-----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, NddVL+LRF7o2xe+EPT6zaZMPxK26I6Avng2IQ6D8Xlr++CKF6AALlCEJ9b7bB2tA YJRjNC8GZFzruXxLZtoAGA== 0000950123-10-112071.txt : 20101208 0000950123-10-112071.hdr.sgml : 20101208 20101208171334 ACCESSION NUMBER: 0000950123-10-112071 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100930 FILED AS OF DATE: 20101208 DATE AS OF CHANGE: 20101208 EFFECTIVENESS DATE: 20101208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRTUS OPPORTUNITIES TRUST CENTRAL INDEX KEY: 0001005020 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07455 FILM NUMBER: 101240508 BUSINESS ADDRESS: STREET 1: 101 MUNSON STREET CITY: GREENFIELD STATE: MA ZIP: 01301 BUSINESS PHONE: 800-243-1574 MAIL ADDRESS: STREET 1: 100 PEARL STREET CITY: HARTFORD STATE: CT ZIP: 06103 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX OPPORTUNITIES TRUST DATE OF NAME CHANGE: 20060127 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX SENECA FUNDS DATE OF NAME CHANGE: 19990122 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FUNDS DATE OF NAME CHANGE: 19951218 0001005020 S000001336 VIRTUS BOND FUND C000003572 CLASS A SAVAX C000003573 CLASS B SAVBX C000003574 CLASS C SAVCX C000003575 CLASS I SAVYX 0001005020 S000018001 VIRTUS CA TAX-EXEMPT BOND FUND C000049899 Class A CTESX C000049900 Class I CTXEX 0001005020 S000018002 VIRTUS REAL ESTATE SECURITIES FUND C000049901 Class A PHRAX C000049902 Class B PHRBX C000049903 Class C PHRCX C000049904 Class I PHRIX 0001005020 S000018005 VIRTUS HIGH YIELD FUND C000049911 Class B PHCCX C000049912 Class C PGHCX C000049913 Class A PHCHX 0001005020 S000018007 VIRTUS MULTI-SECTOR FIXED INCOME FUND C000049915 Class A NAMFX C000049916 Class B NBMFX C000049917 Class C NCMFX C000081781 Class I VMFIX 0001005020 S000018008 VIRTUS MULTI-SECTOR SHORT TERM BOND FUND C000049918 Class A NARAX C000049919 Class B PBARX C000049920 Class C PSTCX C000049921 Class T PMSTX C000066828 Class I Shares PIMSX 0001005020 S000018009 VIRTUS GLOBAL INFRASTRUCTURE FUND C000049922 Class A PGUAX C000049923 Class C PGUCX C000066829 Class I Shares PGIUX 0001005020 S000018010 VIRTUS MARKET NEUTRAL FUND C000049924 Class A EMNAX C000049925 Class B EMNBX C000049926 Class C EMNCX C000081782 Class I VIMNX 0001005020 S000018969 VIRTUS FOREIGN OPPORTUNITIES FUND C000052519 Class A JVIAX C000052520 Class C JVICX C000052521 Class I JVXIX 0001005020 S000018970 VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND C000052522 Class A PXRAX C000052523 Class C PXRCX C000052524 Class I PXRIX 0001005020 S000018972 VIRTUS GLOBAL OPPORTUNITIES FUND C000052528 Class A NWWOX C000052529 Class B WWOBX C000052530 Class C WWOCX 0001005020 S000018974 VIRTUS ALPHASECTOR ROTATION FUND C000052533 Class A PWBAX C000052534 Class C PWBCX C000081783 Class I VARIX 0001005020 S000018975 VIRTUS ALPHASECTOR ALLOCATION FUND C000052535 Class A PSWAX C000052536 Class C PSWCX C000081784 Class I VAAIX 0001005020 S000018976 VIRTUS ALTERNATIVES DIVERSIFIER FUND C000052537 Class A PDPAX C000052538 Class C PDPCX C000081785 Class I VADIX 0001005020 S000020772 VIRTUS SENIOR FLOATING RATE FUND C000058006 Class A PSFRX C000058007 Class C PFSRX C000058008 Class I PSFIX 0001005020 S000025108 Virtus Global Real Estate Securities Fund C000074732 Class A VGSAX C000074733 Class C VGSCX C000074734 Class I VGISX 0001005020 S000025109 Virtus Greater Asia ex Japan Opportunities Fund C000074735 Class A VGAAX C000074736 Class C VGACX C000074737 Class I VGAIX 0001005020 S000025110 Virtus Greater European Opportunities Fund C000074738 Class A VGEAX C000074739 Class C VGECX C000074740 Class I VGEIX 0001005020 S000029390 Virtus Premium AlphaSector Fund C000090272 Class A VAPAX C000090273 Class C VAPCX C000090274 Class I VAPIX 0001005020 S000030077 Virtus International Equity Fund C000092267 Class A C000092268 Class C C000092269 Class I N-CSR 1 g06773nvcsr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07455 Virtus Opportunities Trust (Exact name of registrant as specified in charter) 101 Munson Street Greenfield, MA 01301-9668 (Address of principal executive offices) (Zip code) Kevin J. Carr, Esq. Vice President, Chief Legal Officer, Counsel and Secretary for Registrant 100 Pearl Street Hartford, CT 06103-4506 (Name and address of agent for service) Registrant's telephone number, including area code: (800) 243-1574 Date of fiscal year end: September 30 Date of reporting period: September 30, 2010 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. (VIRTUS MUTUAL FUNDS LOGO) ANNUAL REPORT Virtus AlphaSector(TM) Allocation Fund Virtus AlphaSector(TM) Rotation Fund Virtus Alternatives Diversifier Fund Virtus Bond Fund Virtus CA Tax-Exempt Bond Fund Virtus Global Infrastructure Fund Virtus Global Opportunities Fund Virtus Global Real Estate Securities Fund Virtus Greater Asia ex Japan Opportunities Fund Virtus Greater European Opportunities Fund Virtus High Yield Fund Virtus International Equity Fund Virtus International Real Estate Securities Fund Virtus Market Neutral Fund Virtus Multi-Sector Fixed Income Fund Virtus Premium AlphaSector(TM) Fund Virtus Senior Floating Rate Fund *PROSPECTUS SUPPLEMENT APPLICABLE TO THESE FUNDS APPEARS AT THE BACK OF THIS ANNUAL REPORT. TRUST NAME: September 30, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST eDelivery at Virtus.com (GRAPHIC) NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
TABLE OF CONTENTS Message to Shareholders ........................................................................................................ 1 Disclosure of Fund Expenses .................................................................................................... 2 Key Investment Terms and Footnote Legend ....................................................................................... 5 SCHEDULE FUND OF FUND SUMMARY INVESTMENTS Virtus AlphaSector(TM) Allocation Fund ("AlphaSector(TM) Allocation Fund") ............................. 8 42 Virtus AlphaSector(TM) Rotation Fund ("AlphaSector(TM) Rotation Fund") ................................ 10 43 Virtus Alternatives Diversifier Fund ("Alternatives Diversifier Fund") ................................. 12 44 Virtus Bond Fund ("Bond Fund") ......................................................................... 14 45 Virtus CA Tax-Exempt Bond Fund ("CA Tax-Exempt Bond Fund") ............................................. 16 49 Virtus Global Infrastructure Fund ("Global Infrastructure Fund") ....................................... 18 52 Virtus Global Opportunities Fund ("Global Opportunities Fund") ......................................... 20 53 Virtus Global Real Estate Securities Fund ("Global Real Estate Securities Fund") ....................... 22 55 Virtus Greater Asia ex Japan Opportunities Fund ("Greater Asia ex Japan Opportunities Fund") ........................................................ 24 57 Virtus Greater European Opportunities Fund ("Greater European Opportunities Fund") ..................... 26 59 Virtus High Yield Fund ("High Yield Fund") ............................................................. 28 61 Virtus International Equity Fund ("International Equity Fund")** ....................................... 30 64 Virtus International Real Estate Securities Fund ("International Real Estate Securities Fund") ....................................................... 32 66 Virtus Market Neutral Fund ("Market Neutral Fund")* .................................................... 34 68 Virtus Multi-Sector Fixed Income Fund ("Multi-Sector Fixed Income Fund") ............................... 36 72 Virtus Premium AlphaSector(TM) Fund ("Premium AlphaSector(TM) Fund")*** ................................ 38 79 Virtus Senior Floating Rate Fund ("Senior Floating Rate Fund") ......................................... 40 80 Statements of Assets and Liabilities ........................................................................................ 86 Statements of Operations .................................................................................................... 90 Statements of Changes in Net Assets ......................................................................................... 94 Financial Highlights ........................................................................................................ 100 Notes to Financial Statements ............................................................................................... 108 Report of Independent Registered Public Accounting Firm ..................................................................... 127 Tax Information Notice ...................................................................................................... 128 Consideration of Advisory and Subadvisory Agreements by the Board of Trustees ............................................... 129 Fund Management Tables ...................................................................................................... 133 * Schedule of Investments and Securities Sold Short. ** Inception date September 16, 2010. *** Inception date July 1, 2010. - ------------------------------------------------------------------------------------------------------------------------------------ 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, 2010, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for each Fund with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. - ------------------------------------------------------------------------------------------------------------------------------------ This report is not authorized for distribution to prospective investors in the Funds presented in this book unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information.
MESSAGE TO SHAREHOLDERS Dear Fellow Shareholders of Virtus Mutual Funds: In September 2010, the National Bureau of Economic Research concluded that the "Great Recession" had ended more than a year earlier. Good news? Undoubtedly. The sign that all is right with the economy? Hardly. (PHOTO OF GEORGE R. AYLWARD) While the recession was technically over, the economy has been stalled between tentative growth and a temptation to fall back into recession -- the feared "double dip." The economy certainly has improved since the lows of early 2009, but retail sales have remained weak and the housing market is still depressed, with few signs it has plumbed the bottom of the trough. With the unemployment rate continuing to hover near 10 percent, pessimism remains prevalent and consumer confidence in the economy remains challenged. Are there opportunities for investors in these situations? Absolutely. The broader financial markets have seen overall gains for three of the past four quarters. July 2010 was the best month for stocks in a year, and then September 2010 topped July with returns not seen in 71 years. The Federal Reserve demonstrated its concern about persistently high unemployment rates and the long-term impact of the recession by saying it was prepared to do whatever was necessary to prevent deflation or the double dip. At the start of the 2010 fourth quarter, the Fed was preparing another round of quantitative easing through large-scale purchases of Treasuries and mortgage-backed securities, and the financial markets responded positively. These factors are another reminder that during periods of market volatility, vigilance is the key for the investor, the financial advisor, and the professional money manager alike. Your fund's management team provides details of its approach to these markets in the enclosed commentary, and I encourage you to read this material carefully. We also suggest you rely on the experience of your personal financial advisor, who can review your investment objectives and your portfolio and, when appropriate, recommend adjustments to fit your current financial needs and your tolerance for risk. The wide range of equity and fixed income investments available from the Virtus Mutual Funds allows you to design a portfolio tailored to your individual needs. Information about your investments is always available on our website, www.virtus.com, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will continue do our very best to meet your expectations. On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 1-800-243-1574. PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. 1
VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 We believe it is important for you to understand the impact of EXPENSE TABLE costs on your investment. All mutual funds have operating ----------------------------------------------------------------- expenses. As a shareholder of a Virtus Opportunities Trust Fund Beginning Ending Annualized Expenses Paid (each, a "Fund") you may incur two types of costs: (1) Account Value Account Value Expense During transaction costs, including sales charges on purchases of Class April 1, 2010 September 30, 2010 Ratio Period* A shares and contingent deferred sales charges on Class C shares; ----------------------------------------------------------------- and (2) ongoing costs, including investment advisory fees; ALPHASECTOR(TM) ALLOCATION FUND distribution and service fees; and other expenses. Class I shares ----------------------------------------------------------------- are sold without sales charges. These examples are intended to ACTUAL help you understand your ongoing costs (in dollars) of investing Class A $1,000.00 $1,008.60 1.13% $ 5.69 in the Fund and to compare these costs with the ongoing costs of Class C 1,000.00 1,004.60 1.87 9.40 investing in other mutual funds. These examples are based on an Class I 1,000.00 1,009.60 0.89 4.48 investment of $1,000 invested at the beginning of the period and HYPOTHETICAL (5% RETURN BEFORE EXPENSES) held for the entire six-month period. The following Expense Table Class A 1,000.00 1,019.33 1.13 5.74 illustrates your fund's costs in two ways. Class C 1,000.00 1,015.58 1.87 9.49 Class I 1,000.00 1,020.55 0.89 4.52 ACTUAL EXPENSES ----------------------------------------------------------------- The first section of the accompanying table provides ALPHASECTOR(TM) ROTATION FUND information about actual account values and actual expenses. You ----------------------------------------------------------------- may use the information in this section, together with the amount ACTUAL you invested, to estimate the expenses that you paid over the Class A $1,000.00 $ 989.40 1.08% $ 5.39 period. Simply divide your account value by $1,000 (for example, Class C 1,000.00 986.30 1.83 9.11 an $8,600 account value divided by $1,000 = 8.6), then multiply Class I 1,000.00 990.50 0.84 4.19 the result by the number given for your Fund under the heading HYPOTHETICAL (5% RETURN BEFORE EXPENSES) "Expenses Paid During Period" to estimate the expenses you paid Class A 1,000.00 1,019.59 1.08 5.48 on your account during the period. Class C 1,000.00 1,015.78 1.83 9.29 Class I 1,000.00 1,020.81 0.84 4.26 HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES ----------------------------------------------------------------- The second section of the accompanying table provides ALTERNATIVES DIVERSIFIER FUND information about hypothetical account values and hypothetical ----------------------------------------------------------------- expenses based on the Fund's actual expense ratio and an assumed ACTUAL rate of return of 5% per year before expenses, which is not your Class A $1,000.00 $1,033.20 0.45% $ 2.29 Fund's actual return. The hypothetical account values and Class C 1,000.00 1,029.60 1.20 6.11 expenses may not be used to estimate the actual ending account Class I 1,000.00 1,034.50 0.20 1.02 balance or expenses you paid for the period. You may use this HYPOTHETICAL (5% RETURN BEFORE EXPENSES) information to compare the ongoing costs of investing in your Class A 1,000.00 1,022.79 0.45 2.28 Fund and other funds. To do so, compare these 5% hypothetical Class C 1,000.00 1,018.98 1.20 6.09 examples with the 5% hypothetical examples that appear in the Class I 1,000.00 1,024.05 0.20 1.02 shareholder reports of the other funds. ----------------------------------------------------------------- Please note that the expenses shown in the accompanying table BOND FUND are meant to highlight your ongoing costs only and do not reflect ----------------------------------------------------------------- any transactional costs, such as sales charges or contingent ACTUAL deferred sales charges. Therefore, the second section of the Class A $1,000.00 $1,064.30 0.85% $ 4.40 accompanying table is useful in comparing ongoing costs only, and Class B 1,000.00 1,059.60 1.60 8.26 will not help you determine the relative total costs of owning Class C 1,000.00 1,059.40 1.60 8.26 different funds. In addition, if these transactional costs were Class I 1,000.00 1,064.70 0.60 3.11 included, your costs would have been higher. The calculations HYPOTHETICAL (5% RETURN BEFORE EXPENSES) assume no shares were bought or sold during the period. Your Class A 1,000.00 1,020.75 0.85 4.32 actual costs may have been higher or lower, depending on the Class B 1,000.00 1,016.95 1.60 8.12 amount of your investment and the timing of any purchases or Class C 1,000.00 1,016.95 1.60 8.12 redemptions. Class I 1,000.00 1,022.02 0.60 3.05 ----------------------------------------------------------------- CA TAX-EXEMPT BOND FUND ----------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,055.50 0.85% $ 4.38 Class I 1,000.00 1,056.90 0.60 3.09 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,020.75 0.85 4.32 Class I 1,000.00 1,022.02 0.60 3.05 ----------------------------------------------------------------- GLOBAL INFRASTRUCTURE FUND ----------------------------------------------------------------- ACTUAL Class A $1,000.00 $1,051.20 1.37% $ 7.04 Class C 1,000.00 1,047.40 2.13 10.93 Class I 1,000.00 1,053.40 1.13 5.82 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,018.12 1.37 6.95 Class C 1,000.00 1,014.26 2.13 10.81 Class I 1,000.00 1,019.33 1.13 5.74 ----------------------------------------------------------------- 2
VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 EXPENSE TABLE EXPENSE TABLE - ----------------------------------------------------------------- ----------------------------------------------------------------- Beginning Ending Annualized Expenses Paid Beginning Ending Annualized Expenses Paid Account Value Account Value Expense During Account Value Account Value Expense During April 1, 2010 September 30, 2010 Ratio Period* April 1, 2010 September 30, 2010 Ratio Period* - ----------------------------------------------------------------- ----------------------------------------------------------------- GLOBAL OPPORTUNITIES FUND INTERNATIONAL REAL ESTATE SECURITIES FUND - ----------------------------------------------------------------- ----------------------------------------------------------------- ACTUAL ACTUAL Class A $1,000.00 $1,044.20 1.55% $ 7.94 Class A $1,000.00 $1,121.00 1.50% $ 7.98 Class B 1,000.00 1,040.30 2.30 11.76 Class C 1,000.00 1,117.90 2.25 11.95 Class C 1,000.00 1,040.50 2.30 11.77 Class I 1,000.00 1,122.80 1.25 6.65 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.20 1.55 7.87 Class A 1,000.00 1,017.46 1.50 7.61 Class B 1,000.00 1,013.39 2.30 11.68 Class C 1,000.00 1,013.65 2.25 11.42 Class C 1,000.00 1,013.39 2.30 11.68 Class I 1,000.00 1,018.72 1.25 6.35 - ----------------------------------------------------------------- ----------------------------------------------------------------- GLOBAL REAL ESTATE SECURITIES FUND MARKET NEUTRAL FUND** - ----------------------------------------------------------------- ----------------------------------------------------------------- ACTUAL ACTUAL Class A $1,000.00 $1,105.30 1.40% $ 7.39 Class A $1,000.00 $ 999.10 4.06% $20.35 Class C 1,000.00 1,101.30 2.15 11.33 Class B 1,000.00 995.00 4.81 24.06 Class I 1,000.00 1,106.70 1.15 6.07 Class C 1,000.00 995.00 4.82 24.11 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,000.90 3.82 19.16 Class A 1,000.00 1,017.96 1.40 7.11 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class C 1,000.00 1,014.16 2.15 10.91 Class A 1,000.00 1,004.46 4.06 20.61 Class I 1,000.00 1,019.23 1.15 5.84 Class B 1,000.00 1,000.65 4.81 24.42 - ----------------------------------------------------------------- Class C 1,000.00 1,000.60 4.82 24.47 GREATER ASIA EX JAPAN OPPORTUNITIES FUND Class I 1,000.00 1,005.68 3.82 19.39 - ----------------------------------------------------------------- ----------------------------------------------------------------- ACTUAL MULTI-SECTOR FIXED INCOME FUND Class A $1,000.00 $1,216.00 1.80% $10.00 ----------------------------------------------------------------- Class C 1,000.00 1,211.90 2.55 14.14 ACTUAL Class I 1,000.00 1,217.80 1.55 8.62 Class A $1,000.00 $1,060.70 1.19% $ 6.15 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class B 1,000.00 1,055.90 1.94 10.00 Class A 1,000.00 1,015.93 1.80 9.14 Class C 1,000.00 1,056.40 1.94 10.00 Class C 1,000.00 1,012.12 2.55 12.95 Class I 1,000.00 1,061.10 0.93 4.81 Class I 1,000.00 1,017.20 1.55 7.87 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) - ----------------------------------------------------------------- Class A 1,000.00 1,019.03 1.19 6.04 GREATER EUROPEAN OPPORTUNITIES FUND Class B 1,000.00 1,015.22 1.94 9.85 - ----------------------------------------------------------------- Class C 1,000.00 1,015.22 1.94 9.85 ACTUAL Class I 1,000.00 1,020.35 0.93 4.72 Class A $1,000.00 $1,013.50 1.45% $ 7.32 ----------------------------------------------------------------- Class C 1,000.00 1,009.80 2.20 11.08 PREMIUM ALPHASECTOR(TM) FUND++ Class I 1,000.00 1,014.90 1.20 6.06 ----------------------------------------------------------------- HYPOTHETICAL (5% RETURN BEFORE EXPENSES) ACTUAL Class A 1,000.00 1,017.71 1.45 7.36 Class A $1,000.00 $1,117.00 1.70% $ 9.02 Class C 1,000.00 1,013.90 2.20 11.17 Class C 1,000.00 1,115.00 2.45 12.99 Class I 1,000.00 1,018.98 1.20 6.09 Class I 1,000.00 1,117.00 1.45 7.70 - ----------------------------------------------------------------- HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION) HIGH YIELD FUND Class A 1,000.00 1,008.11 1.70 4.22 - ----------------------------------------------------------------- Class C 1,000.00 1,006.25 2.45 6.08 ACTUAL Class I 1,000.00 1,008.73 1.45 3.60 Class A $1,000.00 $1,069.20 1.38% $ 7.16 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class B 1,000.00 1,066.50 2.13 11.03 Class A 1,000.00 1,016.44 1.70 8.63 Class C 1,000.00 1,066.00 2.13 11.03 Class C 1,000.00 1,012.63 2.45 12.44 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class I 1,000.00 1,017.71 1.45 7.36 Class A 1,000.00 1,018.06 1.38 7.01 ----------------------------------------------------------------- Class B 1,000.00 1,014.26 2.13 10.81 SENIOR FLOATING RATE FUND Class C 1,000.00 1,014.26 2.13 10.81 ----------------------------------------------------------------- - ----------------------------------------------------------------- ACTUAL INTERNATIONAL EQUITY FUND+ Class A $1,000.00 $1,017.10 1.20% $6.07 - ----------------------------------------------------------------- Class C 1,000.00 1,013.30 1.95 9.84 ACTUAL Class I 1,000.00 1,018.30 0.95 4.81 Class A $1,000.00 $1,017.00 1.50% $ 7.58 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class C 1,000.00 1,016.00 2.25 11.37 Class A 1,000.00 1,018.98 1.20 6.09 Class I 1,000.00 1,017.00 1.25 6.32 Class C 1,000.00 1,015.17 1.95 9.90 HYPOTHETICAL (5% RETURN BEFORE EXPENSES SINCE INCEPTION) Class I 1,000.00 1,020.25 0.95 4.82 Class A 1,000.00 1,001.25 1.50 0.53 ----------------------------------------------------------------- Class C 1,000.00 1,000.98 2.25 0.80 Class I 1,000.00 1,001.34 1.25 0.45 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.45 1.50 7.61 Class C 1,000.00 1,013.65 2.25 11.42 Class I 1,000.00 1,018.72 1.25 6.35 - ----------------------------------------------------------------- 3
