-----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, RiiD/L8ebmTod1Wf5rvn+IMAg/odx9+0rFjVBryJ7veLpNyTQeOpG/ivj7WCc5hX c5L2WiyzCCOA0W8wkgwSDw== 0000950123-10-023112.txt : 20100310 0000950123-10-023112.hdr.sgml : 20100310 20100310165241 ACCESSION NUMBER: 0000950123-10-023112 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100310 DATE AS OF CHANGE: 20100310 EFFECTIVENESS DATE: 20100310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRTUS INSIGHT TRUST CENTRAL INDEX KEY: 0001003859 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07447 FILM NUMBER: 10671123 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 INSIGHT FUNDS TRUST DATE OF NAME CHANGE: 20060523 FORMER COMPANY: FORMER CONFORMED NAME: HARRIS INSIGHT FUNDS TRUST DATE OF NAME CHANGE: 19951121 0001003859 S000001930 VIRTUS INSIGHT GOVERNMENT MONEY MARKET FUND C000005080 A SHARES HIGXX C000005081 Class I HGCXX 0001003859 S000001932 VIRTUS VALUE EQUITY FUND C000005085 A SHARES HIEZX C000005086 Class I HEQIX C000035660 Class C PIQCX 0001003859 S000001933 VIRTUS EMERGING MARKETS OPPORTUNITIES FUND C000005088 A SHARES HEMZX C000005089 Class I HIEMX C000035661 Class C PICEX 0001003859 S000001935 VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND C000005093 A SHARES HSCZX C000005094 Class I HSCIX C000035662 Class C POCZX 0001003859 S000001936 VIRTUS CORE EQUITY FUND C000005096 A SHARES HGRZX C000005097 Class I HGRIX C000035663 Class C PICCX 0001003859 S000001938 VIRTUS BALANCED ALLOCATION FUND C000005102 A SHARES HIBZX C000005103 Class I HIBLX C000035665 Class C PBCIX 0001003859 S000001939 VIRTUS DISCIPLINED SMALL-CAP VALUE FUND C000005105 A SHARES HSVZX C000005106 Class I HSCVX C000035666 Class C PCCZX 0001003859 S000001941 VIRTUS INSIGHT MONEY MARKET FUND C000005108 A SHARES HICXX C000005109 Class I HACXX C000005110 EXCHANGE SHARES HECXX 0001003859 S000001942 VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND C000005112 A SHARES HITXX C000005113 Class I HTCXX 0001003859 S000001944 VIRTUS TAX-EXEMPT BOND FUND C000005119 A SHARES HXBZX C000005120 Class I HXBIX C000035670 Class C PXCZX 0001003859 S000001945 VIRTUS HIGH YIELD INCOME FUND C000005122 A SHARES HHYZX C000005123 Class I HHYIX C000035671 Class C PYHCX 0001003859 S000001946 VIRTUS INTERMEDIATE GOVERNMENT BOND FUND C000005125 A SHARES HIGZX C000005126 Class I HIGIX 0001003859 S000001947 VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND C000005128 A SHARES HIXZX C000005129 Class I HIXIX C000035672 Class C PCXIX 0001003859 S000001948 VIRTUS SHORT/INTERMEDIATE BOND FUND C000005131 A SHARES HIMZX C000005132 Class I HIBIX C000035673 Class C PCMZX N-CSR 1 b55916virtusinsight_ncsr.txt VIRTUS INSIGHT ANNUAL REPORT 12-31-2009 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 811-07447 --------- Virtus Insight 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: December 31 ----------- Date of reporting period: December 31, 2009 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. Annual Report (VIRTUS MUTUAL FUNDS LOGO) EQUITY FUNDS Virtus Balanced Allocation Fund Virtus Core Equity Fund Virtus Disciplined Small-Cap Opportunity Fund Virtus Disciplined Small-Cap Value Fund Virtus Emerging Markets Opportunities Fund Virtus Value Equity Fund FIXED INCOME FUNDS Virtus High Yield Income Fund Virtus Intermediate Government Bond Fund Virtus Intermediate Tax-Exempt Bond Fund Virtus Short/Intermediate Bond Fund Virtus Tax-Exempt Bond Fund MONEY MARKET FUNDS Virtus Insight Government Money Market Fund Virtus Insight Money Market Fund Virtus Insight Tax-Exempt Money Market Fund TRUST NAME: December 31, 2009 Eligible VIRTUS INSIGHT 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 Key Investment Terms and Footnote Legend ................................... 2 Disclosure of Fund Expenses ................................................ 6
SCHEDULE FUND OF FUND SUMMARY INVESTMENTS - ---- ------- ----------- Virtus Balanced Allocation Fund ("Balanced Allocation Fund") ..................... 8 36 Virtus Core Equity Fund ("Core Equity Fund") ........ 10 40 Virtus Disciplined Small-Cap Opportunity Fund ("Disciplined Small-Cap Opportunity Fund") ....... 12 42 Virtus Disciplined Small-Cap Value Fund ("Disciplined Small-Cap Value Fund") ............. 14 44 Virtus Emerging Markets Opportunities Fund ("Emerging Markets Opportunities Fund") .......... 16 46 Virtus Value Equity Fund ("Value Equity Fund") ...... 18 48 Virtus High Yield Income Fund ("High Yield Income Fund") ....................... 20 49 Virtus Intermediate Government Bond Fund ("Intermediate Government Bond Fund") ............ 22 52 Virtus Intermediate Tax-Exempt Bond Fund ("Intermediate Tax-Exempt Bond Fund") ............ 24 54 Virtus Short/Intermediate Bond Fund ("Short/Intermediate Bond Fund") ................. 26 56 Virtus Tax-Exempt Bond Fund ("Tax-Exempt Bond Fund") ......................... 28 59 Virtus Insight Government Money Market Fund ("Insight Government Money Market Fund") ......... 30 61 Virtus Insight Money Market Fund ("Insight Money Market Fund") .................... 32 62 Virtus Insight Tax-Exempt Money Market Fund ("Insight Tax-Exempt Money Market Fund") ......... 34 64 Statements of Assets and Liabilities ....................................... 68 Statements of Operations ................................................... 72 Statements of Changes in Net Assets ........................................ 76 Financial Highlights ....................................................... 82 Notes to Financial Statements .............................................. 96 Report of Independent Registered Public Accounting Firm ......................................................... 113 Tax Information Notice ..................................................... 114 Consideration of Advisory and Sub-Advisory Agreements by The Board of Trustees ..................................... 115 Fund Management Tables ..................................................... 117
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 under the Virtus Insight Trust unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information. MESSAGE TO SHAREHOLDERS (PHOTO OF GEORGE R. AYLWARD) DEAR FELLOW SHAREHOLDERS OF VIRTUS MUTUAL FUNDS: We ended 2008 sadly disappointed in the course of the economy and unsure about the future. A year later, we can take stock of 2009 with a measure of relief and tempered optimism toward 2010. While 2008 was an unprecedented year in the financial markets, 2009 was an entire business cycle crammed into one year. The U.S. economy suffered its worst first quarter in three decades. We witnessed a measure of stabilization during the second quarter, then enjoyed the beginnings of what we hope will be a productive growth cycle in the third and fourth quarters. The equity markets reflected this pattern, hitting recent lows in early March before recovering throughout the year. The Dow Jones Industrial Average fell to 6,440 on March 9, 2009, then ended the year up 19 percent from its close the previous year. The Standard & Poor's 500(R) Index ended 2009 at 1,115, up 26 percent for the year and up 65 percent from its low on March 9. Bonds also participated in the rally, with the Barclays Capital U.S. Aggregate Bond Index ahead 5.9 percent for the year, and the Barclays Capital U.S. Municipal Bond Index up 12.9 percent. Challenges remain nonetheless. The U.S. unemployment rate hovers near 10 percent after the recession wiped out more than seven million jobs, and it may take several years before those jobs are replaced. Consumer spending is still restrained, and corporate spending, which is important to stimulate the growth of the economy, is affected by tight bank credit and recovering capital markets. The U.S. housing market, which added fuel to the last cycle, has yet to demonstrate resilience without government subsidies. Policymakers in Washington, D.C. and in capitals throughout the world continue to search for the right balance between support for their economies and unwinding the extraordinary fiscal stimulus measures. The volatility created by these challenges should remind investors of the need to stay focused on your long-term financial goals. Consult with your financial advisor to review your portfolio and ensure it reflects your current investment objectives and your tolerance for risk. When you and your financial advisor review your investments, we hope you will consider the wide range of mutual fund strategies available through Virtus. Please visit us at www.virtus.com or call our customer service line at 800-243-1574 for more information about the Virtus Mutual Funds. On behalf of the entire team at Virtus Investment Partners, and the investment professionals at our affiliated managers and subadvisers, we look forward to serving you in 2010. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds FEBRUARY 2010 1 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS ADR (AMERICAN DEPOSITARY RECEIPT) Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges that are held by a bank or a trust. Foreign companies use ADRs in order to make it easier for Americans to buy their shares. BALANCED ALLOCATION FUND COMPOSITE INDEX A composite index consisting of 60% Russell 1000 Index and 40% Barclays U.S. Capital Aggregate Bond Index. BARCLAYS CAPITAL U.S. MUNICIPAL BOND: 3-15 YEAR INDEX The Barclays Capital U.S. Municipal Bond: 3-15 Year Index is an unmanaged index of investment grade municipal bonds with maturities of 3-15 years. The index is calculated on a total return basis. BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. BARCLAYS CAPITAL U.S. HIGH YIELD-2% ISSUER CAP INDEX Barclays Capital U.S. High Yield 2% Issuer Cap Index is a market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. corporations. No single issuer accounts for more than 2% of market cap. The index is calculated on a total return basis. BARCLAYS CAPITAL U.S. GOVERNMENT INTERMEDIATE BOND INDEX The Barclays Capital U.S. Government Intermediate Bond Index measures intermediate-term bonds issued by the U.S. Treasury, government agencies, and quasi-federal corporations with maturities ranging from 1 to 9.99 years. The index is calculated on a total return basis. BARCLAYS CAPITAL INTERMEDIATE U.S. GOVERNMENT/CREDIT BOND INDEX The Barclays Capital Intermediate U.S. Government/Credit Bond Index measures U.S. investment grade government and corporate debt securities with an average maturity of four to five years. The index is calculated on a total return basis. BARCLAYS CAPITAL U.S. MUNICIPAL BOND INDEX The Barclays Capital U.S. Municipal Bond Index is a market capitalization-weighted index that measures the long-term tax-exempt bond market. The index is calculated on a total return basis. FEDERAL RESERVE (THE "FED") The central bank of the United States, responsible for controlling the money supply, interest rates and credit with the goal of keeping the U.S. economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25 branches and all national and state banks that are part of the system. GROSS DOMESTIC PRODUCT (GDP) An important measure of the United States' economic performance, GDP is the total market value of all final goods and services produced in the U.S. during any quarter or year. MSCI EMERGING MARKETS FREE INDEX The MSCI Emerging Markets Free Index is a free float-adjusted market capitalization index designed to measure equity market performance in the global emerging markets. The index is calculated on a total return basis with gross dividends reinvested. NATIONAL BUREAU OF ECONOMIC RESEARCH (NBER) A private, non-profit, non-partisan research organization that disseminates economic research among public policymakers, business professionals and the academic communities. Their focus is on four types of empirical research: developing new statistical measurements, estimating quantitative models of economic behavior, assessing the effects of public policies on the U.S. economy, and projecting the effects of alternative policy proposals. PIK (PAYMENT-IN-KIND SECURITY) A bond which pays interest in the form of additional bonds, or preferred stock which pays dividends in the form of additional preferred stock. REIT (REAL ESTATE INVESTMENT TRUST) A publicly traded company that owns, develops and operates income-producing real estate such as apartments, office buildings, hotels, shopping centers and other commercial properties. RUSSELL 1000(R) INDEX The Russell 1000(R) Index is a market capitalization-weighted index of the 1,000 largest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. 2 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) RUSSELL 1000(R) VALUE INDEX The Russell 1000(R) Value Index is a market capitalization-weighted index of value-oriented stocks of the 1,000 largest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. RUSSELL 2000(R) INDEX The Russell 2000(R) Index is a market capitalization-weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. RUSSELL 2000(R) GROWTH INDEX The Russell 2000(R) Growth Index is a market capitalization-weighted index of growth-oriented stocks of the smallest 2,000 companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. RUSSELL 2000(R) VALUE INDEX The Russell 2000(R) Value Index is a market capitalization-weighted index of value-oriented stocks of the smallest 2,000 companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. S&P 500(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major U.S. exchange such as the NYSE. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed delivery transactions involve a commitment by a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. THE INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 3 KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at December 31, 2009, see the Federal Income Tax Information Note 11 in the Notes to Financial Statements. (2) Non-income producing. (3) Variable or step coupon security; interest rate shown reflects the rate in effect at December 31, 2009. (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 ($ in thousands) % of Net Assets - ---- ---------------- --------------- Balanced Allocation Fund $ 209 0.4% High Yield Income Fund 9,825 22.2 Intermediate Government Bond Fund 50 0.1 Short/Intermediate Bond Fund 2,154 2.3 Insight Money Market Fund 225,000 8.7
(5) Amount is less than $500. (6) Illiquid Security. (7) Illiquid and restricted security. For acquisition information, see Note 9 "Illiquid and Restricted Securities" in the Notes to Financial Statements. (8) Security valued at fair value as determined in good faith by or under the direction of the Trustees. This security could be disclosed as a Level 3 security in the table located after the Schedule of Investments. (9) Security in default. (10) The rate shown is the discount rate. (11) All or a portion of the security is segregated as collateral. (12) Security with a "put" feature; the date shown is when the security may be put back for redemption. (13) At December 31, 2009, 20.4% of the securities in the Intermediate Tax-Exempt Bond Fund portfolio and 20.0% of the securities in the Tax-Exempt Bond Fund portfolio are backed by insurance of financial institutions and financial guaranty assurance. None of the Insurers' concentration in either Fund exceeded 10% of the respective Funds' net assets. (14) Shares traded on London Exchange. (15) Shares traded on Johannesburg Exchange. (16) The date shown is the reset date. (17) When-issued security. 4 THIS PAGE INTENTIONALLY BLANK. VIRTUS INSIGHT TRUST DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF JULY 1, 2009 TO DECEMBER 31, 2009 We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of a Virtus Insight Trust Fund (the "Fund") you may incur two types of costs: (1) transaction costs, including sales charges on purchases of Class A shares and contingent deferred sales charges on Class C shares; and (2) ongoing costs, including investment advisory fees; distribution and service fees; and other expenses. Class I shares, Class A shares and Exchange shares of the Money Market Funds are sold without sales charges. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's costs in two ways. ACTUAL EXPENSES The first section of the accompanying table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions. EXPENSE TABLE
Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During July 1, 2009 December 31, 2009 Ratio Period* ------------- ----------------- ---------- ------------- BALANCED ALLOCATION FUND ACTUAL Class I $1,000.00 $1,139.30 0.80% $ 4.31 Class A 1,000.00 1,138.40 1.05 5.66 Class C 1,000.00 1,134.30 1.80 9.68 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,021.13 0.80 4.08 Class A 1,000.00 1,019.85 1.05 5.36 Class C 1,000.00 1,016.02 1.80 9.19 CORE EQUITY FUND ACTUAL Class I $1,000.00 $1,190.60 0.96% $ 5.30 Class A 1,000.00 1,188.50 1.21 6.67 Class C 1,000.00 1,184.70 1.96 10.79 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,020.31 0.96 4.90 Class A 1,000.00 1,019.03 1.21 6.18 Class C 1,000.00 1,015.20 1.96 10.01 DISCIPLINED SMALL-CAP OPPORTUNITY FUND ACTUAL Class I $1,000.00 $1,216.50 1.06% $ 5.92 Class A 1,000.00 1,215.00 1.31 7.31 Class C 1,000.00 1,210.50 2.06 11.48 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,019.80 1.06 5.41 Class A 1,000.00 1,018.52 1.31 6.69 Class C 1,000.00 1,014.69 2.06 10.52 DISCIPLINED SMALL-CAP VALUE FUND+++ ACTUAL Class I $1,000.00 $1,204.70 1.08% $ 6.00 Class A 1,000.00 1,202.90 1.33 7.38 Class C 1,000.00 1,198.40 2.08 11.53 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,019.70 1.08 5.51 Class A 1,000.00 1,018.42 1.33 6.79 Class C 1,000.00 1,014.59 2.08 10.62 EMERGING MARKETS OPPORTUNITIES FUND ACTUAL Class I $1,000.00 $1,224.30 1.48% $ 8.30 Class A 1,000.00 1,224.60 1.73 9.70 Class C 1,000.00 1,220.20 2.49 13.93 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,017.66 1.48 7.55 Class A 1,000.00 1,016.38 1.73 8.83 Class C 1,000.00 1,012.50 2.49 12.71 VALUE EQUITY FUND ACTUAL Class I $1,000.00 $1,171.80 0.92% $ 5.04 Class A 1,000.00 1,171.40 1.17 6.40 Class C 1,000.00 1,166.00 1.92 10.48 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,020.51 0.92 4.70 Class A 1,000.00 1,019.24 1.17 5.97 Class C 1,000.00 1,015.41 1.92 9.80
6 VIRTUS INSIGHT TRUST DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF JULY 1, 2009 TO DECEMBER 31, 2009 EXPENSE TABLE
Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During July 1, 2009 December 31, 2009 Ratio Period* ------------- ----------------- ---------- ------------- HIGH YIELD INCOME FUND ACTUAL Class I $1,000.00 $1,139.00 0.76% $4.10 Class A 1,000.00 1,138.60 1.02 5.50 Class C 1,000.00 1,133.20 1.76 9.46 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,021.33 0.76 3.88 Class A 1,000.00 1,020.00 1.02 5.21 Class C 1,000.00 1,016.23 1.76 8.98 INTERMEDIATE GOVERNMENT BOND FUND ACTUAL Class I $1,000.00 $1,019.80 0.65% $3.31 Class A 1,000.00 1,018.50 0.90 4.58 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,021.89 0.65 3.32 Class A 1,000.00 1,020.62 0.90 4.59 INTERMEDIATE TAX-EXEMPT BOND FUND ACTUAL Class I $1,000.00 $1,092.60 0.60% $3.16 Class A 1,000.00 1,091.20 0.85 4.48 Class C 1,000.00 1,087.00 1.60 8.36 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,022.15 0.60 3.06 Class A 1,000.00 1,020.87 0.85 4.34 Class C 1,000.00 1,017.09 1.60 8.12 SHORT/INTERMEDIATE BOND FUND ACTUAL Class I $1,000.00 $1,057.30 0.70% $3.63 Class A 1,000.00 1,054.90 0.95 4.92 Class C 1,000.00 1,051.90 1.70 8.74 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,021.64 0.70 3.57 Class A 1,000.00 1,020.36 0.95 4.85 Class C 1,000.00 1,016.58 1.70 8.63 TAX-EXEMPT BOND FUND ACTUAL Class I $1,000.00 $1,081.90 0.60% $3.15 Class A 1,000.00 1,080.50 0.85 4.46 Class C 1,000.00 1,077.30 1.60 8.33 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,022.15 0.60 3.06 Class A 1,000.00 1,020.87 0.85 4.34 Class C 1,000.00 1,017.09 1.60 8.12
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During July 1, 2009 December 31, 2009 Ratio Period* ------------- ----------------- ---------- ------------- INSIGHT GOVERNMENT MONEY MARKET FUND ACTUAL Class I $1,000.00 $1,000.50 0.22% $1.11 Class A 1,000.00 1,000.10 0.30 1.51 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,024.09 0.22 1.12 Class A 1,000.00 1,023.68 0.30 1.53 INSIGHT MONEY MARKET FUND ACTUAL Class I $1,000.00 $1,002.20 0.21% $1.06 Class A 1,000.00 1,000.80 0.49 2.47 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,024.14 0.21 1.07 Class A 1,000.00 1,022.71 0.49 2.50 INSIGHT TAX-EXEMPT MONEY MARKET FUND ACTUAL Class I $1,000.00 $1,001.00 0.21% $1.06 Class A 1,000.00 1,000.10 0.40 2.02 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,024.14 0.21 1.07 Class A 1,000.00 1,023.17 0.40 2.04
* EXPENSES ARE EQUAL TO THE FUNDS' 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 (184) EXPENSES WERE ACCRUED IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 DAYS TO REFLECT THE ONE-HALF YEAR PERIOD. THE FUNDS MAY INVEST IN OTHER FUNDS. THE ANNUALIZED EXPENSE RATIOS NOTED ABOVE DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. IF SUCH FEES AND EXPENSES HAD BEEN INCLUDED, THE EXPENSES WOULD HAVE BEEN HIGHER. YOU CAN FIND MORE INFORMATION ABOUT THE FUNDS' EXPENSES IN THE FINANCIAL STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING EXPENSES AND OTHER SHAREHOLDER COSTS, REFER TO THE PROSPECTUS. +++ IF EXTRAORDINARY EXPENSES WERE EXCLUDED FOR THE DISCIPLINED SMALL-CAP VALUE FUND, ACTUAL AND HYPOTHETICAL EXPENSES PAID WOULD BE AS FOLLOWS:
Actual Hypothetical Expenses Paid Expenses Paid ------------- ------------- Class I $ 5.83 $ 5.36 Class A 7.22 6.64 Class C 11.36 10.46
7 EQUITY FUNDS TICKER SYMBOLS: I Share: HIBLX VIRTUS BALANCED ALLOCATION FUND A Share: HIBZX C Share: PBCIX - - VIRTUS BALANCED ALLOCATION FUND (THE "FUND") is diversified and has an investment objective to seek to provide current income and capital appreciation. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 18.28%, Class A shares returned 18.16% and Class C shares returned 17.31%. For the same period, the Russell 1000(R) Index, a broad-based equity index, returned 28.43% and the Barclays Capital U.S. Aggregate Bond Index, which is a broad-based fixed income index, returned 5.93%. The Fund's Composite Index, which is the Fund's style-specific index appropriate for comparison, returned 19.50%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? EQUITIES: - - The broad domestic equity market experienced a roller-coaster year with pre- and post-March 9, 2009 showing significant losses followed by a strong upward surge, with the year ending up strongly as shown by the 2009 rise in the S&P 500(R) Index of 26% and the rise in the Russell 2000(R) Index of 27%. - - Growth stocks outperformed value stocks across all capitalization ranges. The best area was mid-cap growth, up 46% for 2009, while large-cap value, although up nearly 20% for the year, trailed the domestic equity classes. FIXED INCOME: - - In the year following 2008's flight to quality which boosted the performance of U.S. Treasury securities, investors in 2009 enthusiastically returned to the risk markets. - - Securitized assets, most violently discounted in 2008, experienced the strongest rebound, posting double-digit excess returns previously believed untenable for high quality assets. - - Against this backdrop of strong attraction to risk, high yield was the best performing sector with asset-backed, commercial mortgages and corporates all joining high yield with strong double-digit excess returns. This was a complete reversal of the double-digit underperformance of these sectors in 2008. - - Agency issues and mortgage-backed bonds also provided modest excess returns, completing a sweep of spread products relative to treasuries. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - The Fund's performance relative to the market benchmarks can vary for several reasons: 1) The allocation to the major asset classes of stocks and bonds; 2) The allocation to sectors of the market within the major asset classes and 3) Issue selection across the portfolio. - - In terms of asset allocation between stocks and bonds, the Fund was slightly under weight equities, about 0.6% on average, throughout the year. Equities performed well relative to bonds but since the underweight is small, this exposure detracted from performance relative to the benchmark by a very small amount. - - The equities held, in aggregate, underperformed the benchmark and thus contributed negatively to relative performance. Both large-cap and small-cap equities underperformed, contributing to underperformance by approximately 3%. - - Fixed income performance allowed the total Fund to make up a significant portion of the equities shortfall to the benchmark. Research supports an above-benchmark exposure to asset-backed and commercial mortgages, especially in the front end of the curve, and in the risk-friendly market of 2009, this strategy contributed to significant outperformance. In fact, an above benchmark allocation to any sector of the bond market, other than treasuries, enhanced relative performance. - - Issue selection in the fixed income portfolio was favorable, especially in the investment grade corporate sector. Careful credit work did result in a positive contribution to returns. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. ASSET ALLOCATION The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Common Stocks 63% Information Technology 17% Health Care 10 Financials 9 All Other Sectors 27 Mortgage-Backed Securities 18 Corporate Bonds 9 Asset-Backed Securities 4 U.S. Government & Agency Securities 4 Other (includes short-term investments) 2 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 8 EQUITY FUNDS VIRTUS BALANCED ALLOCATION FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------- ------- -------- ----------- --------- CLASS I SHARES 18.28% 2.06% 4.47% -- -- CLASS A SHARES AT NAV(2) 18.16 1.81 4.21 -- -- CLASS A SHARES AT POP(3, 4) 11.36 0.61 3.59 -- -- CLASS C SHARES AT NAV(2) 17.31 -- -- 0.04% 6/26/06 CLASS C SHARES WITH CDSC(4) 17.31 -- -- 0.04 6/26/06 RUSSELL 1000(R) INDEX 28.43 0.79 -0.49 NOTE 5 -- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33 NOTE 6 -- COMPOSITE INDEX FOR BALANCED ALLOCATION FUND 19.50 2.77 2.55 NOTE 7 --
FUND EXPENSE RATIOS(8): I SHARES: GROSS 0.85%, NET 0.80%; A SHARES 1.05%; C SHARES 1.80%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.18% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED 6.81% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE INDEX RETURNED 2.37% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (8) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions.
Virtus Balanced Virtus Balanced Barclays Capital Composite Index Allocation Fund Allocation Fund Russell U.S. Aggregate for Balanced Class I Class A 1000(R) Index Bond Index Allocation Fund 12/31/99 $10,000 $ 9,425 $10,000 $10,000 $10,000 12/29/00 11,231 10,553 9,221 11,163 9,988 12/31/01 11,367 10,656 8,073 12,105 9,583 12/31/02 10,342 9,670 6,325 13,347 8,669 12/31/03 12,341 11,514 8,216 13,895 10,329 12/31/04 13,984 13,013 9,153 14,498 11,219 12/30/05 15,025 13,942 9,726 14,850 11,759 12/29/06 16,417 15,201 11,230 15,493 13,043 12/31/07 17,480 16,138 11,878 16,573 13,877 12/31/08 13,093 12,047 7,412 17,441 10,760 12/31/09 15,487 14,235 9,520 18,475 12,858
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 9 EQUITY FUNDS TICKER SYMBOLS: I Share: HGRIX VIRTUS CORE EQUITY FUND A Share: HGRZX C Share: PICCX - - VIRTUS CORE EQUITY FUND (THE "FUND") is diversified and has an investment objective to seek to provide capital appreciation. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 20.41%, Class A shares returned 20.16% and Class C shares returned 19.27%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 26.46%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - The year began with the backdrop of a depressed economy as the financial crisis continued to impact almost all aspects of the broader economy. As businesses looked to weather the economic storm, most implemented significant cost control measures; announcing layoffs, limiting expansion, and further lowering earnings outlooks. The impact from declining manufacturers output, falling consumer confidence, rising unemployment and inaccessible credit markets for many businesses and consumers, led to meaningfully lower spending. In response, the U.S. Federal Reserve reduced key interest rates to their lowest level in five years. The markets continued to be negatively influenced by weak economic indicators such as an extended contraction in manufacturing, few signs of a recovery in the housing market and continued rise in unemployment. Towards the end of the first quarter, the market rallied on somewhat unexpected positive news regarding a few select challenged financial institutions presenting better-than-expected earnings forecasts (partially as a result of ongoing supportive Fed positioning) along with limited signs of manufacturing sector strength. - - As the year came to a close, the global markets staged an impressive recovery, albeit fragile, as economic conditions continued to exhibit improvement. The financial markets' sizable recovery from 1st quarter lows has been in large part due to substantial governmental fiscal and monetary intervention. The government's efforts assisted in stabilizing the markets at a crucial junction and in the near-term partially offset weaker end-user demand. Rebounding low-price, beaten-down issues; many that had been taken down by significant fundamental ongoing concern questions, primarily generated the markets' impressive price gains. Importantly the markets are exhibiting early signs that the extended junk rally has begun to abate, with the markets rewarding issues with improving fundamentals and outlooks. Still weighing on consumer confidence however continues to be a very high historic level of unemployment, ongoing soft housing markets, and the runaway spending deficits of Federal and State Governments. - - In the coming months, fourth quarter earnings quality will be an important signal for the markets. The unprecedented amounts of stimulus, both monetary and fiscal, have clearly benefited the markets. Of concern is how the markets will react to the timing and the form of a reduction of government stimulus. A sustainable recovery in economic growth needs to be driven by end-user demand, not inventory destocking and cost-cutting. Key to end-user demand will be an improvement in the number of people employed and growth in wages. The consumer is expected to remain cautious as they seek to repair their personal balance sheet by deleveraging and higher personal savings rate. Although historically steep downturns have been followed by strong recoveries, consensus expectations are calling for a more moderate recovery due to the broad financial impact of this recession. Household and national debts levels will make it challenging to return to the stronger growth patterns witnessed in past recoveries. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - In general, large cap growth stocks (large cap growth indices) continued their outperformance over value for this year, extending now over the last several years as well--perhaps reflecting the extent of the difficulties experienced within the Financial Sector which represents generally a larger portion within value indices. For the Fund, while sector allocation overall was positive for the year, issue selection detracted from these performance gains. The Fund's overweight in Technology and Materials, along with its slight underweight in Energy were the biggest sector performance contributors. Overall issue selection, particularly within the Consumer Staples and Financials, detracted from performance. - - Issues that contributed positively to results (on a weighed contribution basis) were Amazon.com; an on line retailer, Freeport-McMoRan Copper & Gold; a mining company, and Apple; a computer and communications hardware and software company. Aflac; a life and health insurance company, U.S. Bancorp; a financial services institution, and Exxon Mobil; an integrated energy company detracted from results. - - As stated in previous reports; we have not wavered on our proven investment philosophy of investing in companies with strong fundamentals, attractive valuations, and increasing levels of investor interest. What matters over the long-term is the earnings growth and relative valuations of individual companies; as such our investment process mirrors this view. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. THERE IS NO GUARANTEE THAT THE FUND WILL MEET ITS OBJECTIVE. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Information Technology 22% Health Care 15 Financials 12 Energy 11 Consumer Discretionary 10 Consumer Staples 9 Industrials 8 Other (includes short-term investments) 13 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 10 EQUITY FUNDS VIRTUS CORE EQUITY FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 20.41% 1.31% -0.23% -- -- CLASS A SHARES AT NAV(2) 20.16 1.07 -0.47 -- -- CLASS A SHARES AT POP(3, 4) 13.25 -0.12 -1.05 -- -- CLASS C SHARES AT NAV(2) 19.27 -- -- -1.72% 6/26/06 CLASS C SHARES WITH CDSC(4) 19.27 -- -- -1.72 6/26/06 S&P 500(R) INDEX 26.46 0.42 -0.96 NOTE 5 --
FUND EXPENSE RATIOS(6): I SHARES: GROSS 0.98%, NET 0.93%; A SHARES 1.18%; C SHARES 1.93%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.07% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions. Virtus Core Virtus Core Equity Fund Class I Equity Fund Class A S&P 500(R) Index 12/31/99 $10,000 $ 9,425 $10,000 12/29/00 9,233 8,681 9,081 12/31/01 8,096 7,593 8,003 12/31/02 6,191 5,796 6,234 12/31/03 8,078 7,549 8,024 12/31/04 9,154 8,530 8,896 12/30/05 9,975 9,272 9,334 12/29/06 11,370 10,546 10,807 12/31/07 12,173 11,264 11,401 12/31/08 8,112 7,486 7,183 12/31/09 9,768 8,995 9,084 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 11 EQUITY FUNDS TICKER SYMBOLS: I Share: HSCIX VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND A Share: HSCZX C Share: POCZX - - VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND (THE "FUND") is diversified and has an investment objective to seek to provide capital appreciation. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 23.27%, Class A shares returned 22.88% and Class C shares returned 21.99%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 26.46% and the Russell 2000(R) Index, which is the Fund's style-specific benchmark, returned 27.17%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - The year 2009 will go down as a tale of two extremes. Through early March it looked as if the world was entering economic depression, and the markets were in a downward spiral. As economic stimulus slowed the hemorrhaging, the markets began an upward climb that continued nearly unabated through the end of the year. By year-end, the equity markets broadly recorded sizable gains, as economic optimism trumped ongoing concerns. - - Just as the market made a U-turn in March, so did the type of investment style that was rewarded. While investors shunned risk in late-2008 and early-2009, risk-seekers emerged in droves as the markets rebounded from what is now widely viewed as an over-reaction on the down side. As a result, the best-performing stocks during the year were generally those of companies with weak fundamentals that had largely been written off as casualties of the economic crisis. With extremely tight credit markets during the crisis, the survivability of a laundry list of companies (including many household names) was questioned. On the heels of unprecedented stimulus and rapid and deep cost cutting measures, a large percentage of struggling companies were able to survive the downturn, thus attracting the attention of risk-seeking investors. As the year progressed, various economic indicators became "less bad," and in some cases actually turned positive by year-end. This economic optimism, combined with the previously depressed markets, led to a rally of epic proportions. While there were numerous casualties along the way (i.e., General Motors, Lehman, Washington Mutual, etc.), the companies that most narrowly escaped bankruptcy were cheered on by investors with extreme vigor. - - In addition to a return to risk-seeking in 2009, several other themes played significant roles during the year. One significant driver was the declining dollar, which had a couple of main effects. First, the declining dollar aided in driving commodity prices significantly higher during the year. Oil rebounded, coal and other energy sources bounced back, and precious metals such as gold, silver and copper rose rapidly, in some cases hitting record highs. As a result, Materials and Energy companies generally performed well as 2009 progressed. The second effect of the weakening dollar was the benefit to U.S. companies with a higher proportion of exports, as dollar-denominated goods became relatively less-expensive to the rest of the world. This led to strong performance of larger companies, which is in contrast to the historical belief that small-cap stocks lead the markets as the economy begins to rebound post-recession. - - Additional positive themes in 2009 included government stimulus plans ("Cash For Clunkers, First Time Homebuyers Credit, etc."), renewable energy, a resumption of information technology spending, a bottoming of the housing market, and a resumption of growth in emerging market economies, most notably China. - - While the positives appeared on the forefront, there remained many negative themes. First and foremost was the continued doldrums of the employment markets. The economy continued to shed jobs through the end of the year, resulting in double-digit unemployment. While this undoubtedly aided the survival of many companies as they slashed costs, the longer-term effect on the U.S. economy's ability to grow remains in question. Credit remains tight for consumers and housing prices, while stabilized, remain depressed. Foreclosures continued at a rapid pace throughout the year, and the commercial real estate market repeatedly was questioned as the next potential shoe to drop. Finally, the ability of the U.S. government to extend economic stimulus plans in the face of a ballooning deficit leads to doubt of the economy's true underlying strength and concerns over future inflation. All in, the optimism of investors reigned, although the jury is still out on whether the U.S. (and world) economy is out of the woods. - - The smaller-capitalization Russell 2000 Index slightly trailed the larger-cap Russell 1000 Index in 2009, driven in large part by the attractiveness of multi-national firms in a weakening dollar environment. Within the Russell 2000, growth outperformed value, due primarily to value's higher exposure to financials, which fared much weaker throughout the year. Within the Russell 2000 Index, growth sectors such as Materials, Consumer Discretionary, and Technology fared best, each rising over 60% or more over the full year. Financials stood out as the worst performer, showing a slight decline of just worse than 1% for the year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - Though stock selection showed promise in several sectors and was in fact positive in five of the ten sectors, overall performance was negative as poor selection within the Health Care, Energy, and Information Technology sectors was too much to overcome. However, partially negated the poor showing was a positive contribution from sector selection as an underweight in the worst-performing Financials sector and an overweight in the high-flying Information Technology sector helped to make up some ground. Top performing names during the year included steel maker AK Steel, technology solutions provider Blue Coat Systems, and software provider SPSS. The largest detractors included insurance claims management provider Crawford & Co., semi equipment maker Silicon Image, and commercial engineering and construction company Tutor Perini. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. ASSET ALLOCATION The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Financials 19% Information Technology 18 Consumer Discretionary 17 Health Care 14 Industrials 14 Materials 7 Energy 6 Other (includes short-term investments) 5 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 12 EQUITY FUNDS VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 23.27% -4.44% 2.17% -- -- CLASS A SHARES AT NAV(2) 22.88 -4.69 1.91 -- -- CLASS A SHARES AT POP(3,4) 15.82 -5.81 1.31 -- -- CLASS C SHARES AT NAV(2) 21.99 -- -- -8.95% 6/26/06 CLASS C SHARES WITH CDSC(4) 21.99 -- -- -8.95 6/26/06 S&P 500(R) INDEX 26.46 0.42 -0.96 NOTE 5 -- RUSSELL 2000(R) INDEX 27.17 0.51 3.51 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 1.25%, NET 1.20%; A SHARES 1.45%; C SHARES 2.20%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.07% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED -2.10% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions. Virtus Disciplined Virtus Disciplined Small-Cap Opportunity Small-Cap Opportunity S&P 500(R) Russell Fund Class I Fund Class A Index 2000(R) Index 12/31/99 $10,000 $ 9,425 $10,000 $10,000 12/29/00 10,675 10,034 9,081 9,698 12/31/01 9,645 9,048 8,003 9,939 12/31/02 8,239 7,708 6,234 7,903 12/31/03 12,525 11,687 8,024 11,638 12/31/04 15,551 14,479 8,896 13,771 12/30/05 16,260 15,098 9,334 14,398 12/29/06 17,679 16,381 10,807 17,042 12/31/07 15,852 14,643 11,401 16,775 12/31/08 10,053 9,266 7,183 11,108 12/31/09 12,392 11,386 9,084 14,126 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 13 EQUITY FUNDS TICKER SYMBOLS: I Share: HSCVX VIRTUS DISCIPLINED SMALL-CAP VALUE FUND A Share: HSVZX C Share: PCCZX - - VIRTUS DISCIPLINED SMALL-CAP VALUE FUND (THE "FUND") is diversified and has an investment objective to seek to provide capital appreciation, with income as a secondary objective. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 13.79%, Class A shares returned 13.49% and Class C shares returned 12.60%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 26.46% and the Russell 2000(R) Value Index, which is the Fund's style-specific benchmark, returned 20.58%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - 2009 will likely go down as a tale of two extremes. Through early March it looked as if the world was entering economic depression, and the markets were in a downward spiral. As economic stimulus plans slowed the hemorrhaging, the markets began an upward climb that continued nearly unabated through the end of the year. By year-end, the equity markets broadly recorded sizable gains, as economic optimism trumped ongoing concerns. - - Just as the market made a U-turn in March, so did the type of investment style that was rewarded. While investors shunned risk in late-2008 and early-2009, risk-seekers emerged in droves as the markets rebounded from what is now widely viewed as an over-reaction on the down side. As a result, the best-performing stocks during the year were generally those of companies with weak fundamentals that had largely been written off as casualties of the economic crisis. With extremely tight credit markets during the crisis, the survivability of a laundry list of companies (including many household names) was questioned. On the heels of unprecedented stimulus and rapid and deep cost cutting measures, a large percentage of struggling companies were able to survive the downturn, thus attracting the attention of risk-seeking investors. As the year progressed, various economic indicators became "less bad," and in some cases actually turned positive by year-end. This economic optimism, combined with the previously depressed markets, led to a rally of epic proportions. While there were numerous casualties along the way (i.e., General Motors, Lehman, Washington Mutual, etc.), the companies that most narrowly escaped bankruptcy were cheered on by investors with extreme vigor. - - In addition to a return to risk-seeking in 2009, several other themes played significant roles during the year. One significant driver was the declining dollar, which had a couple of main effects. First, the declining dollar aided in driving commodity prices significantly higher during the year. Oil rebounded, coal and other energy sources bounced back, and precious metals such as gold, silver and copper rose rapidly, in some cases hitting record highs. As a result, Materials and Energy companies generally performed well as 2009 progressed. The second effect of the weakening dollar was the benefit to U.S. companies with a higher proportion of exports, as dollar-denominated goods became relatively less-expensive to the rest of the world. This led to strong performance of larger companies, which is in contrast to the historical belief that small-cap stocks lead the markets as the economy begins to rebound post-recession. - - Additional positive themes in 2009 included government stimulus plans ("Cash For Clunkers, First Time Homebuyers Credit, etc."), renewable energy, a resumption of information technology spending, a bottoming of the housing market, and a resumption of growth in emerging market economies, most notably China. - - While the positives appeared on the forefront, there remained many negative themes. First and foremost was the continued doldrums of the employment markets. The economy continued to shed jobs through the end of the year, resulting in double-digit unemployment. While this undoubtedly aided the survival of many companies as they slashed costs, the longer-term effect on the U.S. economy's ability to grow remains in question. Credit remains tight for consumers and housing prices, while stabilized, remain depressed. Foreclosures continued at a rapid pace throughout the year, and the commercial real estate market repeatedly was questioned as the next potential shoe to drop. Finally, the ability of the U.S. government to extend economic stimulus plans in the face of a ballooning deficit leads to doubt of the economy's true underlying strength and concerns over future inflation. All in, the optimism of investors reigned, although the jury is still out on whether the U.S. (and world) economy is out of the woods. - - The smaller-capitalization Russell 2000 Index slightly trailed the larger-cap Russell 1000 Index in 2009, driven in large part by the attractiveness of multi-national firms in a weakening dollar environment. Within the Russell 2000, growth outperformed value, due primarily to value's higher exposure to financials, which fared much weaker throughout the year. Within the Russell 2000 Value Index, growth sectors such as Materials, Consumer Discretionary, and Technology fared best, each rising over 50% in 2009. Financials, which comprise nearly one-third of the Russell 2000 Value Index, stood out as the worst performer, showing a slight decline for the year. Utilities, Industrials, and Consumer Staples were also laggard sectors in 2009. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - While sector allocation was positive during the year, primarily due to an underweight in Financials, stock selection detracted. Stock selection within two sectors, Consumer Discretionary and Technology, accounted for the entire under-performance during the year. These two sectors exhibited the largest number of names that had been severely impacted by the financial crisis. As a result, companies that narrowly avoided bankruptcy surged off of very low stock prices (sub-$5 in many cases) and led these sectors higher. Our commitment to higher quality names with strong fundamentals and attractive valuations largely kept our portfolio out of these risky names. Top performing names during the year included materials producer Buckeye Technologies, technology firm JDA Software, and healthcare services provider RehabCare Group. The largest detractors included specialty paper maker Wausau Paper, healthcare company Alliance HealthCare Services, and regional bank Community Trust Bancorp. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Financials 28% Industrials 16 Information Technology 14 Consumer Discretionary 13 Materials 8 Energy 6 Health Care 6 Other (includes short-term investments) 9 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 14 EQUITY FUNDS VIRTUS DISCIPLINED SMALL-CAP VALUE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 13.79% -2.43% 7.28% -- -- CLASS A SHARES AT NAV(2) 13.49 -2.68 7.01 -- -- CLASS A SHARES AT POP(3,4) 6.96 -3.82 6.38 -- -- CLASS C SHARES AT NAV(2) 12.60 -- -- -6.81% 6/26/06 CLASS C SHARES WITH CDSC(4) 12.60 -- -- -6.81 6/26/06 S&P 500(R) INDEX 26.46 0.42 -0.96 NOTE 5 -- RUSSELL 2000(R) VALUE INDEX 20.58 -0.01 8.27 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 1.07%, NET 1.02%; A SHARES 1.27%; C SHARES 2.02%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.07% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED -3.46% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions. Virtus Disciplined Virtus Disciplined Small-Cap Value Small-Cap Value Russell 2000(R) S&P 500(R) Fund Class I Fund Class A Value Index Index 12/31/99 $10,000 $ 9,425 $10,000 $10,000 12/29/00 13,445 12,643 12,283 9,081 12/31/01 14,194 13,315 14,005 8,003 12/31/02 12,383 11,587 12,405 6,234 12/31/03 17,712 16,533 18,115 8,024 12/31/04 22,835 21,264 22,144 8,896 12/30/05 24,867 23,099 23,187 9,334 12/29/06 27,581 25,552 28,631 10,807 12/31/07 25,117 23,209 25,832 11,401 12/31/08 17,742 16,358 18,360 7,183 12/31/09 20,189 18,565 22,138 9,084 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 15 EQUITY FUNDS TICKER SYMBOLS: I Share: HIEMX VIRTUS EMERGING MARKETS OPPORTUNITIES FUND A Share: HEMZX C Share: PICEX - - VIRTUS EMERGING MARKETS OPPORTUNITIES FUND (THE "FUND") is diversified and has an investment objective to seek to provide capital appreciation. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 48.52%, Class A shares returned 48.12% and Class C shares returned 47.29%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 26.46% and the MSCI Emerging Markets Free Index, which is the Fund's style-specific benchmark, returned 78.51%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - Although business conditions could hardly be called favorable during 2009, investors were clearly partial to lower quality securities. Late in 2008 and early in 2009, share prices of highly leveraged, more cyclical companies were driven sharply lower as investors prepared for the worst case scenario--an economic depression. Late in the first quarter, as fears of depression dissipated, the market rallied, and shares of lower quality companies rebounded sharply. Even when there was a significant disparity between the anticipated operating performance of these companies and their relative share performance, investors remained optimistic. Meanwhile, shares of higher quality, more stable companies, which had lost less ground when investors' fears were peaking, appreciated but underperformed on a relative basis. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - The Fund provided attractive absolute returns over the full year; however, it underperformed the benchmark, largely because the markets favored lower quality shares during much of the year. Over the full year, the performance of the Fund's holdings in South Korea, India, and Hong Kong were the largest detractors from relative performance. - - Over the full year, the positive relative contributions of positions in the Financial and Telecommunications sectors were offset by the relative underperformance of Consumer Staples, Information Technology, and Materials sectors. Our concentrated positions in high quality consumer staples companies provided mid-double-digit absolute returns, but underperformed the index as markets favored lesser quality names. The Fund had relatively small positions in Information Technology and Materials because we have difficulty finding companies that meet our stringent criteria in these highly cyclical sectors. - - Quality companies tend to lag during sharp market rebounds like the one we experienced during 2009. As markets normalize and, hopefully, continue on a moderate growth trend going forward, we believe that high quality companies have the potential to perform as well as or better than lower quality companies. We remain confident that the Fund is well-positioned for the long-term. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. BECAUSE THE FUND IS HEAVILY WEIGHTED IN A SINGLE SECTOR, IT WILL BE IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER SECTOR DIVERSIFICATION. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN LARGER, MORE ESTABLISHED COMPANIES. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Consumer Staples 31% Financials 18 Utilities 12 Consumer Discretionary 7 Industrials 7 Information Technology 6 Telecommunication Services 5 Other (includes short-term investments) 14 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 16 EQUITY FUNDS VIRTUS EMERGING MARKETS OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 48.52% 13.42% 9.03% -- -- CLASS A SHARES AT NAV(2) 48.12 13.17 8.76 -- -- CLASS A SHARES AT POP(3,4) 39.60 11.84 8.12 -- -- CLASS C SHARES AT NAV(2) 47.29 -- -- 9.63% 6/26/06 CLASS C SHARES WITH CDSC(4) 47.29 -- -- 9.63 6/26/06 S&P 500(R) INDEX 26.46 0.42 -0.96 NOTE 5 -- MSCI EMERGING MARKETS FREE INDEX 78.51 15.51 9.78 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 1.47%, NET 1.42%; A SHARES 1.67%; C SHARES 2.42%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.07% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED 12.85% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions.
