 (4) 55 56 SA) - ------------------------------------------ Scientific Games 144A 6.212%, CORPORATE BONDS--56.3% International, Inc. 11/22/16(4) 935 963 9.250%, 6/15/19 170 181 144A 8.146%, CONSUMER DISCRETIONARY--6.5% Seminole Hard Rock 4/11/18(4) 100 113 Affinia Group, Inc. 144A Entertainment, 144A 6.510%, 10.750%, 8/15/16 (4) 240 263 Inc./Seminole Hard 3/7/22(4) 315 313 American Axle & Rock International Helix Energy Solutions Manufacturing LLC 144A Group, Inc. 144A Holdings, Inc. 144A 2.757%, 9.500%, 1/15/16 (4) 200 207 9.250%, 1/15/17 (4) 350 375 3/15/14 (3)(4) 75 67 Hercules Offshore, Inc. Ameristar Casinos, Inc. Seneca Gaming Corp. 144A 9.250%, 6/1/14 60 63 Series B 10.500%, 10/15/17 (4) 225 226 Arcos Dorados B.V. 144A 7.250%, 5/1/12 19 19 Holly Corp. 144A 7.500%, 10/1/19 (4) 375 388 Starwood Hotels & 9.875%, 6/15/17 (4) 88 91 Blockbuster, Inc. 144A Resorts Worldwide, KazMunaiGaz Finance 11.750%, 10/1/14 (4) 759 564 Inc. Sub BV 144A DigitalGlobe, Inc. 144A 7.150%, 12/1/19 275 280 9.125%, 7/2/18 (4) 400 485 10.500%, 5/1/14 (4) 65 70 Toys R US Property Co., OPTI Canada, Inc. DIRECTV Holdings LLC/ LLC 144A 7.875%, 12/15/14 600 564 DIRECTV Financing Co., 8.500%, 12/1/17 (4) 600 626 Petrohawk Energy Corp. Inc. TRW Automotive, Inc. 10.500%, 8/1/14 475 527 6.375%, 6/15/15 600 623 144A Petroleos de Venezuela DuPont Fabros Technology 8.875%, 12/1/17 (4) 140 146 SA LP 144A Videotron Ltee 5.250%, 4/12/17 950 587 8.500%, 12/15/17 (4) 700 725 6.375%, 12/15/15 180 182 Petroleos Mexicanos 144A Eastman Kodak Co. 9.125%, 4/15/18 82 92 6.000%, 3/5/20 (4) 270 277 7.250%, 11/15/13 72 69 Wyndham Worldwide Corp. Petropower I Funding Echostar DBS Corp. 7.375%, 3/1/20 590 599 Trust 144A 6.625%, 10/1/14 600 606 --------- 7.360%, 2/15/14 (4) 457 451 13,796 --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 36
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) (reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- ENERGY--CONTINUED FINANCIALS--CONTINUED FINANCIALS--CONTINUED Pioneer Drilling Co. Bear Stearns Cos., Inc. Host Hotels & Resorts LP 144A LLC (The) 144A 9.875%, 3/15/18 (4) $ 110 $ 109 7.250%, 2/1/18 $ 700 $ 809 9.000%, 5/15/17 (4) $ 125 $ 136 Pioneer Natural Blackstone Holdings Hyundai Capital Resources Co. Finance Co. LLC 144A Services, Inc. 144A 7.500%, 1/15/20 575 594 6.625%, 8/15/19 (4) 385 387 6.000%, 5/5/15 (4) 325 341 Pride International, Brandywine Operating ICICI Bank Ltd. 144A Inc. Partnership LP 6.375%, 8.500%, 6/15/19 330 373 7.500%, 5/15/15 500 538 4/30/22 (3)(4) 375 353 SEACOR Holdings, Inc. Capital One Capital VI International Lease 7.375%, 10/1/19 600 618 8.875%, 5/15/40 1,000 1,090 Finance Corp. Swift Energy Co. Cemex Finance LLC 144A 4.750%, 1/13/12 600 586 8.875%, 1/15/20 500 522 9.500%, 12/14/16 (4) 245 255 5.300%, 5/1/12 625 607 TengizChevroil Finance Chubb Corp. Jefferies Group, Inc. Co. S.A.R.L. 144A 6.375%, 3/29/67(3) 680 684 8.500%, 7/15/19 500 555 6.124%, 11/15/14 (4) 715 762 CIT Group, Inc. JPMorgan Chase & Co. Tesoro Corp. 7.000%, 5/1/13 600 588 6.125%, 6/27/17 175 188 6.500%, 6/1/17 480 444 Citigroup, Inc. 6.300%, 4/23/19 350 386 Valero Energy Corp. 5.000%, 9/15/14 365 364 Series 1, 4.500%, 2/1/15 100 100 4.875%, 5/7/15 1,100 1,086 7.900%, 12/31/49(3) 247 263 Venoco, Inc. Discover Bank JPMorgan Chase Capital 11.500%, 10/1/17 600 631 8.700%, 11/18/19 250 274 XXVII Weatherford Equity One, Inc. 7.000%, 11/1/39 500 510 International Ltd. 6.250%, 12/15/14 375 384 Kazkommerts 9.625%, 3/1/19 318 402 Fibria Overseas Finance International BV Western Refining, Inc. Ltd. 144A RegS 144A 9.250%, 10/30/19 (4) 150 172 8.500%, 4/16/13(5) 500 488 11.250%, 6/15/17 (4) 600 543 Fifth Third Bancorp 8.000%, 11/3/15(5) 250 236 --------- 6.250%, 5/1/13 200 215 KeyBank NA 13,250 4.500%, 6/1/18 800 734 5.800%, 7/1/14 250 256 --------- First Niagara Financial 4.950%, 9/15/15 500 493 FINANCIALS--24.3% Group, Inc. Kimco Realty Corp. ABH Financial Ltd. 6.750%, 3/19/20 500 505 6.875%, 10/1/19 550 580 (Alfa Markets Ltd.) First Tennessee Bank Kookmin Bank 144A 144A N.A. 7.250%, 5/14/14 (4) 300 335 8.200%, 6/25/12 (4) 150 159 4.625%, 5/15/13 450 438 LBG Capital No.1 plc Abu Dhabi Commercial 5.050%, 1/15/15 725 681 144A Bank 144A FMR LLC 144A 7.875%, 11/1/20 (4) 600 540 4.750%, 10/8/14 (4) 560 541 5.350%, 11/15/21 (4) 750 722 Lincoln National Corp. AFLAC, Inc. Ford Motor Credit Co. 8.750%, 7/1/19 300 367 8.500%, 5/15/19 300 361 LLC 6.050%, 4/20/67(3) 300 253 Agile Property Holdings 7.875%, 6/15/10 385 389 Lukoil International Ltd. 144A 9.875%, 8/10/11 345 366 Finance 10.000%, 11/14/16 (4) 240 258 7.500%, 8/1/12 100 104 BV 144A Alfa Invest Ltd. 144A 8.700%, 10/1/14 125 136 7.250%, 11/5/19 (4) 525 551 9.250%, 6/24/13 (4) 350 377 8.125%, 1/15/20 650 683 Macquarie Group Ltd. Allstate Corp. Genworth Financial, Inc. 144A 6.125%, 5/15/37(3) 680 644 5.750%, 6/15/14 500 511 7.625%, 8/13/19 (4) 500 558 American General 6.515%, 5/22/18 700 690 MetLife, Inc. Finance Corp. Glen Meadow Pass-Through 6.750%, 6/1/16 72 81 5.400%, 12/1/15 750 647 Trust 144A Morgan Stanley Amsouth Bank NA 6.505%, 6.000%, 5/13/14 165 178 4.850%, 4/1/13 825 806 2/12/67 (3)(4) 770 656 4.200%, 11/20/14 280 281 Assurant, Inc. Glencore Funding LLC 144A 10.090%, 5.625%, 2/15/14 345 358 144A 5/3/17(4) 1,000 BRL 544 Atlantic Finance Ltd. 6.000%, 4/15/14 (4) 1,000 1,026 New Communications 144A GMAC LLC Holdings, Inc. 144A 8.750%, 5/27/14 (4) 450 473 7.250%, 3/2/11 633 647 7.875%, 4/15/15 (4) 325 336 BAC Capital Trust XI 6.875%, 9/15/11 253 258 OJSC AK Transneft 6.625%, 5/23/36 525 486 6.000%, 12/15/11 633 641 (TransCapitalInvest Banco do Brasil SA 144A Goldman Sachs Group, Ltd.) 144A 8.500%, 10/29/49 (4) 600 666 Inc. (The) 5.670%, 3/5/14 (4) 390 409 Banco Santander Brasil 5.950%, 1/18/18 300 315 Petroplus Finance Ltd. SA 144A 7.500%, 2/15/19 365 417 144A 4.500%, 4/6/15 (4) 350 349 5.375%, 3/15/20 550 545 6.750%, 5/1/14 (4) 375 339 Bank of America Corp. HBOs plc 144A Pinnacle Foods Finance 5.420%, 3/15/17 700 692 6.750%, 5/21/18 (4) 115 106 LLC/ Series K, Health Care REIT, Inc. Pinnacle Foods Finance 8.000%, 12/29/49(3) 375 383 5.875%, 5/15/15 1,000 1,049 Corp. 144A Barclays Bank plc 144A Hertz Corp. (The) 9.250%, 4/1/15 (4) 175 180 6.050%, 12/4/17 (4) 435 449 8.875%, 1/1/14 350 361 PNC Financial Services BBVA International 10.500%, 1/1/16 100 108 Group, Inc. Preferred 8.250%, 5/29/49(3) 350 362 SA Unipersonal PNC Funding Corp. 5.919%, 12/31/49(3) 375 312 5.625%, 2/1/17 300 310 Principal Financial Group, Inc. 8.875%, 5/15/19 850 1,021 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 37
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- FINANCIALS--CONTINUED HEALTH CARE--CONTINUED INFORMATION TECHNOLOGY--CONTINUED ProLogis Select Medical Corp. Jabil Circuit, Inc. 7.625%, 8/15/14 $ 500 $ 547 7.625%, 2/1/15 $ 425 $ 407 8.250%, 3/15/18 $ 600 $ 651 6.625%, 5/15/18 185 184 U.S. Oncology, Inc. National Semiconductor 6.875%, 3/15/20 400 395 9.125%, 8/15/17 300 315 Corp Prudential Financial, Valeant 6.600%, 6/15/17 400 435 Inc Pharmaceuticals Seagate Technology HDD 8.875%, 6/15/38(3) 450 505 International 144A Holdings, Inc. Realty Income Corp. 8.375%, 6/15/16 (4) 35 37 6.375%, 10/1/11 280 291 6.750%, 8/15/19 425 444 Viant Holdings, Inc. Sorenson Communications, Regions Financial 144A Inc. 144A Corp 10.125%, 10.500%, 2/1/15 (4) 500 485 7.750%, 11/10/14 200 210 7/15/17 (4) 295 295 SunGard Data Systems, Resona Bank Ltd. 144A --------- Inc 5.850%, 1,976 9.125%, 8/15/13 574 591 9/29/49 (3)(4) 750 708 --------- Xerox Corp. Royal Bank of Scotland INDUSTRIALS--3.6% 8.250%, 5/15/14 56 65 Group plc American Airlines, ---------- 6.400%, 10/21/19 370 370 Inc. 01-1, 3,788 Royal Bank of Scotland 6.977%, 5/23/21 714 593 ---------- plc (The) Continental Airlines, MATERIALS--7.1% 4.875%, 3/16/15 285 285 Inc. 98-1A, Allegheny Technologies, Russian Agricultural 6.648%, 9/15/17 354 355 Inc Bank OJSC Delta Air Lines, Inc. 9.375%, 6/1/19 590 686 (RSHB Capital SA) 00-A1, ArcelorMittal 144A 9.000%, 7.379%, 5/18/10 105 105 9.000%, 2/15/15 150 179 6/11/14(4) 100 115 DRS Technologies, Inc. 6.125%, 6/1/18 280 294 144A 6.299%, 6.625%, 2/1/16 500 480 Ball Corp. 5/15/17(4) 380 394 Esco Corp. 144A 7.125%, 9/1/16 1,475 1,575 SLM Corp. 8.625%, Catalyst Paper Corp. 5.450%, 4/25/11 300 305 12/15/13 (4) 600 606 7.375%, 3/1/14 750 525 5.375%, 5/15/14 200 189 General Cable Corp. Celulosa Arauco 8.450%, 6/15/18 1,050 1,062 7.125%, 4/1/17 500 498 7.250%, 7/29/19 350 376 Sovereign Bank General Maritime Corp. Commercial Metals Co. 8.750%, 5/30/18 400 449 144A 7.350%, 8/15/18 730 768 SunTrust Bank 12.000%, CRH America, Inc. 5.400%, 4/1/20 500 469 11/15/17 (4) 470 505 8.125%, 7/15/18 650 765 TNK-BP Finance SA Global Aviation Domtar Corp. 144A 7.500%, Holdings Ltd. 144A 5.375%, 12/1/13 388 397 3/13/13(4) 325 353 14.000%, 7.125%, 8/15/15 322 337 144A 7.250%, 8/15/13 (4) 800 817 Edgen Murray Corp. 144A 2/2/20(4) 100 104 Marquette 12.250%, 1/15/15 (4) 650 612 Universal City Transportation Co./ Georgia Gulf Corp. 144A Development Marquette 9.000%, 1/15/17 (4) 275 289 Partners Ltd. Transportation Georgia-Pacific LLC 144A 144A 8.875%, Finance Corp. 144A 7.125%, 1/15/17 (4) 875 914 11/15/15(4) 60 61 10.875%, Gerdau Holdings, Inc. 144A 10.875%, 1/15/17 (4) 125 128 144A 11/15/16(4) 200 210 Moog, Inc. 7.000%, 1/20/20 (4) 250 264 Unum Group 7.250%, 6/15/18 100 98 Hexion Finance Escrow 7.125%, 9/30/16 450 489 Noble Group Ltd. 144A LLC/ Hexion Escrow UOB Cayman Ltd. 144A 6.750%, 1/29/20 (4) 880 910 Corp. 144A 5.796%, Owens Corning, Inc. 8.875%, 2/1/18 (4) 600 594 12/29/49 (3)(4) 500 467 6.500%, 12/1/16 595 630 Ineos Group Holdings plc Wachovia Bank NA PharmaNet Development 144A 5.000%, 8/15/15 250 259 Group, Inc. 144A 8.500%, 2/15/16 (4) 1,550 1,287 WEA Finance LLC/WT 10.875%, 4/15/17 (4) 305 305 International Paper Co. Finance Australia Smiths Group plc 144A 9.375%, 5/15/19 508 635 144A 7.200%, 5/15/19 (4) 150 169 JonhsonDiversey 6.750%, 9/2/19 (4) 1,000 1,067 Teekay Corp. Holdings, Inc. Webster Financial 8.500%, 1/15/20 300 315 144A 8.250%, Corp United Rentals North 11/15/19 (4) 50 52 5.125%, 4/15/14 205 189 America, Inc. Nalco Co. Willis North America, 10.875%, 6/15/16 198 216 8.875%, 11/15/13 180 186 Inc. USG Corp. 144A Nova Chemicals Corp. 7.000%, 9/29/19 500 524 9.750%, 8/1/14 (4) 100 106 3.649%, 11/15/13(3) 1,000 948 Woori Bank 144A Voto-Votorantim Ltd. Owens-Brockway Glass 6.125%, 144A Container, Inc. 5/3/16 (3)(4) 1,000 1,019 6.750%, 4/5/21 (4) 750 744 7.375%, 5/15/16 475 501 XL Capital Ltd. --------- Plastipak Holdings, Inc. 5.250%, 9/15/14 350 362 7,580 144A Zions Bancorp --------- 8.500%, 12/15/15 (4) 500 511 7.750%, 9/23/14 225 227 INFORMATION TECHNOLOGY--1.8% Ryerson, Inc. --------- Broadridge Financial 12.000%, 11/1/15 600 633 51,480 Solutions, Inc. --------- 6.125%, 6/1/17 525 522 HEALTH CARE--0.9% Crown Castle Holdings DaVita, Inc. GS V LLC/ 7.250%, 3/15/15 525 538 Crown Castle GS III Psychiatric Solutions, Corp. 144A Inc. 7.750%, 5/1/17 (4) 400 436 Series 1, Freescale 7.750%, 7/15/15 375 384 Semiconductor, Inc. 10.125%, 12/15/16 350 312 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 38
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- MATERIALS--CONTINUED UTILITIES--CONTINUED CONSUMER DISCRETIONARY--CONTINUED Steel Dynamics, Inc. Suburban Propane Nielsen Finance 7.375%, 11/1/12 $ 225 $ 235 Partners LP/ LLC/Nielsen Vedanta Resources plc Suburban Energy Finance Co. 144A Finance Corp. Tranche 2.229%, 9.500%, 7/18/18 (4) 375 416 7.375%, 3/15/20 $ 180 $ 184 8/9/13 $ 352 $ 338 Verso Paper Holdings Texas Competitive Tranche B, 3.971%, LLC/ Verso Paper, Electric Holdings Co. 5/1/16 206 203 Inc. LLC Series A PTI Group, Inc. 144A 11.500%, 10.250%, 11/1/15 200 140 Tranche 7/1/14(4) 300 326 --------- 9.250%, 2/18/13 159 154 Series B, 11.375%, 3,205 Sinclair 8/1/16 750 658 ------------------------------------------ Telecommunication --------- TOTAL CORPORATE BONDS Group, Inc. 14,963 (IDENTIFIED COST $112,862) 119,219 Tranche B, --------- ------------------------------------------ 6.500%, 10/29/15 200 203 TELECOMMUNICATION SERVICES--2.1% CONVERTIBLE BONDS--0.1% Six Flags Theme Parks, Axtel SAB de C.V. 144A Inc. Tranche 9.000%, 9/22/19 (4) 200 205 MATERIALS--0.1% 3.750%, 6/15/15 450 447 Cincinnati Bell, Inc. Vale Capital Ltd. Totes Isotoner Corp. 8.250%, 10/15/17 180 183 Series RIO Cv. Tranche Clearwire Communications 5.500%, 6/15/10 4 228 6.252%, 1/6/14 500 290 LLC/ Clearwire ------------------------------------------ Univision Finance, Inc. 144A TOTAL CONVERTIBLE BONDS Communications, Inc. 12.000%, 12/1/15 (4) 200 205 (IDENTIFIED COST $200) 228 Tranche B, 2.540%, Frontier Communications ------------------------------------------ 9/29/14 1,085 970 Corp LOAN AGREEMENTS(3)--13.5% VWR Funding, Inc. 8.125%, 10/1/18 275 276 Tranche ITC Deltacom, Inc. 144A CONSUMER DISCRETIONARY--4.8% 2.748%, 6/29/14 309 291 10.500%, 4/1/16 (4) 400 400 AMF Bowling Worldwide, --------- Nextel Communications, Inc. Tranche B, 10,109 Inc. 2.730%, 5/17/13 485 434 --------- Series E 6.875%, Cengage Learning CONSUMER STAPLES--0.4% 10/31/13 175 172 Acquisitions, Inc. Revlon Consumer Products Series D 7.375%, Tranche Corp. Tranche 8/1/15 650 621 2.790%, 7/5/14 792 701 6.250%, 3/11/15 705 699 Qwest Corp. Ceridian Corp. Tranche Reynolds Group Holdings 8.375%, 5/1/16 200 225 3.249%, 11/8/14 937 844 Ltd. Tranche 6.500%, 6/1/17 215 224 Charter Communications 6.250%, 11/5/15 199 201 Telecom Italia Capital Operating LLC --------- SA Tranche B, 2.300%, 900 6.999%, 6/4/18 350 379 3/6/14 80 77 --------- 7.175%, 6/18/19 500 540 Tranche C, 3.550%, ENERGY--0.7% Virgin Media Finance plc 9/6/16 648 632 ATP Oil & Gas Corp. Series 1, Clear Channel Tranche B-2, 9.500%, 8/15/16 410 450 Communications, Inc. 12.250%, 1/15/11 76 77 Wind Acquisition Finance Tranche B, 3.879%, Tranche B-1, SA 144A 1/29/16 450 366 11.250%, 7/15/14 537 545 11.750%, 7/15/17 (4) 350 388 Ford Motor Co. Big West Oil LLC Tranche Windstream Corp. Tranche B-1, 9.500%, 4/30/15 250 254 7.000%, 3/15/19 250 234 3.260%, 12/15/13 363 352 Hercules Offshore, Inc. --------- Getty Images, Inc. Tranche B, 4,502 Tranche B, 6.580%, 7/11/13 500 489 --------- 6.250%, 7/2/15 435 438 Venoco, Inc. Tranche C, UTILITIES--1.5% Harrah's Operating Co., 4.250%, 5/20/14 225 215 Allegheny Energy Supply Inc. --------- Co. LLC 144A Tranche B-2, 1,580 8.250%, 4/15/12 (4) 145 160 3.249%, 1/28/15 346 300 --------- AmeriGas Partners LP Tranche B-4, FINANCIALS--0.2% 7.250%, 5/20/15 500 510 9.500%, 10/31/16 214 223 Agile Property Holdings Centrais Eletricas HHI Holdings LLC Tranche Ltd. Tranche Brasileiras SA 7.500%, 3/31/15 200 201 2.993%, 1/25/13 315 293 144A 6.875%, Intelsat Jackson Holding Universal City Tranche 7/30/19 (4) 100 109 Ltd. Tranche 6.500%, 11/30/19 75 76 Israel Electric Corp. 3.233%, 2/1/14 575 536 --------- Ltd. 144A Landry's Restaurant, 369 7.250%, 1/15/19 (4) 200 217 Inc. Tranche --------- Majapahit Holding BV 8.000%, 11/30/13 184 185 HEALTH CARE--0.7% 144A 7.250%, Las Vegas Sands LLC Ardent Health Services 6/28/17(4) 725 776 Tranche I-DD, LLC Tranche 144A 7.750%, 2.050%, 5/23/14 92 85 6.500%, 7/19/15 500 494 1/20/20(4) 200 218 Tranche B, Health Management Midwest Generation LLC 2.050%, 5/23/14 458 420 Associates, Inc. Series B Mediacom Illinois LLC Tranche B, 8.560%, 1/2/16 110 113 Tranche D, 2.040%, 2/28/14 182 177 Northeast Utilities 5.500%, 3/31/17 284 286 Psychiatric Solutions, 5.650%, 6/1/13 270 288 Neiman-Marcus Group, Inc. Tranche B, Sempra Energy Inc. (The) 2.153%, 7/1/12 173 171 6.000%, 10/15/39 500 490 Tranche 2.228%, RehabCare Group, Inc. 4/6/13 1,193 1,133 Tranche B, 6.000%, 11/24/15 214 216 Rotech Healthcare, Inc. PIK Interest Capitalization 6.000%, 9/26/11 300 281 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 39
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR VALUE VALUE VALUE VALUE SHARES VALUE ------- --------- ------- --------- --------- ---------- HEALTH CARE--CONTINUED INFORMATION TECHNOLOGY--CONTINUED PREFERRED STOCK--0.1% Select Medical Corp. Spansion, Inc. Tranche B-1, Tranche B, FINANCIALS--0.1% 4.017%, 8/22/14 $ 208 $ 204 7.750%, 2/9/15 $ 540 $ 546 FNMA Pfd. --------- Springboard Finance LLC 8.250%(2) 38,000 $ 48 1,543 Tranche B, 7.000%, GMAC, Inc. Series G Pfd. --------- 2/23/15 215 217 7.00% 144A(4) 321 245 INDUSTRIALS--1.8% --------- ------------------------------------------- Bucyrus International, 5,641 TOTAL PREFERRED STOCK Inc. Tranche C, --------- (IDENTIFIED COST $757) 293 4.500%, 2/19/16 125 127 MATERIALS--1.2% ------------------------------------------- Harland Clarke Holdings Anchor Glass Container COMMON STOCKS--0.0% Corp. Tranche B, Corp. Tranche 2.790%, 6/30/14 991 909 10.000%, 8/2/16 760 752 CONSUMER DISCRETIONARY--0.0% Hawker Beechcraft, Inc. Berry Plastics Group, Mark IV Industries(6) 117 4 Letter of Credit, Inc. Tranche C, ---------- 2.100%, 3/26/14 34 28 2.257%, 4/3/15 757 715 TELECOMMUNICATION SERVICES--0.0% Tranche 2.248%, Gentek Holding LLC AT&T Latin America Corp. 3/26/14 564 476 Tranche Class A(2)(6)(8) 137,550 0 Language Line Holdings 7.000%, 10/29/14 150 151 ------------------------------------------- LLC Tranche B, Lyondell Chemical Co. TOTAL COMMON STOCKS 5.500%, 11/4/15 299 301 Tranche (IDENTIFIED COST $606) 4 Protection One Alarm 5.799%, 6/3/10 250 260 ------------------------------------------- Monitoring, Inc. Nalco Co. Tranche B, EXCHANGE-TRADED FUNDS--0.5% Tranche B-2, 6.500%, 5/13/16 119 120 iShares FTSE/Xinhua 6.250%, 3/31/14 109 109 New Sunward Holding BV China 25 Index Fund 23,000 968 ServiceMaster Co. (The) Tranche B, ------------------------------------------- Tranche DD, 3.250%, 2/14/14 350 327 TOTAL EXCHANGE-TRADED FUNDS 2.750%, 7/24/14 98 94 Smurfit-Stone Container (IDENTIFIED COST $1,008) 968 Tranche B, Enterprise Tranche B, ------------------------------------------- 2.750%, 7/24/14 987 948 4.750%, 2/22/16 215 216 TOTAL LONG-TERM INVESTMENTS--98.3% Transaction Network Solutia, Inc. Tranche B, (IDENTIFIED COST $201,546) 208,220 Services, Inc. 4.750%, 3/17/17 130 131 ------------------------------------------- Tranche --------- SHORT-TERM INVESTMENTS--1.8% 6.000%, 11/18/15 448 451 2,672 Vertrue, Inc. Tranche --------- MONEY MARKET MUTUAL FUNDS--1.8% 3.300%, 8/16/14 200 158 TELECOMMUNICATION SERVICES--0.6% BlackRock Liquidity Zuffa LLC Tranche Level 3 Communications, Funds 7.500%, 6/19/15 211 214 Inc TempFund Portfolio --------- Tranche A, - Institutional 3,815 2.501%, 3/13/14 525 489 Shares (seven-day --------- Tranche B, effective INFORMATION TECHNOLOGY--2.7% 11.500%, 3/13/14 130 143 yield 0.119%) 3,814,502 3,815 Allen Systems Group, Inc. U.S. TelePacific Corp. ------------------------------------------- Tranche 8.500%, Tranche B, TOTAL SHORT-TERM INVESTMENTS 10/20/13 533 538 9.250%, 8/25/15 600 605 (IDENTIFIED COST $3,815) 3,815 Tranche 11.000%, --------- ------------------------------------------- 4/20/14 251 248 1,237 TOTAL INVESTMENTS--100.1% Avaya, Inc. Tranche B-1, --------- (IDENTIFIED COST $201,546) 212,035(1) 3.002%, 10/26/14 744 665 UTILITIES--0.4% Other Assets and Dresser, Inc. PIK NRG Energy, Inc. Liabilities--(0.1)% (190) Interest Letter of Credit ---------- Capitalization 0.190%, 2/1/13 437 428 NET ASSETS--100.0% $ 211,845 6.000%, 5/4/15 834 797 Tranche B, ========== First Data Corp. 2.040%, 2/1/13 33 33 Tranche B-1, Texas Competitive ABBREVIATIONS: 3.040%, 9/24/14 392 348 Electric Holdings Co. Tranche B-3, LLC FNMA Federal National Mortgage Association 3.041%, 9/24/14 626 554 Tranche B-2, ("Fannie Mae") Freescale Semiconductor, 3.729%, 10/10/14 258 213 PIK Payment-in-Kind Security Inc. Tranche Tranche B-3, REIT Real Estate Investment Trust 4.479%, 12/1/16 397 374 3.729%, 10/10/14 137 112 Infor Global Solutions, --------- Inc. Tranche DD, 786 6.498%, 3/2/14 174 146 ------------------------------------------ Tranche 6.498%, TOTAL LOAN AGREEMENTS 3/2/14 301 252 (IDENTIFIED COST $27,687) 28,652 Reynolds & Reynolds Co. ------------------------------------------ (The) Tranche 2.285%, 10/24/12 315 308 Tranche 5.751%, 10/24/13 680 648 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 40
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) COUNTRY WEIGHTINGS as of 3/31/10+ FOREIGN CURRENCIES: - ------------------------------------------------------ United States (includes short-term investments) 72% AUD Australian Dollar Brazil 3 BRL Brazilian Real Argentina 2 CND Canadian Dollar Canada 2 COP Colombian Peso Indonesia 2 IDR Indonesian Rupiah South Korea 2 KRW Korean Won United Kingdom 2 NOK Norwegian Krone Other 15 NZD New Zealand Dollar - ------------------------------------------------------ PLN Polish Zloty Total 100% SEK Swedish Krona - ------------------------------------------------------ TRY Turkish Lira + % of total investments as of March 31, 2010 ZAR South African Rand - ------------------------------------------------------ The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ Debt Securities: Municipal Securities $ 575 $ -- $ 575 $ -- Foreign Government Securities 27,846 -- 27,846 -- Mortgage-Backed Securities 26,377 -- 26,377 -- Asset-Backed Securities 4,058 -- 3,294 764 Corporate Debt 148,099 228 147,251 620 Equity Securities: Preferred Stocks 293 293 -- -- Common Stocks 4 -- -- 4 Exchange-Traded Funds 968 968 -- -- Short-Term Investments 3,815 3,815 -- -- -------- ------ -------- ------ Total Investments $212,035 $5,304 $205,343 $1,388 ======== ====== ======== ====== For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 41
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) 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 ($ reported in thousands) Total Securities Securities Corporate Debt Common Stock ------ --------------- ------------ -------------- ------------ BALANCE AS OF SEPTEMBER 30, 2009: $1,598 $ 890 $ 54 $654 $--(e) Accrued discounts (premiums)(a) 2 -- --(f) 2 -- Realized gain (loss)(b) --(f) -- --(f) --(f) -- Change in unrealized appreciation (depreciation)(b) 103 100 4 (1) -- Net purchases (sales)(c) (91) -- (41) (50) -- Transfers in and/or out of level 3(d) (224) (990) 747 15 4 ------ ----- ---- ---- --- BALANCE AS OF MARCH 31, 2010: $1,388 $ -- $764 $620 $ 4 ====== ===== ==== ==== === (A) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (B) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (C) INCLUDES PAYDOWNS. (D) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF MARCH 31, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (E) LEVEL 3 COMMON STOCKS HAVE A BEGINNING VALUE OF $0. (F) AMOUNT IS LESS THAN $500. Level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 42
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- FOREIGN GOVERNMENT SECURITIES--1.0% FINANCIALS--1.0% TELECOMMUNICATION SERVICES--CONTINUED Bolivarian Republic of Ford Motor Credit Co. ITC Deltacom, Inc. 144A Venezuela LLC 10.500%, 4/1/16 (4) $ 700 $ 701 RegS 5.750%, 7.500%, 8/1/12 $ 100 $ 104 Level 3 Financing, Inc. 2/26/16 (5) $ 825 $ 602 8.700%, 10/1/14 140 152 4.140%, 2/15/15(3) 400 334 Republic of Argentina International Lease ---------- PIK Interest Finance Corp. 1,649 Capitalization 4.750%, 1/13/12 350 342 ------------------------------------------- 8.280%, 12/31/33 825 623 iStar Financial, Inc. TOTAL CORPORATE BONDS - ------------------------------------------ 144A (IDENTIFIED COST $14,271) 14,980 TOTAL FOREIGN GOVERNMENT SECURITIES 10.000%, 6/15/14 (4) 300 301 ------------------------------------------- (IDENTIFIED COST $1,235) 1,225 Universal City LOAN AGREEMENTS(3)--84.7% - ------------------------------------------ Development ASSET-BACKED SECURITIES--0.1% Partners Ltd. CONSUMER DISCRETIONARY--26.8% Harley-Davidson 144A 8.875%, AMF Bowling Worldwide, Motorcycle Trust 11/15/15(4) 45 46 Inc. Tranche B, 07-2, C 144A 10.875%, 2.730%, 5/17/13 574 513 5.410%, 8/15/15 170 177 11/15/16(4) 300 315 Carmike Cinemas, Inc. - ------------------------------------------ --------- Tranche 5.500%, TOTAL ASSET-BACKED SECURITIES 1,260 1/27/16 941 943 (IDENTIFIED COST $131) 177 --------- CDW Corp. Tranche B, - ------------------------------------------ HEALTH CARE--0.1% 4.230%, 10/12/14 997 877 CORPORATE BONDS--11.9% Select Medical Corp. Cengage Learning 7.625%, 2/1/15 100 96 Acquisitions, Inc. CONSUMER DISCRETIONARY--2.6% --------- Tranche 2.790%, Affinia Group, Inc. 144A INDUSTRIALS--1.3% 7/5/14 902 797 10.750%, 8/15/16 (4) 260 285 Delta Air Lines, Inc. Tranche 7.500%, American Axle & 00-A1, 6/5/15 497 506 Manufacturing 7.379%, 5/18/10 196 196 Ceridian Corp. Holdings, Inc. 144A General Maritime Corp. Tranche 9.250%, 1/15/17 (4) 350 375 144A 3.249%, 11/8/14 1,551 1,398 Blockbuster, Inc. 144A 12.000%, 11/15/17 (4) 250 269 Charter Communications 11.750%, 10/1/14 (4) 732 544 Global Aviation Holdings Operating LLC Eastman Kodak Co. Ltd. 144A Tranche B, 3.550%, 7.250%, 11/15/13 55 53 14.000%, 8/15/13 (4) 730 745 3/6/14 158 152 Garda World Security PharmaNet Development Tranche C, 3.550%, Corp. 144A Group, Inc. 144A 9/6/16 1,283 1,251 9.750%, 3/15/17 (4) 350 360 10.875%, 4/15/17 (4) 415 415 Clear Channel Harrah's Operating Co., --------- Communications, Inc. Inc. 1,625 Tranche B, 3.898%, 11.250%, 6/1/17 140 152 --------- 1/29/16 1,020 830 Landry's Restaurants, INFORMATION TECHNOLOGY--1.4% CSC Holdings, Inc. Inc. 144A Freescale Semiconductor, Tranche B-2, 1.980%, 11.625%, 12/1/15 (4) 666 719 Inc. 3/29/16 808 810 Libbey Glass, Inc. 144A 10.125%, 12/15/16 450 401 Cumulus Media, Inc. 10.000%, 2/15/15 (4) 75 79 NXP BV/NXP Funding LLC Tranche 4.240%, MGM MIRAGE 144A 3.001%, 10/15/13(3) 750 706 6/11/14 366 331 10.375%, 5/15/14 (4) 47 52 Sorenson Communications, Dana Holding Corp. Nebraska Book Co., Inc. Inc. Tranche B 4.250%, 10.000%, 12/1/11 615 638 144A 10.500%, 1/31/15 1,000 986 --------- 2/1/15 (4) 750 727 Emmis Operating Co. 3,257 --------- Tranche 4.287%, --------- 1,834 11/1/13 1,195 1,042 CONSUMER STAPLES--0.6% --------- Ford Motor Co. Smithfield Foods, Inc. MATERIALS--2.2% Tranche B-1, 144A Hexion Finance Escrow 3.260%, 12/15/13 1,047 1,016 10.000%, 7/15/14 (4) 400 448 LLC/ Hexion Escrow Getty Images, Inc. Yankee Acquisition Corp. Corp. 144A Tranche B, Series B, 8.875%, 2/1/18 (4) 250 248 6.250%, 7/2/15 1,056 1,064 8.500%, 2/15/15 300 310 Ineos Group Holdings plc Harrah's Operating Co., --------- 144A Inc. 758 8.500%, 2/15/16 (4) 750 622 Tranche B-2, --------- Nova Chemicals Corp. 3.249%, 1/28/15 1,030 890 ENERGY--1.4% 3.649%, 11/15/13(3) 910 862 Tranche B-4, Coffeyville Resources Verso Paper Holdings 9.500%, 10/31/16 584 606 LLC 144A LLC/Verso Paper, Inc. HHI Holdings LLC Tranche 10.875%, 4/1/17 (4) 700 698 144A 11.500%, 7.500%, 3/31/15 600 604 Hercules Offshore, Inc. 7/1/14(4) 365 396 Intelsat Jackson Holding 144A Series B, 3.999%, Ltd. 10.500%, 10/15/17 (4) 275 276 8/1/14(3) 500 429 Tranche 3.228%, OPTI Canada, Inc. 144A Series B, 11.375%, 2/1/14 1,000 932 9.000%, 12/15/12 (4) 475 492 8/1/16 210 184 Intelstat Corp. Western Refining, Inc. --------- Tranche B2-C, 144A 2,741 2.728%, 1/3/14 189 185 10.750%, --------- Tranche B2-A, 6/15/14 (3)(4) 325 294 TELECOMMUNICATION SERVICES--1.3% 2.728%, 1/3/14 189 185 --------- Clearwire Communications Tranche B2-B, 1,760 LLC/Clearwire 2.728%, 1/3/14 189 185 --------- Finance, Inc. Isle of Capri Casinos, 144A 12.000%, Inc. 12/1/15(4) 400 409 Tranche A-DD, 144A 12.000%, 5.000%, 11/25/13 139 135 12/1/15(4) 200 205 Tranche 5.000%, 11/25/13 395 385 Tranche B-DD, 5.000%, 11/25/13 158 154 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 43
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- CONSUMER DISCRETIONARY--CONTINUED ENERGY--4.0% HEALTH CARE--CONTINUED Lamar Media Corp. ATP Oil & Gas Corp. Butler Schein Animal Tranche F, Tranche B-2, Health Tranche B, 5.500%, 3/31/14 $ 1,464 $ 1,476 12.250%, 1/15/11 $ 101 $ 102 5.500%, 12/31/15 $ 748 $ 757 Landry's Restaurant, Tranche B-1, Cardinal Health, Inc. Inc. Tranche 11.250%, 7/15/14 714 724 Tranche B, 8.000%, 11/30/13 871 875 Big West Oil LLC Tranche 0.000%, 4/10/14 1,000 944 Las Vegas Sands LLC 9.500%, 4/30/15 565 574 Community Health Tranche I-DD, Helix Energy Solutions Systems, Inc. 2.050%, 5/23/14 193 177 Group, Inc. Tranche DD, Tranche B, Tranche B, 2.502%, 7/25/14 60 59 2.050%, 5/23/14 954 875 2.480%, 7/1/13 638 627 Tranche B, MCC Georgia LLC Hercules Offshore, Inc. 2.502%, 7/25/14 1,172 1,143 Tranche E, Tranche B, CRC Health Corp. Tranche 3.500%, 1/3/16 995 1,009 4.000%, 7/11/13 1,120 1,096 2.540%, 2/6/13 488 470 Mediacom Illinois LLC Targa Resources, Inc. HCA, Inc. Tranche A-1, Tranche D, Tranche 6.000%, 1.790%, 11/17/12 826 802 5.500%, 3/31/17 348 351 7/6/16 898 904 Health Management MGM MIRAGE Venoco, Inc. Tranche C, Associates, Inc. Tranche D, 4.250%, 5/20/14 1,075 1,023 Tranche B, 4.000%, 10/3/11 500 488 --------- 2.040%, 2/28/14 317 308 Tranche E, 5,050 HealthSouth Corp. 5.000%, 2/21/14 500 445 --------- Tranche 1, Michaels Stores, Inc. FINANCIALS--6.9% 2.510%, 3/10/13 543 534 Tranche B-2, Agile Property Holdings Tranche 2, 4.813%, 7/31/16 473 462 Ltd. Tranche 4.010%, 9/10/15 447 450 Neiman-Marcus Group, 2.993%, 1/25/13 375 349 Psychiatric Solutions, Inc. (The) Tranche CB Richard Ellis Group, Inc. 2.228%, 4/6/13 1,715 1,628 Inc. Tranche A-2 Tranche B, Nielsen Finance 5.250%, 6/24/13 500 500 2.154%, 7/1/12 827 820 LLC/Nielsen CIT Group, Inc. Tranche RehabCare Group, Inc. Finance Co. 13.000%, 1/18/12 1,890 1,961 Tranche B, Tranche Delos Aircraft, Inc. 6.000%, 11/24/15 529 533 2.229%, 8/9/13 649 624 Tranche B-2, Rotech Healthcare, Inc. Tranche B, 7.000%, 3/17/16 102 103 PIK Interest 3.979%, 5/1/16 607 598 Green Tree Credit Capitalization Pilot Travel Centers LLC Solutions Tranche 6.000%, 9/26/11 400 374 Tranche B, 8.000%, 12/31/15 588 587 Select Medical Corp. 0.000%, 1/15/16 325 328 Hertz Corp. Tranche B-1, PTI Group, Inc. Tranche Letter of Credit 4.001%, 8/22/14 166 163 9.250%, 2/18/13 80 77 0.271%, 12/21/12 115 114 Warner Chilcott plc Sabre, Inc. Tranche Tranche B, Tranche A, 0.000%, 9/30/14 1,000 934 1.980%, 12/21/12 624 618 5.500%, 10/30/14 331 332 Sinclair International Lease Tranche B-1 Telecommunication Finance Corp. 5.750%, 4/30/15 152 153 Group, Inc. Tranche B-1, Tranche B-2 Tranche B, 6.750%, 3/17/15 138 143 5.750%, 4/30/15 253 254 6.500%, 10/29/15 575 583 Nuveen Investments, Inc. --------- Six Flags Theme Parks, Tranche B, 9,065 Inc. 3.323%, 11/13/14 1,175 1,081 --------- Tranche Pinnacle Foods Finance INDUSTRIALS--11.0% 3.750%, 6/15/15 1,750 1,738 LLC/ Pinnacle Food Advanced Disposal Travelport LLC Finance Corp. Tranche B, Tranche DD, Tranche B, 6.000%, 1/14/15 1,496 1,515 2.790%, 8/23/13 1,094 1,066 2.979%, 4/2/14 1,080 1,051 ARAMARK Corp. TRW Automotive Holdings Richard Ellis (CB) Letter of Credit Corp. Tranche B-3 Group, Inc. 0.000%, 1/26/14 18 18 5.000%, 5/30/16 250 253 Tranche B-1, Tranche Univision 0.000%, 12/20/15 1,036 1,038 2.165%, 1/26/14 276 271 Communications, Inc. Sungard Data Systems, Tranche 2, Tranche B, Inc. 0.000%, 7/26/16 33 33 2.540%, 9/29/14 2,025 1,811 Tranche A, 1.979%, Tranche VML U.S. Finance LLC 2/28/14 22 22 3.540%, 7/26/16 496 498 Tranche B-DD Synatech, Inc. Bucyrus International, 4.800%, 5/25/12 153 149 Tranche Inc. Tranche C, Tranche B, 0.000%, 4/1/14 497 443 4.500%, 2/19/16 800 810 4.800%, 5/25/13 516 502 Universal City Tranche Harland Clarke Holdings VWR Funding, Inc. 6.500%, 11/30/19 387 391 Corp. Tranche B, Tranche Vanguard Health Holding 2.790%, 6/30/14 1,466 1,344 2.748%, 6/29/14 738 696 Co., I LLC Hawker Beechcraft, Inc. --------- Tranche B, 5.000%, Letter of Credit, 33,922 1/29/16 370 371 2.100%, 3/26/14 81 68 --------- --------- Tranche 2.248%, 3/26/14 1,364 1,151 CONSUMER STAPLES--2.8% 8,772 Language Line Holdings Revlon Consumer Products --------- LLC Tranche B, Corp. Tranche HEALTH CARE--7.2% 5.500%, 11/4/15 983 987 6.000%, 3/11/15 705 699 Ardent Health Services Manitowoc Co., Inc. Reynolds Group Holdings LLC (The) Tranche B, Ltd. Tranche Tranche 6.500%, 7.500%, 4/14/14 1,014 1,018 6.250%, 11/5/15 542 548 7/19/15 500 494 Protection One Alarm Rite Aid Corp. Bausch & Lomb, Inc. Monitoring, Inc. Tranche 3, Tranche DD, Tranche B-2, 6.000%, 6/4/14 1,295 1,272 3.540%, 4/26/15 95 93 6.250%, 3/31/14 229 229 Spectrum Brands, Inc. Tranche B, 3.540%, Tranche B, 4/26/15 390 382 1.500%, 6/30/12 29 29 Tranche 8.000%, 6/30/12 568 568 Yankee Candle Co., Inc. Tranche B, 2.200%, 2/6/14 454 445 --------- 3,561 --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 44
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- --------- ------- --------- ------- ---------- INDUSTRIALS--CONTINUED MATERIALS--8.4% UTILITIES--2.0% ServiceMaster Co. (The) Anchor Glass Container Calpine Corp. Tranche Tranche B, Corp. 3.165%, 3/29/14 $ 391 $ 380 2.750%, 7/24/14 $ 1,748 $ 1,679 Tranche 6.000%, NRG Energy, Inc. Tranche DD, 2/3/16 $ 650 $ 649 Letter of Credit 2.750%, 7/24/14 174 167 Tranche 10.000%, 0.190%, 2/1/13 306 301 Sungard Data Systems, 8/2/16 715 708 Tranche B, Inc. Berry Plastics Group, 2.040%, 2/1/13 464 455 Tranche B, Inc. Tranche C, Texas Competitive 3.874%, 2/28/16 491 488 2.257%, 4/3/15 1,248 1,177 Electric Holdings Co. Transaction Network Building Materials LLC Tranche B-3, Services, Inc. Holding Corp. 3.790%, 10/10/14 1,699 1,386 Tranche 6.000%, of America Tranche B, ---------- 11/18/15 601 605 3.000%, 2/22/14 248 245 2,522 U.S. Investigations Celanese Holdings LLC ------------------------------------------- Services, Inc. Tranche TOTAL LOAN AGREEMENTS Tranche B, 0.000%, 2.000%, 4/2/14 437 429 (IDENTIFIED COST $101,832) 107,130 2/21/15 1,600 1,488 Chemtura Corp. ------------------------------------------- Vertrue, Inc. Tranche Tranche A, TOTAL LONG-TERM INVESTMENTS--97.7% 3.300%, 8/18/14 600 475 6.000%, 2/11/11 500 504 (IDENTIFIED COST $117,469) 123,512 Zuffa LLC Tranche Gentek Holding LLC ------------------------------------------- 7.500%, 6/19/15 1,032 1,043 Tranche --------- 7.000%, 10/29/14 259 262 SHARES 13,887 Hexion Specialty ---------- --------- Chemicals SHORT-TERM INVESTMENTS--14.5% INFORMATION TECHNOLOGY--12.1% Tranche C1-A, Allen Systems Group, Inc. 4.063%, 5/5/13 403 381 MONEY MARKET MUTUAL FUNDS--14.5% Tranche 8.500%, Tranche C2-A, BlackRock Liquidity 10/20/13 346 349 4.063%, 5/5/13 178 168 Funds Tranche 11.000%, Huntsman International TempFund Portfolio 4/20/14 151 149 LLC - Institutional Avaya, Inc. Tranche B-1, Tranche C, 2.498%, Shares (seven-day 3.002%, 10/26/14 1,490 1,332 6/23/16 990 956 effective CommScope, Inc. Ineos Holdings Ltd. yield 0.119%) 18,282,404 18,282 Tranche B, Tranche B-2, ------------------------------------------- 2.748%, 12/27/14 529 526 7.500%, 12/16/13 421 413 TOTAL SHORT-TERM INVESTMENTS Dresser, Inc. Tranche C-2, (IDENTIFIED COST $18,282) 18,282 Tranche B, 8.000%, 12/16/14 421 415 ------------------------------------------- 2.500%, 5/4/14 250 241 JohnsonDiversity, Inc. TOTAL INVESTMENTS--112.2% PIK Interest Tranche (IDENTIFIED COST $135,751) 141,794(1) Capitalization 0.000%, 11/11/15 249 252 Other Assets and 6.000%, 5/4/15 1,400 1,337 Lyondell Chemical Co. Liabilities--(12.2)% (15,379) First Data Corp. Tranche ---------- Tranche B-3, 5.799%, 6/3/10 499 519 NET ASSETS--100.0% $ 126,415 3.040%, 9/24/14 1,908 1,690 Tranche ========== Freescale Semiconductor, 3.250%, 3/14/16 375 379 Inc. New Sunward Holding BV ABBREVIATION: Tranche 4.479%, Tranche B, 12/1/16 814 767 0.000%, 2/14/14 750 701 PIK Payment-in-Kind Security Infor Global Noranda Aluminum, Inc. Solutions, Inc. Tranche B, COUNTRY WEIGHTINGS as of 3/31/10+ Tranche B, 2.248%, 5/18/14 977 936 ------------------------------------------- 4.000%, 1/28/12 983 954 Smurfit-Stone Container United States (includes short-term Tranche 4.000%, Enterprise Tranche B, investments) 92% 7/30/12 513 497 4.750%, 2/22/16 950 954 Canada 2 Tranche 6.498%, Solutia, Inc. Tranche B, United Kingdom 2 3/2/14 348 292 4.750%, 3/17/17 615 622 Germany 1 Tranche DD, 6.498%, --------- Japan 1 3/2/14 202 169 10,670 Other 2 NuSil Technology Tranche --------- ------------------------------------------- B, 6.000%, 2/18/15 400 402 TELECOMMUNICATION SERVICES--3.5% Total 100% RedPrairie Corp. Tranche Level 3 Communications, ------------------------------------------- 4.000%, 3/24/16 1,000 1,003 Inc. + % of total investments as of Reynolds & Reynolds Co. Tranche A, March 31, 2010 (The) 2.501%, 3/13/14 1,450 1,351 ------------------------------------------- Tranche 2.245%, Tranche B, 10/24/12 900 881 11.500%, 3/13/14 70 77 Tranche 5.852%, MetroPCS Wireless, Inc. 10/24/13 900 857 Tranche B, Sensata Technologies BV 2.500%, 11/3/13 411 402 Tranche B, nTelos, Inc. Tranche 1.999%, 4/27/13 1,237 1,196 5.750%, 8/7/15 1,476 1,492 Spansion, Inc. Time Warner Telecom Tranche B, Holdings, Inc. 7.750%, 2/9/15 1,280 1,294 Tranche B, Springboard Finance LLC 2.000%, 1/7/13 463 458 Tranche B, U.S. TelePacific Corp. 7.000%, 2/23/15 850 856 Tranche B, TowerCo LLC Tranche 9.250%, 8/25/15 600 605 6.000%, 11/20/14 499 504 --------- --------- 4,385 15,296 --------- --------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 4. See Notes to Financial Statements 45
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (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 March 31, 2010 Prices Inputs Inputs -------------- --------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: Foreign Government Securities $ 1,225 $ -- $ 1,225 $ -- Asset-Backed Securities 177 -- 177 -- Corporate Debt 122,110 -- 121,060 1,050 Equity Securities: Short-Term Investments 18,282 18,282 -- -- -------- ------- -------- ------ Total Investments $141,794 $18,282 $122,462 $1,050 ======== ======= ======== ====== The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: ($ reported in thousands) Corporate Debt -------------- BALANCE AS OF SEPTEMBER 30, 2009: $ 74 Accrued discounts (premiums)(a) --(d) Realized gain (loss)(b) --(d) Change in unrealized appreciation (depreciation)(b) 2 Net purchases (sales) --(d) Transfers in and/or out of Level 3(c) 974 ------ BALANCE AS OF MARCH 31, 2010: $1,050 ====== (A) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (B) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (C) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF MARCH 31, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (D) AMOUNT IS LESS THAN $500. 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 46