VIRTUS OPPORTUNITIES TRUST DISCLOSURE OF FUND EXPENSES (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 - --------- + Inception date is September 16, 2010. Expenses are equal to the Fund's annualized expense ratio, which includes waived fees and reimbursed fees, if applicable, multiplied by the average account value over the period, multiplied by the number of days (13) expenses were accrued, then divided by 365 days to reflect the period since inception. ++ Inception date is July 1, 2010. Expenses are equal to the Fund's annualized expense ratio, which includes waived fees and reimbursed fees, if applicable, multiplied by the average account value over the period, multiplied by the number of days (90) expenses were accrued, then divided by 365 days to reflect the period since inception. * Expenses are equal to the relevant Funds' annualized expense ratio, which includes waived fees, reimbursed expenses, dividends and interest on short sales, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 365 days to reflect the one-half year period. ** Market Neutral Fund annualized expense ratio includes dividends and interest on short sales. For Funds which may invest in other funds, the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses had been included, the expenses would have been higher. 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. 4
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND KEY INVESTMENT TERMS CITIGROUP 90-DAY TREASURY BILLS INDEX ADR (AMERICAN DEPOSITARY RECEIPT) The Citigroup 90-Day Treasury Bills Index measures monthly return equivalents of yield averages that are not marked to market. The Represents shares of foreign companies traded in U.S. dollars on 90-Day Treasury Bills Index is an average of the last three U.S. exchanges that are held by a U.S. bank or a trust. Foreign three-month Treasury bill issues. companies use ADRs in order to make it easier for Americans to buy their shares. EXCHANGE-TRADED FUNDS (ETF) ALPHASECTOR(TM) ALLOCATION FUND COMPOSITE INDEX Portfolios of stocks or bonds that track a specific market index. The composite index allocation is 75% S&P 500(R) Index and 25% FTSE EPRA/NAREIT DEVELOPED RENTAL EX U.S. INDEX Barclays Capital U.S. Aggregate Bond Index. Prior to September 29, 2009, the composite index consisted of 60% S&P 500(R) Index The FTSE EPRA/NAREIT Developed Rental ex U.S. Index is a and 40% Barclays Capital U.S. Aggregate Bond Index. free-float market capitalization index measuring international real estate securities, which meet minimum size, liquidity and ALPHASECTOR(TM) ROTATION FUND COMPOSITE INDEX investment focus criteria. The index is a sub-set of the FTSE EPRA/NAREIT Investment Focus Index Series, which separates the The composite index allocation is 100% S&P 500(R) Index. Prior to existing constituents into both Rental and Non-Rental Indices. A September 29, 2009, the composite index consisted of 80% S&P company is classified as Rental if the rental revenue from 500(R) Index and 20% Barclays Capital U.S. Aggregate Bond Index. properties is greater than or equal to 70% of total revenue. The classification is based on revenue sources as disclosed in the ALPHASECTOR(TM) ROTATION INDEX latest published financial statement. The index is calculated on a total return basis with dividends reinvested. AlphaSector(SM) Rotation Index ("ASRX"), a public index published by NASDAQ, through investment in exchange-traded funds (ETFs). FTSE EPRA/NAREIT DEVELOPED RENTAL INDEX ASRX is an active index that may invest in the nine Select Sector SPDR(R) ETFs, representing the primary sectors of the S&P 500(R) The FTSE EPRA/NAREIT Developed Rental Index is a free-float Index, plus an ETF representing short-term U.S. Treasuries. market capitalization index measuring global real estate securities, which meet minimum size, liquidity and investment The primary sectors of the S&P 500(R) Index represented by the focus criteria. The index is a sub-set of the FTSE EPRA/NAREIT Select Sector SPDR(R) ETFs are: consumer discretionary, consumer Investment Focus Index Series, which separates the existing staples, energy, financials, healthcare, industrials, materials, constituents into both Rental and Non-Rental Indices. A company technology, and utilities. The Index has the flexibility to be is classified as Rental if the rental revenue from properties is invested in any combination of the nine sector ETFs, a greater than or equal to 70% of total revenue. The classification combination of sector ETFs and short-term U.S. Treasuries, or is based on revenue sources as disclosed in the latest published 100% in short-term U.S. Treasuries. financial statement. The index is calculated on a total return basis with dividends reinvested. BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX FUND OF FUNDS The Barclays Capital California Municipal Bond Index measures long term investment grade, tax-exempt and fixed rate bonds A mutual fund that invests in the shares of other open-end mutual issued in California. The index is calculated on a total return funds according to an established asset allocation model, basis. resulting in a diversified portfolio of asset classes and investment strategies appropriate for pursuit of the overall BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX investment objective. The Barclays Capital High Yield Bond 2% Issuer Cap Index is a ISHARES market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. Represents shares of an open-end Exchange-Traded Fund. corporations. No single issuer accounts for more than 2% of market cap. The index is calculated on a total return basis. JPMORGAN EMERGING MARKETS BOND INDEX PLUS BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX The JPMorgan Emerging Markets Bond Index Plus measures traded external debt instruments in emerging markets. The index is The Barclays Capital U.S. Aggregate Bond Index measures the U.S. calculated on a total return basis. investment grade fixed rate bond market. The index is calculated on a total return basis. 5
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) LONG POSITION ("LONG") PIK (PAYMENT-IN-KIND SECURITY) Ownership of a security, giving the investor the right to A bond which pays interest in the form of additional bonds, or transfer ownership to someone else, the right to receive income preferred stock which pays dividends in the form of additional paid by the security, and the right to any profits or losses as preferred stock. the security's value changes. REIT (REAL ESTATE INVESTMENT TRUST) MSCI AC FAR EAST EX JAPAN INDEX (NET) A publicly traded company that owns, develops and operates The MSCI AC (All Country) Far East excluding Japan Index is a income-producing real estate such as apartments, office free float-adjusted market capitalization weighted index that is buildings, hotels, shopping centers and other commercial designed to measure the equity market performance of the Far properties. East, excluding Japan. Currently, the MSCI AC Far East ex Japan Index consists of the following 10 developed and emerging market S&P 500(R) INDEX country indices: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. MSCI EAFE(R) INDEX companies. The index is calculated on a total return basis with dividends reinvested. The MSCI EAFE(R) (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization index that measures equity S&P/LSTA U.S. LEVERAGED LOAN INDEX market performance of developed markets, excluding the U.S. and Canada. The index is calculated on a total return basis with The S&P/LSTA Leveraged Loan Index is a daily total return index gross dividends reinvested. that uses LSTA/LPC Mark-to-Market Pricing to calculate market value change. On a real-time basis, the Index tracks the current MSCI EUROPE INDEX (NET) outstanding balance and spread over LIBOR for fully funded term loans. The facilities included in the Index represent a broad The MSCI Europe Index is a free float-adjusted market cross section of leveraged loans syndicated in the United States, capitalization weighted index that is designed to measure the including dollar-denominated loans to overseas issuers. equity market performance of the developed markets in Europe. Currently, the MSCI Europe Index consists of the following 16 SHORT POSITION ("SHORT") developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Stock shares that an investor has sold without actually owning Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the (by borrowing the certificates from a broker) in anticipation of United Kingdom. a decline in the stock value by a certain date. If the price falls, the investor buys the shares at the lower rate and makes a MSCI WORLD(SM) INDEX (NET) profit on the difference. It the price rises, the investor must buy at the higher price and sustains a loss. A free float-adjusted market capitalization index that measures developed global market equity performance. The index is SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) calculated on a total return basis with net dividends reinvested. An ADR which is issued with the cooperation of the company whose MSCI WORLD INFRASTRUCTURE SECTOR CAPPED INDEX stock will underlie the ADR. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting The MSCI World Infrastructure Sector Capped Index is a market rights. ADRs must be sponsored to be able to trade on a major capitalization weighted index that measures performance of global U.S. exchange such as the NYSE. infrastructure companies by capturing broad and diversified opportunities across telecommunication, utilities, energy, WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS transportation and social infrastructure sectors. The telecommunication infrastructure and utilities sector each Securities purchased on a when-issued or forward commitment basis represent one-third of the index weight, while energy, are also known as delayed delivery transactions. Delayed delivery transportation and social infrastructure sectors have a combined transactions involve a commitment by a Fund to purchase or sell a weight of the remaining one-third of the index. Prior to security at a future date, ordinarily up to 90 days later. September 1, 2008, the index allocation was 65% MSCI When-issued or forward commitments enable a Fund to lock in what USA/utilities index, 20% MSCI World Telcom Services index and 15% is believed to be an attractive price or yield on a particular MSCI World ex USA utilities index. security for a period of time, regardless of future changes in interest rates. 6
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED) FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2010, see the Federal Income Tax Information Note 12 in the Notes to Financial Statements. (2) Non-income producing. (3) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (4) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. See the table below. Market Value Fund ($ reported in thousands) % of Net Assets ------- ------------------------- --------------- Bond Fund $17,854 9.0% High Yield Fund 16,540 15.9% Multi-Sector Fixed Income Fund 43,550 20.8% Senior Floating Rate Fund 6,937 4.3% (5) Regulation S security. Security is offered and sold outside of the United States; therefore, it is exempt from registration with the SEC under rules 903 and 904 of the Securities Act of 1933. (6) Illiquid security. (7) Illiquid and restricted. See Note 7 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 is disclosed as a level 3 security in the disclosure table located after the Schedule of Investments. (9) At September 30, 2010, the concentration of the Fund's investments by state or territory determined as a percentage of net assets is as follows: California 98%. At September 30, 2010, 66.5% of the securities in the portfolio are backed by insurance of financial institutions and financial guaranty assurance agencies. Insurers with a concentration greater than 10% of net assets are as follows: NATL 26.4%, GNMA 13.1%, AMBAC 12.2%, and AGM 11.4%. (10) All or a portion segregated as collateral. (11) Affiliated Fund(s). (12) Security in default. (13) Escrowed to maturity. (14) All or a portion of security on loan. (15) Represents security purchased with cash collateral received for securities on loan. (16) Amount is less than $500. 7
\ TICKER SYMBOLS: Class A: PSWAX Class C: PSWCX ALPHASECTOR(TM) ALLOCATION FUND Class I: VAAIX - - ALPHASECTOR(TM) ALLOCATION FUND (THE - The good news for the third quarter LACK OF LIQUIDITY IN AN ETF COULD RESULT "FUND") is diversified and has an extends beyond the raw performance IN ITS VALUE BEING MORE VOLATILE THAN THE investment objective of seeking long-term result. When evaluated at a more UNDERLYING PORTFOLIO OF SECURITIES. SECTOR capital appreciation and current income. extensive level, the market exhibited ETFS ARE SUBJECT TO SECTOR RISKS AND improvement in its quality indicators NON-DIVERSIFICATION RISKS, WHICH MAY - - For the fiscal year ended September 30, from a second quarter that delivered very RESULT IN GREATER PRICE FLUCTUATIONS THAN 2010, the Fund's Class A shares at NAV weak and troubling statistics. F-Squared THE OVERALL MARKET. BECAUSE THE FUND returned 10.02%, Class C shares returned (subadviser to the Fund) evaluates the INVESTS IN ETFS, IT INDIRECTLY BEARS ITS 9.20%, and Class I shares returned market from perspective of the major U.S. PROPORTIONATE SHARE OF THE OPERATING 12.34%*. For the same period, the S&P equity sectors, and the three primary EXPENSES OF THE UNDERLYING FUNDS. 500(R) Index ("S&P 500"), a broad-based yardsticks that we focus on are price INDIRECTLY, THE FUND IS SUBJECT TO ALL equity index, returned 10.16%; the trends, volatility, and correlation RISKS ASSOCIATED WITH THE UNDERLYING ETFS. Barclays Capital U.S. Aggregate Bond between the sectors. And for all three of THE GUARANTEE ON U.S. GOVERNMENT Index, a broad-based fixed income index, these measures, the third quarter SECURITIES APPLIES ONLY TO THE UNDERLYING returned 8.16%; and the AlphaSector(TM) demonstrated significant improvements SECURITIES OF THE FUND'S PORTFOLIO, AND Allocation Fund Composite Index, the from the prior quarter. NOT TO THE VALUE OF THE FUND'S SHARES. Fund's style-specific benchmark CREDIT RISK REFERS TO THE POSSIBILITY THAT appropriate for comparison, returned WHAT FACTORS AFFECTED THE FUND'S AN ISSUER OF A SECURITY WILL NOT BE ABLE 10.05%. PERFORMANCE DURING ITS FISCAL YEAR? TO MAKE PRINCIPAL AND INTEREST PAYMENTS IN A TIMELY MANNER. THE FUND MAY INVEST IN * Returns less than 1 year are not - The first half of 2010 saw significant HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO annualized. spikes in volatility (using our GREATER CREDIT AND MARKET RISKS. THE proprietary volatility measure), with the PRINCIPAL ON MORTGAGE- OR ASSET-BACKED ALL PERFORMANCE FIGURES ASSUME average sector volatility increasing by SECURITIES MAY NORMALLY BE PREPAID AT ANY REINVESTMENT OF DISTRIBUTIONS AND EXCLUDE more than 100% from January through June. TIME, WHICH WILL REDUCE THE YIELD AND THE EFFECT OF SALES CHARGES. PAST In the third quarter that volatility came MARKET VALUE OF THESE SECURITIES. PERFORMANCE IS NO GUARANTEE OF FUTURE down an average of 47%, and the trend is RESULTS AND CURRENT PERFORMANCE MAY BE pointing towards further reductions in ------------------------------------------ HIGHER OR LOWER THAN THE PERFORMANCE volatility. The second quarter of 2010 ASSET ALLOCATION SHOWN ABOVE. also had near record levels of correlation between the various industry The following table presents asset HOW DID THE MARKET PERFORM DURING THE sectors, rendering most active management allocations within certain sectors and as FUND'S FISCAL YEAR? and risk management techniques a percentage of total investments as of ineffective. September 30, 2010. - - We just finished a strong third quarter of 2010 with the S&P 500 up an impressive - The second quarter saw the majority of Exchange-Traded Funds 63% 11.3%, bringing year to date returns to a the sectors turn "negative" based on our Domestic Fixed Income Funds 21 positive 3.9% and trailing 12 months up analysis, implying that our analysis Other (includes short-term 10.2%. This marks the fifth quarter out suggests that there is a higher investments and securities of the last six with a positive return probability that the sector will lose lending collateral) 16 for the market, and while that statistic money going forward, versus gain value. --- would imply a strong and robust equity In such cases, we removed those sectors Total 100% market, 2010 has been anything but entirely from the portfolio. === healthy. ------------------------------------------ - Of those sectors that were still - - The 11.3% gain for third quarter 2010 positive, they had regressed to the point comes on the heels of a -11.4% loss in that they were nearing the negative the second quarter 2010. In fact, in six inflection point, which would have of the past eight quarters the S&P 500 triggered a bear market phase by our has either gained or lost at least 10%. calculations. Fortunately, the third This level of volatility is not quarter reversed the trend, and by the unprecedented, but it is indicative of end of September a majority of the the kind of market uncertainty that has sectors were back positive (and thus were traditionally been very challenging for reinstated into the portfolio), and those active investment managers, and remaining negative had turned to a unsettling for investors. Fortunately, "positive bias." Thus the market trends the AlphaSector Rotation Index has been heading into the fourth quarter of 2010 able to weather the market volatility to are positive and improving. outperform for both the third quarter, year to date 2010, and trailing 12 - Of those sectors that contributed most months. significantly to the outperformance of the strategy during the year, having eliminated Health Care in the second quarter of 2010 and maintaining exposure to Consumer Discretionary were most constructive. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 8