Virtus Emerging Virtus Emerging Markets Opportunities Markets Opportunities MSCI Emerging S&P 500(R) Fund Class I Fund Class A Markets Free Index Index 12/31/99 $10,000 $ 9,425 $10,000 $10,000 12/29/00 7,145 6,710 6,917 9,081 12/31/01 7,101 6,660 6,736 8,003 12/31/02 6,971 6,512 6,320 6,234 12/31/03 10,534 9,825 9,848 8,024 12/31/04 12,645 11,757 12,365 8,896 12/30/05 16,594 15,411 16,569 9,334 12/29/06 21,506 19,912 21,899 10,807 12/31/07 29,547 27,312 30,524 11,401 12/31/08 15,984 14,737 14,245 7,183 12/31/09 23,738 21,829 25,428 9,084
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 17 EQUITY FUNDS TICKER SYMBOLS: I Share: HEQIX VIRTUS VALUE EQUITY FUND A Share: HIEZX C Share: PIQCX - - VIRTUS VALUE EQUITY FUND (THE "FUND") is diversified and has an investment objective to seek to provide capital appreciation and current income. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 16.24%, Class A shares returned 15.92% and Class C shares returned 14.96%. For the same period, the S&P 500(R) Index, a broad-based equity index, returned 26.46% and the Russell 1000(R) Value Index, which is the Fund's style-specific benchmark, returned 19.69%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - As the year began economic data clearly showed a broad and intensified deterioration as the year old financial crisis continued to impact the broader economy. As businesses looked to conserve cash and weather the economic storm, many announced layoffs and lowered earnings forecasts. The impact from declining manufacturers output, falling consumer confidence, rising unemployment and inaccessible credit markets for many businesses and consumers, led to meaningfully lower spending. In response, the U.S. Federal Reserve lowered key interest rates to their lowest level in five years. However, the markets continued to be negatively influenced by weak economic indicators such as a continued contraction in manufacturing, few signs of a recovery in the housing market and continued rise in unemployment. By the end of the first quarter, the market rallied on some unexpected positive news regarding the manufacturing sector strength and select, challenged financial institutions had better-than-expected earnings forecast. - - The global markets staged an impressive recovery during the period, albeit fragile, as economic conditions continued to improve. The financial markets' sizable recovery from 1st quarter lows has been in large part due to substantial governmental fiscal and monetary intervention. The government efforts stabilized the markets at a crucial junction and in the near-term partially offset weaker end-user demand. The markets' impressive gains were primarily generated by rebounding low-price, beaten-down issues, many driven down by fundamental concerns. Importantly, we are starting to see early signs that the significant junk rally has begun to abate as the market slowly returns to rewarding issues with improving fundamentals. Still weighing on consumer confidence however continues to be high unemployment (at a 26-year high during the period) and the soft housing markets. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - The challenging issue during the period was that issues with reasonable-to-improving fundamentals underperformed relative to names with a weakened outlook. History would suggest that the recent performance trend of low-quality issues outperforming is not sustainable. Lower quality issues typically have weaker fundamentals. In general during the period growth-style investing has outperformed value for the quarter and year-to-date. - - Sector allocation added to results whereas issue selection detracted from performance. The portfolio benefited from its positions in Utilities, Telecommunications and Materials whereas Consumer Discretionary, Financials, Industrials and Energy detracted from results. Issues that contributed positively to results (on a weighed contribution basis) were Hewlett Packard, a global provider of computer technology and service, International Business Machines, a global manufacturer of information technology products and services, Apple Inc. a global computer manufacturer and associated software and peripherals predominantly in the consumer markets and TJX Cos., an off-price retailer of apparel and home fashions. Issues that detracted from results were Procter & Gamble, a global manufacturer and sales of consumer goods, Exxon Mobil, global energy producer and distributor and Bank of America, a financial holding company of banking and non-banking services. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. THERE IS NO GUARANTEE THAT THE FUND WILL MEET ITS OBJECTIVE. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Financials 19% Energy 16 Health Care 14 Information Technology 10 Consumer Discretionary 9 Materials 8 Telecommunication Services 8 Other (includes short-term investments) 16 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 18 EQUITY FUNDS VIRTUS VALUE EQUITY FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 16.24% 1.28% 3.03% -- -- CLASS A SHARES AT NAV(2) 15.92 1.03 2.77 -- -- CLASS A SHARES AT POP(3, 4) 9.26 -0.16 2.16 -- -- CLASS C SHARES AT NAV(2) 14.96 -- -- -3.56% 6/26/06 CLASS C SHARES WITH CDSC(4) 14.96 -- -- -3.56 6/26/06 S&P 500(R) INDEX 26.46 0.42 -0.96 NOTE 5 -- RUSSELL 1000(R) VALUE INDEX 19.69 -0.25 2.47 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 0.94%, NET 0.89%; A SHARES 1.14%; C SHARES 1.89%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED -1.07% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED -3.75% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions. Virtus Value Virtus Value Equity Fund Equity Fund Russell 1000(R) S&P 500(R) Class I Class A Value Index Index 12/31/99 $10,000 $ 9,425 $10,000 $10,000 12/29/00 10,848 10,195 10,701 9,081 12/31/01 10,523 9,862 10,103 8,003 12/31/02 8,315 7,777 8,535 6,234 12/31/03 10,699 9,984 11,098 8,024 12/31/04 12,639 11,767 12,928 8,896 12/30/05 14,221 13,199 13,840 9,334 12/29/06 16,514 15,291 16,919 10,807 12/31/07 18,182 16,794 16,890 11,401 12/31/08 11,590 10,683 10,666 7,183 12/31/09 13,472 12,384 12,766 9,084 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 19 FIXED INCOME FUNDS TICKER SYMBOLS: I Share: HHYIX VIRTUS HIGH YIELD INCOME FUND A Share: HHYZX C Share: PYHCX - - VIRTUS HIGH YIELD INCOME FUND (THE "FUND") is diversified and has an investment objective to seek to provide a high level of total return through a combination of income and capital appreciation. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 31.67%, Class A shares returned 31.60% and Class C shares returned 30.49%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 5.93% and the Barclays Capital U.S. High Yield Bond 2% Issuer Cap Index, which is the Fund's style-specific benchmark, returned 58.76%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - In 2009, the high yield market posted its highest total return in history. Once the "end of the world" mentality that took hold of the markets in the second half of 2008 abated, the pendulum swung 180 degrees and investors quickly bid up high yielding regardless of rating. That which was shunned in 2008, had a new lease on life. Throughout 2009, companies improved their financial outlook by taking advantage of restructuring opportunities. Decreasing default rates and record mutual fund inflows also combined to propel returns to all time highs. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - Underweight to Low Quality -- Our management style is to be underweight the lowest rated and lowest quality parts of the index. During times of extensive risk taking, as witnessed in 2009, higher quality bonds will tend to underperform lower quality. Our underweight to CCC and lower rated credits was the major reason the Fund underperformed its benchmark. At the end of the fourth quarter, we had a 621 basis point underweight to CCC and below. The majority of the funds under-performance can be attributed to this underweight. The CCC part of the index returned +90.65% for the 12 months ending December 31, 2009. The CC and below part of the index returned 136.34% for the same timeframe. These two ratings represent approximately 25% of the index. Low quality financials and over-levered LBO's led the CCC and below returns. - - High Cash Balances -- During the fourth quarter of 2008 and the first quarter of 2009, we significantly raised our cash balances as we took a firm wide strategic view that a weakening economy would increase defaults and drive high yield prices lower, thereby dictating higher than average cash holdings in the portfolio. This high quality, conservative posture of maintaining a higher cash balance negatively impacted our performance. - - Fallen Angel Financials and Bank Hybrid Securities -- Several fallen angel (formerly Investment Grade) financial companies (e.g. AIG, CIT) that became distressed in 2008/early 2009 enjoyed a government stimulated risk rally during most of 2009. We have very little exposure to fallen angel financials and no exposure to hybrid securities in the fund as they don't meet a higher quality focus. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Corporate Bonds 96% Consumer Discretionary 30% Telecommunication Services 19 Consumer Staples 13 Industrials 9 Energy 8 All Other Sectors 17 Loan Agreements 2 Other (includes short-term investments) 2 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 20 FIXED INCOME FUNDS VIRTUS HIGH YIELD INCOME FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years to 12/31/09 Date ------ ------- ----------- ------------ CLASS I SHARES 31.67% 2.75% 6.25% 9/20/02 CLASS A SHARES AT NAV(2) 31.60 2.54 4.19 5/17/04 CLASS A SHARES AT POP(3,4) 25.35 1.54 3.29 5/17/04 CLASS C SHARES AT NAV(2) 30.49 -- 2.48 6/26/06 CLASS C SHARES WITH CDSC(4) 30.49 -- 2.48 6/26/06 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 NOTE 5 -- BARCLAYS CAPITAL U.S. HIGH YIELD BOND 2% ISSUER CAP INDEX 58.76 6.49 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 0.81%, NET 0.76%; A SHARES 1.01%; C SHARES 1.76%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED 4.84% FOR CLASS I SHARES, 5.34% FOR CLASS A SHARES AND 6.81% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (6) THE INDEX RETURNED 10.33% FOR CLASS I SHARES, 8.06% FOR CLASS A SHARES AND 7.96% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on 9/20/02 (inception date of the class) in Class I shares. The performance of the other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. Performance assumes dividends and capital gain distributions are reinvested. Virtus High Barclays Capital Yield Income U.S. High Yield Bond Barclays Capital Fund Class I - 2% Issuer Cap Index U.S. Aggregate Bond Index 9/20/02 $10,000 $10,000 $10,000 12/31/02 10,390 10,443 10,195 12/31/03 12,275 13,449 10,613 12/31/04 13,582 14,947 11,073 12/30/05 13,845 15,359 11,342 12/29/06 14,858 17,011 11,834 12/31/07 15,232 17,396 12,658 12/31/08 11,814 12,894 13,322 12/31/09 15,586 20,471 14,111 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 21 FIXED INCOME FUNDS TICKER SYMBOLS: I Share: HIGIX VIRTUS INTERMEDIATE GOVERNMENT BOND FUND A Share: HIGZX - - VIRTUS INTERMEDIATE GOVERNMENT BOND FUND (THE "FUND") is diversified and has an investment objective to seek to provide a high level of current income, consistent with preservation of capital. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 0.99% and Class A shares returned 0.74%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 5.93% and the Barclays Capital U.S. Government Intermediate Bond Index, which is the Fund's style-specific benchmark, returned -0.32%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? What a difference a year makes(!) Liquidity concerns from late 2008/early 2009 all but vanished by year end, as Fed programs initiated to ease market turmoil achieved success. While the year wore on, investors no longer looked for the safest vehicle, but one that delivered the greatest return. As a result, investors' need for Treasury holdings diminished; opting instead for the spread sectors and hoping to capture the historic yield spreads offered early in the year. Add in record setting issuance by the Treasury and you have a recipe for rising interest rates. However, with short rates anchored near zero due to Fed policy, the intermediate and longer rates bore the brunt of the negative sentiment and supply, causing the yield curve to steepen quite dramatically, ending the year at 350 basis points between two and 30 year maturities, nearly 50% steeper than 2008. For the year, Treasury returns were negative for all maturities as the modest coupon income was unable to cushion the negative price movement associated with the rising rates. Spread sectors, on the other hand, benefited from historically wide spreads at the start of the year along with growing investor demand, and posted considerably strong nominal and excess returns for the year. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? The fund was positioned to take advantage of the market trends throughout 2009. The duration position was short as a defensive response to calming markets and increasing Treasury supply. This decision proved to be fruitful as the short position added to the fund's outperformance. An overweight to the various spread sectors also added to the fund's excess returns relative to the index. Exposure to FDIC insured bonds, government guaranteed residential and commercial mortgages as well as agency debt provided significant yield relative to the benchmark. As a result, the fund was able to deliver positive returns in a rising rate environment versus the negative return of the benchmark. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. THE GUARANTEE ON U.S. GOVERNMENT SECURITIES APPLIES ONLY TO THE UNDERLYING SECURITIES OF THE FUND'S PORTFOLIO, AND NOT TO THE VALUE OF THE FUND'S SHARES. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. U.S. Government Agency Obligations 50% Mortgage-Backed Securities 31 U.S. Government Securities 17 Other (includes short-term investments) 2 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 22 FIXED INCOME FUNDS VIRTUS INTERMEDIATE GOVERNMENT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years ------ ------- -------- CLASS I SHARES 0.99% 4.82% 6.04% CLASS A SHARES AT NAV(2) 0.74 4.56 5.77 CLASS A SHARES AT POP(3, 4) -4.04 3.54 5.26 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33 BARCLAYS CAPITAL U.S. GOVERNMENT INTERMEDIATE BOND INDEX -0.32 4.74 5.65
FUND EXPENSE RATIOS(5): I SHARES: GROSS 0.89%, NET 0.51%; A SHARES: GROSS 1.09%, NET 0.76%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASS A SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. THE CDSC CHARGES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME AND A VOLUNTARY FEE LIMITATION OF TOTAL OPERATING EXPENSES. THIS LIMITATION MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVERS AND VOLUNTARY EXPENSE LIMITATIONS. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions.
Barclays Capital Virtus Intermediate Virtus Intermediate U.S. Government Barclays Capital Government Bond Government Bond Intermediate U.S. Aggregate Fund Class I Fund Class A Bond Index Bond Index 12/31/99 $10,000 $ 9,525 $10,000 $10,000 12/29/00 11,318 10,753 11,047 11,163 12/31/01 12,193 11,557 11,977 12,105 12/31/02 13,461 12,726 13,132 13,347 12/31/03 13,785 13,000 13,432 13,895 12/31/04 14,205 13,363 13,746 14,498 12/30/05 14,559 13,662 13,977 14,850 12/29/06 15,194 14,223 14,514 15,493 12/31/07 16,256 15,179 15,743 16,573 12/31/08 17,795 16,575 17,386 17,441 12/31/09 17,972 16,698 17,329 18,475
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 23 FIXED INCOME FUNDS TICKER SYMBOLS: I Share: HIXIX VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND A Share: HIXZX C Share: PCXIX - - VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND (THE "FUND") is diversified and has an investment objective to seek to provide a high level of current income that is exempt from federal income tax. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 17.76%, Class A shares returned 17.46% and Class C shares returned 16.69%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 5.93% and the Barclays Capital U.S. Municipal Bond: 3-15 Year Index, which is the Fund's style-specific benchmark, returned 9.46%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MUNICIPAL BOND MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - The municipal bond market spent the first quarter of 2009 recovering from the credit crisis in 2008. On the long end, strong performance continued through December 2009, when Treasury yields moved substantially higher and intermediate muni yields followed somewhat, but long-term muni yields continued their decline. - - Municipal yields rose considerably in 2008 as the capital markets collapsed, bond fund flows turned negative and leveraged investors unwound their positions. Performance in 2009 rebounded from an overdone sell-off. - - Investors sought protection from risk in the Treasury market. The supply/demand imbalance has been largely unwound, causing Treasury yields to rebound as municipals outperformed Treasuries. - - The collapse in short-term yields has forced investors to seek alternatives. In tax-exempt money market funds, yields are effectively down to zero forcing many investors further out on the yield curve. - - Individual investors still have large amounts in low-yielding short-term instruments, providing firm support to the municipal market. - - Flows into tax-exempt bond funds were impressive in 2009 with total flows of approximately $77.0 billion. The prior record was $42.9 billion in 1993, so 2009 flows beat the record by a significant margin. - - Issuance of taxable Build America Bonds ("BAB") has transformed the municipal market. Issuance of BABs started in April 2009, with large deals for the State of California and the New Jersey Turnpike. For 2009, $64.1 billion of BABs were issued; BABs decrease supply otherwise available to tax-exempt investors. - - From a sector perspective, general purpose had the largest percentage (60.0%) of municipal new issuance and dollar amount increase ($48.1 billion) from last year, with $128.3 billion in bond issuance this year. Healthcare issuance ($44.5 billion) had the largest dollar decrease (-$16.6 billion) and housing bonds ($10.4 billion) the largest percentage decline (-40.2%). - - Year-to-date, California has issued $72.0 billion in bonds, the largest among state issuers and a 37.4% increase from last year. New York and Texas have issued $43.7 billion and $32.7 billion, respectively, ranking second and third. New York issuance increased 9.8%, and Texas fell 20.7% from last year. - - During 2009, munis experienced their sharpest rally in 14 years as policymakers engaged in a massive effort to stabilize financial markets and restore the economy. The federal funds rate remained at historical lows for the entire year and Congress passed the American Recovery and Reinvestment Act of 2009. - - Absolute yields trended mostly lower in the first three quarters of the year before retracing some of the gains in the last quarter. By year end, high-grade yields in the 5-, 10- and 30-year area were lower by 91 bps, 53 bps and 90 bps respectively. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? - - The Fund emphasizes quality security selection combined with premium bond structures in the intermediate maturity range. During the year, total rate of return rewarded higher-quality securities where the Fund is overweight. - - The Fund is overweight premium structures, which enhanced performance. In fact, within the investment grade sector of the municipal market, coupon income was a significant contributor to total return. - - The Fund remains vigilant against the prospect of higher interest rates and favors high-quality, liquid structures. Specifically, the Fund's average quality is AA. Additionally, the Fund favors both essential-purpose revenue bonds and dedicated revenue bonds which outperformed during the year. Essential-purpose revenue bonds such as toll roads are largely immune to economic swings and benefit from a defined, segregated flow of revenue payments. - - The key driver of performance was the massive tightening in spreads from their historically wide levels at the height of the credit crisis in mid-December 2008. - - The riskier sectors of the muni market saw the highest total returns, reflecting their recovery from the severe price declines and limited liquidity they suffered in 2008. - - The Fund took advantage of perceived security mis-pricings in late 2008 and early 2009 resulting from the general lack of liquidity in the market and the reallocation to the highest rated securities by many investors. Issuers increased yields on new issues to assure adequate demand. - - Many of the bonds which experienced the worst performance in 2008 rebounded strongly in 2009. The credit review of the bonds in 2008 revealed technical factors rather than credit factors as the source of the underperformance in most cases. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. A PORTION OF INCOME MAY BE SUBJECT TO SOME STATE AND/OR LOCAL TAXES AND, FOR CERTAIN INVESTORS, A PORTION MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. INVESTING IN MUNICIPAL BONDS INVOLVES MARKET RISK AND CREDIT RISK. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Municipal Bonds 95% Alabama 13% New York 8 California 7 Colorado 6 Illinois 6 All Other States 55 Other (includes short-term investments) 5 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 24 FIXED INCOME FUNDS VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 17.76% 3.86% 5.32% -- -- CLASS A SHARES AT NAV(2) 17.46 3.60 -- 4.29% 1/16/01 CLASS A SHARES AT POP(3, 4) 11.88 2.60 -- 3.72 1/16/01 CLASS C SHARES AT NAV(2) 16.69 -- -- 3.83 6/26/06 CLASS C SHARES WITH CDSC(4) 16.69 -- -- 3.83 6/26/06 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33 NOTE 5 -- BARCLAYS CAPITAL U.S. MUNICIPAL BOND: 3-15 YEAR INDEX 9.46 4.49 5.60 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 0.70%, NET 0.60%; A SHARES: GROSS 0.90%, NET 0.85%; C SHARES: GROSS 1.65%, NET 1.60%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED 5.73% FOR CLASS A SHARES AND 6.81% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (6) THE INDEX RETURNED 5.02% FOR CLASS A SHARES AND 5.75% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME AND A VOLUNTARY FEE LIMITATION OF TOTAL OPERATING EXPENSES. THIS LIMITATION MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVERS AND VOLUNTARY EXPENSE LIMITATIONS. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on 12/31/99 in Class I shares. The performance of the other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. Performance assumes dividends and capital gain distributions are reinvested. Virtus Intermediate Barclays Capital Barclays Capital Tax-Exempt Bond U.S. Municipal Bond: U.S. Aggregate Fund Class I 3-15 Year Index Bond Index 12/31/99 $10,000 $10,000 $10,000 12/29/00 11,121 10,993 11,163 12/31/01 11,742 11,572 12,105 12/31/02 12,895 12,690 13,347 12/31/03 13,494 13,338 13,895 12/31/04 13,901 13,840 14,498 12/30/05 14,205 14,152 14,850 12/29/06 14,837 14,742 15,493 12/31/07 15,346 15,399 16,573 12/31/08 14,265 15,748 17,441 12/31/09 16,798 17,237 18,475 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 25 FIXED INCOME FUNDS TICKER SYMBOLS: I Share: HIBIX VIRTUS SHORT/INTERMEDIATE BOND FUND A Share: HIMZX C Share: PCMZX - - VIRTUS SHORT/INTERMEDIATE BOND FUND (THE "FUND") has an investment objective to seek to provide a high level of total return, including a competitive level of current income. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 13.39%, Class A shares returned 13.00% and Class C shares returned 12.26%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 5.93% and the Barclays Capital Intermediate U.S. Government/Credit Bond Index, which is the Fund's style-specific benchmark, returned 5.24%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - A year since the feared potential collapse of the global financial system, investors have enthusiastically returned to risk markets. Securitized assets, whose valuations were most violently discounted in 2008, experienced the strongest rebound, posting double digit excess returns previously believed untenable for high quality assets. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR? - - For 2009, exposure to high quality securitized assets was the overwhelming source of alpha. The Fund further benefited from superior security selection in the investment grade corporate sector, as the credit team took advantage of opportunities presented as a result of investor reaction to the flow of often contradictory news about the recovery and the scope of government regulation. Additionally, relative to the market benchmark, with Treasury rates rising on the year, the Fund's yield curve strategy was a positive contributor to results, as the Fund was positioned modestly short in recognition of the long-term unsustainability of currently low Treasury yields. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Corporate Bonds 47% Financials 19% Telecommunication Services 5 All Other Sectors 23 Mortgage-Backed Securities 20 U.S. Government Securities 16 Asset-Backed Securities 12 Other (includes short-term investments) 5 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 26 FIXED INCOME FUNDS VIRTUS SHORT/INTERMEDIATE BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 13.39% 4.16% 5.23% -- -- CLASS A SHARES AT NAV(2) 13.00 3.88 4.96 -- -- CLASS A SHARES AT POP(3, 4) 7.63 2.87 4.45 -- -- CLASS C SHARES AT NAV(2) 12.26 -- -- 4.58% 6/26/06 CLASS C SHARES WITH CDSC(4) 12.26 -- -- 4.58 6/26/06 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33 NOTE 5 -- BARCLAYS CAPITAL INTERMEDIATE U.S. GOVERNMENT/CREDIT BOND INDEX 5.24 4.66 5.93 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 0.79%, NET 0.70%; A SHARES: GROSS 0.99%, NET 0.95%; C SHARES: GROSS 1.74%, NET 1.70%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0% THEREAFTER. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED 6.81% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (6) THE INDEX RETURNED 6.40% FOR CLASS C SHARES SINCE THE INCEPTION DATE (6/26/06). (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME AND A VOLUNTARY FEE LIMITATION OF TOTAL OPERATING EXPENSES. THIS LIMITATION MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVERS AND VOLUNTARY EXPENSE LIMITATIONS. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 This chart assumes an initial investment of $10,000 made on December 31, 1999, for Class I and Class A shares including any applicable sales charges or fees. The performance of Class C shares may be greater or less than that shown based on differences in inception dates, fees, and sales charges. Performance assumes reinvestment of dividends and capital gain distributions.
Barclays Capital Virtus Virtus Intermediate U.S. Barclays Capital Short/Intermediate Short/Intermediate Government/Credit U.S. Aggregate Bond Fund Class I Bond Fund Class A Bond Index Bond Index 12/31/99 $10,000 $ 9,525 $10,000 $10,000 12/29/00 11,040 10,489 11,011 11,163 12/31/01 11,908 11,286 11,998 12,105 12/31/02 12,671 11,979 13,178 13,347 12/31/03 13,191 12,440 13,746 13,895 12/31/04 13,576 12,772 14,164 14,498 12/30/05 13,761 12,913 14,388 14,850 12/29/06 14,346 13,428 14,975 15,493 12/31/07 15,005 14,010 16,081 16,573 12/31/08 14,680 13,673 16,898 17,441 12/31/09 16,647 15,450 17,784 18,475
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 27 FIXED INCOME FUNDS TICKER SYMBOLS: I Share: HXBIX VIRTUS TAX-EXEMPT BOND FUND A Share: HXBZX C Share: PXCZX - - VIRTUS TAX-EXEMPT BOND FUND (THE "FUND") is diversified and has an investment objective to seek to provide a high level of current income that is exempt from federal income tax. - - For the fiscal year ended December 31, 2009, the Fund's Class I shares returned 18.26%, Class A shares returned 17.96% and Class C shares returned 17.18%. For the same period, the Barclays Capital U.S. Aggregate Bond Index, a broad-based fixed income index, returned 5.93% and the Barclays Capital U.S. Municipal Bond Index, which is the Fund's style-specific benchmark, returned 12.91%. ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. HOW DID THE MUNICIPAL BOND MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - - The municipal bond market spent the first quarter of 2009 recovering from the credit crisis in 2008. On the long end, strong performance continued through December 2009, when Treasury yields moved substantially higher and intermediate muni yields followed somewhat, but long-term muni yields continued their decline. - - Municipal yields rose considerably in 2008 as the capital markets collapsed, bond fund flows turned negative and leveraged investors unwound their positions. Performance in 2009 rebounded from an overdone sell-off. - - Investors sought protection from risk in the Treasury market. The supply/demand imbalance has been largely unwound, causing Treasury yields to rebound as municipals outperformed Treasuries. - - The collapse in short-term yields has forced investors to seek alternatives. In tax-exempt money market funds, yields are effectively down to zero forcing many investors further out on the yield curve. - - Individual investors still have large amounts in low-yielding short-term instruments, providing firm support to the municipal market. - - Flows into tax-exempt bond funds were impressive in 2009 with total flows of approximately $77 billion. The prior record was $42.9 billion in 1993, so 2009 flows beat the record by a significant margin. - - Issuance of taxable Build America Bonds has transformed the municipal market. Issuance of BABs started in April 2009, with large deals for the State of California and the New Jersey Turnpike. For 2009, $64.1 billion of BABs were issued; BABs decrease supply otherwise available to tax-exempt investors. - - From a sector perspective, general purpose had the largest percentage (60.0%) of municipal new issuance and dollar amount increase ($48.1bn) from last year, with $128.3bn in bond issuance this year. Healthcare issuance ($44.5bn) had the largest dollar decrease (-$16.6bn) and housing bonds ($10.4bn) the largest percentage decline (-40.2%). - - Year-to-date, California has issued $72.0bn in bonds, the largest among state issuers and a 37.4% increase from last year. New York and Texas have issued $43.7bn and $32.7bn, respectively, ranking second and third. New York issuance increased 9.8%, and Texas fell 20.7% from last year. - - During 2009, munis experienced their sharpest rally in 14 years as policymakers engaged in a massive effort to stabilize financial markets and restore the economy. The federal funds rate remained at historical lows for the entire year and Congress passed the American Recovery and Reinvestment Act of 2009. - - Absolute yields trended mostly lower in the first three quarters of the year before retracing some of the gains in the last quarter. By year end, high-grade yields in the 5-, 10- and 30-year area were lower by 91 bps, 53 bps and 90 bps respectively. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? - - The Fund emphasizes quality security selection combined with premium bond structures in the longer maturity range. During the year, total rate of return rewarded higher-quality securities where the Fund is overweight. - - The Fund is overweight premium structures, which enhanced performance. In fact, within the investment grade sector of the municipal market, coupon income was a significant contributor to total return. - - The Fund remains vigilant against the prospect of higher interest rates and favors high-quality, liquid structures. Specifically, the Fund's average quality is AA. Additionally, the Fund favors both essential-purpose revenue bonds and dedicated revenue bonds which outperformed during the year. Essential-purpose revenue bonds such as toll roads are largely immune to economic swings and benefit from a defined, segregated flow of revenue payments. - - The key driver of performance was the massive tightening in spreads from their historically wide levels at the height of the credit crisis in mid-December 2008. - - The riskier sectors of the muni market saw the highest total returns, reflecting their recovery from the severe price declines and limited liquidity they suffered in 2008. - - The Fund took advantage of perceived security mis-pricings in late 2008 and early 2009 resulting from the general lack of liquidity in the market and the reallocation to the highest rated securities by many investors. Issuers increased yields on new issues to assure adequate demand. - - Many of the bonds which experienced the worst performance in 2008 rebounded strongly in 2009. The credit review of the bonds in 2008 revealed technical factors rather than credit factors as the source of the underperformance in most cases. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. A PORTION OF INCOME MAY BE SUBJECT TO SOME STATE AND/OR LOCAL TAXES AND, FOR CERTAIN INVESTORS, A PORTION MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM SECURITIES. INVESTING IN MUNICIPAL BONDS INVOLVES MARKET RISK AND CREDIT RISK. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Municipal Bonds 97% New York 14% Texas 9 Massachusetts 8 California 7 Pennsylvania 6 Puerto Rico 5 All Other States 48 Other (includes short-term investments) 3 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 28 FIXED INCOME FUNDS VIRTUS TAX-EXEMPT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception 1 year 5 years 10 years to 12/31/09 Date ------ ------- -------- ----------- --------- CLASS I SHARES 18.26% 4.43% 6.27% -- -- CLASS A SHARES AT NAV(2) 17.96 4.17 -- 5.15% 1/30/01 CLASS A SHARES AT POP(3, 4) 12.36 3.16 -- 4.58 1/30/01 CLASS C SHARES AT NAV(2) 17.18 -- -- 4.49 6/26/06 CLASS C SHARES WITH CDSC(4) 17.18 -- -- 4.49 6/26/06 BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33 NOTE 5 -- BARCLAYS CAPITAL U.S. MUNICIPAL BOND INDEX 12.91 4.32 5.75 NOTE 6 --
FUND EXPENSE RATIOS(7): I SHARES: GROSS 0.75%, NET 0.60%; A SHARES: GROSS 0.95%, NET 0.85%; C SHARES: GROSS 1.70%, NET 1.60%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) THE INDEX RETURNED 5.67% FOR CLASS A SHARES AND 6.81% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (6) THE INDEX RETURNED 5.05% FOR CLASS A SHARES AND 5.13% FOR CLASS C SHARES SINCE THE INCEPTION DATE OF EACH CLASS. (7) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME AND A VOLUNTARY FEE LIMITATION OF TOTAL OPERATING EXPENSES. THIS LIMITATION MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVERS AND VOLUNTARY EXPENSE LIMITATIONS. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 - -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on 12/31/99 in Class I shares. The performance of the other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. Performance assumes dividends and capital gain distributions are reinvested. Barclays Capital U.S. Barclays Capital Virtus Tax-Exempt Municipal Bond U.S. Aggregate Bond Fund Class I Index Bond Index 12/31/99 $10,000 $10,000 $10,000 12/29/00 11,441 11,169 11,163 12/31/01 12,130 11,742 12,105 12/31/02 13,514 12,870 13,347 12/31/03 14,300 13,554 13,895 12/31/04 14,794 14,161 14,498 12/30/05 15,202 14,659 14,850 12/29/06 15,911 15,368 15,493 12/31/07 16,460 15,885 16,573 12/31/08 15,530 15,492 17,441 12/31/09 18,372 17,492 18,475 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 29 MONEY MARKET FUNDS TICKER SYMBOLS: I Share: HGCXX VIRTUS INSIGHT GOVERNMENT MONEY MARKET FUND A Share: HIGXX - - VIRTUS INSIGHT GOVERNMENT MONEY MARKET FUND (THE "FUND") is diversified and has an investment objective to seek to provide as high a level of current income from government obligations as is consistent with preservation of capital and liquidity. HOW DID THE MARKET PERFORM AND WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE FISCAL YEAR? - - Concern over economic weaknesses continued to mount, the Federal Reserve kept the overnight interest rate from at a record low 0 - 0.25% for the entire year. - - The pessimism in the markets reached their crescendo on March 9, 2009 when the S&P 500 bottomed out at 676.53 and the Dow Jones dropped to 6,547.05. The rest of the year saw a dramatic rise of over 50% in both markets. As confidence grew that the worst had passed. - - Even though the U.S. Treasury Temporary Guarantee Program for Money Market Funds expired on September 18, 2009 the market remained flooded with various forms of quantitative easing programs. The Federal Reserve continued to insist that inflation is not a pending threat to low rates. - - By December the Agency and Treasury markets were once again in high demand. Similar to the end of 2008, several investors purchased Treasury Bills at a negative yield in an attempt to park money at year-end. - - The Fund performed well with ample amounts of liquidity. Despite withdrawals in the 3rd and 4th quarters and micro and macro challenges within the United States, the world, and the money market arena, this fund finished the year in the top 8% among its peer group. - - The main factor that affected the Fund results was the tremendous amount of money that existed in the front-end of the market. This surplus of funds caused spreads to tighten and rates to decline throughout the year. A dramatic decline in issuance and continued US Government intervention with funding and its quantitative easing programs also greatly affected the Fund's performance. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. AN INVESTMENT IN THIS FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. THE GUARANTEE ON U.S. GOVERNMENT SECURITIES APPLIES ONLY TO THE UNDERLYING SECURITIES OF THE FUND'S PORTFOLIO, AND NOT TO THE VALUE OF THE FUND'S SHARES. Asset Allocation The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Federal Agency Securities 64% Repurchase Agreements 26 U.S. Government Securities 10 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 30 MONEY MARKET FUNDS VIRTUS INSIGHT GOVERNMENT MONEY MARKET FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years ------ ------- -------- CLASS I SHARES 0.30% 3.10% 2.96% CLASS A SHARES AT NAV(2) 0.09 2.81 2.64
FUND EXPENSE RATIOS(3): I SHARES: GROSS 0.26%, NET 0.21%; A SHARES: 0.56%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE). (3) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 - -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on 12/31/99 in Class I and Class A shares. The total return on Class A shares reflects the maximum sales charge of 5.75% on the initial investment. Performance assumes dividends and capital gain distributions are reinvested. Virtus Insight Virtus Insight Government Money Government Money Market Fund Class I Market Fund Class A 12/31/99 $10,000 $10,000 12/29/00 10,624 10,587 12/31/01 11,053 10,976 12/31/02 11,235 11,119 12/31/03 11,351 11,193 12/31/04 11,490 11,292 12/30/05 11,842 11,596 12/29/06 12,424 12,148 12/31/07 13,054 12,720 12/31/08 13,347 12,961 12/31/09 13,388 12,972 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 31 MONEY MARKET FUNDS TICKER SYMBOLS: I Share: HACXX VIRTUS INSIGHT MONEY MARKET FUND A Share: HICXX E Share: HECXX - - VIRTUS INSIGHT MONEY MARKET FUND (THE "FUND") is diversified and has an an investment objective to seek to provide as high a level of current income as is consistent with its investment policies and with preservation of capital and liquidity. HOW DID THE MARKET PERFORM AND WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE FISCAL YEAR? - - Concern over economic weaknesses continued to mount, the Federal Reserve kept the overnight interest rate from at a record low 0 - 0.25% for the entire year. - - The pessimism in the markets reached their crescendo on March 9, 2009 when the S&P 500 bottomed out at 676.53 and the Dow Jones dropped to 6,547.05. The rest of the year saw a dramatic rise of over 50% in both markets. As confidence grew that the worst had passed. - - Even though the U.S. Treasury Temporary Guarantee Program for Money Market Funds expired on September 18, 2009 the market remained flooded with various forms of quantitative easing programs. The Federal Reserve continued to insist that inflation is not a pending threat to low rates. - - By December the Agency and Treasury markets were once again in high demand. Similar to the end of 2008, several investors purchased Treasury Bills at a negative yield in an attempt to park money at year-end. - - The Fund performed well with ample amounts of liquidity. Despite micro and macro challenges within the United States, the world, and the money market arena, this fund finished the year in the top 7% among its peer group. - - The main factor that affected the Fund results was the tremendous amount of money that existed in the front-end of the market. This surplus of funds caused spreads to tighten and rates to decline throughout the year. A dramatic decline in issuance and continued US Government intervention with funding and its quantitative easing programs also greatly affected the Fund's performance. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. AN INVESTMENT IN THIS FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. ASSET ALLOCATION The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Commercial Paper 44% Medium-Term Notes 10 Money Market Mutual Funds 10 Federal Agency Securities 10 U.S. Government Securities 9 Certificates of Deposit 6 Other (includes short-term investments) 11 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 32 MONEY MARKET FUNDS VIRTUS INSIGHT MONEY MARKET FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years ------ ------- -------- CLASS I SHARES 0.62% 3.37% 3.16% CLASS A SHARES AT NAV(2) 0.31 3.07 2.83