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VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2010 (UNAUDITED) (Amounts reported in thousands except shares and per share amounts) --------------- --------------- ---------------- ----------- ------------- ALPHASECTOR(SM) ALPHASECTOR(SM) ALTERNATIVES CA TAX-EXEMPT ALLOCATION FUND ROTATION FUND DIVERSIFIER FUND BOND FUND BOND FUND --------------- --------------- ---------------- ----------- ------------- ASSETS Investment in securities at value(1) .................... $ 29,300 $ 303,322 $ 91,695 $ 194,723 $ 57,789 Investments in affiliated funds at value(2) ............. 9,582 -- 170,502 -- -- Receivables Investment securities sold ........................... 392 3,257 -- 287 -- Fund shares sold ..................................... 78 11,184 1,015 136 -- Receivable from adviser .............................. -- -- 31 -- -- Dividends and interest receivable .................... --(4) --(4) --(4) 1,910 815 Prepaid expenses ........................................ 23 44 40 34 17 ---------- ----------- ----------- ----------- ---------- Total assets ...................................... 39,375 317,807 263,283 197,090 58,621 ---------- ----------- ----------- ----------- ---------- LIABILITIES Payables Fund shares repurchased .............................. 163 233 490 753 163 Investment securities purchased ...................... 393 9,841 -- 283 504 Dividend distributions ............................... -- -- -- -- 109 Investment advisory fee .............................. 12 102 -- 69 17 Distribution and service fees ........................ 19 103 109 23 7 Administration fee ................................... 3 13 19 16 4 Transfer agent fees and expenses ..................... 6 27 85 20 4 Trustees' fee and expenses ........................... --(4) 3 3 3 1 Professional fee ..................................... 13 16 16 25 21 Other accrued expenses ............................... 2 18 30 25 6 ---------- ----------- ----------- ----------- ---------- Total liabilities ................................. 611 10,356 752 1,217 836 ---------- ----------- ----------- ----------- ---------- NET ASSETS .............................................. $ 38,764 $ 307,451 $ 262,531 $ 195,873 $ 57,785 ========== =========== =========== =========== ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ..... $ 42,426 $ 309,449 $ 350,337 $ 210,368 $ 56,911 Accumulated undistributed net investment income (loss) ............................................ 207 823 336 329 56 Accumulated undistributed net realized gain (loss) ... (6,696) (19,097) (80,329) (23,237) (296) Net unrealized appreciation (depreciation) on investments ....................................... 2,827 16,276 (7,813) 8,413 1,114 ---------- ----------- ----------- ----------- ---------- NET ASSETS .............................................. $ 38,764 $ 307,451 $ 262,531 $ 195,873 $ 57,785 ========== =========== =========== =========== ========== CLASS A Net asset value (net assets/shares outstanding) per share ................................................ $ 10.35 $ 10.32 $ 9.76 $ 10.75 $ 11.92 Maximum offering price per share NAV/(1-4.75%) .......... $ -- $ -- $ -- $ 11.29 $ 12.51 Maximum offering price per share NAV/(1-5.75%) .......... $ 10.98 $ 10.95 $ 10.36 $ -- $ -- Shares of beneficial interest outstanding, unlimited authorization(3) ..................................... 1,955,178 15,166,315 13,543,522 6,123,750 2,666,561 Net Assets .............................................. $ 20,244 $ 156,545 $ 132,182 $ 65,800 $ 31,777 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ............................. $ -- $ -- $ -- $ 10.51 $ -- Shares of beneficial interest outstanding, unlimited authorization(3) ..................................... -- -- -- 317,377 -- Net Assets .............................................. $ -- $ -- $ -- $ 3,336 $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ............................. $ 10.31 $ 10.23 $ 9.66 $ 10.54 $ -- Shares of beneficial interest outstanding, unlimited authorization(3) ..................................... 1,726,716 9,689,782 9,845,131 710,499 -- Net Assets .............................................. $ 17,808 $ 99,152 $ 95,116 $ 7,490 $ -- CLASS I Net asset value (net assets/shares outstanding) and offering price per share ............................. $ 10.37 $ 10.33 $ 9.77 $ 10.86 $ 11.91 Shares of beneficial interest outstanding, unlimited authorization(3) ..................................... 68,643 5,009,868 3,606,211 10,979,054 2,184,133 Net Assets .............................................. $ 712 $ 51,754 $ 35,233 $ 119,247 $ 26,008 (1) Investment in securities at cost .................... $ 26,804 $ 287,046 $ 98,733 $ 186,310 $ 56,675 (2) Investment in affiliated funds at cost .............. $ 9,251 $ -- $ 171,277 $ -- $ -- (3) All Funds except the Bond Fund have no par value. The Bond Fund has a par value of $1.00. (4) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 48
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 2010 (UNAUDITED) (Amounts reported in thousands except shares and per share amounts) ------------------- ------------------ ------------------ ------------------ ------------- GREATER GREATER ASIA EUROPEAN GLOBAL GLOBAL GLOBAL REAL ESTATE EX JAPAN OPPORTUNITIES INFRASTRUCTURE FUND OPPORTUNITIES FUND SECURITIES FUND OPPORTUNITIES FUND FUND ------------------- ------------------ ------------------ ------------------ ------------- ASSETS Investment in securities at value(1) ......................... $ 88,004 $ 60,712 $ 2,634 $ 8,148 $ 7,067 Foreign currency at value(2) ........ -- --(3) --(3) -- --(3) Receivables Investment securities sold ....... -- 50 4 146 15 Fund shares sold ................. 79 1 --(3) 51 3 Receivable from adviser .......... -- -- 7 -- 2 Dividends and interest receivable .................... 162 385 11 28 34 Tax reclaims ..................... 16 53 1 --(3) 11 Unrealized appreciation on forward currency contracts ............... -- 18 -- -- 107 Prepaid expenses .................... 26 21 27 27 27 ---------- ---------- ------- -------- -------- Total assets .................. 88,287 61,240 2,684 8,400 7,266 ---------- ---------- ------- -------- -------- LIABILITIES Payables Fund shares repurchased .......... 27 62 -- -- -- Investment securities purchased .. -- -- 10 408 16 Foreign capital gain taxes payable ....................... -- -- -- 7 -- Investment advisory fee .......... 48 40 -- --(3) -- Distribution and service fees .... 15 14 1 2 2 Administration fee ............... 6 4 --(3) 1 --(3) Transfer agent fees and expenses ...................... 21 19 --(3) --(3) --(3) Trustees' fee and expenses ....... 1 1 --(3) --(3) --(3) Professional fee ................. 20 19 17 17 18 Other accrued expenses ........... 14 13 3 6 3 Unrealized depreciation on forward currency contracts ............... -- 119 -- 15 2 ---------- ---------- ------- -------- -------- Total liabilities ............. 152 291 31 456 41 ---------- ---------- ------- -------- -------- NET ASSETS .......................... $ 88,135 $ 60,949 $ 2,653 $ 7,944 $ 7,225 ========== ========== ======= ======== ======== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ........... $ 99,342 $ 79,112 $ 1,827 $ 5,936 $ 5,510 Accumulated undistributed net investment income (loss) ...... (13) 224 (124) 5 7 Accumulated undistributed net realized gain (loss) .......... (11,737) (30,722) 42 107 105 Net unrealized appreciation (depreciation) on investments ................... 543 12,335 908 1,896 1,603 ---------- ---------- ------- -------- -------- NET ASSETS ....................... $ 88,135 $ 60,949 $ 2,653 $ 7,944 $ 7,225 ========== ========== ======= ======== ======== CLASS A Net asset value (net assets/shares outstanding) per share ........... $ 10.36 $ 7.46 $ 17.95 $ 13.89 $ 13.38 Maximum offering price per share NAV/(1-5.75%) .................... $ 10.99 $ 7.92 $ 19.05 $ 14.74 $ 14.20 Shares of beneficial interest outstanding, no par value, unlimited authorization ............. 3,784,207 7,873,672 99,983 549,372 519,101 Net Assets .......................... $ 39,198 $ 58,714 $ 1,795 $ 7,632 $ 6,946 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ........................ $ -- $ 6.70 $ -- $ -- $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization .......... -- 197,962 -- -- -- Net Assets .......................... $ -- $ 1,327 $ -- $ -- $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 10.34 $ 6.66 $ 17.86 $ 13.83 $ 13.32 Shares of beneficial interest outstanding, no par value, unlimited authorization .......... 730,154 136,311 12,661 12,167 10,420 Net Assets .......................... $ 7,550 $ 908 $ 226 $ 168 $ 139 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ........................ $ 10.36 $ -- $ 17.99 $ 13.91 $ 13.40 Shares of beneficial interest outstanding, no par value, unlimited authorization .......... 3,995,783 -- 35,124 10,363 10,459 Net Assets .......................... $ 41,387 $ -- $ 632 $ 144 $ 140 (1) Investment in securities at cost $ 87,462 $ 48,279 $ 1,726 $ 6,230 $ 5,569 (2) Foreign currency at cost ........ -- --(3) --(3) -- --(3) (3) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 49
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 2010 (UNAUDITED) (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) ............... $ 90,645 $ 28,261 $ 93,786 $ 212,035 $ 141,794 Foreign currency at value(2) ....................... -- -- 11 -- -- Deposits with broker for securities sold short ..... -- -- 93,715 -- -- Receivables Investment securities sold ...................... 799 -- 5,871 3,804 2,300 Fund shares sold ................................ 26 --(4) 163 1,873 1,126 Dividends and interest receivable ............... 2,041 152 139 2,974 474 Tax reclaims .................................... -- 29 6 -- -- Prepaid expenses ................................... 27 19 31 41 30 ----------- ---------- ---------- ----------- ---------- Total assets ................................. 93,538 28,461 193,722 220,727 145,724 ----------- ---------- ---------- ----------- ---------- LIABILITIES Securities sold short at value(3) .................. -- -- 92,181 -- -- Payables Fund shares repurchased ......................... 152 -- 23 254 68 Investment securities purchased ................. 1,959 -- 5,636 7,926 19,099 Dividend distributions .......................... -- -- -- 422 -- Dividends on short sales ........................ -- -- 196 -- -- Investment advisory fee ......................... 50 22 106 96 65 Distribution and service fees ................... 21 1 8 82 28 Administration fee .............................. 7 2 6 14 7 Transfer agent fees and expenses ................ 28 4 12 35 5 Trustees' fee and expenses ...................... 1 --(4) 1 2 1 Professional fee ................................ 24 18 24 25 24 Other accrued expenses .......................... 12 9 14 26 12 ----------- ---------- ---------- ----------- ---------- Total liabilities ............................ 2,254 56 98,207 8,882 19,309 ----------- ---------- ---------- ----------- ---------- NET ASSETS ......................................... $ 91,284 $ 28,405 $ 95,515 $ 211,845 $ 126,415 =========== ========== ========== =========== ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ..................................... $ 210,600 $ 51,158 $ 113,438 $ 223,204 $ 119,327 Accumulated undistributed net investment income (loss) ....................................... 213 (1,774) (1,003) 680 75 Accumulated undistributed net realized gain (loss) ....................................... (120,388) (25,066) (24,744) (22,532) 970 Net unrealized appreciation (depreciation) on investments .................................. 859 4,087 16,835 10,493 6,043 Net unrealized appreciation (depreciation) on securities sold short ........................ -- -- (9,011) -- -- ----------- ---------- ---------- ----------- ---------- NET ASSETS ......................................... $ 91,284 $ 28,405 $ 95,515 $ 211,845 $ 126,415 =========== ========== ========== =========== ========== CLASS A Net asset value (net assets/shares outstanding) per share ....................................... $ 4.04 $ 5.62 $ 10.58 $ 10.49 $ 9.95 Maximum offering price per share NAV/(1-4.75%) ..... $ 4.24 $ -- $ -- $ 11.01 $ 10.45 Maximum offering price per share NAV/(1-5.75%) ..... $ -- $ 5.96 $ 11.23 $ -- $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization .............. 21,935,989 338,885 1,653,102 11,522,382 8,269,696 Net Assets ......................................... $ 88,535 $ 1,904 $ 17,497 $ 120,879 $ 82,314 CLASS B Net asset value (net assets/shares outstanding) and offering price per share .................... $ 3.96 $ -- $ 10.09 $ 10.48 $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization .................. 198,096 -- 96,810 1,341,800 -- Net Assets ......................................... $ 784 $ -- $ 977 $ 14,056 $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share .................... $ 3.99 $ 5.60 $ 10.05 $ 10.56 $ 9.96 Shares of beneficial interest outstanding, no par value, unlimited authorization .................. 492,693 80,687 437,456 5,206,613 1,471,228 Net Assets ......................................... $ 1,965 $ 452 $ 4,396 $ 54,958 $ 14,655 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .................... $ -- $ 5.62 $ 10.58 $ 10.49 $ 9.95 Shares of beneficial interest outstanding, no par value, unlimited authorization .................. -- 4,635,571 6,863,586 2,092,161 2,960,214 Net Assets ......................................... $ -- $ 26,049 $ 72,645 $ 21,952 $ 29,446 (1) Investment in securities at cost ............... $ 89,786 $ 24,173 $ 76,954 $ 201,546 $ 135,751 (2) Foreign currency at cost ....................... -- -- 11 -- -- (3) Proceeds from securities sold short ............ -- -- 83,170 -- -- (4) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 50
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) --------------- --------------- ---------------- --------- ------------- ALPHASECTOR(SM) ALPHASECTOR(SM) ALTERNATIVES CA TAX-EXEMPT ALLOCATION FUND ROTATION FUND DIVERSIFIER FUND BOND FUND BOND FUND --------------- --------------- ---------------- --------- ------------- INVESTMENT INCOME Dividends ...................................... $ 278 $ 1,928 $ 150 $ 4 $ --(1) Dividend income from affiliated funds .......... 197 -- 3,864 -- -- Interest ....................................... -- -- -- 5,659 1,397 ------ ------- ------- ------ ------- Total investment income ..................... 475 1,928 4,014 5,663 1,397 ------ ------- ------- ------ ------- EXPENSES Investment advisory fees ....................... 82 367 132 496 130 Service fees, Class A .......................... 24 101 173 83 40 Distribution and service fees, Class B ......... -- -- -- 19 -- Distribution and service fees, Class C ......... 85 303 491 39 -- Administration fees ............................ 15 63 113 94 25 Transfer agent fee and expenses ................ 21 100 272 81 16 Custodian fees ................................. 2 4 3 12 2 Printing fees and expenses ..................... 6 49 29 2 3 Professional fees .............................. 10 12 17 10 18 Registration fees .............................. 19 24 28 21 12 Trustees' fee and expenses ..................... 2 5 11 9 2 Miscellaneous expenses ......................... 4 10 21 18 5 ------ ------- ------- ------ ------- Total expenses .............................. 270 1,038 1,290 884 253 Less expenses reimbursed/waived by investment adviser ..................................... (16) -- (362) (104) (39) ------ ------- ------- ------ ------- Net expenses ................................... 254 1,038 928 780 214 ------ ------- ------- ------ ------- NET INVESTMENT INCOME (LOSS) ................... 221 890 3,086 4,883 1,183 ------ ------- ------- ------ ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........ 89 (357) (1,318) 3,171 (67) Net realized gain (loss) on affiliated funds ... 2 -- (5,233) -- -- Capital gain distributions from affiliated funds ....................................... -- -- 539 -- -- Net change in unrealized appreciation (depreciation) on investments ............... 2,708 16,895 5,935 456 (1,730) Net change in unrealized appreciation (depreciation) on investments in affiliated funds ............................ 148 -- 10,515 -- -- ------ ------- ------- ------ ------- NET GAIN (LOSS) ON INVESTMENTS .................... 2,947 16,538 10,438 3,627 (1,797) ------ ------- ------- ------ ------- Net increase (decrease) in net assets resulting from operations ...................... $3,168 $17,428 $13,524 $8,510 $ (614) ====== ======= ======= ====== ======= (1) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 51
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) ------------------- ------------- --------------- ------------- ------------- GREATER ASIA GREATER GLOBAL GLOBAL EX JAPAN EUROPEAN GLOBAL OPPORTUNITIES REAL ESTATE OPPORTUNITIES OPPORTUNITIES INFRASTRUCTURE FUND FUND SECURITIES FUND FUND FUND ------------------- ------------- --------------- ------------- ------------- INVESTMENT INCOME Dividends ...................................... $ 1,486 $ 818 $ 49 $ 77 $ 91 Foreign taxes withheld ......................... (86) (21) (2) (7) (6) ------- ------ ---- ---- ---- Total investment income ..................... 1,400 797 47 70 85 ------- ------ ---- ---- ---- EXPENSES Investment advisory fees ....................... 281 246 10 36 29 Service fees, Class A .......................... 48 69 2 9 8 Distribution and service fees, Class B ......... -- 7 -- -- -- Distribution and service fees, Class C ......... 35 4 1 1 1 Administration fees ............................ 37 24 1 3 3 Transfer agent fee and expenses ................ 81 69 1 -- -- Custodian fees ................................. 8 17 6 14 6 Printing fees and expenses ..................... 8 4 --(1) 1 1 Professional fees .............................. 17 17 15 15 14 Registration fees .............................. 18 17 30 26 26 Trustees' fee and expenses ..................... 3 2 --(1) --(1) --(1) Miscellaneous expenses ......................... 7 5 1 1 -- ------- ------ ---- ---- ---- Total expenses .............................. 543 481 67 106 88 Less expenses reimbursed/waived by investment adviser ..................................... -- (11) (50) (41) (38) ------- ------ ---- ---- ---- Net expenses ................................ 543 470 17 65 50 ------- ------ ---- ---- ---- NET INVESTMENT INCOME (LOSS) ................... 857 327 30 5 35 ------- ------ ---- ---- ---- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........ (1,434) 3,496 42 165 242 Net realized gain (loss) on foreign currency transactions ................................ 5 256 --(1) (18) (3) Net change in unrealized appreciation (depreciation) on investments ............... 4,904 3,135 177 573 130 Net change in unrealized appreciation (depreciation) on foreign currency translation ................................. (1) (110) -- (10) 105 ------- ------ ---- ---- ---- NET GAIN (LOSS) ON INVESTMENTS .................... 3,474 6,777 219 710 474 ------- ------ ---- ---- ---- Net increase (decrease) in net assets resulting from operations ............................. $ 4,331 $7,104 $249 $715 $509 ======= ====== ==== ==== ==== (1) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 52
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) ---------- --------------- -------------- ------------ ------------- INTERNATIONAL MULTI-SECTOR SENIOR HIGH YIELD REAL ESTATE MARKET NEUTRAL FIXED INCOME FLOATING RATE FUND SECURITIES FUND FUND FUND FUND ---------- --------------- -------------- ------------ ------------- INVESTMENT INCOME Dividends .................................................. $ 2 $ 588 $ 562 $ 21 $ 8 Interest ................................................... 4,306 --(1) 5 7,395 3,377 Foreign taxes withheld ..................................... -- (23) (5) --(1) -- ------ ----- ------- ------- ------ Total investment income ................................. 4,308 565 562 7,416 3,385 ------ ----- ------- ------- ------ EXPENSES Investment advisory fees ................................... 302 146 657 532 260 Service fees, Class A ...................................... 113 3 22 141 66 Distribution and service fees, Class B ..................... 4 -- 6 69 -- Distribution and service fees, Class C ..................... 9 2 22 238 34 Administration fees ........................................ 40 13 37 83 36 Transfer agent fee and expenses ............................ 96 10 41 127 19 Custodian fees ............................................. 4 12 15 18 5 Printing fees and expenses ................................. 6 2 8 14 7 Professional fees .......................................... 20 16 21 23 20 Registration fees .......................................... 17 17 23 27 8 Trustees' fee and expenses ................................. 4 --(1) 3 8 3 Miscellaneous expenses ..................................... 9 3 8 19 12 ------ ----- ------- ------- ------ Total expenses .......................................... 624 224 863 1,299 470 Dividends on short sales ................................... -- -- 644 -- -- Interest expense on short sales ............................ -- -- 173 -- -- Less expenses reimbursed/waived by investment adviser ...... -- (37) (118) -- 42(2) ------ ----- ------- ------- ------ Net expenses ............................................ 624 187 1,562 1,299 512 ------ ----- ------- ------- ------ NET INVESTMENT INCOME (LOSS) ............................... 3,684 378 (1,000) 6,117 2,873 ------ ----- ------- ------- ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments .................... 3,182 (704) 8,802 2,264 1,343 Net realized gain (loss) on securities sold short .......... -- -- (4,175) -- -- Net realized gain (loss) on foreign currency transactions .. -- 5 (4) 11 -- Net change in unrealized appreciation (depreciation) on investments .......................................... 53 958 629 7,409 1,683 Net change in unrealized appreciation (depreciation) on securities sold short ................................ -- -- (3,609) -- -- Net change in unrealized appreciation (depreciation) on foreign currency translation ......................... -- (35) 3 (19) -- ------ ----- ------- ------- ------ NET GAIN (LOSS) ON INVESTMENTS ................................ 3,235 224 1,646 9,665 3,026 ------ ----- ------- ------- ------ Net increase (decrease) in net assets resulting from operations ................................................. $6,919 $ 602 $ 646 $15,782 $5,899 ====== ===== ======= ======= ====== (1) Amount is less than $500 (not reported in thousands). (2) See Note 3C in the Notes to Financial Statements for information on recapture of expenses previously waived. See Notes to Financial Statements 53
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS ($ Reported in thousands) ---------------------------- ---------------------------- ALPHASECTOR(SM) ALPHASECTOR(SM) ALLOCATION FUND ROTATION FUND ---------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 -------------- ------------- -------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ............................................. $ 221 $ 816 $ 890 $ 1,022 Net realized gain (loss) ................................................. 91 (6,354) (357) (17,763) Net change in unrealized appreciation (depreciation) ..................... 2,856 4,618 16,895 13,479 ------- ------- -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 3,168 (920) 17,428 (3,262) ------- ------- -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................... (151) (590) (233) (670) Net investment income, Class B ........................................... -- -- -- -- Net investment income, Class C ........................................... (99) (387) (97) (424) Net investment income, Class I ........................................... (2) -- (65) -- Net realized long-term gains, Class A .................................... -- (76) -- (558) Net realized long-term gains, Class B .................................... -- -- -- -- Net realized long-term gains, Class C .................................... -- (69) -- (625) Net realized long-term gains, Class I .................................... -- -- -- -- ------- ------- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................ (252) (1,122) (395) (2,277) ------- ------- -------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A .................... (297) (3,417) 110,460 (1,731) Change in net assets from share transactions, Class B .................... -- -- -- -- Change in net assets from share transactions, Class C .................... (263) (4,112) 52,835 (6,293) Change in net assets from share transactions, Class I .................... 684 -- 49,283 -- ------- ------- -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................ 124 (7,529) 212,578 (8,024) ------- ------- -------- -------- CAPITAL CONTRIBUTIONS Fair Funds settlement(1) ................................................. -- -- -- -- ------- ------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .................................... 3,040 (9,571) 229,611 (13,563) NET ASSETS Beginning of period ...................................................... 35,724 45,295 77,840 91,403 ------- ------- -------- -------- END OF PERIOD ............................................................ $38,764 $35,724 $307,451 $ 77,840 ======= ======= ======== ======== Accumulated undistributed net investment income (loss) at end of period .. $ 207 $ 238 $ 823 $ 328 (1) The Fund was a recipient of a portion of a distribution from a Fair Fund settlement established by the United States Securities and Exchange Commission. The proceeds received were a part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 54
- ----------------------------- --------------------------- ---------------------------- ALTERNATIVES DIVERSIFIER FUND BOND FUND CA TAX-EXEMPT BOND FUND - ----------------------------- --------------------------- ---------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 (UNAUDITED) 2009 - -------------- -------------- -------------- ------------ -------------- ------------- $ 3,086 $ 3,586 $ 4,883 $ 7,987 $ 1,183 $ 2,437 (6,012) (58,276) 3,171 (2,547) (67) (140) 16,450 (2,181) 456 17,869 (1,730) 4,403 -------- --------- -------- -------- ------- ------- 13,524 (56,871) 8,510 23,309 (614) 6,700 -------- --------- -------- -------- ------- ------- (2,706) (2,270) (1,378) (1,659) (641) (1,359) -- -- (66) (149) -- -- (1,473) (546) (135) (179) -- -- (375) -- (3,057) (5,993) (537) (1,097) -- -- -- -- -- (21) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (15) -------- --------- -------- -------- ------- ------- (4,554) (2,816) (4,636) (7,980) (1,178) (2,492) -------- --------- -------- -------- ------- ------- (40,021) (58,940) (1,534) 38,228 (944) (2,877) -- -- (940) (197) -- -- (9,299) (18,076) (686) 4,714 -- -- 34,326 -- (28,168) (7,351) 1,169 (4,081) -------- --------- -------- -------- ------- ------- (14,994) (77,016) (31,328) 35,394 225 (6,958) -------- --------- -------- -------- ------- ------- -- -- -- 37 -- 12 -------- --------- -------- -------- ------- ------- (6,024) (136,703) (27,454) 50,760 (1,567) (2,738) 268,555 405,258 223,327 172,567 59,352 62,090 -------- --------- -------- -------- ------- ------- $262,531 $ 268,555 $195,873 $223,327 $57,785 $59,352 ======== ========= ======== ======== ======= ======= $ 336 $ 1,804 $ 329 $ 82 $ 56 $ 51 See Notes to Financial Statements 55
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands) ---------------------------- ---------------------------- GLOBAL INFRASTRUCTURE FUND GLOBAL OPPORTUNITIES FUND ---------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 -------------- ------------- -------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ............................................. $ 857 $ 2,363 $ 327 $ 600 Net realized gain (loss) ................................................. (1,429) (10,235) 3,752 (31,976) Net change in unrealized appreciation (depreciation) ..................... 4,903 6,299 3,025 19,640 -------- -------- ------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 4,331 (1,573) 7,104 (11,736) -------- -------- ------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................... (446) (2,172) (614) (729) Net investment income, Class B ........................................... -- -- (11) (16) Net investment income, Class C ........................................... (57) (103) (6) (9) Net investment income, Class I ........................................... (528) (8) -- -- Net realized short-term gains, Class A ................................... -- -- -- -- Net realized short-term gains, Class B ................................... -- -- -- -- Net realized short-term gains, Class C ................................... -- -- -- -- Net realized short-term gains, Class I ................................... -- -- -- -- Net realized long-term gains, Class A .................................... -- (448) -- -- Net realized long-term gains, Class B .................................... -- -- -- -- Net realized long-term gains, Class C .................................... -- (12) -- -- Net realized long-term gains, Class I .................................... -- (1) -- -- -------- -------- ------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................ (1,031) (2,744) (631) (754) -------- -------- ------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A .................... (38,197) 6,209 (1,159) (7,674) Change in net assets from share transactions, Class B .................... -- -- (193) (572) Change in net assets from share transactions, Class C .................... 1,104 3,849 39 (163) Change in net assets from share transactions, Class I .................... 38,347 238 -- -- -------- -------- ------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................ 1,254 10,296 (1,313) (8,409) -------- -------- ------- -------- CAPITAL CONTRIBUTIONS Fair Funds settlement(2) ................................................. -- -- -- 157 -------- -------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS .................................... 4,554 5,979 5,160 (20,742) NET ASSETS Beginning of period ...................................................... 83,581 77,602 55,789 76,531 -------- -------- ------- -------- END OF PERIOD ............................................................ $ 88,135 $ 83,581 $60,949 $ 55,789 ======== ======== ======= ======== Accumulated undistributed net investment income (loss) at end of period .. $ (13) $ 161 $ 224 $ 528 (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 settlement established by the United States Securities and Exchange Commission. The proceeds received were a part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 56
- ------------------------------- -------------------------------- -------------------------------- GLOBAL REAL ESTATE GREATER ASIA EX JAPAN GREATER EUROPEAN SECURITIES FUND OPPORTUNITIES FUND OPPORTUNITIES FUND - ------------------------------- -------------------------------- -------------------------------- FROM FROM FROM SIX MONTHS INCEPTION SIX MONTHS INCEPTION SIX MONTHS INCEPTION ENDED MARCH 2, 2009 TO ENDED APRIL 21, 2009 TO ENDED APRIL 21, 2009 TO MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 (UNAUDITED) 2009 - -------------- ---------------- -------------- ----------------- -------------- ----------------- $ 30 $ 30 $ 5 $ 48 $ 35 $ 61 42 94 147 146 239 65 177 731 563 1,333 235 1,368 ------ ------ ------ ------ ------ ------ 249 855 715 1,527 509 1,494 ------ ------ ------ ------ ------ ------ (136) -- (67) -- (71) -- -- -- -- -- -- -- (16) -- (1) -- (1) -- (44) -- (1) -- (2) -- (54) -- (159) -- (203) -- -- -- -- -- -- -- (7) -- (3) -- (7) -- (17) -- (3) -- (4) -- (3) -- -- -- -- -- -- -- -- -- -- -- --(1) -- -- -- -- -- (1) -- -- -- -- -- ------ ------ ------ ------ ------ ------ (278) -- (234) -- (288) -- ------ ------ ------ ------ ------ ------ 229 899 738 4,964 494 4,809 -- -- -- -- -- -- 35 109 29 100 (58) 159 455 100 5 100 6 100 ------ ------ ------ ------ ------ ------ 719 1,108 772 5,164 442 5,068 ------ ------ ------ ------ ------ ------ -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ 690 1,963 1,253 6,691 663 6,562 1,963 -- 6,691 -- 6,562 -- ------ ------ ------ ------ ------ ------ $2,653 $1,963 $7,944 $6,691 $7,225 $6,562 ====== ====== ====== ====== ====== ====== $ (124) $ 42 $ 5 $ 69 $ 7 $ 46 See Notes to Financial Statements 57
VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands) ---------------------------- ---------------------------- INTERNATIONAL REAL ESTATE HIGH YIELD FUND SECURITIES FUND ---------------------------- ---------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 -------------- ------------- -------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ............................................. $ 3,684 $ 7,387 $ 378 $ 1,719 Net realized gain (loss) ................................................. 3,182 (18,245) (699) (23,503) Net change in unrealized appreciation (depreciation) ..................... 53 16,375 923 11,782 ------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 6,919 5,517 602 (10,002) ------- -------- -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................... (3,498) (7,268) (145) (1,995) Net investment income, Class B ........................................... (32) (81) -- -- Net investment income, Class C ........................................... (63) (102) (35) (15) Net investment income, Class I ........................................... -- -- (2,179) (3) Net realized short-term gains, Class A ................................... -- -- -- -- Net realized short-term gains, Class B ................................... -- -- -- -- Net realized short-term gains, Class C ................................... -- -- -- -- Net realized short-term gains, Class I ................................... -- -- -- -- ------- -------- -------- -------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................ (3,593) (7,451) (2,359) (2,013) ------- -------- -------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A .................... (5,258) (524) (29,052) (16,660) Change in net assets from share transactions, Class B .................... (267) (271) -- -- Change in net assets from share transactions, Class C .................... 319 155 66 212 Change in net assets from share transactions, Class I .................... -- -- 26,486 8 ------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................ (5,206) (640) (2,500) (16,440) ------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .................................... (1,880) (2,574) (4,257) (28,455) NET ASSETS Beginning of period ...................................................... 93,164 95,738 32,662 61,117 ------- -------- -------- -------- END OF PERIOD ............................................................ $91,284 $ 93,164 $ 28,405 $ 32,662 ======= ======== ======== ======== Accumulated undistributed net investment income (loss) at end of period .. $ 213 $ 122 $ (1,774) $ 207 See Notes to Financial Statements 58
- ---------------------------- ------------------------------ ---------------------------- MARKET NEUTRAL FUND MULTI-SECTOR FIXED INCOME FUND SENIOR FLOATING RATE FUND - ---------------------------- ------------------------------ ---------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, MARCH 31, 2010 SEPTEMBER 30, (UNAUDITED) 2009 (UNAUDITED) 2009 (UNAUDITED) 2009 - -------------- ------------- -------------- --------------- -------------- ------------- $ (1,000) $ (2,043) $ 6,117 $ 7,746 $ 2,873 $ 1,958 4,623 (795) 2,275 (9,528) 1,343 923 (2,977) 8,585 7,390 24,573 1,683 5,291 -------- -------- --------- --------- -------- -------- 646 5,747 15,782 22,791 5,899 8,172 -------- -------- --------- --------- -------- -------- -- -- (3,430) (6,623) (1,641) (1,919) -- -- (367) (854) -- -- -- -- (1,255) (1,656) (205) (51) -- -- (608) -- (952) (18) -- -- -- -- (551) (56) -- -- -- -- -- -- -- -- -- -- (103) (2) -- -- -- -- (552) (1) -------- -------- --------- --------- -------- -------- -- -- (5,660) (9,133) (4,004) (2,047) -------- -------- --------- --------- -------- -------- (57,429) (50,048) (7,036) 25,286 27,957 32,707 (461) (336) 63 169 -- -- (53) (793) 11,078 19,964 11,736 2,212 72,194 -- 21,000 -- 28,706 137 -------- -------- --------- --------- -------- -------- 14,251 (51,177) 25,105 45,419 68,399 35,056 -------- -------- --------- --------- -------- -------- 14,897 (45,430) 35,227 59,077 70,294 41,181 80,618 126,048 176,618 117,541 56,121 14,940 -------- -------- --------- --------- -------- -------- $ 95,515 $ 80,618 $ 211,845 $ 176,618 $126,415 $ 56,121 ======== ======== ========= ========= ======== ======== $ (1,003) $ (3) $ 680 $ 223 $ 75 $ -- See Notes to Financial Statements 59
VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET ASSET NET CAPITAL GAIN NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT DISTRIBUTIONS REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME RECEIVED FROM UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS) AFFILIATED FUNDS GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------- ALPHASECTOR(SM) ALLOCATION FUND - ------------------------------- CLASS A 10/1/09 to 3/31/10(10) $ 9.56 0.08(2) -- 0.79 0.87 (0.08) -- (0.08) 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 10/1/09 to 3/31/10(10) $ 9.54 0.04(2) -- 0.79 0.83 (0.06) -- (0.06) 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) CLASS I 10/1/09(6) to 3/31/10(10) $ 9.39 0.12(2) -- 0.94 1.06 (0.08) -- (0.08) - ----------------------------- ALPHASECTOR(SM) ROTATION FUND - ----------------------------- CLASS A 10/1/09 to 3/31/10(10) $ 9.34 0.07(2) -- 0.94 1.01 (0.03) -- (0.03) 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 10/1/09 to 3/31/10(10) $ 9.29 0.02(2) -- 0.94 0.96 (0.02) -- (0.02) 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) CLASS I 10/1/09(6) to 3/31/10(10) $ 9.11 0.10(2) -- 1.15 1.25 (0.03) -- (0.03) - ----------------------------- ALTERNATIVES DIVERSIFIER FUND - ----------------------------- CLASS A 10/1/09 to 3/31/10(10) $ 9.43 0.13(2) 0.02(2) 0.36 0.51 (0.18) -- (0.18) 10/1/08 to 9/30/09 10.62 0.13(2) 0.01(2) (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) The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 60
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 - ------------------------------------------------------------------------------------------------------------------------------------ 0.79 $10.35 9.08%(4) $ 20,244 1.04%(3) 1.13%(3) 1.56%(3) 26%(4) (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 0.77 $10.31 8.70%(4) $ 17,808 1.79%(3) 1.88%(3) 0.79%(3) 26%(4) (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 0.98 $10.37 11.27%(4) $ 712 0.84%(3) 0.93%(3) 2.39%(3) 26%(4) 0.98 $10.32 10.81%(4) $156,545 1.03%(3) 1.03%(3) 1.32%(3) 11%(4) (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 0.94 $10.23 10.30%(4) $ 99,152 1.78%(3) 1.78%(3) 0.46%(3) 11%(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 1.22 $10.33 13.72%(4) $ 51,754 0.79%(3) 0.79%(3) 2.01%(3) 11%(4) 0.33 $ 9.76 5.41%(4) $132,182 0.45%(3) 0.72%(3) 2.63%(3) 3%(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) See Notes to Financial Statements 61
VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET ASSET NET CAPITAL GAIN NET TOTAL DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT DISTRIBUTIONS REALIZED AND FROM FROM NET FROM NET BEGINNING INCOME RECEIVED FROM UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) AFFILIATED FUNDS GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS - ------------------------------------------------------------------------------------------------------------------------------------ - ----------------------------------------- ALTERNATIVES DIVERSIFIER FUND (CONTINUED) - ----------------------------------------- CLASS C 10/1/09 to 3/31/10(10) $ 9.34 0.09 0.02(2) 0.35 0.46 (0.14) -- (0.14) 10/1/08 to 9/30/09 10.50 0.07 0.01(2) (1.19) (1.11) (0.05) -- (0.05) 10/1/07 to 9/30/08 11.70 0.02 0.12(2) (1.27) (1.13) (0.07) -- (0.07) 8/1/07 to 9/30/07 11.07 0.02 -- 0.68 0.70 (0.01) (0.06) (0.07) 8/1/06 to 7/31/07 10.58 0.11 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 0.04(2) 0.54 0.61 (0.03) -- (0.03) CLASS I 10/1/09(6) to 3/31/10(10) $ 9.27 0.13 0.02(2) 0.54 0.69 (0.19) -- (0.19) - --------- BOND FUND - --------- CLASS A 10/1/09 to 3/31/10(10) $10.57 0.23 -- 0.17 0.40 (0.22) -- (0.22) 10/1/08 to 9/30/09 9.75 0.42 -- 0.82 1.24 (0.42) -- (0.42) 10/1/07 to 9/30/08 10.21 0.42 -- (0.45) (0.03) (0.43) -- (0.43) 10/1/06 to 9/30/07 10.27 0.44 -- (0.05) 0.39 (0.45) -- (0.45) 10/1/05 to 9/30/06 10.46 0.43 -- (0.06) 0.37 (0.41) (0.15) (0.56) 10/1/04 to 9/30/05 10.63 0.34 -- (0.11) 0.23 (0.34) (0.06) (0.40) CLASS B 10/1/09 to 3/31/10(10) $10.34 0.18 -- 0.17 0.35 (0.18) -- (0.18) 10/1/08 to 9/30/09 9.55 0.34 -- 0.80 1.14 (0.35) -- (0.35) 10/1/07 to 9/30/08 10.01 0.33 -- (0.43) (0.10) (0.36) -- (0.36) 10/1/06 to 9/30/07 10.07 0.35 -- (0.04) 0.31 (0.37) -- (0.37) 10/1/05 to 9/30/06 10.28 0.34 -- (0.06) 0.28 (0.34) (0.15) (0.49) 10/1/04 to 9/30/05 10.44 0.25 -- (0.09) 0.16 (0.26) (0.06) (0.32) CLASS C 10/1/09 to 3/31/10(10) $10.37 0.19 -- 0.16 0.35 (0.18) -- (0.18) 10/1/08 to 9/30/09 9.58 0.34 -- 0.80 1.14 (0.35) -- (0.35) 10/1/07 to 9/30/08 10.04 0.31 -- (0.41) (0.10) (0.36) -- (0.36) 10/1/06 to 9/30/07 10.09 0.35 -- (0.03) 0.32 (0.37) -- (0.37) 10/1/05 to 9/30/06 10.30 0.34 -- (0.06) 0.28 (0.34) (0.15) (0.49) 10/1/04 to 9/30/05 10.46 0.25 -- (0.09) 0.16 (0.26) (0.06) (0.32) CLASS I 10/1/09 to 3/31/10(10) $10.68 0.24 -- 0.18 0.42 (0.24) -- (0.24) 10/1/08 to 9/30/09 9.86 0.45 -- 0.83 1.28 (0.46) -- (0.46) 10/1/07 to 9/30/08 10.32 0.53 -- (0.54) (0.01) (0.45) -- (0.45) 10/1/06 to 9/30/07 10.36 0.46 -- (0.02) 0.44 (0.48) -- (0.48) 10/1/05 to 9/30/06 10.56 0.47 -- (0.08) 0.39 (0.44) (0.15) (0.59) 10/1/04 to 9/30/05 10.73 0.37 -- (0.11) 0.26 (0.37) (0.06) (0.43) - ----------------------- CA TAX-EXEMPT BOND FUND - ----------------------- CLASS A 10/1/09 to 3/31/10(10) $12.29 0.24 -- (0.37) (0.13) (0.24) -- (0.24) 10/1/08 to 9/30/09 11.41 0.47 -- 0.90 1.37 (0.48) (0.01) (0.49) 10/1/07 to 9/30/08 12.09 0.46 -- (0.68) (0.22) (0.46) -- (0.46) 5/1/07 to 9/30/07 12.26 0.19 -- (0.17) 0.02 (0.18) (0.01) (0.19) 5/1/06 to 4/30/07 12.19 0.47 -- 0.18 0.65 (0.48) (0.10) (0.58) 5/1/05 to 4/30/06 12.71 0.49 -- (0.39) 0.10 (0.49) (0.13) (0.62) 5/1/04 to 4/30/05 12.49 0.48 -- 0.30 0.78 (0.47) (0.09) (0.56) CLASS I 10/1/09 to 3/31/10(10) $12.28 0.25 -- (0.37) (0.12) (0.25) -- (0.25) 10/1/08 to 9/30/09 11.41 0.50 -- 0.88 1.38 (0.50) (0.01) (0.51) 10/1/07 to 9/30/08 12.08 0.49 -- (0.67) (0.18) (0.49) -- (0.49) 5/1/07 to 9/30/07 12.25 0.20 -- (0.17) 0.03 (0.19) (0.01) (0.20) 9/29/06(6) to 4/30/07 12.43 0.28 -- (0.06) 0.22 (0.30) (0.10) (0.40) The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 62
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 - ----------------------------------------------------------------------------------------------------------------------------------- 0.32 $ 9.66 4.96%(4) $ 95,116 1.20%(3) 1.47%(3) 1.84%(3) 3%(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) 0.50 $ 9.77 7.40%(4) $ 35,233 0.20%(3) 0.48%(3) 2.73%(3) 3%(4) 0.18 $10.75 3.75%(4) $ 65,800 0.83%(3) 0.92%(3) 4.31%(3) 73%(4) 0.82 10.57 13.12 66,232 0.85 1.01 4.15 274 (0.46) 9.75 (0.49) 23,823 1.12(7) 1.17 4.10 325 (0.06) 10.21 4.09 29,077 1.12 1.12 4.25 266 (0.19) 10.27 3.51 28,022 1.11 1.15 4.21 275 (0.17) 10.46 2.14 29,501 1.15 1.19 3.20 221 0.17 $10.51 3.43%(4) $ 3,336 1.58%(3) 1.67%(3) 3.54%(3) 73%(4) 0.79 10.34 12.23 4,212 1.59 1.75 3.52 274 (0.46) 9.55 (1.23) 4,075 1.87(7) 1.92 3.35 325 (0.06) 10.01 3.26 4,294 1.87 1.87 3.49 266 (0.21) 10.07 2.80 5,459 1.88 2.30 3.43 275 (0.16) 10.28 1.36 6,706 1.90 2.30 2.45 221 0.17 $10.54 3.42%(4) $ 7,490 1.58%(3) 1.67%(3) 3.55%(3) 73%(4) 0.79 10.37 12.19 8,048 1.59 1.75 3.43 274 (0.46) 9.58 (1.14) 2,839 1.86(7) 1.92 3.33 325 (0.05) 10.04 3.25 1,534 1.87 1.87 3.50 266 (0.21) 10.09 2.79 1,401 1.88 3.44 3.41 275 (0.16) 10.30 1.35 2,038 1.90 2.90 2.44 221 0.18 $10.86 3.92%(4) $119,247 0.58%(3) 0.67%(3) 4.56%(3) 73%(4) 0.82 10.68 13.34 144,835 0.59 0.75 4.52 274 (0.46) 9.86 (0.16) 141,830 0.76(7) 0.85 4.38 325 (0.04) 10.32 4.32 52,044 0.87 0.87 4.49 266 (0.20) 10.36 3.84 63,156 0.82 0.82 4.59 275 (0.17) 10.56 2.44 30,126 0.89 0.89 3.45 221 (0.37) $11.92 (1.07)%(4) $ 31,777 0.85%(3) 0.99%(3) 3.98%(3) 3%(4) 0.88 12.29 12.31 33,728 0.85 1.02 4.10 8 (0.68) 11.41 (1.94) 34,197 0.85 1.01 3.82 10 (0.17) 12.09 0.18(4) 39,094 0.88(3) 1.05(3) 3.74(3) 4(4) 0.07 12.26 5.40 42,243 0.87 1.10 3.81 19 (0.52) 12.19 0.71 46,214 1.02(7) 1.28 3.89 8 0.22 12.71 6.48 53,113 1.19 1.19 3.78 11 (0.37) $11.91 (0.95)%(4) $ 26,008 0.60%(3) 0.74%(3) 4.24%(3) 3%(4) 0.87 12.28 12.50 25,624 0.60 0.77 4.35 8 (0.67) 11.41 (1.61) 27,893 0.60 0.76 4.07 10 (0.17) 12.08 0.30(4) 28,277 0.64(3) 0.80(3) 3.99(3) 4(4) (0.18) 12.25 1.79(4) 28,952 0.64(3) 0.79(3) 3.90(3) 19(4) See Notes to Financial Statements 63
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 - -------------------------- CLASS A 10/1/09 to 3/31/10(10) $ 9.97 0.09 0.42 0.51 (0.12) -- (0.12) 0.39 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 CLASS C 10/1/09 to 3/31/10(10) $ 9.95 0.06 0.41 0.47 (0.08) -- (0.08) 0.39 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 10/1/09 to 3/31/10(10) $ 9.96 0.12 0.41 0.53 (0.13) -- (0.13) 0.40 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 10/1/09 to 3/31/10(10) $ 6.67 0.04 0.83 0.87 (0.08) -- (0.08) 0.79 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 10/1/09 to 3/31/10(10) $ 6.00 0.01 0.74 0.75 (0.05) -- (0.05) 0.70 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 10/1/09 to 3/31/10(10) $ 5.97 0.01 0.73 0.74 (0.05) -- (0.05) 0.69 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 10/1/09 to 3/31/10(10) $18.33 0.22 1.60 1.82 (1.55) (0.65) (2.20) (0.38) 3/2/09(6) to 9/30/09 10.00 0.30 8.03 8.33 -- -- -- 8.33 The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 64
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 - ------------------------------------------------------------------------------------------------------------------------------------ $10.36 5.11%(4) $ 39,198 1.31%(3) 1.31%(3) 1.83%(3) 13%(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) $10.34 4.73%(4) $ 7,550 2.06%(3) 2.06%(3) 1.16%(3) 13%(4) 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) $10.36 5.33%(4) $ 41,387 1.07%(3) 1.07%(3) 2.27%(3) 13%(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) $ 7.46 13.09%(4) $ 58,714 1.60%(3)(7) 1.64%(3) 1.16%(3) 40%(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 $ 6.70 12.55%(4) $ 1,327 2.35%(3)(7) 2.39%(3) 0.36%(3) 40%(4) 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 $ 6.66 12.45%(4) $ 908 2.35%(3)(7) 2.39%(3) 0.47%(3) 40%(4) 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 $17.95 10.76%(4) $ 1,795 1.40%(3) 3.79%(3) 2.51%(3) 11%(4) 18.33 83.30(4) 1,586 1.40(3) 9.62(3) 3.68(3) 29(4) See Notes to Financial Statements 65
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 REAL ESTATE SECURITIES FUND (CONTINUED) - ---------------------------------------------- CLASS C 10/1/09 to 3/31/10(10) $18.25 0.15 1.60 1.75 (1.49) (0.65) (2.14) (0.39) 3/2/09(6) to 9/30/09 10.00 0.24 8.01 8.25 -- -- -- 8.25 CLASS I 10/1/09 to 3/31/10(10) $18.36 0.27 1.58 1.85 (1.57) (0.65) (2.22) (0.37) 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 10/1/09 to 3/31/10(10) $13.01 0.01 1.32 1.33 (0.13) (0.32) (0.45) 0.88 4/21/09(6) to 9/30/09 10.00 0.10 2.91 3.01 -- -- -- 3.01 CLASS C 10/1/09 to 3/31/10(10) $12.96 (0.04) 1.33 1.29 (0.10) (0.32) (0.42) 0.87 4/21/09(6) to 9/30/09 10.00 0.06 2.90 2.96 -- -- -- 2.96 CLASS I 10/1/09 to 3/31/10(10) $13.02 0.02 1.34 1.36 (0.15) (0.32) (0.47) 0.89 4/21/09(6) to 9/30/09 10.00 0.11 2.91 3.02 -- -- -- 3.02 - ----------------------------------- GREATER EUROPEAN OPPORTUNITIES FUND - ----------------------------------- CLASS A 10/1/09 to 3/31/10(10) $12.97 0.07 0.91 0.98 (0.15) (0.42) (0.57) 0.41 4/21/09(6) to 9/30/09 10.00 0.12 2.85 2.97 -- -- -- 2.97 CLASS C 10/1/09 to 3/31/10(10) $12.93 -- 0.92 0.92 (0.11) (0.42) (0.53) 0.39 4/21/09(6) to 9/30/09 10.00 0.07 2.86 2.93 -- -- -- 2.93 CLASS I 10/1/09 to 3/31/10(10) $12.98 0.08 0.92 1.00 (0.16) (0.42) (0.58) 0.42 4/21/09(6) to 9/30/09 10.00 0.14 2.84 2.98 -- -- -- 2.98 - --------------- HIGH YIELD FUND - --------------- CLASS A 10/1/09 to 3/31/10(10) $ 3.89 0.16 0.14 0.30 (0.15) -- (0.15) 0.15 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 10/1/09 to 3/31/10(10) $ 3.82 0.14 0.14 0.28 (0.14) -- (0.14) 0.14 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 The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 66
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 - -------------------------------------------------------------------------------------------------------------------------------- $17.86 10.36%(4) $ 226 2.15%(3) 4.53%(3) 1.76%(3) 11%(4) 18.25 82.50(4) 194 2.15(3) 10.45(3) 2.94(3) 29(4) $17.99 10.93%(4) $ 632 1.15%(3) 3.67%(3) 3.05%(3) 11%(4) 18.36 83.60(4) 183 1.15(3) 6.04(3) 3.93(3) 29(4) $13.89 10.42%(4) $ 7,632 1.80%(3) 2.92%(3) 0.13%(3) 20%(4) 13.01 30.10(4) 6,431 1.80(3) 3.78(3) 1.88(3) 26(4) $13.83 10.07%(4) $ 168 2.55%(3) 3.67%(3) (0.56)%(3) 20%(4) 12.96 29.60(4) 130 2.55(3) 4.54(3) 1.12(3) 26(4) $13.91 10.60%(4) $ 144 1.55%(3) 2.67%(3) 0.37%(3) 20%(4) 13.02 30.20(4) 130 1.55(3) 3.54(3) 2.11(3) 26(4) $13.38 7.69%(4) $ 6,946 1.45%(3) 2.57%(3) 1.05%(3) 16%(4) 12.97 29.70(4) 6,236 1.45(3) 3.60(3) 2.38(3) 14(4) $13.32 7.24%(4) $ 139 2.20%(3) 3.27%(3) (0.03)%(3) 16%(4) 12.93 29.30(4) 196 2.20(3) 4.27(3) 1.31(3) 14(4) $13.40 7.87%(4) $ 140 1.20%(3) 2.32%(3) 1.27%(3) 16%(4) 12.98 29.80(4) 130 1.20(3) 3.34(3) 2.63%(3) 14(4) $ 4.04 7.96%(4) $ 88,535 1.32%(3) 1.32%(3) 7.95%(3) 47%(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 $ 3.96 7.50%(4) $ 784 2.07%(3) 2.07%(3) 7.18%(3) 47%(4) 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 See Notes to Financial Statements 67
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 - ------------------------------------------------------------------------------------------------------------------------------------ - --------------------------- HIGH YIELD FUND (CONTINUED) - --------------------------- CLASS C 10/1/09 to 3/31/10(10) $ 3.85 0.14 0.14 0.28 (0.14) -- (0.14) 0.14 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 10/1/09 to 3/31/10(10) $ 6.00 0.03 0.07 0.10 (0.48) -- (0.48) (0.38) 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 10/1/09 to 3/31/10(10) $ 6.00 0.05 0.03 0.08 (0.48) -- (0.48) (0.40) 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 10/1/09 to 3/31/10(10) $ 5.99 0.08 0.03 0.11 (0.48) -- (0.48) (0.37) 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) 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 10/1/09 to 3/31/10(10) $10.50 (0.12) 0.20 0.08 -- -- 0.08 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 The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 68
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 - ------------------------------------------------------------------------------------------------------------------------------------ $3.99 7.44%(4) $ 1,965 2.07%(3) 2.07%(3) 7.23%(3) 47%(4) 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 $5.62 2.09%(4) $ 1,904 1.50%(3) 1.65%(3) 1.16%(3) 9%(4) 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 $5.60 1.74%(4) $ 452 2.25%(3) 2.50%(3) 1.68%(3) 9%(4) 6.00 (6.30) 413 2.25 2.40 4.21 54 6.70 (32.09) 141 2.23 3.00 2.52 8 $5.62 2.28%(4) $26,049 1.25%(3) 1.51%(3) 2.74%(3) 9%(4) 5.99 (5.43) 71 1.25 1.41 4.87 54 6.72 (31.32) 69 1.24 2.16 3.00 8 RATIO OF RATIO OF RATIO OF EXPENSES EXPENSES EXPENSES (EXCLUDING (INCLUDING (INCLUDING DIVIDENDS DIVIDENDS DIVIDENDS AND INTEREST AND INTEREST AND INTEREST ON SHORT SALES ON SHORT SALES ON SHORT SALES RATIO OF NET NET AFTER EXPENSE AFTER EXPENSE BEFORE EXPENSE NET INVESTMENT ASSET ASSETS, WAIVERS AND WAIVERS AND WAIVERS AND INCOME VALUE, END OF REIMBURSEMENTS)(8) REIMBURSEMENTS)(8) REIMBURSEMENTS)(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 - ------------------------------------------------------------------------------------------------------------------------------------ $10.58 0.76%(4) $ 17,497 1.83%(3)(7) 3.46%(3)(7) 3.59%(3) (2.24)%(3) 82%(4) 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 See Notes to Financial Statements 69
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 (CONTINUED) - ------------------------------- CLASS B 10/1/09 to 3/31/10(10) $10.06 (0.16) 0.19 0.03 -- -- 0.03 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 10/1/09 to 3/31/10(10) $10.02 (0.16) 0.19 0.03 -- -- 0.03 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 CLASS I 10/1/09(6) to 3/31/10(10) $10.49 (0.12) 0.21 0.09 -- -- 0.09 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 10/1/09 to 3/31/10(10) $ 9.96 0.33 0.51 0.84 (0.31) -- (0.31) 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 (1.66) (0.98) (0.68) -- (0.68) 11/1/06 to 9/30/07 10.88 0.56 (0.03) 0.53 (0.52) -- (0.52) 11/1/05 to 10/31/06 10.63 0.59 0.21 0.80 (0.55) -- (0.55) 11/1/04 to 10/31/05 11.16 0.59 (0.40) 0.19 (0.72) -- (0.72) 11/1/03 to 10/31/04 10.85 0.69 0.34 1.03 (0.72) -- (0.72) CLASS B 10/1/09 to 3/31/10(10) $ 9.95 0.29 0.51 0.80 (0.27) -- (0.27) 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 70
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 - ------------------------------------------------------------------------------------------------------------------------------------ $10.09 0.30%(4) $ 977 2.58%(3)(7) 4.36%(3)(7) 4.50%(3) (3.14)%(3) 82%(4) 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 $10.05 0.30%(4) $ 4,396 2.58%(3)(7) 4.42%(3)(7) 4.56%(3) (3.16)%(3) 82%(4) 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 $10.58 0.86%(4) $72,645 1.59%(3)(7) 3.52%(3)(7) 3.65%(3) (2.22)%(3) 82%(4) 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 - ------------------------------------------------------------------------------------------------------------------------------------ 0.53 $10.49 8.54%(4) $120,879 1.13%(3) 1.13%(3) 6.54%(3) 34%(4) 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 0.53 $10.48 8.15%(4) $ 14,056 1.88%(3) 1.88%(3) 5.79%(3) 34%(4) 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 71
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 10/1/09 to 3/31/10(10) $10.02 0.30 0.51 0.81 (0.27) -- (0.27) 0.54 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 CLASS I 10/1/09(6) to 3/31/10(10) $ 9.95 0.34 0.52 0.86 (0.32) -- (0.32) 0.54 - ------------------------- SENIOR FLOATING RATE FUND - ------------------------- CLASS A 10/1/09 to 3/31/10(10) $ 9.87 0.34 0.25 0.59 (0.32) (0.19) (0.51) 0.08 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 10/1/09 to 3/31/10(10) $ 9.87 0.29 0.27 0.56 (0.28) (0.19) (0.47) 0.09 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 10/1/09 to 3/31/10(10) $ 9.86 0.30 0.31 0.61 (0.33) (0.19) (0.52) 0.09 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) Due to a change in expense ratio, the ratio shown is a blended expense ratio. (8) The Funds will also indirectly bear their prorated share of expenses of the underlying funds in which they invest. Such expenses are not included in the calculation of this ratio. (9) The amount shown for a share outstanding throughout the period does not accord with the aggregate net loss on investments for the period because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. (10) Unaudited. (11) See Note 3C in the Notes to Financial Statements for information on recapture of expenses previously waived. See Notes to Financial Statements 72
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 - ------------------------------------------------------------------------------------------------------------------------------------ $10.56 8.19%(4) $54,958 1.88%(3) 1.88%(3) 5.79%(3) 34%(4) 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 $10.49 8.77%(4) $21,952 0.88%(3) 0.88%(3) 6.80%(3) 34%(4) $ 9.95 6.24%(4) $82,314 1.20%(3)(11) 1.10%(3)(11) 7.02%(3) 27%(4) 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) $ 9.96 5.94%(4) $14,655 1.95%(3)(11) 1.88%(3)(11) 5.88%(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) $ 9.95 6.49%(4) $29,446 0.95%(3)(11) 0.84%(3)(11) 6.03%(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 73
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 (UNAUDITED) 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 (each a "Fund"), of which 15 are reported in this annual report. Each Fund has a distinct investment objective and 13 Funds are diversified. The Global Real Estate Securities Fund and the International Real Estate Securities Fund are non-diversified Funds. The Funds have the following investment objectives. INVESTMENT OBJECTIVE -------------------- AlphaSector(SM) Allocation Fund long-term capital appreciation and current income. AlphaSector(SM) Rotation Fund seeking long-term capital appreciation. Alternatives Diversifier Fund long-term capital appreciation by investing in a diversified mix of affiliated mutual funds. Bond Fund high total return from both current income and capital appreciation. CA Tax-Exempt Bond Fund 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. Global Infrastructure Fund seeking both capital appreciation and current income. Global Opportunities Fund capital appreciation. Global Real Estate Securities Fund Primary investment objective of long-term capital appreciation, with a secondary investment objective of income. Greater Asia ex Japan Opportunities Fund long-term capital appreciation. Greater European Opportunities Fund long-term capital appreciation. High Yield Fund To seek high current income and a secondary objective of capital growth. International Real Estate Securities Fund Primary investment objective of long-term capital appreciation, with a secondary investment objective of income. Market Neutral Fund To seek long-term capital appreciation while maintaining minimal portfolio exposure to general equity market risk. Multi-Sector Fixed Income Fund maximize current income while preserving capital. Senior Floating Rate Fund high total return from both current income and capital appreciation. THERE IS NO GUARANTEE THAT A FUND WILL ACHIEVE ITS OBJECTIVE. All the Funds offer Class A and Class C shares with the exception of the CA Tax-Exempt Bond Fund which does not offer Class C shares. All Funds with the exception of the Global Opportunities Fund and the High Yield Fund, offer Class I shares. Effective December 1, 2009, Class B shares were no longer available for purchase by new or existing shareholders, except for existing shareholders through Qualifying Transactions (for more information regarding Qualifying Transactions refer to the prospectus). 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 0.50% - 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the funds was modified to be 18 months. In each case, the CDSC period begins on the last day of the month proceeding the month in which the purchase was made. Class B shares are generally sold with a contingent deferred sales charge, which declines from 5% to zero depending on the period of time the shares are held. Class C shares are generally sold with a 1%, or 1.25% for the Market Neutral Fund, contingent deferred sales charge if redeemed within one year of purchase. Class I shares are sold without a sales charge. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class I shares bear no distribution and/or service expenses. Income and other expenses and realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. 74
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that 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 those foreign markets. In such cases, the funds fair value foreign securities using an external pricing service which considers the correlation of the trading patterns of the foreign securities to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange-traded funds and certain indexes, as well as prices for similar securities. 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 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. The Funds have adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Funds to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Funds have determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Funds do not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Funds file tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, 2009, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2006 forward (with limited exceptions). 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. 75
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 foreign 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. 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. Warrants and rights are valued at fair value in accordance with the Board of Trustees' approved fair valuation procedures. EQUITY-LINKED INSTRUMENTS: Equity-linked instruments are investments of various types issued by financial institutions or special purpose entities located in foreign countries. They provide investors with the synthetic economic performance of a referenced equity security including benefits from dividends and other corporate actions, but they do not have certain rights of direct investment in the referenced securities, e.g.: voting rights. In addition to the market and other risks of the referenced equity security, investments in equity-linked instruments expose the Funds to counterparty risk, which includes the risk that the issuing entity may not be able to honor its financial commitment to the Fund. Equity-linked instruments have no guaranteed return of principal and may experience a return different from the referenced equity security. Typically, when the Funds invest in equity-linked instruments they do so in order to obtain exposure to certain countries in which the Funds do not have local accounts. The following is a summary of the Funds' derivative instrument holdings categorized by primary risk exposure as of March 31, 2010 ($ reported in thousands): LOCATION ON THE STATEMENTS OF ASSETS AND LIABILITIES ----------------------------------------------------------------------------- DERIVATIVE TYPE** ASSET DERIVATIVES LIABILITY DERIVATIVES ----------------- ---------------------------------- ---------------------------------- EQUITY CONTRACTS Investment in securities at value -- FOREIGN EXCHANGE CONTRACTS Unrealized appreciation on forward Unrealized depreciation on forward currency contracts currency contracts ASSET DERIVATIVE FAIR VALUE ----------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE MARCH 31, 2010 EQUITY CONTRACTS CONTRACTS ---------------- ------------------ ------------------- Global Opportunities Fund $9,862 $9,844 $ 18 Global Real Estate Securities Fund --(1) --(1) -- Greater Asia ex Japan Opportunities Fund 1,753 1,753 -- Greater European Opportunities Fund 107 -- 107 International Real Estate Securities Fund 5 5 -- (1) Amount is less than $500. 76
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) LIABILITY DERIVATIVE FAIR VALUE ----------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE MARCH 31, 2010 EQUITY CONTRACTS CONTRACTS ---------------- ------------------ ------------------- Global Opportunities Fund $119 $-- $119 Greater Asia ex Japan Opportunities Fund 15 -- 15 Greater European Opportunities Fund 2 -- 2 ** FOR OPEN DERIVATIVES AS OF MARCH 31, 2010 SEE THE SCHEDULES OF INVESTMENTS, WHICH IS ALSO INDICATIVE OF ACTIVITY FOR THE PERIOD ENDED MARCH 31, 2010. DERIVATIVE TYPE LOCATION ON THE STATEMENTS OF OPERATIONS -------------------------- ----------------------------------------------------------------------------- EQUITY CONTRACTS Net realized gain (loss) on investments Net change in unrealized appreciation (depreciation) on investments FOREIGN EXCHANGE CONTRACTS Net realized gain (loss) on foreign currency transactions Net change in unrealized appreciation (depreciation) on foreign currency translation REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ----------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE MARCH 31, 2010 EQUITY CONTRACTS CONTRACTS ---------------- ------------------ ------------------- Global Opportunities Fund $336 $16 $320 Greater Asia ex Japan Opportunities Fund 25 9 16 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ----------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE MARCH 31, 2010 EQUITY CONTRACTS CONTRACTS ---------------- ------------------ ------------------- Global Opportunities Fund $1,373 $1,486 $(113) Global Real Estate Securities Fund --(1) --(1) -- Greater Asia ex Japan Opportunities Fund 464 475 (11) Greater European Opportunities Fund 105 -- 105 International Real Estate Securities Fund 3 3 -- (1) Amount is less than $500. 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. The funds currently hold assignment loans. 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. 77
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) K. SHORT SALES: ($ REPORTED IN THOUSANDS) Certain funds may sell securities short. A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in market price. To sell a security short, the Fund must borrow the security. The Fund's obligation to replace the security borrowed and sold short will be fully collateralized at all times by the proceeds from the short sale retained by the broker and by cash and securities deposited in a segregated account with the Fund's custodian. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will realize a loss, and if the price declines during the period, the Fund will realize a 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 March 31, 2010, the value of securities sold short in the Market Neutral Fund amounted to $(92,181) against which collateral of $139,680 was held. The collateral includes the deposits with broker for securities sold short and the market value of segregated investments held long, as footnoted in the Schedule of Investments and Securities Sold Short. Short selling used in the management of the Fund may accelerate the velocity of potential losses if the prices of securities sold short appreciate quickly. Stocks purchased may decline in value at the same time stocks sold short appreciate in value, thereby increasing potential losses. 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 period ended March 31, 2010, the Fund had net charges of $173 on borrowed securities. Such amounts are included in prime broker interest expense on the statement of operations. L. SECURITY LENDING: Certain Funds may loan securities to qualified brokers through an agreement with Bank of New York Mellon ("BNY Mellon") or PFPC Trust Company ("PFPC"). Under the terms of agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash and securities issued by the U.S. Government. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by BNY Mellon or PFPC for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the declining value of the collateral. At March 31, 2010, the Funds had no securities on loan. M. REPURCHASE AGREEMENTS: Certain Funds may invest in repurchase agreements. A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited. At March 31, 2010, the Funds had no open repurchase agreements. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the Adviser to the Trust. For managing, or directing the management of, the investments of each Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund: 1ST $1 BILLION $1+ BILLION - $2 BILLION $2+ 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 $1 BILLION OVER $1 BILLION -------------- --------------- AlphaSector(SM) Allocation Fund ........................ 0.45%** 0.40%** AlphaSector(SM) Rotation Fund .......................... 0.45 0.40 Bond Fund+ ............................................. 0.45 0.40 Greater Asia ex Japan Opportunities Fund ............... 1.00 0.95 Greater European Opportunities Fund .................... 0.85 0.80 Market Neutral Fund*+ .................................. 1.50 1.40 78
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) For the Fund shown below the individual rate is as follows: Alternatives Diversifier Fund .......................... 0.10% The Adviser manages the Funds' investment programs and general operations of the Funds, including oversight of the Funds' subadvisers. * THE ADVISER HAD VOLUNTARILY AGREED TO WAIVE 0.15% OF ITS MANAGEMENT FEE. THE WAIVER WAS DISCONTINUED ON MARCH 15, 2010. ** THE ADVISER HAS VOLUNTARILY AGREED TO WAIVE 0.09% OF ITS MANAGEMENT FEE ASSOCIATED WITH THE FUND'S FIXED INCOME PORTFOLIO. + EFFECTIVE JANUARY 1, 2010, BREAKPOINTS WERE ADDED TO THE MANAGEMENT FEE STRUCTURE. B. SUBADVISER: The subadvisers manage the investments of the Funds for which they are paid a fee by the Adviser. The subadvisers with respect to the Funds they serve are as follows: FUND SUBADVISER FUND SUBADVISER ---- ---------- ---- ---------- AlphaSector(SM) Allocation Fund F-Squared(6) Greater European Opportunities Fund Vontobel(5) AlphaSector(SM) Rotation Fund F-Squared(6) High Yield Fund SCM(4) Bond Fund SCM(4) International Real Estate Securities Fund DPIM(2) Global Infrastructure Fund DPIM(2) Market Neutral Fund TBCAM(1) Global Opportunities Fund Vontobel(5) Multi-Sector Fixed Income Fund Goodwin(3) Global Real Estate Securities Fund DPIM(2) Senior Floating Rate Fund Goodwin(3) Greater Asia ex Japan Opportunities Fund Vontobel(5) (1) Boston Company Asset Management LLC (The) (4) SCM Advisors** (2) Duff & Phelps Investment Management Co.** (5) Vontobel Asset Management, Inc. (3) Goodwin Capital Advisers, Inc. (6) F-Squared Investments, Inc. ("F-Squared"). F-Squared provides VIA with a proposed asset allocation among ETFs. Final allocations and trading for the funds is conducted by VIA based on F-Squared's recommendations. ** DPIM AND SCM ARE INDIRECT, WHOLLY-OWNED SUBSIDIARIES OF VIRTUS. C. EXPENSE LIMITS AND FEE WAIVERS: The Adviser has voluntarily agreed to limit each Fund's total operating expenses (excluding 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 Global Opportunities Fund(4) ..................... 1.55 2.30 2.30 -- International Real Estate Securities Fund ........ 1.50 -- 2.25 1.25 Market Neutral Fund(1) ........................... 1.90 2.65 2.65 1.65 Senior Floating Rate Fund(3) ..................... 1.20 -- 1.95 0.95 (1) Excluding dividends on short sales and prime brokerage expenses. (2) Excluding 12b-1 fees and acquired fund fees and expenses. (3) Excluding leverage expenses, if any. (4) Effective January 1, 2010. Prior to that, there was no expense limitation. The Adviser had 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. The Adviser has voluntarily agreed to continue the expense limitations. The Adviser may discontinue these voluntary expense caps at any time. 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 79
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under this arrangement, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. Each Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with applicable expense limitations. All or a portion of the following Adviser reimbursed expenses 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 * ADVISER IS CURRENTLY RECAPTURING PREVIOUSLY WAIVED OR REIMBURSED EXPENSES. THE AMOUNTS IN THE ABOVE TABLE DO NOT REFLECT THE AMOUNTS RECAPTURED. D. DISTRIBUTOR: As the distributor of each Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Funds that for the six months (the "period") ended March 31, 2010, it retained Class A net commissions of $258 and deferred sales charges of $1; Class B deferred sales charges of $32; and Class C deferred sales charges of $45. In addition, each Fund pays VP Distributors distribution and/or service fees as a percentage of the average daily net assets of each respective class at the annual rates as follows: Class A shares 0.25%(1); Class B shares 1.00%; Class C shares 1.00%; Class I shares do not have distribution and/or service fees. 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 fee, the CDSC schedule of the original shares purchased continues to apply. (1) THE ALPHASECTOR(SM) ALLOCATION FUND, ALPHASECTOR(SM) ROTATION FUND AND ALTERNATIVES DIVERSIFIER FUNDS INVEST IN ETFS. THE FUNDS WILL NOW BEAR THEIR PROPORTIONATE SHARE OF ANY DISTRIBUTION AND SHAREHOLDER SERVICING FEES OF THE ETFS. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Trust. For the period ended March 31, 2010, VP Distributors received administration fees totaling $395 which is included in the Statement of Operations. A portion of these fees was paid to a sub-administrator for certain accounting and administration services. VP Distributors also serves as the Trust's transfer agent. For the period ended March 31, 2010, VP Distributors received transfer agent fees totaling $800 which is included in the Statements of Operations. A portion of these fees was paid to various outside companies for certain sub-transfer agency services. 80
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) F. AFFILIATED SHAREHOLDERS: At March 31, 2010, 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 SHARES NET ASSET VALUE ---------------- --------------- AlphaSector(SM) Allocation Fund, Class I ........................................... 10,730 $ 111 AlphaSector(SM) Rotation Fund, Class I ........................................... 11,008 114 Alternatives Diversifier Fund, Class C ........................................... 10,993 107 Bond Fund, Class I ........................................... 1,251,160 13,588 Global Real Estate Securities Fund, Class A ........................................... 90,482 1,624 Class C ........................................... 11,277 201 Class I ........................................... 11,321 204 Greater Asian ex Japan Opportunities Fund, Class A ........................................... 10 --(1) Class C ........................................... 10 --(1) Class I ........................................... 10 --(1) Greater European Opportunities Fund, Class A ........................................... 10 --(1) Class C ........................................... 10 --(1) Class I ........................................... 10 --(1) International Real Estate Securities Fund, Class A ........................................... 231,388 1,300 Class C ........................................... 11,561 65 Class I ........................................... 4,629,538 26,018 Market Neutral Fund, Class I ........................................... 4,871,405 51,539 Multi-Sector Fixed Income Fund, Class I ........................................... 10,369 109 Senior Floating Rate Fund, Class I ........................................... 2,635,423 26,222 (1) Amount is less than $500 (not reported in thousands). G. INVESTMENTS IN AFFILIATES: ($ REPORTED IN THOUSANDS) A summary of the Fund of Fund's total long-term and short-term purchases and sales of the shares of the underlying Funds during the period ended March 31, 2010 is as follows: BALANCE BALANCE DISTRIBUTIONS AT AT DIVIDEND OF REALIZED 9/30/09 PURCHASES(1) SALES PROCEEDS 3/31/10 INCOME GAINS --------- ------------ -------------- -------- -------- ------------- ALPHASECTOR(SM) ALLOCATION FUND Bond Fund ........................... $ 8,891 $1,606 $ 1,065) $ 9,582 $ 164 $ 0 -------- ------ ------- -------- ------ --- $ 8,891 $1,606 $(1,065) $ 9,582 $ 164 $ 0 ======== ====== ======= ======== ====== === ALTERNATIVES DIVERSIFIER FUND Global Infrastructure Fund(2) ....... $ 41,383 $ 506 $ 3,984 $ 39,561 $ 506 $ 0 International Real Estate Securities Fund(2) ............................. 30,436 2,171 5,046 25,952 2,171 0 Market Neutral Fund(2) .............. 49,991 1,175 -- 51,539 -- 0 Real Estate Securities Fund(2) ...... 30,661 276 8,332 27,228 276 0 Senior Floating Rate Fund(2) ........ 27,088 1,450 2,556 26,222 911 0 -------- ------ ------- -------- ------ --- $179,559 $5,578 $19,918 $170,502 $3,864 $ 0 ======== ====== ======= ======== ====== === (1) Includes reinvested dividends from income and capital gains distributions. (2) Class A shares exchanged for Class I shares on October 5, 2009. 81
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 March 31, 2010, were as follows: PURCHASES SALES ---------- ---------- Alpha-Sector Allocation Fund .............................. $ 9,374 $ 9,794 Alpha-Sector Rotation Fund ................................ 222,711 17,563 Alternative Diversifier Fund .............................. 8,827 25,193 Bond Fund ................................................. 84,696 82,964 CA Tax-Exempt Bond ........................................ 2,509 1,751 Global Infrastructure Fund ................................ 11,650 10,477 Global Opportunities Fund ................................. 22,890 25,015 Global Real Estate Securities Fund ........................ 694 256 Greater Asia ex Japan Opportunities Fund .................. 1,888 1,408 Greater European Opportunities Fund ....................... 1,150 1,070 High Yield Fund ........................................... 42,765 43,437 International Real Estate Securities Fund ................. 2,683 6,710 Market Neutral Fund ....................................... 64,036 60,098 Multi-Sector Fixed Income Fund ............................ 89,131 62,655 Senior Floating Rate Fund ................................. 87,887 23,988 PURCHASES SHORT SALES TO COVER SHORTS ----------- --------------- Market Neutral Fund ....................................... $74,608 $67,108 Purchases and sales of long term U.S. Government and agency securities for the Funds during the period ended March 31, 2010, were as follows: PURCHASES SALES ---------- ------- Bond Fund ................................................. $70,965 $98,349 Multi-Sector Fixed Income Fund ............................ 1,246 3,270 82
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 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 ---------- --------- ----------------------- ----------------------- ----------------------- Six Months Ended - ----------------------------------------- March 31, 2010 Year Ended ALPHASECTOR(SM) ALLOCATION FUND (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS A Sale of shares 349 $ 3,438 248 $ 2,071 Reinvestment of distributions 12 123 71 582 Shares repurchased (393) (3,858) (720) (6,070) ---------- --------- --------- ---------- Net increase/(decrease) (32) $ (297) (401) $ (3,417) ========== ========= ========= ========== CLASS C Sale of shares 146 $ 1,460 94 $ 772 Reinvestment of distributions 5 54 27 220 Shares repurchased (179) (1,777) (616) (5,104) ---------- --------- --------- ---------- Net increase/(decrease) (28) $ (263) (495) $ (4,112) ========== ========= ========= ========== CLASS I(2) Sale of shares 73 $ 732 -- $ -- Reinvestment of distributions --(1) 1 -- -- Shares repurchased (5) (49) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 68 $ 684 -- $ -- ========== ========= ========= ========== - ----------------------------------------- ALPHASECTOR(SM) ROTATION FUND - ----------------------------------------- CLASS A Sale of shares 12,535 $ 124,150 336 $ 2,733 Reinvestment of distributions 21 212 132 1,049 Plan of Reorganization (See Note 11) -- -- 673 4,920 Shares repurchased (1,427) (13,902) (1,267) (10,433) ---------- --------- --------- ---------- Net increase/(decrease) 11,129 $ 110,460 (126) $ (1,731) ========== ========= ========= ========== CLASS C Sale of shares 6,198 $ 60,844 291 $ 2,307 Reinvestment of distributions 5 54 63 495 Plan of Reorganization (See Note 11) --(1) --(1) 326 2,368 Shares repurchased (834) (8,063) (1,421) (11,463) ---------- --------- --------- ---------- Net increase/(decrease) 5,369 $ 52,835 (741) $ (6,293) ========== ========= ========= ========== CLASS I(2) Sale of shares 5,138 $ 50,539 -- $ -- Reinvestment of distributions --(1) 1 -- -- Shares repurchased (128) (1,257) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 5,010 $ 49,283 -- $ -- ========== ========= ========= ========== (1) Amount less than 500. (2) Inception date for Class I is October 1, 2009. 83