ALPHASECTOR(TM) ALLOCATION FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 10.02% 2.50% 4.34% 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 3.69 1.29 3.48 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 9.20 1.73 3.56 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV -- -- 12.34 10/1/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 NOTE 5 -- - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 NOTE 6 -- - ------------------------------------------------------------------------------------------------------------------------------------ ALPHASECTOR(TM) ALLOCATION FUND COMPOSITE INDEX 10.05 3.24 NOTE 7 -- - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(8): A SHARES: 1.45%; C SHARES: 2.20%; I SHARES: 1.20%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 4.21% AND FOR CLASS I (SINCE 10/1/09) IS 13.07%. (6) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 5.70% AND FOR CLASS I (SINCE 10/1/09) IS 7.76%. (7) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 5.13% AND FOR CLASS I (SINCE 10/1/09) IS 12.11%. (8) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on August 1, 2003 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Share S&P 500(R) Barclays Capital AlphaSector(TM) Class A(1,3,4) Class C(1,4) Index U.S. Aggregate Bond Index Allocation Fund Composite Index -------------- ------------ ---------- ------------------------- ------------------------------- 8/1/2003 9425 10000 10000 10000 10000 9/30/2003 9604 10170 10191 10338 10252 9/30/2004 10469 11011 11603 10718 11256 9/30/2005 11299 11798 13024 11018 12211 9/29/2006 12112 12551 14430 11422 13180 9/28/2007 13641 14032 16802 12009 14747 9/30/2008 11466 11703 13109 12447 12935 9/30/2009 11618 11772 12204 13761 13011 9/30/2010 12783 12854 13444 14884 14319 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 9
TICKER SYMBOLS: Class A: PWBAX ALPHASECTOR(TM) ROTATION FUND Class C: PWBCX Class I: VARIX - - ALPHASECTOR(TM) ROTATION FUND (THE WHAT FACTORS AFFECTED THE FUND'S ------------------------------------------ "FUND") is diversified and has an PERFORMANCE DURING ITS FISCAL YEAR? Asset Allocation investment objective of seeking long-term capital appreciation. - The first half of 2010 saw significant The following table presents asset spikes in volatility (using our allocations within certain sectors and as - - For the fiscal year ended September proprietary volatility measure), with a percentage of total investments as of 30, 2010, the Fund's Class A shares at the average sector volatility September 30, 2010. NAV returned 9.63%, Class C shares increasing by more than 100% from returned 8.79%, and Class I shares January through June. In the third Exchange-Traded Funds 79% returned 12.63%*. For the same period, quarter that volatility came down an Other the S&P 500(R) Index ("S&P 500"), a average of 47%, and the trend is broad-based equity index, returned pointing towards further reductions in (including securities lending 10.16%; the Barclays Capital U.S. volatility. The second quarter of 2010 collateral) 21 Aggregate Bond Index, a broad-based also had near record levels of --- fixed income index, returned 8.16%; correlation between the various Total 100% and the AlphaSector(TM) Rotation Fund industry sectors, rendering most === Composite Index, the Fund's active management and risk management ------------------------------------------ style-specific benchmark appropriate techniques ineffective. for comparison, returned 10.16%. - The second quarter saw the majority of * Returns less than 1 year are not the sectors turn "negative" based on annualized. our analysis, implying that our analysis suggests that there is a ALL PERFORMANCE FIGURES ASSUME higher probability that the sector REINVESTMENT OF DISTRIBUTIONS AND will lose money going forward, versus EXCLUDE THE EFFECT OF SALES CHARGES. gain value. In such cases, we removed PAST PERFORMANCE IS NO GUARANTEE OF those sectors entirely from the FUTURE RESULTS AND CURRENT PERFORMANCE portfolio. MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. - Of those sectors that were still positive, they had regressed to the HOW DID THE MARKET PERFORM DURING THE point that they were nearing the FUND'S FISCAL YEAR? negative inflection point, which would have triggered a bear market phase by - - We just finished a strong third our calculations. Fortunately, the quarter of 2010 with the S&P 500 up an third quarter reversed the trend, and impressive 11.3%, bringing year to by the end of September a majority of date returns to a positive 3.9% and the sectors were back positive (and trailing 12 months up 10.2%. This thus were reinstated into the marks the fifth quarter out of the portfolio), and those remaining last six with a positive return for negative had turned to a "positive the market, and while that statistic bias." Thus the market trends heading would imply a strong and robust equity into the fourth quarter of 2010 are market, 2010 has been anything but positive and improving. healthy. - Of those sectors that contributed most - - The 11.3% gain for third quarter 2010 significantly to the outperformance of comes on the heels of a -11.4% loss in the strategy during the year, having the second quarter 2010. In fact, in eliminated Health Care in the second six of the past eight quarters the S&P quarter of 2010 and maintaining 500 has either gained or lost at least exposure to Consumer Discretionary 10%. This level of volatility is not were most constructive. unprecedented, but it is indicative of the kind of market uncertainty that LACK OF LIQUIDITY IN AN ETF COULD has traditionally been very RESULT IN ITS VALUE BEING MORE challenging for active investment VOLATILE THAN THE UNDERLYING PORTFOLIO managers, and unsettling for OF SECURITIES. SECTOR ETFS ARE SUBJECT investors. Fortunately, the TO SECTOR RISKS AND AlphaSector Rotation Index has been NON-DIVERSIFICATION RISKS, WHICH MAY able to weather the market volatility RESULT IN GREATER PRICE FLUCTUATIONS to outperform for both the third THAN THE OVERALL MARKET. BECAUSE THE quarter, year to date 2010, and FUND INVESTS IN ETFS, IT INDIRECTLY trailing 12 months. BEARS ITS PROPORTIONATE SHARE OF THE OPERATING EXPENSES OF THE UNDERLYING - - The good news for the third quarter FUNDS. INDIRECTLY, THE FUND IS SUBJECT extends beyond the raw performance TO ALL RISKS ASSOCIATED WITH THE result. When evaluated at a more UNDERLYING ETFS. THE GUARANTEE ON U.S. extensive level, the market exhibited GOVERNMENT SECURITIES APPLIES ONLY TO improvement in its quality indicators THE UNDERLYING SECURITIES OF THE from a second quarter that delivered FUND'S PORTFOLIO, AND NOT TO THE VALUE very weak and troubling statistics. OF THE FUND'S SHARES. F-Squared evaluates the market from perspective of the major U.S. equity sectors, and the three primary yardsticks that we focus on are price trends, volatility, and correlation between the sectors. And for all three of these measures, the third quarter demonstrated significant improvements from the prior quarter. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 10
ALPHASECTOR(TM) ROTATION FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 9.63% 1.50% 3.98% 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 3.33 0.30 3.13 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 8.79 0.76 3.22 8/1/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV -- -- 12.63 10/1/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 NOTE 5 -- - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 NOTE 6 -- - ------------------------------------------------------------------------------------------------------------------------------------ ALPHASECTOR(TM) ROTATION FUND COMPOSITE INDEX 10.16 2.05 NOTE 7 -- - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(8): A SHARES: 1.34%; C SHARES: 2.09%; I SHARES 1.09%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 4.21% AND FOR CLASS I (SINCE 10/1/09) IS 13.07%. (6) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 5.70% AND FOR CLASS I (SINCE 10/1/09) IS 7.76%. (7) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 8/1/03) IS 4.76% AND FOR CLASS I (SINCE 10/1/09) IS 13.07%. (8) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on August 1, 2003 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Share S&P 500(R) Barclays Capital AlphaSector(TM) Class A(1, 3, 4) Class C(1, 4) Index U.S. Aggregate Bond Index Rotation Fund Composite Index ---------------- ------------- ------------------ ------------------------- ----------------------------- 8/1/2003 9425 10000 10000 10000 10000 9/30/2003 9538 10100 10191 10338 10221 9/30/2004 10528 11074 11603 10718 11431 9/30/2005 11576 12084 13024 11018 12616 9/29/2006 12603 13063 14430 11422 13797 9/28/2007 14567 14999 16802 12009 15751 9/30/2008 11702 11946 13109 12447 13038 9/30/2009 11374 11538 12204 13761 12672 9/30/2010 12469 12552 13444 14884 13960 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 11
TICKER SYMBOLS: Class A: PDPAX ALTERNATIVES DIVERSIFIER FUND Class C: PDPCX Class I: VADIX - - ALTERNATIVES DIVERSIFIER FUND (THE The extreme pessimism reflected in CONCENTRATING INVESTMENTS IN REITS "FUND") is diversified and has an investor sentiment helped to put a INVOLVES CERTAIN RISKS SUCH AS investment objective of long-term recent bottom into stocks, along with REFINANCING, PROPERTY VALUE CHANGES capital appreciation. slightly better economic data, and AND MANAGEMENT SKILL. generally better than expected - - For the fiscal year ended September corporate earnings. Other asset THE FUND'S USE OF ASSET CLASS 30, 2010, the Fund's Class A shares at classes also experienced volatility, ALLOCATIONS DOES NOT ASSURE OR NAV returned 8.91%, Class C shares including many investments in the GUARANTEE BETTER PERFORMANCE AND returned 8.06%, and Class I shares Fund. However, given the multiple CANNOT ELIMINATE THE RISK OF returned 11.11%*. For the same period, investment approach of the Fund as a INVESTMENT LOSS. the S&P 500(R) Index ("S&P 500"), a whole, the Fund experienced less broad-based equity index, returned volatility than the equity markets. BEFORE INVESTING, YOU SHOULD 10.16%, and the Diversifier Composite CAREFULLY READ THE APPLICABLE RISK Index, the Fund's style-specific index WHAT FACTORS AFFECTED THE FUND'S DISCLOSURE FOR EACH OF THE UNDERLYING appropriate for comparison, returned PERFORMANCE DURING ITS FISCAL YEAR? VIRTUS MUTUAL FUNDS, WHICH CAN BE 9.45%. FOUND IN THE CURRENT PROSPECTUS. - There has been a measurable increase * Returns less than 1 year are not in correlation across asset classes, LACK OF LIQUIDITY IN AN ETF COULD annualized. as there seems to be a "risk-on versus RESULT IN ITS VALUE BEING MORE risk-off" mentality among market VOLATILE THAN THE UNDERLYING ALL PERFORMANCE FIGURES ASSUME participants. Stocks, high-yield PORTFOLIO OF SECURITIES. SECTOR ETFS REINVESTMENT OF DISTRIBUTIONS AND bonds, commodities and real estate (to ARE SUBJECT TO SECTOR RISKS AND EXCLUDE THE EFFECT OF SALES CHARGES. name a few classes) tend to move NON-DIVERSIFICATION RISKS, WHICH MAY PAST PERFORMANCE IS NO GUARANTEE OF together as investors either chose to RESULT IN GREATER PRICE FLUCTUATIONS FUTURE RESULTS AND CURRENT PERFORMANCE put risk capital to work, or sell THAN THE OVERALL MARKET. BECAUSE THE MAY BE HIGHER OR LOWER THAN THE assets in tandem. While over time the FUND INVESTS IN ETFS, IT INDIRECTLY PERFORMANCE SHOWN ABOVE. individual investments specific to the BEARS ITS PROPORTIONATE SHARE OF THE Fund have a relatively low correlation OPERATING EXPENSES OF THE UNDERLYING HOW DID THE MARKET PERFORM DURING THE to the stock markets, the correlation FUNDS. INDIRECTLY, THE FUND IS FUND'S FISCAL YEAR? patterns do not work out all the time. SUBJECT TO ALL RISKS ASSOCIATED WITH However, on a rolling three-year THE UNDERLYING ETFS. - - On the face of things, equity markets basis, the Fund has produced higher performed well over the course of the returns with less risk than the S&P INVESTING IN FUNDS THAT USE LEVERAGE, last year, with the S&P 500 rising 500 for all 23 of the rolling 3-year SHORT SELLING, FUTURES, OPTIONS AND/ 10.16% year-over-year. However, it periods since inception through OR DERIVATIVES MAY EXPOSE THE FUND TO would be a simplification to suggest September 30, 2010. The Fund has also ADDITIONAL RISKS. COMMODITY OR the market "had a good year" when experienced significantly less COMMODITY-RELATED EQUITY PRICES MAY looked through the lens of the volatility (as measured by the FLUCTUATE WIDELY OVER SHORT TIME volatility investors endured to garner standard deviation of the fund) than PERIODS. the returns. On April 23, 2010, the the index over all the rolling 3-year S&P 500 closed at 1,217, putting it at periods and over the recent calendar ------------------------------------------ a recent high since the bear market year. Historically, the asset classes Asset Allocation low hit in March of 2009. Optimism in which the Fund invests have a regarding the economic recovery was relatively low correlation to the S&P The following table presents asset high and the market had virtually 500, which means greater allocations within certain sectors and as doubled since the lows. Ultimately a diversification. This spreading out of a percentage of total investments as of spate of bad economic news, including risk should provide investors with September 30, 2010. signs of anemic job growth, rising reasonable portfolio returns with less home foreclosures and falling housing volatility. Exchange-Traded Funds 35% prices, sent the market into a Equity Funds 55 tailspin. The market sold off INVESTING INTERNATIONALLY, ESPECIALLY Fixed Income Funds 10 dramatically until July 22 when the IN EMERGING MARKETS, INVOLVES --- S&P closed at 1,022, for a 16% decline ADDITIONAL RISKS SUCH AS CURRENCY, Total 100% in the broad equity index. This POLITICAL, ACCOUNTING, ECONOMIC AND === "correction" was largely caused by the MARKET RISK. ------------------------------------------ speculation the economy was going into a "double dip" recession and that INVESTING IN THE SECURITIES OF SMALL stocks were overvalued relative to the AND MID-SIZED COMPANIES INVOLVES earnings power. Subsequently, the GREATER RISKS AND PRICE VOLATILITY market has recovered to 1,141 on THAN LARGER, MORE ESTABLISHED September 30, 2010, the date of this COMPANIES. report. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 12
ALTERNATIVES DIVERSIFIER FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 8.91% 1.65% 11/30/05 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 2.65 0.42 11/30/05 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 8.06 0.90 11/30/05 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV -- 11.11 10/1/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 NOTE 5 -- - ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIER COMPOSITE INDEX 9.45 NOTE 6 -- - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(7): A SHARES: GROSS 2.07%, NET 0.45%; C SHARES: GROSS 2.82%, NET 1.20%; I SHARES: GROSS 1.82%, NET 0.20%. 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 11/30/05) IS 0.23% AND FOR CLASS I (SINCE 10/1/09) IS 13.07%. (6) THE INDEX PERFORMANCE FOR CLASS A AND CLASS C (SINCE 11/30/05) IS 3.28% AND FOR CLASS I (SINCE 10/1/09) IS 9.45%. (7) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on November 30, 2005 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Share S&P 500(R) Diversifier Class A(1, 3, 4) Class C(1, 4) Index Composite Index ---------------- ------------- ------------------ --------------- 11/30/2005 9425 10000 10000 10000 9/29/2006 10059 10606 10855 11193 9/28/2007 11431 11965 12639 12809 9/30/2008 10409 10803 9862 11757 9/30/2009 9368 9663 9181 10680 9/30/2010 10203 10442 10114 11689 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 13
TICKER SYMBOLS: Class A: SAVAX BOND FUND Class B: SAVBX Class C: SAVCX Class I: SAVYX - - BOND FUND (THE "FUND") is diversified WHAT FACTORS AFFECTED THE FUND'S ------------------------------------------ and has an investment objective of PERFORMANCE DURING ITS FISCAL YEAR? ASSET ALLOCATION high total return from both current income and capital appreciation. - The fund maintained a healthy The following table presents asset overweight to corporate credit during allocations within certain sectors and as - - For the fiscal year ended September the period, and as a result, it a percentage of total investments as of 30, 2010, the Fund's Class A shares at exceeded the benchmark by 249 basis September 30, 2010. NAV returned 10.42%, Class B shares points. The Fund emphasized returned 9.60%, Class C shares financials, particularly banks and Corporate Bonds 51% returned 9.57%, and Class I shares insurance, which stood out as top Financials 24% returned 10.65%. For the same period, performers due to a supportive Consumer Discretionary 8 the Barclays Capital U.S. Aggregate regulatory environment. The Fund also Telecommunication Services 4 Bond Index, which serves as the maintained a meaningful allocation to Utilities 3 broad based and style-specific high yield debt, which returned All other sectors 12 benchmark index appropriate for roughly 18%. In the securitized Mortgage-Backed Securities 33 comparison, returned 8.16%. sector, the fund emphasized U.S. Government Securities 9 commercial mortgage backed Loan Agreements 2 ALL PERFORMANCE FIGURES ASSUME securities. CMBS was the top Other (includes short-term REINVESTMENT OF DISTRIBUTIONS AND performing component of the portfolio, investments and securities EXCLUDE THE EFFECT OF SALES CHARGES. with a total return of 23.29%. Agency lending collateral) 5 PAST PERFORMANCE IS NO GUARANTEE OF mortgage-backed securities, which --- FUTURE RESULTS AND CURRENT PERFORMANCE returned just 5.77% in the portfolio, Total 100% MAY BE HIGHER OR LOWER THAN THE were de-emphasized relative to the === PERFORMANCE SHOWN ABOVE. benchmark. ------------------------------------------ HOW DID THE MARKET PERFORM DURING THE THE FUND MAY INVEST IN HIGH YIELD FUND'S FISCAL YEAR? BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. AS INTEREST - - The financial markets continued to RATES RISE, EXISTING BOND PRICES FALL recover from the depressed levels they AND CAN CAUSE THE VALUE OF AN reached in early 2009. While returns INVESTMENT IN THE FUND TO DECLINE. did not match the stratospheric CHANGES IN INTEREST RATES WILL AFFECT heights of the previous year, THE VALUE OF LONGER TERM FIXED INCOME corporate credit continued its strong SECURITIES MORE THAN SHORTER-TERM upward trajectory. The catalysts to SECURITIES. THE PRINCIPAL ON MORTGAGE- credit were twofold. First, as OR ASSET-BACKED SECURITIES MAY economic growth improved, credit NORMALLY BE PREPAID AT ANY TIME, fundamentals improved with them. WHICH WILL REDUCE THE YIELD AND MARKET Second, the Federal Reserve's low VALUE OF THESE SECURITIES. interest rate policies drove investors out of money markets and Treasuries and into bonds that provided more yield. Improving fundamentals and the search combined to fan the demand for higher yielding corporate bonds. As a result, high yield bonds, as represented by the Barclays family of indices, returned 18.44% over the course of the year. High grade corporate credit also fared well, producing an 11.67% return. Commercial mortgage-backed securities ("CMBS") rallied along with the corporate sector, with a 17.99% total return according to Barclays. Returns on government related bonds were muted, as U.S. Treasuries generated a 7.57% return during the fiscal year, and mortgage-backed securities lagged, at only 5.71%. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 14
BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ 1 year 5 years 10 years - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 10.42% 6.02% 5.97% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3) 5.18 4.99 5.46 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) 9.60 5.22 5.18 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) 5.60 5.22 5.18 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 9.57 5.22 5.17 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 10.65 6.28 6.26 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 6.41 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.02%, NET 0.85%; B SHARES: GROSS 1.77%, NET 1.60%; C SHARES: GROSS 1.77%, NET 1.60%; I SHARES: GROSS 0.77%, NET 0.60%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B, Class C, and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Barclays Capital U.S. Share Class A(1,3,4) Share Class B(1,4) Share Class C(1,4) Share Class I Aggregate Bond Index -------------------- ------------------ ------------------ ------------- --------------------- 9/29/2000 9525 10000 10000 10000 10000 9/28/2001 10434 10867 10865 10984 11295 9/30/2002 11007 11392 11390 11636 12266 9/30/2003 11919 12239 12235 12634 12930 9/30/2004 12435 12672 12667 13208 13406 9/30/2005 12701 12844 12838 13530 13781 9/29/2006 13147 13203 13197 14049 14286 9/28/2007 13685 13633 13626 14656 15020 9/30/2008 13618 13466 13471 14632 15569 9/30/2009 15405 15113 15114 16584 17212 9/30/2010 17011 16563 16560 18350 18617 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 15