FUND EXPENSE RATIOS(3): I SHARES: GROSS 0.24%, NET 0.19%; A SHARES: GROSS 0.54%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 - -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on 12/31/99 in Class I and Class A shares. The total return on Class A shares reflects the maximum sales charge of 5.75% on the initial investment. Performance assumes dividends and capital gain distributions are reinvested. Virtus Insight Virtus Insight Money Market Money Market Fund Class I Fund Class A 12/31/99 $10,000 $10,000 12/29/00 10,646 10,609 12/31/01 11,094 11,017 12/31/02 11,298 11,180 12/31/03 11,422 11,263 12/31/04 11,569 11,369 12/30/05 11,934 11,687 12/29/06 12,536 12,263 12/31/07 13,197 12,865 12/31/08 13,570 13,183 12/31/09 13,654 13,223 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 33 MONEY MARKET FUNDS TICKER SYMBOLS: I Share: HTCXX VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND A Share: HITXX - - VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND (THE "FUND") is diversified and has an investment objective to seek to provide as high a level of current income that is exempt from federal income taxes as is consistent with its investment policies and with preservation of capital and liquidity. HOW DID THE MARKET PERFORM AND WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE FISCAL YEAR? - - Compared to 2008, the short-term municipal market experienced a relatively low amount of volatility throughout 2009. The auction rate market began to show improvement. While these securities are not eligible to be held in tax-exempt money market funds, any stabilization of this sector can't help but be positive for the short-term market. After hitting multi-year lows in early March 2009, the equity markets staged a rally over the rest of the year, with the S&P and Dow Jones rising by over 50% each. - - Unfortunately the equity markets resurgence did not necessarily translate to confidence in the municipal markets. The Temporary Guarantee Program for Money Market Funds expired in September 2009. This program was created to help promote stability in money market funds and attempt to restore investor confidence and it helped maintain balances at pre-crisis levels in the Tax-Exempt Fund. - - Supply and demand of the variable rate securities has also heavily influenced the yields. Money fund managers continued to be only interested in the highest quality securities, no matter how low the rates. With so much uncertainty in the markets, most managers opted to stay invested in the most highly rated, liquid securities. The Virtus Insight Tax-Exempt Money Market Fund followed this strategy as the portfolio was heavily weighted in high quality variable rate demand notes. This structure benefited the Fund during the second and third quarters as variable rates spiked up. Towards the end of the fourth quarter, investor fears appeared to have been somewhat quelled. Demand resumed for variable rate securities and we witnessed a dramatic drop in rates. - - The short-term yield curve has provided no incentive to extend the portfolio. It has remained relatively flat throughout the past year. As a result, we have been very selective in our term purchases. We will continue to be diligent with our credit analysis of all securities in the Fund and of future purchases. Liquidity and quality of the portfolio continue to be our top priority. THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT MARKET FORECASTS WILL BE REALIZED. AN INVESTMENT IN THIS FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. A PORTION OF INCOME MAY BE SUBJECT TO SOME STATE AND/OR LOCAL TAXES AND, FOR CERTAIN INVESTORS, A PORTION MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX. ASSET ALLOCATION The following table presents asset allocations within certain sectors as a percentage of total investments at December 31, 2009. Variable Rate Demand Obligations 80% Commercial Paper-Municipal 9 Money Market Mutual Funds 8 Municipal Tax-Exempt Bonds 3 --- Total 100% ===
For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 34 MONEY MARKET FUNDS VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years ------ ------- -------- CLASS I SHARES 0.36% 2.34% 2.16% CLASS A SHARES AT NAV(2) 0.09 2.03 1.82
FUND EXPENSE RATIOS(3): I SHARES: GROSS 0.25%, NET 0.20%; A SHARES: 0.55%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) THE EXPENSE RATIOS OF THE FUND, BOTH NET AND GROSS ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A VOLUNTARY FEE WAIVER OF CLASS I SHARES SHAREHOLDER SERVICING FEES WHICH MAY DISCONTINUE AT ANY TIME. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS BEGINNING ON PAGE 82 FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 12/31 - -------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on 12/31/99 in Class I and Class A shares. The total return on Class A shares reflects the maximum sales charge of 5.75% on the initial investment. Performance assumes dividends and capital gain distributions are reinvested. Virtus Insight Virtus Insight Tax-Exempt Money Tax-Exempt Money Market Fund Class I Market Fund Class A 12/31/99 $10,000 $10,000 12/29/00 10,394 10,358 12/31/01 10,675 10,601 12/31/02 10,818 10,706 12/31/03 10,915 10,765 12/31/04 11,025 10,835 12/30/05 11,271 11,038 12/29/06 11,655 11,389 12/31/07 12,066 11,749 12/31/08 12,334 11,968 12/31/09 12,378 11,979 For information regarding the indexes and certain investment terms, see the Key Investment Terms starting on page 2. 35 VIRTUS BALANCED ALLOCATION FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--3.5% U.S. Treasury Bond 7.500%, 11/15/16 $ 378 $ 476 9.000%, 11/15/18 152 213 5.375%, 2/15/31 344 380 4.750%, 2/15/37 590 603 U.S. Treasury Note 4.250%, 11/15/13 200 216 1.875%, 4/30/14 45 44 4.000%, 2/15/15 60 64 4.875%, 8/15/16 97 107 4.000%, 8/15/18 5 5 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $2,088) 2,108 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS--1.1% Israel Government AID Bond Series 7-Z 0.000%, 8/15/22 690 365 Rowan Cos., Inc. 4.330%, 5/1/19 271 282 --------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (IDENTIFIED COST $649) 647 --------------- MORTGAGE-BACKED SECURITIES--17.5% AGENCY--9.2% FHLMC 5.500%, 7/1/35 355 373 6.000%, 12/1/36 337 359 FHLMC REMIC 2513, JE 5.000%, 10/15/17 450 476 2886, BE 4.500%, 11/15/19 260 265 2886, CK 5.000%, 11/15/19 280 290 2835, HB 5.500%, 8/15/24 305 324 2770, LA 4.500%, 4/15/33 144 149 FNMA 4.500%, 1/1/20 197 205 7.500%, 11/1/26 --(5) --(5) 7.500%, 3/1/27 1 2 7.500%, 3/1/27 5 6 5.500%, 12/1/33 169 177 5.500%, 1/1/34 109 114 5.000%, 7/1/34 351 362 5.000%, 11/1/34 91 94 3.650%, 1/1/35(3) 137 141 6.000%, 3/1/35 71 76 5.500%, 6/1/35 130 137 5.500%, 7/1/35 167 175 5.000%, 9/1/35 293 302 6.500%, 5/1/36 340 366 FNMA Grantor Trust 00-T8, A 7.375%, 12/25/30 (3) 18 19 FNMA REMIC 04-15, AB 4.000%, 9/25/17 307 317 02-73, OE 5.000%, 11/25/17 400 424 (Interest Only) 97-20 1.840%, 3/25/27(3)(6) 163 4 GNMA 8.000%, 11/15/26 17 20 7.000%, 9/15/31 4 4 5.500%, 7/15/33 129 136
PAR VALUE VALUE --------------- --------------- AGENCY--CONTINUED GNMA Structured Securities 02-53, B 5.552%, 5/16/26 $ 77 $ 79 04-108, C 5.039%, 12/16/32(3) 195 199 --------------- 5,595 --------------- NON-AGENCY--8.3% Adjustable Rate Mortgage Trust 05-11, 2A42 5.292%, 2/25/36 (3) 560 241 Bear Stearns Commercial Mortgage Securities 06-PW14, A4 5.201%, 12/11/38 165 159 Bear Stearns Commercial Mortgage Securities, Inc. 06-T22, A4 5.463%, 4/12/38(3) 195 196 05-T18, A4 4.933%, 2/13/42(3) 275 269 07-PW15, A2 5.205%, 2/11/44 190 192 Citigroup-Deutsche Bank Commercial Mortgage Trust 06-CD3, A2 5.560%, 10/15/48 305 312 Countrywide Home Loans Series 03-J6, 1A1 5.500%, 8/25/33 165 165 GMAC Mortgage Corp. Loan Trust 05-AR3, 3A3 4.842%, 6/19/35 (3) 65 62 Greenwich Capital Commercial Funding Corp. 07-GG9, A2 5.381%, 3/10/39 230 233 Lehman Brothers-UBS Commercial Mortgage Trust 05-C2, A2 4.821%, 4/15/30 191 192 06-C3, A4 5.661%, 3/15/39(3) 330 306 MASTR Adjustable Rate Mortgages Trust 05-8, 3A1 6.000%, 12/25/35 (3) 442 317 MASTR Alternative Loans Trust 04-13, 12A1 5.500%, 12/25/19 134 134 04-13, 8A1 5.500%, 1/25/25 153 150 MASTR Asset Securitization Trust 03-7, 4A33 5.250%, 9/25/33 173 172 03-10, 3A1 5.500%, 11/25/33 252 254 Morgan Stanley Mortgage Loan Trust 06-7, 5A2 5.962%, 6/25/36 (3) 295 166 Residential Funding Mortgage Securities II, Inc. 01-HS2, A5 7.420%, 4/25/31 (3) 36 35 Residential Funding Securities LLC 03-RM2, AII 5.000%, 5/25/18 216 219
PAR VALUE VALUE --------------- --------------- NON-AGENCY--CONTINUED Structured Asset Securities Corp. 03-34A, 6A 4.992%, 11/25/33(3) $ 118 $ 101 05-2XS, 2A2 5.150%, 2/25/35(3) 85 43 05-15, 4A1 6.000%, 8/25/35 165 137 Structured Asset Securities Corp. (Interest Only) 98-RF3, A 144A 6.100%, 6/15/28 (4)(7) 48 6 Washington Mutual Alternative Mortgage Pass-Through Certificates 05-4, CB7 5.500%, 6/25/35 310 229 05-6, 2A7 5.500%, 8/25/35 204 175 Washington Mutual Mortgage Pass-Through Certificates 02-S8, 2A7 5.250%, 1/25/18 145 148 03-S11, A1 5.000%, 11/25/33 374 369 Wells Fargo & Co. 05-AR4, B1 4.357%, 4/25/35 (3) 203 71 --------------- 5,053 --------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $11,314) 10,648 --------------- ASSET-BACKED SECURITIES--4.4% Capital Auto Receivables Asset Trust 07-3, A3A 5.020%, 9/15/11 78 80 07-3, A4 5.210%, 3/17/14 260 272 Capital One Multi-Asset Execution Trust 03-B5, B5 4.790%, 8/15/13 240 244 Chase Issuance Trust 07-A15, A 4.960%, 9/17/12 325 335 Citibank Credit Card Issuance Trust 07-B2, B2 5.000%, 4/2/12 220 222 07-A5, A5 5.500%, 6/22/12 435 445 E*Trade RV & Marine Trust 04-1, A3 3.620%, 10/8/18 113 113 Ford Credit Auto Owner Trust 09-B, A4 4.500%, 7/15/14 215 226 Mercedes-Benz Auto Receivables Trust 09-1, A3 1.670%, 1/15/14 315 315 Triad Auto Receivables Owner Trust 07-B, A4A 5.430%, 7/14/14 185 186 World Omni Automobile Lease Securitization Trust 09-A, A3 1.650%, 2/15/13 280 279 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $2,672) 2,717 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 36 VIRTUS BALANCED ALLOCATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- CORPORATE BONDS--9.4% CONSUMER DISCRETIONARY--0.1% DaimlerChrysler North America LLC 5.875%, 3/15/11 $ 80 $ 84 --------------- CONSUMER STAPLES--0.3% Proctor & Gamble Co. ESOP Series A 9.360%, 1/1/21 131 160 --------------- ENERGY--0.8% ConocoPhillips Holding Co. 6.950%, 4/15/29 165 187 DCP Midstream LLC 7.875%, 8/16/10 150 156 Devon Energy Corp. 7.950%, 4/15/32 125 159 --------------- 502 --------------- FINANCIALS--3.2% American Express Credit Corp. 5.125%, 8/25/14 215 226 Associates Corp. North America 6.950%, 11/1/18 60 61 AvalonBay Communities, Inc. 6.100%, 3/15/20 220 224 Bank of America Corp. 6.250%, 4/15/12 220 236 Citigroup, Inc. 5.850%, 7/2/13 125 130 General Electric Capital Corp. 4.875%, 3/4/15 75 78 Lehman Brothers Holdings, Inc. 4.250%, 1/27/10(6)(9) 55 11 Merrill Lynch & Co., Inc. 5.770%, 7/25/11 100 106 6.050%, 8/15/12 100 107 Prudential Financial, Inc. 3.625%, 9/17/12 225 228 Royal Bank of Scotland Group plc 5.000%, 10/1/14 200 177 Travelers Cos., Inc. (The) 5.500%, 12/1/15 325 352 --------------- 1,936 --------------- HEALTH CARE--0.3% Schering-Plough Corp. 6.500%, 12/1/33 150 169 --------------- INDUSTRIALS--1.3% Boeing Co. (The) 3.500%, 2/15/15 175 176 8.750%, 9/15/31 100 131 Caterpillar, Inc. 7.300%, 5/1/31 200 239 CSX Corp. 6.750%, 3/15/11 50 53 Republic Services, Inc. 144A 5.500%, 9/15/19 (4) 200 203 --------------- 802 ---------------
PAR VALUE VALUE --------------- --------------- MATERIALS--0.5% CRH America, Inc. 5.625%, 9/30/11 $ 300 $ 315 --------------- TELECOMMUNICATION SERVICES--1.6% BellSouth Corp. 6.000%, 11/15/34 235 229 France Telecom SA 7.750%, 3/1/11 100 107 Verizon Global Funding Corp. 7.250%, 12/1/10 200 212 7.750%, 12/1/30 30 35 Vodafone Group plc 3.375%, 11/24/15 400 387 --------------- 970 --------------- UTILITIES--1.3% America Water Works 6.593%, 10/15/37 130 131 Consolidated Edison Co. of New York 5.700%, 2/1/34 50 50 Dominion Resources, Inc. 5.200%, 8/15/19 200 203 FPL Group Capital, Inc. 5.625%, 9/1/11 300 319 Virginia Electric & Power Co. Series A 4.750%, 3/1/13 100 105 --------------- 808 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $5,664) 5,746 ---------------
SHARES --------------- COMMON STOCKS--62.8% CONSUMER DISCRETIONARY--5.3% Amazon.com, Inc.(2) 1,050 141 Asbury Automotive Group, Inc.(2) 5,150 59 AutoNation, Inc.(2) 11,200 215 Best Buy Co., Inc. 3,900 154 Big Lots, Inc.(2) 8,300 241 Carrols Restaurant Group, Inc.(2) 10,350 73 Chipotle Mexican Grill, Inc. Class A(2) 600 53 Dollar Tree, Inc.(2) 5,000 242 Expedia, Inc.(2) 2,750 71 Family Dollar Stores, Inc. 5,400 150 Liberty Media Corp. - Interactive Class A(2) 11,200 121 Macy's, Inc. 11,300 189 Maidenform Brands, Inc.(2) 4,100 68 National CineMedia, Inc. 6,200 103 Panera Bread Co. Class A(2) 1,700 114 priceline.com, Inc.(2) 1,100 240 Ross Stores, Inc. 1,875 80 Sinclair Broadcast Group, Inc. Class A(2) 13,900 56 Stage Stores, Inc. 6,350 79 TJX Cos., Inc. (The) 8,300 303
SHARES VALUE --------------- --------------- CONSUMER DISCRETIONARY--CONTINUED TRW Automotive Holdings Corp.(2) 7,600 $ 182 UniFirst Corp. 3,050 147 Yum! Brands, Inc. 3,900 136 --------------- 3,217 --------------- CONSUMER STAPLES--6.0% Archer-Daniels-Midland Co. 21,750 681 Central Garden and Pet Co. Class A(2) 6,100 61 Coca-Cola Bottling Co. Consolidated 1,350 73 Coca-Cola Co. (The) 3,000 171 Coca-Cola Enterprises, Inc. 15,300 324 Colgate-Palmolive Co. 8,300 682 Del Monte Foods Co. 38,800 440 Estee Lauder Cos., Inc. (The) Class A 1,100 53 Hansen Natural Corp.(2) 2,875 110 Kimberly-Clark Corp. 825 53 Lorillard, Inc. 5,500 441 SUPERVALU, Inc. 15,100 192 Wal-Mart Stores, Inc. 2,925 156 Walgreen Co. 6,400 235 --------------- 3,672 --------------- ENERGY--4.7% Chevron Corp. 3,600 277 Clayton Williams Energy, Inc.(2) 2,650 93 CVR Energy, Inc.(2) 7,100 48 Ensco International plc Sponsored ADR 2,100 84 Exxon Mobil Corp. 12,215 833 Key Energy Services, Inc.(2) 13,850 122 National Oilwell Varco, Inc. 4,350 192 Newfield Exploration Co.(2) 3,500 169 Noble Corp. 11,200 456 Occidental Petroleum Corp. 5,150 419 Southwestern Energy Co.(2) 1,300 62 Total SA Sponsored ADR 1,700 109 --------------- 2,864 --------------- FINANCIALS--8.7% AFLAC, Inc. 1,275 59 American Express Co. 2,900 117 American Financial Group, Inc. 9,300 232 American Physicians Capital, Inc. 1,866 57 Arch Capital Group Ltd.(2) 7,800 558 Argo Group International Holdings Ltd.(2) 2,250 66 Bank of America Corp. 19,700 297 Berkley (W.R.) Corp. 6,000 148 BlackRock, Inc. 1,025 238 Capital One Financial Corp. 3,300 126 Cardtronics, Inc.(2) 9,250 102 Columbia Banking System, Inc. 7,900 128 Digital Realty Trust, Inc. 3,650 183 Flushing Financial Corp. 6,100 69 GFI Group, Inc. 11,350 52
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 37 VIRTUS BALANCED ALLOCATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- FINANCIALS--CONTINUED Goldman Sachs Group, Inc. (The) 3,950 $ 667 Harleysville Group, Inc. 2,550 81 Highwoods Properties, Inc. 3,250 108 HRPT Properties Trust 11,700 76 IntercontinentalExchange, Inc.(2) 560 63 JPMorgan Chase & Co. 11,200 467 LTC Properties, Inc. 4,900 131 Nara Bancorp, Inc.(2) 7,500 85 PHH Corp.(2) 6,100 98 Prudential Financial, Inc. 3,300 164 PS Business Parks, Inc. 2,200 110 Reinsurance Group of America, Inc. 3,425 163 Renasant Corp. 5,500 75 SeaBright Insurance Holdings, Inc.(2) 3,400 39 Southwest Bancorp, Inc. 12,900 90 Transatlantic Holdings, Inc. 2,200 115 Unitrin, Inc. 2,850 63 Wells Fargo & Co. 8,800 237 World Acceptance Corp.(2) 1,500 54 --------------- 5,318 --------------- HEALTH CARE--9.8% Alliance Healthcare Services, Inc.(2) 12,400 71 AmerisourceBergen Corp. 17,000 443 Amgen, Inc.(2) 12,150 687 AMN Healthcare Services, Inc.(2) 5,850 53 AstraZeneca plc Sponsored ADR 12,000 563 Biogen Idec, Inc.(2) 1,280 68 DaVita, Inc.(2) 1,100 65 Emergency Medical Services Corp. Class A(2) 2,850 154 Endo Pharmaceuticals Holdings, Inc.(2) 5,300 109 Forest Laboratories, Inc.(2) 7,500 241 Gilead Sciences, Inc.(2) 4,725 205 Hospira, Inc.(2) 4,400 224 Humana, Inc.(2) 1,300 57 Intuitive Surgical, Inc.(2) 400 121 Johnson & Johnson 6,300 406 Kinetic Concepts, Inc.(2) 4,050 153 Life Technologies Corp.(2) 6,950 363 McKesson Corp. 8,900 556 Medco Health Solutions, Inc.(2) 2,700 173 Medicis Pharmaceutical Corp. Class A 2,275 62 Millipore Corp.(2) 700 51 Pfizer, Inc. 15,800 287 Teva Pharmaceutical Industries Ltd. Sponsored ADR 2,000 112 Valeant Pharmaceuticals International(2) 1,700 54 Watson Pharmaceuticals, Inc.(2) 16,510 654 --------------- 5,932 ---------------
SHARES VALUE --------------- --------------- INDUSTRIALS--5.0% 3M Co. 1,825 $ 151 ACCO Brands Corp.(2) 9,100 66 Apogee Enterprises, Inc. 5,950 83 Consolidated Graphics, Inc.(2) 2,750 96 Dycom Industries, Inc.(2) 9,050 73 EMCOR Group, Inc.(2) 3,800 102 General Electric Co. 17,200 260 H&E Equipment Services, Inc.(2) 10,950 115 Hubbell, Inc. Class B 1,275 60 Illinois Tool Works, Inc. 1,225 59 Iron Mountain, Inc.(2) 3,100 71 ITT Corp. 1,150 57 KBR, Inc. 12,700 241 Lockheed Martin Corp. 5,150 388 Manpower, Inc. 2,300 126 Mueller Industries, Inc. 3,450 86 Northrop Grumman Corp. 2,600 145 Saia, Inc.(2) 6,150 91 Shaw Group, Inc. (The)(2) 5,050 145 Standex International Corp. 4,150 84 Timken Co. (The) 5,200 123 TransDigm Group, Inc. 2,400 114 Tredegar Corp. 5,700 90 URS Corp.(2) 4,890 218 --------------- 3,044 --------------- INFORMATION TECHNOLOGY--16.5% Accenture plc Class A 5,800 241 Acxiom Corp.(2) 13,400 180 Apple, Inc.(2) 3,675 775 Arrow Electronics, Inc.(2) 7,000 207 Avnet, Inc.(2) 9,300 280 Benchmark Electronics, Inc.(2) 5,450 103 Broadcom Corp. Class A(2) 7,230 227 Cisco Systems, Inc.(2) 33,435 800 Cognizant Technology Solutions Corp. Class A(2) 2,875 130 Computer Sciences Corp.(2) 4,400 253 Cree, Inc.(2) 1,700 96 EMC Corp.(2) 3,750 66 F5 Networks, Inc.(2) 4,850 257 Global Payments, Inc. 3,950 213 Google, Inc. Class A(2) 1,100 682 Hewlett-Packard Co. 12,175 627 Ingram Micro, Inc. Class A(2) 18,800 328 International Business Machines Corp. 5,700 746 JDA Software Group, Inc.(2) 3,600 92 Lender Processing Services, Inc. 2,000 81 Marvell Technology Group Ltd.(2) 4,200 87 McAfee, Inc.(2) 3,400 138 Microsoft Corp. 21,215 647 NetApp, Inc.(2) 2,700 93 Oracle Corp. 38,600 947 Red Hat, Inc.(2) 4,400 136 Sybase, Inc.(2) 1,450 63
SHARES VALUE --------------- --------------- INFORMATION TECHNOLOGY--CONTINUED Symantec Corp.(2) 11,200 $ 200 Tech Data Corp.(2) 3,500 163 Teradata Corp.(2) 2,150 68 ValueClick, Inc.(2) 7,600 77 Western Digital Corp.(2) 17,600 777 Western Union Co. (The) 14,300 270 --------------- 10,050 --------------- MATERIALS--4.1% Ashland, Inc. 5,400 214 Buckeye Technologies, Inc.(2) 10,600 104 Crown Holdings, Inc.(2) 17,800 455 Freeport-McMoRan Copper & Gold, Inc.(2) 6,775 544 International Paper Co. 6,500 174 Lubrizol Corp. (The) 5,800 423 Minerals Technologies, Inc. 2,350 128 PolyOne Corp.(2) 11,300 84 Rock-Tenn Co. Class A 6,050 305 Spartech Corp. 6,300 65 --------------- 2,496 --------------- TELECOMMUNICATION SERVICES--2.1% American Tower Corp. Class A(2) 6,271 271 AT&T, Inc. 11,300 317 CenturyTel, Inc. 17,536 635 RCN Corp.(2) 8,000 87 --------------- 1,310 --------------- UTILITIES--0.6% El Paso Electric Co.(2) 4,850 98 NRG Energy, Inc.(2) 2,700 64 Southwest Gas Corp. 6,050 173 --------------- 335 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $36,013) 38,238 --------------- TOTAL LONG-TERM INVESTMENTS--98.7% (IDENTIFIED COST $58,400) 60,104 --------------- SHORT-TERM INVESTMENTS--1.1% MONEY MARKET MUTUAL FUNDS--1.1% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 692,230 692 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $692) 692 --------------- TOTAL INVESTMENTS--99.8% (IDENTIFIED COST $59,092) 60,796(1) Other assets and liabilities, net--0.2% 123 --------------- NET ASSETS--100.0% $ 60,919 ===============
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 38 VIRTUS BALANCED ALLOCATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) COUNTRY WEIGHTINGS as of 12/31/09 + United States ..................... 95% United Kingdom .................... 2 Bermuda ........................... 1 Israel ............................ 1 Switzerland ....................... 1 --- Total ............................. 100% ---
+ % of total investments as of December 31, 2009 ABBREVIATIONS: ADR American Depositary Receipt FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") FNMA Federal National Mortgage Association ("Fannie Mae") GNMA Government National Mortgage Association ("Ginnie Mae") REMIC Real Estate Mortgage Investment Conduit The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ----------- INVESTMENT IN SECURITIES: Debt Securities: U.S. Government and Agency Securities $ 2,755 $ -- $ 2,755 Mortgage-Backed Securities 10,648 -- 10,648 Asset-Backed Securities 2,717 -- 2,717 Corporate Debt 5,746 -- 5,746 Equity Securities: Common Stocks 38,238 38,238 -- Short-Term Investments 692 692 -- ------- ------- ------- Total Investments $60,796 $38,930 $21,866 ======= ======= =======
There are no Level 3 (significant unobservable inputs) priced securities. 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 Securities --------------- INVESTMENT IN SECURITIES: BALANCE AS OF DECEMBER 31, 2008....................... $ 181 Accrued discounts/premiums(a) ........................ --(e) Realized gain (loss)(b) .............................. -- Change in unrealized appreciation (depreciation)(b)... 11 Net purchases (sales)(c) ............................. -- Transfers in and/or out of Level 3(d)................. (192) ----- BALANCE AS OF DECEMBER 31, 2009 ...................... $ -- =====
(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 December 31, 2009, 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 $500 (not reported in thousands). Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 39 VIRTUS CORE EQUITY FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--98.4% CONSUMER DISCRETIONARY--10.3% Amazon.com, Inc.(2) 17,900 $ 2,408 AutoZone, Inc.(2) 3,250 514 Best Buy Co., Inc. 12,250 484 Discovery Communications, Inc. Class A(2) 56,700 1,739 Gap, Inc. (The) 36,050 755 Home Depot, Inc. (The) 32,950 953 McDonald's Corp. 14,450 902 TJX Cos., Inc. (The) 42,550 1,555 --------------- 9,310 --------------- CONSUMER STAPLES--9.1% Archer-Daniels-Midland Co. 68,300 2,139 Bunge Ltd. 9,950 635 Campbell Soup Co. 16,850 570 CVS Caremark Corp. 56,350 1,815 Hansen Natural Corp.(2) 17,400 668 Kroger Co. (The) 51,600 1,059 Wal-Mart Stores, Inc. 26,400 1,411 --------------- 8,297 --------------- ENERGY--10.6% Anadarko Petroleum Corp. 11,000 687 Chevron Corp. 9,650 743 Exxon Mobil Corp. 25,490 1,738 National Oilwell Varco, Inc. 12,350 545 Noble Corp. 32,800 1,335 Occidental Petroleum Corp. 20,150 1,639 Schlumberger Ltd. 8,300 540 Southwestern Energy Co.(2) 49,900 2,405 --------------- 9,632 --------------- FINANCIALS--12.5% Bank of America Corp. 51,400 774 Capital One Financial Corp. 13,900 533 First Horizon National Corp.(2) 37,941 509 Goldman Sachs Group, Inc. (The) 17,030 2,875 JPMorgan Chase & Co. 67,700 2,821 MetLife, Inc. 16,950 599 Prudential Financial, Inc. 36,800 1,831 Reinsurance Group of America, Inc. 15,050 717 Wells Fargo & Co. 25,050 676 --------------- 11,335 ---------------
SHARES VALUE --------------- --------------- HEALTH CARE--14.6% Amgen, Inc.(2) 13,200 $ 747 AstraZeneca plc Sponsored ADR 19,730 926 Forest Laboratories, Inc.(2) 57,300 1,840 Life Technologies Corp.(2) 10,700 559 McKesson Corp. 32,400 2,025 Medco Health Solutions, Inc.(2) 18,950 1,211 Pfizer, Inc. 28,212 513 St. Jude Medical, Inc.(2) 14,850 546 Teva Pharmaceutical Industries Ltd. Sponsored ADR 37,750 2,121 Valeant Pharmaceuticals International(2) 19,600 623 Watson Pharmaceuticals, Inc.(2) 54,650 2,165 --------------- 13,276 --------------- INDUSTRIALS--8.0% Cummins, Inc. 18,050 828 Danaher Corp. 11,300 850 First Solar, Inc.(2) 4,950 670 Fluor Corp. 12,250 552 General Dynamics Corp. 13,250 903 General Electric Co. 58,750 889 Honeywell International, Inc. 14,700 576 Navistar International Corp.(2) 13,100 506 Northrop Grumman Corp. 26,500 1,480 --------------- 7,254 --------------- INFORMATION TECHNOLOGY--22.5% Accenture plc Class A 43,500 1,805 Apple, Inc.(2) 7,600 1,603 Broadcom Corp. Class A(2) 36,250 1,140 Cisco Systems, Inc.(2) 29,650 710 Cognizant Technology Solutions Corp. Class A(2) 11,950 541 Computer Sciences Corp.(2) 16,350 941 F5 Networks, Inc.(2) 9,150 485 Google, Inc. Class A(2) 2,000 1,240 International Business Machines Corp. 17,100 2,238 Intuit, Inc.(2) 50,400 1,548 Marvell Technology Group Ltd.(2) 61,300 1,272 McAfee, Inc.(2) 12,550 509 Microsoft Corp. 24,550 749 QLogic Corp.(2) 76,600 1,445 Synopsys, Inc.(2) 71,000 1,582 Tech Data Corp.(2) 23,850 1,113 VMware, Inc. Class A(2) 14,700 623 Western Digital Corp.(2) 20,100 887 --------------- 20,431 ---------------
SHARES VALUE --------------- --------------- MATERIALS--4.9% ArcelorMittal 19,550 $ 894 BHP Billiton Ltd. Sponsored ADR 8,900 681 Freeport-McMoRan Copper & Gold, Inc.(2) 12,986 1,043 International Paper Co. 21,200 568 Praxair, Inc. 9,000 723 Reliance Steel & Aluminum Co. 12,850 555 --------------- 4,464 --------------- TELECOMMUNICATION SERVICES--2.6% AT&T, Inc. 54,530 1,529 Verizon Communications, Inc. 25,550 846 --------------- 2,375 --------------- UTILITIES--3.3% FPL Group, Inc. 37,150 1,962 NRG Energy, Inc.(2) 43,450 1,026 --------------- 2,988 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $80,623) 89,362 --------------- TOTAL LONG-TERM INVESTMENTS--98.4% (IDENTIFIED COST $80,623) 89,362 --------------- SHORT-TERM INVESTMENTS--1.7% MONEY MARKET MUTUAL FUNDS--1.7% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 1,561,376 1,561 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,561) 1,561 --------------- TOTAL INVESTMENTS--100.1% (IDENTIFIED COST $82,184) 90,923(1) Other assets and liabilities, net--(0.1)% (77) --------------- NET ASSETS--100.0% $ 90,846 ===============
COUNTRY WEIGHTINGS as of 12/31/09 + United States 89% Bermuda 2 Ireland 2 Israel 2 Switzerland 2 Luxembourg 1 United Kingdom 1 Other 1 --- Total 100% ---
+ % of total investments as of December 31, 2009 ABBREVIATIONS: ADR American Depositary Receipt Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 40 VIRTUS CORE EQUITY FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Level 1 - Value at Quoted December 31, 2009 Prices ----------------- --------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $89,362 $89,362 Short-Term Investments 1,561 1,561 ------- ------- Total Investments $90,923 $90,923 ======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 41 VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--99.4% CONSUMER DISCRETIONARY--16.9% Aeropostale, Inc.(2) 16,100 $ 548 American Greetings Corp. Class A 17,450 380 Bally Technologies, Inc.(2) 7,300 301 California Pizza Kitchen, Inc.(2) 33,480 450 Carter's, Inc.(2) 43,050 1,130 Collective Brands, Inc.(2) 44,800 1,020 Cooper Tire & Rubber Co. 29,000 581 Deckers Outdoor Corp.(2) 11,100 1,129 Finish Line, Inc. (The) Class A 56,850 714 Fossil, Inc.(2) 9,350 314 Jo-Ann Stores, Inc.(2) 26,600 964 JOS. A. Bank Clothiers, Inc.(2) 13,150 555 Kirkland's, Inc.(2) 31,700 551 Phillips-Van Heusen Corp. 22,310 908 Shutterfly, Inc.(2) 24,800 442 Systemax, Inc. 41,775 656 Tempur-Pedic International, Inc.(2) 11,050 261 Tupperware Brands Corp. 28,800 1,341 Warnaco Group, Inc. (The)(2) 13,700 578 Wet Seal, Inc. (The) Class A(2) 184,250 636 WMS Industries, Inc.(2) 13,150 526 --------------- 13,985 --------------- CONSUMER STAPLES--1.5% Boston Beer Co., Inc. (The) Class A(2) 14,625 681 Darling International, Inc.(2) 69,300 581 --------------- 1,262 --------------- ENERGY--6.0% Cal Dive International, Inc.(2) 122,900 929 Dawson Geophysical Co.(2) 26,100 603 Geokinetics, Inc.(2) 33,900 326 Helix Energy Solutions Group, Inc.(2) 42,450 499 Natural Gas Services Group, Inc.(2) 35,850 676 Parker Drilling Co.(2) 126,295 625 Vaalco Energy, Inc. 102,350 466 Willbros Group, Inc.(2) 51,750 873 --------------- 4,997 --------------- FINANCIALS--18.8% Argo Group International Holdings Ltd.(2) 34,770 1,013 Aspen Insurance Holdings Ltd. 22,550 574 Cardinal Financial Corp. 51,100 447 Cash America International, Inc. 18,950 663 Cedar Shopping Centers, Inc. 72,150 491 Compass Diversified Trust 60,450 771
SHARES VALUE --------------- --------------- FINANCIALS--CONTINUED Encore Capital Group, Inc.(2) 62,200 $ 1,082 Entertainment Properties Trust 12,400 437 EZCORP, Inc. Class A(2) 24,350 419 First Citizens BancShares, Inc. Class A 4,295 705 Flushing Financial Corp. 57,300 645 GFI Group, Inc. 51,950 237 Jones Lang LaSalle, Inc. 11,175 675 Meadowbrook Insurance Group, Inc. 140,350 1,039 Medical Properties Trust, Inc. 42,300 423 MFA Financials, Inc. 107,900 793 Mid-America Apartment Communities, Inc. 17,900 864 Montpelier Re Holdings Ltd. 70,300 1,218 Nara Bancorp, Inc.(2) 40,550 460 Oppenheimer Holdings, Inc. 9,100 302 Prosperity Bancshares, Inc. 25,900 1,048 SeaBright Insurance Holdings, Inc.(2) 33,900 390 SWS Group, Inc. 30,675 371 Tanger Factory Outlet Centers 12,500 487 --------------- 15,554 --------------- HEALTH CARE--14.1% American Dental Partners, Inc.(2) 16,750 216 AmSurg Corp.(2) 34,225 754 Cambrex Corp.(2) 52,300 292 Centene Corp.(2) 33,050 700 Cubist Pharmaceuticals, Inc.(2) 16,000 303 Enzon Pharmaceuticals, Inc.(2) 33,250 350 Hanger Orthopedic Group, Inc.(2) 47,775 661 Health Management Associates, Inc. Class A(2) 75,700 550 HealthSouth Corp.(2) 31,900 599 HealthSpring, Inc.(2) 24,300 428 Healthways, Inc.(2) 38,200 700 Kendle International, Inc.(2) 41,650 763 Kensey Nash Corp.(2) 9,600 245 Medicis Pharmaceutical Corp. Class A 26,500 717 Natus Medical, Inc.(2) 15,700 232 Odyssey HealthCare, Inc.(2) 26,350 410 Par Pharmaceutical Cos., Inc.(2) 16,450 445 Phase Forward, Inc.(2) 42,000 645 SonoSite, Inc.(2) 28,200 666 STERIS Corp. 21,725 608 U.S. Physical Therapy, Inc.(2) 22,150 375 ViroPharma, Inc.(2) 66,625 559 WellCare Health Plans, Inc.(2) 11,850 436 --------------- 11,654 ---------------
SHARES VALUE --------------- --------------- INDUSTRIALS--14.3% Aircastle Ltd. 36,000 $ 354 Ampco-Pittsburgh Corp. 32,140 1,013 ATC Technology Corp.(2) 20,500 489 Chart Industries, Inc.(2) 43,400 718 Comfort Systems USA, Inc. 48,700 601 Dycom Industries, Inc.(2) 48,900 393 EMCOR Group, Inc.(2) 38,100 1,025 EnerSys(2) 28,800 630 EnPro Industries, Inc.(2) 20,875 551 GenCorp, Inc.(2) 98,400 689 Graham Corp. 52,900 1,095 K-Tron International, Inc.(2) 4,700 511 Layne Christensen Co.(2) 39,450 1,133 M & F Worldwide Corp.(2) 46,775 1,848 On Assignment, Inc.(2) 63,825 456 Spherion Corp.(2) 70,400 396 --------------- 11,902 --------------- INFORMATION TECHNOLOGY--18.4% 3Com Corp.(2) 96,500 724 Arris Group, Inc.(2) 86,925 993 Blue Coat Systems, Inc.(2) 48,800 1,393 CSG Systems International, Inc.(2) 55,475 1,059 Emulex Corp.(2) 72,950 795 Forrester Research, Inc.(2) 15,500 402 Insight Enterprises, Inc.(2) 48,800 557 j2 Global Communications, Inc.(2) 45,065 917 MicroStrategy, Inc. Class A(2) 11,700 1,100 MIPS Technologies, Inc.(2) 89,300 390 Multi-Fineline Electronix, Inc.(2) 19,800 562 Netgear, Inc.(2) 44,400 963 Oplink Communications, Inc.(2) 28,300 464 Parametric Technology Corp.(2) 25,100 410 Pegasystems, Inc. 12,900 439 Pericom Semiconductor Corp.(2) 36,575 422 Plantronics, Inc. 13,950 362 Sapient Corp.(2) 72,400 599 Skyworks Solutions, Inc.(2) 21,700 308 SonicWALL, Inc.(2) 95,550 727 TeleTech Holdings, Inc.(2) 31,050 622 TIBCO Software, Inc.(2) 50,950 491 Wright Express Corp.(2) 16,600 529 --------------- 15,228 --------------- MATERIALS--7.5% Buckeye Technologies, Inc.(2) 61,200 597 Bway Holding Co.(2) 23,100 444 Innophos Holdings, Inc. 40,100 922 LSB Industries, Inc.(2) 50,750 715 Minerals Technologies, Inc. 12,400 675 NewMarket Corp. 5,150 591 OM Group, Inc.(2) 35,380 1,111
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 42 VIRTUS DISCIPLINED SMALL-CAP OPPORTUNITY FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- MATERIALS--CONTINUED Rock-Tenn Co. Class A 11,300 $ 570 Stepan Co. 9,750 632 --------------- 6,257 --------------- TELECOMMUNICATION SERVICES--0.9% tw telecom, Inc.(2) 45,250 775 --------------- UTILITIES--1.0% Nicor, Inc. 19,425 818 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $73,912) 82,432 --------------- TOTAL LONG-TERM INVESTMENTS--99.4% (IDENTIFIED COST $73,912) 82,432 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--1.7% MONEY MARKET MUTUAL FUNDS--1.7% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 1,406,083 $ 1,406 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,406) 1,406 --------------- TOTAL INVESTMENTS--101.1% (IDENTIFIED COST $75,318) 83,838(1) Other assets and liabilities, net--(1.1)% (938) --------------- NET ASSETS--100.0% $ 82,900 ===============
The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Level 1 - Value at Quoted December 31, 2009 Prices ----------------- --------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $82,432 $82,432 Short-Term Investments 1,406 1,406 ------- ------- Total Investments $83,838 $83,838 ======= =======
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 43 VIRTUS DISCIPLINED SMALL-CAP VALUE FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--98.0% CONSUMER DISCRETIONARY--13.2% Big 5 Sporting Goods Corp. 36,350 $ 625 Bob Evans Farms, Inc. 32,850 951 Carrols Restaurant Group, Inc.(2) 77,550 548 Children's Place Retail Stores, Inc. (The)(2) 13,000 429 Core-Mark Holding Co., Inc.(2) 40,500 1,335 CSS Industries, Inc. 16,900 329 Entercom Communications Corp. Class A(2) 86,950 615 Harte-Hanks, Inc. 52,850 570 Journal Communications, Inc. Class A 182,900 711 Monro Muffler Brake, Inc. 10,000 334 National CineMedia, Inc. 64,250 1,065 Oxford Industries, Inc. 32,300 668 Papa John's International, Inc.(2) 48,050 1,122 Perry Ellis International, Inc.(2) 34,450 519 RC2 Corp.(2) 51,000 752 Rent-A-Center, Inc.(2) 64,650 1,146 Sinclair Broadcast Group, Inc. Class A(2) 166,800 672 Stage Stores, Inc. 90,650 1,120 Timberland Co. (The) Class A(2) 39,700 712 UniFirst Corp. 48,050 2,312 --------------- 16,535 --------------- CONSUMER STAPLES--2.2% Central Garden and Pet Co. Class A(2) 81,400 809 Coca-Cola Bottling Co. Consolidated 11,600 627 Nash-Finch Co. 5,000 185 TreeHouse Foods, Inc.(2) 30,000 1,166 --------------- 2,787 --------------- ENERGY--5.8% Clayton Williams Energy, Inc.(2) 41,500 1,454 CVR Energy, Inc.(2) 92,750 636 Geokinetics, Inc.(2) 66,100 636 Key Energy Services, Inc.(2) 161,050 1,416 Oil States International, Inc.(2) 28,000 1,100 Parker Drilling Co.(2) 139,450 690 T-3 Energy Services, Inc.(2) 32,000 816 Vaalco Energy, Inc. 121,750 554 --------------- 7,302 --------------- FINANCIALS--27.8% Amerisafe, Inc.(2) 32,000 575 Argo Group International Holdings Ltd.(2) 11,950 348 Aspen Insurance Holdings Ltd. 64,350 1,638 BancFirst Corp. 16,686 618
SHARES VALUE --------------- --------------- FINANCIALS--CONTINUED BGC Partners, Inc. Class A 152,750 $ 706 CapLease, Inc. 143,750 630 Cardtronics, Inc.(2) 35,000 387 Columbia Banking System, Inc. 80,800 1,307 Dollar Financial Corp.(2) 52,600 1,245 First Mercury Financial Corp. 79,800 1,094 First Midwest Bancorp, Inc. 73,500 800 First Potomac Realty Trust 65,000 817 FirstMerit Corp. 38,556 777 Flushing Financial Corp. 40,400 455 FNB Corp. 42,750 290 Harleysville Group, Inc. 42,100 1,338 Highwoods Properties, Inc. 41,050 1,369 Home Properties, Inc. 13,650 651 Horace Mann Educators Corp. 65,000 813 HRPT Properties Trust 95,500 618 Interactive Brokers Group, Inc. Class A(2) 65,100 1,154 Kilroy Realty Corp. 20,150 618 Knight Capital Group, Inc. Class A(2) 46,000 708 Lakeland Financial Corp. 21,000 362 LTC Properties, Inc. 39,000 1,043 MarketAxess Holdings, Inc. 48,600 676 Meadowbrook Insurance Group, Inc. 1 --(5) Nara Bancorp, Inc.(2) 104,700 1,187 Nationwide Health Properties, Inc. 17,450 614 Navigators Group, Inc. (The)(2) 23,300 1,098 Nelnet, Inc. Class A 45,450 783 PHH Corp.(2) 57,600 928 Platinum Underwriters Holdings Ltd. 8,000 306 Prosperity Bancshares, Inc. 23,900 967 Provident New York Bancorp 19,200 162 PS Business Parks, Inc. 34,250 1,714 Renasant Corp. 41,950 571 SeaBright Insurance Holdings, Inc.(2) 45,750 526 Southwest Bancorp, Inc. 66,000 458 SWS Group, Inc. 57,500 696 Trico Bancshares 49,600 826 Umpqua Holdings Corp. 41,200 552 Unitrin, Inc. 47,500 1,047 World Acceptance Corp.(2) 30,550 1,095 WSFS Financial Corp. 14,000 359 --------------- 34,926 --------------- HEALTH CARE--5.7% AMERIGROUP Corp.(2) 28,000 755 AMN Healthcare Services, Inc.(2) 167,900 1,521 AmSurg Corp.(2) 54,200 1,193
SHARES VALUE --------------- --------------- HEALTH CARE--CONTINUED Emergency Medical Services Corp. Class A(2) 35,750 $ 1,936 HealthSpring, Inc.(2) 16,000 282 RehabCare Group, Inc.(2) 50,100 1,525 --------------- 7,212 --------------- INDUSTRIALS--16.0% ACCO Brands Corp.(2) 181,200 1,319 Altra Holdings, Inc.(2) 114,200 1,410 American Reprographics Co.(2) 80,750 566 Apogee Enterprises, Inc. 63,600 890 ATC Technology Corp.(2) 27,500 656 Beacon Roofing Supply, Inc.(2) 29,000 464 Celadon Group, Inc.(2) 62,900 683 Comfort Systems USA, Inc. 89,450 1,104 Consolidated Graphics, Inc.(2) 52,400 1,835 Dycom Industries, Inc.(2) 169,400 1,360 EMCOR Group, Inc.(2) 65,600 1,765 Ennis, Inc. 44,800 752 G&K Services, Inc. Class A 14,700 370 Gibraltar Industries, Inc.(2) 44,850 706 H&E Equipment Services, Inc.(2) 100,690 1,056 Kforce, Inc.(2) 28,128 352 Lydall, Inc.(2) 30,000 156 Navigant Consulting, Inc.(2) 32,000 476 RSC Holdings, Inc.(2) 102,600 722 Saia, Inc.(2) 85,300 1,264 Standex International Corp. 42,316 850 Tredegar Corp. 62,850 994 Watson Wyatt Worldwide, Inc. Class A 6,000 285 --------------- 20,035 --------------- INFORMATION TECHNOLOGY--14.2% Acxiom Corp.(2) 146,350 1,964 Anixter International, Inc.(2) 29,000 1,366 Benchmark Electronics, Inc.(2) 80,100 1,515 CACI International, Inc. Class A(2) 4,000 195 CSG Systems International, Inc.(2) 96,700 1,846 EarthLink, Inc. 124,450 1,034 Insight Enterprises, Inc.(2) 87,500 999 JDA Software Group, Inc.(2) 42,700 1,088 Photronics, Inc.(2) 201,200 895 SAIC, Inc.(2) 20,000 379 Skyworks Solutions, Inc.(2) 83,000 1,178 Sybase, Inc.(2) 26,000 1,128 Symmetricom, Inc.(2) 103,100 536 TeleTech Holdings, Inc.(2) 49,550 993 TIBCO Software, Inc.(2) 45,000 433 TTM Technologies, Inc.(2) 54,550 629 ValueClick, Inc.(2) 44,950 455 Vishay Intertechnology, Inc.(2) 143,250 1,196 --------------- 17,829 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 44 VIRTUS DISCIPLINED SMALL-CAP VALUE FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- MATERIALS--8.5% Buckeye Technologies, Inc.(2) 138,550 $ 1,352 Innophos Holdings, Inc. 22,000 506 Innospec, Inc. 65,500 661 Minerals Technologies, Inc. 34,700 1,890 PolyOne Corp.(2) 83,100 621 Rock-Tenn Co. Class A 44,100 2,223 Schulman (A.), Inc. 77,350 1,561 Spartech Corp. 111,700 1,146 Stepan Co. 11,300 732 --------------- 10,692 --------------- TELECOMMUNICATION SERVICES--0.4% Consolidated Communications Holdings, Inc. 31,400 550 --------------- UTILITIES--4.2% California Water Service Group 2,000 74 El Paso Electric Co.(2) 80,600 1,634 New Jersey Resources Corp. 9,000 337 Southwest Gas Corp. 70,250 2,004 Unisource Energy Corp. 36,700 1,181 --------------- 5,230 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $106,358) 123,098 --------------- TOTAL LONG-TERM INVESTMENTS--98.0% (IDENTIFIED COST $106,358) 123,098 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--2.1% MONEY MARKET MUTUAL FUNDS--2.1% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 2,590,472 $ 2,590 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $2,590) 2,590 --------------- TOTAL INVESTMENTS--100.1% (IDENTIFIED COST $108,948) 125,688(1) Other assets and liabilities, net--(0.1)% (94) --------------- NET ASSETS--100.0% $ 125,594 ===============
The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Level 1 - Value at Quoted December 31, 2009 Prices ----------------- --------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $123,098 $123,098 Short-Term Investments 2,590 2,590 -------- --------- Total Investments $125,688 $ 125,688 ======== =========
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 45 VIRTUS EMERGING MARKETS OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- PREFERRED STOCK--5.0% CONSUMER STAPLES--2.4% Companhia de Bebidas das Americas ADR Pfd. 3.50% 66,317 $ 6,704 --------------- UTILITIES--2.6% AES Tiete SA Pfd. 12.580% 438,789 5,041 Cia de Transmissao de Energia Eletrica Paulista Pfd. 5.440% 71,069 2,112 --------------- 7,153 --------------- TOTAL PREFERRED STOCK (IDENTIFIED COST $9,716) 13,857 --------------- COMMON STOCKS--92.0% CONSUMER DISCRETIONARY--6.9% BEC World plc 2,073,700 1,532 Cyrela Brazil Realty SA 337,826 4,754 Grupo Televisa SA 741,100 3,083 Hero Honda Motors, Ltd. 67,376 2,478 Kangwon Land, Inc.(2) 143,200 2,030 MRV Engenharia e Participacoes SA 231,600 1,876 NET Servicos de Comunicacao SA(2) 251,721 3,470 Peace Mark Holdings Ltd.(2)(6)(8) 464,100 0 --------------- 19,223 --------------- CONSUMER STAPLES--29.0% AmorePacific Corp. 8,402 6,739 Anadolu Efes Biracilik Ve Malt Sanayii AS 115,000 1,285 British American Tobacco Bhd 187,300 2,338 British American Tobacco plc 229,526(14) 7,451 British American Tobacco plc 54,595(15) 1,783 Coca-Cola Femsa S.A.B. de C.V. 347,367 2,288 Colgate Palmolive India Ltd. 164,700 2,330 Dabur India Ltd. 937,600 3,183 Dairy Farm International Holdings Ltd. 400,700 2,400 Guinness Anchor Bhd 599,000 1,216 Hengan International Group Co., Ltd. 851,292 6,303 Hindustan Unilever Ltd. 645,644 3,659 ITC Ltd. 1,402,709 7,533 Kimberly-Clark de Mexico S.A.B. de C.V. Class A 449,426 2,012 KT&G Corp.(2) 23,563 1,303 Marico Ltd. 510,529 1,128 Nestle India Ltd. 112,846 6,166 Nestle Malaysia Bhd 122,100 1,180 Shoprite Holdings Ltd. 460,463 4,048 Souza Cruz SA 286,126 9,493