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 ---------- --------- ----------------------- SHARES AMOUNT SHARES AMOUNT ---------- --------- ----------------------- ----------------------- ----------------------- Six Months Ended - ----------------------------------------- March 31, 2010 Year Ended ALTERNATIVES DIVERSIFIER FUND (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS A Sale of shares 3,034 $ 29,294 9,545 $ 79,842 Reinvestment of distributions 246 2,402 208 1,695 Shares repurchased (7,490) (71,717) (17,177) (140,477) ---------- --------- --------- ---------- Net increase/(decrease) (4,210) $ (40,021) (7,424) $ (58,940) ========== ========= ========= ========== CLASS C Sale of shares 996 $ 9,500 2,585 $ 21,666 Reinvestment of distributions 93 899 40 318 Shares repurchased (2,068) (19,698) (4,935) (40,060) ---------- --------- --------- ---------- Net increase/(decrease) (979) $ (9,299) (2,310) $ (18,076) ========== ========= ========= ========== CLASS I(2) Sale of shares 4,224 $ 40,278 -- $ -- Reinvestment of distributions --(1) 3 -- -- Shares repurchased (618) (5,955) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 3,606 $ 34,326 -- $ -- ========== ========= ========= ========== - ----------------------------------------- BOND FUND - ----------------------------------------- CLASS A Sale of shares 226 $ 2,405 799 $ 7,932 Reinvestment of distributions 93 990 136 1,365 Plan of Reorganization (See Note 11) -- -- 5,242 52,917 Shares repurchased (462) (4,929) (2,352) (23,986) ---------- --------- --------- ---------- Net increase/(decrease) (143) $ (1,534) 3,825 $ 38,228 ========== ========= ========= ========== CLASS B Sale of shares 11 $ 110 105 $ 1,008 Reinvestment of distributions 4 42 8 79 Plan of Reorganization (See Note 11) -- -- 95 940 Shares repurchased (105) (1,092) (227) (2,224) ---------- --------- --------- ---------- Net increase/(decrease) (90) $ (940) (19) $ (197) ========== ========= ========= ========== CLASS C Sale of shares 75 $ 787 463 $ 4,507 Reinvestment of distributions 10 102 14 137 Plan of Reorganization (See Note 11) -- -- 201 1,994 Shares repurchased (151) (1,575) (199) (1,924) ---------- --------- --------- ---------- Net increase/(decrease) (66) $ (686) 479 $ 4,714 ========== ========= ========= ========== CLASS I Sale of shares 460 $ 4,964 1,802 $ 18,627 Reinvestment of distributions 263 2,833 533 5,339 Shares repurchased (3,309) (35,965) (3,159) (31,317) ---------- --------- --------- ---------- Net increase/(decrease) (2,586) $ (28,168) (824) $ (7,351) ========== ========= ========= ========== (1) Amount less than 500. (2) Inception date for Class I is October 1, 2009. 84
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 ---------- --------- ----------------------- SHARES AMOUNT SHARES AMOUNT ---------- --------- ----------------------- ----------------------- ----------------------- Six Months Ended - ----------------------------------------- March 31, 2010 Year Ended CA TAX-EXEMPT BOND FUND (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS A Sale of shares 4 $ 43 84 $ 955 Reinvestment of distributions 31 367 69 792 Shares repurchased (113) (1,354) (403) (4,624) ---------- --------- --------- ---------- Net increase/(decrease) (78) $ (944) (250) $ (2,877) ========== ========= ========= ========== CLASS I Sale of shares 152 $ 1,822 417 $ 4,764 Reinvestment of distributions 14 165 32 363 Shares repurchased (68) (818) (807) (9,208) ---------- --------- --------- ---------- Net increase/(decrease) 98 $ 1,169 (358) $ (4,081) ========== ========= ========= ========== - ----------------------------------------- GLOBAL INFRASTRUCTURE FUND - ----------------------------------------- CLASS A Sale of shares 1,014 $ 10,399 3,481 $ 30,659 Reinvestment of distributions 39 412 275 2,518 Shares repurchased (4,999) (49,008) (2,961) (26,968) ---------- --------- --------- ---------- Net increase/(decrease) (3,946) $ (38,197) 795 $ 6,209 ========== ========= ========= ========== CLASS C Sale of shares 157 $ 1,609 547 $ 4,742 Reinvestment of distributions 3 31 8 74 Shares repurchased (52) (536) (103) (967) ---------- --------- --------- ---------- Net increase/(decrease) 108 $ 1,104 452 $ 3,849 ========== ========= ========= ========== CLASS I Sale of shares 4,317 $ 42,019 36 $ 317 Reinvestment of distributions 49 514 1 9 Shares repurchased (405) (4,186) (10) (88) ---------- --------- --------- ---------- Net increase/(decrease) 3,961 $ 38,347 27 $ 238 ========== ========= ========= ========== - ----------------------------------------- GLOBAL OPPORTUNITIES FUND - ----------------------------------------- CLASS A Sale of shares 359 $ 2,518 253 $ 1,470 Reinvestment of distributions 78 547 110 642 Shares repurchased (605) (4,224) (1,652) (9,786) ---------- --------- --------- ---------- Net increase/(decrease) (168) $ (1,159) (1,289) $ (7,674) ========== ========= ========= ========== CLASS B Sale of shares 12 $ 72 59 $ 314 Reinvestment of distributions 2 10 3 15 Shares repurchased (44) (275) (170) (901) ---------- --------- --------- ---------- Net increase/(decrease) (30) $ (193) (108) $ (572) ========== ========= ========= ========== CLASS C Sale of shares 14 $ 87 20 $ 103 Reinvestment of distributions 1 5 1 7 Shares repurchased (8) (53) (55) (273) ---------- --------- --------- ---------- Net increase/(decrease) 7 $ 39 (34) $ (163) ========== ========= ========= ========== 85
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 ---------- --------- --------- ----------- SHARES AMOUNT SHARES AMOUNT ---------- --------- --------- ----------- ----------------------- ----------------------- Six Months Ended From Inception - ----------------------------------------- March 31, 2010 March 2, 2009 to GLOBAL REAL ESTATE SECURITIES FUND (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS A Sale of shares 4 $ 78 87 $ 906 Reinvestment of distributions 11 192 -- -- Shares repurchased (2) (41) --(1) (7) ---------- --------- --------- ---------- Net increase/(decrease) 13 $ 229 87 $ 899 ========== ========= ========= ========== CLASS C Sale of shares 1 $ 12 11 $ 109 Reinvestment of distributions 1 23 -- -- Shares repurchased --(1) --(1) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 2 $ 35 11 $ 109 ========== ========= ========= ========== CLASS I Sale of shares 24 $ 445 10 $ 104 Reinvestment of distributions 4 62 -- -- Shares repurchased (3) (52) --(1) (4) ---------- --------- --------- ---------- Net increase/(decrease) 25 $ 455 10 $ 100 ========== ========= ========= ========== ----------------------- From Inception - ----------------------------------------- April 21, 2009 to GREATER ASIA EX JAPAN OPPORTUNITIES FUND September 30, 2009 - ----------------------------------------- ----------------------- CLASS A Sale of shares 48 $ 643 496 $ 4,977 Reinvestment of distributions 17 229 -- -- Shares repurchased (10) (134) (1) (13) ---------- --------- --------- ---------- Net increase/(decrease) 55 $ 738 495 $ 4,964 ========== ========= ========= ========== CLASS C Sale of shares 2 $ 25 10 $ 100 Reinvestment of distributions --(1) 4 -- -- ---------- --------- --------- ---------- Net increase/(decrease) 2 $ 29 10 $ 100 ========== ========= ========= ========== CLASS I Sale of shares -- $ -- 10 $ 100 Reinvestment of distributions --(1) 5 -- -- ---------- --------- --------- ---------- Net increase/(decrease) --(1) $ 5 10 $ 100 ========== ========= ========= ========== - ----------------------------------------- GREATER EUROPEAN OPPORTUNITIES FUND - ----------------------------------------- CLASS A Sale of shares 17 $ 217 481 $ 4,809 Reinvestment of distributions 21 277 -- -- Shares repurchased --(1) --(1) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 38 $ 494 481 $ 4,809 ========== ========= ========= ========== CLASS C Sale of shares -- $ -- 15 $ 159 Reinvestment of distributions 1 8 -- -- Shares repurchased (5) (66) --(1) --(1) ---------- --------- --------- ---------- Net increase/(decrease) (4) $ (58) 15 $ 159 ========== ========= ========= ========== CLASS I Sale of shares -- $ -- 10 $ 100 Reinvestment of distributions --(1) 6 -- -- Shares repurchased --(1) --(1) -- -- ---------- --------- --------- ---------- Net increase/(decrease) --(1) $ 6 10 $ 100 ========== ========= ========= ========== (1) Amount less than 500. 86
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 ---------- --------- --------- ---------- SHARES AMOUNT SHARES AMOUNT ---------- --------- --------- ---------- ----------------------- ----------------------- Six Months Ended - ----------------------------------------- March 31, 2010 Year Ended HIGH YIELD FUND (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS A Sale of shares 586 $ 2,323 2,754 $ 9,302 Reinvestment of distributions 600 2,376 1,398 4,860 Shares repurchased (2,511) (9,957) (4,232) (14,686) ---------- --------- --------- ---------- Net increase/(decrease) (1,325) $ (5,258) (80) $ (524) ========== ========= ========= ========== CLASS B Sale of shares 12 $ 45 49 $ 177 Reinvestment of distributions 5 19 14 48 Shares repurchased (85) (331) (145) (496) ---------- --------- --------- ---------- Net increase/(decrease) (68) $ (267) (82) $ (271) ========== ========= ========= ========== CLASS C Sale of shares 103 $ 406 160 $ 564 Reinvestment of distributions 9 35 17 59 Shares repurchased (31) (122) (137) (468) ---------- --------- --------- ---------- Net increase/(decrease) 81 $ 319 40 $ 155 ========== ========= ========= ========== - ----------------------------------------- INTERNATIONAL REAL ESTATE SECURITIES FUND - ----------------------------------------- CLASS A Sale of shares 35 $ 209 1,367 $ 5,970 Reinvestment of distributions 27 145 420 1,993 Shares repurchased (5,087) (29,406) (5,485) (24,623) ---------- --------- --------- ---------- Net increase/(decrease) (5,025) $ (29,052) (3,698) $ (16,660) ========== ========= ========= ========== CLASS C Sale of shares 8 $ 47 92 $ 428 Reinvestment of distributions 5 29 3 13 Shares repurchased (2) (10) (47) (229) ---------- --------- --------- ---------- Net increase/(decrease) 11 $ 66 48 $ 212 ========== ========= ========= ========== CLASS I Sale of shares 4,884 $ 28,180 1 $ 5 Reinvestment of distributions 407 2,177 1 3 Shares repurchased (667) (3,871) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 4,624 $ 26,486 2 $ 8 ========== ========= ========= ========== - ----------------------------------------- MARKET NEUTRAL FUND - ----------------------------------------- CLASS A Sale of shares 660 $ 6,975 3,947 $ 40,379 Reinvestment of distributions -- -- -- -- Shares repurchased (6,124) (64,404) (8,995) (90,427) ---------- --------- --------- ---------- Net increase/(decrease) (5,464) $ (57,429) (5,048) $ (50,048) ========== ========= ========= ========== CLASS B Sale of shares 3 $ 27 31 $ 302 Shares repurchased (49) (488) (65) (638) ---------- --------- --------- ---------- Net increase/(decrease) (46) $ (461) (34) $ (336) ========== ========= ========= ========== CLASS C Sale of shares 54 $ 537 137 $ 1,345 Shares repurchased (59) (590) (223) (2,138) ---------- --------- --------- ---------- Net increase/(decrease) (5) $ (53) (86) $ (793) ========== ========= ========= ========== 87
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 ---------- --------- --------- ---------- SHARES AMOUNT SHARES AMOUNT ---------- --------- --------- ---------- ----------------------- ----------------------- Six Months Ended - ----------------------------------------- March 31, 2010 Year Ended MARKET NEUTRAL FUND (CONTINUED) (Unaudited) September 30, 2009 - ----------------------------------------- ----------------------- ----------------------- CLASS I(2) Sale of shares 6,960 $ 73,213 -- $ -- Shares repurchased (97) (1,019) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 6,863 $ 72,194 -- $ -- ========== ========= ========= ========== - ----------------------------------------- MULTI-SECTOR FIXED INCOME FUND - ----------------------------------------- CLASS A Sale of shares 2,439 $ 24,881 5,597 $ 49,548 Reinvestment of distributions 246 2,519 514 4,358 Shares repurchased (3,409) (34,436) (3,479) (28,620) ---------- --------- --------- ---------- Net increase/(decrease) (724) $ (7,036) 2,632 $ 25,286 ========== ========= ========= ========== CLASS B Sale of shares 74 $ 741 258 $ 2,120 Reinvestment of distributions 19 199 54 453 Shares repurchased (86) (877) (276) (2,404) ---------- --------- --------- ---------- Net increase/(decrease) 7 $ 63 36 $ 169 ========== ========= ========= ========== CLASS C Sale of shares 1,477 $ 15,179 3,161 $ 27,293 Reinvestment of distributions 59 605 96 830 Shares repurchased (459) (4,706) (942) (8,159) ---------- --------- --------- ---------- Net increase/(decrease) 1,077 $ 11,078 2,315 $ 19,964 ========== ========= ========= ========== CLASS I(2) Sale of shares 2,742 $ 27,596 -- $ -- Reinvestment of distributions --(1) 3 -- -- Shares repurchased (650) (6,599) -- -- ---------- --------- --------- ---------- Net increase/(decrease) 2,092 $ 21,000 -- $ -- ========== ========= ========= ========== - ----------------------------------------- SENIOR FLOATING RATE FUND - ----------------------------------------- CLASS A Sale of shares 6,727 $ 65,719 3,998 $ 34,119 Reinvestment of distributions 133 1,298 205 1,836 Shares repurchased (3,961) (39,060) (357) (3,248) ---------- --------- --------- ---------- Net increase/(decrease) 2,899 $ 27,957 3,846 $ 32,707 ========== ========= ========= ========== CLASS C Sale of shares 1,194 $ 11,740 249 $ 2,289 Reinvestment of distributions 21 204 4 38 Shares repurchased (21) (208) (13) (115) ---------- --------- --------- ---------- Net increase/(decrease) 1,194 $ 11,736 240 $ 2,212 ========== ========= ========= ========== CLASS I Sale of shares 3,030 $ 29,792 40 $ 365 Reinvestment of distributions 151 1,475 2 18 Shares repurchased (261) (2,561) (27) (246) ---------- --------- --------- ---------- Net increase/(decrease) 2,920 $ 28,706 15 $ 137 ========== ========= ========= ========== (1) Amount less than 500. (2) Inception date for Class I is October 1, 2009. 88
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 6. 10% SHAREHOLDERS As of March 31, 2010, 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 ...................... 20% 1 AlphaSector(SM) Rotation Fund ........................ 10 1 Alternatives Diversifier Fund ........................ 13 1 Bond Fund ............................................ 35 2 CA Tax-Exempt Bond Fund .............................. 31 2 Global Infrastructure Fund ........................... 45 1 Global Real Estate Securities Fund ................... 76 2* Greater Asia ex Japan Opportunities Fund ............. 87 1 Greater European Opportunities Fund .................. 93 1 International Real Estate Securities Fund ............ 91 1* Market Neutral Fund .................................. 76 2* Multi-Sector Fixed Income Fund ....................... 10 1 Senior Floating Rate Fund ............................ 63 4* * 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 March 31, 2010, the Fund was the owner of record of approximately 91% of the International Real Estate Securities Fund, 54% of the Market Neutral Fund, 45% of the Global Infrastructure Fund, and 21% 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 March 31, 2010, the Funds held the following illiquid and restricted securities: MARKET VALUE % OF ACQUISITION ACQUISITION AT NET ASSETS AT DATE COST 3/31/10 3/31/10 ----------- ----------- ------------ ------------- Bond Fund --------- DLJ Mortgage Acceptance Corp. 96-M, 1 (Principal Only) 144A 0.000%, 9/18/11 ............................. 4/28/04 $ 2 $ 2 0.0% 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. 89
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 March 31, 2010, certain Funds held securities issued by various companies in specific sectors or countries as detailed below: PERCENTAGE OF TOTAL FUND SECTOR INVESTMENTS ----------------------------------- -------------------------- ------------------- Global Infrastructure Fund Telecommunication Services 31% Utilities 30 Global Opportunities Fund Consumer Staples 40 Greater European Opportunities Fund Consumer Staples 35 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 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 February 25, 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 $70,731. The shareholders of the Wealth Accumulator Fund received for each share owned approximately 0.87 and 0.87, respectively, of Class A and Class C shares of the same class of the AlphaSector(SM) Rotation Fund. 12. EXEMPTIVE ORDER On June 5, 2006, the SEC issued an order under Section 12(d) (1) (J) of the Investment Company Act ("1940 Act") granting an exemption from Sections 12(d) (1) (A) and (B) of the 1940 Act and under Sections 6(c) and 17(b) of the 1940 Act granting an exemption from Section 17(a) of the 1940 Act, which permits the Trust to invest in other affiliated and unaffiliated funds, including exchange-traded funds. 90
VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 13. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At March 31, 2010, 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 $ 2,827 $ (163) $ 2,664 AlphaSector(SM) Rotation Fund ............... 287,451 16,572 (702) 15,870 Alternatives Diversifier Fund ............... 277,871 36,040 (51,714) (15,674) Bond Fund ................................... 186,980 8,739 (996) 7,743 CA Tax-Exempt Bond Fund ..................... 56,675 2,830 (1,716) 1,114 Global Infrastructure Fund .................. 88,236 6,053 (6,285) (232) Global Opportunities Fund ................... 48,470 12,302 (60) 12,242 Global Real Estate Securities Fund .......... 1,870 913 (149) 764 Greater Asia ex Japan Opportunities Fund .... 6,230 1,958 (40) 1,918 Greater European Opportunities Fund ......... 5,595 1,518 (46) 1,471 High Yield Fund ............................. 90,112 5,967 (5,434) 533 International Real Estate Securities Fund ... 31,050 4,518 (7,307) (2,789) Market Neutral Fund (Long positions) ........ 79,812 17,519 (3,545) 13,974 Market Neutral Fund (Short positions) ....... (83,885) 2,135 (10,431) (8,296) Multi-Sector Fixed Income Fund .............. 201,673 15,022 (4,660) 10,362 Senior Floating Rate Fund ................... 135,751 6,463 (420) 6,043 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. 14. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements." ASU 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, and other required disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures. 15. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available for issuance, and has determined that the following subsequent event requires recognition or disclosure in the financial statements. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Trust with immediate effect. 91
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES The Board of Trustees of the Trust, along with the Boards of With respect to the sub-advisory Agreements, the Board noted Trustees of the other trusts in the Virtus Mutual Funds family that each full-service subadviser(2) provided portfolio of funds (collectively, the "Board"), are responsible for management, compliance with the respective Fund's investment determining whether to approve the establishment and policies and procedures, compliance with applicable securities continuation of each investment advisory and sub-advisory laws and assurances thereof. In considering the renewal of the agreement (each, an "Agreement") applicable to the Virtus Mutual sub-advisory Agreements, therefore, the Board considered each Funds (collectively, the "Funds"). At meetings held on November subadviser's investment management process, including (a) the 17-19, 2009, the Board, including a majority of the independent experience, capability and integrity of the subadviser's Trustees, considered and approved the continuation of each management and other personnel committed by the subadviser to Agreement, as further discussed below. In approving each its respective Fund(s); (b) the financial position of the Agreement, the Board determined that the continued retention of subadviser; (c) the quality and commitment of the subadviser's the applicable adviser or subadviser was in the best interests regulatory and legal compliance policies, procedures and of the Funds and their shareholders. The Trustees considered systems; and (d) the subadviser's brokerage and trading each Fund separately, though they also collectively took into practices. account those interests that all the Funds had in common. After considering all of the information provided to them, the In reaching their decisions, the Board considered information Trustees concluded that the nature, extent and quality of the furnished throughout the year at regular Board meetings as well services provided by VIA and each subadviser were reasonable and as information prepared specifically in connection with the beneficial to the Funds and their shareholders. annual review process. During the review process, the Board received assistance and advice from, and met separately with, INVESTMENT PERFORMANCE independent legal counsel. The Board's determination contemplated a number of factors that the Trustees believed, in The Board placed significant emphasis on its consideration of light of the legal advice furnished to them as well as their own the investment performance of the Funds, in view of its business judgment, to be relevant. Some of the factors that the importance to shareholders, and evaluated Fund performance in Board considered are described below, although the Trustees did the context of the special considerations that a not identify any particular information or factor as controlling manager-of-managers structure requires. The Board also but instead considered the Agreements in the totality of the considered that VIA continued to be proactive in seeking to circumstances. Each individual Trustee may have evaluated the replace and/or add subadvisers as necessary, with a view toward information presented differently, giving different weights to improving Fund performance over the long term. different factors. While consideration was given to performance reports and NATURE, EXTENT AND QUALITY OF SERVICES discussions at Board meetings throughout the year, particular attention in assessing such performance was given to a report The majority of the Funds(1) are managed using a "manager of (the "Lipper Report") for the Funds prepared by Lipper Inc. managers" structure that generally involves the use of one or ("Lipper") and furnished specifically for the contract renewal more subadvisers to manage some or all of a Fund's portfolio. process. (Lipper is an independent provider of investment Under this structure, Virtus Investment Advisers, Inc. ("VIA") company data retained by the Funds for this purpose.) The Lipper is responsible for evaluating and selecting subadvisers on an Report presented each Fund's short-term and long-term ongoing basis and making any recommendations to the Board performance relative to a peer group of other mutual funds and regarding hiring, retaining or replacing subadvisers. In relevant benchmarks, as selected by Lipper. The Board considered considering the Agreement with VIA, therefore, the Trustees the composition of each peer group, selection criteria and the considered VIA's process for supervising and managing the Funds' appropriateness of the benchmark used for each Fund. The Board subadvisers, including (a) VIA's ability to select and monitor also assessed each Fund's performance in the context of its the subadvisers; (b) VIA's ability to provide the services review of the fees and expenses of each Fund as well as VIA's necessary to monitor the subadvisers' compliance with the Funds' profitability. respective investment objectives, policies and restrictions as well as provide other oversight activities; and (c) VIA's The Board noted that while many of the Funds had generally ability and willingness to identify instances in which a performed in line with their respective benchmarks and peer subadviser should be replaced and to carry out the required groups during the periods measured, some of the Funds had changes. The Trustees also considered: (d) the experience, underperformed in comparison with their respective benchmarks capability and integrity of VIA's management and other and/or peer groups. Where significant, the Board extensively personnel; (e) the financial position of VIA; (f) the quality of considered the performance of the underperforming Funds and the VIA's own regulatory and legal compliance policies, procedures reasons for the performance issues. The Board discussed the and systems; (g) the nature, extent and quality of possible reasons for the underperformance with VIA, and spoke administrative and other services provided by VIA to the Funds; with representatives from VIA regarding plans to monitor and and (h) VIA's supervision of the Funds' other service providers. address performance issues during the coming year. Finally, the Board also noted the extent of benefits that are provided to Fund shareholders as a result of being part of the The Board ultimately determined, within the context of all of family of Virtus Mutual Funds, including the right to exchange its considerations in connection with the Agreements, that the investments between Funds within the same class without a sales Funds' overall investment performance was reasonable, and charge, the ability to reinvest Fund dividends into other Funds concluded that VIA's and each subadviser's performance record and the right to combine holdings in other Funds to obtain a and process in managing the Funds merited approval of the reduced sales charge. continuation of the Agreements. However, the Board noted that certain Funds' - ---------- (1) DURING THE PERIOD BEING REPORTED, THE ONLY FUNDS THAT DID NOT EMPLOY A MANAGER OF MANAGERS STRUCTURE WERE VIRTUS GROWTH & INCOME FUND, WHICH IS A SERIES OF VIRTUS EQUITY TRUST; AND VIRTUS ALTERNATIVES DIVERSIFIER FUND AND VIRTUS CA TAX-EXEMPT BOND FUND, EACH OF WHICH IS A SERIES OF VIRTUS OPPORTUNITIES TRUST. VIA ACTED AS THE ADVISER FOR THESE FUNDS WITHOUT EMPLOYING A SUBADVISER, AND THE BOARD CONSIDERED THE VIA AGREEMENT WITH RESPECT TO THESE FUNDS IN THAT CONTEXT. (2) F-SQUARED INVESTMENTS, INC. IS THE SUB-ADVISER TO VIRTUS ALPHASECTOR(SM) ALLOCATION FUND AND VIRTUS ALPHASECTOR(SM) ROTATION FUND BUT PROVIDES LIMITED SERVICES IN THIS ROLE. THE BOARD CONSIDERED BOTH THE VIA AGREEMENT AND THE APPLICABLE SUB-ADVISORY AGREEMENT IN THIS CONTEXT. 92
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) performance would continue to be closely monitored and it addition, the Board noted that as part of the contract renewal expected that if performance over a longer period of time did process, it had voted for the advisory fees for certain of the not improve the adviser would recommend that the subadviser be Funds to be changed from flat fees to fees containing replaced in a timely manner. breakpoints and that such changes would reduce the fees paid by the Funds to VIA.(3) It was noted by the Board that Fund PROFITABILITY Management had represented that with respect to such fee changes, VIA would not reduce the quality or quantity of its The Board also considered the level of profits realized by VIA services, and that its obligations would remain the same in all and its affiliates in connection with the operation of the respects. Finally, the Board also noted that several of the Funds. In this regard, the Board reviewed the analysis presented Funds had fee waivers and/or expense caps in place to limit the regarding the overall profitability of VIA for its management of total expenses incurred by the Funds and their shareholders. the Virtus Mutual Funds, as well as its profits and those of its Based upon the information presented by VIA and Lipper, the affiliates for managing and providing other services to each Trustees then determined, in the exercise of their business Fund. In addition to the fees paid to VIA and its affiliates, judgment, that the management fees charged by VIA and the total the Trustees considered any other benefits derived by VIA or its expenses of the Funds were reasonable, both on an absolute basis affiliates from their relationship with the Funds. Specific and in comparison with the fees and expenses of other funds in attention was paid to the methodology used to allocate costs to each Fund's peer group and the industry at large. each Fund, in recognition of the fact that allocation methodologies are inherently subjective and various allocation The Board did not receive comparative fee information relating methodologies may each be reasonable while producing different specifically to sub-advisory fees, in light of the fact that the results. In this regard, the Board noted that the allocations sub-advisory fees are paid by VIA and not by the Funds, so that appeared reasonable, and concluded that the profitability to VIA Fund shareholders are not directly impacted by those fees. from each Fund was reasonable in light of the quality of all services rendered to the Funds by VIA and its affiliates. ECONOMIES OF SCALE The Board did not separately review profitability information The Board noted that the management fees for several of the for each subadviser, noting that the sub-advisory fees are paid Funds included breakpoints based on assets under management, and by VIA rather than the Funds, so that Fund shareholders are not that fee waivers and/or expense caps were also in place for directly impacted by those fees. several of the Funds. The Board determined that VIA and the Funds likely would achieve certain economies of scale, MANAGEMENT FEES AND TOTAL EXPENSES particularly in relationship to certain fixed costs, and that shareholders of the Funds would have an opportunity to benefit In evaluating the management fees and total expenses of each from these economies of scale. Fund, the Board reviewed information provided by VIA and comparisons to other funds in each Fund's peer group as In considering the sub-advisory Agreements, the Board also presented in the Lipper Report. The Board noted that certain considered the existence of any economies of scale and whether Funds had higher gross expenses when expressed as a percentage they would be passed along to the Funds' shareholders, but noted of net assets than those of such Funds' larger peers, which the that any such economies would likely be generated at the Fund Trustees considered in the context of these Funds' expectations level rather than at the subadviser level. for future growth. In - ---------- (3) DURING THE PERIOD BEING REPORTED, THE ONLY FUNDS THAT HAD SUCH CHANGES WERE VIRTUS MID-CAP VALUE FUND AND VIRTUS SMALL-CAP CORE FUND, EACH A SERIES OF VIRTUS EQUITY TRUST; VIRTUS BALANCED ALLOCATION FUND, VIRTUS CORE EQUITY FUND, VIRTUS EMERGING MARKETS OPPORTUNITIES FUND, VIRTUS SHORT/INTERMEDIATE BOND FUND AND VIRTUS VALUE EQUITY FUND, EACH A SERIES OF VIRTUS INSIGHT TRUST; AND, VIRTUS BOND FUND AND VIRTUS MARKET NEUTRAL FUND, EACH A SERIES OF VIRTUS OPPORTUNITIES TRUST. 93
VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Nancy G. Curtiss, Senior Vice President VP Distributors, Inc. Francis G. Waltman, Senior Vice President 100 Pearl Street Marc Baltuch, Vice President and Hartford, CT 06103-4506 Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer CUSTODIANS and Treasurer The Bank of New York Mellon Kevin J. Carr, Vice President, Chief Legal One Wall Street Officer, Counsel and Secretary New York, NY 10286 PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19153-3111 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 LOGO) PRSRT STD U.S. POSTAGE c/o State Street Bank and Trust Company PAID P.O. Box 8301 LANCASTER, Boston, MA 02266-8301 PA PERMIT 1793 For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or Virtus.com. 8022 4-10 SEMIANNUAL (VIRTUS MUTUAL FUNDS LOGO) REPORT ================================================================================================================================== Virtus Foreign Opportunities Fund - ---------------------------------------------------------------------------------------------------------------------------------- TRUST NAME: March 31, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST 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 Disclosure of Fund Expenses ................................................................................................. 2 Schedule of Investments ..................................................................................................... 4 Statement of Assets and Liabilities ......................................................................................... 8 Statement of Operations ..................................................................................................... 9 Statement of Changes in Net Assets .......................................................................................... 10 Financial Highlights ........................................................................................................ 12 Notes to Financial Statements ............................................................................................... 14 Consideration of Advisory and Sub-advisory Agreements by the Board of Trustees .............................................. 22 - ---------------------------------------------------------------------------------------------------------------------------------- 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 Dear Fellow Shareholders of Virtus Mutual Funds: The first quarter of 2010 gave investors a taste of the kind of volatility that could be in store for some time. The quarter began with a 9 percent correction in the S&P 500(R) Index from mid-January to early February 5, followed by a resumption of 2009's bull market. The major indices were up more than 4 percent for the quarter and by the end of March, both the Dow Jones Industrial Average(SM) and the S&P 500 Index were up more than 65 percent from their lows on March 9, 2009. Surprisingly robust consumer spending and corporate earnings continued to support the transition of the U.S. economy out of recession toward modest growth. Unfortunately, there are some dark clouds on the horizon that may temper investors' optimism. The economy must navigate the long term impact of the unprecedented government spending to revive the global economy. Significant headwinds remain for investors, as evidenced by the current underperformance of the Chinese equity market, the solvency crisis in the Eurozone and persistently high unemployment rates in the U.S. and abroad. We believe this volatility is a reminder that investors should rely on the discipline and focus of professional investment managers and financial advisors. Ask your financial advisor to review your portfolio to ensure it reflects your current investment objectives, your tolerance for risk, and your long-term financial goals. As your advisor reviews your portfolio, we hope you will consider the wide range of equity, fixed income and alternative funds that Virtus offers. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our affiliated managers and subadvisers, we look forward to continuing to serve all your investment needs. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds MAY 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 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. 1
VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 We believe it is important for you to understand the impact HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Foreign Opportunities The second section of the accompanying table provides Fund (the "Fund") you may incur two types of costs: (1) information about hypothetical account values and hypothetical transaction costs, including sales charges on purchases of Class expenses based on the Fund's actual expense ratio and an A shares and contingent deferred sales charges on Class C assumed rate of return of 5% per year before expenses, which is shares; and (2) ongoing costs, including investment advisory not your Fund's actual return. The hypothetical account values fees; distribution and service fees; and other expenses. Class I and expenses may not be used to estimate the actual ending shares are sold without a sales charge and do not incur account balance or expenses you paid for the period. You may distribution and service fees. These examples are intended to use this information to compare the ongoing costs of investing help you understand your ongoing costs (in dollars) of investing in your Fund and other funds. To do so, compare these 5% in the Fund and to compare these costs with the ongoing costs of hypothetical examples with the 5% hypothetical examples that investing in other mutual funds. These examples are based on an appear in the shareholder reports of the other funds. investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Please note that the expenses shown in the accompanying Table illustrates your fund's costs in two ways. table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or ACTUAL EXPENSES contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing The first section of the accompanying table provides ongoing costs only, and will not help you determine the information about actual account values and actual expenses. You relative total costs of owning different funds. In addition, if may use the information in this section, together with the these transactional costs were included, your costs would have amount you invested, to estimate the expenses that you paid over been higher. The calculations assume no shares were bought or the period. Simply divide your account value by $1,000 (for sold during the period. Your actual costs may have been higher example, an $8,600 account value divided by $1,000 = 8.6), then or lower, depending on the amount of your investment and the multiply the result by the number given for your fund under the timing of any purchases or redemptions. heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. 2
VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 EXPENSE TABLE - ---------------------------------------------------------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During October 1, 2009 March 31, 2010 Ratio Period* - ---------------------------------------------------------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,086.50 1.44% $ 7.49 Class C 1,000.00 1,082.30 2.20 11.42 Class I 1,000.00 1,088.10 1.20 6.25 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.66 1.44 7.27 Class C 1,000.00 1,013.82 2.20 11.11 Class I 1,000.00 1,018.87 1.20 6.06 * 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 (182) 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. 3