TICKER SYMBOLS: Class A: CTESX CA TAX-EXEMPT BOND FUND Class I: CTXEX - - CA TAX-EXEMPT BOND FUND (THE "FUND") is well as the prospect of lower federal when interest rates reverse course and diversified and has an investment and state financial support. Ongoing move higher. The Fund did benefit from objective to obtain a high level of reports challenging the fiscal soundness its allocation to high quality current income exempt from California of future retirement benefits along with zero-coupon bonds. While out of favor state and local income taxes, as well as sizable budget deficits still being for the first part of the year, this federal income tax, consistent with the reported throughout the country could structure provided the portfolio with preservation of capital. derail the strong municipal valuation attractive yield as relative spreads momentum, especially if fiscal remain attractive. The Fund's allocation - - For the fiscal year ended September 30, conditions do not improve. to the Healthcare Sector also benefited 2010, the Fund's Class A shares at NAV performance as these higher coupon returned 4.43% and Class I shares The technicals have clearly dominated securities saw steady improvement in returned 4.69%. For the same period, the the fundamentals in the municipal market risk premiums throughout the year. Barclays Capital U.S. Aggregate Bond with strong demand from individual Index, a broad-based fixed income index, investors and lower supply of tax-exempt The technicals have clearly dominated returned 8.16%, and the Barclays Capital issuance due to the BAB program the fundamentals in the municipal market California Municipal Bond Index, the dominating the market. However, the with strong demand from individual Fund's style-specific benchmark fundamentals are starting to get investors and lower supply of tax-exempt appropriate for comparison, returned attention as municipalities are issuance due to the BAB program 6.04%. experiencing budget problems not seen dominating the market. However, the since the 1930s. With very low absolute fundamentals are starting to get ALL PERFORMANCE FIGURES ASSUME yields and the huge amount of money that attention as municipal credits are REINVESTMENT OF DISTRIBUTIONS AND has poured into the market over the past experiencing budget problems not seen EXCLUDE THE EFFECT OF SALES CHARGES. 18 months, against the backdrop of since the 1930s. With very low absolute PAST PERFORMANCE IS NO GUARANTEE OF weaker fundamentals, we expect market yields and the huge amount of money that FUTURE RESULTS AND CURRENT PERFORMANCE performance to level off as we move has poured into the market over the past MAY BE HIGHER OR LOWER THAN THE through the balance of 2010 and into 18 months, against the backdrop of PERFORMANCE SHOWN ABOVE. 2011. weaker fundamentals, we expect market performance to level off as we move HOW DID THE MARKET PERFORM DURING THE WHAT FACTORS AFFECTED THE FUND'S through the balance of 2010. FUND'S FISCAL YEAR? PERFORMANCE DURING ITS FISCAL YEAR? A FUND THAT CONCENTRATES ITS INVESTMENTS - - The municipal bond market performed very - Due to the fiscal challenges impacting IN A SINGLE STATE WILL BE MORE well over the past year as strong demand the State of California, California SUSCEPTIBLE TO FACTORS ADVERSELY for tax-exempt bonds from individual municipal bonds mostly underperformed AFFECTING ISSUERS LOCATED IN THAT STATE investors and municipal bond funds and bonds issued outside of the state. Just THAN WOULD A MORE GEOGRAPHICALLY DIVERSE the continued success of the Build recently, California finally passed its PORTFOLIO OF SECURITIES. A PORTION OF America Bond program ("BABs") each 2011 budget, over 90 days past its INCOME MAY BE SUBJECT TO SOME STATE benefited the market. Individuals have original deadline. This budget attempts AND/OR LOCAL TAXES AND, FOR CERTAIN invested record amounts of money into to close a $19.1 billion deficit the INVESTORS, A PORTION MAY BE SUBJECT TO municipal bond funds over the past 18 state is projecting for 2011. Because of THE FEDERAL ALTERNATIVE MINIMUM TAX. months as they look to diversify their the uncertainty surrounding the state's INVESTING IN MUNICIPAL BONDS INVOLVES risks beyond the equity market and to fiscal position, investors are demanding MARKET RISK AND CREDIT RISK. AS INTEREST help prepare for the inevitable rise in higher risk premiums on most California RATES RISE, EXISTING BOND PRICES FALL taxes to fund federal and state municipal bonds. AND CAN CAUSE THE VALUE OF AN INVESTMENT deficits. This huge demand for IN THE FUND TO DECLINE. CHANGES IN tax-exempt bonds has helped drive prices Despite solid absolute performance, the INTEREST RATES WILL AFFECT THE VALUE OF higher and improved the liquidity for Fund's high quality emphasis hurt LONGER-TERM FIXED INCOME SECURITIES MORE the entire municipal bond market. After relative performance over the past year THAN SHORTER-TERM SECURITIES. being shut out of the market for part of as investors' search for yield in an 2008 and 2009, issuers once again have extremely low interest rate environment ------------------------------------------ affordable access to the market through helped prices on lower rated municipal ASSET ALLOCATION BABs and the traditional tax-exempt bonds move significantly higher. The following table presents asset market as the cost of capital has Investors are venturing into single-A allocations within certain sectors and as improved greatly. The general effect of and BBB rated issues in search of yield a percentage of total investments as of the BAB program has been an overall as overall interest rates have declined. September 30, 2010. improvement in the price of most This trend impacted performance in 2009 municipal bonds, since this issuance and through the first 9 months of 2010. Pre-Refunded 27% would previously have come to the market While the Fund's absolute returns are General Revenue 16 as tax-exempt debt. Issuers are enjoying solidly positive, it could not keep pace General Obligation 15 a much lower cost of capital on both BAB with the improvement in prices of lower Water & Sewer Revenue 11 issues and tax-exempt issues due to the quality bonds. Additionally, the Fund's Medical Revenue 9 great success of this program. higher allocation to longer maturity Development Revenue 6 bonds with short dated call options has Education Revenue 3 Despite this improvement over the past impacted performance. As interest rates Other (includes short-term year, ongoing concerns persist over moved steadily lower during the year, investments) 13 difficult state and local fiscal these bonds experienced less price --- conditions. Investors are closely appreciation than similar maturity Total 100% monitoring the financial health of noncallable bonds or bonds with longer === municipal issuers struggling with lower dated call options. We continue to hold ------------------------------------------ revenues due to declines in sales tax these high quality, shorter call dated and income tax receipts as bonds as interest rates hover near historic low levels. These bonds will provide strong relative performance For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 16
CA TAX-EXEMPT BOND FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years 10 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 4.43% 4.03% 4.64% -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3,4) -0.54 3.03 4.13 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 4.69 -- -- 4.29% 9/29/06 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(5) 8.16 6.20 6.41 6.83 -- - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL CALIFORNIA MUNICIPAL BOND INDEX(5) 6.04 4.92 5.59 4.99 -- - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 1.02%, NET 0.85%; I SHARES: GROSS 0.77%, NET 0.60%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE INCEPTION DATE OF THE CLASS. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000 for Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Barclays Capital California Barclays Capital Share Class Munitipal Bond U.S. Aggregate A(1, 3, 4) Index Bond Index ----------- ---------------- ---------------- 9/29/2000 9525 10000 10000 9/28/2001 10413 10978 11295 9/30/2002 11396 11926 12266 9/30/2003 11540 12216 12930 9/30/2004 11943 12898 13406 9/30/2005 12310 13550 13781 9/29/2006 12810 14174 14286 9/28/2007 13044 14594 15020 9/30/2008 12791 14207 15569 9/30/2009 14365 16245 17212 9/30/2010 15001 17226 18617 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 17
TICKER SYMBOLS: Class A: PGUAX Class C: PGUCX GLOBAL INFRASTRUCTURE FUND Class I: PGIUX - - GLOBAL INFRASTRUCTURE FUND (THE "FUND") - Given the global nature of the Fund, ------------------------------------------ is diversified and has an investment European markets had a significant ASSET ALLOCATION objective of seeking both capital impact on performance during the fiscal appreciation and current income. year. In the first half of calendar year The following table presents asset 2010, the sovereign debt crisis spread allocations within certain sectors and as - - For the fiscal year ended September 30, across several countries in which the a percentage of total investments as of 2010, the Fund's Class A shares at NAV Fund is invested, including Spain, September 30, 2010. returned 10.48%, Class C shares returned Portugal and Italy. In particular, the 9.70%, and Class I shares returned Fund's transportation holdings were hit Telecommunication Services 30% 10.96%. For the same period, the S&P by these concerns. Utilities 30 500(R) Index, a broad-based equity Energy 21 index, returned 10.16%, and the MSCI WHAT FACTORS AFFECTED THE FUND'S Industrials 16 World Infrastructure Sector Capped PERFORMANCE DURING ITS FISCAL YEAR? Consumer Discretionary 2 Index, the Fund's style-specific Other (includes short-term benchmark appropriate for comparison, - The Fund significantly outperformed the investments) 1 returned 6.79%. benchmark for the fiscal year ended --- September 30, 2010, mainly due to the Total 100% ALL PERFORMANCE FIGURES ASSUME strength of stock selection in === REINVESTMENT OF DISTRIBUTIONS AND communications, utilities and ------------------------------------------ EXCLUDE THE EFFECT OF SALES CHARGES. transportation. However, the overweight PAST PERFORMANCE IS NO GUARANTEE OF in transportation was a slight detractor FUTURE RESULTS AND CURRENT PERFORMANCE from performance as that sector MAY BE HIGHER OR LOWER THAN THE underperformed all sectors in the Fund PERFORMANCE SHOWN ABOVE. due to the European sovereign debt concerns. HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? - Looking at regional contributions, stock selection and an overweight in North - - Despite a positive return for both the America contributed to relative Fund and the market during the fiscal performance. In Europe, the underweight year ended September 30, 2010, in utilities and strong stock selection volatility continued to define the in transportation helped performance investing environment. For the last versus the benchmark. The Fund's twelve months, the Fund outperformed the underweight in Asia combined with poor broader market as our high-quality, stock selection was a partial detractor lower-risk, above-market dividend yield to performance on a relative basis. strategy came into favor as the stock market rally lost some steam. INVESTING INTERNATIONALLY INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, - - Communications and Utilities showed POLITICAL, ACCOUNTING, ECONOMIC AND their traditional defensiveness, MARKET RISK. THE FUND MAY INVEST IN HIGH outperforming the broader market in weak YIELD BONDS, WHICH MAY BE SUBJECT TO periods, namely the calendar fourth GREATER CREDIT AND MARKET RISKS. quarter of 2009 and the calendar third INFRASTRUCTURE RELATED ENTITIES ARE quarter of 2010. Communications rallied SUBJECT TO FACTORS THAT MAY ADVERSELY in the last quarter of the fiscal year AFFECT THEIR BUSINESS INCLUDING and have outperformed the broader GOVERNMENT POLICIES AND REGULATION. market over the last year on the INVESTING IN FUNDS THAT USE LEVERAGE, strength of dividends. Despite some SHORT SELLING, FUTURES, OPTIONS AND/OR recovery in the most recent quarter, DERIVATIVES MAY EXPOSE THE FUND TO utilities have largely remained out of ADDITIONAL RISKS. BECAUSE THE FUND IS favor during the better part of the past HEAVILY WEIGHTED IN A SINGLE SECTOR, IT twelve months. The energy sector rallied WILL BE IMPACTED BY THAT SECTOR'S early in the fiscal year as the economic PERFORMANCE MORE THAN A FUND WITH outlook showed improvement, but BROADER SECTOR DIVERSIFICATION. performance stalled along with the economy. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 18
GLOBAL INFRASTRUCTURE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 10.48% 4.26% 5.45% 12/30/04 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 4.13 3.04 4.37 12/30/04 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 9.70 3.48 4.67 12/30/04 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 10.96 -- -5.66 6/6/08 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 NOTE 5 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ MSCI WORLD INFRASTRUCTURE SECTOR CAPPED INDEX 6.79 3.46 NOTE 6 NOTE 6 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(7): A SHARES: 1.33%; C SHARES: 2.08%, I SHARES: 1.08%. 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 1.06% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND -5.14% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 5.64% FOR CLASS A AND CLASS C (SINCE 12/30/04) AND -6.95% FOR CLASS I (SINCE 6/6/08). (7) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on December 30, 2004 (inception date of the Fund), for Class A and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1,3,4) Share Class C(1,4) S&P 500(R) Index Global Infrastructure Linked Benchmark -------------------- ------------------ ---------------- -------------------------------------- 12/30/2004 9425 10000 10000 10000 9/30/2005 10378 10959 10291 11567 9/29/2006 11381 11911 11401 12702 9/28/2007 14405 14964 13276 15986 9/30/2008 12153 12543 10358 13131 9/30/2009 11574 11855 9643 12837 9/30/2010 12788 13004 10623 13709 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 19
GLOBAL OPPORTUNITIES FUND TICKER SYMBOLS: Class A: NWWOX Class B: WWOBX Class C: WWOCX - - GLOBAL OPPORTUNITIES FUND (THE "FUND") - Tremendous uncertainty remains at the INVESTING INTERNATIONALLY, ESPECIALLY IN is diversified and has an investment macroeconomic level. Globally, EMERGING MARKETS, INVOLVES ADDITIONAL objective of capital appreciation. concerns about a double-dip recession, RISKS SUCH AS CURRENCY, POLITICAL, deflation, consumer deleveraging and ACCOUNTING, ECONOMIC AND MARKET RISK. - - For the fiscal year ended September 30, government deficits persist. It appears INVESTING IN THE SECURITIES OF SMALL AND 2010, the Fund's Class A shares at NAV that it may take some time before MID-SIZED COMPANIES INVOLVES GREATER RISKS returned 18.09%, Class B shares markets regain solid ground and AND PRICE VOLATILITY THAN LARGER, MORE returned 17.09%, and Class C shares business confidence gains a strong ESTABLISHED COMPANIES. BECAUSE THE FUND IS returned 17.01%. For the same period, footing. HEAVILY WEIGHTED IN A SINGLE SECTOR, IT the S&P 500(R) Index, a broad-based WILL BE IMPACTED BY THAT SECTOR'S equity index, returned 10.16%, and the WHAT FACTORS AFFECTED THE FUND'S PER-FORMANCE MORE THAN A FUND WITH BROADER MSCI World(SM) Index (Net), the Fund's PERFORMANCE DURING ITS FISCAL YEAR? SECTOR DIVERSIFICATION. style-specific benchmark appropriate for comparison, returned 6.76%. - The Fund's out-of-index holdings in ------------------------------------------ India, strong stock selection in the ASSET ALLOCATION ALL PERFORMANCE FIGURES ASSUME U.S. and Switzerland, and its limited REINVESTMENT OF DISTRIBUTIONS AND exposure to Japan helped the Fund The following table presents asset EXCLUDE THE EFFECT OF SALES CHARGES. outperform during the year. allocations within certain sectors and as PAST PERFORMANCE IS NO GUARANTEE OF a percentage of total investments as of FUTURE RESULTS AND CURRENT PERFORMANCE - The Fund has sizeable positions in September 30, 2010. MAY BE HIGHER OR LOWER THAN THE large, multi-national corporations. In PERFORMANCE SHOWN ABOVE. general, their multiples remain fairly Consumer Staples 39% attractive. The companies are growing, Information Technology 23 HOW DID THE MARKET PERFORM DURING THE but their valuations don't always Financials 11 FUND'S FISCAL YEAR? reflect that growth. The Fund is Health Care 10 growing faster than the Index while Consumer Discretionary 6 - - World economies are stabilizing, and trading at similar valuations. Energy 4 financial conditions are improving, Industrials 3 albeit unevenly, across the world. - The Fund's out-of-index Indian Other (includes short-term Emerging countries had fewer holdings, including HDFC Bank and investments) 4 structural issues than developed Housing Development Finance, made --- countries, and have recovered from the positive contributions to absolute and Total 100% crisis more quickly, in general. We relative performance during the year. === anticipate that these countries will ------------------------------------------ continue to show strength, although - Strong stock selection helped the growth rates may be slower as demand United States make attractive for goods among consumers in developed contributions to relative performance. countries remains muted. If domestic Apple, McDonalds, Cognizant Technology demand grows quickly enough in emerging Solutions, Mead, and Altria Group countries, it could help sustain growth helped relative performance during the rates at higher levels. year. - - The United States economy seems to have - Limited sector exposure and strong stabilized, and the country is further stock selection helped make Financials along in cleaning up its financial the best performing sector in the Fund system than are many other countries. during the year. Indian Banks delivered However, headwinds remain. Unemployment strong relative performance during the is very high. Consumer spending is Fund's fiscal year. HDFC Bank and muted, although saving more and Housing Development Finance Corp. made spending less may be good for the positive contributions to relative economy over the longer term. We performance. continue, as always, to carefully monitor the situation and adjust our risk exposures around the world accordingly. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 20
GLOBAL OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ 1 year 5 years 10 years - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 18.09% -0.08% 0.01% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 11.30 -1.26 -0.58 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) 17.09 -0.81 -0.73 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) 13.09 -0.81 -0.73 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 17.01 -0.83 -0.76 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 -0.43 - ------------------------------------------------------------------------------------------------------------------------------------ MSCI WORLD(SM) INDEX (NET) 6.76 1.30 0.79 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(5): A SHARES: GROSS 1.86%, NET 1.55%; B SHARES: GROSS 2.61%, NET 2.30%; C SHARES: GROSS 2.61%, NET 2.30%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ----------------------------------------------------------------------------------------------------------------------------------- This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1,3,4) Share Class B(1,4) Share Class C(1,4) S&P 500(R) Index MSCI World(SM) Index (Net) -------------------- ------------------ ------------------ ---------------- -------------------------- 9/29/2000 9425 10000 10000 10000 10000 9/28/2001 6787 7139 7144 7336 7186 9/30/2002 5704 5964 5967 5834 5807 9/30/2003 6873 7120 7113 7259 7282 9/30/2004 7880 8106 8103 8265 8527 9/30/2005 9472 9673 9662 9277 10141 9/29/2006 10973 11126 11118 10279 11679 9/28/2007 13291 13371 13361 11968 14022 9/30/2008 9237 9236 9226 9338 10370 9/30/2009 7987 7934 7920 8693 10132 9/30/2010 9433 9289 9267 9577 10817 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 21