SHARES VALUE --------------- --------------- CONSUMER STAPLES--CONTINUED Unilever Indonesia Tbk PT 2,317,377 $ 2,688 Wal-Mart de Mexico S.A.B. de C.V. 397,300 1,771 Want Want China Holdings Ltd. 3,756,900 2,624 --------------- 80,921 --------------- ENERGY--3.4% CNOOC Ltd. 1,235,635 1,925 PTT Exploration & Production plc 821,000 3,622 Sasol Ltd. 94,669 3,794 --------------- 9,341 --------------- FINANCIALS--18.6% Banco Compartamos S.A.B. de C.V. 870,648 4,494 Banco Santander Chile ADR 47,100 3,051 BM&F BOVESPA S.A. 393,967 2,772 Cetip SA - Balcao Organizado de Ativos e Derivativos 492,900 4,034 Credicorp Ltd. ADR 46,093 3,550 HDFC Bank Ltd. 298,412 10,873 Housing Development Finance Corp. 190,095 10,876 Itausa Investimentos SA 445,543 3,033 Jammu & Kashmir Bank Ltd. 92,150 1,135 JSE Ltd. 339,125 2,765 Samsung Fire & Marine Insurance Co., Ltd. 31,869 5,455 --------------- 52,038 --------------- HEALTH CARE--3.8% Cipla Ltd. 733,434 5,261 Sun Pharmaceutical Industries Ltd. 68,399 2,211 Yuhan Corp.(2) 20,277 3,099 --------------- 10,571 --------------- INDUSTRIALS--7.0% Beijing Enterprises Holdings Ltd. 939,615 6,806 Bharat Electronics Ltd. 46,538 1,940 Bharat Heavy Electricals Ltd. 55,818 2,874 Elbit Systems Ltd. 42,500 2,749 Jain Irrigation Systems Ltd. 160,825 3,001 Taiwan Secom Co., Ltd. 1,341,100 2,249 --------------- 19,619 --------------- INFORMATION TECHNOLOGY--5.8% Cielo SA 434,600 3,829 NetEase.Com, Inc. ADR(2) 68,800 2,588 NHN Corp.(2) 18,646 3,082 Redecard SA 404,634 6,740 --------------- 16,239 ---------------
SHARES VALUE --------------- --------------- MATERIALS--2.6% AMVIG Holdings Ltd. 2,013,467 $ 826 Asian Paints Ltd. 10,800 416 Pretoria Portland Cement Co., Ltd. 274,760 1,287 Semen Gresik (Persero) Tbk PT 4,349,354 3,464 Yingde Gases Group Co., Ltd.(2) 1,217,790 1,255 --------------- 7,248 --------------- TELECOMMUNICATION SERVICES--5.3% America Movil S.A.B. de C.V. Series L 1,108,121 2,606 MTN Group Ltd. 310,163 4,936 Philippine Long Distance Telephone Co. Sponsored ADR 75,731 4,292 Telekomunikasi Indonesia Tbk PT 3,050,771 3,037 --------------- 14,871 --------------- UTILITIES--9.6% Companhia de Saneamento de Minas Gerais 2,664 51 Companhia Energetica de Minas Gerais 306,831 5,569 CPFL Energia SA 166,100 3,369 Light SA 223,500 3,335 Tanjong plc 2,011,200 9,874 Xinao Gas Holdings Ltd. 1,811,436 4,638 --------------- 26,836 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $205,362) 256,907 --------------- TOTAL LONG-TERM INVESTMENTS--97.0% (IDENTIFIED COST $215,078) 270,764 --------------- SHORT-TERM INVESTMENTS--4.0% MONEY MARKET MUTUAL FUNDS--4.0% Dreyfus Cash Management Fund - Institutional Shares (seven-day effective yield 0.080%) 11,206,636 11,207 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $11,207) 11,207 --------------- TOTAL INVESTMENTS--101.0% (IDENTIFIED COST $226,285) 281,971(1) Other assets and liabilities, net--(1.0)% (2,782) --------------- NET ASSETS--100.0% $ 279,189 ===============
ABBREVIATIONS: ADR American Depositary Receipt Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 46 VIRTUS EMERGING MARKETS OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) COUNTRY WEIGHTINGS as of 12/31/09 + Brazil 24% India 23 China 9 Mexico 6 South Africa 6 Korea 5 Malaysia 5 Other (includes Short-term investments) 22 --- Total 100% ---
+ % of total investments as of December 31, 2009 At December 31, 2009, the Fund had entered into forward currency contracts as follows:
Contracts Unrealized to Sell In Exchange Settlement Appreciation (000's) for Date Counterparty Value (Depreciation) - ---------- ----------- ---------- -------------- ------- -------------- BRL 38,692 USD 20,868 6/21/10 Citigroup $21,435 $ (567) GBP 2,907 USD 4,625 4/06/10 Citigroup 4,693 (68) ZAR 64,690 USD 7,974 4/30/10 Northern Trust 8,563 (589) ------- $(1,224) =======
CURRENCIES: BRL Brazilian Real GBP British Pound Sterling USD United States Dollar ZAR South African Rand The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Level 2 - Level 3 - Value at Level 1 - Significant Significant December 31, Quoted Observable Unobservable 2009 Prices Inputs Inputs ------------ --------- ----------- ------------ ASSETS TABLE INVESTMENT IN SECURITIES: Equity Securities: Preferred Stock $ 13,857 $ 13,857 $ -- $-- Common Stocks 256,907 99,436 157,471 0* Short-Term Investments 11,207 11,207 -- -- -------- -------- -------- --- Total Assets $281,971 $124,500 $157,471 $ 0 ======== ======== ======== === LIABILITIES TABLE DERIVATIVES: Forward Currency Contracts** $ (1,224) $ -- $ (1,224) $-- -------- -------- -------- --- Total Liabilities $ (1,224) $ -- $ (1,224) $-- ======== ======== ======== ===
* Level 3 Common Stock valued at zero at the end of the period. ** Valued at the unrealized appreciation (depreciation) on the investments. 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:
Corporate Common Debt Stocks --------- ------ INVESTMENTS IN SECURITIES: BALANCE AS OF DECEMBER 31, 2008 .......................... $ 38 $-- Accrued discounts/premiums ............................... -- -- Realized gain (loss)(a) .................................. -- -- Change in unrealized appreciation (depreciation)(a) ...... 13 -- Net purchases (sales) .................................... -- -- Transfers in and/or out of Level 3(b) .................... (51) 0 ---- --- BALANCE AS OF DECEMBER 31, 2009 .......................... $ -- $ 0 ==== ===
(a) Disclosed in the Statement of Operations under Net realized and unrealized gain (loss) on investments. (b) "Transfers in and/or out" represent the ending value as of December 31, 2009, for any investment security where a change in the pricing level occurred from the beginning to the end of the period. 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. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 47 VIRTUS VALUE EQUITY FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
SHARES VALUE --------------- --------------- COMMON STOCKS--98.0% CONSUMER DISCRETIONARY--9.4% AutoNation, Inc.(2) 68,000 $ 1,302 Big Lots, Inc.(2) 41,500 1,203 Cablevision Systems Corp. Class A 33,100 855 Jarden Corp. 28,300 875 Liberty Media Corp. - Interactive Class A(2) 138,600 1,502 Macy's, Inc. 121,300 2,033 News Corp. Class A 60,000 821 Ross Stores, Inc. 26,400 1,128 TJX Cos., Inc. (The) 56,800 2,076 TRW Automotive Holdings Corp.(2) 83,000 1,982 Viacom, Inc. Class B(2) 26,000 773 Yum! Brands, Inc. 24,200 846 --------------- 15,396 --------------- CONSUMER STAPLES--6.7% Archer-Daniels-Midland Co. 93,600 2,931 Coca-Cola Enterprises, Inc. 114,000 2,417 Del Monte Foods Co. 251,500 2,852 Lorillard, Inc. 18,800 1,508 SUPERVALU, Inc. 100,200 1,273 --------------- 10,981 --------------- ENERGY--15.5% Chevron Corp. 72,200 5,559 ConocoPhillips 46,210 2,360 El Paso Corp. 107,300 1,055 Ensco International plc Sponsored ADR 22,900 915 Exxon Mobil Corp. 87,200 5,946 Murphy Oil Corp. 15,500 840 National Oilwell Varco, Inc. 23,700 1,045 Newfield Exploration Co.(2) 54,300 2,619 Noble Corp. 70,300 2,861 Occidental Petroleum Corp. 27,700 2,253 --------------- 25,453 --------------- FINANCIALS--18.9% ACE Ltd.(2) 44,800 2,258 American Express Co. 22,200 900 American Financial Group, Inc. 64,300 1,604 Arch Capital Group Ltd.(2) 59,700 4,272 Bank of America Corp. 251,100 3,782 Capital One Financial Corp. 27,000 1,035 Goldman Sachs Group, Inc. (The) 26,500 4,474 JPMorgan Chase & Co. 127,700 5,321 MetLife, Inc. 39,300 1,389 Prudential Financial, Inc. 24,000 1,194 Travelers Cos., Inc. (The) 35,000 1,745 Wells Fargo & Co. 113,100 3,053 --------------- 31,027 ---------------
SHARES VALUE --------------- --------------- HEALTH CARE--13.9% Amgen, Inc.(2) 43,800 $ 2,478 AstraZeneca plc Sponsored ADR 69,500 3,262 CIGNA Corp. 46,100 1,626 Forest Laboratories, Inc.(2) 46,500 1,493 Humana, Inc.(2) 69,100 3,033 Johnson & Johnson 25,100 1,616 Life Technologies Corp.(2) 32,900 1,718 McKesson Corp. 66,700 4,169 Pfizer, Inc. 118,800 2,161 Watson Pharmaceuticals, Inc.(2) 33,600 1,331 --------------- 22,887 --------------- INDUSTRIALS--5.5% Donnelley (R.R.) & Sons Co. 46,200 1,029 General Electric Co. 284,400 4,303 KBR, Inc. 38,900 739 Lockheed Martin Corp. 15,300 1,153 URS Corp.(2) 42,300 1,883 --------------- 9,107 --------------- INFORMATION TECHNOLOGY--10.1% Avnet, Inc.(2) 49,400 1,490 Computer Sciences Corp.(2) 49,300 2,836 Hewlett-Packard Co. 26,500 1,365 Ingram Micro, Inc. Class A(2) 222,300 3,879 International Business Machines Corp. 17,000 2,226 Western Digital Corp.(2) 77,600 3,426 Western Union Co. (The) 68,500 1,291 --------------- 16,513 --------------- MATERIALS--8.5% Ashland, Inc. 56,400 2,234 Crown Holdings, Inc.(2) 99,400 2,543 Freeport-McMoRan Copper & Gold, Inc.(2) 27,700 2,224 International Paper Co. 94,000 2,517 Lubrizol Corp. (The) 21,300 1,554 Reliance Steel & Aluminum Co. 33,250 1,437 Walter Energy, Inc. 18,800 1,416 --------------- 13,925 --------------- TELECOMMUNICATION SERVICES--7.6% AT&T, Inc. 167,587 4,698 CenturyTel, Inc. 118,430 4,288 Verizon Communications, Inc. 102,900 3,409 --------------- 12,395 ---------------
SHARES VALUE --------------- --------------- UTILITIES--1.9% FPL Group, Inc. 26,400 $ 1,395 Integrys Energy Group, Inc. 18,300 768 ONEOK, Inc. 23,200 1,034 --------------- 3,197 --------------- TOTAL COMMON STOCKS (IDENTIFIED COST $159,837) 160,881 --------------- TOTAL LONG-TERM INVESTMENTS--98.0% (IDENTIFIED COST $159,837) 160,881 --------------- SHORT-TERM INVESTMENTS--2.0% MONEY MARKET MUTUAL FUNDS--2.0% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 3,329,786 3,330 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $3,330) 3,330 --------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $163,167) 164,211(1) Other assets and liabilities, net--0.0% (67) --------------- NET ASSETS--100.0% $ 164,144 ===============
COUNTRY WEIGHTINGS as of 12/31/09 + United States (includes Short-term investments) 92% Bermuda 3 Switzerland 3 United Kingdom 2 --------------- Total 100% ---------------
+ % of total investments as of December 31, 2009 The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Total Market Level 1 - Value at Quoted December 31, 2009 Prices ----------------- --------- INVESTMENT IN SECURITIES: Equity Securities: Common Stocks $160,881 $160,881 Short-Term Investments 3,330 3,330 -------- -------- Total Investments $164,211 $164,211 ======== ========
There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. ABBREVIATIONS: ADR American Depositary Receipt Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 48 VIRTUS HIGH YIELD INCOME FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- CORPORATE BONDS--93.5% CONSUMER DISCRETIONARY--29.5% Affinion Group, Inc. 10.125%, 10/15/13 $ 400 $ 413 11.500%, 10/15/15 610 642 AMC Entertainment, Inc. 8.000%, 3/1/14 585 562 American Real Estate Partners LP 8.125%, 6/1/12 635 648 7.125%, 2/15/13 205 209 Bon-Ton Stores, Inc. (The) 10.250%, 3/15/14 365 339 Caesars Entertainment, Inc. 7.875%, 3/15/10 420 420 Cengage Learning Acquisitions, Inc. 144A 13.250%, 7/15/15 (3)(4) 350 342 Cinemark USA, Inc. 144A 8.625%, 6/15/19 (4) 315 329 CSC Holdings, Inc. 144A 8.625%, 2/15/19 (4) 950 1,027 Dollar General Corp. PIK Interest Capitalization 11.875%, 7/15/17 244 283 Echostar DBS Corp. 6.625%, 10/1/14 265 268 Education Management LLC/ Education Management Finance Corp. 10.250%, 6/1/16 38 41 Goodyear Tire & Rubber Co. (The) 10.500%, 5/15/16 555 616 Hanesbrands, Inc. 8.000%, 12/15/16 145 148 Intelsat Corp. 9.250%, 8/15/14 590 609 Levi Strauss & Co. 8.875%, 4/1/16 345 363 Mediacom Broadband LLC/ Mediacom Broadband Corp. 8.500%, 10/15/15 30 30 Peninsula Gaming LLC 144A 10.750%, 8/15/17 (4) 460 465 Sally Holdings LLC/Sally Capital, Inc. 10.500%, 11/15/16 335 362 Scientific Games International, Inc. 9.250%, 6/15/19 695 733 Service Corp. International 7.625%, 10/1/18 450 448 8.000%, 11/15/21 140 139 Speedway Motorsports, Inc. 6.750%, 6/1/13 515 515 8.750%, 6/1/16 150 159 Susser Holdings LLC/Susser Finance Corp. 10.625%, 12/15/13 385 403 United Artists Theatre Circuit, Inc. Series 95-A, 9.300%, 7/1/15(6)(8) 146 132 Series BD-1, 9.300%, 7/1/15(6)(8) 129 116 Series BE-9, 9.300%, 7/1/15(6)(8) 5 4 UPC Germany GmbH 144A 8.125%, 12/1/17 (4) 390 396
PAR VALUE VALUE --------------- --------------- CONSUMER DISCRETIONARY--CONTINUED Valassis Communications, Inc. 8.250%, 3/1/15 $ 490 $ 491 Videotron Ltee 9.125%, 4/15/18 680 751 WMG Holdings Corp. 9.500%, 12/15/14(3) 670 682 --------------- 13,085 --------------- CONSUMER STAPLES--12.6% Ingles Markets, Inc. 8.875%, 5/15/17 550 575 Alliance One International, Inc. 144A 10.000%, 7/15/16 (4) 635 670 ASG Consolidated LLC/ ASG Finance, Inc. 11.500%, 11/1/11(3) 490 494 Bumble Bee Foods LLC 144A 7.750%, 12/15/15 (4) 160 161 Central Garden & Pet Co. 9.125%, 2/1/13 435 443 Constellation Brands, Inc. 7.250%, 9/1/16 555 566 Cott Beverages, Inc. 144A 8.375%, 11/15/17 (4) 160 166 Del Monte Corp. 144A 7.500%, 10/15/19 (4) 35 36 Dole Food Co., Inc. 8.750%, 7/15/13 15 16 144A 13.875%, 3/15/14(4) 276 333 144A 8.000%, 10/1/16(4) 160 163 Jarden Corp. 7.500%, 5/1/17 415 416 Pantry, Inc. (The) 7.750%, 2/15/14 420 405 Stater Brothers Holdings, Inc. 7.750%, 4/15/15 260 265 SUPERVALU, Inc. 8.000%, 5/1/16 425 434 Tops Markets LLC 144A 10.125%, 10/15/15 (4) 410 424 --------------- 5,567 --------------- ENERGY--7.4% Chesapeake Energy Corp. 9.500%, 2/15/15 130 143 6.625%, 1/15/16 550 547 Comstock Resources, Inc. 8.375%, 10/15/17 345 355 El Paso Corp. 6.875%, 6/15/14 300 301 8.250%, 2/15/16 230 247 Encore Acquisition Co. 6.000%, 7/15/15 180 181 Pioneer Natural Resources Co. 6.650%, 3/15/17 115 114 6.875%, 5/1/18 390 388 Plains Exploration & Production Co. 7.000%, 3/15/17 335 331 7.625%, 6/1/18 270 277 Sandridge Energy, Inc. 144A 8.750%, 1/15/20 (4) 395 397 --------------- 3,281 ---------------
PAR VALUE VALUE --------------- --------------- FINANCIALS--5.7% CEDC Finance Corp. International, Inc. 144A 9.125%, 12/1/16 (4) $ 310 $ 321 Ford Motor Credit Co. LLC 7.500%, 8/1/12 680 686 GMAC, Inc. 144A 6.750%, 12/1/14 (4) 555 533 Host Hotels & Resorts LP Series O, 6.375%, 3/15/15 550 542 NBC Acquisition Corp. 11.000%, 3/15/13(3) 580 360 Ventas Realty LP/Ventas Capital Corp. Series 1, 6.500%, 6/1/16 70 67 --------------- 2,509 --------------- HEALTH CARE--4.5% Bio-Rad Laboratories, Inc. 144A 8.000%, 9/15/16 (4) 155 164 Community Health Systems, Inc. 8.875%, 7/15/15 510 529 HCA, Inc. 9.250%, 11/15/16 900 969 144A 8.500%, 4/15/19(4) 310 335 --------------- 1,997 --------------- INDUSTRIALS--9.1% ARAMARK Corp. 8.500%, 2/1/15 360 372 Biomet, Inc. 11.625%, 10/15/17 980 1,088 Casella Waste Systems, Inc. 9.750%, 2/1/13 555 551 Corrections Corp. of America 7.750%, 6/1/17 275 285 DI Finance/DynCorp International, Inc. Series B, 9.500%, 2/15/13 910 926 Goodman Global Group, Inc. 144A 0.000%, 12/15/14 (4) 325 186 Travelport LLC 9.875%, 9/1/14 595 617 --------------- 4,025 --------------- INFORMATION TECHNOLOGY--4.5% Advanced Micro Devices, Inc. 144A 8.125%, 12/15/17 (4) 85 85 Dycom Industries, Inc. 8.125%, 10/15/15 447 413 Jabil Circuit, Inc. 7.750%, 7/15/16 140 148 JDA Software Group, Inc. 144A 8.000%, 12/15/14 (4) 80 82 Lender Processing Services, Inc. 8.125%, 7/1/16 490 524 SunGard Data Systems, Inc. 9.125%, 8/15/13 245 252 10.250%, 8/15/15 445 476 Viasat, Inc. 144A 8.875%, 9/15/16 (4) 20 21 --------------- 2,001 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 49 VIRTUS HIGH YIELD INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MATERIALS--1.1% Boise Paper Holdings LLC 144A 9.000%, 11/1/17 (4) $ 155 $ 161 Cascades, Inc. 144A 7.875%, 1/15/20 (4) 30 31 Freeport-McMoRan Copper & Gold, Inc. 8.375%, 4/1/17 285 312 --------------- 504 --------------- TELECOMMUNICATION SERVICES--17.7% Cincinnati Bell, Inc. 8.250%, 10/15/17 395 403 Citizens Communications Corp. 7.125%, 3/15/19 210 200 Crown Castle International Corp. 7.125%, 11/1/19 25 25 Frontier Communications Corp. 8.125%, 10/1/18 290 295 GCI, Inc. 144A 8.625%, 11/15/19 (4) 760 770 Global Crossing Ltd. 144A 12.000%, 9/15/15 (4) 585 645 Hughes Network Systems LLC/ Hughes Network Systems Finance Corp. 9.500%, 4/15/14 820 851 NII Capital Corp. 144A 8.875%, 12/15/19 (4) 935 915 PAETEC Holding Corp. 9.500%, 7/15/15 510 493 Qwest Corp. 8.375%, 5/1/16 75 80 6.500%, 6/1/17 370 364 Sprint Capital Corp. 8.375%, 3/15/12 430 447 Stratos Global Corp. 9.875%, 2/15/13 283 300 Virgin Media Finance plc 8.750%, 4/15/14 208 216 8.375%, 10/15/19 325 336 West Corp. 9.500%, 10/15/14 555 566 Wind Acquisition Holdings Finance S.p.A. 144A 12.250%, 7/15/17 (4) 325 322 Windstream Corp. 7.000%, 3/15/19 675 634 --------------- 7,862 --------------- UTILITIES--1.4% Ferrellgas Partners LP 144A 9.125%, 10/1/17 (4) 325 345 NRG Energy, Inc. 7.375%, 1/15/17 295 297 --------------- 642 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $38,630) 41,473 ---------------
PAR VALUE VALUE --------------- --------------- LOAN AGREEMENTS(3)--2.4% CONSUMER DISCRETIONARY--2.4% Education Management LLC/ Education Management Finance Corp. Tranche C, 2.063%, 6/3/13 $ 632 $ 595 KAR Holdings, Inc. Tranche 2.745%, 10/21/13 250 237 Rental Services Corp. Tranche 3.790%, 11/30/13 228 214 --------------- TOTAL LOAN AGREEMENTS (IDENTIFIED COST $859) 1,046 --------------- TOTAL LONG-TERM INVESTMENTS--95.9% (IDENTIFIED COST $39,489) 42,519 --------------- SHORT-TERM INVESTMENTS--2.1% MONEY MARKET MUTUAL FUNDS--2.1% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 941,077 941 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $941) 941 --------------- TOTAL INVESTMENTS--98.0% (IDENTIFIED COST $40,430) 43,460(1) Other Assets and Liabilities--2.0% 823 --------------- NET ASSETS--100.0% $ 44,283 ===============
ABBREVIATIONS: PIK Payment-in-Kind Security COUNTRY WEIGHTINGS as of 12/31/09 + United States (includes Short-term investments) 94% Canada 2 Bermuda 1 Germany 1 Italy 1 United Kingdom 1 Total 100%
+ % of total investments as of December 31, 2009 Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 50 VIRTUS HIGH YIELD INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2- Level 3 - Total Market Level 1 - Significant Significant Value at Quoted Observable Unobservable December 31, 2009 Prices Inputs Inputs ----------------- --------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: Corporate Debt $42,519 $ -- $42,267 $252 Equity Securities: Short-Term Investments 941 941 -- -- ------- ---- ------- ---- Total Investments $43,460 $941 $42,267 $252 ======= ==== ======= ====
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:
Corporate Debt --------- INVESTMENTS IN SECURITIES: BALANCE AS OF DECEMBER 31, 2008 .................................. $222 Accrued discounts/premiums(a) .................................... 1 Realized gain (loss)(b) .......................................... -- Change in unrealized appreciation (depreciation)(b) .............. 62 Net purchases (sales)(c) ......................................... (33) Transfers in and/or out of Level 3(d) ............................ -- ---- BALANCE AS OF DECEMBER 31, 2009 .................................. $252 ====
(a) Disclosed in the Statement of Operations under interest income. (b) Disclosed in the Statement of Operations under Net realized and unrealized gain (loss) on investments. (c) Includes paydowns. (d) "Transfers in and/or out" represent the ending value as of December 31, 2009, for any investment security where a change in the pricing level occurred from the beginning to the end of the period. Level 3 securities are without an active market or market participants and therefore are internally fair valued. These internally fair valued securities derive their valuation based on the review of inputs such as, but not limited to, similar securities, liquidity factors, capital structure, and credit analysis. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 51 VIRTUS INTERMEDIATE GOVERNMENT BOND FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--16.7% U.S. Treasury Bond 11.250%, 2/15/15 $ 250 $ 353 7.500%, 11/15/16 1,610 2,029 9.000%, 11/15/18 1,080 1,516 8.125%, 8/15/19 500 673 U.S. Treasury Note 1.375%, 11/15/12 400 397 2.000%, 11/30/13 302 301 1.875%, 4/30/14 95 93 4.000%, 2/15/15 800 850 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $6,155) 6,212 --------------- U.S. GOVERNMENT AGENCY OBLIGATIONS--49.7% Federal Deposit Insurance Corp. (FDIC) Guaranteed: Morgan Stanley 3.250%, 12/1/11 1,100 1,141 Wells Fargo & Co. 3.000%, 12/9/11 500 516 Bank of America Corp. Series L 2.100%, 4/30/12 1,120 1,130 General Electric Capital Corp. 2.200%, 6/8/12 1,000 1,014 JPMorgan Chase & Co. 2.200%, 6/15/12 1,000 1,014 Goldman Sachs Group, Inc. 3.250%, 6/15/12 1,000 1,039 FFCB Series 1, 3.500%, 10/3/11 600 624 3.875%, 10/7/13 1,000 1,057 2.625%, 4/17/14 1,000 997 FHLB 5.500%, 7/15/36 480 493 FHLMC 2.125%, 3/23/12 1,000 1,015 2.000%, 11/5/12 770 768 4.500%, 7/15/13 775 837 4.125%, 9/27/13 900 959 2.500%, 1/7/14 1,200 1,201 FNMA 3.375%, 5/19/11 200 207 3.625%, 8/15/11 700 729 Israel Government AID Bond 5.500%, 9/18/23 1,500 1,598 Rowan Cos., Inc. 6.150%, 7/1/10 367 367 Small Business Administration 09-P10A, 1 4.727%, 2/10/19 580 594 Participation Certificates 09-20B, 1 4.760%, 2/1/29 500 516 Participation Certificates 09-20F, 1 4.950%, 6/1/29 662 690 --------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (IDENTIFIED COST $18,011) 18,506 ---------------
PAR VALUE VALUE --------------- --------------- MUNICIPAL BONDS--0.6% LOUISIANA--0.6% Public Facilities Authority, System Restoration Projects Taxable Series 08-ELL, A1 4.500%, 2/1/14 $ 208 $ 210 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $207) 210 --------------- MORTGAGE-BACKED SECURITIES--30.9% AGENCY--30.8% FHLMC 5.679%, 4/1/37(3) 278 294 FHLMC (Interest Only) 202 6.500%, 4/1/29 66 15 FNMA 11.000%, 12/1/15 12 14 5.500%, 6/1/28 845 890 6.500%, 5/1/36 319 342 5.000%, 2/1/38 639 656 FNMA Grantor Trust 01-T2, A 5.780%, 11/25/10 379 379 02-T3, B 5.763%, 12/25/11 2,000 2,136 FNMA REMIC 04-15, AB 4.000%, 9/25/17 261 270 02-73, OE 5.000%, 11/25/17 1,200 1,272 (Interest Only) 97-20 1.840%, 3/25/27(3)(6) 454 12 GNMA 9.000%, 5/15/16 1 1 8.000%, 3/15/23 6 7 7.000%, 8/15/23 59 66 4.125%, 10/20/25(3) 6 6 8.000%, 11/15/26 58 67 5.500%, 1/15/33 397 419 GNMA Structured Securities 04-45, A 4.020%, 12/16/21 561 573 05-9, A 4.026%, 5/16/22 137 139 02-53, B 5.552%, 5/16/26 28 29 06-9, A 4.201%, 8/16/26 376 385 04-78, C 4.658%, 4/16/29 250 261 07-75, A 4.747%, 4/16/29 445 460 03-88, CA 4.746%, 1/16/30 373 391 06-63, A 4.255%, 2/16/32 367 380 03-48, C 4.891%, 7/16/34 1,000 1,030 08-78, C 4.420%, 1/16/37 620 641 05-79, B 4.646%, 8/16/39 285 298 --------------- 11,433 --------------- NON-AGENCY--0.1% Structured Asset Securities Corp. (Interest Only) 98-RF3, AIO 144A 6.100%, 6/15/28 (4)(7) 378 50 --------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $11,253) 11,483 ---------------
PAR VALUE VALUE --------------- --------------- ASSET-BACKED SECURITIES--0.7% AEP Texas Central Transition Funding LLC 06-A, A5 5.306%, 7/1/20 $ 250 $ 264 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $250) 264 --------------- TOTAL LONG-TERM INVESTMENTS--98.6% (IDENTIFIED COST $35,876) 36,675 ---------------
SHARES --------------- SHORT-TERM INVESTMENTS--0.7% MONEY MARKET MUTUAL FUNDS--0.7% AIM Short-Term Investment Treasury Portfolio (The) - Institutional Shares (seven-day effective yield 0.020%) 6,595 7 BlackRock Liquidity Funds FedFund Portfolio - Institutional Shares (seven-day effective yield 0.066%) 253,057 253 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $260) 260 --------------- TOTAL INVESTMENTS--99.3% (IDENTIFIED COST $36,136) 36,935(1) Other Assets and Liabilities--0.7% 254 --------------- NET ASSETS--100.0% $ 37,189 ===============
ABBREVIATIONS: FDIC Federal Deposit Insurance Corporation FFCB Federal Farm Credit Bank FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") FNMA Federal National Mortgage Association ("Fannie Mae") GNMA Government National Mortgage Association ("Ginnie Mae") REMIC Real Estate Mortgage Investment Conduit Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 52 VIRTUS INTERMEDIATE GOVERNMENT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ----------- INVESTMENT IN SECURITIES: Debt Securities: U.S. Government and Agency Securities $24,718 $ -- $24,718 Municipal Securities 210 -- 210 Mortgage-Backed Securities 11,483 -- 11,483 Asset-Backed Securities 264 -- 264 Equity Securities: Short-Term Investments 260 260 -- ------- ---- ------- Total Investments $36,935 $260 $36,675 ======= ==== =======
There are no Level 3 (significant unobservable inputs) priced securities. 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 Securities --------------- INVESTMENTS IN SECURITIES: BALANCE AS OF DECEMBER 31, 2008 ...................... $ 28 Accrued discounts/premiums(a) ........................ --(e) Realized gain (loss)(b) .............................. -- Change in unrealized appreciation (depreciation)(b) .. 27 Net purchases (sales)(c) ............................. (5) Transfers in and/or out of Level 3(d) ................ (50) ---- BALANCE AS OF DECEMBER 31, 2009 ...................... $ -- ====
(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 December 31, 2009, 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 $500. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 53 VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MUNICIPAL BONDS(13)--97.7% ALABAMA--13.8% Jefferson County Limited Obligation Series A, 5.250%, 1/1/17 $ 6,000 $ 5,315 Series A, 5.500%, 1/1/21 2,415 2,124 Marshall County Health Care Authority Series A, 6.250%, 1/1/22 770 791 State Drinking Water Finance Authority Series A-02, (AMBAC Insured) 5.000%, 8/15/14 2,875 3,002 --------------- 11,232 --------------- ARIZONA--4.2% Salt Verde Financial Corp. Series 07, 5.250%, 12/1/20 2,400 2,355 State School Facilities Board Certificates of Participation Series 08, 5.250%, 9/1/23 1,000 1,061 --------------- 3,416 --------------- CALIFORNIA--6.9% City of Lodi Wastewater System Certificates of Participation Series A, (NATL-RE Insured) 5.500%, 10/1/18 1,535 1,655 Health Facility Authority, Catholic Health System Series K, 5.125%, 7/1/22 1,705 1,725 State of California 6.000%, 11/1/35 2,150 2,204 --------------- 5,584 --------------- COLORADO--6.1% Gunnison Watershed School District No. 1-J Series 09, 5.250%, 12/1/22 500 566 Public Authority For Colorado Energy, Natural Gas Purchase Series 08, 6.125%, 11/15/23 1,400 1,463 University of Colorado Series A, 5.625%, 6/1/22 2,500 2,914 --------------- 4,943 --------------- CONNECTICUT--1.2% State Health & Education Facilities Authority, Yale University Series Y-2, 0.180%, 7/1/35 (3) 1,000 1,000 --------------- DISTRICT OF COLUMBIA--0.6% Metropolitan Washington Airport Authority, Dulles Airport Metrorail Series Lien A-09, 5.125%, 10/1/32 500 517 ---------------
PAR VALUE VALUE --------------- --------------- FLORIDA--1.3% Miami Dade County Educational Facilities Authority, University of Miami Series A, 5.250%, 4/1/18 $ 1,000 $ 1,067 --------------- ILLINOIS--6.0% Development Finance Authority DePaul University Series C, 5.625%, 10/1/20 1,000 1,069 Educational Facilities Authority University of Chicago Series A, 5.250%, 7/1/22 3,000 3,173 State Finance Authority, KishHealth System Obligated Group, Series 08, 4.750%, 10/1/18 650 654 --------------- 4,896 --------------- INDIANA--3.3% Indiana University (AMBAC Insured) 5.250%, 11/15/17 1,055 1,168 Series A, 5.250%, 6/1/23 1,320 1,505 --------------- 2,673 --------------- LOUISIANA--1.3% State of Louisiana Office Facilities Corp., Capitol Complex Program 5.000%, 3/1/19 1,000 1,063 MARYLAND--4.2% City of Baltimore, Convention Center Series 06-A, (XLCA Insured) 5.250%, 9/1/23 2,500 2,296 State Health and Higher Educational Facilities Authority, Anne Arundel Health System Series A, 6.750%, 7/1/29 1,000 1,131 --------------- 3,427 --------------- MASSACHUSETTS--4.9% Commonwealth of Massachusetts Series C, (AGM Insured) 5.250%, 8/1/23 800 895 State Health & Educational Facilities Authority, Partners Healthcare System Series J-1, 5.250%, 7/1/29 1,000 1,031 --------------- State Health & Educational Facilities Authority, Partners Healthcare System Series J-2, 4.250%, 7/1/17 1,000 1,045 4.250%, 7/1/18 1,000 1,033 --------------- 4,004 ---------------
PAR VALUE VALUE --------------- --------------- MICHIGAN--5.0% City of Detroit Sewer Disposal Series Lien B, (FSA Insured) 7.500%, 7/1/33 $ 2,500 $ 2,949 State of Michigan Highway Improvements (AGM Insured) 5.250%, 9/15/19 1,000 1,085 --------------- 4,034 --------------- MISSOURI--1.4% State Health & Educational Facilities Authority, University of Washington 0.250%, 9/1/30 (3) 1,100 1,100 --------------- NEBRASKA--1.4% University of Nebraska Lincoln College Series A, 5.000%, 7/1/22 1,000 1,120 --------------- NEVADA--1.7% State of Nevada 5.000%, 7/1/17 1,305 1,420 --------------- NEW JERSEY--3.5% State Economic Development Authority Series O, 5.250%, 3/1/21 2,700 2,892 --------------- NEW YORK--8.6% City of New York Series C, 0.200%, 10/1/23 (3) 2,000 2,000 City of New York, Industrial Development Agency, Queens Baseball Stadium Project (AMBAC Insured) 5.000%, 1/1/20 900 918 (AGC Insured) 6.125%, 1/1/29 500 567 City of New York, Municipal Water Finance Authority, Water & Sewer Series A-09, 5.500%, 6/15/21 500 582 5.500%, 6/15/22 500 580 5.625%, 6/15/24 1,050 1,216 5.750%, 6/15/40 1,000 1,112 --------------- 6,975 --------------- OHIO--5.7% Franklin County, American Chemical Society Project Development 5.500%, 10/1/12 4,600 4,654 --------------- PENNSYLVANIA--2.6% State Turnpike Commission Authority, Sub-Series B, (AGM Insured) 5.750%, 6/1/39 2,000 2,122 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 54 VIRTUS INTERMEDIATE TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- PUERTO RICO--5.1% Puerto Rico Sales Tax Financing Corp. First Sub-Series B 6.125%, 8/1/29 $ 4,000 $ 4,183 --------------- TEXAS--3.0% State Municipal Gas Acquisition & Supply Corp. II 0.800%, 9/15/27(3) 3,000 2,451 --------------- WISCONSIN--4.1% State of Wisconsin Series A, 6.000%, 5/1/33 3,000 3,359 --------------- WYOMING--1.8% Sublette County, Pollution Control (Exxon Project) 0.180%, 11/1/14(3) 1,500 1,500 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $78,975) 79,632 --------------- TOTAL LONG-TERM INVESTMENTS--97.7% (IDENTIFIED COST $78,975) 79,632 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--5.2% MONEY MARKET MUTUAL FUNDS--5.2% AIM Tax-Free Cash Reserve Portfolio (The) - Institutional Shares (seven-day effective yield 0.120%) 757,186 $ 757 Goldman Sachs Financial Square Funds - Tax-Free Money Market Fund - Institutional Shares (seven-day effective yield 0.190%) 3,521,901 3,522 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $4,279) 4,279 --------------- TOTAL INVESTMENTS--102.9% (IDENTIFIED COST $83,254) 83,911(1) Other assets and liabilities, net--(2.9)% (2,390) --------------- NET ASSETS--100.0% $ 81,521 ===============
ABBREVIATIONS: AGC Assured Guaranty Corp. AGM Assured Guaranty Municipal Corp. (formerly Financial Security Assurance, Inc.) AMBAC American Municipal Bond Assurance Corporation NATL-RE National Public Finance Guarantee Corp. (formerly Municipal Bond Insurance Association) XLCA XL Capital Assurance The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ----------- INVESTMENT IN SECURITIES: Debt Securities: Municipal Securities $79,632 $ -- $79,632 Equity Securities: Short-Term Investments 4,279 4,279 -- ------- ------ ------- Total Investments $83,911 $4,279 $79,632 ======= ====== =======
There are no Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 55 VIRTUS SHORT/INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES--15.5% U.S. Treasury Bond 7.500%, 11/15/16 $ 4,133 $ 5,209 9.000%, 11/15/18 1,525 2,141 U.S. Treasury Note 3.125%, 9/30/13 1,100 1,143 4.000%, 2/15/15 4,295 4,565 4.000%, 8/15/18 900 919 3.625%, 8/15/19 600 590 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $14,611) 14,567 --------------- MUNICIPAL BONDS--1.8% LOUISIANA--1.8% Public Facilities Authority, System Restoration Projects Taxable Series 08-ELL, A1 4.500%, 2/1/14 1,615 1,635 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $1,615) 1,635 --------------- MORTGAGE-BACKED SECURITIES--19.8% AGENCY--3.2% FNMA 6.000%, 5/1/16 253 271 10.500%, 12/1/16 1 1 5.000%, 5/1/18 332 351 9.000%, 10/1/25 1 2 FNMA REMIC 97-70, PE 0.000%, 4/25/22 210 192 (Interest Only) 97-20 1.840%, 3/25/27(3)(6) 1,332 35 GNMA 7.000%, 6/15/23 30 33 7.000%, 7/15/23 4 4 7.000%, 9/15/23 34 37 7.000%, 9/15/23 7 7 7.000%, 1/15/24 28 31 7.000%, 5/15/24 15 17 7.000%, 9/15/24 29 32 7.000%, 7/15/25 24 27 7.000%, 7/15/25 12 13 7.000%, 7/15/25 17 19 GNMA Structured Securities 04-108, C 5.039%, 12/16/32 (3) 1,905 1,944 --------------- 3,016 --------------- NON-AGENCY--16.6% Adjustable Rate Mortgage Trust 05-11, 2A42 5.292%, 2/25/36 (3) 4,455 1,916 Bear Stearns Commercial Mortgage Securities, Inc. 06-PW14, AAB 5.171%, 12/11/38 955 957 07-PW15, A2 5.205%, 2/11/44 1,450 1,469 Countrywide Alternative Loan Trust 04-22CB, 1A1 6.000%, 10/25/34 1,538 1,398
PAR VALUE VALUE --------------- --------------- NON-AGENCY--CONTINUED DLJ Mortgage Acceptance Corp. 96-I, (Principal Only) 144A 0.000%, 9/18/11 (4)(7) $ 7 $ 7 First Horizon Alternative Mortgage Security 05-FA8, 1A18 5.500%, 11/25/35 970 800 GMAC Mortgage Corp. Loan Trust 05-AR3, 3A3 4.842%, 6/19/35 (3) 628 602 GSR Mortgage Loan Trust 04-10F, 1A1 4.500%, 8/25/19 465 466 Lehman Brothers-UBS Commercial Mortgage Trust 01-C2, A1 6.270%, 6/15/20 26 26 05-C5, A3 4.964%, 9/15/30 797 808 Morgan Stanley Capital I 06-T23, A2 5.741%, 8/12/41 (3) 1,770 1,813 Morgan Stanley Mortgage Loan Trust 06-7, 5A2 5.962%, 6/25/36 (3) 1,800 1,013 Residential Funding Mortgage Securities II, Inc. 01-HS2, A5 7.420%, 4/25/31 (3) 287 279 Residential Funding Securities LLC 03-RM2, AII 5.000%, 5/25/18 887 901 Structured Asset Securities Corp. 03-34A, 6A 4.992%, 11/25/33(3) 1,343 1,149 05-2XS, 2A2 5.150%, 2/25/35(3) 812 411 Structured Asset Securities Corp. (Interest Only) 98-RF3, AIO 144A 6.100%, 6/15/28 (4)(7) 951 125 Washington Mutual Alternative Mortgage Pass-Through Certificates 05-6, 2A7 5.500%, 8/25/35 1,732 1,487 --------------- 15,627 --------------- TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $23,105) 18,643 --------------- ASSET-BACKED SECURITIES--12.1% Avis Budget Rental Car Funding AESOP LLC 09-2A, A 144A 5.680%, 2/20/13 (4) 600 619 Capital Auto Receivables Asset Trust 07-3, A4 5.210%, 3/17/14 1,870 1,959 Capital One Multi-Asset Execution Trust 03-B5, B5 4.790%, 8/15/13 2,480 2,518 Citibank Credit Card Issuance Trust 07-B2, B2 5.000%, 4/2/12 1,770 1,787
PAR VALUE VALUE --------------- --------------- CitiFinancial Auto Issuance Trust 09-1, A2 144A 1.830%, 11/15/12 (4) $ 1,400 $ 1,403 E*Trade RV & Marine Trust 04-1, A3 3.620%, 10/8/18 40 41 USAA Auto Owner Trust 07-2, A3 4.900%, 2/15/12 166 168 09-2, A4 2.530%, 7/15/15 1,955 1,944 World Omni Automobile Lease Securitization Trust 09-A, A3 1.650%, 2/15/13 945 942 --------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $11,227) 11,381 --------------- CORPORATE BONDS--46.7% CONSUMER DISCRETIONARY--2.7% DaimlerChrysler North America LLC 5.875%, 3/15/11 525 549 Disney Walt Co. (The) 5.625%, 9/15/16 935 1,009 Time Warner Cable, Inc. 5.000%, 2/1/20 1,000 970 --------------- 2,528 --------------- CONSUMER STAPLES--1.4% Heinz (H.J.) Co. 5.350%, 7/15/13 1,220 1,312 --------------- ENERGY--6.0% Conoco Funding Co. 6.350%, 10/15/11 2,305 2,508 DCP Midstream LLC 7.875%, 8/16/10 1,380 1,434 Devon Financing Corp. 6.875%, 9/30/11 1,550 1,684 --------------- 5,626 --------------- FINANCIALS--18.4% AvalonBay Communities, Inc. 5.750%, 9/15/16 425 435 Bank of America Corp. 6.250%, 4/15/12 1,065 1,141 Boeing Capital Corp. 3.250%, 10/27/14 725 720 Capital One Financial Corp. 6.150%, 9/1/16 980 984 Caterpillar Financial Service Corp. 5.125%, 10/12/11 1,000 1,061 Citigroup, Inc. 5.100%, 9/29/11 1,000 1,034 General Electric Capital Corp. 4.875%, 3/4/15 230 239 HSBC Finance Corp. 6.375%, 10/15/11 1,850 1,968 4.750%, 7/15/13 465 484 IBM International Group Capital LLC 5.050%, 10/22/12 800 867
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 56 VIRTUS SHORT/INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- FINANCIALS--CONTINUED John Deere Capital Corp. 5.100%, 1/15/13 $ 750 $ 797 JPMorgan Chase & Co. 5.125%, 9/15/14 920 970 Lehman Brothers Holdings, Inc. 4.250%, 1/27/10(6)(9) 1,465 293 6.200%, 9/26/14(6)(9) 370 74 Merrill Lynch & Co., Inc. 6.150%, 4/25/13 1,250 1,338 National City Bank 4.625%, 5/1/13 1,345 1,378 Simon Property Group LP 5.750%, 5/1/12 445 467 Union Planters Corp. 7.750%, 3/1/11 1,400 1,392 Wachovia Corp. 5.300%, 10/15/11 1,000 1,062 Wells Fargo & Co. 5.300%, 8/26/11 600 635 --------------- 17,339 --------------- HEALTH CARE--2.8% Schering-Plough Corp. 5.300%, 12/1/13 1,135 1,248 Wellpoint, Inc. 5.875%, 6/15/17 1,400 1,442 --------------- 2,690 --------------- INDUSTRIALS--3.4% Burlington Northern Santa Fe Corp. 6.750%, 7/15/11 690 743 CSX Corp. 6.750%, 3/15/11 1,780 1,891 Honeywell International, Inc. 5.625%, 8/1/12 500 546 --------------- 3,180 --------------- INFORMATION TECHNOLOGY--0.8% Cisco Systems, Inc. 5.250%, 2/22/11 50 52 2.900%, 11/17/14 700 699 --------------- 751 --------------- MATERIALS--1.7% CRH America, Inc. 5.625%, 9/30/11 1,520 1,598 --------------- TELECOMMUNICATION SERVICES--5.1% AT&T, Inc. 5.625%, 6/15/16 710 763 Rogers Communications, Inc. 7.250%, 12/15/12 1,000 1,127 Verizon Global Funding Corp. 7.250%, 12/1/10 1,250 1,321 Vodafone Group plc 3.375%, 11/24/15 1,600 1,548 --------------- 4,759 ---------------
PAR VALUE VALUE --------------- --------------- UTILITIES--4.4% Consolidated Edison Company of New York, Inc. 06-C 5.500%, 9/15/16 $ 1,165 $ 1,229 Pacific Gas & Electric Co. 4.200%, 3/1/11 1,200 1,238 Southern Co. Series A 5.300%, 1/15/12 1,575 1,688 --------------- 4,155 --------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $43,238) 43,938 --------------- TOTAL LONG-TERM INVESTMENTS--95.9% (IDENTIFIED COST $93,796) 90,164 ---------------
SHARES --------------- SHORT-TERM INVESTMENTS--3.0% MONEY MARKET MUTUAL FUNDS--3.0% AIM Short Term Investment - Liquid Assets Portfolio (The) - Institutional Shares (seven-day effective yield 0.180%) 2,151,721 2,152 BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.118%) 639,276 639 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $2,791) 2,791 --------------- TOTAL INVESTMENTS--98.9% (IDENTIFIED COST $96,587) 92,955(1) Other Assets and Liabilities--1.1% 1,075 --------------- NET ASSETS--100.0% $ 94,030 ===============
ABBREVIATIONS: FNMA Federal National Mortgage Association ("Fannie Mae") GNMA Government National Mortgage Association ("Ginnie Mae") REMIC Real Estate Mortgage Investment Conduit Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 57 VIRTUS SHORT/INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ----------- INVESTMENT IN SECURITIES: Debt Securities: U.S. Government Securities $14,567 $ -- $14,567 Municipal Securities 1,635 -- 1,635 Mortgage-Backed Securities 18,643 -- 18,643 Asset-Backed Securities 11,381 -- 11,381 Corporate Debt 43,938 -- 43,938 Equity Securities: Short-Term Investments 2,791 2,791 -- ------- ------ ------- Total Investments $92,955 $2,791 $90,164 ======= ====== =======
There are no Level 3 (significant unobservable inputs) priced securities. 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 Securities ---------------- INVESTMENTS IN SECURITIES: BALANCE AS OF DECEMBER 31, 2008 ........................ $ 80 Accrued discounts/premiums(a) .......................... --(e) Realized gain (loss)(b) ................................ --(e) Change in unrealized appreciation (depreciation)(b) .... 68 Net purchases (sales)(c) ............................... (17) Transfers in and/or out of Level 3(d) .................. (131) ----- BALANCE AS OF DECEMBER 31, 2009 ........................ $ -- =====
(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 December 31, 2009, 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 $500. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 58 VIRTUS TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MUNICIPAL BONDS(13)--96.6% ALABAMA--4.0% City of Birmingham Series A, 5.500%, 8/1/25 $ 1,000 $ 1,018 Jefferson County Limited Obligation Series A, 5.250%, 1/1/17 3,000 2,657 --------------- 3,675 --------------- ARIZONA--1.0% Health Facilities Authority Phoenix Children's Hospital Series B, 1.170%, 2/1/42 (3) 1,000 884 --------------- ARKANSAS--0.0% Lonoke County Residential Housing Facilities Board Series A-2, (FNMA Collateralized) 7.900%, 4/1/11 2 1 Stuttgart Public Facilities Board Series A-2, (FNMA Collateralized) 7.900%, 9/1/11 1 1 --------------- 2 --------------- CALIFORNIA--7.5% California Educational Facilities Authority, University of Southern California Series A, 5.250%, 10/1/38 2,000 2,116 M-S-R Energy Authority Series C, 6.500%, 11/1/39 1,655 1,757 South Gate Utility Authority (NATL-RE, FGIC Insured) 0.000%, 10/1/19 1,385 885 State of California 6.000%, 11/1/35 2,000 2,051 --------------- 6,809 --------------- COLORADO--4.5% Denver City & County School District No.1 Series A, 5.500%, 12/1/26 1,335 1,516 Public Authority For Energy 6.250%, 11/15/28 675 705 State Health Facilities Authority, Catholic Health Initiatives Series D, 6.250%, 10/1/33 575 624 State Public Highway Authority E-470 Series B, (NATL-RE Insured) 0.000%, 9/1/29 665 178 University of Colorado Enterprise System Series A, 5.375%, 6/1/38 1,000 1,073 --------------- 4,096 ---------------