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ------------------------------------------------------------------------------- Asset Allocations ----------------- The following table presents the portfolio holdings within certain sectors as a percentage of total investments at March 31, 2010. Consumer Staples 41% Health Care 17 Financials 15 Utilities 10 Energy 6 Industrials 5 Information Technology 3 Other (includes short-term investments) 3 --- Total 100% === ------------------------------------------------------------------------------- ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- ---------- ---------- ---------- PREFERRED STOCK--2.5% CONSUMER STAPLES--CONTINUED Nestle S.A. Registered Shares 979,500 $ 50,164 CONSUMER STAPLES--1.4% Philip Morris International, Inc. 1,149,188 59,942 Companhia de Bebidas das Americas ADR Reckitt Benckiser Group plc 677,717 37,198 Pfd. 3.50% 189,328 $ 17,354 Shoppers Drug Mart Corp. 390,614 16,784 ---------- Souza Cruz SA 568,311 19,871 Tesco plc 5,669,939 37,467 UTILITIES--1.1% Woolworths Ltd. 1,297,937 33,349 AES Tiete SA Pfd. ---------- 12.580% 1,189,315 12,988 471,148 - --------------------------------------------------------------- ---------- TOTAL PREFERRED STOCK ENERGY--6.1% (IDENTIFIED COST $21,458) 30,342 BG Group plc 472,357 8,175 - --------------------------------------------------------------- Canadian Natural Resources Ltd. 275,981 20,426 COMMON STOCKS--96.2% Core Laboratories N.V. 159,420 20,852 Total SA 406,238 23,583 CONSUMER DISCRETIONARY--1.6% ---------- Nitori Co., Ltd. 253,950 19,286 73,036 ---------- ---------- CONSUMER STAPLES--39.1% FINANCIALS--15.4% British American Tobacco plc 1,797,321 61,953 Amlin plc 2,648,023 15,595 Coca-Cola Amatil Ltd. 998,102 10,304 Cetip SA-Balcao Organizado de Ativos e Colruyt SA 72,344 17,808 Derivativos 692,507 5,666 Diageo plc 1,504,817 25,256 HDFC Bank Ltd. 1,410,250 60,735 Hindustan Unilever Ltd. 2,470,630 13,183 Housing Development Finance Corp. 827,194 50,065 Imperial Tobacco Group plc 1,729,110 52,741 ITC Ltd. 3,462,289 20,286 Lindt & Spruengli AG 2,562 6,062 Nestle India Ltd. 147,288 8,780 See Notes to Financial Statements 4
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- ---------- ---------- ---------- FINANCIALS--CONTINUED UTILITIES--9.0% Muenchener Rueckversicherungs- CPFL Energia SA 564,700 $ 11,333 Gesellschaft AG Registered Shares 114,057 $ 18,509 Enagas S.A. 1,370,150 30,026 Power Corp. of Canada 440,076 13,285 Red Electrica Corp. S.A. 383,090 20,560 QBE Insurance Group Ltd. 1,123,051 21,467 RWE AG 150,980 13,377 ---------- Scottish & Southern Energy plc 721,618 12,057 185,322 Terna Rete Elettrica ---------- Nazionale S.p.A. 4,940,000 21,368 HEALTH CARE--17.2% ---------- Cie Generale D'optique 108,721 Essilor International SA 346,954 22,151 --------------------------------------------------------------- Cipla Ltd. 2,226,847 16,783 TOTAL COMMON STOCKS Covidien plc 534,536 26,876 (IDENTIFIED COST $952,323) 1,158,854 Novartis AG Registered --------------------------------------------------------------- Shares 562,906 30,404 TOTAL LONG TERM INVESTMENTS--98.7% Novo Nordisk A/S (IDENTIFIED COST $973,781) 1,189,196 Class B 582,817 45,225 --------------------------------------------------------------- Roche Holding AG SHORT-TERM INVESTMENTS--1.0% Registered Shares 271,760 44,073 MONEY MARKET MUTUAL FUNDS--1.0% Synthes, Inc. 177,767 22,187 Dreyfus Cash ---------- Management Fund - 207,699 Institutional Shares ---------- (seven-day effective yield 0.070%) 11,931,433 11,931 INDUSTRIALS--5.1% --------------------------------------------------------------- Bharat Heavy Electricals Ltd. 171,136 9,113 TOTAL SHORT-TERM INVESTMENTS Capita Group plc/The 1,817,824 20,868 (IDENTIFIED COST $11,931) 11,931 De La Rue plc 917,140 12,895 --------------------------------------------------------------- G4S plc 1,703,184 6,759 TOTAL INVESTMENTS--99.7% Secom Co. Ltd. 271,100 11,860 (IDENTIFIED COST $985,712) 1,201,127(1) ---------- Other assets and liabilities, net--0.3% 4,019 61,495 ---------- ---------- NET ASSETS--100.0% $1,205,146 INFORMATION TECHNOLOGY--2.7% ========== Cielo SA 1,554,000 14,759 FOOTNOTE LEGEND: Redecard SA 939,860 17,388 ---------- (1) Federal Income Tax Information: For tax information at 32,147 March 31, 2010, see Note 9 Federal Income Tax Information ---------- in the Notes to Financial Statements. See Notes to Financial Statements 5
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) COUNTRY WEIGHTINGS as of March 31, 2010+ KEY INVESTMENT TERMS - --------------------------------------------------------------- ADR (AMERICAN DEPOSITARY RECEIPT) United States (includes short-term investments) 30% Represents shares of foreign companies traded in U.S. dollars on India 15 U.S. exchanges that are held by a U.S. bank or trust. Foreign Switzerland 13 companies use ADRs in order to make it easier for Americans to buy Brazil 8 their shares. Australia 6 Spain 4 SPONSORED ADR Other 24 (AMERICAN DEPOSITARY RECEIPT) - --------------------------------------------------------------- An ADR which is issued with the cooperation of the company whose Total 100% 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. + % of total investments as of March 31, 2010. exchange such as the NYSE. See Notes to Financial Statements 6
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) At March 31, 2010, 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 13,939 USD 12,407 6/10/10 $ 12,687 $ (280) CHF 11,175 USD 10,722 6/10/10 10,605 117 CHF 19,682 USD 19,239 6/10/10 18,677 562 EUR 4,691 USD 6,581 6/10/10 6,336 245 EUR 7,023 USD 10,026 6/10/10 9,486 540 EUR 8,576 USD 11,611 6/10/10 11,583 28 EUR 9,135 USD 13,069 6/10/10 12,339 730 EUR 17,543 USD 25,846 6/10/10 23,695 2,151 EUR 12,818 USD 17,102 9/27/10 17,311 (209) GBP 95,963 USD 142,760 9/27/10 145,471 (2,711) ------- $ 1,173 ======= FOREIGN CURRENCIES: AUD Australian Dollar CHF Swiss Franc EUR Euro GBP United Kingdom Pound Sterling USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Value Level 2 - at Level 1 - Significant March 31, Quoted Observable 2010 Prices Inputs ----------- ---------- ----------- INVESTMENTS IN SECURITIES Equity Securities: Common Stocks $1,158,854 $1,158,854 $ -- Preferred Stocks 30,342 30,342 -- Short-Term Investments 11,931 11,931 -- ---------- ---------- ------- Total Investments $1,201,127 $1,201,127 $ -- ========== ========== ======= Other Financial Instruments: Assets: Forward Currency Contracts(1) $ 4,373 $ -- $ 4,373 ========== ========== ======= Liabilities: Forward Currency Contracts(1) $ (3,200) $ -- $(3,200) ========== ========== ======= There are no Level 3 (significant unobservable inputs) priced securities. (1) Valued at the unrealized appreciation (depreciation) on the investment. See Notes to Financial Statements 7
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2010 (UNAUDITED) (Amounts reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) ................................................................. $ 1,201,127 Foreign currency at value(2) ......................................................................... 109 Receivables Investment securities sold ........................................................................ 3,154 Fund shares sold .................................................................................. 2,340 Dividends and interest ............................................................................ 8,592 Tax reclaims ...................................................................................... 1,665 Unrealized appreciation on forward currency contracts ................................................ 4,373 Prepaid expenses ..................................................................................... 100 ----------- Total assets ................................................................................... 1,221,460 ----------- LIABILITIES Payables Fund shares repurchased ........................................................................... 1,825 Investment securities purchased ................................................................... 7,433 Foreign capital gain taxes payable ................................................................ 2,181 Investment advisory fee ........................................................................... 862 Distribution and service fees ..................................................................... 169 Administration fee ................................................................................ 86 Transfer agent fees and expenses .................................................................. 296 Trustees' fee and expenses ........................................................................ 15 Professional fee .................................................................................. 27 Other accrued expenses ............................................................................ 220 Unrealized depreciation on forward currency contracts ................................................ 3,200 ----------- Total liabilities .............................................................................. 16,314 ----------- NET ASSETS ........................................................................................... $ 1,205,146 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ..................................................... $ 1,376,859 Accumulated undistributed net investment income (loss) ............................................... 5,898 Accumulated undistributed net realized gain (loss) ................................................... (392,106) Net unrealized appreciation (depreciation) on investments ............................................ 214,495 ----------- NET ASSETS ........................................................................................... $ 1,205,146 =========== CLASS A Net asset value (net assets/shares outstanding) per share ............................................ $ 20.79 Maximum offering price per share NAV/(1-5.75%) ....................................................... $ 22.06 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................. 24,802,346 Net Assets ........................................................................................... $ 515,552 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ......................... $ 20.63 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................. 3,402,710 Net Assets ........................................................................................... $ 70,182 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ......................... $ 20.81 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ................. 29,761,738 Net Assets ........................................................................................... $ 619,412 (1) Investment in securities at cost ................................................................. $ 985,712 (2) Foreign currency at cost ......................................................................... $ 107 See Notes to Financial Statements 8
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) INVESTMENT INCOME Dividends ......................................................................................... $ 18,450 Interest .......................................................................................... 5 Foreign taxes withheld ............................................................................ (1,071) ----------- Total investment income ........................................................................ 17,384 ----------- EXPENSES Investment advisory fees .......................................................................... 4,999 Service fees, Class A ............................................................................. 624 Distribution and service fees, Class C ............................................................ 351 Administration fees ............................................................................... 506 Transfer agent fees and expenses .................................................................. 906 Custodian fees .................................................................................... 308 Printing fees and expenses ........................................................................ 72 Registration fees ................................................................................. 63 Trustees' fee and expenses ........................................................................ 47 Professional fees ................................................................................. 45 Miscellaneous expenses ............................................................................ 82 ----------- Total expenses ................................................................................. 8,003 ----------- NET INVESTMENT INCOME (LOSS) ......................................................................... 9,381 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........................................................... 2,434 Net realized gain (loss) on foreign currency transactions ......................................... 1,298 Net change in unrealized appreciation (depreciation) on investments ............................... 80,328 Net change in unrealized appreciation (depreciation) on foreign currency translation .............. 2,508 ----------- NET GAIN (LOSS) ON INVESTMENTS ....................................................................... 86,568 ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 95,949 =========== See Notes to Financial Statements 9
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands) Six Months Ended March 31, 2010 Year Ended (Unaudited) September 30, 2009 ---------------- ------------------ FROM OPERATIONS Net investment income (loss) .......................................................... $ 9,381 $ 19,216 Net realized gain (loss) .............................................................. 3,732 (276,330) Net change in unrealized appreciation (depreciation) .................................. 82,836 206,917 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. 95,949 (50,197) ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................................ (6,262) (5,015) Net investment income, Class C ........................................................ (470) -- Net investment income, Class I ........................................................ (8,996) (4,811) Net realized short-term gains, Class A ................................................ -- (259) Net realized short-term gains, Class C ................................................ -- (40) Net realized short-term gains, Class I ................................................ -- (184) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................................ (15,728) (10,309) ---------- ---------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (3,991 and 11,828 shares, respectively) ....................................... 79,892 191,967 Class C (284 and 724 shares, respectively) ............................................ 5,620 11,630 Class I (4,649 and 17,113 shares, respectively) ....................................... 92,442 289,001 REINVESTMENT OF DISTRIBUTIONS Class A (286 and 293 shares, respectively) ............................................ 5,659 4,739 Class C (17 and 2 shares, respectively) ............................................... 341 29 Class I (402 and 249 shares, respectively) ............................................ 7,956 4,026 SHARES REPURCHASED Class A (5,500 and 16,329 shares, respectively) ....................................... (109,431) (265,401) Class C (553 and 1,783 shares, respectively) .......................................... (10,962) (28,718) Class I (3,830 and 8,248 shares, respectively) ........................................ (76,776) (133,887) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................................ (5,259) 73,386 CAPITAL CONTRIBUTIONS Fair Funds settlement(1) .............................................................. -- 931 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... 74,962 13,811 NET ASSETS Beginning of period ................................................................... 1,130,184 1,116,373 ---------- ---------- END OF PERIOD ............................................................................ $1,205,146 $1,130,184 ========== ========== Accumulated undistributed net investment income (loss) at end of period .................. $ 5,898 $ 12,245 (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 10
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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 10/1/09 to 3/31/10(10) $19.40 0.15(4) 1.49 1.64 (0.25) -- (0.25) 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 10/1/09 to 3/31/10(10) $19.21 0.07(4) 1.48 1.55 (0.13) -- (0.13) 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 10/1/09 to 3/31/10(10) $19.45 0.18(4) 1.47 1.65 (0.29) -- (0.29) 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) (1) Sales charges, where applicable, are not reflected in the (7) Payment by non-affiliate. total return calculation. (8) Blended net expense ratio. (2) Annualized. (9) Inception date. (3) Not annualized. (10) Unaudited. (4) Computed using average shares outstanding. (11) The Fund may invest in other funds, and the annualized (5) Amount is less than $0.005. expense ratios do not reflect fees and expenses associated (6) Payment by affiliate. with the underlying funds. See Notes to Financial Statements 12
RATIO RATIO OF GROSS OF NET EXPENSES TO RATIO OF NET NET EXPENSES AVERAGE NET PAYMENT CHANGE ASSET ASSETS, TO NET ASSETS INVESTMENT BY IN NET VALUE, END OF AVERAGE (BEFORE INCOME (LOSS) PORTFOLIO AFFILIATE/ ASSET END OF TOTAL PERIOD NET WAIVERS AND TO AVERAGE TURNOVER NON-AFFILIATE VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS(11) REIMBURSEMENTS)(11) NET ASSETS RATE - ---------------------------------------------------------------------------------------------------------------------------- -- 1.39 $20.79 8.65%(3) $515,552 1.44%(2) 1.44%(2) 1.51%(2) 15%(3) -- (1.14) 19.40 (4.41) 505,009 1.48 1.48 2.09 63 -- (8.04) 20.54 (26.48) 620,952 1.37(8) 1.39 0.78 129 --(5)(7) 3.58 28.58 14.72(3) 667,719 1.36(2) 1.40(2) 1.44(2) 49(3) -- 3.53 25.00 20.39 360,822 1.37 1.43 0.88 57 -- 2.45 21.47 21.82 128,991 1.25 1.62 0.85 52 --(5)(6) 3.55 19.02 26.15 2,714 1.25 2.10 1.50 32 -- 1.42 $20.63 8.23%(3) $ 70,182 2.20%(2) 2.20%(2) 0.73%(2) 15%(3) -- (1.06) 19.21 (5.18) 70,201 2.23 2.23 1.33 63 -- (8.04) 20.27 (27.04) 95,523 2.12(8) 2.15 0.03 129 --(5)(7) 3.46 28.31 14.24(3) 106,847 2.11(2) 2.16(2) 0.64(2) 49(3) -- 3.44 24.85 19.46 45,154 2.13 2.17 (0.06) 57 -- 2.30 21.41 20.96 6,019 2.00 2.35 (0.29) 52 --(5)(6) 3.56 19.11 25.21 39 2.00 2.86 0.76 32 -- 1.36 $20.81 8.81%(3) $619,412 1.20%(2) 1.20%(2) 1.77%(2) 15%(3) -- (1.13) 19.45 (4.03) 554,974 1.23 1.23 2.42 63 -- (8.03) 20.58 (26.31) 399,898 1.12(8) 1.15 1.01 129 --(5)(7) 3.61 28.61 14.88(3) 431,985 1.11(2) 1.15(2) 1.59(2) 49(3) -- 2.46 25.00 14.84(3) 83,938 1.13(2) 1.17(2) 0.71(2) 57(3) See Notes to Financial Statements 13
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 (UNAUDITED) 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 Foreign Opportunities Fund is reported in this semiannual report. 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. 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 a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month proceeding the month in which 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. 14
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that 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 those foreign markets. In such cases, the Fund fair values foreign securities using an external pricing service which considers the correlation of the trading patterns of the foreign securities to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange-traded funds and certain indexes, as well as prices for similar securities. 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). The Fund utilizes 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 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. 15
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of March 31, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2006 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, 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 foreign 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. 16
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. 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 March 31, 2010 ($ reported in thousands): ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------- ---------------------------- BALANCE SHEET FAIR BALANCE SHEET FAIR LOCATION VALUE LOCATION VALUE ------------------- ------ ------------------- ------ Foreign Unrealized Unrealized exchange appreciation on depreciation on contracts forward currency forward currency contracts $4,373 contracts $3,200 For open derivative instruments as of March 31, 2010, see the Schedule of Investments, which is also indicative of activity for the period ended March 31, 2010. REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS --------------------------------------------------- TOTAL VALUE ----------- Foreign exchange contracts(1) $2,518 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS --------------------------------------------------- TOTAL VALUE ----------- Foreign exchange contracts(2) $826 (1) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (2) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. 17
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) H. SECURITY LENDING: The Fund may loan securities to qualified brokers through an agreement with The Bank of New York Mellon ("BNY Mellon"). Under the terms of the agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash, or securities issued or guaranteed by the U.S. Government or its agencies. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by BNY Mellon for its services in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At March 31, 2010, the Fund had no securities on loan. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the Adviser to the Fund. For managing, or directing the management of, the investments of 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 0.85% of 1st $2 billion; 0.80% $2+ billion through $4 billion; and 0.75% $4+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Vontobel Asset Management, Inc. ("Vontobel") serves as the Fund's subadviser. C. EXPENSE LIMITATIONS: Effective August 23, 2007, 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 D. DISTRIBUTOR: As the distributor of the Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Fund that for the six-months (the "period") ended March 31, 2010, it retained Class A net commissions of $8 and Class C deferred sales charges of $10. 18
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended March 31, 2010, VP Distributors received administration fees totaling $369 which is included in the Statement of Operations. A portion of these fees was paid to a sub-administrator for certain accounting and administration services. VP Distributors also serves as the Trust's transfer agent. For the period ended March 31, 2010, VP Distributors received transfer agent fees totaling $835 which is included in the Statement of Operations. A portion of these fees was paid to various outside companies for certain sub-transfer agency services. F. AFFILIATED SHAREHOLDERS: At March 31, 2010, Virtus and its affiliates and 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 ................. 5,732 $ 119 Class I shares ................. 1,558,406 32,430 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 March 31, 2010, were as follows: PURCHASES SALES --------- -------- $174,661 $173,910 There were no purchases or sales of long-term U.S. Government and agency securities. 5. 10% SHAREHOLDERS As of March 31, 2010, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below. The shareholder is not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- -------- 27% 1 19
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 March 31, 2010, the Fund held securities issued by various companies in the consumer staples sector, representing 41% 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 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 March 31, 2010, 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) -------- ------------ ------------ -------------- $1,003,793 $205,872 $(8,538) $197,334 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. 20
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 10. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements." ASU 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, and other required disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures. 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available for issuance, and has determined that the following subsequent event requires recognition or disclosure in the financial statements. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Trust with immediate effect. 21
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES The Board of Trustees of the Trust, along with the Boards of Trustees of the other trusts in the Virtus Mutual Funds family of funds (collectively, the "Board"), are responsible for determining whether to approve the establishment and continuation of each investment advisory and sub-advisory agreement (each, an "Agreement") applicable to the Virtus Mutual Funds (collectively, the "Funds"). At meetings held on November 17-19, 2009, the Board, including a majority of the independent Trustees, considered and approved the continuation of each Agreement, as further discussed below. In approving each Agreement, the Board determined that the continued retention of the applicable adviser or subadviser was in the best interests of the Funds and their shareholders. The Trustees considered each Fund separately, though they also collectively took into account those interests that all the Funds had in common. In reaching their decisions, the Board considered information furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the annual review process. During the 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, in light of the legal advice furnished to them as well as their own business judgment, 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 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 The majority of the Funds(1) are managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of a Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. In considering the Agreement with VIA, therefore, the Trustees considered VIA's process for supervising and managing the Funds' 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 Funds; and (h) VIA's supervision of the Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Fund shareholders as a result of being part of the family of Virtus Mutual Funds, including the right to exchange investments between Funds within the same class without a sales charge, the ability to reinvest Fund dividends into other Funds and the right to combine holdings in other Funds to obtain a reduced sales charge. - ---------------- (1) During the period being reported, the only Funds that did not employ a manager of managers structure were Virtus Growth & Income Fund, which is a series of Virtus Equity Trust; and Virtus Alternatives Diversifier Fund and Virtus CA Tax-Exempt Bond Fund, each of which is a series of Virtus Opportunities Trust. VIA acted as the adviser for these Funds without employing a subadviser, and the Board considered the VIA Agreement with respect to these Funds in that context. 22
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) With respect to the sub-advisory Agreements, the Board noted that each full-service subadviser(2) provided portfolio management, compliance with the respective Fund's investment policies and procedures, compliance with applicable securities laws and assurances thereof. In considering the renewal of the sub-advisory Agreements, therefore, the Board considered each 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 its respective Fund(s); (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 each subadviser were reasonable and beneficial to the Funds and their shareholders. INVESTMENT PERFORMANCE The Board placed significant emphasis on its consideration of the investment performance of the Funds, in view of its importance to shareholders, and evaluated Fund performance in the context of the special considerations that a manager-of-managers structure requires. The Board also considered that VIA continued to be proactive in seeking to replace and/or add subadvisers as necessary, with a view toward improving Fund performance over the long term. While consideration was given to performance reports and discussions at Board meetings throughout the year, particular attention in assessing such performance was given to a report (the "Lipper Report") for the Funds prepared by Lipper Inc. ("Lipper") and furnished specifically for the contract renewal process. (Lipper is an independent provider of investment company data retained by the Funds for this purpose.) The Lipper Report presented each Fund's short-term and long-term performance relative to a peer group of other mutual funds and relevant benchmarks, as selected by Lipper. The Board considered the composition of each peer group, selection criteria and the appropriateness of the benchmark used for each Fund. The Board also assessed each Fund's performance in the context of its review of the fees and expenses of each Fund as well as VIA's profitability. The Board noted that while many of the Funds had generally performed in line with their respective benchmarks and peer groups during the periods measured, some of the Funds had underperformed in comparison with their respective benchmarks and/or peer groups. Where significant, the Board extensively considered the performance of the underperforming Funds and the reasons for the performance issues. The Board discussed the possible reasons for the underperformance with VIA, and spoke with representatives from VIA regarding plans to monitor and address performance issues during the coming year. The Board ultimately determined, within the context of all of its considerations in connection with the Agreements, that the Funds' overall investment performance was reasonable, and concluded that VIA's and each subadviser's performance record and process in managing the Funds merited approval of the continuation of the Agreements. However, the Board noted that certain Funds' performance would continue to be closely monitored and it expected that if performance over a longer period of time did not improve the adviser would recommend that the subadviser be replaced in a timely manner. - ---------------- (2) F-Squared Investments, Inc. is the sub-adviser to Virtus AlphaSector(SM) Allocation Fund and Virtus AlphaSector(SM) Rotation Fund but provides limited services in this role. The Board considered both the VIA Agreement and the applicable sub-advisory Agreement in this context. 23
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) PROFITABILITY The Board also considered the level of profits realized by VIA and its affiliates in connection with the operation of the Funds. In this regard, the Board reviewed the analysis presented regarding the overall profitability of VIA for its management of the Virtus Mutual Funds, as well as its profits and those of its affiliates for managing and providing other services to each Fund. In addition to the fees paid to VIA and its affiliates, the Trustees considered any other benefits derived by VIA or its affiliates from their relationship with the Funds. Specific attention was paid to the methodology used to allocate costs to each Fund, in recognition of the fact that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this regard, the Board noted that the allocations appeared reasonable, and concluded that the profitability to VIA from each Fund was reasonable in light of the quality of all services rendered to the Funds by VIA and its affiliates. The Board did not separately review profitability information for each subadviser, noting that the sub-advisory fees are paid by VIA rather than the Funds, so that Fund shareholders are not directly impacted by those fees. 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 presented in the Lipper Report. The Board noted that certain Funds had higher gross expenses when expressed as a percentage of net assets than those of such Funds' larger peers, which the Trustees considered in the context of these Funds' expectations for future growth. In addition, the Board noted that as part of the contract renewal process, it had voted for the advisory fees for certain of the Funds to be changed from flat fees to fees containing breakpoints and that such changes would reduce the fees paid by the Funds to VIA.(3) It was noted by the Board that Fund Management had represented that with respect to such fee changes, VIA would not reduce the quality or quantity of its services, and that its obligations would remain the same in all respects. Finally, the Board also noted that several of the Funds had fee waivers and/or expense caps in place to limit the total expenses incurred by the Funds and their shareholders. Based upon the information presented by VIA and Lipper, the Trustees then determined, in the exercise of their business judgment, that the management fees charged by VIA and the total expenses of the Funds were reasonable, both on an absolute basis and in comparison with the fees and expenses of other funds in each Fund's peer group and the industry at large. The Board did not receive comparative fee information relating specifically to sub-advisory fees, in light of the fact that the sub-advisory fees are paid by VIA and not by the Funds, so that Fund shareholders are not directly impacted by those fees. - ---------- (3) During the period being reported, the only Funds that had such changes were Virtus Mid-Cap Value Fund and Virtus Small-Cap Core Fund, each a series of Virtus Equity Trust; Virtus Balanced Allocation Fund, Virtus Core Equity Fund, Virtus Emerging Markets Opportunities Fund, Virtus Short/Intermediate Bond Fund and Virtus Value Equity Fund, each a series of Virtus Insight Trust; and, Virtus Bond Fund and Virtus Market Neutral Fund, each a series of Virtus Opportunities Trust. 24
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE The Board noted that the management fees for several of the Funds included breakpoints based on assets under management, and that fee waivers and/or expense caps were also in place for several of the Funds. The Board determined that VIA and the Funds likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and that shareholders of the Funds would have an opportunity to benefit from these economies of scale. In considering the sub-advisory Agreements, the Board also considered the existence of any economies of scale and whether they would be passed along to the Funds' shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the subadviser level. 25
VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Nancy G. Curtiss, Senior Vice President VP Distributors, Inc. Francis G. Waltman, Senior Vice President 100 Pearl Street Marc Baltuch, Vice President and Chief Compliance Officer Hartford, CT 06103-4506 W. Patrick Bradley, Chief Financial Officer and Treasurer Kevin J. Carr, Vice President, Chief Legal Officer, Counsel CUSTODIAN and Secretary The Bank of New York Mellon One Wall Street New York, NY 10286 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. - ----------------------------------------------------------------------------------------------------------------------------------
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(VIRTUS MUTUAL FUNDS LOGO) ------------ PRSRT STD c/o State Street Bank and Trust Company U.S. POSTAGE P.O. Box 8301 PAID Boston, MA 02266-8301 LANCASTER, PA PERMIT 1793 ------------ For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or Virtus.com 8025 4-10
(VIRTUS MUTUAL FUNDS LOGO) SEMIANNUAL REPORT Virtus Multi-Sector Short Term Bond Fund (GRAPHIC) TRUST NAME: March 31, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST eDelivery at Virtus.com 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 Disclosure of Fund Expenses ...................................................... 2 Schedule of Investments .......................................................... 4 Statement of Assets and Liabilities .............................................. 24 Statement of Operations .......................................................... 25 Statement of Changes in Net Assets ............................................... 26 Financial Highlights ............................................................. 28 Notes to Financial Statements .................................................... 30 Consideration of Advisory and Sub-advisory Agreements by the Board of Trustees ... 38
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: The first quarter of 2010 gave investors a taste of the kind of volatility that could be in store for some time. The quarter began with a 9 percent correction in the S&P 500(R) Index from mid-January to early February 5, followed by a resumption of 2009's bull market. The major indices were up more than 4 percent for the quarter and by the end of March, both the Dow Jones Industrial Average(SM) and the S&P 500 Index were up more than 65 percent from their lows on March 9, 2009. Surprisingly robust consumer spending and corporate earnings continued to support the transition of the U.S. economy out of recession toward modest growth. Unfortunately, there are some dark clouds on the horizon that may temper investors' optimism. The economy must navigate the long term impact of the unprecedented government spending to revive the global economy. Significant headwinds remain for investors, as evidenced by the current underperformance of the Chinese equity market, the solvency crisis in the Eurozone and persistently high unemployment rates in the U.S. and abroad. We believe this volatility is a reminder that investors should rely on the discipline and focus of professional investment managers and financial advisors. Ask your financial advisor to review your portfolio to ensure it reflects your current investment objectives, your tolerance for risk, and your long-term financial goals. As your advisor reviews your portfolio, we hope you will consider the wide range of equity, fixed income and alternative funds that Virtus offers. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our affiliated managers and subadvisers, we look forward to continuing to serve all your investment needs. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds MAY 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 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. 1 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 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. 2 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 EXPENSE TABLE
Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During October 1, 2009 March 31, 2010 Ratio Period* --------------- -------------- ---------- -------- MULTI-SECTOR SHORT TERM BOND FUND ACTUAL Class A $1,000.00 $1,063.20 1.04% $5.35 Class B 1,000.00 1,060.90 1.54 7.91 Class C 1,000.00 1,063.50 1.29 6.64 Class T 1,000.00 1,061.00 1.79 9.20 Class I 1,000.00 1,066.80 0.80 4.12 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.68 1.04 5.25 Class B 1,000.00 1,017.16 1.54 7.77 Class C 1,000.00 1,018.42 1.29 6.51 Class T 1,000.00 1,015.89 1.79 9.04 Class I 1,000.00 1,020.89 0.80 4.04