TICKER SYMBOLS: Class A: VGSAX Class C: VGSCX GLOBAL REAL ESTATE SECURITIES FUND Class I: VGISX - - GLOBAL REAL ESTATE SECURITIES FUND (THE put their banking system through a - Looking forward, the outlook for global "FUND") is non-diversified and has a series of stress tests. The results of real estate space market fundamentals primary investment objective of which were published during late July (i.e., changes in rents and long-term capital appreciation and a and helped calmed market fears and set occupancies) remains mixed with Asia secondary investment objective of the stage for a strong reversal in the Pacific and emerging markets such as income. performance of the Euro. Brazil further along the recovery curve versus the U.S., Europe and the U.K. - - For the fiscal year ended September 30, - Toward the end of the Fund's fiscal However, the current low interest rate 2010, the Fund's Class A shares at NAV year The Wall Street Journal ran an environment and expectations for low returned 22.42%, Class C shares article titled "Macro Forces in Market global economic growth have enhanced returned 21.55%, and Class I shares Confound Stock Pickers,"(1) which went the income appeal of high-quality core returned 22.77%. For the same period, on to review how big picture items such real estate on a global basis. With the the S&P 500(R) Index, a broad-based as the economy, politics and monetary return of liquidity to the real estate equity index, returned 10.16%, and the policy seem to have a much greater financing markets, the transaction FTSE EPRA/NAREIT Developed Rental influence on the direction of stocks market for real asset assets has Index, the Fund's style-specific today than in the past. In our opinion, improved markedly in 2010 and capital benchmark appropriate for comparison, the events that transpired over the values have increased across most returned 22.32%. fiscal year and their impact on markets, particularly for prime securities markets are a perfect assets. ALL PERFORMANCE FIGURES ASSUME example of this trend. Nonetheless, REINVESTMENT OF DISTRIBUTIONS AND despite the intra-year volatility that - Moreover, an environment of low growth EXCLUDE THE EFFECT OF SALES CHARGES. occurred because of these evolving and low interest rates is positive for PAST PERFORMANCE IS NO GUARANTEE OF macro forces, overall the markets global real estate securities and the FUTURE RESULTS AND CURRENT PERFORMANCE posted positive returns during the increased appetite for yield MAY BE HIGHER OR LOWER THAN THE fiscal year. alternatives has definitely been a PERFORMANCE SHOWN ABOVE. large driver behind returns for global WHAT FACTORS AFFECTED THE FUND'S real estate securities during the HOW DID THE MARKET PERFORM DURING THE PERFORMANCE DURING ITS FISCAL YEAR? fiscal year and 2010 year-to-date. FUND'S FISCAL YEAR? Should these conditions remain in - Macro forces, such as changing place, we could see further capital - - During the first half of the Fund's expectations for the global economy, appreciation in global real estate fiscal year signs of continued global concerns regarding structural fiscal shares over the balance of 2010 and economic recovery abounded, but the imbalances across many developed into 2011. However, to sustain the recovery remained uneven and bifurcated countries and ongoing monetary policy recent healthy moves in valuations over between emerging and developed initiatives were significant factors the medium-term, additional reductions economies at one level and then across that affected the performance of the in the cost of capital and/or further major developed economies at the next Fund during the fiscal year. progress in space market fundamentals, level. Structural fiscal imbalances Additionally, given the capital and ultimately cash flow growth, will were a common issue of discussion and intensive nature of the real estate be needed. unfortunately are a too common feature industry, the material reduction in among many of the developed economies capital costs during the fiscal year (1) TOM LAURICELLA AND GREGORY ZUCKERMAN, around the world. Even very small has been a significant factor behind "MACRO FORCES IN MARKET CONFOUND STOCK economies, such as Greece, can in the the performance of the securities PICKERS," THE WALL STREET JOURNAL, short run have a disproportionate within the Fund. SEPTEMBER 24, 2010. impact on global financial markets and this was made abundantly clear during - Taking a closer look at the countries CONCENTRATING INVESTMENTS IN REITS early 2010. Fiscal imbalances can represented within the Fund's style INVOLVES CERTAIN RISKS SUCH AS clearly be an impediment to long-run benchmark the top five performing REFINANCING, PROPERTY VALUE CHANGES AND growth and the market was keenly countries during the fiscal year on a MANAGEMENT SKILL. INVESTING focused on the will of political U.S. dollar basis were Sweden, Hong INTERNATIONALLY, ESPECIALLY IN leadership to put policies in place to Kong, Canada, Singapore and EMERGING MARKETS, INVOLVES ADDITIONAL help correct these structural Switzerland, respectively. Conversely RISKS SUCH AS CURRENCY, POLITICAL, imbalances going forward. the bottom five performing countries ACCOUNTING, ECONOMIC AND MARKET RISK. were Greece, Spain, the U.K., Belgium INVESTING IN THE SECURITIES OF SMALL - - During the second half of the Fund's and Italy, respectively. Factors AND MID-SIZED COMPANIES INVOLVES fiscal year the uncertainty surrounding driving the performance of the top GREATER RISKS AND PRICE VOLATILITY THAN the financial situations across performing countries include better LARGER, MORE ESTABLISHED COMPANIES. A several southern European countries economic growth outlook, a more stable NON-DIVERSIFIED FUND MAY BE MORE (i.e., Italy, Greece and Spain) and fiscal situation and a healthier SUSCEPTIBLE TO ANY SINGLE ECONOMIC, whether or not the European Union and financial sector. Whereas the bottom POLITICAL OR REGULATORY EVENT AFFECTING its healthier members, at least on a performing countries were generally AN ISSUER THAN IS A DIVERSIFIED FUND. relative basis, were going to act to plagued by a weak fiscal situation and stabilize the ongoing European financial sector and relatively weaker ------------------------------------------ sovereign debt crisis consumed economic outlook. ASSET ALLOCATION investors' attention. Over the second weekend in May, a large package of - During the fiscal year, 14 countries The following table presents asset financial assistance was unveiled by positively contributed to portfolio allocations within certain sectors and as the European Union in coordination with performance, 7 countries detracted from a percentage of total investments as of the International Monetary Fund and the performance and one was neutral. In September 30, 2010. European Central Bank, which went a aggregate, the fiscal year's long way to averting a larger financial performance was driven primarily by Retail REITs 30% catastrophe. The unveiling of this stock selection versus country Office REITs 16 financial rescue package, however, was allocation. The performance of the Fund Specialized REITs 16 not enough to halt the downward spiral relative to its style benchmark Diversified REITs 12 of the Euro versus the U.S. dollar. benefited from stock selection within Residential REITs 10 Thus, in an attempt to boost investor the U.S., allocation to and stock Real Estate Operating Companies 9 confidence, toward the end of the selection within the Netherlands, Industrial REITs 4 second quarter of 2010, European allocation to Brazil, stock selection Other (includes short-term financial regulators announced that with Australia and allocation to investments) 3 they would Belgium. However, allocation to and --- stock selection within Sweden, Canada Total 100% and Japan negatively impacted the === performance of the Fund relative to its ------------------------------------------ style benchmark. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 22
GLOBAL REAL ESTATE SECURITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 22.42% 66.74% 3/2/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 15.38 60.61 3/2/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 21.55 65.53 3/2/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 22.77 67.22 3/2/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 39.06 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FTSE EPRA/NAREIT DEVELOPED RENTAL INDEX 22.32 70.10 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 4.85%, NET 1.40%; C SHARES: GROSS 5.60%, NET 2.15%; CLASS I SHARES: GROSS 4.60%, NET 1.15%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY CONTRACTUAL FEE WAIVER IN EFFECT THROUGH MARCH 31, 2010. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE CONTRACTUAL FEE WAIVER. EFFECTIVE APRIL 1, 2010, THE WAIVER IS VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on March 2, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1,3,4) Share Class C(1,4) Share Class I S&P 500(R) Index FTSE EPRA/NAREIT Developed Rental Index -------------------- ------------------ ------------- ---------------- --------------------------------------- 3/2/2009 9425 10000 10000 10000 10000 9/30/2009 17276 18250 18360 15289 18933 9/30/2010 21149 22182 22541 16842 23158 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 23
TICKER SYMBOLS: Class A: VGAAX Class C: VGACX GREATER ASIA EX JAPAN OPPORTUNITIES FUND Class I: VGAIX - - GREATER ASIA EX JAPAN OPPORTUNITIES WHAT FACTORS AFFECTED THE FUND'S Financial companies led the way with FUND (THE "FUND") is diversified and PERFORMANCE DURING ITS FISCAL YEAR? strong performance from HDFC Bank, has an investment objective to seek Housing Development Finance Corp. long-term capital appreciation. - Strong stock selection, in addition to making attractive contributions to positive sector and country allocation, absolute and relative performance - - For the fiscal year ended September 30, were the primary drivers behind the during the year. 2010, the Fund's Class A shares at NAV Fund's outperformance during the fiscal returned 34.27%, Class C shares year. INVESTING IN THE SECURITIES OF SMALL returned 33.39%, and Class I shares AND MID-SIZED COMPANIES INVOLVES returned 34.69%. For the same period, - Strong underlying earnings growth of GREATER RISKS AND PRICE VOLATILITY THAN the S&P 500(R) Index, a broad-based the stocks held in the portfolio over LARGER, MORE ESTABLISHED COMPANIES. equity index, returned 10.16%, and the the past several years was finally BECAUSE THE FUND IS HEAVILY WEIGHTED IN MSCI AC Far East ex Japan Index (Net), reflected in share price performance, A SINGLE SECTOR, IT WILL BE IMPACTED BY the Fund's style-specific benchmark helping the Fund outperform the indexes THAT SECTOR'S PERFORMANCE MORE THAN A appropriate for comparison, returned during the year. FUND WITH BROADER SECTOR 18.50%. DIVERSIFICATION. INVESTING - The Fund's Indian holdings made the INTERNATIONALLY, ESPECIALLY IN EMERGING ALL PERFORMANCE FIGURES ASSUME greatest contributions to absolute and MARKETS, INVOLVES ADDITIONAL RISKS SUCH REINVESTMENT OF DISTRIBUTIONS AND relative performance as the Fund was AS CURRENCY, POLITICAL, ACCOUNTING, EXCLUDE THE EFFECT OF SALES CHARGES. overweight the country. ECONOMIC AND MARKET RISK. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE - Sri Lanka is an out-of-index play. The ------------------------------------------ MAY BE HIGHER OR LOWER THAN THE Fund's holdings in the country made ASSET ALLOCATION PERFORMANCE SHOWN ABOVE. attractive contributions to relative and absolute performance during the The following table presents asset HOW DID THE MARKET PERFORM DURING THE Fund's fiscal year. The country is allocations within certain sectors and as FUND'S FISCAL YEAR? benefiting from a period of peace and a percentage of total investments as of investment following a decadeslong September 30, 2010. - - Markets in the Far East had a strong civil war. year as countries in the region have Consumer Staples 35% been some of the first to recover from - The Fund was significantly overweight Financials 22 the financial crisis. the Consumer Staples sector, as that is Industrials 11 the sector we find the largest number Consumer Discretionary 8 - - Tremendous uncertainty remains at the of attractive investments. This Information Technology 7 macroeconomic level. Globally, weighting helped absolute and relative Health Care 5 concerns about a double-dip recession, performance during the Fund's fiscal Materials 5 deflation, consumer deleveraging and year. The strong performance of ITC and Other (includes short-term government deficits persist. In this Nestle India helped the Consumer investments and securities environment investor dollars are Staples sector become a top performer lending collateral) 7 flowing to the regions less affected by during the Fund's fiscal year. --- these issues, namely emerging markets Total 100% and the Far East. - Financials was another top-performing === sector in the Fund during the Fund's ------------------------------------------ fiscal year. Indian For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 24
GREATER ASIA EX JAPAN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 34.27% 47.16% 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 26.55 41.25 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 33.39 46.10 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 34.69 47.56 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 23.76 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ MSCI AC FAR EAST EX JAPAN INDEX (NET) 18.50 42.15 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 2.95%, NET 1.80%; C SHARES: GROSS 3.70%, NET 2.55%; CLASS I SHARES: GROSS 2.70%, NET 1.55%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY CONTRACTUAL FEE WAIVER IN EFFECT THROUGH MARCH 31, 2010. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE CONTRACTUAL FEE WAIVER. EFFECTIVE APRIL 1, 2010, THE WAIVER IS VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME. GROWTH OF $10,000 For period ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on April 21, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1,3,4) Share Class C(1,4) Share Class I S&P 500(R) Index MSCI AC Far East ex Japan Index (Net) -------------------- ------------------ ------------- ----------------- ------------------------------------- 4/21/2009 9425 10000 10000 10000 10000 9/30/2009 12262 12960 13020 12327 13982 9/30/2010 16465 17287 17537 13580 16569 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 25
TICKER SYMBOLS: Class A: VGEAX Class C: VGECX GREATER EUROPEAN OPPORTUNITIES FUND Class I: VGEIX - - GREATER EUROPEAN OPPORTUNITIES FUND - Tremendous uncertainty remains at the INVESTING IN THE SECURITIES OF SMALL (THE "FUND") is diversified and has an macroeconomic level. Globally, AND MID-SIZED COMPANIES INVOLVES investment objective to seek long-term concerns about a double-dip recession, GREATER RISKS AND PRICE VOLATILITY THAN capital appreciation. deflation, consumer deleveraging and LARGER, MORE ESTABLISHED COMPANIES. government deficits persist. It appears BECAUSE THE FUND IS HEAVILY WEIGHTED IN - - For the fiscal year ended September 30, that it may take some time before A SINGLE SECTOR, IT WILL BE IMPACTED BY 2010, the Fund's Class A shares at NAV markets regain solid ground and THAT SECTOR'S PERFORMANCE MORE THAN A returned 9.14%, Class C shares returned business confidence gains a strong FUND WITH BROADER SECTOR 8.28%, and Class I shares returned footing. DIVERSIFICATION. INVESTING 9.48%. For the same period, the S&P INTERNATIONALLY, ESPECIALLY IN EMERGING 500(R) Index, a broad-based equity WHAT FACTORS AFFECTED THE FUND'S MARKETS, INVOLVES ADDITIONAL RISKS SUCH index, returned 10.16%, and the MSCI PERFORMANCE DURING ITS FISCAL YEAR? AS CURRENCY, POLITICAL, ACCOUNTING, Europe Index (Net), the Fund's ECONOMIC AND MARKET RISK. style-specific benchmark appropriate - The Fund has sizeable positions in for comparison, returned 2.63%. large, multi-national corporations. In ------------------------------------------ general, their multiples remain fairly ASSET ALLOCATION ALL PERFORMANCE FIGURES ASSUME attractive. The companies are growing, REINVESTMENT OF DISTRIBUTIONS AND but their valuations don't always The following table presents asset EXCLUDE THE EFFECT OF SALES CHARGES. reflect that growth. We believe that allocations within certain sectors and as PAST PERFORMANCE IS NO GUARANTEE OF many of the Fund's large holdings are a percentage of total investments as of FUTURE RESULTS AND CURRENT PERFORMANCE relatively less expensive than they September 30, 2010. MAY BE HIGHER OR LOWER THAN THE were last year. The Fund is growing PERFORMANCE SHOWN ABOVE. faster than the Index while trading at Consumer Staples 35% similar valuations. Health Care 17 HOW DID THE MARKET PERFORM DURING THE Industrials 16 FUND'S FISCAL YEAR? - French firms such as Bureau Veritas and Financials 12 Air Liquide made positive contributions Consumer Discretionary 7 - - While some evidence suggested that to absolute and relative performance Energy 5 recovery was gaining momentum in the during the Fund's fiscal year. Information Technology 2 Eurozone during the first half of 2010, Other (includes short-term the end of fiscal stimulus, the - The Fund's Swiss holdings made positive investments sovereign debt crisis, and failure to contributions to performance; Nestle and securities lending restructure debt have negatively delivered positive absolute and collateral) 6 affected sentiment, slowing recovery. relative returns. --- Across Europe, countries have been Total 100% adopting austerity measures: reducing - The Fund's limited exposure to the === spending increases, reining in public Financial sector made positive ------------------------------------------ deficits, and working to restore fiscal contributions during the Fund's fiscal stability. At the same time, they have year. begun to pursue revenue by increasing taxes on certain goods and services. - Consumer Staples companies also made Higher taxes will, in some cases, positive contributions to absolute affect the performance of companies in performance during the Fund's fiscal specific market segments. We have year. BAT and Phillip Morris assessed the affect on our holdings and International helped relative made some adjustments to minimize the performance. potential impact. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 26
GREATER EUROPEAN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for period ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 9.14% 27.21% 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 2.87 22.10 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 8.28 26.25 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 9.48 27.56 4/21/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 25.15 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ MSCI EUROPE INDEX (NET) 2.63 31.21 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 2.38%, NET 1.45%; C SHARES: GROSS 3.13%, NET 2.20%; CLASS I SHARES: GROSS 2.13%, NET 1.20%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY CONTRACTUAL FEE WAIVER IN EFFECT THROUGH MARCH 31, 2010. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE CONTRACTUAL FEE WAIVER. EFFECTIVE APRIL 1, 2010, THE WAIVER IS VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on April 21, 2009 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Share Share S&P MSCI Europe Class A(1,3,4) Class C(1,4) Class I 500(R) Index Index (Net) -------------- ------------ ------- ------------ ----------- 4/21/2009 9425 10000 10000 10000 10000 9/30/2009 12224 12930 12980 12534 14402 9/30/2010 13342 14001 14210 13808 14780 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 27
TICKER SYMBOLS: Class A: PHCHX Class B: PHCCX HIGH YIELD FUND Class C: PGHCX - - HIGH YIELD FUND (THE "FUND") is WHAT FACTORS AFFECTED THE FUND'S ------------------------------------------ diversified and has a primary investment PERFORMANCE DURING ITS FISCAL YEAR? ASSET ALLOCATION objective to seek high current income and a secondary objective of capital - Quality Diversification - We continue to The following table presents asset growth. increase our exposure to B rated and CCC allocations within certain sectors as a & below rated securities that we believe percentage of total investments as of - - For the fiscal year ended September 30, to be good relative value, mispriced September 30, 2010. 2010, the Fund's Class A shares at NAV and/or misrated. The portfolio is returned 15.43%, Class B shares returned currently overweight single B's and Corporate Bonds 88% 14.65%, and Class C shares returned slightly underweight CCC & below rated Consumer Discretionary 22% 14.53%. For the same period, the securities. The single B weight has been Telecommunication Services 14 Barclays Capital U.S. Aggregate Bond relatively constant throughout the year Consumer Staples 10 Index, a broad-based fixed income index, while the CCC & below has slightly Financials 9 returned 8.16%, and the Barclays Capital increased. Industrials 7 High Yield Bond 2% Issuer Cap Index, the All other sectors 26 Fund's style-specific index appropriate - Manage Cash Levels - During the quarter, Other (includes short-term for comparison, returned 18.24%. we proactively managed our cash levels investments and securities to balance the risk return trade-off lending collateral) 12 ALL PERFORMANCE FIGURES ASSUME between being fully invested and --- REINVESTMENT OF DISTRIBUTIONS AND reducing positions that we thought were Total 100% EXCLUDE THE EFFECT OF SALES CHARGES. overvalued given current fundamentals. === PAST PERFORMANCE IS NO GUARANTEE OF Due to the payoff of several ----------------------------------------- FUTURE RESULTS AND CURRENT PERFORMANCE yield-to-call investments and cash MAY BE HIGHER OR LOWER THAN THE inflows, we ended September with a PERFORMANCE SHOWN ABOVE. higher cash balance than planned. HOW DID THE MARKET PERFORM DURING THE - Shorter Duration Investments - FUND'S FISCAL YEAR? Throughout the last two quarters, we invested in several short maturity/take - - The High Yield Market posted strong out trades in the portfolio. These performance for the fiscal year ended trades generated a reasonable return September 30, 2010. The market recovery during the summer flight to quality with that began in the second quarter of a lower risk profile. We currently have 2009, continued into 2010. Returns were a couple of these types of trades still driven by low interest rates, slow but on in the portfolio. positive economic growth, significant investor cash inflows, declining default THE FUND MAY INVEST IN HIGH YIELD BONDS, rates, and positive corporate financial WHICH MAY BE SUBJECT TO GREATER CREDIT results. AND MARKET RISKS. AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN - - While sentiment was bullish throughout CAUSE THE VALUE OF AN INVESTMENT IN THE the year, as indicated by positive FUND TO DECLINE. CHANGES IN INTEREST returns in all rating categories, the RATES WILL AFFECT THE VALUE OF BB and B categories were the largest LONGER-TERM FIXED INCOME SECURITIES MORE contributors to returns. This is a THAN SHORTER-TERM SECURITIES. departure from fiscal year 2009 when we saw the CC & below rating categories generate the highest market returns. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 28