PAR VALUE VALUE --------------- --------------- CONNECTICUT--1.1% State Health & Education Facilities Authority, Yale University Series Y-2, 0.180%, 7/1/35 (3) $ 1,000 $ 1,000 --------------- DISTRICT OF COLUMBIA--3.5% Metropolitan Washington Airports Authority, Dulles Airport Metrorail Series Lien - B-09, (Assured Guaranty) 0.000%, 10/1/36 2,000 357 Series Lien - C-09, (Assured Guaranty) 0.000%, 10/1/41 4,000 2,790 --------------- 3,147 --------------- FLORIDA--3.5% Brevard County Health Facilities Authority, Health First, Inc. Project 7.000%, 4/1/39 1,050 1,152 Tampa Bay Water Utility System (NATL-RE Insured) 5.000%, 10/1/31 2,000 2,014 --------------- 3,166 --------------- GEORGIA--4.5% Athens-Clarke County Unified Government Water and Sewer Authority, 5.625%, 1/1/28 1,500 1,694 Chatham County Hospital Authority, Memorial Medical Health Center Series A, 6.125%, 1/1/24 1,280 1,281 Private Colleges & Universities Authority, 5.000%, 9/1/28 1,000 1,080 --------------- 4,055 --------------- ILLINOIS--3.4% State Finance Authority, Art Institute of Chicago, Series A, 6.000%, 3/1/38 895 977 State Finance Authority, Rush University Medical Center, Series A, 7.250%, 11/1/38 1,000 1,103 State Finance Authority, University of Chicago, Series A, 5.000%, 7/1/26 1,000 1,052 --------------- 3,132 --------------- IOWA--1.1% Finance Authority Health Facilities, Iowa Health System Series A-05, (Assured Guaranty) 5.250%, 2/15/29 1,000 1,020 ---------------
PAR VALUE VALUE --------------- --------------- LOUISIANA--1.2% State of Louisiana Office Facilities Corp., Capitol Complex Program 5.000%, 3/1/18 $ 1,000 $ 1,066 --------------- MARYLAND--3.4% City of Baltimore, Convention Center Series A, (XLCA Insured) 5.250%, 9/1/22 2,100 1,954 State Health and Higher Educational Facilities Authority, Anne Arundel Health System Series A, 6.750%, 7/1/29 1,000 1,131 --------------- 3,085 --------------- MASSACHUSETTS--8.6% Commonwealth of Massachusetts 0.240%, 3/1/26(3) 1,500 1,500 Series B 5.000%, 7/1/36 2,000 2,099 State Health & Educational Facilities Authority, Harvard University Series A, 5.500%, 11/15/36 2,000 2,219 State Health & Educational Facilities Authority, Partners Healthcare Series J-1, 5.000%, 7/1/34(17) 2,000 1,994 --------------- 7,812 --------------- MICHIGAN--3.0% City of Detroit Sewer Disposal Series Lien B, (AGM Insured) 7.500%, 7/1/33 (11) 2,000 2,359 State Hospital Finance Authority McLaren Health Care 5.625%, 5/15/28 400 391 --------------- 2,750 --------------- MISSOURI--2.8% St. Louis Metropolitan District Sewer & Wastewater System Series A, 5.750%, 5/1/38 2,000 2,183 State Health & Educational Facilities Authority Washington University Series A, 5.375%, 3/15/39 300 326 --------------- 2,509 --------------- NEBRASKA--2.4% University of Nebraska Lincoln Student Fees and Facilities Series A, 5.250%, 7/1/34 2,000 2,142 --------------- NEW HAMPSHIRE--0.8% State Health & Education Facilities Authority, Exeter Project 6.000%, 10/1/24 750 769 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 59 VIRTUS TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- NEW YORK--13.7% City of New York Series E-1, 6.250%, 10/15/28 $ 1,000 $ 1,162 City of New York, Industrial Development Agency, Queens Baseball Stadium Project (AMBAC Insured) 5.000%, 1/1/31 450 427 (Assured Guaranteed) 6.375%, 1/1/39 1,000 1,118 City of New York, Municipal Water Finance Authority, Water & Sewer Series A-09, 5.750%, 6/15/40 5,590 6,217 Metropolitan Transportation Authority Series C-08, 6.250%, 11/15/23 3,000 3,479 --------------- 12,403 --------------- OHIO--1.2% State Higher Educational Facility Commission University Hospital Health System Series A-09, 6.750%, 1/15/39 1,000 1,062 --------------- PENNSYLVANIA--6.1% Chester County Health & Education Facilities Authority, Chester County Hospital Series A, 6.750%, 7/1/31 1,000 976 State Turnpike Commission Authority, Sub-Series E, 0.000%, 12/1/38 2,000 1,246 Sub-Series B, 5.250%, 6/1/39 1,250 1,266 Sub-Series B, (AGM Insured) 5.750%, 6/1/39 1,000 1,061 Sub-Series D, 5.125%, 12/1/40 1,000 1,003 --------------- 5,552 ---------------
PAR VALUE VALUE --------------- --------------- PUERTO RICO--4.7% Puerto Rico Sales Tax Financing Corp. First Sub-Series A, 5.250%, 8/1/27 $ 1,000 $ 1,033 6.000%, 8/1/42 1,000 1,041 6.500%, 8/1/44 2,000 2,163 --------------- 4,237 --------------- TEXAS--8.6% Dallas Independent School District (PSF Guaranteed) 5.250%, 2/15/30 1,850 2,008 Forney Independent School District Series A, (PSF Guaranteed) 5.750%, 8/15/33 750 835 6.000%, 8/15/37 2,000 2,233 Harris County Health Facilities Development Corp., Memorial Hermann Healthcare System Series B, 7.250%, 12/1/35 2,450 2,752 --------------- 7,828 --------------- WISCONSIN--4.4% State Health & Educational Facilities Authority, Howard Young (Radian Insured) 5.000%, 8/15/18 2,150 2,076 State of Wisconsin Series A, 5.999%, 5/1/33 1,750 1,959 --------------- 4,035 --------------- WYOMING--1.6% Lincoln County Pollution Control (Exxon Project) 0.180%, 8/1/15 (3) 1,500 1,500 --------------- TOTAL MUNICIPAL BONDS (IDENTIFIED COST $82,806) 87,736 --------------- TOTAL LONG-TERM INVESTMENTS--96.6% (IDENTIFIED COST $82,806) 87,736 ---------------
SHARES VALUE --------------- --------------- SHORT-TERM INVESTMENTS--3.3% MONEY MARKET MUTUAL FUNDS--3.3% AIM Tax-Free Cash Reserve Portfolio (The) - Institutional Shares (seven-day effective yield 0.120%) 261,901 $ 262 Goldman Sachs Financial Square Funds - Tax-Free Money Market Fund - Institutional Shares (seven-day effective yield 0.190%) 2,739,126 2,739 --------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $3,001) 3,001 --------------- TOTAL INVESTMENTS--99.9% (IDENTIFIED COST $85,807) 90,737(1) Other assets and liabilities, net--0.1% 58 --------------- NET ASSETS--100.0% $ 90,795 ===============
ABBREVIATIONS: AGM Assured Guaranty Municipal Corp. (formerly Financial Security Assurance Inc.) AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company FNMA Federal National Mortgage Association ("Fannie Mae") NATL-RE National Public Finance Guarantee Corp. PSF Permanent School Fund Radian Radian Asset Assurance, Inc. XLCA XL Capital Assurance The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ------------ INVESTMENT IN SECURITIES: Debt Securities: Municipal Securities $87,736 $ -- $87,736 Equity Securities: Short-Term Investments 3,001 3,001 -- ------- ------ ------- Total Investments $90,737 $3,001 $87,736 ======= ====== =======
There are no Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 60 VIRTUS INSIGHT GOVERNMENT MONEY MARKET FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES(10)--10.0% U.S. Cash Management Bill 0.385%, 6/10/10 $ 10,000 $ 9,983 U.S. Treasury Bill 0.385%, 10/21/10 20,000 19,937 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $29,920) 29,920 --------------- FEDERAL AGENCY SECURITIES--3.3% FHLB 0.450%, 12/30/10 10,000 9,999 --------------- TOTAL FEDERAL AGENCY SECURITIES (IDENTIFIED COST $9,999) 9,999 --------------- FEDERAL AGENCY SECURITIES - VARIABLE(3)(16)--60.9% FFCB 0.625%, 1/1/10(3) 20,000 20,059 0.100%, 1/4/10(3) 20,000 20,000 0.335%, 1/5/10(3) 20,000 20,006 0.472%, 1/22/10(3) 25,000 25,014 FHLMC 0.570%, 1/4/10(3) 25,000 25,000 0.184%, 1/12/10(3) 25,000 25,000 FNMA 0.630%, 1/4/10(3) 20,000 20,010 Overseas Private Investment Corp. 0.160%, 1/6/10(3) 17,633 17,633 0.160%, 1/6/10(3) 10,000 10,000 --------------- TOTAL FEDERAL AGENCY SECURITIES - VARIABLE (IDENTIFIED COST $182,722) 182,722 --------------- REPURCHASE AGREEMENTS--25.8% Bank of America Corp. 0.010% dated 12/31/09 due 1/4/10, repurchase price $19,376 collateralized by FHLMC 4.887%, 4/1/38 market value $19,764 19,376 19,376 Goldman Sachs Group, Inc. (The) 0.010% dated 12/31/09 due 1/4/10, repurchase price $58,000 collateralized by FHLMC 4.856-5.500%, 2/1/36-4/1/37, and FNMA 6.500%, 10/1/37 market value $59,160 58,000 58,000 --------------- TOTAL REPURCHASE AGREEMENTS (IDENTIFIED COST $77,376) 77,376 --------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $300,017) 300,017(1) Other assets and liabilities, net--0.0% 27 --------------- NET ASSETS--100.0% $ 300,044 ===============
ABBREVIATIONS: FFCB Federal Farm Credit Bank FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") FNMA Federal National Mortgage Association ("Fannie Mae") The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Significant Value at Observable December 31, 2009 Inputs ----------------- ------------ INVESTMENT IN SECURITIES: Debt Securities: U.S. Government Agency Securities $222,641 $222,641 Repurchase Agreements 77,376 77,376 -------- -------- Total Investments $300,017 $300,017 ======== ========
There are no Level 1 (quoted prices) or Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 61 VIRTUS INSIGHT MONEY MARKET FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- U.S. GOVERNMENT SECURITIES(10)--8.7% U.S. Cash Management Bill 0.411%, 6/10/10 $ 25,000 $ 24,955 U.S. Treasury Bill 0.435%, 7/1/10 30,000 29,935 0.392%, 7/29/10 25,000 24,943 0.460%, 7/29/10 25,000 24,933 0.392%, 10/21/10 40,000 39,872 0.407%, 12/16/10 25,000 24,901 0.420%, 12/16/10 30,000 29,878 0.435%, 12/16/10 25,000 24,895 --------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $224,312) 224,312 --------------- COMMERCIAL PAPER--44.4% Bank of Nova Scotia(10) 0.300%, 6/16/10 25,000 24,965 BNP Paribas(10) 0.180%, 1/26/10 40,000 39,995 Chariot Funding LLC(10) 0.210%, 1/25/10 25,000 24,996 DnB Nor Bank ASA 144A 0.323%, 1/11/10(3)(4)(16) 100,000 100,000 Edison Asset Securitization LLC(10) 0.100%, 1/4/10 30,000 30,000 0.220%, 1/28/10 20,000 19,997 Enterprise Funding LLC(10) 0.210%, 2/24/10 40,000 39,987 Grampian Funding LLC(10) 0.330%, 1/21/10 40,000 39,993 0.580%, 5/14/10 30,000 29,936 0.580%, 5/17/10 30,000 29,934 Johnson & Johnson(10) 0.170%, 5/3/10 30,000 29,983 0.190%, 6/4/10 35,000 34,972 Kitty Hawk Funding Corp.(10) 0.210%, 1/12/10 36,077 36,075 Old Line Funding Corp.(10) 0.190%, 2/8/10 55,000 54,989 0.180%, 2/9/10 25,000 24,995 Park Avenue Receivables Corp.(10) 0.220%, 1/14/10 21,200 21,198 0.210%, 1/15/10 25,000 24,998 Rabobank Nederland N.V.(10) 0.410%, 1/14/10 15,000 14,998 Regency Markets LLC(10) 0.180%, 1/13/10 54,700 54,697 0.190%, 1/21/10 30,000 29,997 Salisbury Receivables LLC(10) 0.180%, 1/26/10 50,000 49,994 0.190%, 1/26/10 28,000 27,996 0.170%, 1/28/10 12,719 12,717 Sheffield Receivables Corp.(10) 0.180%, 1/13/10 30,000 29,998 0.210%, 1/25/10 30,000 29,996 0.200%, 2/23/10 30,000 29,991 Solitaire Funding LLC(10) 0.310%, 1/20/10 20,000 19,997 0.250%, 1/22/10 30,000 29,996 0.250%, 1/25/10 17,850 17,847 0.310%, 1/27/10 30,000 29,993
PAR VALUE VALUE --------------- --------------- Thunder Bay Funding LLC(10) 0.230%, 1/19/10 $ 34,646 $ 34,642 Versailles LLC(10) 0.300%, 1/5/10 80,000 79,997 0.320%, 1/5/10 20,165 20,164 Yorktown Capital LLC(10) 0.180%, 1/15/10 30,000 29,998 --------------- TOTAL COMMERCIAL PAPER (IDENTIFIED COST $1,150,031) 1,150,031 --------------- FEDERAL AGENCY SECURITIES - VARIABLE(3)(16)--9.7% FFCB 0.472%, 1/22/10 100,000 100,058 FHLMC 0.570%, 1/4/10 50,000 50,000 0.184%, 1/12/10 100,000 100,000 --------------- TOTAL FEDERAL AGENCY SECURITIES - VARIABLE (IDENTIFIED COST $250,058) 250,058 --------------- MEDIUM-TERM NOTES--10.2% Bank of America N.A. 0.657%, 1/22/10(3) 75,000 75,000 General Electric Capital Corp. 0.344%, 1/5/10(3) 43,000 42,969 0.354%, 1/20/10(3) 6,100 6,097 Rabobank Nederland N.V. 144A 0.273%, 2/16/10(3)(4) 25,000 25,000 Svenska Handelsbanken AB 144A 0.308%, 2/9/10(3)(4) 100,000 100,000 Wachovia Bank N.A. 1.173%, 2/16/10(3) 14,280 14,294 --------------- TOTAL MEDIUM-TERM NOTES (IDENTIFIED COST $263,360) 263,360 ---------------
SHARES --------------- CERTIFICATES OF DEPOSIT--5.8% Bank of Nova Scotia 0.380%, 1/27/10 50,000 50,000 Barclays Bank plc 0.533%, 1/19/10(3) 50,000 50,000 Rabobank Nederland N.V. 0.279%, 2/4/10(4) 50,000 50,000 --------------- TOTAL CERTIFICATES OF DEPOSIT (IDENTIFIED COST $150,000) 150,000 ---------------
PAR VALUE --------------- PROMISSORY NOTES--3.8% Goldman Sachs Group, Inc. (The) 0.440%, 5/12/10(6) $ 100,000 100,000 --------------- TOTAL PROMISSORY NOTES (IDENTIFIED COST $100,000) 100,000 ---------------
PAR VALUE VALUE --------------- --------------- REPURCHASE AGREEMENTS--3.8% Bank of America Corp. 0.01% dated 12/31/09, due 1/4/10, repurchase price $98,248 collateralized by FNMA 5.000%-6.032%, 1/6/37-1/1/40 and FHLMC 5.000%-5.172%, 1/10/35- 1/10/39 total market value $100,213 $ 98,248 $ 98,248 --------------- TOTAL REPURCHASE AGREEMENTS (IDENTIFIED COST $98,248) 98,248 --------------- TIME DEPOSITS--3.9% Loyds TSB Bank 0.020%, 1/4/10 100,000 100,000 --------------- TOTAL TIME DEPOSITS (IDENTIFIED COST $100,000) 100,000 ---------------
SHARES --------------- MONEY MARKET MUTUAL FUNDS--9.7% AIM Short-Term Investments Liquid Assets Portfolio (The) Institutional Shares (seven-day effective yield 0.180%) 124,966,000 124,966 Goldman Sachs Financial Square Funds - Money Market Fund - Institutional Shares (seven-day effective yield 0.030%) 125,974,984 125,975 --------------- TOTAL MONEY MARKET MUTUAL FUNDS (IDENTIFIED COST $250,941) 250,941 --------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $2,586,950) 2,586,950(1) Other assets and liabilities, net--0.0% (335) --------------- NET ASSETS--100.0% $ 2,586,615 ===============
COUNTRY WEIGHTINGS as of 12/31/09 + United States 89% Norway 4 Sweden 4 United Kingdom 2 Netherlands 1 --- Total 100% ===
+ % of total investments as of December 31, 2009 ABBREVIATIONS: FDIC Federal Deposit Insurance Corporation FFCB Federal Farm Credit Bank FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation ("Freddie Mac") Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 62 VIRTUS INSIGHT MONEY MARKET FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ------------ INVESTMENT IN SECURITIES: Debt Securities: U.S. Government & Agency Securities $ 474,370 $ -- $ 474,370 Corporate Debt 1,763,391 -- 1,763,391 Repurchase Agreements 98,248 -- 98,248 Equity Securities: Money Market Mutual Funds 250,941 250,941 -- ---------- -------- ---------- Total Investments $2,586,950 $250,941 $2,336,009 ========== ======== ==========
There are no Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 63 VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- COMMERCIAL PAPER - MUNICIPAL(10)--9.0% MARYLAND--1.3% Baltimore County 0.350%, 3/4/10 $ 13,800 $ 13,800 --------------- MASSACHUSETTS--1.5% Massachusetts Water Resources Authority 0.450%, 1/5/10 2,000 2,000 Series 99, 0.450%, 1/5/10 13,000 13,000 --------------- 15,000 --------------- MISSISSIPPI--1.1% Claiborne County, Pollution Control Board 1.700%, 1/4/10 11,500 11,500 --------------- TEXAS--1.4% University of Texas 0.400%, 1/4/10 15,000 15,000 --------------- WASHINGTON--1.0% University of Washington 0.200%, 1/4/10 10,000 10,000 --------------- WISCONSIN--2.7% City of Milwaukee 0.350%, 1/11/10 13,200 13,200 Health & Educational Facilities 0.250%, 1/7/10 15,000 15,000 --------------- 28,200 --------------- TOTAL COMMERCIAL PAPER - MUNICIPAL (IDENTIFIED COST $93,500) 93,500 --------------- VARIABLE RATE DEMAND OBLIGATIONS - MUNICIPAL(3)(16)--79.6% ALABAMA--0.2% Chatom Industrial Development Board Pollution Control Electric Cooperative, Inc. (National Rural Utilities Co. Guaranty) 1.070%, 1/6/10 2,005 2,005 --------------- ALASKA--1.3% Housing Finance Corp. University of Alaska Series A, 0.200%, 1/7/10 13,800 13,800 --------------- ARIZONA--1.2% Arizona State University, Board of Regents Series B, 0.170%, 1/6/10 5,000 5,000 State Health Facilities Authority, Banner Health Series B, 0.200%, 1/6/10 7,900 7,900 --------------- 12,900 ---------------
PAR VALUE VALUE --------------- --------------- COLORADO--0.5% City of Aurora, The Children Hospital Series C, 0.200%, 1/7/10 $ 5,720 $ 5,720 --------------- CONNECTICUT--3.0% State Health & Education Facilities Authority, Yale University Series V-2, 0.180%, 1/4/10 5,000 5,000 Series Y-2, 0.180%, 1/4/10 8,360 8,360 Series U, 0.200%, 1/6/10 3,100 3,100 Series U-2, 0.150%, 1/6/10 15,110 15,110 --------------- 31,570 --------------- FLORIDA--7.0% Broward County School Board Certificate of Participation Series D, (AGM Insured) 0.270%, 1/7/10 8,725 8,725 City of West Palm Beach, Utility System Series C, (Assured Guaranty Insured) 0.270%, 1/6/10 10,000 10,000 JEA Electric System Series 3D-2-A, 0.200%, 1/6/10 19,770 19,770 JEA Water & Sewer System Series B-1, 0.200%, 1/6/10 9,670 9,670 St. Lucie County Pollution Control, Florida Power & Light Co. Project 0.220%, 1/1/10 25,000 25,000 --------------- 73,165 --------------- GEORGIA--3.6% Metropolitan Atlanta Rapid Transit Authority Series A, 0.320%, 1/6/10 37,070 37,070 --------------- ILLINOIS--8.4% Chicago O'Hare International Airport, General Airport Third Lien 0.280%, 1/6/10 10,000 10,000 Educational Facilities Authority, Field Museum of Natural History 0.240%, 1/6/10 16,500 16,500 Finance Authority, Advocate Health Care Network Series 08 A-2, 0.750%, 2/5/10 (12) 10,000 10,000 Finance Authority, Bradley University Series A, 0.210%, 1/7/10 10,000 10,000 Finance Authority, Carle Foundation Hospital Series C, 0.180%, 1/7/10 1,800 1,800
PAR VALUE VALUE --------------- --------------- ILLINOIS--CONTINUED Finance Authority, Lake Forest Academy 0.330%, 1/6/10 $ 5,000 $ 5,000 Finance Authority, Lake Forest Country Day School 0.330%, 1/6/10 3,250 3,250 Finance Authority, McGraw YMCA Evanston Project 0.520%, 1/7/10 4,000 4,000 Finance Authority, North Park University 0.300%, 1/6/10 22,500 22,500 Health Facilities Authority, Northwestern Memorial Healthcare Series C, 0.200%, 1/4/10 5,000 5,000 --------------- 88,050 --------------- INDIANA--4.5% Finance Authority, Trinity Health Series D-2, 0.200%, 1/7/10 12,815 12,815 Health System Finance Authority, Sisters St. Francis Health Services, Inc. Series F, 0.200%, 1/7/10 2,640 2,640 Series G, 0.200%, 1/7/10 2,250 2,250 Series J, 0.200%, 1/7/10 4,500 4,500 Purdue University 0.200%, 1/6/10 15,000 15,000 State Educational Facilities Authority, Wabash College Project 0.300%, 1/7/10 10,000 10,000 --------------- 47,205 --------------- KENTUCKY--1.2% Mason County, Pollution Control East Kentucky Power Cooperative, Inc. Series B-1, 1.070%, 1/6/10 3,600 3,600 Series B-2, 1.070%, 1/6/10 5,570 5,570 Series B-3, 1.070%, 1/6/10 3,160 3,160 --------------- 12,330 --------------- MARYLAND--1.8% Washington Suburban Sanitary Commission Series A-10, 0.240%, 1/6/10 19,000 19,000 --------------- MICHIGAN--6.2% Michigan Strategic Fund Ltd. 0.200%, 1/6/10 5,700 5,700 Oakland County Economic Development Corp. 0.230%, 1/7/10 22,000 22,000
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 64 VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- MICHIGAN--CONTINUED State Finance Authority Ascension Hospital Series B-1, 0.700%, 1/6/10 (12) $ 25,000 $ 25,000 University of Michigan Hospital Series A, 0.200%, 1/4/10 11,585 11,585 --------------- 64,285 --------------- MINNESOTA--1.3% City of Minneapolis, Health Care System, Fairview Health Services, Series 08-C, 0.210%, 1/6/10 5,700 5,700 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System, Allina Health System Series C-1, 0.170%, 1/7/10 7,375 7,375 --------------- 13,075 --------------- MISSISSIPPI--2.7% Hospital Equipment & Facilities Authority, North Mississippi Health Services Series 97-1, 0.280%, 1/6/10 14,300 14,300 Series 01-1, 0.200%, 1/7/10 13,400 13,400 --------------- 27,700 --------------- MISSOURI--1.0% St. Louis County Industrial Development & Educational Facilities Whitefield School, Inc. Series B, 0.400%, 1/7/10 1,100 1,100 State Health & Educational Facilities Authority, Sisters of Mercy Health System Series H, 0.210%, 1/6/10 8,300 8,300 State Health & Educational Facilities Authority, St. Louis University Series B-1, 0.200%, 1/4/10 1,100 1,100 --------------- 10,500 --------------- NEW MEXICO--1.9% State Hospital Equipment Loan Council, Presbyterian Healthcare System Series C, 0.200%, 1/7/10 8,905 8,905 Series D, 0.200%, 1/7/10 10,700 10,700 --------------- 19,605 ---------------
PAR VALUE VALUE --------------- --------------- NEW YORK--1.8% City of New York, Municipal Water Finance Authority, Water & Sewer Subseries B-4, 0.190%, 1/7/10 $ 6,900 $ 6,900 State Housing Finance Agency Series G, 0.250%, 1/6/10 6,600 6,600 Transitional Finance Authority, Building Aid Subseries 3-3D, 0.280%, 1/7/10 5,200 5,200 --------------- 18,700 --------------- NORTH CAROLINA--2.9% City of Raleigh 0.350%, 1/7/10 5,000 5,000 State of North Carolina Series C, 0.190%, 1/6/10 24,800 24,800 --------------- 29,800 --------------- OHIO--0.9% City of Cleveland Series R, 0.170%, 1/7/10 4,500 4,500 Franklin County, Holy Cross Health System 0.200%, 1/7/10 4,900 4,900 --------------- 9,400 --------------- OREGON--1.1% Clackamas County Hospital Facility Authority, Legacy Health System, Series A, 0.200%, 1/6/10 2,000 2,000 Series C, 0.200%, 1/6/10 4,700 4,700 State Facilities Authority, PeaceHealth Series B, 0.200%, 1/7/10 4,300 4,300 --------------- 11,000 --------------- TENNESSEE--2.2% City of Chattanooga, Health, Educational and Housing Facility Board, Catholic Health Initiatives Series 04-C, 0.300%, 1/6/10 18,450 18,450 Metropolitan Government of Nashville & Davidson County, Health and Educational Facilities Board, Ascension Health Series 01 B-1, 0.400%, 1/7/10 (3) 5,000 5,000 --------------- 23,450 --------------- TEXAS--10.2% Board of Regents of the University of Texas System, Series 08-B, 0.150%, 1/7/10 1,150 1,150
PAR VALUE VALUE --------------- --------------- TEXAS--CONTINUED City of San Antonio Electric 0.350%, 1/6/10 $ 25,000 $ 25,000 Denton Independent School District Series 05-A, 0.280%, 1/7/10 19,900 19,900 Nueces County Health Facilities Development Corp. Driscoll Foundation Children's Hospital 0.350%, 1/6/10 17,600 17,600 State Veterans Housing Assistance Program Fund 1 (VA Guaranteed) 0.200%, 1/6/10 21,680 21,680 Texas Small Business Industrial Development Corp. 0.290%, 1/6/10 21,160 21,160 --------------- 106,490 --------------- UTAH--0.5% City of Murray, Intermountain Healthcare Service, Inc. Series C, 0.200%, 1/4/10 2,300 2,300 State Board of Regents, University Health Care 0.220%, 1/7/10 3,000 3,000 --------------- 5,300 --------------- VIRGINIA--3.9% Fairfax County Industrial Development Authority, Inova Health System Project Series 09-B2, 0.550%, 4/12/10 (12) 10,000 10,000 Loudoun County Industrial Development Authority, Howard Hughes Medical Institute, Series B, 0.200%, 1/6/10 7,200 7,200 Series E, 0.170%, 1/6/10 8,600 8,600 Series F, 0.170%, 1/6/10 15,000 15,000 --------------- 40,800 --------------- WASHINGTON--4.2% Energy Northwest, Project 3 08-F-1, 0.250%, 1/6/10 17,500 17,500 08-F-2, 0.250%, 1/6/10 7,500 7,500 State of Washington Series 96-A, 0.180%, 1/7/10 18,600 18,600 --------------- 43,600 ---------------
Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 65 VIRTUS INSIGHT TAX-EXEMPT MONEY MARKET FUND SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2009 ($ reported in thousands)
PAR VALUE VALUE --------------- --------------- WISCONSIN--2.0% City of Beaver Dam, YMCA Dodge County, Inc. Project 0.320%, 1/7/10 $ 3,320 $ 3,320 Health & Educational Facilities Authority Wheaton Franciscan Healthcare Series B, 0.200%, 1/6/10 14,320 14,320 Milwaukee Redevelopment Authority American Society for Quality 0.320%, 1/7/10 3,745 3,745 --------------- 21,385 --------------- WYOMING--4.1% Lincoln County, Pollution Control, Exxon Project 0.180%, 1/1/10 19,700 19,700 Platte County, Pollution Control, Tri-State Generation Series B, 0.700%, 1/4/10 3,300 3,300 Sublette County, Pollution Control Exxon Project 0.180%, 1/1/10 18,500 18,500 Uinta County, Pollution Control, Chevron U.S.A., Inc. Project 0.220%, 1/4/10 1,500 1,500 --------------- 43,000 --------------- TOTAL VARIABLE RATE DEMAND OBLIGATIONS - MUNICIPAL (IDENTIFIED COST $830,905) 830,905 ---------------
PAR VALUE VALUE --------------- --------------- TAX-EXEMPT BONDS - MUNICIPAL--2.9% KENTUCKY--1.9% Louisville & Jefferson County Metropolitan Sewer District Sewer and Drainage System Series A, 3.000%, 8/19/10 $ 20,000 $ 20,218 --------------- OHIO--0.5% Milton Union Exempt Village School District 1.950%, 2/11/10 5,000 5,002 --------------- WISCONSIN--0.5% City of Middletown 1.750%, 7/1/10 5,000 5,013 --------------- TOTAL TAX-EXEMPT BONDS - MUNICIPAL (IDENTIFIED COST $30,233) 30,233 ---------------
SHARES VALUE --------------- --------------- MONEY MARKET MUTUAL FUNDS--8.5% AIM Tax-Free Cash Reserve Portfolio (The) - Institutional Shares (seven-day effective yield 0.120%) 27,150,146 $ 27,150 Dreyfus Tax Exempt Cash Management - Institutional Shares (seven-day effective yield 0.120%) 10,000,052 10,000 Goldman Sachs Financial Square Funds - Tax-Free Money Market Fund - Institutional Shares (seven-day effective yield 0.190%) 51,818,559 51,819 --------------- TOTAL MONEY MARKET MUTUAL FUNDS (IDENTIFIED COST $88,969) 88,969 --------------- TOTAL INVESTMENTS--100.0% (IDENTIFIED COST $1,043,607) 1,043,607(1) Other assets and liabilities, net--0.0% 422 --------------- NET ASSETS--100.0% $ 1,044,029 ===============
ABBREVIATIONS: AGM Assured Guaranty Municipal Corp. (formerly Financial Security Assurance, Inc.) VA Department of Veterans Affairs The following table provides a summary of inputs used to value the Fund's net assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Total Market Level 1 - Significant Value at Quoted Observable December 31, 2009 Prices Inputs ----------------- --------- ----------- INVESTMENT IN SECURITIES: Debt Securities: Municipal Securities $ 954,638 $ -- $954,638 Equity Securities: Money Market Mutual Funds 88,969 88,969 -- ---------- ------- -------- Total Investments $1,043,607 $88,969 $954,638 ========== ======= ========
There are no Level 3 (significant unobservable inputs) priced securities. Refer to Key Investment Terms and Footnote Legend starting on page 2. See Notes to Financial Statements 66 THIS PAGE INTENTIONALLY BLANK. VIRTUS INSIGHT TRUST STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2009 (Reported in thousands except shares and per share amounts)
EQUITY FUNDS -------------------------------------- DISCIPLINED BALANCED CORE SMALL-CAP ALLOCATION EQUITY OPPORTUNITY FUND FUND FUND ---------- ---------- ----------- ASSETS Investments in securities at value(1) ................................................. $ 60,796 $ 90,923 $ 83,838 Receivables Investment securities sold ......................................................... -- -- 572 Fund shares sold ................................................................... --(2) 1 1 Dividends and interest receivable .................................................. 184 33 93 Prepaid expenses ...................................................................... 15 18 16 Other assets .......................................................................... 1 1 4 ---------- ---------- ----------- Total assets .................................................................... 60,996 90,976 84,524 ---------- ---------- ----------- LIABILITIES Payables Fund shares repurchased ............................................................ 8 31 79 Investment securities purchased .................................................... -- -- 1,433 Investment advisory fee ............................................................ 25 54 53 Distribution and service fees ...................................................... 2 2 4 Administration fee ................................................................. 4 6 6 Transfer agent fees and expenses ................................................... 3 6 13 Trustees' fee and expenses ......................................................... 1 1 1 Professional fees .................................................................. 28 26 26 Trustee deferred compensation plan ................................................. 1 1 4 Other accrued expenses ............................................................. 5 3 5 ---------- ---------- ----------- Total liabilities ............................................................... 77 130 1,624 ---------- ---------- ----------- NET ASSETS ............................................................................... $ 60,919 $ 90,846 $ 82,900 ========== ========== =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ...................................... $ 67,336 $ 100,149 $ 124,756 Accumulated undistributed net investment income (loss) ................................ 9 63 (8) Accumulated undistributed net realized gain (loss) .................................... (8,130) (18,105) (50,368) Net unrealized appreciation (depreciation) on investments ............................. 1,704 8,739 8,520 ---------- ---------- ----------- NET ASSETS ............................................................................... $ 60,919 $ 90,846 $ 82,900 ========== ========== =========== CLASS I Net asset value (net assets/shares outstanding) and offering price per share .......... $ 12.10 $ 16.33 $ 10.34 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 4,345,403 4,974,392 6,355,068 Net Assets ............................................................................ $ 52,601 $ 81,239 $ 65,690 CLASS A Net asset value (net assets/shares outstanding) per share ............................. $ 12.07 $ 16.07 $ 9.72 Maximum offering price per share NAV/(1-5.75%) ........................................ $ 12.80 $ 17.05 $ 10.31 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 651,665 567,454 1,707,915 Net Assets ............................................................................ $ 7,864 $ 9,121 $ 16,604 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .......... $ 12.07 $ 15.91 $ 9.43 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 37,644 30,544 64,269 Net Assets ............................................................................ $ 454 $ 486 $ 606 (1) Investments in securities at cost ................................................... $ 59,092 $ 82,184 $ 75,318
(2) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 68 VIRTUS INSIGHT TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2009 (Reported in thousands except shares and per share amounts)
EQUITY FUNDS --------------------------------------- EMERGING DISCIPLINED MARKETS VALUE SMALL-CAP OPPORTUNITIES EQUITY VALUE FUND FUND FUND ----------- ------------- ----------- ASSETS Investments in securities at value(1) ................................................. $ 125,688 $ 281,971 $ 164,211 Foreign currency at value(2) .......................................................... -- 77 -- Cash .................................................................................. -- 245 -- Receivable Investment securities sold ......................................................... 120 -- -- Fund shares sold ................................................................... 3 1,105 61 Dividends and interest receivable .................................................. 71 173 78 Prepaid expenses ...................................................................... 19 31 17 Other assets .......................................................................... 3 2 3 ----------- ------------- ----------- Total assets .................................................................... 125,904 283,604 164,370 ----------- ------------- ----------- LIABILITIES Payables Fund shares repurchased ............................................................ 130 245 62 Investment securities purchased .................................................... -- 1,042 -- Foreign capital gain taxes payable ................................................. -- 1,476 -- Investment advisory fee ............................................................ 73 231 98 Distribution and service fees ...................................................... 25 12 3 Administration fee ................................................................. 9 17 12 Transfer agent fees and expenses ................................................... 37 33 11 Trustees' fee and expenses ......................................................... 1 3 2 Professional fees .................................................................. 26 43 26 Trustee deferred compensation plan ................................................. 3 2 3 Other accrued expenses ............................................................. 6 87 9 Net unrealized depreciation on forward currency contracts ............................. -- 1,224 -- ----------- ------------- ----------- Total liabilities ............................................................... 310 4,415 226 ----------- ------------- ----------- NET ASSETS ............................................................................... $ 125,594 $ 279,189 $ 164,144 =========== ============= =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ...................................... $ 179,982 $ 249,343 $ 198,407 Accumulated undistributed net investment income (loss) ................................ 51 350 141 Accumulated undistributed net realized gain (loss) .................................... (71,179) (23,490) (35,448) Net unrealized appreciation (depreciation) on investments ............................. 16,740 52,986 1,044 ----------- ------------- ----------- NET ASSETS ............................................................................... $ 125,594 $ 279,189 $ 164,144 =========== ============= =========== CLASS I Net asset value (net assets/shares outstanding) and offering price per share .......... $ 24.89 $ 7.17 $ 9.73 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 2,117,512 32,417,077 15,502,857 Net Assets ............................................................................ $ 52,703 $ 232,325 $ 150,822 CLASS A Net asset value (net assets/shares outstanding) per share ............................. $ 24.54 $ 6.96 $ 9.82 Maximum offering price per share NAV/(1-5.75%) ........................................ $ 26.04 $ 7.38 $ 10.41 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 2,309,732 6,130,723 1,335,201 Net Assets ............................................................................ $ 56,676 $ 42,658 $ 13,106 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .......... $ 23.92 $ 6.90 $ 9.79 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .. 677,801 609,503 22,064 Net Assets ............................................................................ $ 16,215 $ 4,206 $ 216 (1) Investments in securities at cost .................................................... $ 108,948 $ 226,285 $ 163,167 (2) Foreign currency at cost ............................................................. $ -- $ 78 $ --
See Notes to Financial Statements 69 VIRTUS INSIGHT TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2009 (Reported in thousands except shares and per share amounts)
FIXED INCOME FUNDS ------------------------------------------------------- HIGH YIELD INTERMEDIATE INTERMEDIATE SHORT/ INCOME GOVERNMENT TAX-EXEMPT INTERMEDIATE FUND BOND FUND BOND FUND BOND FUND ---------- ------------ ------------ ------------ ASSETS Investments in securities at value(1) ......................... $ 43,460 $ 36,935 $ 83,911 $ 92,955 Receivables Investment securities sold ................................. 2 5 104 6 Fund shares sold ........................................... 18 3 196 220 Dividends and interest receivable .......................... 919 285 1,146 991 Prepaid expenses .............................................. 14 14 18 16 Other assets .................................................. 1 --(2) 2 2 ---------- ------------ ------------ ------------ Total assets ............................................ 44,414 37,242 85,377 94,190 ---------- ------------ ------------ ------------ LIABILITIES Cash overdraft ................................................ 70 -- -- -- Payables Fund shares repurchased .................................... 4 4 506 20 Investment securities purchased ............................ -- -- 3,096 -- Dividend distributions ..................................... -- 1 176 52 Investment advisory fee .................................... 17 9 23 37 Distribution and service fees .............................. 1 3 8 6 Administration fee ......................................... 3 3 5 7 Transfer agent fees and expenses ........................... 1 6 8 4 Trustees' fee and expenses ................................. --(2) --(2) 1 1 Professional fees .......................................... 31 26 27 27 Trustee deferred compensation plan ......................... 1 --(2) 2 2 Other accrued expenses ..................................... 3 1 4 4 ---------- ------------ ------------ ------------ Total liabilities ....................................... 131 53 3,856 160 ---------- ------------ ------------ ------------ NET ASSETS ....................................................... $ 44,283 $ 37,189 $ 81,521 $ 94,030 ========== ============ ============ ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .............. $ 60,067 $ 36,382 $ 83,084 $ 103,961 Accumulated undistributed net investment income (loss) ........ 88 9 6 29 Accumulated undistributed net realized gain (loss) ............ (18,902) (1) (2,226) (6,328) Net unrealized appreciation (depreciation) on investments ..... 3,030 799 657 (3,632) ---------- ------------ ------------ ------------ NET ASSETS ....................................................... $ 44,283 $ 37,189 $ 81,521 $ 94,030 ========== ============ ============ ============ CLASS I Net asset value (net assets/shares outstanding) and offering price per share ............................................ $ 10.19 $ 17.25 $ 10.84 $ 10.21 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .................................... 4,227,797 1,390,013 5,091,242 7,910,080 Net Assets .................................................... $ 43,061 $ 23,976 $ 55,189 $ 80,733 CLASS A Net asset value (net assets/shares outstanding) per share ..... $ 10.20 $ 17.25 $ 10.84 $ 10.20 Maximum offering price per share NAV/(1-4.75%) ................ $ 10.72 $ 18.11 $ 11.38 $ 10.71 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .................................... 82,328 765,923 2,041,300 801,224 Net Assets .................................................... $ 840 $ 13,213 $ 22,130 $ 8,176 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ............................................ $ 10.19 $ -- $ 10.84 $ 10.21 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .................................... 37,553 -- 387,529 501,838 Net Assets .................................................... $ 382 $ -- $ 4,202 $ 5,121 (1) Investments in securities at cost ......................... $ 40,430 $ 36,136 $ 83,254 $ 96,587 (2) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 70 VIRTUS INSIGHT TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2009 (Reported in thousands except shares and per share amounts)
MONEY MARKET FUNDS FIXED ----------------------------------------------- INCOME FUNDS INSIGHT INSIGHT ------------ GOVERNMENT INSIGHT TAX-EXEMPT TAX-EXEMPT MONEY MONEY MONEY BOND FUND MARKET FUND MARKET FUND MARKET FUND ------------ ------------- -------------- ------------ ASSETS Investments in securities at value(1) ....................... $ 90,737 $ 300,017(4) $ 2,586,950 1,043,607 Cash ........................................................ -- --(2) --(2) -- Receivables Investment securities sold ............................... --(2) -- -- -- Fund shares sold ......................................... 967 -- 1 -- Dividends and interest receivable ........................ 1,290 100 554 689 Prepaid expenses ............................................ 17 41 115 52 Other assets ................................................ 1 5 33 12 ---------- ------------ -------------- ------------ Total assets .......................................... 93,012 300,163 2,587,653 1,044,360 ---------- ------------ -------------- ------------ LIABILITIES Payables Fund shares repurchased .................................. 6 -- 31 -- Investment securities purchased .......................... 1,978 -- -- -- Dividend distributions ................................... 146 12 359 104 Investment advisory fee .................................. 25 31 231 87 Distribution and service fees ............................ 17 6 96 22 Administration fee ....................................... 6 10 80 29 Transfer agent fees and expenses ......................... 8 6 55 4 Trustees' fee and expenses ............................... 1 5 25 9 Professional fees ........................................ 26 23 37 26 Trustee deferred compensation plan ....................... 1 5 33 12 Other accrued expenses ................................... 3 21 91 38 ---------- ------------ -------------- ------------ Total liabilities ..................................... 2,217 119 1,038 331 ---------- ------------ -------------- ------------ NET ASSETS ..................................................... $ 90,795 $ 300,044 $ 2,586,615 $ 1,044,029 ========== ============ ============== ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ............ $ 87,372 $ 300,023 $ 2,586,615 $ 1,044,032 Accumulated undistributed net investment income (loss) ...... 19 -- -- -- Accumulated undistributed net realized gain (loss) .......... (1,526) 21 -- (3) Net unrealized appreciation (depreciation) on investments ... 4,930 -- -- -- ---------- ------------ -------------- ------------ NET ASSETS ..................................................... $ 90,795 $ 300,044 $ 2,586,615 $ 1,044,029 ========== ============ ============== ============ CLASS I Net asset value (net assets/shares outstanding) and offering price per share ................................. $ 10.55 $ 1.00 $ 1.00 $ 1.00 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization................................... 2,406,034 131,997,261 2,054,919,176 844,493,436 Net Assets .................................................. $ 25,394 $ 131,990 $ 2,054,581 $ 844,557 CLASS A Net asset value (net assets/shares outstanding) per share ... $ 10.55 $ 1.00 $ 1.00 $ 1.00 Maximum offering price per share(3) ......................... $ 11.08 $ 1.00 $ 1.00 $ 1.00 Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .................................. 5,611,322 168,025,769 531,709,453 199,542,211 Net Assets .................................................. $ 59,226 $ 168,054 $ 532,034 $ 199,472 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .......................................... $ 10.56 $ -- $ -- $ -- Shares of beneficial interest outstanding, par value $0.001, unlimited authorization .................................. 584,904 -- -- -- Net Assets .................................................. $ 6,175 $ -- $ -- $ -- (1) Investments in securities at cost ......................... $ 85,807 $ 300,017 $ 2,586,950 $ 1,043,607