* 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 (182) 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. 3 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ASSET ALLOCATIONS This table presents asset allocations within certain sectors as a percentage of total investments as of March 31, 2010. Corporate Bonds 39% Mortgage-Backed Securities 26 Asset-Backed Securities 11 Loan Agreements 11 Foreign Government Securities 10 Other (includes short-term investments) 3 --- Total 100% ===
(reported in thousands)
PAR VALUE VALUE ------------ ------------ U.S. GOVERNMENT SECURITIES--0.4% U.S. Treasury Note 2.875%, 6/30/10 $ 1,000 $ 1,007 1.750%, 8/15/12 8,150 8,250 ------------ TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $9,181) 9,257 ------------ MUNICIPAL BONDS--0.2% CONNECTICUT--0.1% Mashantucket Western Pequot Tribe Taxable Series A, 144A (NATL-RE Insured) 6.910%, 9/1/12 (4) 2,515 1,876 ------------ SOUTH DAKOTA--0.0% Educational Enhancement Funding Corp. Taxable Series 02-A, 6.720%, 6/1/25 110 97 ------------ VIRGINIA--0.1% Tobacco Settlement Financing Corp. Taxable Series 07-A1, 6.706%, 6/1/46 4,850 3,532 ------------ TOTAL MUNICIPAL BONDS (IDENTIFIED COST $7,126) 5,505 ------------
PAR VALUE VALUE ------------ ------------ FOREIGN GOVERNMENT SECURITIES--10.4% Bolivarian Republic of Venezuela 10.750%, 9/19/13 $ 4,920 $ 4,834 8.500%, 10/8/14 17,860 15,627 RegS 5.750%, 2/26/16 (5) 4,260 3,110 RegS 7.000%, 12/1/18 (5) 3,230 2,318 Commonwealth of Australia Series 121, 5.250%, 8/15/10 33,826 AUD 31,139 Commonwealth of Canada 2.750%, 12/1/10 43,377 CND 43,296 Commonwealth of New Zealand Series 1111, 6.000%, 11/15/11 14,494 NZD 10,652 Federative Republic of Brazil 12.500%, 1/5/16 36,354 BRL 23,356 12.500%, 1/5/22 8,000 BRL 5,275 Kingdom of Norway 6.000%, 5/16/11 63,725 NOK 11,155 5.000%, 5/15/15 13,515 NOK 2,469 Kingdom of Sweden Series 1045, 5.250%, 3/15/11 28,200 SEK 4,077 Republic of Argentina PIK Interest Capitalization 8.280%, 12/31/33 32,877 24,822 Series GDP 3.169%, 12/15/35(3) 44,890 3,591 Republic of Colombia 12.000%, 10/22/15 9,935,000 COP 6,317 Republic of Indonesia Series FR-23, 11.000%, 12/15/12 80,600,000 IDR 9,584 Series FR-30, 10.750%, 5/15/16 40,550,000 IDR 4,960
See Notes to Financial Statements 4 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) (reported in thousands)
PAR VALUE VALUE ------------ ------------ Republic of Korea Series 1112, 4.750%, 12/10/11 23,141,000 KRW 20,914 Republic of Lithuania 144A 6.750%, 1/15/15 (4) $ 4,000 $ 4,366 Republic of Poland Series 0414, 5.750%, 4/25/14 23,825 PLN 8,574 6.375%, 7/15/19 2,075 2,273 Republic of South Africa Series R-201 8.750%, 12/21/14 111,065 ZAR 15,678 Republic of Turkey 0.000%, 2/2/11 22,335 TRY 13,802 Republic of Ukraine RegS 6.580%, 11/21/16 (5) 2,400 2,313 Russian Federation RegS 7.500%, 3/31/30 (5) 1,840 2,121 ------------ TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $256,260) 276,623 ------------ MORTGAGE-BACKED SECURITIES--26.2% AGENCY--2.0% FHLMC 6.000%, 8/1/34 1,349 1,462 FNMA 5.500%, 1/1/17 482 519 6.000%, 5/1/17 139 150 5.500%, 8/1/17 105 114 4.500%, 4/1/18 1,006 1,059 5.000%, 10/1/19 1,860 1,981 5.500%, 2/1/20 759 818 5.500%, 3/1/20 803 865 5.500%, 3/1/20 280 302 5.500%, 3/1/20 821 885 5.500%, 3/1/20 1,726 1,861 5.500%, 4/1/20 1,226 1,322 5.000%, 6/1/20 3,295 3,506 6.000%, 12/1/32 223 242 5.500%, 2/1/33 508 540 5.500%, 5/1/34 2,158 2,285 6.000%, 8/1/34 1,484 1,611 6.000%, 10/1/34 1,868 2,015 6.000%, 10/1/34 1,011 1,091 5.500%, 11/1/34 2,560 2,711 5.500%, 11/1/34 1,560 1,652 6.000%, 11/1/34 1,981 2,138 5.500%, 12/1/34 1,224 1,297
PAR VALUE VALUE ------------ ------------ AGENCY--CONTINUED 5.500%, 1/1/35 $ 2,724 $ 2,885 6.000%, 1/1/37 1,693 1,807 6.000%, 1/1/37 2,935 3,133 5.500%, 7/1/37 15 16 6.000%, 7/1/37 855 910 6.000%, 12/1/37 4,289 4,563 6.000%, 4/1/38 2,941 3,129 5.500%, 9/1/38 2,644 2,789 5.500%, 12/1/38 3,448 3,638 GNMA 6.500%, 7/15/31 34 38 6.500%, 8/15/31 97 106 6.500%, 11/15/31 61 67 6.500%, 2/15/32 27 30 6.500%, 4/15/32 122 134 6.500%, 4/15/32 114 124 ------------ 53,795 ------------ NON-AGENCY--24.2% American General Mortgage Loan Trust 06-1, A2 144A 5.750%, 12/25/35 (4) 2,995 2,994 American Tower Trust 07-1A, C 144A 5.615%, 4/15/37 (4) 3,685 3,878 Banc of America Alternative Loan Trust 03-10, 2A1 6.000%, 12/25/33 8,119 8,117 Banc of America Commercial Mortgage, Inc. 05-6, AM 5.179%, 9/10/47 (3) 1,630 1,494 Banc of America Funding Corp. 05-8, 1A1 5.500%, 1/25/36 4,182 4,031 Bear Stearns Commercial Mortgage Securities 06-PW12, A4 5.719%, 9/11/38(3) 7,450 7,782 06-PW14, A4 5.201%, 12/11/38 7,400 7,397 05-PW10, A4 5.405%, 12/11/40(3) 11,300 11,570 07-PW18, A4 5.700%, 6/11/50 6,500 6,275 Chase Mortgage Finance Corp. 05-S1, A10 5.500%, 5/25/35 10,514 10,429
See Notes to Financial Statements 5 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED Citicorp Mortgage Securities, Inc. 03-11, 2A10 5.500%, 12/25/33 $ 13,082 $ 13,140 04-4, A6 5.500%, 6/25/34 13,647 13,580 Citigroup-Deutsche Bank Commercial Mortgage Trust 05-CD1, A4 5.225%, 7/15/44(3) 5,000 5,181 05-CD1, AM 5.225%, 7/15/44(3) 6,410 5,812 07-CD4, A4 5.322%, 12/11/49 6,465 6,258 Countrywide Home Loan Mortgage Pass-Through Trust 02-34, B2 5.750%, 1/25/33 1,233 960 02-36, B2 6.000%, 1/25/33 1,269 1,003 04-9, A6 5.250%, 6/25/34 6,395 6,135 Credit Suisse First Boston Mortgage Securities Corp. 02-CKS4, B 5.333%, 11/15/36 5,000 4,963 02-CKS4, C 5.394%, 11/15/36 5,000 4,860 04-C5, A3 4.499%, 11/15/37 2,990 3,025 Credit Suisse Mortgage Capital Certificates 06-C1, A3 5.549%, 2/15/39 (3) 4,727 4,902 Credit-Based Asset Servicing & Securitization LLC 05-CB6, A3 5.120%, 7/25/35 (3) 2,073 1,750 Crown Castle Towers LLC 06-1A, C 144A 5.470%, 11/15/36 (4) 5,000 5,288 Entertainment Properties Trust 03-EPR, A2 144A 5.244%, 2/15/18 (4) 7,854 8,250 FFCA Secured Lending Corp. 99-2, WA1C 144A 7.850%, 5/18/26 (4) 7,353 5,588
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED First Union National Bank Commercial Mortgage 01-C3, G 144A 7.299%, 8/15/33 (3)(4) $ 10,282 $ 10,627 GE Capital Commercial Mortgage Corp. 03-C1, C 4.975%, 1/10/38(3) 4,332 4,308 04-C3, A4 5.189%, 7/10/39(3) 13,500 14,046 GMAC Commercial Mortgage Securities, Inc. 04-C2, A3 5.134%, 8/10/38 1,200 1,230 04-C2, A4 5.301%, 8/10/38(3) 8,178 8,439 04-C3, A4 4.547%, 12/10/41 4,820 4,904 Greenwich Capital Commercial Funding Corp. 04-GG1, A7 5.317%, 6/10/36 (3) 7,950 8,359 GS Mortgage Securities Corp. II 07-EOP, G 144A 0.769%, 3/6/20(3)(4) 5,840 4,942 07-EOP, H 144A 0.899%, 3/6/20(3)(4) 1,850 1,548 04-GG2, A4 4.964%, 8/10/38 6,900 7,094 07-GG10, A4 5.805%, 8/10/45(3) 10,550 9,775 GSR Mortgage Loan Trust 05-5F, 2A8 5.500%, 6/25/35 9,820 9,651 05-AR6, 3A1 3.597%, 9/25/35(3) 7,509 6,788 IndyMac Index Mortgage Loan Trust 07-AR2, B1 5.748%, 6/25/37 (3) 4,732 151 JPMorgan Chase Commercial Mortgage Securities Corp. 04-C1, A3 4.719%, 1/15/38 5,565 5,711 05-LDP2, AM 4.780%, 7/15/42 3,410 3,186 05-LDP5, AM 5.222%, 12/15/44(3) 2,822 2,633
See Notes to Financial Statements 6 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED 06-LDP7, A4 5.875%, 4/15/45(3) $ 9,997 $ 10,321 06-LDP9, A3 5.336%, 5/15/47 7,450 7,264 07-LD12, A4 5.882%, 2/15/51(3) 8,029 7,850 JPMorgan Chase Commercial Mortgage Securities Trust 09-IWST, A1 4.314%, 12/5/19 9,725 9,937 JPMorgan Mortgage Trust 03-A2, 3A1 4.411%, 11/25/33(3) 17,620 17,104 05-A4, 3A1 5.166%, 7/25/35(3) 9,253 8,679 06-A1, B1 5.256%, 2/25/36(3) 7,632 648 Lehman Brothers - UBS Commercial Mortgage Trust 04-C7, A6 4.786%, 10/15/29(3) 10,536 10,606 01-C2, C 6.975%, 9/15/34 6,500 6,709 06-C3, AM 5.712%, 3/15/39(3) 960 841 06-C6, A4 5.372%, 9/15/39 11,830 12,035 07-C2, A2 5.303%, 2/15/40 10,527 10,801 07-C2, A3 5.430%, 2/15/40 6,830 6,573 05-C3, AM 4.794%, 7/15/40 7,460 6,877 07-C6, A2 5.845%, 7/15/40 11,087 11,515 07-C6, A4 5.858%, 7/15/40(3) 4,950 4,868 07-C7, A3 5.866%, 9/15/45(3) 10,300 10,139 Merrill Lynch Floating Trust 08-LAQA, A1 0.077%, 7/9/21 (3) 14,900 13,003 Merrill Lynch Mortgage Investors, Inc. 06-3, 2A1 6.074%, 10/25/36 (3) 3,381 2,977
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED Merrill Lynch Mortgage Trust 06-C1, AM 5.656%, 5/12/39(3) $ 7,205 $ 6,250 04-KEY2, A3 4.615%, 8/12/39 12,250 12,440 Merrill Lynch-Countrywide Commercial Mortgage Trust 06-4, A3 5.172%, 12/12/49 (3) 9,500 9,192 Morgan Stanley Capital I 06-T23, A4 5.811%, 8/12/41(3) 8,150 8,623 06-IQ12, A4 5.332%, 12/15/43 14,500 14,584 07-IQ14, A4 5.692%, 4/15/49(3) 9,720 8,914 Morgan Stanley Mortgage Loan Trust 04-2AR, 3A 4.713%, 2/25/34(3) 5,758 5,515 04-2AR, 4A 4.759%, 2/25/34(3) 13,552 13,583 05-5AR, 4A1 5.484%, 9/25/35(3) 1,825 1,338 PNC Mortgage Acceptance Corp. 00-C2, A2 7.300%, 10/12/33 122 123 Prudential Securities Secured Financing Corp. 99-NRF1, F 144A 6.074%, 11/1/31 (4) 4,235 4,211 Residential Accredit Loans, Inc. 03-QS6, A4 4.250%, 3/25/33 10,739 10,529 Residential Asset Mortgage Products, Inc. 04-SL1, A8 6.500%, 11/25/31 8,023 7,812 Residential Funding Mortgage Securities I, Inc. 06-S12, 1A1 5.500%, 12/25/21 6,749 6,911 06-S4, A2 6.000%, 4/25/36 4,822 4,289 Salomon Brothers Mortgage Securities VII, Inc. 01-C1, C 6.729%, 12/18/35(3) 2,189 2,203 01-C1, D 6.831%, 12/18/35(3) 2,290 2,251
See Notes to Financial Statements 7 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED SBA Commercial Mortgage-Backed Securities Trust 06-1A, A 144A 5.314%, 11/15/36(4) $ 7,450 $ 7,823 06-1A, B 144A 5.451%, 11/15/36(4) 2,875 2,972 Structured Asset Securities Corp. 03-21, 2A2 5.250%, 8/25/33 7,222 7,073 Timberstar Trust 06-1A, A 144A 5.668%, 10/15/36 (4) 2,240 2,338 Wachovia Bank Commercial Mortgage Trust 04-C12, A2 5.001%, 7/15/41 9,439 9,546 04-C12, A4 5.239%, 7/15/41(3) 10,145 10,428 05-C20, AMFX 5.179%, 7/15/42(3) 2,100 1,938 07-C30, A5 5.342%, 12/15/43 6,935 6,017 05-C22, AM 5.320%, 12/15/44(3) 2,920 2,656 07-C33, A4 5.902%, 2/15/51(3) 8,940 8,335 Wachovia Mortgage Loan Trust LLC 06-A, B1 5.231%, 5/20/36 (3) 3,418 207 WaMu Mortgage Pass-Through Certificates 05-AR10, 1A2 4.791%, 9/25/35 (3) 6,240 5,163 Washington Mutual Mortgage Pass-Through Certificates 06-AR16, 1A1 5.566%, 12/25/36 (3) 5,279 3,804 Wells Fargo Mortgage-Backed Securities Trust 04-R, 2A1 2.999%, 9/25/34(3) 2,956 2,878 04-EE, 2A3 3.087%, 12/25/34(3) 1,527 1,187 05-AR4, 2A1 3.017%, 4/25/35(3) 3,119 2,825 05-9, 2A11 5.250%, 10/25/35 1,813 1,722 05-9, 1A6 5.500%, 10/25/35 1,609 1,568
PAR VALUE VALUE ------------ ------------ NON-AGENCY--CONTINUED 06-AR10, 5A3 5.497%, 7/25/36(3) $ 11,088 $ 8,771 06-9, 1A15 6.000%, 8/25/36 3,965 3,714 06-12, A2 6.000%, 10/25/36 5,265 4,904 04-CC, A1 4.932%, 1/25/35(3) 4,553 4,431 05-6, A1 5.250%, 8/25/35 4,387 4,395 06-AR2, B1 4.957%, 3/25/36(3) 13,888 806 ------------ 641,070 ------------ TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $694,230) 694,865 ------------ ASSET-BACKED SECURITIES--11.2% 1st Financial Bank USA 09-C, C 144A 9.000%, 10/15/15 (4) 5,000 5,007 American General Mortgage Loan Trust 144A 5.150%, 3/25/58 (4) 9,850 9,848 AmeriCredit Automobile Receivables Trust 10-1, B 3.720%, 11/17/14 9,825 9,885 10-1, C 5.190%, 8/17/15 3,925 4,035 Avis Budget Rental Car Funding AESOP LLC 09-2A, A 144A 5.680%, 2/20/14 (4) 9,825 10,397 Banc of America Mortgage Securities, Inc. 05-1, 1A22 5.250%, 2/25/35 10,180 9,538 Banc of America Securities Auto Trust 06-G1, B 5.340%, 2/18/11 4,855 4,868 Bay View Auto Trust 05-LJ1, A4 4.090%, 5/25/12 882 886 Bayview Financial Acquisition Trust 06-B, 1A2 5.800%, 4/28/36 (3) 3,515 3,299
See Notes to Financial Statements 8 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ Bombardier Capital Mortgage Securitization Corp 99-A, A3 5.980%, 1/15/18 (3) $ 2,526 $ 2,176 Capital Auto Receivables Asset Trust 07-1, C 5.380%, 11/15/12 6,080 6,367 Capital One Prime Auto Receivables Trust 06-2, B 5.050%, 6/15/13 9,449 9,566 Carmax Auto Owner Trust 07-2, B 5.370%, 3/15/13 10,025 10,366 09-2, A4 2.820%, 12/15/14 11,750 11,798 Chase Funding Mortgage Loan Asset-Backed Certificates 04-1,1A4 4.111%, 8/25/30 1,695 1,688 CIT Equipment Collateral 10-VT1A, B 144A 3.880%, 9/16/13 (4) 5,900 5,899 Citicorp Residential Mortgage Securities, Inc. 07-1, A3 5.667%, 3/25/37 3,000 2,872 07-2, A4 6.538%, 6/25/37(3) 5,000 4,525 Conseco Finance Securitizations Corp. 01-3, A4 6.910%, 5/1/33 (3) 10,476 10,220 CPS Auto Trust 08-A, A4 144A 7.130%, 10/15/14 (4) 1,800 1,888 Credit-Based Asset Servicing and Securitization LLC 07-CB4, A2A 5.844%, 4/25/37 (3) 667 653 Daimler Chrysler Auto Trust 08-B, A4A 5.320%, 11/10/14 9,620 10,148 Dominos Pizza Master Issuer LLC 07-1, A2 144A 5.261%, 4/25/37 (4) 10,000 9,033 DT Auto Owner Trust 09-1, B, 144A 5.920%, 10/15/15 (4) 4,444 4,450
PAR VALUE VALUE ------------ ------------ Dunkin Securitization 06-1, A2 144A 5.779%, 6/20/31(4) $ 8,815 $ 8,558 06-1, M1 144A 8.285%, 6/20/31(4) 6,345 5,716 First Plus Home Loan Trust 97-3, M2 7.520%, 11/10/23 (8) 25 --(9) FMAC Loan Receivables Trust 98-CA, A2 144A 6.660%, 9/15/20 (4) 481 473 Ford Credit Auto Owner Trust 09-E, D 144A 5.530%, 5/15/16 (4) 17,750 18,317 Ford Credit Floorplan Master Owner Trust 10-3, A1 144A 4.200%, 2/15/17 (4) 11,800 11,752 GMAC Mortgage Corp. Loan Trust 06-HE2, A3 6.320%, 5/25/36 (3) 11,045 4,678 GreenTree Financial Corp. 08-MH1, A1 144A 7.000%, 4/25/38 (3)(4) 3,047 3,105 GSR Mortgage Loan Trust 04-6F, 1A1 5.000%, 5/25/34 8,735 8,608 Harley-Davidson Motorcycle Trust 09-4, B 3.190%, 9/15/14 9,000 9,027 07-2, C 5.410%, 8/15/15 6,750 7,044 Hertz Vehicle Financing LLC 09-2A, A1, 144A 4.260%, 3/25/14 (4) 5,000 5,147 IHOP Franchising LLC 07-3A 144A 7.059%, 12/20/37 (4) 8,350 7,974 IndyMac Manufactured Housing Contract 98-1, A3 6.370%, 9/25/28 1,897 1,308 Long Grove Collateral Loan Obligation Ltd. PIK Interest Capitalization 04-1A, C 144A 2.652%, 5/25/16(3)(4)(7) 1,600 1,080 04-1A, D 144A 7.002%, 5/25/16(3)(4)(7) 529 201
See Notes to Financial Statements 9 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ MASTR Alternative Loans Trust 4.500%, 7/25/19 $ 15,034 $ 14,842 Merrill Auto Trust Securitization 07-1, B 5.790%, 12/15/13 2,579 2,629 Renaissance Home Equity Loan Trust 05-3, AF4 5.140%, 11/25/35 (3) 5,380 4,407 Residential Funding Mortgage Securities II, Inc. 04-HI3, A5 5.480%, 6/25/34(3) 5,841 4,030 06-HI2, A3 5.790%, 2/25/36 1,510 1,111 07-HI1, A2 5.640%, 3/25/37 7,500 6,925 Saxon Asset Securities Trust 06-3 A2 0.356%, 10/25/46 (3) 5,334 5,022 Tidewater Auto Receivables Trust 10-A, A 144A 5.920%, 5/15/17 (4) 6,052 6,069 Wachovia Auto Loan Owner Trust 07-1, D 5.650%, 2/20/13 5,183 5,370 06-2A, E 144A 7.050%, 5/20/14(4) 5,000 5,151 ------------ TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $304,786) 297,956 ------------ CORPORATE BONDS--39.0% CONSUMER DISCRETIONARY--2.4% Ameristar Casinos, Inc. 9.250%, 6/1/14 350 368 AutoZone, Inc. 5.750%, 1/15/15 4,420 4,771 COX Communications, Inc. 4.625%, 6/1/13 5,620 5,942 Daimler Finance North America LLC 6.500%, 11/15/13 3,390 3,758 DigitalGlobe, Inc. 144A 10.500%, 5/1/14 (4) 700 758 DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 6.375%, 6/15/15 6,740 7,001
PAR VALUE VALUE ------------ ------------ CONSUMER DISCRETIONARY--CONTINUED DuPont Fabros Technology LP 144A 8.500%, 12/15/17 (4) $ 5,025 $ 5,201 Ford Motor Credit Co. LLC 8.000%, 6/1/14 4,865 5,126 Garda World Security Corp. 144A 9.750%, 3/15/17 (4) 750 772 Harrah's Operating Co., Inc. 11.250%, 6/1/17 2,260 2,446 Hyatt Hotels Corp. 144A 5.750%, 8/15/15 (4) 900 919 International Game Technology 7.500%, 6/15/19 1,115 1,263 Korea Expressway Corp. 144A 4.500%, 3/23/15 (4) 2,670 2,710 Landry's Restaurants, Inc. 144A 11.625%, 12/1/15 (4) 2,226 2,404 Libbey Glass, Inc. 144A 10.000%, 2/15/15 (4) 375 397 McJunkin Red Man Corp. 144A 9.500%, 12/15/16 (4) 2,590 2,658 MGM MIRAGE 144A 10.375%, 5/15/14 (4) 160 177 Mobile Mini, Inc. 6.875%, 5/1/15 540 506 QVC, Inc. 144A 7.500%, 10/1/19 (4) 2,710 2,778 Scientific Games Corp. 144A 7.875%, 6/15/16 (4) 810 824 Scientific Games International, Inc. 9.250%, 6/15/19 1,570 1,668 Seminole Hard Rock Entertainment, Inc./ Seminole Hard Rock International LLC 144A 2.757%, 3/15/14 (3)(4) 767 687 Seneca Gaming Corp. Series B 7.250%, 5/1/12 131 130 Staples, Inc. 9.750%, 1/15/14 905 1,097 Starwood Hotels & Resort Worldwide, Inc. 6.250%, 2/15/13 2,815 2,970 Time Warner, Inc. 6.875%, 5/1/12 1,500 1,650
See Notes to Financial Statements 10 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ CONSUMER DISCRETIONARY--CONTINUED TRW Automotive, Inc. 144A 8.875%, 12/1/17 (4) $ 780 $ 812 Videotron Ltee 6.375%, 12/15/15 3,500 3,544 ------------ 63,337 ------------ CONSUMER STAPLES--0.9% Altria Group, Inc. 8.500%, 11/10/13 2,775 3,244 BAT International Finance plc 144A 9.500%, 11/15/18 (4) 1,410 1,826 Cargill, Inc. 144A 5.600%, 9/15/12 (4) 4,845 5,242 Kraft Foods, Inc. 4.125%, 2/9/16 3,950 4,003 Tyson Foods, Inc. 10.500%, 3/1/14 940 1,121 Yankee Acquisition Corp. Series B, 8.500%, 2/15/15 7,915 8,192 ------------ 23,628 ------------ ENERGY--4.0% Adaro Indonesia PT 144A 7.625%, 10/22/19 (4) 3,065 3,199 Anadarko Petroleum Corp. 8.700%, 3/15/19 2,925 3,619 Buckeye Partners LP 6.050%, 1/15/18 854 907 Cenovus Energy, Inc. 144A 4.500%, 9/15/14 (4) 1,968 2,053 Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp. 144A 8.250%, 12/15/17 (4) 2,920 2,993 Denbury Resources, Inc. 7.500%, 12/15/15 4,952 5,076 Expro Finance Luxembourg SCA 144A 8.500%, 12/15/16 (4) 3,395 3,446 Gaz Capital SA 144A 7.343%, 4/11/13 (4) 2,000 2,167 Gazprom International SA 144A 7.201%, 2/1/20 (4) 1,915 2,035
PAR VALUE VALUE ------------ ------------ ENERGY--CONTINUED Gazprom OAO (Gaz Capital SA) 144A 6.212%, 11/22/16(4) $ 10,405 $ 10,717 144A 6.510%, 3/7/22(4) 3,235 3,215 Helix Energy Solutions Group, Inc. 144A 9.500%, 1/15/16 (4) 692 716 Holly Corp. 144A 9.875%, 6/15/17 (4) 3,000 3,105 KazMunaiGaz Finance Sub BV 144A 8.375%, 7/2/13 (4) 3,900 4,383 Kinder Morgan Energy Partners LP 6.850%, 2/15/20 2,545 2,855 Knight, Inc. 6.500%, 9/1/12 3,545 3,749 Korea National Oil Corp. 144A 5.375%, 7/30/14 (4) 4,345 4,613 NAK Naftogaz Ukraine 9.500%, 9/30/14 2,900 3,020 OPTI Canada, Inc. 144A 9.000%, 12/15/12 (4) 6,525 6,753 Petro-Canada 6.050%, 5/15/18 1,200 1,292 Petrohawk Energy Corp. 10.500%, 8/1/14 3,885 4,307 Pioneer Drilling Co. 144A 9.875%, 3/15/18 (4) 1,245 1,239 Pride International, Inc. 8.500%, 6/15/19 4,065 4,593 SEACOR Holdings, Inc. 7.375%, 10/1/19 2,200 2,265 Tesoro Corp. 6.250%, 11/1/12 4,340 4,373 Valero Energy Corp. 4.500%, 2/1/15 800 801 Weatherford International Ltd. 9.625%, 3/1/19 4,110 5,201 Western Refining, Inc. 144A 10.750%, 6/15/14(3)(4) 3,285 2,973 144A 11.250%, 6/15/17(4) 2,465 2,231 XTO Energy, Inc. 5.900%, 8/1/12 1,980 2,174 5.750%, 12/15/13 5,910 6,584 ------------ 106,654 ------------
See Notes to Financial Statements 11 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ FINANCIALS--20.0% ADCB Finance Cayman Ltd. 144A 4.750%, 10/8/14 (4) $ 5,290 $ 5,113 AFLAC, Inc. 8.500%, 5/15/19 1,059 1,275 Agile Property Holdings Ltd. 144A 10.000%, 11/14/16 (4) 1,660 1,784 Alfa Invest Ltd. 144A 9.250%, 6/24/13 (4) 4,940 5,323 Allstate Corp. 6.125%, 5/15/37(3) 4,730 4,482 American Express Credit Corp. 5.875%, 5/2/13 4,805 5,205 Series C, 7.300%, 8/20/13 2,600 2,918 American Honda Finance Corp. 144A 6.700%, 10/1/13 (4) 4,850 5,405 Amsouth Bank N.A. Series A1, 4.850%, 4/1/13 7,275 7,103 Assurant, Inc. 5.625%, 2/15/14 4,060 4,216 Atlantic Finance Ltd. 144A 8.750%, 5/27/14 (4) 4,800 5,043 Avalonbay Communities, Inc. 5.700%, 3/15/17 2,950 3,110 Banco do Brasil SA 144A 8.500%, 10/29/49 (4) 700 777 Bank of America Corp. 7.400%, 1/15/11 3,815 3,992 4.750%, 8/15/13 3,000 3,120 5.420%, 3/15/17 3,700 3,656 Barclays Bank plc 5.200%, 7/10/14 4,110 4,389 144A 6.050%, 12/4/17(4) 4,130 4,259 144A 7.375%, 6/29/49(3)(4) 6,900 6,658 BBVA International Preferred SA Unipersonal 5.919%, 12/31/49(3) 3,220 2,681 Bear Stearns Cos., Inc. LLC (The) 7.250%, 2/1/18 4,365 5,045 Berkley (WR) Corp. 5.125%, 9/30/10 2,000 2,025 BlackRock, Inc. 3.500%, 12/10/14 2,900 2,936
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Bosphorus Financial Services Ltd. 144A 2.050%, 2/15/12 (3)(4) $ 1,000 $ 976 Brandywine Operating Partnership LP 7.500%, 5/15/15 4,305 4,632 Capital One Financial Corp. 6.150%, 9/1/16 4,300 4,461 Cemex Finance LLC 144A 9.500%, 12/14/16 (4) 1,430 1,487 Chubb Corp. 6.375%, 3/29/67(3) 4,730 4,760 CIT Group, Inc. 7.000%, 5/1/13 3,206 3,142 7.000%, 5/1/14 459 435 7.000%, 5/1/15 459 429 7.000%, 5/1/16 765 708 7.000%, 5/1/17 1,071 991 Citigroup, Inc. 5.000%, 9/15/14 3,200 3,195 4.875%, 5/7/15 15,710 15,505 CME Group, Inc. 5.400%, 8/1/13 2,450 2,673 CNA Financial Corp. 5.850%, 12/15/14 7,575 7,708 Colonial Realty LP 4.800%, 4/1/11 1,442 1,420 Comerica Bank 5.700%, 6/1/14 1,900 1,990 5.750%, 11/21/16 3,850 3,963 Comerica, Inc. 4.800%, 5/1/15 1,828 1,832 Commonwealth Bank of Australia 144A 3.750%, 10/15/14 (4) 3,000 3,041 Corporacion Andina de Fomento 5.200%, 5/21/13 1,000 1,058 Credit Suisse New York 5.000%, 5/15/13 4,335 4,659 Crown Castle Towers LLC 144A 4.523%, 1/15/15(4) 4,925 4,992 144A 5.495%, 1/15/17(4) 5,915 6,076 Deutsche Bank Financial LLC 5.375%, 3/2/15 2,933 3,114
See Notes to Financial Statements 12 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Discover Bank 8.700%, 11/18/19 $ 1,750 $ 1,917 Equity One, Inc. 6.250%, 12/15/14 2,485 2,547 ERAC USA Finance Co. 144A 5.800%, 10/15/12 (4) 805 869 Export-Import Bank of Korea 8.125%, 1/21/14 1,480 1,717 5.875%, 1/14/15 4,625 4,986 4.125%, 9/9/15 4,000 4,012 Fibria Overseas Finance Ltd. 144A 9.250%, 10/30/19 (4) 750 859 Fifth Third Bancorp 6.250%, 5/1/13 1,770 1,903 4.750%, 2/1/15 750 756 4.500%, 6/1/18 3,975 3,647 First Horizon National Corp. 4.500%, 5/15/13 1,000 943 First Tennessee Bank N.A. 0.390%, 2/14/11(3) 2,900 2,848 4.625%, 5/15/13 2,220 2,159 5.050%, 1/15/15 4,925 4,628 Ford Motor Credit Co. LLC 9.875%, 8/10/11 3,480 3,692 3.001%, 1/13/12(3) 2,000 1,945 7.500%, 8/1/12 800 829 8.700%, 10/1/14 735 798 General Electric Capital Corp. 3.750%, 11/14/14 3,940 3,992 0.629%, 5/5/26(3) 5,000 4,100 Genworth Financial, Inc. 5.750%, 6/15/14 6,890 7,038 6.515%, 5/22/18 3,275 3,226 Glen Meadow Pass-Through Trust 144A 6.505%, 2/12/67 (3)(4) 7,545 6,432 GMAC LLC 6.875%, 9/15/11 2,662 2,719 6.750%, 12/1/14 552 555 GMAC, Inc. 144A 8.300%, 2/12/15 (4) 5,360 5,641 Goldman Sachs Group, Inc. (The) 5.350%, 1/15/16 3,225 3,397 5.950%, 1/18/18 2,759 2,895 7.500%, 2/15/19 2,451 2,801 HBOs plc 144A 6.750%, 5/21/18 (4) 685 629
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Healthcare Realty Trust, Inc. 6.500%, 1/17/17 $ 3,000 $ 3,078 Hertz Corp. (The) 8.875%, 1/1/14 2,595 2,679 Host Hotels & Resorts LP 144A 9.000%, 5/15/17 (4) 875 949 Huntington National Bank (The) 4.900%, 1/15/14 1,400 1,342 Hyundai Capital Services, Inc. 144A 6.000%, 5/5/15 (4) 4,975 5,221 ICICI Bank Ltd. 144A 5.750%, 11/16/10(4) 4,775 4,871 144A 5.500%, 3/25/15(4) 3,000 3,044 International Lease Finance Corp. 4.750%, 1/13/12 5,820 5,687 5.300%, 5/1/12 5,375 5,223 iStar Financial, Inc. 144A 10.000%, 6/15/14 (4) 2,700 2,713 JPMorgan Chase & Co. 5.750%, 1/2/13 4,945 5,367 6.125%, 6/27/17 3,550 3,821 Series 1, 7.900%, 12/31/49(3) 3,360 3,582 Kazkommerts International BV RegS (5) 8.000%, 11/3/15 1,000 945 KeyBank NA 5.700%, 8/15/12 1,800 1,891 5.800%, 7/1/14 1,450 1,483 7.413%, 5/6/15 3,000 3,069 4.950%, 9/15/15 1,295 1,276 KeyCorp 6.500%, 5/14/13 2,925 3,124 Kimco Realty Corp. 4.820%, 8/15/11 1,945 1,982 Kookmin Bank 144A 7.250%, 5/14/14 (4) 5,700 6,358 Korea Development Bank 5.300%, 1/17/13 1,113 1,182 4.375%, 8/10/15 2,525 2,563 Lincoln National Corp. 8.750%, 7/1/19 2,340 2,861 6.050%, 4/20/67(3) 2,885 2,431 Lloyds TSB Bank plc 144A 4.375%, 1/12/15 (4) 2,900 2,859 Lukoil International Finance BV 144A 6.375%, 11/5/14 (4) 4,900 5,151
See Notes to Financial Statements 13 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) (reported in thousands)
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Mercantile Bankshares Corp. Series B, 4.625%, 4/15/13 $ 4,708 $ 4,800 Merrill Lynch & Co., Inc. 6.150%, 4/25/13 3,925 4,226 MetLife, Inc. 6.750%, 6/1/16 910 1,020 Metropolitan Life Global Funding I 144A 5.125%, 6/10/14 (4) 1,160 1,229 Morgan Stanley 6.000%, 5/13/14 1,970 2,128 4.200%, 11/20/14 3,455 3,463 144A 10.090%, 5/3/17(4) 10,525 BRL 5,726 National Australia Bank Ltd. 144A 5.350%, 6/12/13 (4) 9,715 10,470 Nationwide Health Properties, Inc. 6.250%, 2/1/13 4,825 5,138 Nissan Motor Acceptance Corp. 144A 4.500%, 1/30/15 (4) 8,620 8,642 Northern Trust Corp. 5.500%, 8/15/13 2,775 3,071 Nuveen Investments 10.500%, 11/15/15 800 780 OJSC AK Transneft (TransCapitalInvest Ltd.) 144A 5.670%, 3/5/14 (4) 5,715 5,996 Petroplus Finance Ltd. 144A 6.750%, 5/1/14 (4) 4,215 3,815 PNC Funding Corp. 5.625%, 2/1/17 3,130 3,230 Principal Financial Group, Inc. 7.875%, 5/15/14 2,595 2,936 Principal Life Global Funding I 144A 4.400%, 10/1/10 (4) 1,500 1,522 ProLogis 7.625%, 8/15/14 5,275 5,768 6.625%, 5/15/18 1,110 1,103 Prudential Financial, Inc. 4.750%, 9/17/15 4,770 4,910 8.875%, 6/15/38(3) 4,200 4,714 Regions Financial Corp. 7.750%, 11/10/14 2,525 2,657 Royal Bank of Scotland Group plc 6.400%, 10/21/19 3,130 3,129
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Royal Bank of Scotland plc (The) 4.875%, 3/16/15 $ 3,230 $ 3,229 Russian Agricultural Bank OJSC (RSHB Capital SA) 144A 9.000%, 6/11/14(4) 780 900 144A 6.299%, 5/15/17(4) 2,905 3,014 Simon Property Group LP 4.600%, 6/15/10 3,825 3,850 4.200%, 2/1/15 700 702 SLM Corp. 5.375%, 5/15/14 14,700 13,924 Sovereign Bank 5.125%, 3/15/13 7,000 7,175 SunTrust Banks, Inc. 6.000%, 9/11/17 4,925 4,989 Textron Financial Corp. 5.125%, 11/1/10 3,865 3,924 TNK-BP Finance SA RegS 6.125%, 3/20/12 (5) 4,210 4,457 144A 7.500%, 3/13/13(4) 1,750 1,903 144A 6.250%, 2/2/15(4) 500 525 Trustreet Properties, Inc. 7.500%, 4/1/15 1,215 1,252 Universal City Development Partners Ltd. 144A 8.875%, 11/15/15 (4) 820 830 Unum Group 7.125%, 9/30/16 6,620 7,196 VTB Capital SA 144A 6.465%, 3/4/15 (4) 6,000 6,135 Wachovia Bank NA 5.000%, 8/15/15 2,600 2,697 Wachovia Corp. 5.300%, 10/15/11 4,870 5,153 WEA Finance LLC/ WT Finance Australia 144A 5.750%, 9/2/15 (4) 5,425 5,710 Webster Financial Corp. 5.125%, 4/15/14 2,500 2,307 Wells Fargo & Co. 4.375%, 1/31/13 800 844 Westpac Banking Corp. 4.200%, 2/27/15 4,920 5,064 Woori Bank 144A 7.000%, 2/2/15 (4) 4,000 4,436 XL Capital Ltd. 5.250%, 9/15/14 4,335 4,481
See Notes to Financial Statements 14 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ FINANCIALS--CONTINUED Zions Bancorp 7.750%, 9/23/14 $ 1,880 $ 1,896 ------------- 530,060 ------------- HEALTH CARE--0.5% CareFusion Corp. 5.125%, 8/1/14 2,940 3,120 HCA, Inc. 9.125%, 11/15/14 1,739 1,841 Life Technologies Corp. 3.375%, 3/1/13 1,970 1,981 Medco Health Solutions, Inc. 7.250%, 8/15/13 1,000 1,131 Select Medical Corp. 7.625%, 2/1/15 2,820 2,700 U.S. Oncology, Inc. 9.125%, 8/15/17 1,263 1,326 Valeant Pharmaceuticals International 144A 8.375%, 6/15/16 (4) 417 438 ------------- 12,537 ------------- INDUSTRIALS--2.6% America West Airlines 98-1A, 6.870%, 1/2/17 2,783 2,748 American Airlines, Inc. 01-1, 6.977%, 5/23/21 8,190 6,797 Continental Airlines, Inc. 98-1A, 6.648%, 9/15/17 4,081 4,089 Delta Air Lines, Inc. 00-A1, 7.379%, 5/18/10 2,371 2,371 02-1, G-2 6.417%, 7/2/12 13,000 12,919 DI Finance/DynCorp International, Inc. Series B, 9.500%, 2/15/13 5,175 5,266 Esco Corp. 144A 8.625%, 12/15/13 (4) 1,725 1,742 GATX Corp. 4.750%, 5/15/15 4,940 4,903 General Cable Corp. 2.666%, 4/1/15(3) 3,375 3,046 Hutchison Whampoa International Ltd. 144A 4.625%, 9/11/15 (4) 3,900 4,008
PAR VALUE VALUE ------------ ------------ INDUSTRIALS--CONTINUED Ingersoll-Rand Global Holdings Co. Ltd. 9.500%, 4/15/14 $ 1,410 $ 1,710 Marquette Transportation Co./ Marquette Transportation Finance Corp. 144A 10.875%, 1/15/17 (4) 750 766 Noble Group Ltd. 144A 6.750%, 1/29/20 (4) 4,420 4,569 Owens Corning, Inc. 6.500%, 12/1/16 3,150 3,334 Smiths Group plc 144A 7.200%, 5/15/19 (4) 1,700 1,913 Steelcase, Inc. 6.500%, 8/15/11 2,825 2,906 Toledo Edison Co. (The) 7.250%, 5/1/20 1,360 1,572 Tyco International Finance SA 4.125%, 10/15/14 1,000 1,034 United Rentals North America, Inc. 10.875%, 6/15/16 1,772 1,936 USG Corp. 144A 9.750%, 8/1/14 (4) 701 747 ------------- 68,376 ------------- INFORMATION TECHNOLOGY--1.6% Agilent Technologies, Inc. 5.500%, 9/14/15 2,185 2,342 Corning, Inc. 6.625%, 5/15/19 850 943 Crown Castle Holdings GS V LLC/Crown Castle GS III Corp. 144A 7.750%, 5/1/17 (4) 4,375 4,769 Intuit, Inc. 5.750%, 3/15/17 1,334 1,410 Jabil Circuit, Inc. 7.750%, 7/15/16 2,952 3,122 National Semiconductor Corp. 6.600%, 6/15/17 3,330 3,621 NXP BV/NXP Funding LLC 3.001%, 10/15/13(3) 3,040 2,861 Seagate Technology HDD Holdings, Inc. 6.375%, 10/1/11 3,950 4,108 Sorenson Communications, Inc. 144A 10.500%, 2/1/15 (4) 3,400 3,298
See Notes to Financial Statements 15 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ INFORMATION TECHNOLOGY--CONTINUED SunGard Data Systems, Inc. 9.125%, 8/15/13 $ 5,426 $ 5,589 Xerox Corp. 5.650%, 5/15/13 4,345 4,660 8.250%, 5/15/14 444 515 4.250%, 2/15/15 4,000 4,033 ------------- 41,271 ------------- MATERIALS--4.1% Airgas, Inc. 4.500%, 9/15/14 1,512 1,560 Allegheny Technologies, Inc. 9.375%, 6/1/19 7,245 8,430 Anglo American Capital plc 144A 9.375%, 4/8/19 (4) 1,950 2,484 ArcelorMittal 5.375%, 6/1/13 4,825 5,136 9.000%, 2/15/15 2,560 3,058 Barrick Gold Financeco LLC 6.125%, 9/15/13 4,500 5,013 Bemis Co., Inc. 5.650%, 8/1/14 980 1,054 Catalyst Paper Corp. 7.375%, 3/1/14 1,055 739 144A 11.000%, 12/15/16(4) 3,520 3,546 Commercial Metals Co. 7.350%, 8/15/18 7,760 8,164 CRH America, Inc. 5.625%, 9/30/11 3,500 3,668 8.125%, 7/15/18 4,770 5,617 Domtar Corp. 5.375%, 12/1/13 2,625 2,684 7.125%, 8/15/15 2,185 2,283 Dow Chemical Co. (The) 7.600%, 5/15/14 2,950 3,368 5.900%, 2/15/15 3,950 4,276 Georgia-Pacific LLC 144A 7.125%, 1/15/17 (4) 3,525 3,684 7.700%, 6/15/15 4,820 5,133 Gerdau Holdings, Inc. 144A 7.000%, 1/20/20 (4) 1,950 2,057 Hexion Finance Escrow LLC/ Hexion Escrow Corp. 144A 8.875%, 2/1/18 (4) 3,000 2,970 International Paper Co. 9.375%, 5/15/19 5,330 6,663
PAR VALUE VALUE ------------ ------------ MATERIALS--CONTINUED JonhsonDiversey, Inc. 144A 8.250%, 11/15/19 (4) $ 435 $ 452 Nalco Co. 8.875%, 11/15/13 1,630 1,687 Nova Chemicals Corp. 3.649%, 11/15/13(3) 8,694 8,238 Sappi Pappier Holding AG 144A 6.750%, 6/15/12 (4) 5,000 4,980 Steel Dynamics, Inc. 7.375%, 11/1/12 1,528 1,597 Vedanta Resources plc 144A 8.750%, 1/15/14 (4) 3,400 3,749 Verso Paper Holdings LLC/ Verso Paper, Inc. 144A 11.500%, 7/1/14(4) 3,650 3,960 Series B, 3.999%, 8/1/14(3) 2,570 2,204 ------------- 108,454 ------------- TELECOMMUNICATION SERVICES--1.8% Axtel SAB de C.V. 144A 9.000%, 9/22/19 (4) 750 $ 769 Cincinnati Bell, Inc. 8.250%, 10/15/17 3,760 3,826 Clearwire Communications LLC/Clearwire Finance, Inc. 144A 12.000%, 12/1/15(4) 4,000 4,090 144A 12.000%, 12/1/15(4) 2,795 2,865 Deutsche Telekom International Finance BV 8.500%, 6/15/10 1,000 1,015 Embarq Corp. 6.738%, 6/1/13 2,385 2,595 Nextel Communications, Inc. Series E 6.875%, 10/31/13 5,590 5,478 Series D 7.375%, 8/1/15 2,095 2,001 OJSC Vimpel Communications (VIP Finance Ireland Ltd.) 144A 8.375%, 4/30/13 (4) 1,400 1,522 Qwest Corp. 7.875%, 9/1/11 5,220 5,533 Telecom Italia Capital SA 6.175%, 6/18/14 4,900 5,238 Verizon Wireless Capital LLC 5.550%, 2/1/14 4,090 4,470
See Notes to Financial Statements 16 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ TELECOMMUNICATION SERVICES--CONTINUED Virgin Media Finance plc Series 1, 9.500%, 8/15/16 $ 2,575 $ 2,826 Wind Acquisition Finance SA 144A 11.750%, 7/15/17 (4) 2,450 2,719 Windstream Corp. 7.875%, 11/1/17 2,000 1,980 ------------ 46,927 ------------ UTILITIES--1.1% Allegheny Energy Supply Co. LLC 144A 8.250%, 4/15/12 (4) 1,860 2,051 AmeriGas Partners LP 7.250%, 5/20/15 860 877 Enel Finance International SA 144A 3.875%, 10/7/14 (4) 2,000 2,026 Israel Electric Corp. Ltd. 144A 7.250%, 1/15/19 (4) 2,285 2,482 Korea Electric Power Corp. 144A 5.500%, 7/21/14 (4) 3,420 3,654 Korea Gas Corp. 144A 6.000%, 7/15/14 (4) 2,000 2,175 Majapahit Holding BV 144A 7.250%, 6/28/17 (4) 1,550 1,658 Midwest Generation LLC Series B 8.560%, 1/2/16 1,455 1,489 NiSource Finance Corp. 7.875%, 11/15/10 3,440 3,572 Northeast Utilities 5.650%, 6/1/13 3,950 4,210 ONEOK Partners LP 5.900%, 4/1/12 980 1,051 Sempra Energy 6.500%, 6/1/16 1,760 1,966 Texas Competitive Electric Holdings Co. LLC Series A 10.250%, 11/1/15 1,390 973 TransAlta Corp. 4.750%, 1/15/15 2,220 2,292 ------------ 30,476 ------------ TOTAL CORPORATE BONDS (IDENTIFIED COST $967,571) 1,031,720 ------------
PAR VALUE VALUE ------------ ------------ LOAN AGREEMENTS(3)--10.7% CONSUMER DISCRETIONARY--3.4% AMF Bowling Worldwide, Inc. Tranche B, 2.730%, 5/17/13 $ 2,125 $ 1,901 Cengage Learning Acquisitions, Inc. Tranche 2.790%, 7/5/14 7,068 6,252 Ceridian Corp. Tranche 3.249%, 11/8/14 6,592 5,941 Charter Communications Operating LLC Tranche B-1, 3.550%, 3/6/14 530 511 Tranche C, 3.550%, 9/6/16 4,300 4,195 Ford Motor Co. Tranche B-1, 3.260%, 12/15/13 4,481 4,345 Getty Images, Inc. Tranche B, 6.250%, 7/2/15 3,570 3,595 Harrah's Operating Co., Inc. Tranche B-2, 3.249%, 1/28/15 1,577 1,363 Tranche B-4, 9.500%, 10/31/16 2,165 2,246 Intelsat Jackson Holding Ltd. Tranche 3.228%, 2/1/14 2,335 2,177 Intelstat Corp. Tranche B2-B, 2.728%, 1/3/14 1,681 1,640 Tranche B2-C, 2.728%, 1/3/14 1,681 1,640 Tranche B2-A, 2.728%, 1/3/14 1,680 1,640 Isle of Capri Casinos, Inc. Tranche A-DD, 5.000%, 11/25/13 658 642 Tranche B-DD, 5.000%, 11/25/13 748 729 Tranche 5.000%, 11/25/13 1,869 1,823 Lamar Media Corp. Tranche F, 5.500%, 3/31/14 898 905 Landry's Restaurant, Inc. Tranche 8.000%, 11/30/13 2,769 2,782
See Notes to Financial Statements 17 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ CONSUMER DISCRETIONARY--CONTINUED Las Vegas Sands LLC Tranche I-DD, 2.050%, 5/23/14 $ 546 $ 501 Tranche B, 2.050%, 5/23/14 2,704 2,481 Mediacom Illinois LLC Tranche D, 5.500%, 3/31/17 4,753 4,794 Neiman-Marcus Group, Inc. (The) Tranche 2.252%, 4/6/13 8,600 8,168 Nielsen Finance LLC/ Nielsen Finance Co. Tranche 2.229%, 8/9/13 3,943 3,789 Tranche B, 3.979%, 5/1/16 3,358 3,306 Pilot Travel Centers LLC Tranche B, 3.250%, 1/15/16 4,675 4,726 PTI Group, Inc. Tranche 9.250%, 2/18/13 1,428 1,378 Sinclair Telecommunication Group, Inc. Tranche B, 6.500%, 10/29/15 1,525 1,547 Six Flags Theme Parks, Inc. Tranche 3.750%, 6/15/15 5,275 5,240 Totes Isotoner Corp. Tranche B, 2.751%, 1/16/13 373 342 TRW Automotive Holdings Corp. Tranche B-3 5.000%, 5/30/16 249 252 Univision Communications, Inc. Tranche B, 2.540%, 9/29/14 6,130 5,482 VWR Funding, Inc. Tranche 2.748%, 6/29/14 3,245 3,061 ------------ 89,394 ------------ CONSUMER STAPLES--0.3% Revlon Consumer Products Corp. Tranche 6.000%, 3/11/15 6,015 5,966
PAR VALUE VALUE ------------ ------------ CONSUMER STAPLES--CONTINUED Reynolds Group Holdings Ltd. Tranche 6.250%, 11/5/15 $ 1,476 $ 1,494 ------------ 7,460 ------------ ENERGY--0.2% ATP Oil & Gas Corp. Tranche B-2, 12.250%, 1/15/11 606 615 Tranche B-1, 11.250%, 7/15/14 4,284 4,346 Targa Resources, Inc. Tranche 6.000%, 7/6/16 1,596 1,607 ------------ 6,568 ------------ FINANCIALS--0.6% Agile Property Holdings Ltd. Tranche 2.993%, 1/25/13 3,750 3,487 CIT Group, Inc. Tranche 13.000%, 1/18/12 1,260 1,308 Delos Aircraft, Inc. Tranche B-2, 7.000%, 3/17/16 243 247 Green Tree Credit Solutions Tranche 8.000%, 12/31/16 1,617 1,613 Hertz Corp. Letter of Credit 0.020%, 12/21/12 479 474 Tranche B, 1.980%, 12/21/12 2,380 2,358 International Lease Finance Corp. Tranche B-1, 6.750%, 3/17/15 332 341 Pinnacle Foods Finance LLC/ Pinnacle Food Finance Corp. Tranche B, 2.979%, 4/2/14 2,402 2,339 Universal City Tranche 6.500%, 11/30/19 742 751 Vanguard Health Holding Co., I LLC Tranche B, 5.000%, 1/29/16 2,085 2,093 ------------ 15,011 ------------
See Notes to Financial Statements 18 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ HEALTH CARE--0.4% Butler Schein Animal Health Tranche B, 5.500%, 12/31/15 $ 1,247 $ 1,262 HCA, Inc. Tranche B-1, 2.540%, 11/17/13 1,824 1,781 Health Management Associates, Inc. Tranche B, 2.040%, 2/28/14 1,140 1,108 HealthSouth Corp. Tranche 2, 4.033%, 9/10/15 1,628 1,637 RehabCare Group, Inc. Tranche B, 6.000%, 11/24/15 4,040 4,070 Select Medical Corp. Tranche B-1, 4.001%, 8/22/14 1,137 1,115 ------------ 10,973 ------------ INDUSTRIALS--1.1% Advanced Disposal Tranche B, 6.000%, 1/14/15 499 505 Bucyrus International, Inc. Tranche C, 4.500%, 2/19/16 2,840 2,874 Harland Clarke Holdings Corp. Tranche B, 2.790%, 6/30/14 6,295 5,772 Language Line Holdings LLC Tranche B, 5.500%, 11/4/15 3,706 3,723 Protection One Alarm Monitoring, Inc. Tranche B-2, 6.250%, 3/31/14 1,104 1,104 ServiceMaster Co. (The) Tranche DD, 2.750%, 7/24/14 792 761 Tranche B, 2.750%, 7/24/14 7,952 7,640 Transaction Network Services, Inc. Tranche 6.000%, 11/18/15 4,798 4,828 U.S. Investigations Services, Inc. Tranche B, 3.271%, 2/21/15 1,477 1,374 ------------ 28,581 ------------
PAR VALUE VALUE ------------ ------------ INFORMATION TECHNOLOGY--2.1% Allen Systems Group, Inc. Tranche 8.500%, 10/20/13 $ 3,476 $ 3,510 Avaya, Inc. Tranche B-1, 3.002%, 10/26/14 4,704 4,204 CommScope, Inc. Tranche B, 2.748%, 12/27/14 1,933 1,922 Dresser, Inc. Tranche B, 2.500%, 5/4/14 2,405 2,315 PIK Interest Capitalization 6.000%, 5/4/15 3,605 3,442 First Data Corp. Tranche B-1, 3.040%, 9/24/14 1,960 1,739 Tranche B-2, 3.040%, 9/24/14 488 432 Tranche B-3, 3.040%, 9/24/14 6,829 6,047 Freescale Semiconductor, Inc. Tranche 4.479%, 12/1/16 3,188 3,003 Infor Global Solutions, Inc. Tranche B, 6.498%, 1/28/12 4,600 4,462 Tranche 6.498%, 7/30/12 2,400 2,328 NuSil Technology Tranche B, 6.000%, 2/18/15 2,600 2,613 Reynolds & Reynolds Co. (The) Tranche 2.245%, 10/24/12 3,560 3,485 Tranche 5.852%, 10/24/13 4,845 4,615 Spansion, Inc. Tranche B, 7.750%, 2/9/15 6,640 6,715 Springboard Finance LLC Tranche B, 7.000%, 2/23/15 3,935 3,964 TowerCo LLC Tranche 6.000%, 11/20/14 2,494 2,519 ------------ 57,315 ------------
See Notes to Financial Statements 19 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
PAR VALUE VALUE ------------ ------------ MATERIALS--1.4% Anchor Glass Container Corp. Tranche 6.000%, 2/3/16 $ 4,195 $ 4,190 Tranche 10.000%, 8/2/16 3,475 3,438 Berry Plastics Group, Inc. Tranche C, 2.257%, 4/3/15 8,676 8,185 Building Materials Holding Corp. of America Tranche B, 3.000%, 2/22/14 743 734 Building Materials Holdings Corp. 5.000%, 1/5/15(6) 1,251 970 Gentek Holding LLC Tranche 7.000%, 10/29/14 5,536 5,589 Huntsman International LLC Tranche B, 1.999%, 4/21/14 2,439 2,347 Ineos Holdings Ltd. Tranche B-2, 7.500%, 12/16/13 1,343 1,320 Tranche C-2, 8.000%, 12/16/14 1,343 1,326 JohnsonDiversity, Inc. Tranche 0.000%, 11/11/15 698 706 Nalco Co. Tranche B, 6.500%, 5/13/16 1,618 1,637 New Sunward Holding BV Tranche B, 0.000%, 2/14/14 3,757 3,513 Smurfit-Stone Container Enterprise Tranche B, 0.000%, 2/22/16 1,625 1,631 Solutia, Inc. Tranche B, 4.750%, 3/17/17 2,000 2,022 ------------ 37,608 ------------
PAR VALUE VALUE ------------ ------------ TELECOMMUNICATION SERVICES--0.7% Level 3 Communications, Inc. Tranche A, 2.501%, 3/13/14 $ 8,362 $ 7,794 Tranche B, 11.500%, 3/13/14 1,044 1,143 nTelos, Inc. Tranche 5.750%, 8/7/15 5,298 5,353 U.S. TelePacific Corp. Tranche B, 9.250%, 8/25/15 3,500 3,528 ------------ 17,818 ------------ UTILITIES--0.5% NRG Energy, Inc. Letter of Credit 0.190%, 2/1/13 2,863 2,812 Tranche B, 2.040%, 2/1/13 5,788 5,684 Texas Competitive Electric Holdings Co. LLC Tranche B-2, 3.729%, 10/10/14 2,244 1,849 Tranche B-3, 3.729%, 10/10/14 3,984 3,250 ------------ 13,595 ------------ TOTAL LOAN AGREEMENTS (IDENTIFIED COST $274,278) 284,323 ------------