HIGH YIELD FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ 1 year 5 years 10 years - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 15.43% 4.15% 3.13% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 9.95 3.14 2.63 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) 14.65 3.40 2.37 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) 10.65 3.40 2.37 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 14.53 3.43 2.37 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 6.41 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL HIGH YIELD BOND 2% ISSUER CAP INDEX 18.24 8.39 8.09 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(5): A SHARES: 1.38%, B SHARES: 2.13%, C SHARES: 2.13%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Barclays Capital Barclays Capital Share Share Share High Yield Bond U.S. Aggregate Class A(1, 3, 4) Class B(1, 4) Class C(1, 4) 2% Issuer Cap Index Bond Index ---------------- ------------- ------------- ------------------- ---------------- 9/29/2000 9525 10000 10000 10000 10000 9/28/2001 8066 8414 8401 9458 11295 9/30/2002 7771 8045 8031 9376 12266 9/30/2003 9248 9500 9498 12139 12930 9/30/2004 10049 10238 10232 13659 13406 9/30/2005 10581 10687 10679 14559 13781 9/29/2006 11097 11133 11123 15612 14286 9/28/2007 11939 11878 11888 16801 15020 9/30/2008 10495 10383 10376 15035 15569 9/30/2009 11232 11020 11036 18420 17212 9/30/2010 12965 12634 12639 21780 18617 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 29
TICKER SYMBOLS: Class A: VIEAX Class C: VIECX Class I: VIIEX INTERNATIONAL EQUITY FUND - - INTERNATIONAL EQUITY FUND (THE "FUND") is -------------------------------------------------- diversified and has an investment objective to ASSET ALLOCATION seek to provide long-term capital appreciation. The following table presents asset allocations - - For the fiscal period September 16, 2010 within certain sectors and as a percentage of (inception date) through September 30, 2010, total investments as of September 30, 2010. the Fund's Class A shares at NAV returned 1.70%*, Class C shares returned 1.60%*, and Consumer Staples 12% Class I shares returned 1.70%.* For the same Telecommunication Services 12 period, the S&P 500(R) Index, a broad-based Energy 11 equity index, returned 1.52%*, and the MSCI Industrials 11 EAFE(R) Index (Net), the Fund's style-specific Health Care 10 benchmark appropriate for comparison, returned Information Technology 10 2.51%.* Utilities 8 Other (includes short-term investments) 26 * Returns less than 1 year are not annualized. --- Total 100% 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 INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE. MARKETS, INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, ACCOUNTING, ECONOMIC AND MARKET RISK. A PORTFOLIO THAT HOLDS A LIMITED NUMBER OF SECURITIES WILL BE IMPACTED BY EACH SECURITY'S PERFORMANCE MORE THAN A PORTFOLIO WITH A LARGER NUMBER OF HOLDINGS. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 30
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TICKER SYMBOLS: Class A: PXRAX Class C: PXRCX INTERNATIONAL REAL ESTATE SECURITIES FUND Class I: PXRIX - - INTERNATIONAL REAL ESTATE SECURITIES put their banking system through a - Looking forward, the outlook for FUND (THE "FUND") is non-diversified series of stress tests. The results of international real estate space market and has a primary investment objective which were published during late July fundamentals (i.e., changes in rents of long-term capital appreciation and a and helped calm market fears and set and occupancies) remains mixed with secondary investment objective of the stage for a strong reversal in the Asia Pacific and emerging markets such income. performance of the Euro. as Brazil further along the recovery curve versus Europe and the U.K. - - For the fiscal year ended September 30, - Toward the end of the Fund's fiscal However, the current low interest rate 2010, the Fund's Class A shares at NAV year The Wall Street Journal ran an environment and expectations for low returned 14.44%, Class C shares article titled "Macro Forces in Market global economic growth have enhanced returned 13.73%, and Class I shares Confound Stock Pickers,"(1) which went the income appeal of high-quality core returned 14.83%. For the same period, on to review how big picture items such real estate on a global basis. With the the S&P 500(R) Index, a broad-based as the economy, politics and monetary return of liquidity to the real estate equity index, returned 10.16%, and the policy seem to have a much greater financing markets, the transaction FTSE EPRA/NAREIT Developed Rental ex influence on the direction of stocks market for real estate assets has U.S. Index, the Fund's style-specific today than in the past. In our opinion, improved markedly in 2010 and capital benchmark appropriate for comparison, the events that transpired over the values have increased across most returned 15.04%. fiscal year and their impact on markets, particularly for prime securities markets are a perfect assets. ALL PERFORMANCE FIGURES ASSUME example of this trend. Nonetheless, REINVESTMENT OF DISTRIBUTIONS AND despite the intra-year volatility that - Moreover, an environment of low growth EXCLUDE THE EFFECT OF SALES CHARGES. occurred because of these evolving and low interest rates is positive for PAST PERFORMANCE IS NO GUARANTEE OF macro forces, overall the markets international real estate securities FUTURE RESULTS AND CURRENT PERFORMANCE posted positive returns during the and the increased appetite for yield MAY BE HIGHER OR LOWER THAN THE fiscal year. alternatives has definitely been a PERFORMANCE SHOWN ABOVE. large driver behind returns for WHAT FACTORS AFFECTED THE FUND'S international real estate securities HOW DID THE MARKET PERFORM DURING THE PERFORMANCE DURING ITS FISCAL YEAR? during the fiscal year and 2010 FUND'S FISCAL YEAR? year-to-date. Should these conditions - Macro forces, such as changing remain in place, we could see further - - During the first half of the Fund's expectations for the global economy, capital appreciation in international fiscal year signs of continued global concerns regarding structural fiscal real estate shares over the balance of economic recovery abounded, but the imbalances across many developed 2010 and into 2011. However, to sustain recovery remained uneven and bifurcated countries and ongoing monetary policy the recent healthy moves in valuations between emerging and developed initiatives were significant factors over the medium-term, additional economies at one level and then across that affected the performance of the reductions in the cost of capital major developed economies at the next Fund during the fiscal year. and/or further progress in space level. Structural fiscal imbalances Additionally, given the capital market fundamentals, and ultimately were a common issue of discussion and intensive nature of the real estate cash flow growth, will be needed. unfortunately are a too common feature industry, the material reduction in among many of the developed economies capital costs during the fiscal year (1) TOM LAURICELLA AND GREGORY ZUCKERMAN, around the world. Even very small has been a significant factor behind "MACRO FORCES IN MARKET CONFOUND STOCK economies, such as Greece, can in the the performance of the securities PICKERS," THE WALL STREET JOURNAL, short run have a disproportionate within the Fund. SEPTEMBER 24, 2010. impact on global financial markets and this was made abundantly clear during - Taking a closer look at the countries INVESTING IN THE SECURITIES OF SMALL early 2010. Fiscal imbalances can represented within the Fund's style AND MID-SIZED COMPANIES INVOLVES clearly be an impediment to long-run benchmark the top five performing GREATER RISKS AND PRICE VOLATILITY THAN growth and the market was keenly countries during the fiscal year on a LARGER, MORE ESTABLISHED COMPANIES. focused on the will of political U.S. dollar basis were Sweden, Hong INVESTING INTERNATIONALLY, ESPECIALLY leadership to put policies in place to Kong, Canada, Singapore and IN EMERGING MARKETS, INVOLVES help correct these structural Switzerland, respectively. Conversely ADDITIONAL RISKS SUCH AS CURRENCY, imbalances going forward. the bottom five performing countries POLITICAL, ACCOUNTING, ECONOMIC AND were Greece, Spain, the U.K., Belgium MARKET RISK. A NON-DIVERSIFIED FUND MAY - - During the second half of the Fund's and Italy, respectively. Factors BE MORE SUSCEPTIBLE TO ANY SINGLE fiscal year the uncertainty surrounding driving the performance of the top ECONOMIC, POLITICAL OR REGULATORY the financial situations across performing countries include better EVENT AFFECTING AN ISSUER THAN IS A several southern European countries economic growth outlook, a more stable DIVERSIFIED FUND. CONCENTRATING (i.e., Italy, Greece and Spain) and fiscal situation and a healthier INVESTMENTS IN REITS INVOLVES CERTAIN whether or not the European Union and financial sector. Whereas the bottom RISKS SUCH AS REFINANCING, PROPERTY its healthier members, at least on a performing countries were generally VALUE CHANGES AND MANAGEMENT SKILL. relative basis, were going to act to plagued by a weak fiscal situation and stabilize the ongoing European financial sector and relatively weaker ------------------------------------------ sovereign debt crisis consumed economic outlook. ASSET ALLOCATION investors' attention. Over the second weekend in May, a large package of - During the fiscal year, 15 countries The following table presents asset financial assistance was unveiled by positively contributed to portfolio allocations within certain sectors and as the European Union in coordination with performance and 6 countries detracted a percentage of total investments as of the International Monetary Fund and the from performance. In aggregate, the September 30, 2010. European Central Bank, which went a fiscal year's performance was driven long way to averting a larger financial primarily by country allocation versus Retail REITs 38% catastrophe. The unveiling of this stock selection. The performance of Real Estate Operating Companies 19 financial rescue package, however, was the Fund relative to its style Diversified REITs 18 not enough to halt the downward spiral bench-mark benefited from stock Office REITs 15 of the Euro versus the U.S. dollar. selection within Australia, allocation Industrial REITs 6 Thus, in an attempt to boost investor to Brazil and Hong Kong, stock Specialized REITs 2 confidence, toward the end of the selection and allocation in the Residential REITs 1 second quarter of 2010, European Netherlands and allocation to Belgium. Other (includes short-term financial regulators announced that However, allocation to and stock investments) 1 they would selection within Sweden and Canada and --- allocation to Switzerland negatively Total 100% impacted the performance of the Fund === relative to its style benchmark. ------------------------------------------ For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 32
INTERNATIONAL REAL ESTATE SECURITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 Year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 14.44% -9.53% 10/1/07 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 7.86 -11.30 10/1/07 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 13.73 -10.22 10/1/07 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 14.83 -9.31 10/1/07 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 -7.57 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FTSE EPRA/NAREIT DEVELOPED RENTAL EX U.S. INDEX 15.04 -11.55 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 1.66%, NET 1.50%; C SHARES: GROSS 2.41%, NET 2.25%; CLASS I SHARES: GROSS 1.41%, NET 1.25%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on October 1, 2007 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) FTSE EPRA/NAREIT Share Share Share S&P Developed Rental Class A(1, 3, 4) Class C(1, 4) Class I 500(R) Index ex U.S. Index ---------------- ------------- ------- ------------ ---------------- 10/1/2007 9425 10000 10000 10000 10000 9/30/2008 6460 6791 6868 7700 6486 9/30/2009 6099 6363 6496 7168 6016 9/30/2010 6979 7237 7459 7897 6920 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 33
TICKER SYMBOLS: Class A: EMNAX Class B: EMNBX Class C: EMNCX MARKET NEUTRAL FUND Class I: VIMNX - - MARKET NEUTRAL FUND (THE "FUND") is WHAT FACTORS AFFECTED THE FUND'S - On a sector basis we added value most diversified and has an investment PERFORMANCE DURING ITS FISCAL YEAR? significantly in Information objective to seek long-term capital Technology and Health Care and appreciation while maintaining minimal - Market environments such as we detracted most significantly in portfolio exposure to general equity experienced this year are challenging Consumer Discretionary and Financials. market risk. for market neutral investing, because We held positions across all ten the benefits of stock selection become sectors we monitor during the period - - For the fiscal year ended September 30, muted when larger macro concerns drive and generated positive results in 6 out 2010, the Fund's Class A shares at NAV market returns. The range of returns of the 10 sectors. returned 0.67%, Class B shares returned across the equity universe has narrowed -0.20%, Class C shares returned -0.20%, considerably since mid-2009, as for INVESTMENTS IN SHORT POSITIONS HAVE and Class I shares returned 0.95%*. For much of this period stocks have traded ADDITIONAL RISK THAT LONG POSITIONS DO the same period, the S&P 500(R) Index not on their individual merits (an NOT. IN THEORY, THE RISK OF LOSS ON A ("S&P 500"), A broad-based equity environment that rewards skillful stock SHORT POSITION IS UNLIMITED. INVESTING index, returned 10.16%, and the selection) but on changing expectations IN THE SECURITIES OF SMALL AND Citigroup 90-Day Treasury Bills Index, on the prospects for global recovery. MID-SIZED COMPANIES INVOLVES GREATER which is the Fund's style-specific RISKS AND PRICE VOLATILITY THAN LARGER, index appropriate for comparison, - In addition, the portfolio is generally MORE ESTABLISHED COMPANIES. INVESTING returned 0.12%. positioned (long) to favor stocks of INTERNATIONALLY, ESPECIALLY IN EMERGING companies that we expect to deliver MARKETS, INVOLVES ADDITIONAL RISKS SUCH * Returns less than 1 year are not earnings and revenue growth as economic AS CURRENCY, POLITICAL, ACCOUNTING, annualized. conditions improve and against (short) ECONOMIC AND MARKET RISK. LACK OF companies that we consider to be LIQUIDITY IN AN ETF COULD RESULT IN ITS ALL PERFORMANCE FIGURES ASSUME overvalued relative to their growth VALUE BEING MORE VOLATILE THAN THE REINVESTMENT OF DISTRIBUTIONS AND prospects or expect to fall short of UNDERLYING PORTFOLIO OF SECURITIES. EXCLUDE THE EFFECT OF SALES CHARGES. expectations. But in the face of recent SECTOR ETFS ARE SUBJECT TO SECTOR RISKS PAST PERFORMANCE IS NO GUARANTEE OF turmoil, many investors have clung to AND NON-DIVERSIFICATION RISKS, WHICH FUTURE RESULTS AND CURRENT PERFORMANCE stocks that HAVE DONE WELL, rather than MAY RESULT IN GREATER PRICE MAY BE HIGHER OR LOWER THAN THE looking for those that WILL DO WELL. FLUCTUATIONS THAN THE OVERALL MARKET. PERFORMANCE SHOWN ABOVE. Moreover, in a market that trends BECAUSE THE FUND INVESTS IN ETFS, IT upward with frequent sharp reversals, INDIRECTLY BEARS ITS PROPORTIONATE HOW DID THE MARKET PERFORM DURING THE one can generally only gain ground SHARE OF THE OPERATING EXPENSES OF THE FUND'S FISCAL YEAR? under one scenario or the UNDERLYING FUNDS. INDIRECTLY, THE FUND other--attempting to time such things IS SUBJECT TO ALL RISKS ASSOCIATED WITH - - Global equity markets advanced over the is not part of our investment approach. THE UNDERLYING ETFS. INVESTING IN FUNDS year ended September 30, 2010, with the As a result, we have stood by our THAT USE LEVERAGE, SHORT SELLING, S&P 500 gaining 10.2% and the MSCI EAFE portfolio selections, while carefully FUTURES, OPTIONS AND/OR DERIVATIVES MAY ("EAFE") index coming in with a lower, managing risk and hedging; and during EXPOSE THE FUND TO ADDITIONAL RISKS. but positive, return at 3.7%. Although the last few months we have begun to the end result was a positive one, the see more positive results from those ------------------------------------------ process of getting there was variable efforts. ASSET ALLOCATION to say the least. The S&P 500, for example, gained more than 5% in each of - During the year our domestic large cap The following table presents asset the first two quarters of the fiscal slices made the largest contributions allocations within certain sectors as a year--only to give it back by June 30, to return, while the developed percentage of total investments as of dropping -11.4%. A gain of 11.3% in the international slices struggled more September 30, 2010. final quarter of the year brought us with the fallout from sovereign debt back to roughly where we were on March problems and the austerity measures Long Short 31. they brought about. Emerging markets Positions Positions generated the highest long-short spread Consumer Discretionary 20% 20% - - The most significant sources of in the portfolio, but their smaller Consumer Staples 17 19 volatility during the period were weight in the portfolio muted their Health Care 16 16 concerns around European sovereign debt impact. Our perennial strong performer, Financials 10 13 and the potential for a "double-dip" the Small Mid-Cap Opportunistic team, Industrials 10 11 recession. Not surprisingly, sovereign contributed with a small positive Information Technology 9 8 debt worries hit non-U.S. markets result; while both the Small-Cap Growth Energy 6 6 harder--thus the lower return for the and Small-Cap Value teams had negative Other (includes short-term EAFE index. Thus, the markets wavered long-short spreads and negative investments) 12 7 between upward trends on incremental contributions to return. The teams that --- --- evidence of recovery across global fared worst during this year tend to be Total 100% 100% economies, only to drop precipitously the leading contributors to return === === on news that indicated a pause or under normal conditions--which ------------------------------------------ retreat. supports our view that a widely diversified portfolio is conducive to consistency of performance. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 34
MARKET NEUTRAL FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 09/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years 10 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 0.67% -1.63% 1.43% -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) -5.12 -2.79 0.83 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) -0.20 -2.39 0.68 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) -4.19 -2.58 0.68 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) -0.20 -2.38 0.69 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV -- -- -- 0.95% 10/1/09 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 -0.43 13.07 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ CITIGROUP 90-DAY TREASURY BILLS INDEX 0.12 2.48 2.41 0.12 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 4.24% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES), NET 4.18% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES); B SHARES: GROSS 4.99% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES), NET 4.93% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES); C SHARES: GROSS 4.99% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES), NET 4.93% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES); I SHARES: GROSS 3.99% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES), NET 3.93% (WHICH INCLUDES 2.27% OF DIVIDENDS ON SHORT SALES). ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE INCEPTION DATE OF CLASS I. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Citigroup Share Share Share S&P 90-Day Treasury Class A(1, 3, 4) Class B(1 ,4) Class C(1, 4) 500(R) Index Bills Index ---------------- ------------- ------------- ------------ --------------- 9/29/2000 9425 10000 10000 10000 10000 9/28/2001 10733 11306 11311 7336 10504 9/30/2002 12558 13131 13129 5834 10711 9/30/2003 11299 11734 11736 7259 10842 9/30/2004 11468 11818 11820 8265 10954 9/30/2005 11795 12078 12082 9277 11230 9/29/2006 11151 11328 11327 10279 11725 9/28/2007 10653 10743 10749 11968 12312 9/30/2008 10082 10094 10100 9338 12626 9/30/2009 10791 10723 10731 8693 12675 9/30/2010 10863 10701 10710 9577 12690 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 35