(2) Amount is less than $500 (not reported in thousands). (3) For the Tax-Exempt Bond Fund, the Maximum Offering Price per share is NAV/(1-4.75%). (4) Investments in securities at value includes repurchase agreements totaling $77,376. See Notes to Financial Statements 71 VIRTUS INSIGHT TRUST STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2009 (Reported in thousands)
EQUITY FUNDS ----------------------------------------------------------- BALANCED DISCIPLINED SMALL-CAP ALLOCATION FUND CORE EQUITY FUND OPPORTUNITY FUND --------------- ---------------- ---------------------- INVESTMENT INCOME Dividends ................................................... $ 500 $ 1,272 $ 759 Interest .................................................... 1,161 23 --(1) Foreign taxes withheld ...................................... --(1) (6) (1) ------- ------- -------- Total investment income .................................. 1,661 1,289 758 ------- ------- -------- EXPENSES Investment advisory fee ..................................... 275 582 530 Service fees, Class I ....................................... 24 38 27 Distribution and service fees, Class A ...................... 18 17 41 Distribution and service fees, Class C ...................... 5 5 5 Administration fee .......................................... 47 71 60 Transfer agent fee and expenses ............................. 25 46 88 Custodian fees .............................................. 20 17 20 Printing fees and expenses .................................. 2 3 3 Professional fees ........................................... 33 31 31 Registration fees ........................................... 33 33 34 Trustees fees and expenses .................................. 5 8 6 Miscellaneous expenses ...................................... 10 14 13 ------- ------- -------- Total expenses ........................................... 497 865 858 Less expenses reimbursed by investment adviser and/(or) distributor .............................................. (24) (38) (27) ------- ------- -------- Net expenses ............................................. 473 827 831 ------- ------- -------- NET INVESTMENT INCOME (LOSS) ............................. 1,188 462 (73) ------- ------- -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ..................... (4,029) (9,337) (28,308) Net change in unrealized appreciation (depreciation) on investments .............................................. 12,113 24,879 43,190 ------- ------- -------- NET GAIN (LOSS) ON INVESTMENTS .............................. 8,084 15,542 14,882 ------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................... $ 9,272 $16,004 $ 14,809 ======= ======= ========
(1) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 72 VIRTUS INSIGHT TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED DECEMBER 31, 2009 (Reported in thousands)
EQUITY FUNDS ----------------------------------------------- DISCIPLINED SMALL-CAP EMERGING MARKETS VALUE EQUITY VALUE FUND OPPORTUNITIES FUND FUND ----------- ------------------ ------------ INVESTMENT INCOME Dividends ................................................... $ 1,444 $ 5,269 $ 3,577 Interest .................................................... -- 5 47 Foreign taxes withheld ...................................... (3) (153) (1) -------- ------- -------- Total investment income .................................. 1,441 5,121 3,623 -------- ------- -------- EXPENSES Investment advisory fee ..................................... 758 1,652 1,127 Service fees, Class I ....................................... 23 69 73 Distribution and service fees, Class A ...................... 124 66 37 Distribution and service fees, Class C ...................... 132 16 2 Administration fee .......................................... 92 139 138 Transfer agent fee and expenses ............................. 246 199 80 Custodian fees .............................................. 16 294 18 Printing fees and expenses .................................. 22 7 5 Professional fees ........................................... 30 54 33 Registration fees ........................................... 36 44 37 Trustees fees and expenses .................................. 10 13 15 Miscellaneous expenses ...................................... 40 25 27 -------- ------- -------- Total expenses ........................................... 1,529 2,578 1,592 -------- ------- -------- Less expenses reimbursed by investment adviser and/(or) distributor .............................................. (23) (69) (73) -------- ------- -------- Net expenses ............................................. 1,506 2,509 1,519 -------- ------- -------- NET INVESTMENT INCOME (LOSS) ............................. (65) 2,612 2,104 -------- ------- -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ..................... (34,350) (6,981) (19,499) Net realized gain (loss) on foreign currency transactions ... -- (3,065) -- Net change in unrealized appreciation (depreciation) on investments .............................................. 60,432 78,061 42,254 Net change in unrealized appreciation (depreciation) on foreign currency translation ............................. -- (1,172) -- Net change in foreign taxes accrued on unrealized capital gains .................................................... -- (1,436) -- -------- ------- -------- NET GAIN (LOSS) ON INVESTMENTS .............................. 26,082 65,407 22,755 -------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................... $ 26,017 $68,019 $ 24,859 ======== ======= ========
See Notes to Financial Statements 73 VIRTUS INSIGHT TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED DECEMBER 31, 2009 (Reported in thousands)
FIXED INCOME FUNDS -------------------------------------------------------------- INTERMEDIATE INTERMEDIATE HIGH YIELD GOVERNMENT TAX-EXEMPT SHORT/INTERMEDIATE INCOME FUND BOND FUND BOND FUND BOND FUND ----------- ------------ ------------ ------------------ INVESTMENT INCOME Dividends .............................................. $ 14 $ 1 $ 12 $ 6 Interest ............................................... 3,926 1,455 3,963 5,293 ------- ------ ------- ------- Total investment income ............................. 3,940 1,456 3,975 5,299 ------- ------ ------- ------- EXPENSES Investment advisory fee ................................ 182 200 381 566 Service fees, Class I .................................. 19 14 34 47 Distribution and service fees, Class A ................. 7 40 39 15 Distribution and service fees, Class C ................. 2 -- 15 26 Administration fee ..................................... 34 39 70 88 Transfer agent fee and expenses ........................ 13 40 49 42 Custodian fees ......................................... 8 6 9 9 Printing fees and expenses ............................. 3 2 2 3 Professional fees ...................................... 36 31 32 33 Registration fees ...................................... 33 27 34 34 Trustees fees and expenses ............................. 4 4 8 10 Miscellaneous expenses ................................. 9 7 16 19 ------- ------ ------- ------- Total expenses ...................................... 350 410 689 892 Less expenses reimbursed by investment adviser and/(or) distributor ......................................... (19) (81) (128) (130) ------- ------ ------- ------- Net expenses ........................................ 331 329 561 762 ------- ------ ------- ------- NET INVESTMENT INCOME (LOSS) ........................ 3,609 1,127 3,414 4,537 ------- ------ ------- ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ................ (2,412) 72 591 (565) Net change in unrealized appreciation (depreciation) on investments ......................................... 9,813 (920) 9,820 9,008 ------- ------ ------- ------- NET GAIN (LOSS) ON INVESTMENTS ......................... 7,401 (848) 10,411 8,443 ------- ------ ------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $11,010 $ 279 $13,825 $12,980 ======= ====== ======= =======
See Notes to Financial Statements 74 VIRTUS INSIGHT TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED DECEMBER 31, 2009 (Reported in thousands)
MONEY MARKET FUNDS FIXED --------------------------------------- INCOME FUNDS INSIGHT INSIGHT ------------ GOVERNMENT INSIGHT TAX-EXEMPT TAX-EXEMPT MONEY MONEY MONEY BOND FUND MARKET FUND MARKET FUND MARKET FUND ------------ ----------- ----------- ----------- INVESTMENT INCOME Dividends .............................................. $ 12 $ -- $ 1,185 $ 232 Interest ............................................... 4,301 3,153 18,090(1) 6,612 ------- ------ ------- ------ Total investment income ............................. 4,313 3,153 19,275 6,844 ------- ------ ------- ------ EXPENSES Investment advisory fee ................................ 385 619 2,518 1,188 Service fees, Class I .................................. 15 189 886 480 Distribution and service fees, Class A ................. 130 701 2,285 656 Distribution and service fees, Exchange Shares ......... -- -- 28 -- Distribution and service fees, Class C ................. 27 -- -- -- Administration fee ..................................... 72 203 873 402 Transfer agent fee and expenses ........................ 63 40 291 59 Custodian fees ......................................... 9 37 92 51 Printing fees and expenses ............................. 3 20 108 43 Professional fees ...................................... 32 38 95 51 Registration fees ...................................... 35 33 60 38 Trustees fees and expenses ............................. 8 58 225 110 Miscellaneous expenses ................................. 15 329 1,588 636 ------- ------ ------- ------ Total expenses ................................... 794 2,267 9,049 3,714 Less expenses reimbursed by investment adviser and/(or) distributor ......................................... (124) (450) (1,157) (625) ------- ------ ------- ------ Net expenses ........................................ 670 1,817 7,892 3,089 ------- ------ ------- ------ NET INVESTMENT INCOME (LOSS) ........................ 3,643 1,336 11,383 3,755 ------- ------ ------- ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ................ 160 34 2,604(1) (3) Net change in unrealized appreciation (depreciation) on investments ...................................... 10,301 -- -- -- ------- ------ ------- ------ NET GAIN (LOSS) ON INVESTMENTS ......................... 10,461 34 2,604 (3) ------- ------ ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $14,104 $1,370 $13,987 $3,752 ======= ====== ======= ======
(1) The Insight Money Market Fund received $3,642 in distributions from the Tyco International Ltd. Securities Litigation Settlement proceeds. $1,025 of these distributions have been reclassed from realized capital gains to interest income. See Notes to Financial Statements 75 VIRTUS INSIGHT TRUST STATEMENTS OF CHANGES IN NET ASSETS ($ Reported in thousands)
EQUITY FUNDS --------------------------------------------------------- BALANCED ALLOCATION FUND CORE EQUITY FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 ------------ ------------ ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................. $ 1,188 $ 1,547 $ 462 $ 800 Net realized gain (loss) ..................................... (4,029) (3,884) (9,337) (8,621) Net change in unrealized appreciation (depreciation) ......... 12,113 (17,225) 24,879 (36,954) ------- -------- ------- -------- Increase (decrease) in net assets resulting from operations .. 9,272 (19,562) 16,004 (44,775) ------- -------- ------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class I ............................... (1,046) (1,350) (438) (704) Net investment income, Class A ............................... (143) (176) (21) (35) Net investment income, Class C ............................... (6) (4) -- -- Net realized short-term gains, Class I ....................... -- -- -- (22) Net realized short-term gains, Class A ....................... -- -- -- (2) Net realized short-term gains, Class C ....................... -- -- -- --(1) Net realized long-term gains, Class I ........................ -- -- -- (1,156) Net realized long-term gains, Class A ........................ -- -- -- (94) Net realized long-term gains, Class C ........................ -- -- -- (2) ------- -------- ------- -------- Decrease in net assets from distributions to shareholders .... (1,195) (1,530) (459) (2,015) ------- -------- ------- -------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class I ........ (879) (6,712) (9,554) (4,243) Change in net assets from share transactions, Class A ........ (261) (1,928) 1,831 (1,035) Change in net assets from share transactions, Class C ........ (111) 255 (194) 442 ------- -------- ------- -------- Increase (decrease) in net assets from share transactions .... (1,251) (8,385) (7,917) (4,836) ------- -------- ------- -------- CAPITAL CONTRIBUTIONS Fair Funds settlement(2) ..................................... -- -- -- -- Net increase (decrease) in net assets ........................ 6,826 (29,477) 7,628 (51,626) NET ASSETS Beginning of period .......................................... 54,093 83,570 83,218 134,844 ------- -------- ------- -------- End of period ................................................ $60,919 $ 54,093 $90,846 $ 83,218 ======= ======== ======= ======== Accumulated undistributed net investment income (loss) at end of period ................................................. $ 9 $ 17 $ 63 $ 64
(1) Amount is less than $500 (not reported in thousands). (2) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 76
EQUITY FUNDS - --------------------------------------------------------------------------------------------------------------------- DISCIPLINED SMALL-CAP DISCIPLINED SMALL-CAP EMERGING MARKETS OPPORTUNITY FUND VALUE FUND OPPORTUNITIES FUND VALUE EQUITY FUND - --------------------------- --------------------------- --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 2009 2008 2009 2008 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (73) $ (214) $ (65) $ 282 $ 2,612 $ 1,025 $ 2,104 $ 3,199 (28,308) (18,708) (34,350) (15,859) (10,046) (11,854) (19,499) (15,924) 43,190 (27,817) 60,432 (14,489) 75,453 (65,101) 42,254 (89,992) -------- -------- -------- -------- -------- --------- -------- --------- 14,809 (46,739) 26,017 (30,066) 68,019 (75,930) 24,859 (102,717) -------- -------- -------- -------- -------- --------- -------- --------- (11) -- (30) (187) (2,457) (1,485) (2,030) (2,728) -- -- (40) (8) (403) (198) (170) (202) -- -- (11) -- (9) (2) (1) (1) -- -- -- -- -- (6,078) -- (193) -- -- -- -- -- (588) -- (17) -- -- -- -- -- (29) -- --(1) -- -- -- -- -- (4,573) -- (7,310) -- -- -- -- -- (443) -- (642) -- -- -- -- -- (22) -- (14) -------- -------- -------- -------- -------- --------- -------- --------- (11) -- (81) (195) (2,869) (13,418) (2,201) (11,107) -------- -------- -------- -------- -------- --------- -------- --------- 3,231 (29,025) (3,896) (18,486) 114,472 (54,297) (20,786) (17,350) (6,740) (15,538) 25,768 (13,066) 20,957 7,506 (4,794) 3,100 (29) 202 10,973 90 3,323 240 (208) (99) -------- -------- -------- -------- -------- --------- -------- --------- (3,538) (44,361) 32,845 (31,462) 138,752 (46,551) (25,788) (14,349) -------- -------- -------- -------- -------- --------- -------- --------- 138 -- -- -- -- -- -- -- 11,398 (91,100) 58,781 (61,723) 203,902 (135,899) (3,130) (128,173) 71,502 162,602 66,813 128,536 75,287 211,186 167,274 295,447 -------- -------- -------- -------- -------- --------- -------- --------- $ 82,900 $ 71,502 $125,594 $ 66,813 $279,189 $ 75,287 $164,144 $ 167,274 ======== ======== ======== ======== ======== ========= ======== ========= $ (8) $ 58 $ 51 $ 165 $ 350 $ 1,294 $ 141 $ 266
See Notes to Financial Statements 77 VIRTUS INSIGHT TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
FIXED INCOME FUNDS --------------------------------------------------------- INTERMEDIATE GOVERNMENT HIGH YIELD INCOME FUND BOND FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 ------------ ------------ ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................. $ 3,609 $ 4,008 $ 1,127 $ 1,058 Net realized gain (loss) ..................................... (2,412) (10,909) 72 384 Net change in unrealized appreciation (depreciation) ......... 9,813 (5,110) (920) 1,467 ------- -------- ------- ------- Increase (decrease) in net assets resulting from operations .. 11,010 (12,011) 279 2,909 ------- -------- ------- ------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class I ............................... (3,331) (3,620) (751) (842) Net investment income, Class A ............................... (242) (379) (377) (216) Net investment income, Class C ............................... (16) (9) -- -- Net realized short-term gains, Class I ....................... -- -- (92) -- Net realized short-term gains, Class A ....................... -- -- (53) -- Net realized short-term gains, Class C ....................... -- -- -- -- Net realized long-term gains, Class I ........................ -- -- (47) (71) Net realized long-term gains, Class A ........................ -- -- (26) (25) Net realized long-term gains, Class C ........................ -- -- -- -- ------- -------- ------- ------- Decrease in net assets from distributions to shareholders .... (3,589) (4,008) (1,346) (1,154) ------- -------- ------- ------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class I ........ 4,315 (1,535) (6,046) 10,991 Change in net assets from share transactions, Class A ........ (3,281) (354) (713) 9,575 Change in net assets from share transactions, Class C ........ 229 19 -- -- ------- -------- ------- ------- Increase (decrease) in net assets from share transactions .... 1,263 (1,870) (6,759) 20,566 ------- -------- ------- ------- CAPITAL CONTRIBUTIONS Fair Funds settlement(2) ..................................... -- -- 4 -- Net increase (decrease) in net assets ........................ 8,684 (17,889) (7,822) 22,321 NET ASSETS Beginning of period .......................................... 35,599 53,488 45,011 22,690 ------- -------- ------- ------- End of period ................................................ $44,283 $ 35,599 $37,189 $45,011 ======= ======== ======= ======= Accumulated undistributed net investment income (loss) at end of period ................................................. $ 88 $ 68 $ 9 $ 6
(1) Amount is less than $500 (not reported in thousands). (2) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 78
FIXED INCOME FUNDS - --------------------------------------------------------------------------------------- INTERMEDIATE TAX-EXEMPT SHORT/INTERMEDIATE TAX-EXEMPT BOND FUND BOND FUND BOND FUND - --------------------------- --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 2009 2008 - ------------ ------------ ------------ ------------ ------------ ------------ $ 3,414 $ 6,301 $ 4,537 $ 7,607 $ 3,643 $ 5,313 591 (2,786) (565) 322 160 (1,636) 9,820 (14,610) 9,008 (11,736) 10,301 (11,046) -------- -------- -------- -------- -------- -------- 13,825 (11,095) 12,980 (3,807) 14,104 (7,369) -------- -------- -------- -------- -------- -------- (2,785) (5,718) (4,186) (7,395) (1,382) (2,944) (586) (655) (240) (184) (2,186) (2,363) (43) (17) (85) (28) (93) (42) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (144) -- -- -- (78) -- (18) -- -- -- (66) -- --(1) -- -- -- (1) -------- -------- -------- -------- -------- -------- (3,414) (6,552) (4,511) (7,607) (3,661) (5,494) -------- -------- -------- -------- -------- -------- (35,742) (60,834) (43,764) (86,965) (20,300) (20,752) 7,744 (1,029) 3,736 (232) 3,876 (5,341) 3,518 191 3,601 1,080 4,467 869 -------- -------- -------- -------- -------- -------- (24,480) (61,672) (36,427) (86,117) (11,957) (25,224) -------- -------- -------- -------- -------- -------- -- -- 3 -- 18 -- (14,069) (79,319) (27,955) (97,531) (1,496) (38,087) 95,590 174,909 121,985 219,516 92,291 130,378 -------- -------- -------- -------- -------- -------- $ 81,521 $ 95,590 $ 94,030 $121,985 $ 90,795 $ 92,291 ======== ======== ======== ======== ======== ======== $ 6 $ (5) $ 29 $ -- $ 19 $ 9
See Notes to Financial Statements 79 VIRTUS INSIGHT TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
MONEY MARKET FUNDS ----------------------------------------------------- INSIGHT GOVERNMENT INSIGHT MONEY MONEY MARKET FUND MARKET FUND -------------------------- ------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 ------------ ------------ ------------- ----------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) ................................. $ 1,336 $ 11,355 $ 11,383(2) $ 100,795 Net realized gain (loss) ..................................... 34 2 2,604(2) (19,522) Payment by affiliate (See Note 3) ............................ -- -- -- 19,500 --------- -------- ---------- ----------- Increase (decrease) in net assets resulting from operations .. 1,370 11,357 13,987 100,773 --------- -------- ---------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class I ............................... (1,154) (7,341) (9,239) (70,598) Net investment income, Class A ............................... (186) (4,014) (1,671) (22,446) Net investment income, Exchange Shares ....................... -- -- (473) (7,751) Net realized short-term gains, Class I ....................... (7) -- (1,565) -- Net realized short-term gains, Class A ....................... (4) -- (390) -- Net realized long-term gains, Class I ........................ -- -- -- -- Net realized long-term gains, Class A ........................ -- -- -- -- --------- -------- ---------- ----------- Decrease in net assets from distributions to shareholders .... (1,351) (11,355) (13,338) (100,795) --------- -------- ---------- ----------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class I ........ (296,335) 148,919 435,493 (1,186,035) Change in net assets from share transactions, Class A ........ (61,683) 21,786 (174,764) (462,907) Change in net assets from share transactions, Exchange Shares .................................................... -- -- (172,546) (190,079) --------- -------- ---------- ----------- Increase (decrease) in net assets from share transactions .... (358,018) 170,705 88,183 (1,839,021) --------- -------- ---------- ----------- CAPITAL CONTRIBUTIONS Net increase (decrease) in net assets ........................ (357,999) 170,707 88,832 (1,839,043) NET ASSETS Beginning of period .......................................... 658,043 487,336 2,497,783 4,336,826 --------- -------- ---------- ----------- End of period ................................................ $ 300,044 $658,043 $2,586,615 $ 2,497,783 ========= ======== ========== =========== Accumulated undistributed net investment income (loss) at end of period ................................... $ -- $ 4 $ -- $ --
(1) Amount is less than $500 (not reported in thousands) (2) The Insight Money Market Fund received $3,642 in distributions from the Tyco International Ltd. Securities Litigation Settlement proceeds. $1,025 of these distributions have been reclassed from realized capital gains to interest income. See Notes to Financial Statements 80
MONEY MARKET FUNDS - ------------------------------------ INSIGHT TAX-EXEMPT MONEY MARKET FUND - ------------------------------------ YEAR ENDED YEAR ENDED DECEMBER 31, 2009 DECEMBER 31, 2008 - ----------------- ----------------- $ 3,755 $ 27,286 (3) 623 -- -- ---------- ---------- 3,752 27,909 ---------- ---------- (3,583) (23,229) (172) (4,057) -- -- -- (229) -- (46) (37) (118) (8) (23) ---------- ---------- (3,800) (27,702) ---------- ---------- (346,205) 123,487 (25,205) 5,015 -- -- ---------- ---------- (371,410) 128,502 ---------- ---------- (371,458) 128,709 1,415,487 1,286,778 ---------- ---------- $1,044,029 $1,415,487 ========== ========== $ -- $ --
See Notes to Financial Statements 81 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
DISTRIBUTIONS NET NON FROM NET REALIZED -RECURRING DIVIDENDS NON-RECURRING ASSET NET AND PAYMENT TOTAL FROM DISTRIBUTIONS PAYMENT VALUE, INVESTMENT UNREALIZED FROM FROM NET FROM NET FROM FORMER BEGINNING INCOME GAIN FORMER INVESTMENT INVESTMENT REALIZED ADMINISTRATOR OF PERIOD (LOSS) /(LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS (8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ------------- BALANCED ALLOCATION FUND CLASS I 1/1/09 to 12/31/09 $10.46 0.24(7) 1.64 -- 1.88 (0.24) -- -- 1/1/08 to 12/31/08 14.30 0.29(7) (3.84) -- (3.55) (0.29) -- -- 1/1/07 to 12/31/07 15.00 0.34(7) 0.63 -- 0.97 (0.35) (1.32) -- 1/1/06 to 12/31/06 14.72 0.33(7) 0.99 0.02 1.34 (0.33) (0.71) (0.02) 1/1/05 to 12/31/05 14.99 0.30 0.81 -- 1.11 (0.30) (1.08) -- CLASS A 1/1/09 to 12/31/09 $10.42 0.21(7) 1.66 -- 1.87 (0.22) -- -- 1/1/08 to 12/31/08 14.26 0.26(7) (3.84) -- (3.58) (0.26) -- -- 1/1/07 to 12/31/07 14.96 0.30(7) 0.63 -- 0.93 (0.31) (1.32) -- 1/1/06 to 12/31/06 14.69 0.29(7) 0.99 0.02 1.30 (0.30) (0.71) (0.02) 1/1/05 to 12/31/05 14.97 0.27 0.79 -- 1.06 (0.26) (1.08) -- CLASS C 1/1/09 to 12/31/09 $10.42 0.13(7) 1.66 -- 1.79 (0.14) -- -- 1/1/08 to 12/31/08 14.26 0.16(7) (3.84) -- (3.68) (0.16) -- -- 1/1/07 to 12/31/07 14.96 0.18(7) 0.63 -- 0.81 (0.19) (1.32) -- 6/26/06 (inception) to 12/31/06 14.24 0.08(7) 1.25 -- 1.33 (0.09) (0.52) -- CORE EQUITY FUND CLASS I 1/1/09 to 12/31/09 $13.64 0.08(7) 2.69 -- 2.77 (0.08) -- -- 1/1/08 to 12/31/08 20.84 0.13(7) (7.01) -- (6.88) (0.12) (0.20) -- 1/1/07 to 12/31/07 21.85 0.21(7) 1.32 -- 1.53 (0.22) (2.32) -- 1/1/06 to 12/31/06 21.19 0.16(7) 2.71 0.06 2.93 (0.16) (2.05) (0.06) 1/1/05 to 12/31/05 21.91 0.12 1.83 -- 1.95 (0.12) (2.55) -- CLASS A 1/1/09 to 12/31/09 $13.42 0.05(7) 2.65 -- 2.70 (0.05) -- -- 1/1/08 to 12/31/08 20.51 0.08(7) (6.89) -- (6.81) (0.08) (0.20) -- 1/1/07 to 12/31/07 21.53 0.15(7) 1.31 -- 1.46 (0.16) (2.32) -- 1/1/06 to 12/31/06 20.91 0.11(7) 2.66 0.05 2.82 (0.10) (2.05) (0.05) 1/1/05 to 12/31/05 21.66 0.07 1.80 -- 1.87 (0.07) (2.55) -- CLASS C 1/1/09 to 12/31/09 $13.36 (0.06)(7) 2.61 -- 2.55 -- -- -- 1/1/08 to 12/31/08 20.44 (0.04)(7) (6.84) -- (6.88) -- (0.20) -- 1/1/07 to 12/31/07 21.49 (0.02)(7) 1.31 -- 1.29 (0.02) (2.32) -- 6/26/06 (inception) to 12/31/06 20.46 (0.02)(7) 2.63 -- 2.61 (0.02) (1.56) --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 82
RATIO TOTAL RETURN RATIO OF RATIO OF OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE TO AVERAGE AVERAGE TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3, 8) (IN THOUSANDS) NET ASSETS NET ASSETS NET ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ---------- --------- (0.24) -- $12.10 18.28% -- $ 52,601 0.82% 0.87% 2.20% 58% (0.29) -- 10.46 (25.10) -- 46,545 0.83 0.88 2.28 55 (1.67) -- 14.30 6.48 -- 71,603 0.77 0.82 2.18 71 (1.06) --(9) 15.00 9.26 9.14 74,724 0.76 0.82 2.20 66 (1.38) -- 14.72 7.45 -- 71,570 0.79 0.84 1.95 61 (0.22) -- $12.07 18.16% -- $ 7,864 1.07% 1.07% 1.95% 58% (0.26) -- 10.42 (25.35) -- 7,050 1.08 1.08 2.02 55 (1.63) -- 14.26 6.16 -- 11,646 1.02 1.02 1.93 71 (1.03) -- 14.96 9.03 8.92 12,613 1.01 1.02 1.93 66 (1.34) -- 14.69 7.14 -- 2,953 1.04 1.09 1.74 61 (0.14) -- $12.07 17.31% -- $ 454 1.82% 1.82% 1.22% 58% (0.16) -- 10.42 (25.93) -- 498 1.83 1.83 1.33 55 (1.51) -- 14.26 5.45 -- 321 1.78 1.78 1.19 71 (0.61) -- 14.96 9.31(2) -- 255 1.77(1) 1.77(1) 1.04(1) 66(2) (0.08) -- $16.33 20.41% -- $ 81,239 0.97% 1.02% 0.58% 83% (0.32) -- 13.64 (33.36) -- 76,658 0.95 1.00 0.73 68 (2.54) -- 20.84 7.06 -- 124,328 0.91 0.96 0.91 58 (2.27) --(9) 21.85 13.98 13.07 146,245 0.90 0.95 0.74 74 (2.67) -- 21.19 8.97 -- 135,587 0.93 0.97 0.54 80 (0.05) -- $16.07 20.16% -- $ 9,121 1.22% 1.22% 0.32% 83% (0.28) -- 13.42 (33.54) -- 5,943 1.20 1.20 0.47 68 (2.48) -- 20.51 6.81 -- 10,265 1.16 1.16 0.66 58 (2.20) -- 21.53 13.73 13.46 11,795 1.16 1.16 0.50 74 (2.62) -- 20.91 8.70 -- 1,009 1.18 1.22 0.29 80 -- -- $15.91 19.27% -- $ 486 1.97% 1.97% (0.41)% 83% (0.20) -- 13.36 (34.04) -- 617 1.95 1.95 (0.23) 68 (2.34) -- 20.44 6.00 -- 251 1.92 1.92 (0.10) 58 (1.58) -- 21.49 12.84(2) -- 171 1.89(1) 1.89(1) (0.19)(1) 74(2)
See Notes to Financial Statements 83 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ---------------- DISCIPLINED SMALL-CAP OPPORTUNITY FUND CLASS I 1/1/09 to 12/31/09 $ 8.39 --(7)(9) 1.95 -- 1.95 --(9) -- -- 1/1/08 to 12/31/08 13.23 (0.01)(7) (4.83) -- (4.84) -- -- -- 1/1/07 to 12/31/07 19.67 0.01(7) (1.88) -- (1.87) --(9) (4.57) -- 1/1/06 to 12/31/06 21.48 --(9) 1.85 0.04 1.89 --(9) (3.66) (0.04) 1/1/05 to 12/31/05 24.64 0.04 1.13 -- 1.17 (0.04) (4.29) -- CLASS A 1/1/09 to 12/31/09 $ 7.91 (0.02)(7) 1.83 -- 1.81 --(9) -- -- 1/1/08 to 12/31/08 12.50 (0.04)(7) (4.55) -- (4.59) -- -- -- 1/1/07 to 12/31/07 18.91 (0.04)(7) (1.80) -- (1.84) --(9) (4.57) -- 1/1/06 to 12/31/06 20.81 (0.03)(7) 1.80 0.03 1.80 -- (3.66) (0.04) 1/1/05 to 12/31/05 24.03 (0.09) 1.16 -- 1.07 -- (4.29) -- CLASS C 1/1/09 to 12/31/09 $ 7.73 (0.08)(7) 1.78 -- 1.70 --(9) -- -- 1/1/08 to 12/31/08 12.31 (0.12)(7) (4.46) -- (4.58) -- -- -- 1/1/07 to 12/31/07 18.83 (0.19)(7) (1.76) -- (1.95) --(9) (4.57) -- 6/26/06 (inception) to 12/31/06 20.31 (0.10)(7) 1.27 -- 1.17 -- (2.65) -- DISCIPLINED SMALL-CAP VALUE FUND CLASS I 1/1/09 to 12/31/09 $21.89 0.04(7) 2.97 -- 3.01 (0.01) -- -- 1/1/08 to 12/31/08 31.11 0.11(7) (9.25) -- (9.14) (0.08) -- -- 1/1/07 to 12/31/07 44.42 0.21(7) (3.65) -- (3.44) (0.21) (9.66) -- 1/1/06 to 12/31/06 47.40 0.10(7) 4.97 0.06 5.13 (0.13) (7.92) (0.06) 1/1/05 to 12/31/05 50.67 0.27 4.24 -- 4.51 (0.24) (7.58) -- CLASS A 1/1/09 to 12/31/09 $21.64 (0.02)(7) 2.93 -- 2.91 (0.01) -- -- 1/1/08 to 12/31/08 30.72 0.02(7) (9.09) -- (9.07) (0.01) -- -- 1/1/07 to 12/31/07 43.97 0.10(7) (3.60) -- (3.50) (0.09) (9.66) -- 1/1/06 to 12/31/06 47.02 0.05(7) 4.85 0.05 4.95 (0.03) (7.92) (0.05) 1/1/05 to 12/31/05 50.35 0.17 4.18 -- 4.35 (0.13) (7.58) -- CLASS C 1/1/09 to 12/31/09 $21.26 (0.18)(7) 2.85 -- 2.67 (0.01) -- -- 1/1/08 to 12/31/08 30.39 (0.13)(7) (9.00) -- (9.13) -- -- -- 1/1/07 to 12/31/07 43.82 (0.19)(7) (3.58) -- (3.77) --(9) (9.66) -- 6/26/06 (inception) to 12/31/06 45.40 (0.19)(7) 4.65 -- 4.46 -- (6.04) --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 84
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3, 8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ------------ --------- --(9) -- $10.34 23.27% -- $ 65,690 1.11% 1.16% (0.04)% 109% -- -- 8.39 (36.58) -- 50,568 1.10 1.15 (0.10) 72 (4.57) -- 13.23 (10.33) -- 112,397 1.00 1.05 0.05 92 (3.70) -- 19.67 8.73 8.56 399,712 0.93 0.99 0.00 85 (4.33) --(9) 21.48 4.55 -- 480,501 0.94 0.97 0.16 76 --(9) -- $ 9.72 22.88% -- $ 16,604 1.37% 1.37% (0.28)% 109% -- -- 7.91 (36.72) -- 20,421 1.35 1.35 (0.36) 72 (4.57) -- 12.50 (10.61) -- 49,593 1.25 1.25 (0.22) 92 (3.70) -- 18.91 8.50 8.34 86,850 1.20 1.20 (0.17) 85 (4.29) --(9) 20.81 4.28 -- 12,094 1.19 1.22 (0.18) 76 --(9) -- $ 9.43 21.99% -- $ 606 2.11% 2.11% (1.04)% 109% -- -- 7.73 (37.21) -- 513 2.10 2.10 (1.09) 72 (4.57) -- 12.31 (11.26) -- 612 2.02 2.02 (1.06) 92 (2.65) -- 18.83 5.77(2) -- 249 1.92(1) 1.92(1) (0.98)(1) 85(2) (0.01) -- $24.89 13.79% -- $ 52,703 1.14% 1.19% 0.21% 67% (0.08) -- 21.89 (29.36) -- 51,715 1.06 1.11 0.38 77 (9.87) -- 31.11 (8.93) -- 92,809 0.96 1.01 0.50 83 (8.11) --(9) 44.42 10.92 10.82 297,831 0.88 0.94 0.20 92 (7.82) 0.04 47.40 8.90 -- 335,085 0.90 0.94 0.49 74 (0.01) -- $24.54 13.49% -- $ 56,676 1.41% 1.41% (0.09)% 67% (0.01) -- 21.64 (29.52) -- 14,895 1.31 1.31 0.09 77 (9.75) -- 30.72 (9.17) -- 35,478 1.21 1.21 0.25 83 (8.00) -- 43.97 10.62 10.52 83,558 1.16 1.17 0.11 92 (7.71) 0.03 47.02 8.63 -- 11,226 1.15 1.19 0.24 74 (0.01) -- $23.92 12.60% -- $ 16,215 2.17% 2.17% (0.85)% 67% -- -- 21.26 (30.04) -- 203 2.06 2.06 (0.49) 77 (9.66) -- 30.39 (9.85) -- 249 1.98 1.98 (0.47) 83 (6.04) -- 43.82 9.86(2) -- 167 1.89(1) 1.89(1) (0.77)(1) 92(2)
See Notes to Financial Statements 85 VIRTUS INSIGHTTRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ---------------- EMERGING MARKETS OPPORTUNITIES FUND CLASS I 1/1/09 to 12/31/09 $ 4.90 0.10(7) 2.26 -- 2.36 (0.09) -- -- 1/1/08 to 12/31/08 10.08 0.06(7) (4.43) -- (4.37) (0.11) (0.70) -- 1/1/07 to 12/31/07 12.34 0.15(7) 3.62 -- 3.77 (0.09) (5.94) -- 1/1/06 to 12/31/06 12.43 0.20(7) 3.32 0.01 3.53 (0.22) (3.39) (0.01) 1/1/05 to 12/31/05 11.01 0.14 3.15 -- 3.29 (0.11) (1.76) -- CLASS A 1/1/09 to 12/31/09 $ 4.76 0.08(7) 2.20 -- 2.28 (0.08) -- -- 1/1/08 to 12/31/08 9.80 0.05(7) (4.30) -- (4.25) (0.09) (0.70) -- 1/1/07 to 12/31/07 12.14 0.09(7) 3.57 -- 3.66 (0.06) (5.94) -- 1/1/06 to 12/31/06 12.27 0.08(7) 3.36 0.01 3.45 (0.18) (3.39) (0.01) 1/1/05 to 12/31/05 10.88 0.10 3.14 -- 3.24 (0.09) (1.76) -- CLASS C 1/1/09 to 12/31/09 $ 4.72 0.02(7) 2.19 -- 2.21 (0.03) -- -- 1/1/08 to 12/31/08 9.69 --(9) (4.23) -- (4.23) (0.04) (0.70) -- 1/1/07 to 12/31/07 12.14 --(9) 3.55 -- 3.55 (0.06) (5.94) -- 6/26/06 (inception) to 12/31/06 11.71 (0.03)(7) 3.35 -- 3.32 (0.07) (2.82) -- VALUE EQUITY FUND CLASS I 1/1/09 to 12/31/09 $ 8.49 0.11(7) 1.25 -- 1.36 (0.12) -- -- 1/1/08 to 12/31/08 13.94 0.16(7) (5.05) -- (4.89) (0.15) (0.41) -- 1/1/07 to 12/31/07 14.66 0.18(7) 1.27 -- 1.45 (0.18) (1.99) -- 1/1/06 to 12/31/06 13.88 0.14(7) 2.04 0.04 2.22 (0.14) (1.26) (0.04) 1/1/05 to 12/31/05 13.44 0.17 1.51 -- 1.68 (0.17) (1.07) -- CLASS A 1/1/09 to 12/31/09 $ 8.57 0.09(7) 1.26 -- 1.35 (0.10) -- -- 1/1/08 to 12/31/08 14.06 0.13(7) (5.09) -- (4.96) (0.12) (0.41) -- 1/1/07 to 12/31/07 14.77 0.14(7) 1.28 -- 1.42 (0.14) (1.99) -- 1/1/06 to 12/31/06 13.97 0.13(7) 2.04 0.03 2.20 (0.11) (1.26) (0.03) 1/1/05 to 12/31/05 13.53 0.13 1.52 -- 1.65 (0.14) (1.07) -- CLASS C 1/1/09 to 12/31/09 $ 8.56 0.03(7) 1.24 -- 1.27 (0.04) -- -- 1/1/08 to 12/31/08 14.04 0.04(7) (5.08) -- (5.04) (0.03) (0.41) -- 1/1/07 to 12/31/07 14.76 0.02(7) 1.27 -- 1.29 (0.02) (1.99) -- 6/26/06 (inception) to 12/31/06 14.20 0.01(7) 1.61 -- 1.62 (0.02) (1.04) --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 86
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3)(8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ------------ --------- (0.09) -- $ 7.17 48.52% -- $232,325 1.47% 1.52% 1.64% 50% (0.81) -- 4.90 (45.90) -- 63,699 1.54 1.59 0.77 126 (6.03) -- 10.08 37.39 -- 199,197 1.34 1.39 1.22 92 (3.62) --(9) 12.34 29.60 28.54 242,422 1.32 1.50 1.51 83 (1.87) -- 12.43 31.23 -- 329,081 1.45 1.60 1.20 43 (0.08) -- $ 6.96 48.12% -- $ 42,658 1.72% 1.72% 1.34% 50% (0.79) -- 4.76 (46.04) -- 11,281 1.79 1.79 0.65 126 (6.00) -- 9.80 37.16 -- 11,616 1.60 1.60 0.77 92 (3.58) --(9) 12.14 29.21 29.15 7,456 1.59 1.63 0.60 83 (1.85) -- 12.27 31.08 -- 1,205 1.70 1.85 0.91 43 (0.03) -- $ 6.90 47.29% -- $ 4,206 2.49% 2.49% 0.30% 50% (0.74) -- 4.72 (46.50) -- 307 2.54 2.54 (0.05) 126 (6.00) -- 9.69 35.89 -- 373 2.35 2.35 0.01 92 (2.89) -- 12.14 29.04(2) -- 186 2.30(1) 2.30(1) (0.49)(1) 83(2) (0.12) -- $ 9.73 16.24% -- $150,822 0.92% 0.97% 1.33% 64% (0.56) -- 8.49 (36.26) -- 150,922 0.90 0.95 1.37 56 (2.17) -- 13.94 10.10 -- 272,426 0.87 0.92 1.13 55 (1.44) --(9) 14.66 16.12 15.85 278,841 0.87 0.93 0.96 59 (1.24) -- 13.88 12.52 -- 261,584 0.87 0.91 1.20 63 (0.10) -- $ 9.82 15.92% -- $ 13,106 1.17% 1.17% 1.10% 64% (0.53) -- 8.57 (36.39) -- 15,946 1.15 1.15 1.14 56 (2.13) -- 14.06 9.82 -- 22,330 1.12 1.12 0.88 55 (1.40) -- 14.77 15.85 15.62 25,800 1.14 1.14 0.84 59 (1.21) -- 13.97 12.18 -- 2,416 1.12 1.16 1.00 63 (0.04) -- $ 9.79 14.96% -- $ 216 1.92% 1.92% 0.39% 64% (0.44) -- 8.56 (36.87) -- 406 1.90 1.90 0.36 56 (2.01) -- 14.04 8.92 -- 691 1.87 1.87 0.12 55 (1.06) -- 14.76 11.35(2) -- 175 1.89(1) 1.89(1) 0.15(1) 59(2)
See Notes to Financial Statements 87 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ---------------- HIGH YIELD INCOME FUND CLASS I 1/1/09 to 12/31/09 $ 8.45 0.84(7) 1.74 -- 2.58 (0.84) -- -- 1/1/08 to 12/31/08 11.87 0.88(7) (3.42) -- (2.54) (0.88) -- -- 1/1/07 to 12/31/07 12.45 0.89(7) (0.58) -- 0.31 (0.89) -- -- 1/1/06 to 12/31/06 12.44 0.85(7) 0.02 0.01 0.88 (0.86) -- (0.01) 1/1/05 to 12/31/05 13.07 0.83 (0.59) -- 0.24 (0.83) (0.04) -- CLASS A 1/1/09 to 12/31/09 $ 8.45 0.81(7) 1.75 -- 2.56 (0.81) -- -- 1/1/08 to 12/31/08 11.87 0.85(7) (3.42) -- (2.57) (0.85) -- -- 1/1/07 to 12/31/07 12.45 0.86(7) (0.58) -- 0.28 (0.86) -- -- 1/1/06 to 12/31/06 12.44 0.88(7) (0.04) 0.01 0.85 (0.83) -- (0.01) 1/1/05 to 12/31/05 13.07 0.80 (0.59) -- 0.21 (0.80) (0.04) -- CLASS C 1/1/09 to 12/31/09 $ 8.45 0.74(7) 1.74 -- 2.48 (0.74) -- -- 1/1/08 to 12/31/08 11.87 0.78(7) (3.42) -- (2.64) (0.78) -- -- 1/1/07 to 12/31/07 12.45 0.77(7) (0.58) -- 0.19 (0.77) -- -- 6/26/06 (inception) to 12/31/06 11.98 0.38(7) 0.47 -- 0.85 (0.38) -- -- INTERMEDIATE GOVERNMENT BOND FUND CLASS I 1/1/09 to 12/31/09 $17.63 0.46(7) (0.29) -- 0.17 (0.46) (0.09) -- 1/1/08 to 12/31/08 16.75 0.62(7) 0.92 -- 1.54 (0.62) (0.04) -- 1/1/07 to 12/31/07 16.37 0.73(7) 0.38 -- 1.11 (0.73) -- -- 1/1/06 to 12/31/06 16.50 0.73(7) (0.13) 0.10 0.70 (0.73) -- (0.10) 1/1/05 to 12/31/05 16.84 0.70 (0.28) -- 0.42 (0.70) (0.06) -- CLASS A 1/1/09 to 12/31/09 $17.63 0.42(7) (0.29) -- 0.13 (0.42) (0.09) -- 1/1/08 to 12/31/08 16.75 0.57(7) 0.94 -- 1.51 (0.59) (0.04) -- 1/1/07 to 12/31/07 16.36 0.69(7) 0.39 -- 1.08 (0.69) -- -- 1/1/06 to 12/31/06 16.50 0.69(7) (0.14) 0.10 0.65 (0.69) -- (0.10) 1/1/05 to 12/31/05 16.84 0.66 (0.28) -- 0.38 (0.66) (0.06) -- INTERMEDIATE TAX-EXEMPT BOND FUND CLASS I 1/1/09 to 12/31/09 $ 9.58 0.42(7) 1.26 -- 1.68 (0.42) -- -- 1/1/08 to 12/31/08 10.78 0.43(7) (1.18) -- (0.75) (0.44) (0.01) -- 1/1/07 to 12/31/07 10.93 0.44(7) (0.06) -- 0.38 (0.44) (0.09) -- 1/1/06 to 12/31/06 11.16 0.47(7) --(9) 0.02 0.49 (0.49) (0.21) (0.02) 1/1/05 to 12/31/05 11.41 0.49 (0.25) -- 0.24 (0.49) -- --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 88
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3,8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------ -------------- ----------- ---------- ------------ --------- (0.84) -- $10.19 31.67% -- $ 43,061 0.79% 0.84% 8.91% 117% (0.88) -- 8.45 (22.44) -- 31,932 0.83 0.88 8.33 121 (0.89) -- 11.87 2.52 -- 47,958 0.74 0.79 7.22 117 (0.87) --(9) 12.45 7.31 7.20 68,692 0.64 0.76 6.90 147 (0.87) -- 12.44 1.94 -- 74,697 0.58 0.78 6.80 42 (0.81) -- $10.20 31.60% -- $ 840 1.06% 1.06% 8.90% 117% (0.85) -- 8.45 (22.63) -- 3,550 1.08 1.08 8.09 121 (0.86) -- 11.87 2.34 -- 5,390 0.99 0.99 7.01 117 (0.84) --(9) 12.45 6.97 6.86 5,648 0.96 1.02 7.16 147 (0.84) -- 12.44 1.68 -- 442 0.83 1.03 6.55 42 (0.74) -- $10.19 30.49% -- $ 382 1.79% 1.79% 7.75% 117% (0.78) -- 8.45 (23.21) -- 117 1.84 1.84 7.37 121 (0.77) -- 11.87 1.50 -- 140 1.74 1.74 6.26 117 (0.38) -- 12.45 7.17(2) -- 139 1.71(1) 1.71(1) 5.94(1) 147(2) (0.55) -- $17.25 0.99% -- $ 23,976 0.65% 0.85% 2.62% 41% (0.66) -- 17.63 9.47 -- 30,722 0.51 0.92 3.67 43 (0.73) -- 16.75 6.98 -- 18,429 0.50 0.94 4.46 35 (0.83) --(9) 16.37 4.37 3.76 19,970 0.47 1.02 4.49 22 (0.76) --(9) 16.50 2.49 -- 20,235 0.48 0.94 3.76 71 (0.51) -- $17.25 0.74% -- $ 13,213 0.90% 1.05% 2.38% 41% (0.63) -- 17.63 9.20 -- 14,289 0.76 1.12 3.36 43 (0.69) -- 16.75 6.72 -- 4,261 0.75 1.13 4.22 35 (0.79) --(9) 16.36 4.11 3.50 6,118 0.74 1.21 4.24 22 (0.72) --(9) 16.50 2.23 -- 2,480 0.73 1.19 3.58 71 (0.42) -- $10.84 17.76% -- $ 55,189 0.60% 0.76% 4.11% 101% (0.45) -- 9.58 (7.04) -- 82,418 0.60 0.72 4.17 73 (0.53) -- 10.78 3.43 -- 158,834 0.60 0.69 4.01 39 (0.72) --(9) 10.93 4.45 4.26 203,378 0.51 0.68 4.24 76 (0.49) -- 11.16 2.19 -- 229,320 0.39 0.67 4.38 46
See Notes to Financial Statements 89 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ---------------- INTERMEDIATE TAX-EXEMPT BOND FUND (CONTINUED) CLASS A 1/1/09 to 12/31/09 $ 9.58 0.40(7) 1.26 -- 1.66 (0.40) -- -- 1/1/08 to 12/31/08 10.78 0.41(7) (1.18) -- (0.77) (0.42) (0.01) -- 1/1/07 to 12/31/07 10.93 0.41(7) (0.06) -- 0.35 (0.41) (0.09) -- 1/1/06 to 12/31/06 11.16 0.44(7) 0.01 0.02 0.47 (0.46) (0.22) (0.02) 1/1/05 to 12/31/05 11.41 0.47 (0.25) -- 0.22 (0.47) -- -- CLASS C 1/1/09 to 12/31/09 $ 9.58 0.32(7) 1.26 -- 1.58 (0.32) -- -- 1/1/08 to 12/31/08 10.78 0.33(7) (1.18) -- (0.85) (0.34) (0.01) -- 1/1/07 to 12/31/07 10.94 0.33(7) (0.07) -- 0.26 (0.33) (0.09) -- 6/26/06 (inception) to 12/31/06 10.91 0.18(7) 0.25 -- 0.43 (0.18) (0.22) -- SHORT/INTERMEDIATE BOND FUND CLASS I 1/1/09 to 12/31/09 $ 9.41 0.44(7) 0.80 -- 1.24 (0.44) -- -- 1/1/08 to 12/31/08 10.05 0.43(7) (0.64) -- (0.21) (0.43) -- -- 1/1/07 to 12/31/07 10.03 0.43(7) 0.02 -- 0.45 (0.43) -- -- 1/1/06 to 12/31/06 10.04 0.41(7) 0.01 0.02 0.44 (0.43) -- (0.02) 1/1/05 to 12/31/05 10.29 0.39 (0.25) -- 0.14 (0.39) -- -- CLASS A 1/1/09 to 12/31/09 $ 9.41 0.41(7) 0.79 -- 1.20 (0.41) -- -- 1/1/08 to 12/31/08 10.05 0.41(7) (0.64) -- (0.23) (0.41) -- -- 1/1/07 to 12/31/07 10.03 0.41(7) 0.02 -- 0.43 (0.41) -- -- 1/1/06 to 12/31/06 10.04 0.38(7) 0.01 0.02 0.41 (0.40) -- (0.02) 1/1/05 to 12/31/05 10.29 0.36 (0.25) -- 0.11 (0.36) -- -- CLASS C 1/1/09 to 12/31/09 $ 9.41 0.34(7) 0.80 -- 1.14 (0.34) -- -- 1/1/08 to 12/31/08 10.05 0.33(7) (0.64) -- (0.31) (0.33) -- -- 1/1/07 to 12/31/07 10.03 0.34(7) 0.01 -- 0.35 (0.33) -- -- 6/26/06 (inception) to 12/31/06 9.80 0.16(7) 0.23 -- 0.39 (0.16) -- -- TAX-EXEMPT BOND FUND CLASS I 1/1/09 to 12/31/09 $ 9.32 0.45(7) 1.23 -- 1.68 (0.45) -- -- 1/1/08 to 12/31/08 10.36 0.45(7) (1.03) -- (0.58) (0.45) (0.01) -- 1/1/07 to 12/31/07 10.49 0.44(7) (0.09) -- 0.35 (0.44) (0.04) -- 1/1/06 to 12/31/06 10.74 0.47(7) 0.02 0.02 0.51 (0.49) (0.25) (0.02) 1/1/05 to 12/31/05 11.02 0.50 (0.20) -- 0.30 (0.50) (0.08) -- CLASS A 1/1/09 to 12/31/09 $ 9.32 0.43(7) 1.23 -- 1.66 (0.43) -- -- 1/1/08 to 12/31/08 10.36 0.42(7) (1.02) -- (0.60) (0.43) (0.01) -- 1/1/07 to 12/31/07 10.50 0.41(7) (0.09) -- 0.32 (0.41) (0.05) -- 1/1/06 to 12/31/06 10.74 0.43(7) 0.05 0.02 0.50 (0.47) (0.25) (0.02) 1/1/05 to 12/31/05 11.02 0.47 (0.20) -- 0.27 (0.47) (0.08) --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 90