SHARES ------------ PREFERRED STOCK--0.0% FINANCIALS--0.0% GMAC, Inc. Series G Pfd. 7.00% 144A(4) 702 535 ------------ TOTAL PREFERRED STOCK (IDENTIFIED COST $221) 535 ------------
See Notes to Financial Statements 20 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands)
SHARES VALUE ------------ ------------ EXCHANGE TRADED FUNDS--0.2% iShares FTSE/Xinhua China 25 Index Fund 137,800 $ 5,801 ------------ TOTAL EXCHANGE TRADED FUNDS (IDENTIFIED COST $6,038) 5,801 ------------ COMMON STOCKS--0.1% FINANCIALS--0.1% CIT Group, Inc.(2) 26,344 1,027 ------------ MATERIALS--0.0% Building Materials Holdings Corp.(6) 677,817 542 ------------ TOTAL COMMON STOCKS (IDENTIFIED COST $1,987) 1,569 ------------ TOTAL LONG-TERM INVESTMENTS--98.4% (IDENTIFIED COST $2,521,678) 2,608,154 ------------
SHARES VALUE ------------ ------------ SHORT-TERM INVESTMENTS--1.1% MONEY MARKET MUTUAL FUNDS--1.1% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.119%) 28,541,180 $ 28,541 ------------ TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $28,541) 28,541 ------------ TOTAL INVESTMENTS--99.5% (IDENTIFIED COST $2,550,219) 2,636,695(1) Other Assets and Liabilities--0.5% 12,234 ------------ NET ASSETS--100.0% $ 2,648,929 ============
FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at March 31, 2010, see Note 9, Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. (3) Variable or step coupon security; interest rate shown reflects the rate 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 March 31, 2010, these securities amounted to a value of $504,830 or 19.1% 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. (9) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 21 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. PIK Payment-in-Kind Security SBA Small Business Administration FOREIGN CURRENCIES: AUD Australian Dollar BRL Brazilian Real CND Canadian Dollar COP Colombian Peso EUR European Currency Unit IDR Indonesian Rupiah KRW Korean Won NOK Norwegian Krone NZD New Zealand Dollar PLN Polish Zloty SEK Swedish Krona TRY Turkish Lira ZAR South African Rand COUNTRY WEIGHTINGS as of March 31, 2010+ United States (includes short-term investments) 79% Canada 3 Australia 2 South Korea 2 United Kingdom 2 Brazil 1 Russia 1 Other 10 --- Total 100% ===
+ % of total investments as of March 31, 2010 KEY INVESTMENT TERMS 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. 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. See Notes to Financial Statements 22 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements):
Total Level 2 - Level 3 - Value at Level 1 - Significant Significant March 31, Quoted Observable Unobservable 2010 Prices Inputs Inputs ---------- --------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: U.S. Government Securities $ 9,257 $ -- $ 9,257 $ -- Municipal Securities 5,505 -- 5,505 -- Foreign Government Securities 276,623 -- 276,623 -- Mortgage-Backed Securities 694,865 -- 694,714 151 Asset-Backed Securities 297,956 -- 288,701 9,255 Corporate Debt 1,316,043 -- 1,308,073 7,970 Equity Securities: Preferred Stocks 535 535 -- -- Exchange Traded Funds 5,801 5,801 -- -- Common Stocks 1,569 1,027 -- 542 Short-Term Investments 28,541 28,541 -- -- ---------- ------- ---------- ------- Total Investments $2,636,695 $35,904 $2,582,873 $17,918 ========== ======= ========== =======
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 Common Total Securities Securities Debt Stocks -------- --------------- ------------ --------- ------ INVESTMENT IN SECURITIES: BALANCE AS OF SEPTEMBER 30, 2009 $ 36,849 $ 10,982 $15,912 $ 9,955 $ -- Accrued discounts/premiums(a) 269 11 73 185 -- Realized gain (loss)(b) (2,004) -- (2,256) 252 -- Change in unrealized appreciation (depreciation)(b) 6,035 956 4,697 382 -- Net purchases (sales)(d) (7,498) -- (1,121) (6,377) -- Transfers in and/or out of level 3(c) (15,733) (11,798) (8,050) 3,573 542 -------- -------- ------- ------- ---- BALANCE AS OF MARCH 31, 2010 $ 17,918 $ 151 $ 9,255 $ 7,970 $542 ======== ======== ======= ======= ====
(a) Disclosed in the Statement of Operations under interest income. (b) Disclosed in the Statement of Operations under Net realized and unrealized gain (loss) on investments. (c) "Transfers in and/or out" represent the ending value as of March 31, 2010, for any investment security where a change in the pricing level occurred from the beginning to the end of the period. (d) Includes paydowns. 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 23 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2010 (UNAUDITED) (Reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) .............................................. $ 2,636,695 Receivables Investment securities sold ..................................................... 22,688 Fund shares sold ............................................................... 27,403 Dividends and interest ......................................................... 27,869 Prepaid expenses .................................................................. 167 ------------ Total assets ................................................................ 2,714,822 ------------ LIABILITIES Payables Fund shares repurchased ........................................................ 8,421 Investment securities purchased ................................................ 51,609 Dividend distributions ......................................................... 3,121 Investment advisory fee ........................................................ 1,109 Distribution and service fees .................................................. 759 Administration fee ............................................................. 167 Transfer agent fees and expenses ............................................... 426 Professional fee ............................................................... 41 Trustees' fee and expenses ..................................................... 30 Other accrued expenses ......................................................... 210 ------------ Total liabilities ........................................................... 65,893 ------------ NET ASSETS ........................................................................ $ 2,648,929 ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................................. $ 2,676,800 Accumulated undistributed net investment income (loss) ............................ (348) Accumulated undistributed net realized gain (loss) ................................ (114,044) Net unrealized appreciation (depreciation) on investments ......................... 86,521 ------------ NET ASSETS ........................................................................ $ 2,648,929 ============ CLASS A Net asset value (net assets/shares outstanding) per share ......................... $ 4.69 Maximum offering price per share NAV/(1-2.25%) .................................... $ 4.80 Shares of beneficial interest outstanding, no par value, unlimited authorization .. 353,817,309 Net Assets ........................................................................ $ 1,660,677 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ...... $ 4.67 Shares of beneficial interest outstanding, no par value, unlimited authorization .. 2,448,974 Net Assets ........................................................................ $ 11,443 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ...... $ 4.74 Shares of beneficial interest outstanding, no par value, unlimited authorization .. 79,198,714 Net Assets ........................................................................ $ 375,261 CLASS T Net asset value (net assets/shares outstanding) and offering price per share ...... $ 4.73 Shares of beneficial interest outstanding, no par value, unlimited authorization .. 65,532,869 Net Assets ........................................................................ $ 309,945 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ...... $ 4.70 Shares of beneficial interest outstanding, no par value, unlimited authorization .. 62,061,556 Net Assets ........................................................................ $ 291,603 (1) Investment in securities at cost .............................................. $ 2,550,219
See Notes to Financial Statements 24 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) INVESTMENT INCOME Interest ............................................................. $ 75,415 Dividends ............................................................ 41 Foreign taxes withheld ............................................... (125) -------- Total investment income ........................................... 75,331 -------- EXPENSES Investment advisory fees ............................................. 5,830 Service fees, Class A ................................................ 1,853 Distribution and service fees, Class B ............................... 46 Distribution and service fees, Class C ............................... 767 Distribution and service fees, Class T ............................... 1,303 Administration fees .................................................. 952 Transfer agent fees and expenses ..................................... 1,538 Custodian fees ....................................................... 104 Printing fees and expenses ........................................... 103 Trustees' fee and expenses ........................................... 85 Professional fees .................................................... 72 Registration fees .................................................... 64 Miscellaneous expenses ............................................... 205 -------- Total expenses .................................................... 12,922 -------- NET INVESTMENT INCOME (LOSS) ............................................ 62,409 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments .............................. 20,815 Net realized gain (loss) on foreign currency transactions ............ (187) Net change in unrealized appreciation (depreciation) on investments .. 58,515 Net change in unrealized appreciation (depreciation) on foreign currency translation .............................................. 316 -------- NET GAIN (LOSS) ON INVESTMENTS .......................................... 79,459 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $141,868 ========
See Notes to Financial Statements 25 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands)
Six Months Ended March 31, 2010 Year Ended (Unaudited) September 30, 2009 ---------------- ------------------ FROM OPERATIONS Net investment income (loss) .............................. $ 62,409 $ 85,992 Net realized gain (loss) .................................. 20,628 (99,539) Net change in unrealized appreciation (depreciation) ...... 58,831 217,809 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .. 141,868 204,262 ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ............................ (42,757) (73,817) Net investment income, Class B ............................ (323) (754) Net investment income, Class C ............................ (8,340) (9,218) Net investment income, Class T ............................ (6,467) (7,849) Net investment income, Class I ............................ (5,874) (55) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (63,761) (91,693) ---------- ---------- FROM SHARE TRANSACTIONS: SALE OF SHARES Class A (117,804 and 141,615 shares, respectively) ........ 543,730 580,327 Class B (172 and 508 shares, respectively) ................ 789 2,073 Class C (35,455 and 25,625 shares, respectively) .......... 165,253 109,150 Class T (21,807 and 25,531 shares, respectively) .......... 101,444 106,114 Class I (62,494 and 4,545 shares, respectively) ........... 287,661 20,355 REINVESTMENT OF DISTRIBUTIONS Class A (7,585 and 14,292 shares, respectively) ........... 35,031 57,416 Class B (52 and 130 shares, respectively) ................. 239 518 Class C (1,308 and 1,671 shares, respectively) ............ 6,096 6,812 Class T (689 and 871 shares, respectively) ................ 3,208 3,566 Class I (309 and 8 shares, respectively) .................. 1,433 32 SHARES REPURCHASED Class A (87,719 and 167,066 shares, respectively) ......... (403,687) (662,579) Class B (599 and 1,612 shares, respectively) .............. (2,750) (6,391) Class C (10,297 and 12,692 shares, respectively) .......... (48,062) (51,062) Class T (5,007 and 11,685 shares, respectively) ........... (23,301) (46,913) Class I (5,266 and 51 shares, respectively) ............... (24,335) (202) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS .... 642,749 119,216 ---------- ---------- CAPITAL CONTRIBUTIONS Fair Funds settlement(1) .................................. -- 2 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ..................... 720,856 231,787 NET ASSETS Beginning of period .......................................... 1,928,073 1,696,286 ---------- ---------- END OF PERIOD ................................................ $2,648,929 $1,928,073 ========== ========== Accumulated undistributed net investment income (loss) at end of period ............................................. $ (348) $ 1,004
(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 26 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 VALUE, INVESTMENT AND FROM FROM NET FROM NET BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED RETURN OF OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS CAPITAL --------- ---------- ----------- ---------- ---------- ------------- --------- CLASS A 10/1/09 to 3/31/10(7) $4.54 0.13(2) 0.15 0.28 (0.13) -- -- 10/1/08 to 9/30/09 4.21 0.24(2) 0.35 0.59 (0.26) -- -- 10/1/07 to 9/30/08 4.70 0.25(2) (0.48) (0.23) (0.26) -- -- 11/1/06 to 9/30/07 4.74 0.21(2) (0.03) 0.18 (0.22) -- -- 11/1/05 to 10/31/06 4.70 0.22(2) 0.03 0.25 (0.21) -- -- 11/1/04 to 10/31/05 4.83 0.20(2) (0.12) 0.08 (0.19) --(5) (0.02) 11/1/03 to 10/31/04 4.78 0.21 0.06 0.27 (0.22) -- -- CLASS B 10/1/09 to 3/31/10(7) $4.52 0.12(2) 0.15 0.27 (0.12) -- -- 10/1/08 to 9/30/09 4.19 0.22(2) 0.35 0.57 (0.24) -- -- 10/1/07 to 9/30/08 4.68 0.23(2) (0.48) (0.25) (0.24) -- -- 11/1/06 to 9/30/07 4.72 0.19(2) (0.03) 0.16 (0.20) -- -- 11/1/05 to 10/31/06 4.68 0.20(2) 0.02 0.22 (0.18) -- -- 11/1/04 to 10/31/05 4.82 0.18(2) (0.14) 0.04 (0.16) --(5) (0.02) 11/1/03 to 10/31/04 4.77 0.19 0.05 0.24 (0.19) -- -- CLASS C 10/1/09 to 3/31/10(7) $4.58 0.13(2) 0.16 0.29 (0.13) -- -- 10/1/08 to 9/30/09 4.24 0.23(2) 0.36 0.59 (0.25) -- -- 10/1/07 to 9/30/08 4.73 0.24(2) (0.48) (0.24) (0.25) -- -- 11/1/06 to 9/30/07 4.77 0.20(2) (0.03) 0.17 (0.21) -- -- 11/1/05 to 10/31/06 4.73 0.21(2) 0.02 0.23 (0.19) -- -- 11/1/04 to 10/31/05 4.87 0.19(2) (0.13) 0.06 (0.18) --(5) (0.02) 11/1/03 to 10/31/04 4.81 0.21 0.05 0.26 (0.20) -- -- CLASS T 10/1/09 to 3/31/10(7) $4.57 0.11(2) 0.17 0.28 (0.12) -- -- 10/1/08 to 9/30/09 4.23 0.21(2) 0.36 0.57 (0.23) -- -- 10/1/07 to 9/30/08 4.72 0.22(2) (0.48) (0.26) (0.23) -- -- 11/1/06 to 9/30/07 4.76 0.18(2) (0.03) 0.15 (0.19) -- -- 11/1/05 to 10/31/06 4.73 0.19(2) 0.01 0.20 (0.17) -- -- 11/1/04 to 10/31/05 4.86 0.17(2) (0.13) 0.04 (0.15) --(5) (0.02) 11/1/03 to 10/31/04 4.80 0.18 0.06 0.24 (0.18) -- -- CLASS I 10/1/09 to 3/31/10(7) $4.54 0.14(2) 0.16 0.30 (0.14) -- -- 10/1/08 to 9/30/09 4.21 0.28(2) 0.32 0.60 (0.27) -- -- 6/6/08(6) to 9/30/08 4.53 0.08(2) (0.31) (0.23) (0.09) -- --
(1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Computed using average shares outstanding. (3) Annualized. (4) Not annualized. (5) Amount is less than $0.005. (6) Inception date. (7) Unaudited. (8) The Fund may invest in other funds and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds. See Notes to Financial Statements 28
RATIO OF NET NET NET CHANGE ASSET ASSETS, RATIO OF INVESTMENT IN NET VALUE, END OF EXPENSES TO INCOME TO PORTFOLIO TOTAL ASSET END OF TOTAL PERIOD AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS VALUE PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS(8) ASSETS RATE - ------------- ------ ------ --------- -------------- ------------- ----------- --------- (0.13) 0.15 $4.69 6.32%(4) $1,660,677 1.04%(3) 5.62%(3) 29%(4) (0.26) 0.33 4.54 14.91 1,433,927 1.12 5.93 88 (0.26) (0.49) 4.21 (5.07) 1,377,371 1.08 5.54 83 (0.22) (0.04) 4.70 3.84(4) 1,435,415 1.11(3) 4.93(3) 57(4) (0.21) 0.04 4.74 5.37 1,062,479 1.04 4.75 93 (0.21) (0.13) 4.70 1.64 819,283 1.02 4.24 83 (0.22) 0.05 4.83 5.69 372,463 1.03 4.17 95 (0.12) 0.15 $4.67 6.09%(4) $ 11,443 1.54%(3) 5.12%(3) 29%(4) (0.24) 0.33 4.52 14.41 12,753 1.62 5.47 88 (0.24) (0.49) 4.19 (5.57) 15,919 1.57 5.03 83 (0.20) (0.04) 4.68 3.38(4) 21,487 1.61(3) 4.40(3) 57(4) (0.18) 0.04 4.72 4.64 27,845 1.54 4.24 93 (0.18) (0.14) 4.68 1.12 33,003 1.51 3.72 83 (0.19) 0.05 4.82 5.16 33,325 1.52 3.68 95 (0.13) 0.16 $4.74 6.35%(4) $ 375,261 1.29%(3) 5.38%(3) 29%(4) (0.25) 0.34 4.58 14.75 241,339 1.36 5.63 88 (0.25) (0.49) 4.24 (5.28) 161,770 1.33 5.28 83 (0.21) (0.04) 4.73 3.57(4) 179,222 1.36(3) 4.66(3) 57(4) (0.19) 0.04 4.77 5.07 205,385 1.28 4.48 93 (0.20) (0.14) 4.73 1.15 295,926 1.26 3.98 83 (0.20) 0.06 4.87 5.59 238,854 1.27 3.92 95 (0.12) 0.16 $4.73 6.10%(4) $ 309,945 1.79%(3) 4.88%(3) 29%(4) (0.23) 0.34 4.57 14.21 219,501 1.86 5.11 88 (0.23) (0.49) 4.23 (5.78) 141,131 1.83 4.79 83 (0.19) (0.04) 4.72 3.11(4) 155,450 1.86(3) 4.17(3) 57(4) (0.17) 0.03 4.76 4.34 153,395 1.79 3.98 93 (0.17) (0.13) 4.73 0.84 195,830 1.76 3.48 83 (0.18) 0.06 4.86 5.05 120,145 1.78 3.40 95 (0.14) 0.16 $4.70 6.68%(4) $ 291,603 0.80%(3) 5.90%(3) 29%(4) (0.27) 0.33 4.54 15.20 20,553 1.03 6.47 88 (0.09) (0.32) 4.21 (5.11)(4) 95 0.89(3) 5.85(3) 83(4)
See Notes to Financial Statements 29 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 (UNAUDITED) 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 Multi-Sector Short Term Bond Fund is reported in this semiannual report. The Fund is diversified and has an investment objective to provide high current income while attempting to limit changes in the Fund's net asset value per share caused by interest rate changes. THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS OBJECTIVE. The Fund offers Class A shares, Class C shares, Class T shares and Class I shares. Effective December 31, 2009 (the "Closing Date") Class B shares are no longer available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to the Trust's prospectus). 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 0.50% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, a 1% CDSC fee was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010 the period for which such CDSC applies to the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month proceeding the month in which 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. 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. 30 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that 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 those foreign markets. In such cases, the Fund fair values foreign securities using an external pricing service which considers the correlation of the trading patterns of the foreign securities to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange-traded funds and certain indexes, as well as prices for similar securities. 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. - 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 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. 31 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of March 31, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2006 forward (with limited exceptions). 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 foreign 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. 32 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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 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. There were no open forward currency contracts at March 31, 2010. H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: The Fund may engage in when-issued or delayed delivery transactions. Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed delivery transactions involve a commitment by a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. The 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 33 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due. Currently, the Fund only holds assignment loans. 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) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus") is Adviser to the Fund. For managing or directing the management of the investments of 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 0.55% of the first $1 billion; 0.50% of $1 billion to $2 billion; 0.45% of $2+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Goodwin Capital Advisers, Inc. ("Goodwin") serves as the Fund's subadviser. C. DISTRIBUTOR: As the distributor of each Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Funds for the six-months (the "period") ended March 31, 2010, it retained Class A net commissions of $19 and deferred sales charges of $15; Class B deferred sales charges of $3; Class C deferred sales charges of $__*; and Class T deferred sales charges of $57. 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, 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 34 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. * The amount is less than $500 (not reported in thousands). D. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended March 31, 2010, VP Distributors received administration fees totaling $671 which is included in the Statement of Operations. A portion of these fees was paid to a sub-administrator for certain accounting and administration services. VP Distributors also serves as the Trust's transfer agent. For the period ended March 31, 2010, VP Distributors received transfer agent fees totaling $1,312 which is included in the Statement of Operations. A portion of these fees was paid to various outside companies for certain sub-transfer agency services. E. AFFILIATED SHAREHOLDERS: At March 31, 2010, Virtus and its affiliates and 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 24,812 $117
4. PURCHASES AND SALES OF SECURITIES ($ 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 March 31, 2010, were as follows:
PURCHASES SALES ---------- -------- $1,218,947 $500,284
Purchases and sales of long-term U.S. Government and agency securities for the Fund during the period ended March 31, 2010, were as follows:
PURCHASES SALES --------- -------- $60,367 $140,757
5. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. 35 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 6. ILLIQUID AND RESTRICTED SECURITIES ($ 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 March 31, 2010, the Fund held the following illiquid and restricted securities:
ACQUISITION ACQUISITION MARKET VALUE % OF NET ASSETS DATE COST AT 3/31/10 AT 3/31/10 ----------- ----------- ------------ --------------- Long Grove Collateral Loan Obligation Ltd. PIK Interest Capitalization 04-1A, C 144A 2.652%, 5/25/16 5/12/04 $1,588 $1,080 0.0% 04-1A, D 144A 7.002%, 5/25/16 5/12/04 520 201 0.0
The Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 36 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 9. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At March 31, 2010, 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) - ---------- ------------ -------------- -------------- $2,551,140 $146,603 $(61,048) $85,555
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. 10. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements." ASU 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, and other required disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures. 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through 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. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Trust with immediate effect. Effective April 14, 2010, the Adviser will voluntarily limit the Fund's total operating expenses (excluding interest, taxes and extraordinary expenses) to 1.10% for Class A shares, 1.60% for Class B shares, 1.35% for Class C shares, 1.85% for Class T shares and 0.85% for Class I shares. This voluntary expense limitation may be modified or discontinued at any time. Under certain conditions, the adviser may recapture operating expenses reimbursed under this arrangement for a period of three years following the end of the fiscal year in which such reimbursements are made. 37 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES The Board of Trustees of the Trust, along with the Boards of Trustees of the other trusts in the Virtus Mutual Funds family of funds (collectively, the "Board"), are responsible for determining whether to approve the establishment and continuation of each investment advisory and sub-advisory agreement (each, an "Agreement") applicable to the Virtus Mutual Funds (collectively, the "Funds"). At meetings held on November 17-19, 2009, the Board, including a majority of the independent Trustees, considered and approved the continuation of each Agreement, as further discussed below. In approving each Agreement, the Board determined that the continued retention of the applicable adviser or subadviser was in the best interests of the Funds and their shareholders. The Trustees considered each Fund separately, though they also collectively took into account those interests that all the Funds had in common. In reaching their decisions, the Board considered information furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the annual review process. During the 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, in light of the legal advice furnished to them as well as their own business judgment, 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 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 The majority of the Funds(1) are managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of a Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. In considering the Agreement with VIA, therefore, the Trustees considered VIA's process for supervising and managing the Funds' 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 Funds; and (h) VIA's supervision of the Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Fund shareholders as a result of being part of the family of Virtus Mutual Funds, including the right to exchange investments between Funds within the same class without a sales charge, the ability to reinvest Fund dividends into other Funds and the right to combine holdings in other Funds to obtain a reduced sales charge. - ---------- (1) During the period being reported, the only Funds that did not employ a manager of managers structure were Virtus Growth & Income Fund, which is a series of Virtus Equity Trust; and Virtus Alternatives Diversifier Fund and Virtus CA Tax-Exempt Bond Fund, each of which is a series of Virtus Opportunities Trust. VIA acted as the adviser for these Funds without employing a subadviser, and the Board considered the VIA Agreement with respect to these Funds in that context. 38 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) With respect to the sub-advisory Agreements, the Board noted that each full-service subadviser(2) provided portfolio management, compliance with the respective Fund's investment policies and procedures, compliance with applicable securities laws and assurances thereof. In considering the renewal of the sub-advisory Agreements, therefore, the Board considered each 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 its respective Fund(s); (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 each subadviser were reasonable and beneficial to the Funds and their shareholders. INVESTMENT PERFORMANCE The Board placed significant emphasis on its consideration of the investment performance of the Funds, in view of its importance to shareholders, and evaluated Fund performance in the context of the special considerations that a manager-of-managers structure requires. The Board also considered that VIA continued to be proactive in seeking to replace and/or add subadvisers as necessary, with a view toward improving Fund performance over the long term. While consideration was given to performance reports and discussions at Board meetings throughout the year, particular attention in assessing such performance was given to a report (the "Lipper Report") for the Funds prepared by Lipper Inc. ("Lipper") and furnished specifically for the contract renewal process. (Lipper is an independent provider of investment company data retained by the Funds for this purpose.) The Lipper Report presented each Fund's short-term and long-term performance relative to a peer group of other mutual funds and relevant benchmarks, as selected by Lipper. The Board considered the composition of each peer group, selection criteria and the appropriateness of the benchmark used for each Fund. The Board also assessed each Fund's performance in the context of its review of the fees and expenses of each Fund as well as VIA's profitability. The Board noted that while many of the Funds had generally performed in line with their respective benchmarks and peer groups during the periods measured, some of the Funds had underperformed in comparison with their respective benchmarks and/or peer groups. Where significant, the Board extensively considered the performance of the underperforming Funds and the reasons for the performance issues. The Board discussed the possible reasons for the underperformance with VIA, and spoke with representatives from VIA regarding plans to monitor and address performance issues during the coming year. The Board ultimately determined, within the context of all of its considerations in connection with the Agreements, that the Funds' overall investment performance was reasonable, and concluded that VIA's and each subadviser's performance record and process in managing the Funds merited approval of the continuation of the Agreements. However, the Board noted that certain Funds' performance would continue to be closely monitored and it expected that if performance over a longer period of time did not improve the adviser would recommend that the subadviser be replaced in a timely manner. - ---------- (2) F-Squared Investments, Inc. is the sub-adviser to Virtus AlphaSector(SM) Allocation Fund and Virtus AlphaSector(SM) Rotation Fund but provides limited services in this role. The Board considered both the VIA Agreement and the applicable sub-advisory Agreement in this context. 39 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) PROFITABILITY The Board also considered the level of profits realized by VIA and its affiliates in connection with the operation of the Funds. In this regard, the Board reviewed the analysis presented regarding the overall profitability of VIA for its management of the Virtus Mutual Funds, as well as its profits and those of its affiliates for managing and providing other services to each Fund. In addition to the fees paid to VIA and its affiliates, the Trustees considered any other benefits derived by VIA or its affiliates from their relationship with the Funds. Specific attention was paid to the methodology used to allocate costs to each Fund, in recognition of the fact that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this regard, the Board noted that the allocations appeared reasonable, and concluded that the profitability to VIA from each Fund was reasonable in light of the quality of all services rendered to the Funds by VIA and its affiliates. The Board did not separately review profitability information for each subadviser, noting that the sub-advisory fees are paid by VIA rather than the Funds, so that Fund shareholders are not directly impacted by those fees. 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 presented in the Lipper Report. The Board noted that certain Funds had higher gross expenses when expressed as a percentage of net assets than those of such Funds' larger peers, which the Trustees considered in the context of these Funds' expectations for future growth. In addition, the Board noted that as part of the contract renewal process, it had voted for the advisory fees for certain of the Funds to be changed from flat fees to fees containing breakpoints and that such changes would reduce the fees paid by the Funds to VIA.(3) It was noted by the Board that Fund Management had represented that with respect to such fee changes, VIA would not reduce the quality or quantity of its services, and that its obligations would remain the same in all respects. Finally, the Board also noted that several of the Funds had fee waivers and/or expense caps in place to limit the total expenses incurred by the Funds and their shareholders. Based upon the information presented by VIA and Lipper, the Trustees then determined, in the exercise of their business judgment, that the management fees charged by VIA and the total expenses of the Funds were reasonable, both on an absolute basis and in comparison with the fees and expenses of other funds in each Fund's peer group and the industry at large. The Board did not receive comparative fee information relating specifically to sub-advisory fees, in light of the fact that the sub-advisory fees are paid by VIA and not by the Funds, so that Fund shareholders are not directly impacted by those fees. - ---------- (3) During the period being reported, the only Funds that had such changes were Virtus Mid-Cap Value Fund and Virtus Small-Cap Core Fund, each a series of Virtus Equity Trust; Virtus Balanced Allocation Fund, Virtus Core Equity Fund, Virtus Emerging Markets Opportunities Fund, Virtus Short/Intermediate Bond Fund and Virtus Value Equity Fund, each a series of Virtus Insight Trust; and, Virtus Bond Fund and Virtus Market Neutral Fund, each a series of Virtus Opportunities Trust. 40 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE The Board noted that the management fees for several of the Funds included breakpoints based on assets under management, and that fee waivers and/or expense caps were also in place for several of the Funds. The Board determined that VIA and the Funds likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and that shareholders of the Funds would have an opportunity to benefit from these economies of scale. In considering the sub-advisory Agreements, the Board also considered the existence of any economies of scale and whether they would be passed along to the Funds' shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the subadviser level. 41 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 19153-3111 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 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 8024 4-10 (VIRTUS MUTUAL FUNDS LOGO) SEMIANNUAL REPORT - ---------------------------------------------------------------------------------------------------------------------------------- Virtus Real Estate Securities Fund - ---------------------------------------------------------------------------------------------------------------------------------- TRUST NAME: March 31, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST 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 Disclosure of Fund Expenses ................................................................................................. 2 Schedule of Investments ..................................................................................................... 4 Statement of Assets and Liabilities ......................................................................................... 7 Statement of Operations ..................................................................................................... 8 Statement of Changes in Net Assets .......................................................................................... 9 Financial Highlights ........................................................................................................ 10 Notes to Financial Statements ............................................................................................... 12 Consideration of Advisory and Sub-advisory Agreements by the Board of Trustees .............................................. 18 - ---------------------------------------------------------------------------------------------------------------------------------- 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: The first quarter of 2010 gave investors a taste of the kind of volatility that could be in store for some time. The quarter began with a 9 percent correction in the S&P 500(R) Index from mid-January to early February 5, followed by a resumption of 2009's bull market. The major indices were up more than 4 percent for the quarter and by the end of March, both the Dow Jones Industrial AverageSM and the S&P 500 Index were up more than 65 percent from their lows on March 9, 2009. Surprisingly robust consumer spending and corporate earnings continued to support the transition of the U.S. economy out of recession toward modest growth. Unfortunately, there are some dark clouds on the horizon that may temper investors' optimism. The economy must navigate the long term impact of the unprecedented government spending to revive the global economy. Significant headwinds remain for investors, as evidenced by the current underperformance of the Chinese equity market, the solvency crisis in the Eurozone and persistently high unemployment rates in the U.S. and abroad. We believe this volatility is a reminder that investors should rely on the discipline and focus of professional investment managers and financial advisors. Ask your financial advisor to review your portfolio to ensure it reflects your current investment objectives, your tolerance for risk, and your long-term financial goals. As your advisor reviews your portfolio, we hope you will consider the wide range of equity, fixed income and alternative funds that Virtus offers. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our affiliated managers and subadvisers, we look forward to continuing to serve all your investment needs. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds May 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 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. 1
VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 We believe it is important for you to understand the impact HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Virtus Real Estate Securities The second section of the accompanying table provides Fund (the "Fund"), you may incur two types of costs: (1) information about hypothetical account values and hypothetical transaction costs, including sales charges on purchases of Class expenses based on the Fund's actual expense ratio and an assumed A shares and contingent deferred sales charges on Class B and rate of return of 5% per year before expenses, which is not your Class C shares; and (2) ongoing costs, including investment Fund's actual return. The hypothetical account values and advisory fees; distribution and service fees; and other expenses may not be used to estimate the actual ending account expenses. Class I shares are sold without a sales charge and do balance or expenses you paid for the period. You may use this not incur distribution and service fees. These examples are information to compare the ongoing costs of investing in your intended to help you understand your ongoing costs (in dollars) Fund and other funds. To do so, compare these 5% hypothetical of investing in the Fund and to compare these costs with the examples with the 5% hypothetical examples that appear in the ongoing costs of investing in other mutual funds. These examples shareholder reports of the other funds. are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The Please note that the expenses shown in the accompanying following Expense Table illustrates your Fund's costs in two table are meant to highlight your ongoing costs only and do not ways. reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second line of ACTUAL EXPENSES the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs The first section of the accompanying table provides of owning different funds. In addition, if these transactional information about actual account values and actual expenses. You costs were included, your costs would have been higher. The may use the information in this line, together with the amount calculations assume no shares were bought or sold during the you invested, to estimate the expenses that you paid over the period. Your actual costs may have been higher or lower period. Simply divide your account value by $1,000 (for example, depending on the amount of your investments and timing of any an $8,600 account value divided by $1,000 = 8.6), then multiply purchases or redemptions. 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. 2
VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF OCTOBER 1, 2009 TO MARCH 31, 2010 EXPENSE TABLE - ---------------------------------------------------------------------------------------------------------------------------------- Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During October 1, 2009 March 31, 2010 Ratio Period* - ---------------------------------------------------------------------------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,198.40 1.47% $ 8.06 Class B 1,000.00 1,193.90 2.22 12.14 Class C 1,000.00 1,194.10 2.22 12.14 Class I 1,000.00 1,199.90 1.22 6.69 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.51 1.47 7.42 Class B 1,000.00 1,013.72 2.22 11.21 Class C 1,000.00 1,013.72 2.22 11.21 Class I 1,000.00 1,018.77 1.22 6.16 * 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 (182) 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. 3
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS MARCH 31, 2010 (UNAUDITED) ------------------------------------------------------------------------------- Asset Allocations ----------------- The following table presents asset allocations within certain sectors as a percentage of total investments at March 31, 2010. Apartments 16% Office 13 Regional Malls 12 Health Care 12 Shopping Centers 9 Specialty 7 Self Storage 7 Other (includes short-term investments) 24 --- Total 100% === ------------------------------------------------------------------------------- ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- ---------- ---------- ---------- COMMON STOCKS--96.9% OFFICE--12.5% Alexandria Real Estate Equities, Inc. 174,998 $ 11,830 REAL ESTATE INVESTMENT TRUSTS--96.9% BioMed Realty Trust, Inc. 736,434 12,181 Boston Properties, Inc. 538,383 40,616 DIVERSIFIED--5.1% Corporate Office Properties Trust 237,985 9,550 Vornado Realty Trust 612,327 $ 46,353 Douglas Emmett, Inc. 118,070 1,815 - --------------------------------------------------------------- Highwoods Properties, Inc. 363,508 11,534 TOTAL DIVERSIFIED 46,353 Mack-Cali Realty Corp. 382,736 13,491 - --------------------------------------------------------------- SL Green Realty Corp. 222,671 12,752 HEALTH CARE--12.3% ---------- HCP, Inc. 1,142,257 37,695 113,769 Health Care REIT, Inc. 521,209 23,574 --------------------------------------------------------------- Nationwide Health Properties, Inc. 552,290 19,413 TOTAL INDUSTRIAL/OFFICE 179,416 Ventas, Inc. 667,954 31,714 --------------------------------------------------------------- - --------------------------------------------------------------- LODGING/RESORTS--6.1% TOTAL HEALTH CARE 112,396 Host Hotels & Resorts, Inc. 2,890,662 42,349 - --------------------------------------------------------------- LaSalle Hotel Properties 566,313 13,195 INDUSTRIAL/OFFICE--19.7% --------------------------------------------------------------- TOTAL LODGING/RESORTS 55,544 INDUSTRIAL--4.4% --------------------------------------------------------------- AMB Property Corp. 499,660 13,611 RESIDENTIAL--16.9% Eastgroup Properties, Inc. 102,610 3,872 ProLogis 1,746,043 23,048 APARTMENTS--15.9% ---------- American Campus Communities, Inc. 131,860 3,647 40,531 Apartment Investment & Management Co. ---------- Class A 547,627 10,082 MIXED--2.8% Duke Realty Corp. 460,532 5,711 Liberty Property Trust 571,750 19,405 ---------- 25,116 ---------- See Notes to Financial Statements 4
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- ---------- ---------- ---------- APARTMENTS--CONTINUED SELF STORAGE--7.2% AvalonBay Communities, Inc. 312,346 $ 26,971 Extra Space Storage, Inc. 1,361,749 $ 17,267 BRE Properties, Inc. 318,480 11,386 Public Storage 525,003 48,295 Equity Residential 1,365,489 53,459 --------------------------------------------------------------- Essex Property Trust, Inc. 181,672 16,341 TOTAL SELF STORAGE 65,562 Home Properties, Inc. 177,744 8,319 --------------------------------------------------------------- UDR, Inc. 814,924 14,375 SPECIALTY--7.4% ---------- Digital Realty Trust, Inc. 663,651 35,970 144,580 Entertainment Properties Trust 200,829 8,260 ---------- Plum Creek Timber Co., Inc. 310,861 12,096 MANUFACTURED HOMES--1.0% Rayonier, Inc. 249,980 11,356 Equity Lifestyle Properties, Inc. 163,861 8,829 --------------------------------------------------------------- - --------------------------------------------------------------- TOTAL SPECIALTY 67,682 TOTAL RESIDENTIAL 153,409 --------------------------------------------------------------- - --------------------------------------------------------------- TOTAL COMMON STOCKS RETAIL--22.2% (IDENTIFIED COST $604,298) 882,701 --------------------------------------------------------------- FREE STANDING--0.6% TOTAL LONG TERM INVESTMENTS--96.9% National Retail Properties, Inc. 258,545 5,902 (IDENTIFIED COST $604,298) 882,701 ---------- --------------------------------------------------------------- REGIONAL MALLS--12.1% SHORT TERM INVESTMENTS--3.0% Macerich Co. (The) 507,955 19,460 Simon Property Group, Inc. 1,044,216 87,610 MONEY MARKET MUTUAL FUNDS--3.0% Taubman Centers, Inc. 81,970 3,272 BlackRock Liquidity Funds ---------- TempFund Portfolio - Institutional 110,342 Shares (seven-day effective ---------- yield 0.119%) 27,385,132 27,385 --------------------------------------------------------------- SHOPPING CENTERS--9.5% TOTAL SHORT TERM INVESTMENTS Developers Diversified Realty Corp. 769,117 9,360 (IDENTIFIED COST $27,385) 27,385 Federal Realty Investments Trust 264,120 19,231 --------------------------------------------------------------- Kimco Realty Corp. 1,899,765 29,712 Regency Centers Corp. 94,170 3,529 TOTAL INVESTMENTS--99.9% Tanger Factory Outlet Centers 347,810 15,011 (IDENTIFIED COST $631,683) 910,086(1) Weingarten Realty Investors 429,120 9,252 Other assets and liabilities, net--0.1% 1,174 ---------- ---------- 86,095 NET ASSETS--100.0% $ 911,260 - --------------------------------------------------------------- ========== TOTAL RETAIL 202,339 - --------------------------------------------------------------- FOOTNOTE LEGEND: (1) Federal Income Tax Information: For tax information at March 31, 2010, see the Federal Income Tax Information Note 9 in the Notes to Financial Statements. ABBREVIATION: REIT Real Estate Investment Trust See Notes to Financial Statements 5
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) The following table provides a summary of inputs used to value the Fund's net assets as of March 31, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Value at Level 1 - March 31, 2010 Quoted Prices -------------- ------------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $882,701 $882,701 Short-Term Investments 27,385 27,385 -------- -------- Total Investments $910,086 $910,086 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. See Notes to Financial Statements 6
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2010 (UNAUDITED) (Reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) ................................................................. $ 910,086 Receivables Investment securities sold ........................................................................ 5,267 Fund shares sold .................................................................................. 4,665 Dividends ......................................................................................... 2,590 Prepaid expenses ..................................................................................... 81 ----------- Total assets ................................................................................... 922,689 ----------- LIABILITIES Payables Fund shares repurchased ........................................................................... 3,634 Investment securities purchased ................................................................... 6,384 Investment advisory fee ........................................................................... 574 Distribution and service fees ..................................................................... 170 Administration fee ................................................................................ 62 Transfer agent fees and expenses .................................................................. 454 Professional fee .................................................................................. 25 Trustees' fee and expenses ........................................................................ 11 Other accrued expenses ............................................................................ 115 ----------- Total liabilities .............................................................................. 11,429 ----------- NET ASSETS ........................................................................................... $ 911,260 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ..................................................... $ 846,957 Accumulated undistributed net investment income (loss) ............................................... 2,818 Accumulated undistributed net realized gain (loss) ................................................... (216,918) Net unrealized appreciation (depreciation) on investments ............................................ 278,403 ----------- NET ASSETS ........................................................................................... $ 911,260 =========== CLASS A Net asset value (net assets/shares outstanding) per share ............................................ $ 24.01 Maximum offering price per share NAV/(1-5.75%) ....................................................... $ 25.47 Shares of beneficial interest outstanding, no par value, unlimited authorization ..................... 23,375,514 Net Assets ........................................................................................... $ 561,148 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ......................... $ 23.69 Shares of beneficial interest outstanding, no par value, unlimited authorization ..................... 739,437 Net Assets ........................................................................................... $ 17,521 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ......................... $ 23.98 Shares of beneficial interest outstanding, no par value, unlimited authorization ..................... 1,941,198 Net Assets ........................................................................................... $ 46,541 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ......................... $ 23.99 Shares of beneficial interest outstanding, no par value, unlimited authorization ..................... 11,924,517 Net Assets ........................................................................................... $ 286,050 (1) Investment in securities at cost ................................................................. $ 631,683 See Notes to Financial Statements 7
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 2010 (UNAUDITED) (Reported in thousands) INVESTMENT INCOME Dividends ......................................................................................... $ 16,622 ----------- Total investment income ........................................................................ 16,622 ----------- EXPENSES Investment advisory fees .......................................................................... 3,171 Service fees, Class A ............................................................................. 646 Distribution and service fees, Class B ............................................................ 85 Distribution and service fees, Class C ............................................................ 213 Administration fees ............................................................................... 369 Transfer agent fees and expenses .................................................................. 1,336 Printing fees and expenses ........................................................................ 80 Registration fees ................................................................................. 43 Professional fees ................................................................................. 37 Trustees' fee and expenses ........................................................................ 34 Custodian fees .................................................................................... 25 Miscellaneous expenses ............................................................................ 58 ----------- Total expenses ................................................................................. 6,097 ----------- NET INVESTMENT INCOME (LOSS) ......................................................................... 10,525 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........................................................... 9,869 Net change in unrealized appreciation (depreciation) on investments ............................... 136,262 ----------- NET GAIN (LOSS) ON INVESTMENTS ....................................................................... 146,131 ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 156,656 =========== See Notes to Financial Statements 8
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands) Six Months Ended March 31, 2010 Year Ended (Unaudited) September 30, 2009 ---------------- ------------------ INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS Net investment income (loss) .......................................................... $ 10,525 $ 17,623 Net realized gain (loss) .............................................................. 9,869 (218,412) Net change in unrealized appreciation (depreciation) .................................. 136,262 (97,517) --------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. 156,656 (298,306) --------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................................ (4,805) (13,091) Net investment income, Class B ........................................................ (96) (348) Net investment income, Class C ........................................................ (245) (720) Net investment income, Class I ........................................................ (2,802) (3,219) --------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................................ (7,948) (17,378) --------- ---------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (3,677 and 13,818 shares, respectively) ....................................... 79,957 221,839 Class B (3 and 53 shares, respectively) ............................................... 74 888 Class C (122 and 418 shares, respectively) ............................................ 2,596 6,721 Class I (3,944 and 8,180 shares, respectively) ........................................ 79,406 135,413 REINVESTMENT OF DISTRIBUTIONS Class A (182 and 757 shares, respectively) ............................................ 4,245 11,294 Class B (3 and 20 shares, respectively) ............................................... 79 282 Class C (9 and 40 shares, respectively) ............................................... 200 585 Class I (107 and 187 shares, respectively) ............................................ 2,498 2,869 SHARES REPURCHASED Class A (7,826 and 16,768 shares, respectively) ....................................... (163,088) (272,522) Class B (152 and 415 shares, respectively) ............................................ (3,198) (6,803) Class C (261 and 831 shares, respectively) ............................................ (5,557) (13,231) Class I (2,354 and 1,779 shares, respectively) ........................................ (53,118) (28,068) --------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................................ (55,906) 59,267 --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... 92,802 (256,417) NET ASSETS Beginning of period ...................................................................... 818,458 1,074,875 --------- ---------- END OF PERIOD ............................................................................ $ 911,260 $ 818,458 ========= ========== Accumulated undistributed net investment income (loss) at end of period .................. $ 2,818 $ 241 See Notes to Financial Statements 9
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 OF PERIOD (LOSS)(2) GAIN (LOSS) OPERATIONS INCOME GAINS - ------------------------------------------------------------------------------------------------------- CLASS A 10/1/09 to 3/31/10(7) $20.21 0.26 3.74 4.00 (0.20) -- 10/1/08 to 9/30/09 29.19 0.47 (8.99) (8.52) (0.46) -- 10/1/07 to 9/30/08 34.10 0.45 (3.88) (3.43) (0.47) (1.01) 12/1/06 to 9/30/07 38.18 0.32 (2.59) (2.27) (0.32) (1.49) 12/1/05 to 11/30/06 28.15 0.30 10.73 11.03 (0.37) (0.63) 12/1/04 to 11/30/05 25.46 0.43 4.08 4.51 (0.42) (1.40) 12/1/03 to 11/30/04 20.09 0.44 5.60 6.04 (0.50) (0.17) CLASS B 10/1/09 to 3/31/10(7) $19.95 0.18 3.69 3.87 (0.13) -- 10/1/08 to 9/30/09 28.85 0.35 (8.91) (8.56) (0.34) -- 10/1/07 to 9/30/08 33.72 0.22 (3.83) (3.61) (0.25) (1.01) 12/1/06 to 9/30/07 37.74 0.10 (2.56) (2.46) (0.07) (1.49) 12/1/05 to 11/30/06 27.86 0.07 10.59 10.66 (0.15) (0.63) 12/1/04 to 11/30/05 25.21 0.23 4.05 4.28 (0.23) (1.40) 12/1/03 to 11/30/04 19.91 0.27 5.54 5.81 (0.34) (0.17) CLASS C 10/1/09 to 3/31/10(7) $20.19 0.18 3.74 3.92 (0.13) -- 10/1/08 to 9/30/09 29.17 0.35 (8.99) (8.64) (0.34) -- 10/1/07 to 9/30/08 34.07 0.23 (3.88) (3.65) (0.24) (1.01) 12/1/06 to 9/30/07 38.11 0.10 (2.59) (2.49) (0.06) (1.49) 12/1/05 to 11/30/06 28.12 0.06 10.71 10.77 (0.15) (0.63) 12/1/04 to 11/30/05 25.43 0.25 4.07 4.32 (0.23) (1.40) 12/1/03 to 11/30/04 20.07 0.26 5.61 5.87 (0.34) (0.17) CLASS I 10/1/09 to 3/31/10(7) $20.19 0.29 3.74 4.03 (0.23) -- 10/1/08 to 9/30/09 29.17 0.49 (8.97) (8.48) (0.50) -- 10/1/07 to 9/30/08 34.08 0.62 (3.98) (3.36) (0.54) (1.01) 12/29/06(6) to 9/30/07 35.99 0.28 (1.87) (1.59) (0.31) (0.01) (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. (7) Unaudited. (8) The Fund may invest in other funds, and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds. See Notes to Financial Statements 10
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 TOTAL ASSET END OF TOTAL PERIOD NET WAIVERS AND AVERAGE NET TURNOVER DISTRIBUTIONS VALUE PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ASSETS RATE - ----------------------------------------------------------------------------------------------------------------------------- (0.20) 3.80 $24.01 19.84%(4) $ 561,148 1.47%(3) 1.47%(3) 2.46%(3) 16%(4) (0.46) (8.98) 20.21 (28.61) 552,518 1.59 1.59 2.88 48 (1.48) (4.91) 29.19 (9.94) 862,062 1.37(5) 1.45 1.51 32 (1.81) (4.08) 34.10 (6.14)(4) 1,136,923 1.32(3) 1.39(3) 1.06(3) 25(4) (1.00) 10.03 38.18 40.37 1,289,007 1.30 1.30 0.94 24 (1.82) 2.69 28.15 18.67 737,744 1.30 1.30 1.68 22 (0.67) 5.37 25.46 30.68 511,107 1.28 1.28 1.98 28 (0.13) 3.74 $23.69 19.39%(4) $ 17,521 2.22%(3) 2.22%(3) 1.70%(3) 16%(4) (0.34) (8.90) 19.95 (29.20) 17,648 2.34 2.34 2.16 48 (1.26) (4.87) 28.85 (10.65) 35,376 2.12(5) 2.20 0.76 32 (1.56) (4.02) 33.72 (6.72)(4) 49,964 2.07(3) 2.13(3) 0.32(3) 25(4) (0.78) 9.88 37.74 39.29 71,240 2.05 2.05 0.24 24 (1.63) 2.65 27.86 17.81 59,042 2.05 2.05 0.93 22 (0.51) 5.30 25.21 29.74 57,797 2.03 2.03 1.25 28 (0.13) 3.79 $23.98 19.41%(4) $ 46,541 2.22%(3) 2.22%(3) 1.71%(3) 16%(4) (0.34) (8.98) 20.19 (29.17) 41,818 2.34 2.34 2.12 48 (1.25) (4.90) 29.17 (10.63) 71,278 2.12(5) 2.20 0.76 32 (1.55) (4.04) 34.07 (6.71)(4) 100,321 2.07(3) 2.14(3) 0.32(3) 25(4) (0.78) 9.99 38.11 39.32 112,794 2.05 2.05 0.19 24 (1.63) 2.69 28.12 17.80 67,764 2.05 2.05 0.97 22 (0.51) 5.36 25.43 29.78 38,399 2.03 2.03 1.17 28 (0.23) 3.80 $23.99 19.99%(4) $ 286,050 1.22%(3) 1.22%(3) 2.72%(3) 16%(4) (0.50) (8.98) 20.19 (28.45) 206,474 1.32 1.32 3.00 48 (1.55) (4.91) 29.17 (9.71) 106,159 1.12(5) 1.20 2.11 32 (0.32) (1.91) 34.08 (4.44)(4) 32,887 1.11(3) 1.23(3) 1.09(3) 25(4) See Notes to Financial Statements 11
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 2010 (UNAUDITED) 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 Real Estate Securities Fund is reported in this semiannual report. 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. The Fund offers Class A shares, Class C shares and Class I shares for sale. Effective December 1, 2009 (the "Closing Date"), Class B shares are no longer available for by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to the Trust's prospectus). 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 a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month proceeding the month in which 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 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 12
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 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. 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). The Fund utilizes 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 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. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax 13
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of March 31, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, 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) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is Adviser to the Fund. For managing, or directing the management of, the investments of each 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: 0.75% of 1st $1 billion; 0.70% $1+ billion through $2+ billion and 0.65% $2+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Duff & Phelps Investment Management Co. ("Duff & Phelps") serves as the Fund's Subadviser. Duff & Phelps is an indirect, wholly-owned subsidiary of Virtus. 14
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) C. EXPENSE LIMITATIONS: Effective August 23, 2007, 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 D. DISTRIBUTOR: As the distributor of the Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Fund that for the six months (the "period") ended March 31, 2010, it retained Class A net commissions of $15; Class B deferred sales charges of $20; and Class C deferred sales charges of $3. 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 CDSC, the CDSC schedule of the original shares purchased continues to apply. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended March 31, 2010, VP Distributors received administration fees totaling $268 which is included in the Statement of Operations. A portion of these fees was paid to a sub-administrator for certain accounting and administration services. VP Distributors also serves as the Trust's transfer agent. For the period ended March 31, 2010, VP Distributors received transfer agent fees totaling $1,206 which is included in the Statement of Operations. A portion of these fees was paid to various outside companies for certain sub-transfer agency services. 4. PURCHASES AND SALES OF SECURITIES ($ 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 March 31, 2010, were as follows: LONG-TERM -------------------- PURCHASES SALES --------- -------- $134,601 $197,038 There were no purchases or sales of long-term U.S. Government or agency securities. 15
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 5. 10% SHAREHOLDERS As of March 31, 2010, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the Fund as detailed below. The shareholders are not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- -------- 30% 2 6. CREDIT RISK AND ASSET CONCENTRATIONS The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. REGULATORY EXAMS Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Virtus and its subsidiaries (collectively "the Company") with securities and other laws and regulations affecting their registered products. There are currently no such matters which the Company believes will be material to these financial statements. 9. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At March 31, 2010, 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) -------- ------------ -------------- -------------- $681,972 $278,402 $(50,288) $228,114 16
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2010 (UNAUDITED) 10. RECENT ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06, "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, and other required disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures. 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available for issuance, and has determined that the following subsequent event requires recognition or disclosure in the financial statements. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Trust with immediate effect. 17
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES The Board of Trustees of the Trust, along with the Boards of Trustees of the other trusts in the Virtus Mutual Funds family of funds (collectively, the "Board"), are responsible for determining whether to approve the establishment and continuation of each investment advisory and sub-advisory agreement (each, an "Agreement") applicable to the Virtus Mutual Funds (collectively, the "Funds"). At meetings held on November 17-19, 2009, the Board, including a majority of the independent Trustees, considered and approved the continuation of each Agreement, as further discussed below. In approving each Agreement, the Board determined that the continued retention of the applicable adviser or subadviser was in the best interests of the Funds and their shareholders. The Trustees considered each Fund separately, though they also collectively took into account those interests that all the Funds had in common. In reaching their decisions, the Board considered information furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the annual review process. During the 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, in light of the legal advice furnished to them as well as their own business judgment, 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 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 The majority of the Funds(1) are managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of a Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. In considering the Agreement with VIA, therefore, the Trustees considered VIA's process for supervising and managing the Funds' 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 Funds; and (h) VIA's supervision of the Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Fund shareholders as a result of being part of the family of Virtus Mutual Funds, including the right to exchange investments between Funds within the same class without a sales charge, the ability to reinvest Fund dividends into other Funds and the right to combine holdings in other Funds to obtain a reduced sales charge. - ---------- (1) During the period being reported, the only Funds that did not employ a manager of managers structure were Virtus Growth & Income Fund, which is a series of Virtus Equity Trust; and Virtus Alternatives Diversifier Fund and Virtus CA Tax-Exempt Bond Fund, each of which is a series of Virtus Opportunities Trust. VIA acted as the adviser for these Funds without employing a subadviser, and the Board considered the VIA Agreement with respect to these Funds in that context. 18
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) With respect to the sub-advisory Agreements, the Board noted that each full-service subadviser(2) provided portfolio management, compliance with the respective Fund's investment policies and procedures, compliance with applicable securities laws and assurances thereof. In considering the renewal of the sub-advisory Agreements, therefore, the Board considered each 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 its respective Fund(s); (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 each subadviser were reasonable and beneficial to the Funds and their shareholders. INVESTMENT PERFORMANCE The Board placed significant emphasis on its consideration of the investment performance of the Funds, in view of its importance to shareholders, and evaluated Fund performance in the context of the special considerations that a manager-of-managers structure requires. The Board also considered that VIA continued to be proactive in seeking to replace and/or add subadvisers as necessary, with a view toward improving Fund performance over the long term. While consideration was given to performance reports and discussions at Board meetings throughout the year, particular attention in assessing such performance was given to a report (the "Lipper Report") for the Funds prepared by Lipper Inc. ("Lipper") and furnished specifically for the contract renewal process. (Lipper is an independent provider of investment company data retained by the Funds for this purpose.) The Lipper Report presented each Fund's short-term and long-term performance relative to a peer group of other mutual funds and relevant benchmarks, as selected by Lipper. The Board considered the composition of each peer group, selection criteria and the appropriateness of the benchmark used for each Fund. The Board also assessed each Fund's performance in the context of its review of the fees and expenses of each Fund as well as VIA's profitability. The Board noted that while many of the Funds had generally performed in line with their respective benchmarks and peer groups during the periods measured, some of the Funds had underperformed in comparison with their respective benchmarks and/or peer groups. Where significant, the Board extensively considered the performance of the underperforming Funds and the reasons for the performance issues. The Board discussed the possible reasons for the underperformance with VIA, and spoke with representatives from VIA regarding plans to monitor and address performance issues during the coming year. The Board ultimately determined, within the context of all of its considerations in connection with the Agreements, that the Funds' overall investment performance was reasonable, and concluded that VIA's and each subadviser's performance record and process in managing the Funds merited approval of the continuation of the Agreements. However, the Board noted that certain Funds' performance would continue to be closely monitored and it expected that if performance over a longer period of time did not improve the adviser would recommend that the subadviser be replaced in a timely manner. - ---------- (2) F-Squared Investments, Inc. is the sub-adviser to Virtus AlphaSectorSM Allocation Fund and Virtus AlphaSectorSM Rotation Fund but provides limited services in this role. The Board considered both the VIA Agreement and the applicable sub-advisory Agreement in this context. 19
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) PROFITABILITY The Board also considered the level of profits realized by VIA and its affiliates in connection with the operation of the Funds. In this regard, the Board reviewed the analysis presented regarding the overall profitability of VIA for its management of the Virtus Mutual Funds, as well as its profits and those of its affiliates for managing and providing other services to each Fund. In addition to the fees paid to VIA and its affiliates, the Trustees considered any other benefits derived by VIA or its affiliates from their relationship with the Funds. Specific attention was paid to the methodology used to allocate costs to each Fund, in recognition of the fact that allocation methodologies are inherently subjective and various allocation methodologies may each be reasonable while producing different results. In this regard, the Board noted that the allocations appeared reasonable, and concluded that the profitability to VIA from each Fund was reasonable in light of the quality of all services rendered to the Funds by VIA and its affiliates. The Board did not separately review profitability information for each subadviser, noting that the sub-advisory fees are paid by VIA rather than the Funds, so that Fund shareholders are not directly impacted by those fees. 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 presented in the Lipper Report. The Board noted that certain Funds had higher gross expenses when expressed as a percentage of net assets than those of such Funds' larger peers, which the Trustees considered in the context of these Funds' expectations for future growth. In addition, the Board noted that as part of the contract renewal process, it had voted for the advisory fees for certain of the Funds to be changed from flat fees to fees containing breakpoints and that such changes would reduce the fees paid by the Funds to VIA.(3) It was noted by the Board that Fund Management had represented that with respect to such fee changes, VIA would not reduce the quality or quantity of its services, and that its obligations would remain the same in all respects. Finally, the Board also noted that several of the Funds had fee waivers and/or expense caps in place to limit the total expenses incurred by the Funds and their shareholders. Based upon the information presented by VIA and Lipper, the Trustees then determined, in the exercise of their business judgment, that the management fees charged by VIA and the total expenses of the Funds were reasonable, both on an absolute basis and in comparison with the fees and expenses of other funds in each Fund's peer group and the industry at large. The Board did not receive comparative fee information relating specifically to sub-advisory fees, in light of the fact that the sub-advisory fees are paid by VIA and not by the Funds, so that Fund shareholders are not directly impacted by those fees. - ---------- (3) During the period being reported, the only Funds that had such changes were Virtus Mid-Cap Value Fund and Virtus Small-Cap Core Fund, each a series of Virtus Equity Trust; Virtus Balanced Allocation Fund, Virtus Core Equity Fund, Virtus Emerging Markets Opportunities Fund, Virtus Short/Intermediate Bond Fund and Virtus Value Equity Fund, each a series of Virtus Insight Trust; and, Virtus Bond Fund and Virtus Market Neutral Fund, each a series of Virtus Opportunities Trust. 20
CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE The Board noted that the management fees for several of the Funds included breakpoints based on assets under management, and that fee waivers and/or expense caps were also in place for several of the Funds. The Board determined that VIA and the Funds likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and that shareholders of the Funds would have an opportunity to benefit from these economies of scale. In considering the sub-advisory Agreements, the Board also considered the existence of any economies of scale and whether they would be passed along to the Funds' shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the subadviser level. 21
VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Nancy G. Curtiss, Senior Vice President VP Distributors, Inc. Francis G. Waltman, Senior Vice President 100 Pearl Street Marc Baltuch, Vice President and Hartford, CT 06103-4506 Chief Compliance Officer W. Patrick Bradley, Chief Financial Officer CUSTODIAN and Treasurer PFPC Trust Company Kevin J. Carr, Vice President, Chief Legal 8800 Tinicum Boulevard Officer, Counsel and Secretary Philadelphia, PA 19153-3111 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. - -----------------------------------------------------------------------------------------------------------------------------------
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(VIRTUS MUTUAL FUNDS LOGO) ------------ PRSRT STD c/o State Street Bank and Trust Company U.S. POSTAGE P.O. Box 8301 PAID Boston, MA 02266-8301 LANCASTER, PA PERMIT 1793 ------------ For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or virtus.com 8023 4-10
ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. 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) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Virtus Opportunities Trust -------------------------------------------------------------------- By (Signature and Title)* /s/ George R. Aylward ------------------------------------------------------- George R. Aylward, President (principal executive officer) Date June 4, 2010 ---------------------------------------------------------------------------- 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 June 4, 2010 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ W. Patrick Bradley ------------------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date June 4, 2010 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 b56689_302cert.txt 302 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, George R. Aylward, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 4, 2010 /s/ George R. Aylward ---------------------- ----------------------------------------------- George R. Aylward, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, W. Patrick Bradley, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 4, 2010 /s/ W. Patrick Bradley ---------------------- ----------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) EX-99.906CERT 3 b56689_906cert.txt 906 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, George R. Aylward, President of Virtus Opportunities Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: June 4, 2010 /s/ George R. Aylward ---------------------- ----------------------------------------------- George R. Aylward, President (principal executive officer) I, W. Patrick Bradley, Chief Financial Officer and Treasurer of Virtus Opportunities Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: June 4, 2010 /s/ W. Patrick Bradley ---------------------- ----------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----