TICKER SYMBOLS: Class A: NAMFX MULTI-SECTOR FIXED INCOME FUND Class B: NBMFX Class C: NCMFX Class I: VMFIX - - MULTI-SECTOR FIXED INCOME FUND (THE - Over the last 12 months yields declined INVESTING INTERNATIONALLY, ESPECIALLY IN "FUND") is diversified and has an across the U.S. Treasury curve, with a EMERGING MARKETS, INVOLVES ADDITIONAL investment objective to maximize current flattening of the curve between 2 and 10 RISKS SUCH AS CURRENCY, POLITICAL, income while preserving capital. year Treasuries and a steepening of the ACCOUNTING, ECONOMIC AND MARKET RISK. THE curve between 10 and 30 year Treasuries. FUND MAY INVEST IN HIGH YIELD BONDS, - - For the fiscal year ended September 30, WHICH MAY BE SUBJECT TO GREATER CREDIT 2010, the Fund's Class A shares at NAV - Conditions in the Fixed Income Market AND MARKET RISKS. AS INTEREST RATES RISE, returned 15.14%, Class B shares returned remain greatly improved as compared to EXISTING BOND PRICES FALL AND CAN CAUSE 14.20%, Class C shares returned 14.29%, the credit crunch during 2008, and the THE VALUE OF AN INVESTMENT IN THE FUND TO and Class I shares returned 15.41%*. For beginning of 2009. DECLINE. CHANGES IN INTEREST RATES WILL the same period, the Barclays Capital AFFECT THE VALUE OF LONGER-TERM FIXED U.S. Aggregate Bond Index, which is both - The flight to quality of 2008, continued INCOME SECURITIES MORE THAN SHORTER-TERM the Fund's broad-based and to reverse over the last 12 months. U.S. SECURITIES. style-specific fixed income index, Treasuries under-performed spread returned 8.16%. sectors during this time period as the ------------------------------------------- economy showed signs of improvement, ASSET ALLOCATION * Returns less than 1 year are not liquidity increased in the markets, and annualized. investors were less risk averse. The following table presents asset allocations within certain sectors and as a ALL PERFORMANCE FIGURES ASSUME WHAT FACTORS AFFECTED THE FUND'S percentage of total investments as of REINVESTMENT OF DISTRIBUTIONS AND PERFORMANCE DURING ITS FISCAL YEAR? September 30, 2010. EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF - The significant outperformance of fixed Corporate Bonds 54% FUTURE RESULTS AND CURRENT PERFORMANCE income spread sectors relative to U.S. Loan Agreements 15 MAY BE HIGHER OR LOWER THAN THE Treasuries and agency debentures was the Mortgage-Backed Securities 13 PERFORMANCE SHOWN ABOVE. key driver of the Fund's strong Foreign Government Securities 12 performance for the fiscal year. The Asset-Backed Securities 2 HOW DID THE BOND MARKETS PERFORM DURING THE Fund benefited from its overweight to U.S. Government Securities 1 FUND'S FISCAL YEAR? spread product and lack of exposure to Other (includes short-term U.S. Treasuries and agency debentures. investments) 3 - - The broad U.S. Fixed Income Market, as --- represented by the Barclays Capital - The Fund's underweight to Agency Total 100% Aggregate Bond Index, returned 8.16% for Mortgage-Backed Securities also === the fiscal year ended September 30, benefited performance. ------------------------------------------- 2010. - Among Fixed Income Sectors, the Fund's - - In the 8 meetings during the fiscal year over-weight to Corporate High Yield the Federal Reserve left rates unchanged (including High Yield Bank Loans), at 0-0.25%. In the first 5 meetings Emerging Markets Debt, Commercial citing that economic activity continues Mortgage-Backed Securities, and to pick up however risks to growth still Corporate High Quality were all exist. In the last 3 meetings citing the significant positive contributors to economic activity surrounding employment performance for the fiscal year. and output had slowed and was expected to be more modest in the near term than - The Fund's higher quality bias to was previously anticipated. corporate high yield detracted from performance during the fiscal year as lower quality within the sector outperformed. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 36
MULTI-SECTOR FIXED INCOME FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 year 5 years 10 years to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 15.14% 6.44% 7.04% -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 9.67 5.40 6.52 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) 14.20 5.63 6.24 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) 10.20 5.63 6.24 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 14.29 5.66 6.26 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV -- -- -- 15.41% 10/1/09 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 6.41 7.76 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: 1.16%, B SHARES: 1.91%, C SHARES: 1.91%, I SHARES: 0.91% ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE INCEPTION DATE OF CLASS I. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B, and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Barclays Capital U.S. Share Class A(1, 3, 4) Share Class B(1, 4) Share Class C(1, 4) Aggregate Bond Index ---------------------- ------------------- ------------------- --------------------- 9/29/2000 9525 10000 10000 10000 9/28/2001 9586 9989 9999 11295 9/30/2002 10315 10669 10677 12266 9/30/2003 12014 12331 12343 12930 9/30/2004 13162 13413 13421 13406 9/30/2005 13784 13947 13951 13781 9/29/2006 14495 14545 14559 14286 9/28/2007 15393 15348 15357 15020 9/30/2008 13937 13789 13791 15569 9/30/2009 16353 16061 16079 17212 9/30/2010 18829 18341 18376 18617 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 37
TICKER SYMBOLS: Class A: VAPAX PREMIUM ALPHASECTOR(TM) FUND Class C: VAPCX Class I: VAPIX - - PREMIUM ALPHASECTOR(TM) FUND (THE WHAT FACTORS AFFECTED THE FUND'S LACK OF LIQUIDITY IN AN ETF COULD RESULT "FUND") is diversified and has an PERFORMANCE DURING ITS FISCAL PERIOD? IN ITS VALUE BEING MORE VOLATILE THAN THE investment objective of seeking UNDERLYING PORTFOLIO OF SECURITIES. long-term capital appreciation. - The first half of 2010 saw significant SECTOR ETFS ARE SUBJECT TO SECTOR RISKS spikes in volatility (using our AND NON-DIVERSIFICATION RISKS, WHICH MAY - - For the fiscal period July 1, 2010 proprietary volatility measure), with RESULT IN GREATER PRICE FLUCTUATIONS THAN (inception date) through September 30, the average sector volatility increasing THE OVERALL MARKET. BECAUSE THE FUND 2010, the Fund's Class A shares at NAV by more than 100% from January through INVESTS IN ETFS, IT INDIRECTLY BEARS ITS returned 11.70%*, Class C shares June. In the third quarter that PROPORTIONATE SHARE OF THE OPERATING returned 11.50%, and Class I shares volatility came down an average of 47%, EXPENSES OF THE UNDERLYING FUNDS. returned 11.70%*. For the same period, and the trend is pointing towards INDIRECTLY, THE FUND IS SUBJECT TO ALL the S&P 500(R) Index ("S&P 500"), a further reductions in volatility. The RISKS ASSOCIATED WITH THE UNDERLYING broad-based equity index, returned second quarter of 2010 also had near ETFS. 11.65%*. AlphaSector(TM) Premium Index, record levels of correlation between the the Fund's style-specific index various industry sectors, rendering most THE GUARANTEE ON U.S. GOVERNMENT appropriate for comparison, returned active management and risk management SECURITIES APPLIES ONLY TO THE UNDERLYING 14.93%*. techniques ineffective. SECURITIES OF THE PORTFOLIO, AND NOT TO THE VALUE OF THE PORTFOLIO'S SHARES. * Returns less than 1 year are not - The second quarter saw the majority of annualized. the sectors turn "negative" based on our A PORTFOLIO THAT HOLDS A LIMITED NUMBER analysis, implying that our analysis OF SECURITIES WILL BE IMPACTED BY EACH ALL PERFORMANCE FIGURES ASSUME suggests that there is a higher SECURITY'S PERFORMANCE MORE THAN A REINVESTMENT OF DISTRIBUTIONS AND probability that the sector will lose PORTFOLIO WITH A LARGER NUMBER OF EXCLUDE THE EFFECT OF SALES CHARGES. money going forward, versus gain value. HOLDINGS. PAST PERFORMANCE IS NO GUARANTEE OF In such cases, we removed those sectors FUTURE RESULTS AND CURRENT PERFORMANCE entirely from the portfolio. ------------------------------------------ MAY BE HIGHER OR LOWER THAN THE ASSET ALLOCATION PERFORMANCE SHOWN ABOVE. - Of those sectors that were still positive, they had regressed to the The following table presents asset HOW DID THE MARKET PERFORM DURING THE point that they were nearing the allocations within certain sectors and as a FUND'S FISCAL PERIOD? negative inflection point, which would percentage of total investments as of have triggered a bear market phase by September 30, 2010. - - We just finished a strong third quarter our calculations. Fortunately, the third of 2010 with the S&P 500 up an quarter reversed the trend, and by the Exchange-Traded Funds 79% impressive 11.3%, bringing year to date end of September a majority of the Other (includes short-term investments returns to a positive 3.9% and trailing sectors were back positive (and thus and securities lending collateral) 21 12 months up 10.2%. This marks the fifth were reinstated into the portfolio), and --- quarter out of the last six with a those remaining negative had turned to a Total 100% positive return for the market, and "positive bias." Thus the market trends === while that statistic would imply a heading into the fourth quarter of 2010 ------------------------------------------ strong and robust equity market, 2010 are positive and improving. has been anything but healthy. - Of those sectors that contributed most - - The 11.3% gain for third quarter 2010 significantly to the outperformance of comes on the heels of a -11.4% loss in the strategy during the period, the second quarter 2010. In fact, in six maintaining exposure to Consumer of the past eight quarters the S&P 500 Discretionary was most constructive. has either gained or lost at least 10%. This level of volatility is not unprecedented, but it is indicative of the kind of market uncertainty that has traditionally been very challenging for active investment managers, and unsettling for investors. Fortunately, the AlphaSector Premium Index has been able to weather the market volatility to outperform for both the third quarter, year to date 2010, and trailing 12 months. - - The good news for the third quarter extends beyond the raw performance result. When evaluated at a more extensive level, the market exhibited improvement in its quality indicators from a second quarter that delivered very weak and troubling statistics. F-Squared evaluates the market from perspective of the major U.S. equity sectors, and the three primary yardsticks that we focus on are price trends, volatility, and correlation between the sectors. And for all three of these measures, the third quarter demonstrated significant improvements from the prior quarter. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 38
PREMIUM ALPHASECTOR(TM) FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 11.70% 7/1/10 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 5.28 7/1/10 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) 11.50 7/1/10 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES WITH CDSC(4) 10.50 7/1/10 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV(2) 11.70 7/1/10 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 11.65 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 2.04%, NET 1.70%; C SHARES: GROSS 2.79%, NET 2.45%; I SHARES: GROSS 1.79%, NET 1.45%. 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 MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY CONTRACTUAL FEE WAIVER IN EFFECT THROUGH JUNE 30, 2011. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE CONTRACTUAL FEE WAIVER. EXPENSE RATIOS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE UNDERLYING FUNDS. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on July 1, 2010 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1, 3, 4) Share Class C(1, 4) Share Class I S&P 500(R) Index ---------------------- ------------------- ------------- ---------------- 7/1/2010 9425 10000 10000 10000 9/30/2010 10528 11050 11170 11165 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 39
TICKER SYMBOLS: Class A: PSFRX Class C: PFSRX SENIOR FLOATING RATE FUND Class I: PSFIX - - SENIOR FLOATING RATE FUND (THE "FUND") - Bank Loan performance benefited from a INVESTING IN FUNDS THAT USE LEVERAGE, is diversified and has an investment combination of factors including SHORT SELLING, FUTURES, OPTIONS AND/OR objective of high total return from both attractive valuations, a decline in the DERIVATIVES MAY EXPOSE THE FUND TO current income and capital appreciation. projected default rate, an increased ADDITIONAL RISKS. INVESTING risk appetite by investors overall, and INTERNATIONALLY INVOLVES ADDITIONAL - - For the fiscal year ended September 30, strong demand for bank loans. RISKS SUCH AS CURRENCY, POLITICAL, 2010, the Fund's Class A shares at NAV ACCOUNTING, ECONOMIC AND MARKET RISK. returned 8.05%, Class C shares returned WHAT FACTORS AFFECTED THE FUND'S THE FUND MAY INVEST IN HIGH YIELD 7.35%, and Class I shares returned PERFORMANCE DURING ITS FISCAL YEAR? BONDS, WHICH MAY BE SUBJECT TO GREATER 8.44%. For the same period, the Barclays CREDIT AND MARKET RISKS. AS INTEREST Capital U.S. Aggregate Bond Index, a - The overall positive returns in the U.S. RATES RISE, EXISTING BOND PRICES FALL broad-based fixed index, returned 8.16%, Leveraged Loan Market positively AND CAN CAUSE THE VALUE OF AN and the S&P/LSTA Leveraged Loan Index, impacted the Fund, achieving positive INVESTMENT IN THE FUND TO DECLINE. the Fund's style-specific benchmark, returns for the fiscal year. Similar to CHANGES IN INTEREST RATES WILL AFFECT returned 10.80%. the overall U.S. leveraged loan market, THE VALUE OF LONGER-TERM FIXED INCOME the Fund's had a positive total return SECURITIES MORE THAN SHORTER-TERM ALL PERFORMANCE FIGURES ASSUME and outperformed U.S. Treasuries 3 out SECURITIES. REINVESTMENT OF DISTRIBUTIONS AND of the 4 quarters during the fiscal EXCLUDE THE EFFECT OF SALES CHARGES. year. ------------------------------------------ PAST PERFORMANCE IS NO GUARANTEE OF ASSET ALLOCATION FUTURE RESULTS AND CURRENT PERFORMANCE - The underweight in the Fund to the MAY BE HIGHER OR LOWER THAN THE lowest quality rating tiers relative to The following table presents asset PERFORMANCE SHOWN ABOVE. the index contributed to its allocations within certain sectors and as underperformance as the CCC, not rated, a percentage of total investments as of HOW DID THE MARKET PERFORM DURING THE and the distressed loan quality tiers September 30, 2010. FUND'S FISCAL YEAR? outperformed. Overall negative issue selection within the fund, including in Consumer Discretionary 28% - - The U.S. Leveraged Loan Market, as the retail, broadcasting, and Information Technology 13 represented by the S&P/LSTA Leveraged telecommunications industries, detracted Industrials 11 Loan Index and the Credit Suisse from performance. Materials 10 Leveraged Loan Index, returned 10.80% Financials 9 and 10.34% respectively for the fiscal - The Fund benefited from an overweight to Health Care 9 year ended September 30, 2010, split B/CCC bank loans, as this rating Telecommunication Services 5 outperforming the majority of other tier returned 15.36%, outperforming the Other (includes short-term fixed income sectors on an excess return overall return of the index by over 4%. investments) 15 basis. The overweight to the Chemical Industry --- and underweight to the Utility and Total 100% - - One of the key factors driving the Healthcare Sectors also benefited === strong returns of the loan market was performance. In addition, the allocation ------------------------------------------ the outperformance of the lower rating to high yield bonds benefited the tiers within the Bank Loan Market. performance of the Fund. During the Fund's fiscal year CCC loans returned 19.44%, not rated loans returned 13.21%, and distressed loans returned 12.94%. For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 40
SENIOR FLOATING RATE FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception Inception 1 Year to 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 8.05% 6.47% 1/31/08 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 2.92 4.54 1/31/08 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 7.35 5.72 1/31/08 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 8.44 6.74 1/31/08 - ------------------------------------------------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(5) 8.16 6.52 -- - ------------------------------------------------------------------------------------------------------------------------------------ S&P/LSTA LEVERAGED LOAN INDEX(5) 10.80 6.61 -- - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(6): A SHARES: GROSS 1.35%, NET 1.20%; C SHARES: GROSS 2.10%, NET 1.95%; I SHARES: GROSS 1.10%, NET 0.95%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES. PLEASE VISIT virtus.com FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 4.75% SALES CHARGE. (4) "CDSC" (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS C SHARES WITHIN THE FIRST YEAR ARE 1% AND 0% THEREAFTER. (5) THE SINCE INCEPTION INDEX RETURNS ARE FROM THE FUND'S INCEPTION DATE. (6) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. GROWTH OF $10,000 For periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on January 31, 2008 (inception date of the Fund), for Class A, Class C and Class I shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Barclays Capital U.S. Share Class A(1, 3, 4) Share Class C(1, 4) Share Class I S&P/LSTA Leveraged Loan Index Aggregate Bond Index ---------------------- ------------------- ------------- ----------------------------- --------------------- 1/30/2004 9525 10000 10000 10000 10000 9/29/2004 9324 9741 9804 9507 9897 9/29/2005 10418 10806 10974 10704 10942 9/29/2006 11257 11600 11900 11860 11835 For information regarding the indexes and certain investment terms, see the Key Investment Terms and Footnote Legend starting on page 5. 41
VIRTUS ALPHASECTOR(TM) ALLOCATION FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE ------- -------- ------- -------- MUTUAL FUNDS--25.1% SHORT-TERM INVESTMENTS--1.5% ABBREVIATION: SPDR S&P Depositary Receipt FIXED INCOME FUNDS--25.1% MONEY MARKET MUTUAL FUNDS--1.5% Virtus Bond Fund BlackRock Liquidity Funds ClassI (11) 873,486 $ 9,871 TempFund Portfolio - - ------------------------------------------- Institutional Shares TOTAL MUTUAL FUNDS (seven-day effective (IDENTIFIED COST $9,172) 9,871 yield 0.229%) 610,077 $ 610 - ------------------------------------------- ------------------------------------------ TOTAL SHORT-TERM INVESTMENTS EXCHANGE-TRADED FUNDS--74.5% (IDENTIFIED COST $610) 610 Consumer Discretionary ------------------------------------------ Select Sector SPDR Fund 126,065 4,212 SECURITIES LENDING COLLATERAL--18.1% Consumer Staples Select Sector SPDR Fund(14) 150,015 4,181 MONEY MARKET MUTUAL FUNDS--18.1% Financial Select Sector BlackRock Institutional SPDR Fund(14) 282,990 4,061 Money Market Trust Industrial Select Sector (seven-day effective SPDR Fund 134,370 4,203 yield 0.309%)(15) 546,089 546 Materials Select Sector BlackRock Liquidity Funds SPDR Fund 126,290 4,140 TempCash Portfolio - Technology Select Sector Institutional Shares SPDR Fund 189,360 4,359 (seven-day effective Utilities Select Sector yield 0.240%)(15) 6,559,021 6,559 SPDR Fund 133,995 4,200 ------------------------------------------ - ------------------------------------------- TOTAL SECURITIES LENDING COLLATERAL TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $7,105) 7,105 (IDENTIFIED COST $27,144) 29,356 ------------------------------------------ - ------------------------------------------- TOTAL INVESTMENTS--119.2% TOTAL LONG-TERM INVESTMENTS--99.6% (IDENTIFIED COST $44,031) 46,942(1) (IDENTIFIED COST $36,316) 39,227 - ------------------------------------------- Other assets and liabilities, net--(19.2)% (7,557) ------- NET ASSETS--100.0% $39,385 ======= The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Value Level 1 - Significant at Quoted Observable September 30, 2010 Prices Inputs ------------------ --------- ----------- INVESTMENTS IN SECURITIES: Equity Securities: Exchange-Traded Funds $29,356 $29,356 $ -- Mutual Funds 9,871 9,871 -- Securities Lending Collateral 7,105 6,559 546 Short-Term Investments 610 610 -- ------- ------- ---- Total Investments $46,942 $46,396 $546 ======= ======= ==== There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 42