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3)(8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ------------ --------- (0.40) -- $10.84 17.46% -- $ 22,130 0.85% 0.96% 3.79% 101% (0.43) -- 9.58 (7.28) -- 12,617 0.85 0.92 3.94 73 (0.50) -- 10.78 3.27 -- 15,647 0.85 0.89 3.77 39 (0.70) --(9) 10.93 4.10 3.91 18,293 0.83 0.88 3.93 76 (0.47) -- 11.16 1.93 -- 1,802 0.64 0.92 4.13 46 (0.32) -- $10.84 16.69% -- $ 4,202 1.60% 1.70% 2.89% 101% (0.35) -- 9.58 (8.07) -- 555 1.60 1.67 3.21 73 (0.42) -- 10.78 2.39 -- 428 1.60 1.63 3.00 39 (0.40) -- 10.94 3.92(2) -- 125 1.61(1) 1.63(1) 3.14(1) 76(2) (0.44) -- $10.21 13.39% -- $ 80,733 0.70% 0.83% 4.46% 21% (0.43) -- 9.41 (2.16) -- 116,639 0.70 0.80 4.36 46 (0.43) -- 10.05 4.59 -- 214,669 0.70 0.77 4.30 35 (0.45) --(9) 10.03 4.25 4.06 245,073 0.63 0.84 4.09 44 (0.39) -- 10.04 1.36 -- 257,274 0.57 0.92 3.80 46 (0.41) -- $10.20 13.00% -- $ 8,176 0.95% 1.03% 4.08% 21% (0.41) -- 9.41 (2.41) -- 3,996 0.95 1.00 4.13 46 (0.41) -- 10.05 4.33 -- 4,526 0.95 0.97 4.05 35 (0.42) --(9) 10.03 3.99 3.80 5,956 0.91 1.04 3.83 44 (0.36) -- 10.04 1.10 -- 3,707 0.82 1.17 3.55 46 (0.34) -- $10.21 12.26% -- $ 5,121 1.70% 1.78% 3.29% 21% (0.33) -- 9.41 (3.13) -- 1,350 1.70 1.76 3.44 46 (0.33) -- 10.05 3.56 -- 321 1.70 1.72 3.34 35 (0.16) -- 10.03 3.96(2) -- 159 1.70(1) 1.73(1) 3.03(1) 44(2) (0.45) -- $10.55 18.26% -- $ 25,394 0.60% 0.78% 4.46% 91% (0.46) -- 9.32 (5.62) -- 41,662 0.60 0.75 4.49 111 (0.48) -- 10.36 3.45 -- 69,482 0.60 0.72 4.21 71 (0.76) --(9) 10.49 4.67 4.44 78,796 0.54 0.76 4.38 83 (0.58) -- 10.74 2.76 -- 75,285 0.45 0.74 4.55 42 (0.43) -- $10.55 17.96% -- $ 59,226 0.85% 0.98% 4.19% 91% (0.44) -- 9.32 (5.85) -- 49,160 0.85 0.95 4.25 111 (0.46) -- 10.36 3.09 -- 60,147 0.85 0.93 3.96 71 (0.74) --(9) 10.50 4.51 4.28 77,135 0.85 0.95 3.97 83 (0.55) -- 10.74 2.50 -- 4,197 0.70 0.99 4.30 42
See Notes to Financial Statements 91 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED PAYMENT FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ BY FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) AFFILIATE ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- --------- ---------------- ---------- ---------- ------------- ---------------- TAX-EXEMPT BOND FUND (CONTINUED) CLASS C 1/1/09 to 12/31/09 $ 9.33 0.35(7) 1.23 -- -- 1.58 (0.35) -- -- 1/1/08 to 12/31/08 10.36 0.35(7) (1.02) -- -- (0.67) (0.35) (0.01) -- 1/1/07 to 12/31/07 10.50 0.34(7) (0.10) -- -- 0.24 (0.33) (0.05) -- 6/26/06 (inception) to 12/31/06 10.49 0.18(7) 0.26 -- -- 0.44 (0.18) (0.25) -- INSIGHT GOVERNMENT MONEY MARKET FUND CLASS I 1/1/09 to 12/31/09 $ 1.00 --(9) --(9) -- -- --(9) --(9) --(9) -- 1/1/08 to 12/31/08 1.00 0.02 --(9) -- -- 0.02 (0.02) -- -- 1/1/07 to 12/31/07 1.00 0.05 --(9) -- -- 0.05 (0.05) --(9) -- 1/1/06 to 12/31/06 1.00 0.05 -- -- -- 0.05 (0.05) -- -- 1/1/05 to 12/31/05 1.00 0.03 -- -- -- 0.03 (0.03) -- -- CLASS A(5) 1/1/09 to 12/31/09 $ 1.00 --(9) --(9) -- -- --(9) --(9) --(9) -- 1/1/08 to 12/31/08 1.00 0.02 --(9) -- -- 0.02 (0.02) -- -- 1/1/07 to 12/31/07 1.00 0.05 -- -- -- 0.05 (0.05) --(9) -- 1/1/06 to 12/31/06 1.00 0.05 -- -- --(9) 0.05 (0.05) -- --(9) 1/1/05 to 12/31/05 1.00 0.03 -- -- -- 0.03 (0.03) -- -- INSIGHT MONEY MARKET FUND CLASS I 1/1/09 to 12/31/09 $ 1.00 0.01 --(9) -- -- 0.01 (0.01) --(9) -- 1/1/08 to 12/31/08 1.00 0.03 --(9) --(9) -- 0.03 (0.03) -- -- 1/1/07 to 12/31/07 1.00 0.05 -- -- -- 0.05 (0.05) -- -- 1/1/06 to 12/31/06 1.00 0.05 -- -- -- 0.05 (0.05) -- -- 1/1/05 to 12/31/05 1.00 0.03 -- -- -- 0.03 (0.03) -- -- CLASS A(5) 1/1/09 to 12/31/09 $ 1.00 --(9) --(9) -- -- --(9) --(9) --(9) -- 1/1/08 to 12/31/08 1.00 0.02 --(9) --(9) -- 0.02 (0.02) -- -- 1/1/07 to 12/31/07 1.00 0.05 -- -- -- 0.05 (0.05) -- -- 1/1/06 to 12/31/06 1.00 0.05 -- -- --(9) 0.05 (0.05) -- --(9) 1/1/05 to 12/31/05 1.00 0.03 -- -- -- 0.03 (0.03) -- --
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 92
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3)(8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ------------ --------- (0.35) -- $10.56 17.18% -- $ 6,175 1.60% 1.72% 3.33% 91% (0.36) -- 9.33 (6.57) -- 1,469 1.60 1.70 3.56 111 (0.38) -- 10.36 2.33 -- 749 1.60 1.68 3.26 71 (0.43) -- 10.50 4.16(2) -- 188 1.61(1) 1.68(1) 3.20(1) 83(2) --(9) -- $ 1.00 0.30% -- $ 131,990 0.24% 0.29% 0.31% N/A (0.02) -- 1.00 2.25 -- 428,314 0.21 0.26 2.12 N/A (0.05) -- 1.00 5.07 -- 279,393 0.19 0.24 4.94 N/A (0.05) -- 1.00 4.92 -- 312,535 0.24 0.29 4.91 N/A (0.03) -- 1.00 3.06 -- 215,132 0.20 0.25 3.00 N/A --(9) -- $ 1.00 0.09% -- $ 168,054 0.46% 0.59% 0.09% N/A (0.02) -- 1.00 1.89 -- 229,729 0.56 0.56 1.84 N/A (0.05) -- 1.00 4.71 -- 207,943 0.54 0.54 4.59 N/A (0.05) -- 1.00 4.76 4.56 238,247 0.57 0.60 4.46 N/A (0.03) -- 1.00 2.70 -- 262,512 0.55 0.60 2.65 N/A (0.01) -- $ 1.00 0.62%(10) -- $2,054,581 0.23% 0.28% 0.52% N/A (0.03) -- 1.00 2.82(6) -- 1,619,040 0.19 0.24 2.86 N/A (0.05) -- 1.00 5.28 -- 2,805,101 0.18 0.24 5.16 N/A (0.05) -- 1.00 5.04 -- 2,437,872 0.17 0.24 4.90 N/A (0.03) -- 1.00 3.15 -- 3,724,311 0.17 0.25 3.16 N/A --(9) -- $ 1.00 0.31%(10) -- $ 532,034 0.55% 0.59% 0.26% N/A (0.02) -- 1.00 2.47(6) -- 706,353 0.54 0.55 2.52 N/A (0.05) -- 1.00 4.91 -- 1,169,249 0.53 0.54 4.80 N/A (0.05) -- 1.00 4.93 4.68 880,851 0.52 0.56 4.58 N/A (0.03) -- 1.00 2.80 -- 920,774 0.52 0.60 2.72 N/A
See Notes to Financial Statements 93 VIRTUS INSIGHT TRUST FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET DISTRIBUTIONS NET REALIZED NON-RECURRING FROM ASSET NET AND PAYMENT TOTAL DIVIDENDS DISTRIBUTIONS NON-RECURRING VALUE, INVESTMENT UNREALIZED FROM FROM FROM NET FROM NET PAYMENT BEGINNING INCOME GAIN/ FORMER INVESTMENT INVESTMENT REALIZED FROM FORMER OF PERIOD (LOSS) (LOSS) ADMINISTRATOR(8) OPERATIONS INCOME GAINS ADMINISTRATOR(8) --------- ---------- ---------- ---------------- ---------- ---------- ------------- ---------------- INSIGHT TAX-EXEMPT MONEY MARKET FUND CLASS I 1/1/09 to 12/31/09 $1.00 --(9) --(9) -- --(9) --(9) --(9) -- 1/1/08 to 12/31/08 1.00 0.02 --(9) -- 0.02 (0.02) --(9) -- 1/1/07 to 12/31/07 1.00 0.04 -- -- 0.04 (0.04) -- -- 1/1/06 to 12/31/06 1.00 0.03 -- --(9) 0.03 (0.03) -- --(9) 1/1/05 to 12/31/05 1.00 0.02 -- -- 0.02 (0.02) -- -- CLASS A(5) 1/1/09 to 12/31/09 $1.00 --(9) --(9) -- --(9) --(9) --(9) -- 1/1/08 to 12/31/08 1.00 0.02 --(9) -- 0.02 (0.02) --(9) -- 1/1/07 to 12/31/07 1.00 0.03 -- -- 0.03 (0.03) -- -- 1/1/06 to 12/31/06 1.00 0.03 -- --(9) 0.03 (0.03) -- --(9) 1/1/05 to 12/31/05 1.00 0.02 -- -- 0.02 (0.02) -- --
FOOTNOTE LEGEND : (1) Annualized. (2) Not annualized. (3) Sales charges, where applicable, are not reflected in total return calculation. (4) Fund assessed a redemption fee in the amount of 2.00% on redemptions of shares that were held 90 days or less (30 days or less, effective June 4, 2004) from time of purchase. Fees collected were retained by the Fund for the benefit of the remaining shareholders. (5) For period ended 12/31/05 and prior periods information represents the N Shares which converted to Class A on June 26, 2006. (6) Total return includes the effect of a payment by affiliate. Without this effect, the total return would have been 2.27% for Class I shares and 1.91% for Class A shares. Please refer to Note 3H in the Notes to Financial Statements. (7) Computed using average shares outstanding. (8) Non-recurring payment. Represents reimbursements for fees paid in excess of fee agreements. (9) Amount is less than $0.005. (10) The Insight Money Market Fund received $3,642 (in thousands) in distributions from the Tyco International Ltd. Securities Litigation Settlement proceeds. If these proceeds had not been received, the total return would have been lower by 0.11% and 0.07% for Class I and Class A, respectively. See Notes to Financial Statements 94
TOTAL RETURN RATIO OF RATIO OF RATIO OF NET REDEMPTION NET EXCLUDING NET NET GROSS INVESTMENT FEES ASSET NON-RECURRING ASSETS, OPERATING OPERATING INCOME ADDED TO VALUE, PAYMENT END OF EXPENSES TO EXPENSES TO PORTFOLIO TOTAL PAID-IN END OF TOTAL FROM FORMER PERIOD AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER DISTRIBUTIONS CAPITAL(4) PERIOD RETURN(3) ADMINISTRATOR(3)(8) (IN THOUSANDS) ASSETS NET ASSETS ASSETS RATE - ------------- ---------- ------ --------- ------------------- -------------- ----------- ---------- ------------ --------- --(9) -- $1.00 0.36% -- $ 844,557 0.22% 0.27% 0.37% N/A (0.02) -- 1.00 2.22 -- 1,190,802 0.20 0.25 2.16 N/A (0.04) -- 1.00 3.52 -- 1,067,153 0.19 0.24 3.46 N/A (0.03) -- 1.00 3.41 3.31 1,079,743 0.18 0.25 3.26 N/A (0.02) -- 1.00 2.23 -- 1,035,130 0.22 0.25 2.22 N/A --(9) -- $1.00 0.09% -- $ 199,472 0.50% 0.57% 0.09% N/A (0.02) -- 1.00 1.86 -- 224,685 0.55 0.55 1.82 N/A (0.03) -- 1.00 3.16 -- 219,625 0.53 0.53 3.11 N/A (0.03) -- 1.00 3.18 2.95 217,664 0.57 0.59 2.88 N/A (0.02) -- 1.00 1.87 -- 257,842 0.57 0.60 1.87 N/A
See Notes to Financial Statements 95 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 1. ORGANIZATION Virtus Insight Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. Currently, fourteen funds are offered for sale (each a "Fund"). Each Fund's investment objective is outlined on the respective Fund's summary page. All of the Funds offer Class I shares, and Class A shares. All the Funds with the exception of Intermediate Government Bond Fund and the Money Market Funds offer Class C shares. The Insight Money Market Fund also offers the Exchange shares. As of December 31, 2009, there were no shareholders of Exchange shares in the Insight Money Market Fund. Class A shares of the Equity Funds are sold with a front-end sales charge of up to 5.75% with some exceptions. Class A shares of the Fixed Income Funds are sold with a front-end sales charge of up to 4.75% with some exceptions. Class A shares of the Money Market Funds are sold without a front-end sales charge. Generally, Class A shares are not subject to any charges by the funds when redeemed; however, a 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within one year following purchases on which a finder's fee has been paid. The one year period begins on the last day of the month preceding the month in which the purchase was made. Class C shares are sold with a 1% contingent deferred sales charge if redeemed within one year of purchase. Class I shares and Exchange 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. 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 Funds in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price. Debt securities (not including securities held by the Money Market Funds) 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 the sale of the securities. As required, some securities and assets may be valued at fair value as determined in good faith by or under the direction of the Trustees. Certain foreign common stocks may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the NYSE) that may impact the value of securities traded in those foreign markets. In such cases, information from an external vendor may be utilized to adjust closing market prices of certain foreign common stocks to reflect their fair value. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. 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 Money Market Funds use the amortized cost method of security valuation absent extraordinary or unusual market conditions. In the opinion of the Trustees, this represents the fair value of the securities. The Trustees monitor the deviations between the Money Market Funds' net asset value per share as determined by using available market quotations and its net asset value per share using amortized cost. If the deviation exceeds 1/2 of 1%, the Board of Trustees will consider what action, if any, should be initiated to provide fair valuation. Using this method, the Money Market Funds attempt to maintain a constant net asset value of $1 per share. 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 each Fund's net assets by each major security type, is disclosed at the end of the Schedules of Investments for each Fund. 96 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities may be valued using amortized cost, in accordance with the Investment Company Act of 1940. Generally, amortized cost reflects the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities valuation are reflected as Level 2. 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, except the Money Market Funds which use the straight line 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 amount. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund in the Trust to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Trust may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Each Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which they invest. 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 December 31, 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 Money Market Funds and the Fixed Income Funds are income distributions are declared and recorded daily and distributed monthly. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more appropriately made. In addition to the Net Annual Operating Expenses that the Funds bear directly, the shareholders of the Funds indirectly bear the pro-rata expenses of the underlying mutual funds in which certain funds invest. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures about derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. 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 97 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 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 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. The following is a summary of the Emerging Market Fund's derivative instrument holdings categorized by primary risk exposure as of December 31, 2009 ($ reported in thousands):
FOREIGN EXCHANGE CONTRACTS TOTAL VALUE ---------------- Liability Derivatives Fair Value(1) ......................... $(1,224) Realized Gain (Loss) on Derivatives Recognized in Results from Operations(2) ............................... $(2,380) Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Results from Operations(3) ..... $(1,224) -------
(1) Located within Net unrealized depreciation on forward currency contracts on the Statement of Assets and Liabilities. (2) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (3) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. For open forward currency contracts as of December 31, 2009, see the Schedule of Investments, which is also indicative of activity for the year ended December 31, 2009. H. REPURCHASE AGREEMENTS: Certain Funds 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. I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: Certain Funds may engage in when-issued or delayed delivery transactions. Each Fund records when-issued and delayed delivery securities on the trade date. Each Fund maintains collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date. J. INTEREST-ONLY AND PRINCIPAL-ONLY SECURITIES: Certain Funds may invest in stripped mortgage-backed securities. Stripped mortgage-backed securities represent a participation in, or are secured by, or payable from, mortgage loans on real property, and may be structured in classes with rights to receive varying proportions of principal and interest. Stripped mortgage-backed securities include interest-only securities (IOs) which receive all of the interest, and principal-only securities (POs) which receive all of the principal. The market value of these securities is highly sensitive to changes in interest rates and a rapid (slow) rate of principal payments may have an adverse (positive) effect on yield to maturity. Payments received for IOs are included in interest income. Because principal will not be received at the maturity of an IO, adjustments are made to the book value of the security on a daily basis until maturity and these adjustments are also included in interest income. Payments received for POs are treated as reductions to the cost and par value of the securities. Any pay down gains or losses associated with the payments received are included in interest income. If the underlying mortgage assets are greater than anticipated payments of principal, a Fund may fail to recoup some or all of its initial investment in these securities. 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. The Adviser manages the Funds' investment program and general operations of the Funds, including oversight of the Funds' subadvisers. As compensation for its services to the Trust, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund: Balanced Allocation Fund ................... 0.50% Core Equity Fund ........................... 0.70% Disciplined Small-Cap Opportunity Fund ..... 0.75% Disciplined Small-Cap Value Fund ........... 0.70% Emerging Markets Opportunities Fund ........ 1.00% Value Equity Fund .......................... 0.70% High Yield Income Fund ..................... 0.45% Intermediate Government Bond Fund .......... 0.45% Intermediate Tax-Exempt Bond Fund .......... 0.45% Short/Intermediate Bond Fund ............... 0.55% Tax-Exempt Bond Fund ....................... 0.45%
As compensation for its services to the Insight Government Money Market Fund, the Insight Money Market Fund and the Insight Tax-Exempt Money Market Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of each Fund's average daily net assets: 0.14% of each Fund's first $100 million of net assets, plus 0.10% of the Fund's remaining net assets. 98 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 B. SUBADVISER: The subadvisers manage the investments of the Funds for which they are paid a fee by the Adviser. Harris Investment Management, Inc. ("HIM"), a subsidiary of Harris Bankcorp, Inc., serves as the subadviser for all Funds with the exception of the Emerging Markets Opportunities Fund and the High Yield Income Fund. Vontobel Asset Management, Inc. ("Vontobel") is the subadviser for the Emerging Markets Opportunities Fund and SCM Advisers LLC ("SCM"), an indirect wholly-owned subsidiary of Virtus, is the subadviser for the High Yield Income Fund. C. EXPENSE LIMITS AND FEE WAIVERS: The Adviser has voluntarily agreed to limit certain Fund's operating expenses (excluding acquired fund fees and expenses, interest, taxes, and extraordinary expenses), so that such expenses do not exceed the following percentages of average annual net assets of each Fund:
CLASS I(1) CLASS A CLASS C ---------- ------- ------- Intermediate Government Bond Fund ..... 0.70% 0.90% -- Intermediate Tax-Exempt Bond Fund ..... 0.65% 0.85% 1.60% Short/Intermediate Bond Fund .......... 0.75% 0.95% 1.70% Tax-Exempt Bond Fund .................. 0.65% 0.85% 1.60%
The Adviser may discontinue these voluntary expense caps at any time. (1) These percentages do not include the waiver of the Class I Shares' shareholder servicing fees of 0.05% for each Fund. The Funds' distributor has voluntarily agreed to waive this fee. The distributor may discontinue this waiver at any time. 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 as follows:
FISCAL YEAR ENDED -------------------------- 2010 2011 2012 TOTAL ---- ---- ---- ----- Intermediate Government Bond Fund ..... $26 $107 $ 66 $199 Intermediate Tax-Exempt Bond Fund ..... 18 99 94 211 Short/Intermediate Bond Fund .......... 4 88 83 175 Tax-Exempt Bond Fund .................. 28 115 108 251 Insight Money Market Fund ............. 77 226 -- 303
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 fiscal year ended December 31, 2009, it received net commissions of $44,486 and deferred sales charges of $32 of Class A Shares and deferred sales charges of $7,407 for Class C Shares. 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 I shares 0.25%(1); Class A shares (Non Money Market Funds) 0.25%; Class A shares Money Market Funds 0.35%(2); Class C shares 1.00%; Exchange shares 0.05%(1). 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 Funds' distributor has voluntarily agreed to waive the Funds' Class I Shares' and Exchange Shares' Shareholder servicing fee. The distributor may discontinue this voluntary waiver at any time. (2) The Funds' distributor may from time to time temporarily waive all or a portion of the distribution fees or service fees on Class A shares of the Money Market Funds in order to maintain a Fund's current annualized yield at or above 0.01% (1 basis point). If waived, the distribution and/or service fees may be reinstated at any time. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Trust. For the period ending December 31, 2009, the Trust incurred administration fees totaling $2,328. VP Distributors also serves as the Trust's transfer agent. For the period ended December 31, 2009, transfer agent fees were $1,281 as reported in the Statement of Operations. 99 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 F. AFFILIATED SHAREHOLDERS: At December 31, 2009, Virtus and its affiliates, Harris Bankcorp, Inc. (a minority investor in Virtus) and its affiliates, and the retirement plans of Virtus and its affiliates held shares, which may be redeemed at any time, that aggregated the following:
AGGREGATE NET ASSET SHARES VALUE ------------- ---------- Balanced Allocation Fund, Class A ............................ 2,995 $ 36 Core Equity Fund, Class I ............................ 2,799,930 45,723 Class C ............................ 5,914 94 Disciplined Small-Cap Opportunity Fund, Class I ............................ 1,245,841 12,882 Class A ............................ 12,735 124 Disciplined Small-Cap Value Fund, Class I ............................ 327,228 8,145 Class A ............................ 8,093 199 Emerging Markets Opportunities Fund, Class I ............................ 868,003 6,224 Class C ............................ 19,993 138 Value Equity Fund, Class I ............................ 3,367,450 32,765 Class A ............................ 8,023 79 High Yield Income Fund, Class I ............................ 332,039 3,387 Class C ............................ 10,695 109
AGGREGATE NET ASSET SHARES VALUE ------------- ---------- Intermediate Government Bond Fund, Class I ............................ 45,372 $ 783 Intermediate Tax-Exempt Bond Fund, Class I ............................ 3,875,144 42,007 Class C ............................ 10,528 114 Short/Intermediate Bond Fund, Class I ............................ 2,002,717 20,448 Tax-Exempt Bond Fund, Class I ............................ 1,442,289 15,216 Insight Government Money Market Fund, Class I ............................ 108,735,039 108,735 Class A ............................ 158,996,362 158,996 Insight Money Market Fund, Class I ............................ 1,302,181,713 1,302,182 Class A ............................ 447,865,360 447,865 Insight Tax-Exempt Money Market Fund, Class I ............................ 816,745,684 816,746 Class A ............................ 198,276,357 198,276
G. TRUSTEE COMPENSATION: The Trust provided a deferred compensation plan for its independent trustees which allowed its trustees to defer receipt of all or 50% of their compensation. Amounts deferred were retained by the Funds and to the extent permitted by the 1940 Act, as amended, were invested in the shares of funds selected by the trustees. One trustee participated in this plan and has elected to receive distributions over a five year period ending in May 2010. The undistributed remaining balance invested in the funds is included in "Other assets" on the Statement of Assets and Liabilities at December 31, 2009. H. OTHER: On September 15, 2008, HIM, the subadviser to the Insight Money Market Fund, purchased one short-term note from the Insight Money Market Fund. This note was purchased at a price equal to the note's par totaling $30,000, of which $19,500 was a contribution from the subadviser representing the amount in excess of the estimated value of the note determined in good faith. 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities for all Funds except the Money Market Funds (excluding U.S. Government securities and agency securities, forward currency contracts, futures and short-term securities) during the period ended December 31, 2009, were as follows:
PURCHASES SALES --------- -------- Balanced Allocation Fund ................. $ 26,987 $ 26,218 Core Equity Fund ......................... 67,155 73,756 Disciplined Small-Cap Opportunity Fund ... 75,723 78,150 Disciplined Small-Cap Value Fund ......... 71,043 88,979 Emerging Markets Opportunities Fund ...... 206,775 78,406 Value Equity Fund ........................ 101,712 126,422 High Yield Income Fund ................... 46,295 43,451 Intermediate Government Bond Fund ........ 6,041 1,084 Intermediate Tax-Exempt Bond Fund ........ 82,155 109,449 Short/Intermediate Bond Fund ............. 10,882 42,123 Tax-Exempt Bond Fund ..................... 76,517 89,480
Purchases and sales of long-term U.S. Government and agency securities for Funds except the Money Market Funds during the period ended December 31, 2009, were as follows:
PURCHASES SALES --------- -------- Balanced Allocation Fund ................. $ 4,095 $ 5,532 High Yield Income Fund ................... 423 426 Intermediate Government Bond Fund ........ 11,332 18,227 Short/Intermediate Bond Fund ............. 10,078 15,786
100 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 5. CAPITAL SHARES (REPORTED IN THOUSANDS) Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:
SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------ ------------------ BALANCED ALLOCATION FUND CLASS I Sale of shares 517 $ 5,606 494 $ 6,292 Reinvestment of distributions 96 1,046 110 1,350 Shares repurchased (719) (7,531) (1,159) (14,354) ------ -------- ------ -------- Net Increase / (Decrease) (106) $ (879) (555) $ (6,712) ====== ======== ====== ======== CLASS A Sale of shares 67 $ 717 95 $ 1,141 Reinvestment of distributions 12 132 13 163 Shares repurchased (103) (1,110) (249) (3,232) ------ -------- ------ -------- Net Increase / (Decrease) (24) $ (261) (141) $ (1,928) ====== ======== ====== ======== CLASS C Sale of shares 6 $ 66 28 $ 292 Reinvestment of distributions --(1) 3 --(1) 2 Shares repurchased (16) (180) (3) (39) ------ -------- ------ -------- Net Increase / (Decrease) (10) $ (111) 25 $ 255 ====== ======== ====== ======== CORE EQUITY FUND CLASS I Sale of shares 983 $ 13,602 975 $ 17,353 Reinvestment of distributions 13 190 57 1,033 Shares repurchased (1,644) (23,346) (1,374) (22,629) ------ -------- ------ -------- Net Increase / (Decrease) (648) $ (9,554) (342) $ (4,243) ====== ======== ====== ======== CLASS A Sale of shares 248 $ 3,527 74 $ 1,198 Reinvestment of distributions 1 19 7 124 Shares repurchased (124) (1,715) (138) (2,357) ------ -------- ------ -------- Net Increase / (Decrease) 125 $ 1,831 (57) $ (1,035) ====== ======== ====== ======== CLASS C Sale of shares 10 $ 144 59 $ 837 Reinvestment of distributions -- -- --(1) 2 Shares repurchased (26) (338) (25) (397) ------ -------- ------ -------- Net Increase / (Decrease) (16) $ (194) 34 $ 442 ====== ======== ====== ========
(1) Amount less than 500. 101 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009
SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------ ------------------ DISCIPLINED SMALL-CAP OPPORTUNITY FUND CLASS I Sale of shares 1,915 $ 16,567 319 $ 3,560 Reinvestment of distributions 1 8 -- -- Shares repurchased (1,588) (13,344) (2,789) (32,585) ------ -------- ------ -------- Net Increase / (Decrease) 328 $ 3,231 (2,470) $(29,025) ====== ======== ====== ======== CLASS A Sale of shares 191 $ 1,332 424 $ 4,525 Reinvestment of distributions -- -- -- -- Shares repurchased (1,064) (8,072) (1,810) (20,063) ------ -------- ------ -------- Net Increase / (Decrease) (873) $ (6,740) (1,386) $(15,538) ====== ======== ====== ======== CLASS C Sale of shares 9 $ 58 24 $ 289 Shares repurchased (11) (87) (8) (87) ------ -------- ------ -------- Net Increase / (Decrease) (2) $ (29) 16 $ 202 ====== ======== ====== ======== DISCIPLINED SMALL-CAP VALUE FUND CLASS I Sale of shares 386 $ 8,479 264 $ 6,850 Reinvestment of distributions 1 28 8 157 Shares repurchased (632) (12,403) (894) (25,493) ------ -------- ------ -------- Net Increase / (Decrease) (245) $ (3,896) (622) $(18,486) ====== ======== ====== ======== CLASS A Sale of shares 120 $ 2,463 116 $ 3,194 Reinvestment of distributions 2 37 --(1) 8 Plan of Reorganization (See Note 10 Plans of Reorganization) 2,242 38,974 -- -- Shares repurchased (742) (15,706) (583) (16,268) ------ -------- ------ -------- Net Increase / (Decrease) 1,622 $ 25,768 (467) $(13,066) ====== ======== ====== ======== CLASS C Sale of shares 6 $ 130 10 $ 286 Reinvestment of distributions --(1) 9 -- -- Plan of Reorganization (See Note 10 Plans of Reorganization) 789 13,468 -- -- Shares repurchased (128) (2,634) (9) (196) ------ -------- ------ -------- Net Increase / (Decrease) 667 $ 10,973 1 $ 90 ====== ======== ====== ========
(1) Amount less than 500. 102 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009
SHARES AMOUNT SHARES AMOUNT ------ -------- ------- -------- Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------ ------------------- EMERGING MARKETS OPPORTUNITIES FUND CLASS I Sale of shares 23,522 $139,002 3,368 $ 23,256 Reinvestment of distributions 352 2,214 1,398 10,424 Shares repurchased (4,449) (26,744) (11,542) (87,977) ------ -------- ------- -------- Net Increase / (Decrease) 19,425 $114,472 (6,776) $(54,297) ====== ======== ======= ======== CLASS A Sale of shares 5,736 $ 32,448 2,154 $ 14,626 Reinvestment of distributions 62 374 167 1,171 Shares repurchased (2,037) (11,865) (1,136) (8,291) ------ -------- ------- -------- Net Increase / (Decrease) 3,761 $ 20,957 1,185 $ 7,506 ====== ======== ======= ======== CLASS C Sale of shares 597 $ 3,644 62 $ 464 Reinvestment of distributions 1 7 4 30 Shares repurchased (54) (328) (40) (254) ------ -------- ------- -------- Net Increase / (Decrease) 544 $ 3,323 26 $ 240 ====== ======== ======= ======== VALUE EQUITY FUND CLASS I Sale of shares 2,131 $ 17,125 2,225 $ 25,265 Reinvestment of distributions 185 1,544 663 7,935 Shares repurchased (4,580) (39,455) (4,669) (50,550) ------ -------- ------- -------- Net Increase / (Decrease) (2,264) $(20,786) (1,781) $(17,350) ====== ======== ======= ======== CLASS A Sale of shares 374 $ 3,073 789 $ 8,715 Reinvestment of distributions 19 154 64 769 Shares repurchased (918) (8,021) (581) (6,384) ------ -------- ------- -------- Net Increase / (Decrease) (525) $ (4,794) 272 $ 3,100 ====== ======== ======= ======== CLASS C Sale of shares 1 $ 5 44 $ 416 Reinvestment of distributions --(1) 1 1 14 Shares repurchased (26) (214) (47) (529) ------ -------- ------- -------- Net Increase / (Decrease) (25) $ (208) (2) $ (99) ====== ======== ======= ======== HIGH YIELD INCOME FUND CLASS I Sale of shares 648 $ 6,048 455 $ 4,932 Reinvestment of distributions 341 3,209 336 3,433 Shares repurchased (538) (4,942) (1,053) (9,900) ------ -------- ------- -------- Net Increase / (Decrease) 451 $ 4,315 (262) $ (1,535) ====== ======== ======= ======== CLASS A Sale of shares 60 $ 559 45 $ 419 Reinvestment of distributions 23 207 34 350 Shares repurchased (421) (4,047) (113) (1,123) ------ -------- ------- -------- Net Increase / (Decrease) (338) $ (3,281) (34) $ (354) ====== ======== ======= ======== CLASS C Sale of shares 24 $ 230 2 $ 13 Reinvestment of distributions 1 9 1 7 Shares repurchased (1) (10) --(1) (1) ------ -------- ------- -------- Net Increase / (Decrease) 24 $ 229 3 $ 19 ====== ======== ======= ========
(1) Amount less than 500. 103 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009
SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------ ----------------- INTERMEDIATE GOVERNMENT BOND FUND CLASS I Sale of shares 603 $ 10,476 1,018 $ 17,330 Reinvestment of distributions 49 843 50 854 Shares repurchased (1,004) (17,365) (426) (7,193) ------ -------- ------ -------- Net Increase / (Decrease) (352) $ (6,046) 642 $ 10,991 ====== ======== ====== ======== CLASS A Sale of shares 528 $ 9,186 617 $ 10,615 Reinvestment of distributions 24 410 13 225 Shares repurchased (596) (10,309) (75) (1,265) ------ -------- ------ -------- Net Increase / (Decrease) (44) $ (713) 555 $ 9,575 ====== ======== ====== ======== INTERMEDIATE TAX-EXEMPT BOND FUND CLASS I Sale of shares 474 $ 4,901 1,432 $ 14,800 Reinvestment of distributions 56 578 70 724 Shares repurchased (4,044) (41,221) (7,629) (76,358) ------ -------- ------ -------- Net Increase / (Decrease) (3,514) $(35,742) (6,127) $(60,834) ====== ======== ====== ======== CLASS A Sale of shares 1,154 $ 12,169 716 $ 7,461 Reinvestment of distributions 20 208 19 198 Shares repurchased (450) (4,633) (869) (8,688) ------ -------- ------ -------- Net Increase / (Decrease) 724 $ 7,744 (134) $ (1,029) ====== ======== ====== ======== CLASS C Sale of shares 380 $ 4,043 35 $ 360 Reinvestment of distributions 2 26 1 10 Shares repurchased (53) (551) (18) (179) ------ -------- ------ -------- Net Increase / (Decrease) 329 $ 3,518 18 $ 191 ====== ======== ====== ======== SHORT/INTERMEDIATE BOND FUND CLASS I Sale of shares 316 $ 3,157 637 $ 6,316 Reinvestment of distributions 268 2,653 279 2,728 Shares repurchased (5,072) (49,574) (9,880) (96,009) ------ -------- ------ -------- Net Increase / (Decrease) (4,488) $(43,764) (8,964) $(86,965) ====== ======== ====== ======== CLASS A Sale of shares 706 $ 7,047 84 $ 833 Reinvestment of distributions 19 194 15 149 Shares repurchased (349) (3,505) (125) (1,214) ------ -------- ------ -------- Net Increase / (Decrease) 376 $ 3,736 (26) $ (232) ====== ======== ====== ======== CLASS C Sale of shares 467 $ 4,683 173 $ 1,673 Reinvestment of distributions 4 43 2 21 Shares repurchased (113) (1,125) (64) (614) ------ -------- ------ -------- Net Increase / (Decrease) 358 $ 3,601 111 $ 1,080 ====== ======== ====== ========
104 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009
SHARES AMOUNT SHARES AMOUNT ---------- ----------- ----------- ------------ Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------------ -------------------------- TAX-EXEMPT BOND FUND CLASS I Sale of shares 419 $ 4,397 726 $ 7,388 Reinvestment of distributions 21 214 29 285 Shares repurchased (2,502) (24,911) (2,996) (28,425) ---------- ----------- ----------- ------------ Net Increase / (Decrease) (2,062) $ (20,300) (2,241) $ (20,752) ========== =========== =========== ============ CLASS A Sale of shares 1,011 $ 10,593 612 $ 6,145 Reinvestment of distributions 122 1,241 139 1,372 Shares repurchased (794) (7,958) (1,287) (12,858) ---------- ----------- ----------- ------------ Net Increase / (Decrease) 339 $ 3,876 (536) $ (5,341) ========== =========== =========== ============ CLASS C Sale of shares 484 $ 5,051 167 $ 1,668 Reinvestment of distributions 5 47 2 20 Shares repurchased (61) (631) (84) (819) ---------- ----------- ----------- ------------ Net Increase / (Decrease) 428 $ 4,467 85 $ 869 ========== =========== =========== ============ INSIGHT GOVERNMENT MONEY MARKET FUND CLASS I Sale of shares 578,319 $ 578,319 854,160 $ 854,160 Reinvestment of distributions 67 67 260 260 Shares repurchased (874,722) (874,721) (705,501) (705,501) ---------- ----------- ----------- ------------ Net Increase / (Decrease) (296,336) $ (296,335) 148,919 $ 148,919 ========== =========== =========== ============ CLASS A Sale of shares 845,182 $ 845,182 1,246,659 $ 1,246,659 Reinvestment of distributions 278 278 4,442 4,442 Shares repurchased (907,143) (907,143) (1,229,315) (1,229,315) ---------- ----------- ----------- ------------ Net Increase / (Decrease) (61,683) $ (61,683) 21,786 $ 21,786 ========== =========== =========== ============ INSIGHT MONEY MARKET FUND CLASS I Sale of shares 3,352,047 $ 3,352,047 12,128,671 $ 12,128,671 Reinvestment of distributions 2,503 2,503 18,464 18,464 Shares repurchased (2,919,057) (2,919,057) (13,333,170) (13,333,170) ---------- ----------- ----------- ------------ Net Increase / (Decrease) 435,493 $ 435,493 (1,186,035) $ (1,186,035) ========== =========== =========== ============ CLASS A Sale of shares 1,603,022 $ 1,603,022 2,163,725 $ 2,163,725 Reinvestment of distributions 2,943 2,943 25,283 25,283 Plan of Reorganization (See Note 10 Plans of Reorganization) 75,977 75,950 -- -- Shares repurchased (1,856,679) (1,856,679) (2,651,915) (2,651,915) ---------- ----------- ----------- ------------ Net Increase / (Decrease) (174,737) $ (174,764) (462,907) $ (462,907) ========== =========== =========== ============ EXCHANGE SHARES Sale of shares 848,932 $ 848,932 3,233,953 $ 3,233,953 Reinvestment of distributions 645 645 8,867 8,867 Shares repurchased (1,022,123) (1,022,123) (3,432,899) (3,432,899) ---------- ----------- ----------- ------------ Net Increase / (Decrease) (172,546) $ (172,546) (190,079) $ (190,079) ========== =========== =========== ============
105 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009
SHARES AMOUNT SHARES AMOUNT ---------- ----------- ---------- ----------- Year Ended Year Ended December 31, 2009 December 31, 2008 ------------------------ ------------------------ INSIGHT TAX-EXEMPT MONEY MARKET FUND CLASS I Sale of shares 814,262 $ 814,262 1,653,349 $ 1,653,349 Reinvestment of distributions 6 6 56 56 Shares repurchased (1,160,473) (1,160,473) (1,529,918) (1,529,918) ---------- ----------- ---------- ----------- Net Increase / (Decrease) (346,205) $ (346,205) 123,487 $ 123,487 ========== =========== ========== =========== CLASS A Sale of shares 338,219 $ 338,219 448,573 $ 448,573 Reinvestment of distributions 251 250 3,901 3,901 Shares repurchased (363,674) (363,674) (447,459) (447,459) ---------- ----------- ---------- ----------- Net Increase / (Decrease) (25,204) $ (25,205) 5,015 $ 5,015 ========== =========== ========== ===========
106 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 6. 10% SHAREHOLDERS As of December 31, 2009, the 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 OUTSTANDING OF ACCOUNTS ----------- ----------- Balanced Allocation Fund ................. 86% 1 Core Equity Fund ......................... 82 3 Disciplined Small-Cap Opportunity Fund ... 54 2 Disciplined Small-Cap Value Fund ......... 27 2 Emerging Markets Opportunities Fund ...... 29 2 Value Equity Fund ........................ 45 1 High Yield Income Fund ................... 83 2 Intermediate Government Bond Fund ........ 56 1 Intermediate Tax-Exempt Bond Fund ........ 39 1 Short/Intermediate Bond Fund ............. 60 2 Tax-Exempt Bond Fund ..................... 11 1 Insight Government Money Market Fund ..... 81 3* Insight Money Market Fund ................ 50 1 Insight Tax-Exempt Money Market Fund ..... 91 2*
* Includes affiliated shareholder accounts. 7. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. 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. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that the market may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. Insured securities have been identified in the Schedule of Investments. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in the Funds. 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 December 31, 2009, certain Funds held securities issued by various companies in specific sectors or countries as detailed below:
PERCENTAGE OF TOTAL FUND SECTOR/COUNTRY INVESTMENTS ---- ---------------------- ----------- Disciplined Small-Cap Value Fund Financials 28% Emerging Markets Opportunities Fund Consumer Staples 31 High Yield Income Fund Consumer Discretionary 30
8. INDEMNIFICATIONS Under the Funds' organizational documents, its 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. 9. 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 noted 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. 107 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 At December 31, 2009, the Funds held the following illiquid and restricted securities:
PERCENTAGE OF ACQUISITION ACQUISITION MARKET VALUE AT NET ASSETS AT DATE COST DECEMBER 31, 2009 DECEMBER 31, 2009 ----------- ----------- ----------------- ----------------- BALANCED ALLOCATION FUND Structured Assets Securities Corp. (Interest Only) 98-RF3, A 144A 6.100%, 6/15/28.................................... 11/1/06 $ 8 $ 6 0.0% INTERMEDIATE GOVERNMENT BOND FUND Structured Assets Securities Corp. (Interest Only) 98-RF3, A 144A 6.100%, 6/15/28.................................... 11/1/06 58 50 0.1% SHORT/INTERMEDIATE BOND FUND DLJ Mortgage Acceptance Corp. 96-1 144A.......................................... 10/2/96 6 0.000%, 9/18/11.................................... 4/28/04 4 --- 10 7 0.0% Structured Assets Securities Corp. (Interest Only) 98-RF3, A 144A 6.100%, 6/15/28.................................... 11/1/06 138 125 0.1%
Each Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 10. PLANS OF REORGANIZATION (ALL AMOUNTS ARE REPORTED IN THOUSANDS) At the Board of Trustees meeting held on November 20, 2008, the Board of the Virtus Money Market Fund (the "Fund"), a series of the Virtus Opportunities Trust, approved an Agreement and Plan of Reorganization (the "Plan") which was subsequently approved by the shareholders of the Fund at a special meeting held on March 27, 2009, which provides for the transfer of all of the assets of the merged fund for shares of the acquiring fund and the assumption of the liabilities of the merged fund. The purpose of the transaction was to eliminate the offering of overlapping Funds with similar investment objectives and similar investment strategies within the Virtus Mutual Fund Complex, while simultaneously creating economies of scale for the surviving funds that were intended to lower fund expenses. The acquisition was accomplished by a tax-free exchange of shares on April 3, 2009. The share transaction associated with the merger is shown in Note 5 as Plan of Reorganization. For financial reporting purposes, assets received and shares issued by the Virtus Insight Money Market Fund were recorded at fair value; however, the cost basis of the investments received from the Virtus Money Market Fund was carried forward to align ongoing reporting of the Virtus Insight Money Market Fund's realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. The outstanding shares of the merged fund and the outstanding shares and value of the acquiring fund immediately before the acquisition were as follows:
MERGED ACQUIRING FUND SHARES FUND SHARES VALUE ---- ------ ----------------- ------ ------- Virtus Money Virtus Insight Market Fund Money Market Fund Class A 75,977 Class A 75,977 $75,950
The net assets, including net unrealized appreciation (depreciation) of the merged fund and the net assets of the acquiring fund immediately before the acquisitions, were as follows:
UNREALIZED MERGED NET APPRECIATION ACQUIRING NET FUND ASSETS (DEPRECIATION) FUND ASSETS ---- ------- -------------- ----------------- ---------- Virtus Money Virtus Insight Market Fund $75,950 $0 Money Market Fund $2,440,056
Assuming the acquisition had been completed on January 1, 2009, the Virtus Insight Money Market Fund's results of operations for the year ended December 31, 2009 are as follows: Net investment income (loss) $11,684(a) Net gain (loss) on investments $ 2,608(b) Net increase (decrease) in assets from operations $14,292
(a) $11,383, as reported in the Statement of Operations, plus $301 Net Investment Income from Virtus Money Market Fund pre-merger. (b) $2,604, as reported in the Statement of Operations, plus $4 Net Realized and Unrealized Gain (Loss) on Investments from Virtus Money Market Fund pre-merger. Because both the Virtus Money Market Fund and the Virtus Insight Money Market Fund sold and redeemed shares throughout the period, providing pro forma information on a per-share basis is not practicable. 108 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 On November 20, 2008, the Board of Trustees of the Virtus Equity Trust approved an Agreement and Plan of Reorganization (the "Plan") which provides for the transfer of all of the assets of the merged fund for shares of the acquiring fund and the assumption of the liabilities of the merged fund. The purpose of the transaction was to eliminate the offering of overlapping Funds with similar investment objectives and similar investment strategies within the Virtus Mutual Fund Complex, while simultaneously creating economies of scale for the surviving funds that were intended to lower fund expenses. The acquisition was accomplished by a tax-free exchange of shares on February 20, 2009. The share transactions associated with the Merger are shown in Note 5 as Plan of Reorganization. For financial reporting purposes, assets received and shares issued by the Virtus Disciplined Small-Cap Value Fund were recorded at fair value; however, the cost basis of the investments received from the Virtus Small-Cap Value Fund was carried forward to align ongoing reporting of the Virtus Disciplined Small-Cap Value Fund's realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. The outstanding shares of the merged fund and the outstanding shares and value of the acquiring fund immediately before the acquisition were as follows:
MERGED ACQUIRING FUND SHARES FUND SHARES VALUE ---- ------ -------------------- ------ ------- Virtus Small-Cap Virtus Disciplined Value Fund Small-Cap Value Fund Class A 6,185 Class A 2,242 $38,974 Class C 2,439 Class C 789 13,468
The net assets and net unrealized appreciation (depreciation) of the merged fund and the net assets of the acquiring fund immediately before the acquisitions were as follows:
UNREALIZED MERGED NET APPRECIATION ACQUIRING NET FUND ASSETS (DEPRECIATION) FUND ASSETS ---- ------- -------------- -------------------- ------- Virtus Small-Cap Virtus Disciplined Value Fund $52,442 $(22,809) Small-Cap Value Fund $53,531
Assuming the acquisition had been completed on January 1, 2009, the Virtus Disciplined Small-Cap Value Fund's results of operations for the year ended December 31, 2009, are as follows: Net investment income (loss) $ (25)(a) Net gain (loss) on investments $(17,433)(b) Net increase (decrease) in assets from operations $(17,458)
(a) $(65), as reported in the Statement of Operations, plus $40 Net Investment Income from the Small-Cap Value Fund pre-merger. (b) $26,082, as reported in the Statement of Operations, plus $(43,515) Net Realized and Unrealized Gain (Loss) on Investments from the Small-Cap Value Fund pre-merger. Because both the Virtus Small-Cap Value Fund and the Virtus Disciplined Small-Cap Value Fund sold and redeemed shares throughout the period, providing pro forma information on a per-share basis is not practicable. 11. FEDERAL TAX INFORMATION ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) At December 31, 2009, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by each Fund were as follows:
NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION FUND TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ---- ---------- ------------ -------------- -------------- Balanced Allocation Fund $ 59,181 $ 5,181 $ (3,566) $ 1,615 Core Equity Fund 83,351 10,543 (2,971) 7,572 Disciplined Small-Cap Opportunity Fund 76,043 11,719 (3,924) 7,795 Disciplined Small-Cap Value Fund 110,726 18,481 (3,519) 14,962 Emerging Markets Opportunities Fund 228,212 54,776 (1,017) 53,759 Value Equity Fund 164,426 12,726 (12,941) (215) High Yield Income Fund 40,548 2,995 (83) 2,912 Intermediate Government Bond Fund 36,136 1,186 (387) 799 Intermediate Tax-Exempt Bond Fund 83,254 2,823 (2,166) 657 Short/Intermediate Bond Fund 96,615 2,789 (6,449) (3,660) Tax-Exempt Bond Fund 85,807 5,855 (925) 4,930 Insight Government Money Market Fund 300,017 -- -- -- Insight Money Market Fund 2,586,950 -- -- -- Insight Tax-Exempt Money Market Fund 1,043,607 -- -- --
109 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 The Funds have capital-loss carryforwards available to offset future realized capital gains through the indicated expiration dates:
EXPIRING DECEMBER 31, ---------------------------------------------------------------------- 2010 2011 2013 2014 2015 2016 2017 TOTAL ------ ---- ------ ------ ------ ------- ------- ------- Balanced Allocation Fund .................... $ -- $ -- $ -- $ -- $ -- $ 1,856 $ 6,187 $ 8,043 Core Equity Fund ............................ -- -- -- -- -- 669 15,459 16,128 Disciplined Small-Cap Opportunity Fund ...... -- -- -- -- -- 8,965 39,188 48,153 Disciplined Small-Cap Value Fund ............ -- -- -- -- 1,965 33,951 32,147 68,063 Emerging Markets Opportunities Fund ......... -- -- -- -- -- 3,674 18,211 21,885 Value Equity Fund ........................... -- -- -- -- -- 4,384 29,091 33,475 High Yield Income Fund ...................... 2,846 -- -- 2,152 -- 7,285 6,501 18,784 Intermediate Tax-Exempt Bond Fund ........... -- -- -- -- -- 804 1,422 2,226 Short/Intermediate Bond Fund ................ 1,662 232 1,270 823 1,172 -- 1,169 6,328 Tax-Exempt Bond Fund ........................ -- -- -- -- -- 732 794 1,526 Insight Tax-Exempt Money Market Fund ........ -- -- -- -- -- -- 3 3
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. The High Yield Income Fund and the Disciplined Small-Cap Value Fund amounts include losses acquired in connection with mergers. Utilization of this capital loss carryover is subject to annual limitations. For the period ended December 31, 2009, the Funds utilized losses deferred in prior years against the current year capital gains as follows: Insight Government Money Market Fund ........ $ 2 Insight Money Market Fund ................... 587
The Disciplined Small-Cap Value Fund had $20,229 in capital loss carryforward which expired in 2009. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended December 31, 2009, the Funds deferred and recognized post-October losses as follows:
CAPITAL CAPITAL CURRENCY LOSS LOSS LOSS DEFERRED RECOGNIZED DEFERRED -------- ---------- -------- Balanced Allocation Fund .................... $ -- $ 2,083 $-- Core Equity Fund ............................ 810 7,207 -- Disciplined Small-Cap Opportunity Fund ...... 1,533 12,401 -- Disciplined Small-Cap Value Fund ............ 1,339 18,707 -- Emerging Markets Opportunities Fund ......... 901 9,039 22 Value Equity Fund ........................... 714 10,519 -- High Yield Income Fund ...................... -- 3,949 -- Intermediate Government Bond Fund ........... 1 -- -- Intermediate Tax-Exempt Bond Fund ........... -- 2,003 -- Short/Intermediate Bond Fund ................ -- 552 -- Tax-Exempt Bond Fund ........................ -- 945 -- Insight Money Market Fund ................... -- 47 --
The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed in the beginning of this note) consist of the following:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED LONG-TERM TAX EXEMPT ORDINARY INCOME CAPITAL GAINS INTEREST DIVIDENDS --------------- ------------- ------------------ Balanced Allocation Fund .................... $ 11 $-- $-- Core Equity Fund ............................ 62 -- -- Disciplined Small-Cap Opportunity Fund ...... 35 -- -- Disciplined Small-Cap Value Fund ............ 51 -- -- Emerging Markets Opportunities Fund ......... 373 -- -- Value Equity Fund ........................... 142 -- -- High Yield Income Fund ...................... 88 -- -- Intermediate Government Bond Fund ........... 9 -- -- Intermediate Tax-Exempt Bond Fund ........... -- -- 6 Short/Intermediate Bond Fund ................ 57 -- -- Tax-Exempt Bond Fund ........................ -- -- 19 Insight Government Money Market Fund ........ 21 -- -- Insight Money Market Fund ................... -- -- -- Insight Tax-Exempt Money Market Fund ........ -- -- --
110 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 For the period ended December 31, 2009, the Funds distributed exempt interest dividends as follows: Intermediate Tax-Exempt Bond Fund ........ $3,381 Tax-Exempt Bond Fund ..................... 3,594 Insight Tax-Exempt Money Market Fund ..... 3,755
The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. 12. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of December 31, 2009, the Funds recorded reclassifications to increase (decrease) the accounts as listed below:
CAPITAL PAID UNDISTRIBUTED IN ON ACCUMULATED NET SHARES OF NET INVESTMENT BENEFICIAL REALIZED INCOME INTEREST GAIN (LOSS) (LOSS) ---------- ----------- ------------- Balanced Allocation Fund .................... $ -- $ 1 $ (1) Core Equity Fund ............................ -- 4 (4) Disciplined Small-Cap Opportunity Fund ...... (136) 118 18 Disciplined Small-Cap Value Fund ............ 16,779 (16,811) 32 Emerging Markets Opportunities Fund ......... 2 685 (687) Value Equity Fund ........................... -- 28 (28) High Yield Income Fund ...................... 1,399 (1,399) --(1) Intermediate Government Bond Fund ........... (4) -- 4 Intermediate Tax-Exempt Bond Fund ........... -- (11) 11 Short/Intermediate Bond Fund ................ (3) --(1) 3 Tax-Exempt Bond Fund ........................ (18) (10) 28 Insight Money Market Fund ................... 16 (16) -- Insight Tax-Exempt Money Market Fund ........ (4) 4 --
(1) Amount is less than $500. 13. TREASURY GUARANTEE PROGRAM On September 30, 2008, the Board authorized each Virtus Money Market Fund to apply for participation in the Department of Treasury's Temporary money market fund Guarantee Program (the "Program"). The Funds were subsequently accepted into the Program. Subject to certain conditions and limitations, in the event that the per share value of a Fund falls below $0.995 and a Fund liquidates its holdings, the Program will provide coverage to shareholders in the Fund for up to $1.00 per share for the lesser of either the number of shares the investor held in the Fund at the close of business on September 19, 2008 or the number of shares the investor held the date the per share value fell below $0.995. Shares acquired by investors after September 19, 2008 generally are not eligible for protection under the Program. The Program ended on September 18, 2009. The Funds paid $1,498 ($ reported in thousands), for the period of January 1, 2009 to September 18, 2009. 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. 111 VIRTUS INSIGHT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 15. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through February 23, 2010, the date the financial statements were available for issuance, and has determined that the following subsequent events require disclosure in the financial statements. 1. Effective January 1, 2010, the Board of Trustees of the Virtus Mutual Funds has approved the changes to the management fee structure for the following Funds:
1ST $1 BILLION $1+ BILLION -------------- ----------- Virtus Emerging Markets Opportunities Fund 1.00% 0.95%
1ST $2 BILLION $2+ BILLION -------------- ----------- Virtus Balanced Allocation Fund .......... 0.50% 0.45% Virtus Core Equity Fund .................. 0.70% 0.65% Virtus Value Equity Fund ................. 0.70% 0.65%
1ST $1 BILLION NEXT $1 BILLION $2+ BILLION -------------- --------------- ----------- Virtus Short/Intermediate Bond Fund ...... 0.55% 0.50% 0.45%
2. Effective January 29, 2010, Virtus Mutual Funds made a number of changes to the terms of dealer compensation plans for certain types of Class A Share purchases. These changes, and the associated disclosure changes described below, are effective for new purchases made on and after January 29, 2010. For Class A Shares of the Fixed Income Funds, a contingent deferred sales charge of 0.50% may apply on certain redemptions made within 18 months following purchases on which a finder's fee has been paid. For Class A Shares of the Equity Funds, a contingent deferred sales charge of 1.00% may apply on certain redemptions made within 18 months following purchases on which a finder's fee has been paid. 3. PNC Global Investment Servicing (U.S.), Inc. provides certain sub-administrative services to the Funds. Additionally, PFPC Trust Company provides custodian services to most of the Funds. On February 2, 2010, The PNC Financial Services Group, Inc. ("PNC") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with The Bank of New York Mellon Corporation ("BNY Mellon"). Upon the terms and subject to the conditions set forth in the Stock Purchase Agreement, which has been approved by the board of directors of each company, PNC will sell to BNY Mellon (the "Stock Sale") 100% of the issued and outstanding shares of PNC Global Investment Servicing Inc., an indirect, wholly-owned subsidiary of PNC. The Stock Sale includes PNC Global Investment Servicing (U.S.) Inc., and PFPC Trust Company and is expected to close in the third quarter of 2010. 112 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PRICEWATERHOUSECOOPERS LOGO) To the Board of Trustees and Shareholders of Virtus Insight Trust In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the 14 funds (the "Funds") constituting Virtus Insight Trust, hereafter referred to as the "Trust," at December 31, 2009, the results of each of their operations for the year then ended, the changes in each of their net assets for the two years then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The Funds' financial highlights for the period ended December 31, 2005 was audited by other independent accountants whose report dated February 22, 2006, expressed an unqualified opinion on those statements. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 23, 2010 113 VIRTUS INSIGHT TRUST TAX INFORMATION NOTICE (UNAUDITED) DECEMBER 31, 2009 For the fiscal year-end December 31, 2009, the Funds make the following disclosures for federal income tax purposes. Below is listed the percentages, or maximum amount allowable of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders and the percentage of ordinary income dividends earned by the Funds which qualify for the dividends received deduction ("DRD") for corporate shareholders. The amounts (reported in thousands) the Funds designated as long-term capital gains dividends ("LTCG") or if subsequently different. The actual percentages for the calendar year will be designated in year-end tax statement.
FUND QDI DRD LTCG - ---- --- --- ---- Balanced Allocation Fund 41% 38% $-- Core Equity Fund 100 100 -- Disciplined Small-Cap Opportunity Fund 100 100 -- Disciplined Small-Cap Value Fund 100 100 -- Emerging Markets Opportunities Fund 100 -- -- Value Equity Fund 100 100 -- High Yield Income Fund -- -- -- Intermediate Government Bond Fund -- -- 73 Intermediate Tax-Exempt Bond Fund -- -- -- Short/Intermediate Bond Fund -- -- -- Tax-Exempt Bond Fund -- -- -- Insight Government Money Market Fund -- -- -- Insight Money Market Fund -- -- -- Insight Tax-Exempt Money Market Fund -- -- --
For federal income tax purposes, the following percentages of income dividends paid qualify as exempt-interest dividends. Intermediate Tax-Exempt Bond Fund 99% Tax-Exempt Bond Fund 98 Insight Tax-Exempt Money Market Fund 100
For the period ended December 31, 2009, the Emerging Markets Opportunities Fund recognized $5,250 of foreign source income on which the Fund paid foreign taxes of $154. This information is being furnished to you pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. 114 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES DECEMBER 31, 2009 (UNAUDITED) 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. 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' - ---------- (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 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. 115 CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES DECEMBER 31, 2009 (CONTINUED) (UNAUDITED) 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. 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. 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. - ---------- (3) DURING THE PERIOD BEING REPORTED, THE ONLY FUNDS THAT HAD SUCH CHANGES WERE VIRTUS BALANCED ALLOCATION FUND, VIRTUS EMERGING MARKETS OPPORTUNITIES FUND, VIRTUS MID-CAP VALUE FUND AND VIRTUS SMALL-CAP CORE FUND, EACH A SERIES OF VIRTUS EQUITY TRUST; VIRTUS CORE EQUITY FUND, VIRTUS SHORT/INTERMEDIATE BOND FUND AND VIRTUS VALUE EQUITY FUND, EACH A SERIES OF VIRTUS INSIGHT TRUST, AND, VIRTUS BOND FUND AND VIRTUS MID-CAP VALUE FUND, EACH A SERIES OF VIRTUS OPPORTUNITIES FUND. 116 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of December 31, 2009, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES
NAME, YEAR OF BIRTH, YEAR ELECTED AND NUMBER OF FUNDS PRINCIPAL OCCUPATION(S) DURING OVERSEEN PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD BY TRUSTEE - ----------------------- ------------------------------------------------------ Leroy Keith, Jr. Chairman, BLOC Global Services Group, LLC (since YOB: 1939 2010). Managing Director, Almanac Capital Management Elected: 1993 (commodities business) (2007-2008). Partner, 46 Funds Stonington Partners, Inc. (private equity firm) (2001-2007). Director/Trustee, Evergreen Funds (88 portfolios). Philip R. McLoughlin Partner, Cross Pond Partners, LLC (2006-Present). YOB: 1946 Director, World Trust Fund. Chairman and Trustee, The Elected: 1993 Phoenix Edge Series Fund. Director, DTF Tax-Free 49 Funds Income Fund, Inc., Duff & Phelps Utility and Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. Managing Director, SeaCap, Asset Management Fund I L.P. Managing Director, SeaCap Partners, LLC. (Investment Management Advisory Business). Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New YOB: 1951 York (private bank) (1982-2006). Director, DTF Elected: 2001 Tax-Free Income Fund, Inc., Duff & Phelps Utility and 49 Funds Corporate Bond Trust, Inc. and DNP Select Income Fund, Inc. James M. Oates Managing Director, Wydown Group (consulting firm) YOB: 1946 (1994-present). Chairman, Hudson Castle Group, Inc. Elected: 1993 (formerly IBEX Capital Markets, Inc.) (financial 46 Funds services) (1997-2006). Director, Stifel Financial. Chairman and Trustee, John Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios). Non-Executive Chairman, Hudson Castle Group, Inc. Richard E. Segerson Managing Director, Northway Management Company YOB: 1946 (1998-present). Elected: 1998 46 Funds Ferdinand L.J. Verdonck Retired. Director, Galapagos N.V. (biotechnology). Mr. YOB: 1942 Verdonck is also a director of several non-U.S. Elected: 2004 companies. 46 Funds
INTERESTED TRUSTEE The individual listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
NAME, YEAR OF BIRTH, YEAR ELECTED AND NUMBER OF FUNDS PRINCIPAL OCCUPATION(S) DURING OVERSEEN PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD BY TRUSTEE - ----------------------- ------------------------------------------------------ George R. Aylward(1) Director, President and Chief Executive Officer YOB: 1964 (2008-present), Director and President (2006-2008), Elected: 2006 Chief Operating Officer (2004-2006), Vice President, 48 Funds Finance (2001-2002), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Various senior officer and directorship positions with Virtus affiliates (2005-present). Senior Executive Vice President and President, Asset Management (2007-2008), Senior Vice President and Chief Operating Officer, Asset Management (2004-2007), Vice President and Chief of Staff (2001-2004), The Phoenix Companies, Inc. Various senior officer and directorship positions with Phoenix affiliates (2005-2008). President (2006-present), Executive Vice President (2004-2006), the Virtus Mutual Funds Family. Chairman, President and Chief Executive Officer, The Zweig Fund Inc. and The Zweig Total Return Fund Inc. (2006-present).
(1) Mr. Aylward is an "interested person," as defined in the Investment Company Act of 1940, by reason of his relationship with Virtus Investment Partners, Inc. and/or its affiliates. 117 FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED) OFFICERS OF THE FUND WHO ARE NOT TRUSTEES
POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF YEAR OF BIRTH TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ----------------------- --------------------- -------------------------------------------------- Nancy G. Curtiss Senior Vice President Executive Vice President, Head of Operations YOB: 1952 since 2006. (since 2009), Senior Vice President, Operations (2008-2009), Vice President, Head of Asset Management Operations (2007-2008), Vice President (2003-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Ms. Curtiss is Treasurer of various other investment companies within the Virtus Mutual Funds Complex (1994-present). Assistant Treasurer (2001-2009), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Francis G. Waltman Senior Vice President Executive Vice President, Head of Product YOB: 1962 since 2008. Management (since 2009), Senior Vice President, Asset Management Product Development (2008-2009), Senior Vice President, Asset Management Product Development (2005-2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Director (2008-present), Director and Senior President (2006-2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (2008-present). Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates c/o Zweig-DiMenna Chief Compliance LLC (1989-present). Vice President, and Chief Associates, LLC Officer since 2004. Compliance Officer, The Zweig Total Return Fund, 900 Third Avenue Inc. (2004- present). Vice President, and Chief New York, NY 10022 Compliance Officer, The Zweig Fund, Inc. (2004- YOB: 1945 present). President and Director of Watermark Securities, Inc. (1991-present). Assistant Secretary, Gotham Advisors Inc. (1990-2005). W. Patrick Bradley Chief Financial Senior Vice President, Fund Administration (since YOB: 1972 Officer and 2009), Vice President, Fund Administration Treasurer since 2006. (2007-2009), Second Vice President, Fund Control & Tax (2004-2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer (2006-present), Assistant Treasurer (2004-2006), The Phoenix Edge Series Fund. Chief Financial Officer and Treasurer (2005-present), Assistant Treasurer (2004-2006), certain funds within the Virtus Mutual Funds Family. Kevin J. Carr Vice President, Chief Senior Vice President, Counsel and Secretary YOB: 1954 Legal Officer, (2008-present) and Vice President (2008-2009), Counsel and Secretary Virtus Investment Partners, Inc. and/or certain of since 2005. its subsidiaries. Vice President and Counsel, Phoenix Life Insurance Company. Compliance Officer of Investments and Counsel, Travelers Life & Annuity Company (January 2005-May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995-2005).
118 VIRTUS INSIGHT TRUST 101 Munson Street Greenfield, MA 01301 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 St. Hartford, CT 06103-4506 TRANSFER AGENT VP Distributors, Inc. 100 Pearl Street Hartford, CT 06103-4506 CUSTODIANS The Bank of New York Mellon One Wall Street New York, NY 10286 PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19155-3111 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 2001 Market Street Philadelphia, PA 19103-7042 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site virtus.com IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. THIS PAGE INTENTIONALLY BLANK. ------------- (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, or contact us at 1-800-243-1574 or VIRTUS.COM. 8004 12-09 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics described in Item 2(b) of the instructions for completion of Form N-CSR. (d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of the instructions for completion of this Item. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has determined that the Registrant has an "audit committee financial expert" serving on its Audit Committee. (a)(2) James M. Oates has been determined by the Registrant to possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert." Mr. Oates is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. (a)(3) Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees - ---------- (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $395,918 for 2009 and $442,250 for 2008. Audit-Related Fees - ------------------ (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $49,137 for 2009 and $35,102 for 2008. This represents the review of the semi-annual financial statements, and out of pocket expenses. Tax Fees - -------- (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $71,450 for 2009 and $74,850 for 2008. "Tax Fees" are those primarily associated with review of the Trust's tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust's financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund's federal income and excise tax returns. All Other Fees - -------------- (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2009 and $0 for 2008. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Virtus Insight Trust (the "Fund") Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. Audit, audit-related and tax compliance services provided to the Fund on an annual basis require specific pre-approval by the Board. As noted above, the Board must also approve other non-audit services provided to the Fund and those non-audit services provided to the Fund's Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund. Certain of these non-audit services that the Board believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent auditors may be approved by the Board without consideration on a specific case-by-case basis ("general pre-approval"). The Audit Committee has determined that Mr. James M. Oates, Chair of the Audit Committee, may provide pre-approval for such services that meet the above requirements in the event such approval is sought between regularly scheduled meetings. In any event, the Board is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) 100% for 2009 and 100% for 2008 (c) 100% for 2009 and 100% for 2008 (d) Not applicable (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $446,121 for 2009 and $1,624,671 for 2008. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Virtus Insight Trust -------------------------------------------------------------------- By (Signature and Title)* /s/ George R. Aylward ------------------------------------------------------- George R. Aylward, President (principal executive officer) Date March 8, 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 March 8, 2010 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ W. Patrick Bradley ------------------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date March 8, 2010 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 b55916_ethics.txt CODE OF ETHICS EX-99.CODE ETH CODE OF ETHICS FOR CHIEF EXECUTIVE AND SENIOR FINANCIAL OFFICERS The Virtus Mutual Funds(1) (each, and collectively, a "FUND") is committed to conducting business in accordance with applicable laws, rules and regulations and the highest standards of business ethics, and to full and accurate disclosure -- financial and otherwise -- in compliance with applicable law. This Code of Ethics, applicable to each Fund's Chief Executive Officer, President, Chief Financial Officer and Treasurer (or persons performing similar functions) (together, "SENIOR OFFICERS"), sets forth policies to guide you in the performance of your duties. As a Senior Officer, you must comply with applicable law. You also have a responsibility to conduct yourself in an honest and ethical manner. You have leadership responsibilities that include creating a culture of high ethical standards and a commitment to compliance, maintaining a work environment that encourages the internal reporting of compliance concerns and promptly addressing compliance concerns. This Code of Ethics recognizes that the Senior Officers are subject to certain conflicts of interest inherent in the operation of investment companies, because the Senior Officers (in addition to their role as senior officers of the Fund) currently or may in the future serve as officers or employees of a Virtus investment adviser(2) (the "ADVISER"), Virtus Investment Partners, Inc. or other affiliates thereof (collectively, "VIRTUS") and as officers or trustees/directors of other registered investment companies and unregistered investment funds advised by Virtus. This Code of Ethics also recognizes that certain laws and regulations applicable to, and certain policies and procedures adopted by, the Fund, the Adviser or Virtus govern your conduct in connection with many of the conflict of interest situations that arise in connection with the operations of the Fund, including: o the Investment Company Act of 1940, as amended, and the rules and regulation promulgated thereunder by the Securities and Exchange Commission (the "1940 ACT"); o the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder by the Securities and Exchange Commission (the "ADVISERS ACT"); o the Code of Ethics adopted by the Fund pursuant to Rule 17j-1(c) under the 1940 Act (collectively, the "FUND'S 1940 ACT CODE OF ETHICS"); - ---------- (1) Virtus Mutual Funds (which include Virtus Equity Trust, Virtus Insight Funds Trust, Virtus Institutional Mutual Funds, and Virtus Opportunities Trust). (2) Virtus Investment Advisers, Inc. ("VIA"), Duff & Phelps Investment Management Co. ("DPIM"), Engemann Asset Management ("EAM"), Euclid Advisors LLC ("EAL"), Kayne Anderson Rudnick Investment Management LLC ("KAR"), SCM Advisers, LLC ("SCM"), Zweig Advisers LLC ("ZA"). Tab 2 o one or more codes of ethics adopted by the Adviser that have been reviewed and approved by those trustees (the "TRUSTEES") of the Fund that are not "interested persons" of the Fund (the "INDEPENDENT TRUSTEES") within the meaning of the 1940 Act (the "ADVISER'S 1940 ACT CODE OF ETHICS" and, together with the Fund's 1940 Act Code of Ethics, the "1940 ACT CODES OF ETHICS"); o the policies and procedures adopted by the Fund to address conflict of interest situations, such as procedures under Rule 10f-3 and Rule 17a-7 under the 1940 Act (collectively, the "FUND POLICIES"); and o each Adviser's general policies and procedures to address, among other things, conflict of interest situations and related matters (collectively, the "ADVISER POLICIES"). The provisions of the 1940 Act, the Advisers Act, the 1940 Act Codes of Ethics, the Fund Policies and the Adviser Policies are referred to herein collectively as the "ADDITIONAL CONFLICT RULES". This Code of Ethics is different from, and is intended to supplement, the Additional Conflict Rules. Accordingly, a violation of the Additional Conflict Rules by a Senior Officer is hereby deemed not to be a violation of this Code of Ethics, unless and until the Board of Trustees of the Fund (the "BOARD") shall determine that any such violation of the Additional Conflict Rules is also a violation of this Code of Ethics. SENIOR OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Senior Officer has a responsibility to the Fund to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Senior Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Additional Conflict Rules; o comply with the laws, rules and regulations that govern the conduct of the Fund's operations and report any suspected violations thereof in accordance with the section below entitled "Compliance With Code Of Ethics"; and o adhere to a high standard of business ethics. CONFLICTS OF INTEREST A conflict of interest for the purpose of this Code of Ethics occurs when your private interests interfere in any way, or even appear to interfere, with the interests of the Fund. Senior Officers are expected to use objective and unbiased standards when making decisions that affect the Fund, keeping in mind that Senior Officers are subject to certain inherent conflicts of interest because Senior Officers of a Fund also are or may be officers of the Adviser and other funds advised or serviced by Virtus (as a result of which it is incumbent upon you to be familiar with and to seek to comply with the Additional Conflict Rules). Tab 2 2 You are required to conduct the business of the Fund in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and business relationships. When making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in a manner that creates or appears to create a conflict of interest with respect to the Fund where you are receiving a personal benefit, you should act in accordance with the letter and spirit of this Code of Ethics. If you are in doubt as to the application or interpretation of this Code of Ethics to you as a Senior Officer of the Fund, you should make full disclosure of all relevant facts and circumstances to the Chief Compliance Officer of the Fund (the "CHIEF COMPLIANCE OFFICER") and obtain the prior approval of the Chief Compliance Officer prior to taking action. Some conflict of interest situations that should always be approved by the Chief Compliance Officer, if material, include the following: o the receipt of any entertainment or non-nominal gift by the Senior Officer, or a member of his or her family, from any company with which the Fund has current or prospective business dealings (other than the Adviser or Virtus), unless such entertainment or gift is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than the Adviser or Virtus; or o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Senior Officer's employment by the Adviser or Virtus, such as compensation or equity ownership. DISCLOSURES It is the policy of the Fund to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission or a national securities exchange and in all other public communications made by the Fund. As a Senior Officer, you are required to promote compliance with this policy and to abide by the Fund's standards, policies and procedures designed to promote compliance with this policy. Each Senior Officer must: Tab 2 3 o familiarize himself or herself with the disclosure requirements applicable to the Fund as well as the business and financial operations of the Fund; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, including to the Trustees, the Fund's independent auditors, the Fund's counsel, counsel to the Independent Directors, governmental regulators or self-regulatory organizations. COMPLIANCE WITH CODE OF ETHICS If you know of or suspect a violation of this Code of Ethics or other laws, regulations, policies or procedures applicable to the Fund, you must report that information on a timely basis to the Chief Compliance Officer or report it anonymously by following the "whistle blower" policies adopted by the Fund from time to time. For the purposes hereof, the Fund has endorsed usage of the Virtus confidential, 24-hour toll-free telephone help line at 1-800-737-2797 and shall require the Virtus Chief Compliance Officer to promptly report any calls made to such number affecting a Fund. NO ONE WILL BE SUBJECT TO RETALIATION BECAUSE OF A GOOD FAITH REPORT OF A SUSPECTED VIOLATION. The Fund will follow these procedures in investigating and enforcing this Code of Ethics, and in reporting on this Code of Ethics: o the Chief Compliance Officer will take all appropriate action to investigate any actual or potential violations reported to him or her; o violations and potential violations will be reported to the applicable Fund Board after such investigation; o if the Fund Board determines that a violation has occurred, it will take all appropriate disciplinary or preventive action; and o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification of the Securities and Exchange Commission or other appropriate law enforcement authorities. Senior Officers must make this Code of Ethics known to persons who might know of a potential conflict of interest, including the "whistle blower" policies adopted by the Fund from time to time. WAIVERS OF CODE OF ETHICS Except as otherwise provided in this Code of Ethics, the Chief Compliance Officer is responsible for applying this Code of Ethics to specific situations in which questions are presented to the Chief Compliance Officer and has the authority to interpret this Code of Ethics in any particular situation. The Chief Compliance Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported under this Code of Ethics. Tab 2 4 The Chief Compliance Officer is authorized to consult, as appropriate, with the chair of the Fund Board and with counsel to the Fund, the Adviser, Virtus or the Independent Trustees, and is encouraged to do so. Each Fund Board, or any duly designated committee thereof, is responsible for granting waivers of this Code of Ethics, as appropriate. Any changes to or waivers of this Code of Ethics will, to the extent required, be disclosed on Form N-CSR, or otherwise, as provided by Securities and Exchange Commission rules. RECORDKEEPING The Fund will maintain and preserve for a period of not less than six (6) years from the date an action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Fund Board or to any appropriate Committee thereof: o that provided the basis for any amendment or waiver to this Code of Ethics; and o relating to any violation of this Code of Ethics and sanctions imposed for such violation, together with a written record of the approval or action taken by the Board. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code of Ethics shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code of Ethics, such matters shall not be disclosed to anyone other than the Independent Trustees and their counsel, the Fund and its counsel, the Adviser and/or other Virtus entity and its counsel and any other advisors, consultants or counsel retained by the Trustees, the Independent Trustees or any committee of the Board. AMENDMENTS This Code of Ethics may not be amended except in written form, which is specifically approved by a majority vote of the Trustees of each Fund, including a majority of the Independent Trustees. NO RIGHTS CREATED This Code of Ethics is a statement of certain fundamental principles, policies and procedures that govern each of the Senior Officers in the conduct of each Fund's business. It is not intended to and does not create any rights in any employee, investor, supplier, competitor, shareholder or any other person or entity. Tab 2 5 (Approved August 23, 2006 by the Virtus Mutual Funds Board of Trustees) Tab 2 6 EX-99.CERT 3 b55916_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 Insight 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: March 8, 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 Insight 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: March 8, 2010 /s/ W. Patrick Bradley ---------------------- ----------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) EX-99.906CERT 4 b55916_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 Insight 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: March 8, 2010 /s/ George R. Aylward ---------------------- ----------------------------------------------- George R. Aylward, President (principal executive officer) I, W. Patrick Bradley, Chief Financial Officer and Treasurer of Virtus Insight 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: March 8, 2010 /s/ W. Patrick Bradley ---------------------- ----------------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----