VIRTUS ALPHASECTOR(TM) ROTATION FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE ------- -------- ------- -------- EXCHANGE-TRADED FUNDS--99.5% SECURITIES LENDING COLLATERAL--26.0% ABBREVIATION: Consumer Discretionary BlackRock Institutional SPDR S&P Depositary Receipt Select Sector SPDR Money Market Trust Fund(14) 1,871,400 $ 62,523 (seven-day effective Consumer Staples Select yield 0.309%)(15) 8,763,932 $ 8,764 Sector SPDR Fund(14) 2,224,680 62,002 BlackRock Liquidity Financial Select Sector Funds TempCash SPDR Fund(14) 4,197,280 60,231 Portfolio - Institutional Industrial Select Sector Shares (seven-day SPDR Fund(14) 1,994,170 62,378 effective yield Materials Select Sector 0.240%)(15) 105,262,637 105,263 SPDR Fund(14) 1,873,330 61,408 ------------------------------------------- Technology Select Sector TOTAL SECURITIES LENDING COLLATERAL SPDR Fund 2,811,350 64,717 (IDENTIFIED COST $114,027) 114,027 Utilities Select Sector ------------------------------------------- SPDR Fund 1,987,700 62,314 TOTAL INVESTMENTS--125.5% - ------------------------------------------- (IDENTIFIED COST $523,535) 549,600(1) TOTAL EXCHANGE-TRADED FUNDS Other assets and liabilities, (IDENTIFIED COST $409,508) 435,573 net--(25.5)% (111,640) - ------------------------------------------- -------- TOTAL LONG-TERM INVESTMENTS--99.5% NET ASSETS--100.0% $437,960 (IDENTIFIED COST $409,508) 435,573 ======== - ------------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Value Level 1 - Level 2 - at Quoted Significant September 30, 2010 Prices Observable Inputs ------------------ --------- ----------------- INVESTMENTS IN SECURITIES: Equity Securities: Exchange-Traded Funds $435,573 $435,573 $ -- Securities Lending Collateral 114,027 105,263 8,764 -------- -------- ------ Total Investments $549,600 $540,836 $8,764 ======== ======== ====== There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 43
VIRTUS ALTERNATIVES DIVERSIFIER FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE --------- -------- ------- -------- MUTUAL FUNDS(11)--64.4% SHORT-TERM INVESTMENTS--0.0% EQUITY FUNDS--54.6% MONEY MARKET MUTUAL FUNDS--0.0% Virtus Global BlackRock Liquidity Funds Infrastructure TempFund Portfolio - Fund Class I 3,236,152 $ 34,691 Institutional Shares Virtus International (seven-day effective Real Estate yield 0.229%) 104,662 $ 105 Securities Fund ------------------------------------------- Class I 3,778,932 23,845 TOTAL SHORT-TERM INVESTMENTS Virtus Market Neutral (IDENTIFIED COST $105) 105 Fund Class I(2) 4,287,161 45,358 ------------------------------------------- Virtus Real Estate TOTAL INVESTMENTS--99.7% Securities Class I 877,629 22,889 (IDENTIFIED COST 231,563(1) -------- $226,280) 126,783 Other assets and liabilities, -------- net--0.2% 580 -------- FIXED INCOME FUNDS--9.8% NET ASSETS--100.0% $232,143 Virtus Senior Floating ======== Rate Fund Class I 2,325,461 22,790 - ------------------------------------------- TOTAL MUTUAL FUNDS (IDENTIFIED COST $141,691) 149,573 - ------------------------------------------- EXCHANGE-TRADED FUNDS--35.3% iShares S&P North American Natural Resources Sector Index Fund 670,900 23,307 PowerShares DB Commodity Index Tracking Fund(2) 1,466,860 35,366 PowerShares DB G10 Currency Harvest Fund(2) 998,802 23,212 - ------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $84,484) 81,885 - ------------------------------------------- TOTAL LONG-TERM INVESTMENTS--99.7% (IDENTIFIED COST $226,175) 231,458 - ------------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Value Level 1 - at Quoted September 30, 2010 Prices ------------------ ------------- INVESTMENTS IN SECURITIES: Equity Securities: Exchange-Traded Funds $ 81,885 $ 81,885 Mutual Funds 149,573 149,573 Short-Term Investments 105 105 -------- -------- Total Investments $231,563 $231,563 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 44
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ------- -------- U.S. GOVERNMENT SECURITIES--9.6% AGENCY--CONTINUED NON-AGENCY--CONTINUED U.S. Treasury Bond 5.000%, 5/1/33 $ 1,576 $ 1,673 DLJ Mortgage Acceptance 3.500%, 2/15/39 $ 9,430 $ 9,123 5.500%, 6/1/33 1,090 1,171 Corp. 96-M, I U.S. Treasury Note 5.500%, 7/1/33 957 1,028 (Principal Only) 2.625%, 6/30/14 1,590 1,693 5.000%, 9/1/33 236 251 144A 3.250%, 12/31/16 1,300 1,419 6.000%, 11/1/34 1,813 1,979 0.000%, 3.625%, 2/15/20 6,310 6,921 5.500%, 5/1/35 2,029 2,158 9/18/11 (4)(7) $ 1 $ 1 - ------------------------------------------- 5.500%, 12/1/35 211 225 Greenwich Capital TOTAL U.S. GOVERNMENT SECURITIES 5.500%, 3/1/36 453 484 Commercial (IDENTIFIED COST $17,869) 19,156 5.500%, 4/1/36 363 391 Funding Corp. - ------------------------------------------- 6.390%, 5/25/36 807 908 05-GG5, A5 5.500%, 9/1/36 1,670 1,791 5.224%, 4/10/37 1,080 1,164 MUNICIPAL BONDS--0.6% 5.500%, 11/1/36 243 259 Merrill Lynch- 6.000%, 9/1/37 47 51 Countrywide MICHIGAN--0.1% 6.000%, 10/1/37 313 337 Commercial City of Flat Rock Finance 6.000%, 1/1/38 117 126 Mortgage Authority Taxable 6.000%, 2/1/38 120 129 Trust Series A, 6.000%, 2/1/38 34 36 06-4, A3 6.750%, 10/1/16 95 103 6.000%, 2/1/38 83 89 5.172%, -------- 6.000%, 2/1/38 144 155 12/12/49 1,000 1,036 6.000%, 3/1/38 668 719 Morgan Stanley RHODE ISLAND--0.5% 6.500%, 3/1/38 5,307 5,909 Capital I City of Woonsocket 5.500%, 4/1/38 404 430 04-T15, A3 Pension Funding 6.000%, 5/1/38 161 173 5.030%, Taxable 5.500%, 6/1/38 575 611 6/13/41 490 511 (AGM Insured) 6.000%, 7/1/38 3,627 3,928 06-T23, A4 5.660%, 7/15/13 1,000 1,087 5.500%, 8/1/38 1,378 1,466 5.981%, - ------------------------------------------- 6.000%, 8/1/38 292 314 8/12/41 1,030 1,153 TOTAL MUNICIPAL BONDS 6.000%, 8/1/38 485 522 05-T17, A5 (IDENTIFIED COST $1,125) 1,190 6.000%, 8/1/38 1,578 1,708 4.780%, - ------------------------------------------- 6.000%, 8/1/38 138 149 12/13/41 690 744 5.500%, 9/1/39 2,438 2,609 07-T27, A4 MORTGAGE-BACKED SECURITIES--33.7% 4.500%, 9/1/40 1,580 1,647 5.802%, FNMA REMICs 6/11/42 1,050 1,165 AGENCY--24.8% 03-42, HC 06-IQ11, A4 FHLMC 4.500%, 12/25/17 335 349 5.938%, 7.500%, 4/1/14 18 19 GNMA 10/15/42(3) 1,400 1,552 7.000%, 4/1/16 20 22 8.500%, 11/15/22 1 1 05-T19, A4A 7.000%, 1/1/33 173 196 6.500%, 9/15/28 137 154 4.890%, 5.000%, 1/1/35 934 989 7.500%, 9/15/29 139 160 6/12/47 305 332 5.000%, 7/1/35 3,749 3,969 5.000%, 7/15/33 1,317 1,413 05-IQ9, A3 FHLMC REMICs 6.000%, 6/15/34 232 254 4.540%, JA-2777 -------- 7/15/56 645 668 4.500%, 11/15/17 275 283 49,259 OBP Depositor CH-2904 -------- LLC Trust 4.500%, 4/15/19 858 896 NON-AGENCY--8.9% 10-OBP, A 144A FNMA American Tower Trust 07-1A, 4.646%, 7.000%, 5/1/14 12 13 AFX 144A 7/15/45 (4) 870 941 6.000%, 10/1/14 178 192 5.420%, 4/15/37 (4) 190 209 Paine Webber 8.000%, 1/1/15 3 3 Banc of America Commercial Mortgage 6.500%, 6/1/16 127 138 Mortgage, Inc. Acceptance 6.000%, 7/1/17 62 68 05-1, A4 5.063%, Corp. 5.500%, 9/1/17 155 169 11/10/42(3) 290 306 99-C1, D 4.500%, 12/1/18 1,024 1,078 06-2, A3 5.712%, 7.150%, 4.500%, 3/1/20 165 174 5/10/45(3) 2,285 2,468 6/15/32 74 74 5.000%, 4/1/20 274 292 Bear Stearns Commercial Wachovia Bank 4.500%, 5/1/20 444 467 Mortgage Securities Commercial 4.000%, 6/1/20 285 301 04-T16, A6 Mortgage Trust 4.500%, 11/1/20 1,517 1,597 4.750%, 2/13/46 260 277 05-C19, A5 5.000%, 8/1/21 102 108 Commercial Mortgage 4.661%, 5/15/44 3,145 3,271 6.508%, 3/25/29 1,115 1,290 Pass-Through -------- 6.000%, 5/1/29 149 164 Certificates 17,732 6.500%, 7/1/29 179 200 05-C6, A4 5.168%, --------------------------------------- 6.500%, 5/1/30 5 6 6/10/44 315 342 TOTAL MORTGAGE-BACKED SECURITIES 7.500%, 3/1/31 105 120 07-C9, A4 5.815%, (IDENTIFIED COST $63,617) 66,991 7.000%, 7/1/31 68 77 12/10/49(3) 675 735 --------------------------------------- 7.000%, 9/1/31 117 133 Credit Suisse Mortgage 6.500%, 2/1/32 252 282 Capital Certificates ASSET-BACKED SECURITIES--0.0% 6.500%, 3/1/32 99 110 06-C1, A3 5.711%, Carmax Auto Owner 5.500%, 4/1/33 136 146 2/15/39(3) 100 107 Trust 07-2, A3 06-C5, A3 5.311%, 5.230%, 12/15/39 650 676 12/15/11 2 2 --------------------------------------- TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $2) 2 --------------------------------------- CORPORATE BONDS--52.7% CONSUMER DISCRETIONARY--8.1% Affinion Group, Inc. 10.125%, 10/15/13 560 578 Avis Budget Car Rental LLC/Avis Budget Finance, Inc. 7.625%, 5/15/14(14) 610 622 Cablevision Systems Corp. 8.000%, 4/15/20 85 92 Cequel Communications Holdings I LLC/Cequel Capital Corp. 144A 8.625%, 11/15/17 (4) 360 382 Comcast Corp. 5.700%, 7/1/19 980 1,124 Discovery Communications LLC 3.700%, 6/1/15 465 493 Echostar DBS Corp. 7.125%, 2/1/16 530 560 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 45
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- CONSUMER DISCRETIONARY--CONTINUED ENERGY--CONTINUED FINANCIALS--CONTINUED Fortune Brands, Inc. Energy Transfer Partners Credit Suisse 3.000%, 6/1/12 $ 910 $ 927 LP Guernsey Ltd. Landry's Holdings, Inc. 8.500%, 4/15/14 $ 755 $ 896 5.860%, 144A 6.700%, 7/1/18 570 664 11/15/49(3) $ 815 $ 775 11.500%, 6/1/14 (4) 665 622 Harvest Operations Corp. CVS Pass-Through NBC Universal, Inc. 7.875%, 10/15/11 915 923 Trust 144A 144A 2.100%, 4/1/14(4) 840 844 Kinder Morgan Energy 7.507%, 144A 3.650%, 4/30/15(4) 400 422 Partners LP 1/10/32 (4) 317 371 144A 4.375%, 4/1/21(4) 845 855 5.850%, 9/15/12 415 448 Developers Nebraska Book Co., Inc. 9.000%, 2/1/19 500 651 Diversified 10.000%, 12/1/11 1,125 1,145 Linn Energy LLC/Linn Realty Corp. 8.625%, 3/15/12 240 230 Energy 7.875%, 9/1/20 430 446 Payless Shoesource, Inc. Finance Corp. 144A Duke Realty LP 8.250%, 8/1/13 465 474 7.750%, 2/1/21 (4) 230 233 5.950%, 2/15/17 950 1,019 Royal Caribbean Cruises Petroleos Mexicanos 144A Export-Import Bank Ltd. 4.875%, 3/15/15 (4) 390 421 of Korea 8.750%, 2/2/11(14) 1,090 1,119 Petropower I Funding 5.500%, 10/17/12 135 144 Scientific Games Trust 144A Ford Motor Credit International, 7.360%, 2/15/14 (4) 70 71 Co. LLC Inc. Plains All American 7.500%, 8/1/12 625 664 9.250%, 6/15/19 700 747 Pipeline General Electric Sinclair Broadcast Group, LP/Plains All American Capital Corp. Inc. Finance Corp. 2.800%, 1/8/13 1,340 1,380 8.000%, 3/15/12 785 788 4.250%, 9/1/12 215 224 4.375%, 9/16/20 960 964 Time Warner Cable, Inc. TransCanada Pipelines Ltd. Genworth Global 5.000%, 2/1/20 815 873 6.350%, 5/15/67(3) 300 281 Funding Trusts United Artists Theatre -------- 5.125%, 3/15/11 925 940 Circuit, 6,249 Goldman Sachs Inc. Series BD-1 -------- Group, Inc. 9.300%, 7/1/15 (6)(8) 22 21 FINANCIALS--24.8% (The) United Components, Inc. AFLAC, Inc. 3.700%, 8/1/15 300 307 9.375%, 6/15/13 980 1,000 6.450%, 8/15/40 300 312 6.000%, 6/15/20 665 731 Unitymedia Hessen GmbH Ally Financial, Inc. HSBC Bank USA NA & Co. 0.000%, 6/15/15 920 665 4.875%, 8/24/20 700 730 KG/Unitymedia NRW GmbH American Express Co. Icahn Enterprises 144A 7.250%, 5/20/14 795 932 LP/Icahn 8.125%, 12/1/17 (4) 1,120 1,170 Bank of America Corp. Enterprises WMG Holdings Corp. 5.750%, 8/15/16 960 1,031 Finance Corp. 9.500%, 12/15/14(3)(14) 1,045 1,006 5.625%, 7/1/20 870 919 8.000%, 1/15/18 490 495 -------- Barclays Bank plc ICICI Bank Ltd. 16,094 Series 1, RegS -------- 5.000%, 9/22/16 985 1,078 5.750%, CONSUMER STAPLES--2.6% 144A 11/16/10 (5) 105 105 Altria Group, Inc. 10.179%, 6/12/21(4) 560 747 ING Capital Funding 9.250%, 8/6/19 495 664 Bear Stearns Cos., Inc. Trust III Anheuser-Busch InBev LLC (The) 8.439%, Worldwide, Inc. 7.250%, 2/1/18 785 956 12/31/49(3) 1,060 1,023 3.000%, 10/15/12 900 934 Capital One Capital VI International Lease Beverages & More, Inc. 8.875%, 5/15/40 320 336 Finance Corp. 144A Capital One Financial 144A 8.625%, 9.625%, 10/1/14 (4) 520 525 Corp. 9/15/15(4) 100 107 Delhaize Group 5.700%, 9/15/11 620 646 144A 8.750%, 6.500%, 6/15/17 725 865 7.375%, 5/23/14 365 426 3/15/17(4) 460 495 Kraft Foods, Inc. 6.150%, 9/1/16 625 685 JPMorgan Chase & 2.625%, 5/8/13 360 373 Chubb Corp. Co. 6.125%, 2/1/18 535 631 6.375%, 3/29/67(3) 420 414 5.750%, 1/2/13 1,020 1,110 Philip Morris CIT Group Funding Co. of 5.125%, 9/15/14 860 943 International, Inc. Delaware LLC 3.700%, 1/20/15 620 655 6.875%, 3/17/14 275 324 10.250%, 5/1/13 335 349 Series 1, Stater Brothers Holdings, 10.250%, 5/1/14 650 677 7.900%, Inc. Citigroup, Inc. 12/31/49(3) 395 423 8.125%, 6/15/12 940 946 5.000%, 9/15/14 1,745 1,812 Macquarie Group -------- 4.875%, 5/7/15 280 291 Ltd. 144A 5,262 CNA Financial Corp. 7.300%, -------- 5.875%, 8/15/20 480 490 8/1/14 (4) 870 984 ENERGY--3.1% Credit Suisse First MetLife, Inc. Bristow Group, Inc. Boston 2.375%, 2/6/14 475 480 6.125%, 6/15/13 760 773 6.000%, 2/15/18 630 696 6.750%, 6/1/16 210 251 Chesapeake Energy Corp. Metropolitan Life 7.250%, 12/15/18 245 265 Global Enbridge Energy Partners Funding I 144A LP 2.875%, 5.875%, 12/15/16 350 399 9/17/12 (4) 980 1,011 Morgan Stanley 6.000%, 4/28/15 615 676 6.625%, 4/1/18 1,215 1,347 Protective Life Secured Trust 4.000%, 4/1/11 1,670 1,697 Prudential Financial, Inc. 3.625%, 9/17/12 820 852 6.200%, 1/15/15 505 569 7.375%, 6/15/19 520 633 8.875%, 6/15/38(3) 605 675 Rabobank Nederland NV 144A 11.000%, 12/31/49 (3)(4) 425 553 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 46
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ------- -------- FINANCIALS--CONTINUED INFORMATION TECHNOLOGY--1.9% UTILITIES--3.4% Regions Financial Corp. Corning, Inc. Appalachian Power Co. 0.459%, 6/26/12(3) $ 1,935 1,848 4.250%, 8/15/20 $ 385 $ 404 5.550%, 4/1/11 $ 810 $ 828 4.875%, 4/26/13 560 567 Fiserv, Inc. Atmos Energy Corp. 5.750%, 6/15/15 560 570 6.125%, 11/20/12 920 1,004 6.350%, 6/15/17 465 532 Resona Bank Ltd. 144A Intuit, Inc. Calpine Corp. 144A 5.850%, 9/29/49 (3)(4) 985 983 5.750%, 3/15/17 430 487 7.875%, 7/31/20 (4) 170 175 Royal Bank of Scotland plc Sanmina-SCI Corp. 144A CMS Energy Corp. (The) 3.042%, 6/15/14 (3)(4) 870 824 6.250%, 2/1/20 760 804 3.950%, 9/21/15 540 546 Symantec Corp. Dominion Resources, Inc. 5.625%, 8/24/20 995 1,043 2.750%, 9/15/15 145 146 8.875%, 1/15/19 180 245 Santander Issuances S.A Viasat, Inc. FirstEnergy Solutions Unipersonal 144A 8.875%, 9/15/16 105 114 Corp. 5.911%, 6/20/16 (4)(14) 1,085 1,152 Xerox Corp. 6.050%, 8/15/21 435 465 SunTrust Banks, Inc. 4.250%, 2/15/15 680 730 Florida Power Corp. 5.250%, 11/5/12 310 328 -------- 6.650%, 7/15/11 520 544 Sydney Airport Finance Co. 3,709 Georgia Power Co. Propriety Ltd. -------- 6.000%, 11/1/13 335 382 5.125%, 2/22/21 205 205 MATERIALS--2.1% Nevada Power Co. Series O Teachers Insurance & Ball Corp. 6.500%, 5/15/18 730 880 Annuity Association of 6.750%, 9/15/20 245 261 Pacific Gas & Electric America 144A Buckeye Technologies, Inc. Co. 6.850%, 12/16/39 (4) 480 591 8.500%, 10/1/13 730 743 8.250%, 10/15/18 650 864 UBS Preferred Funding Dow Chemical Co. (The) South Carolina Electric & Trust I 6.000%, 10/1/12 1,050 1,138 Gas Co. 8.622%, 10/29/49(3) 1,990 1,990 5.900%, 2/15/15 970 1,081 6.500%, 11/1/18 310 384 Wachovia Corp. Holcim U.S. Finance Virginia Electric & Power 5.750%, 2/1/18 570 650 S.A.R.L. & Cie S.C.S Co WEA Finance LLC/WCI 144A Series A Finance LLC 144A 6.000%, 12/30/19 (4) 435 475 5.400%, 1/15/16 645 756 5.700%, 10/1/16 (4) 1,065 1,190 Huntsman International LLC -------- Wells Fargo Capital XIII 8.625%, 3/15/20(14) 110 114 6,859 7.700%, 3/26/13(3) 460 477 Solutia, Inc. ------------------------------------------ Westfield Capital Corp., 7.875%, 3/15/20 275 295 TOTAL CORPORATE BONDS Ltd./Westfield Finance -------- (IDENTIFIED COST $97,613) 104,900 Authority 144A 4,107 ------------------------------------------ 5.125%, 11/15/14 (4) 150 164 -------- -------- TELECOMMUNICATION LOAN AGREEMENTS(3)--2.4% 49,321 SERVICES--4.0% -------- Alltel Corp. CONSUMER DISCRETIONARY--0.5% HEALTH CARE--1.4% 7.000%, 7/1/12 350 385 KAR Holdings, Inc. Boston Scientific Corp. AT&T, Inc. Tranche 6.000%, 1/15/20 465 497 2.500%, 8/15/15 680 693 3.085%, 10/21/13 1,000 977 DaVita, Inc. GCI, Inc. -------- 6.625%, 3/15/13 420 429 8.625%, 11/15/19 745 799 CONSUMER STAPLES--0.3% Express Scripts, Inc. Global Crossing Ltd. Roundy's Supermarkets, 5.250%, 6/15/12 775 827 12.000%, 9/15/15 550 624 Inc. 7.250%, 6/15/19 245 308 Nextel Communications, Tranche Pfizer, Inc. Inc. Series C 10.000%, 4/16/16 500 510 4.450%, 3/15/12 625 658 5.950%, 3/15/14 495 495 -------- -------- NII Capital Corp. FINANCIALS--0.3% 2,719 8.875%, 12/15/19 910 1,016 AGFS Funding Co. Tranche, -------- Qwest Corp. 7.250%, 4/21/15 575 579 INDUSTRIALS--1.3% 7.875%, 9/1/11 1,055 1,117 -------- Corrections Corp. of Telcordia Technologies, HEALTH CARE--0.5% America Inc. 144A Biomet, Inc. Tranche B, 7.750%, 6/1/17 595 643 11.000%, 5/1/18 (4) 430 424 3.358%, 3/25/15 995 967 DynCorp International, Telefonica Emisiones SAU -------- Inc. 144A 5.984%, 6/20/11 1,080 1,120 INFORMATION TECHNOLOGY--0.5% 10.375%, 7/1/17 (4) 210 210 Virgin Media Finance plc Reynolds & Reynolds Co. Goodman Global Group, Inc. 8.375%, 10/15/19 545 601 (The) Tranche B, 0.000%, 12/15/14 950 613 Windstream Corp. 5.250%, 4/21/17 230 230 Hutchison Whampoa 144A Reynolds Group International Ltd. 144A 8.125%, 9/1/18(4) 210 219 0.000%, 5/5/16 825 830 5.750%, 9/11/19 (4) 435 483 7.000%, 3/15/19 400 394 -------- Travelport LLC -------- 1,060 9.875%, 9/1/14 720 744 7,887 -------- -------- -------- UTILITIES--0.3% 2,693 Calpine Corp. Tranche, -------- 3.415%, 3/29/14 682 666 ------------------------------------------ TOTAL LOAN AGREEMENTS (IDENTIFIED COST $4,753) 4,759 ------------------------------------------ For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 47
VIRTUS BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE -------- -------- -------- -------- PREFERRED STOCK--0.2% SECURITIES LENDING ABBREVIATIONS: COLLATERAL--1.9% FINANCIALS--0.2% BlackRock Institutional AGM Assured Guaranty Municipal Corp. Citigroup Capital XII Money Market Trust FHLMC Federal Home Loan Mortgage Pfd. (seven-day effective Corporation ("Freddie Mac") 7.875% 16,200 $ 405 yield 0.309%)(15) 292,520 $ 293 FNMA Federal National Mortgage - ------------------------------------------- BlackRock Liquidity Funds Association ("Fannie Mae") TOTAL PREFERRED STOCK TempCash Portfolio - GNMA Government National Mortgage (IDENTIFIED COST $405) 405 Institutional Shares Association ("Ginnie Mae") - ------------------------------------------- (seven-day effective REMIC Real Estate Mortgage Investment TOTAL LONG-TERM INVESTMENTS--99.2% yield 0.240%)(15) 3,513,421 3,513 Conduit (IDENTIFIED COST $185,384) 197,403 ------------------------------------------- - ------------------------------------------- TOTAL SECURITIES LENDING COLLATERAL COUNTRY WEIGHTINGS as of 9/30/10+ (IDENTIFIED COST $3,806) 3,806 ----------------------------------------- SHORT-TERM ------------------------------------------- United States (includes short-term INVESTMENTS--1.7% TOTAL INVESTMENTS--102.8% investments and securities lending (IDENTIFIED COST $192,604) 204,623(1) collateral) 93% MONEY MARKET MUTUAL Australia 1 FUNDS--1.7% Other Assets and Canada 1 BlackRock Liquidity Funds Liabilities--(2.8)% (5,542) Germany 1 TempFund Portfolio - -------- Spain 1 Institutional Shares NET ASSETS--100.0% $199,081 United Kingdom 1 (seven-day effective ======== Other 2 yield 0.229%) 3,414,177 3,414 ----------------------------------------- - ------------------------------------------- Total 100% TOTAL SHORT-TERM INVESTMENTS ----------------------------------------- (IDENTIFIED COST $3,414) 3,414 + % of total investments as of - ------------------------------------------- September 30, 2010 ----------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Level 3 - Total Market Level 1 - Significant Significant Value at Quoted Observable Unobservable September 30, 2010 Prices Inputs Inputs ------------------ --------- ----------- ------------ INVESTMENTS IN SECURITIES: Debt Securities: Asset-Backed Securities $ 2 $ -- $ 2 $ -- Corporate Bonds 104,900 -- 104,354 546 Loan Agreements 4,759 -- 4,759 -- Mortgage-Backed Securities 66,991 -- 66,991 -- Municipal Bonds 1,190 -- 1,190 -- U.S. Government Securities 19,156 -- 19,156 -- Equity Securities: Preferred Stock 405 405 -- -- Securities Lending Collateral 3,806 3,513 293 -- Short-Term Investments 3,414 3,414 -- -- -------- ------ -------- ---- Total Investments $204,623 $7,332 $196,745 $546 ======== ====== ======== ---- 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 Total Securities Corporate Bonds -------- --------------- --------------- BALANCE AS OF SEPTEMBER 30, 2009: $ 248 $ 139 $109 Accrued discount (premium)(a) 1 --(e) 1 Realized gain (loss)(b) --(e) --(e) -- Change in unrealized appreciation (depreciation)(b) (15) 6 (21) Net purchases (sales)(c) (142) -- (142) Transfers in and/or out of Level 3(d) 454 (145) 599 ----- ----- ---- BALANCE AS OF SEPTEMBER 30, 2010: $ 546 $ -- $546 ===== ===== ==== (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, IF ANY. (d) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (e) AMOUNT IS LESS THAN $500. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 48
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ------- -------- MUNICIPAL TAX-EXEMPT BONDS(9)--97.9% GENERAL OBLIGATION--CONTINUED GENERAL REVENUE--CONTINUED DEVELOPMENT REVENUE--5.6% Los Angeles Unified School State Public Works Board Hercules Redevelopment District Series C (AGM of the State of Agency Tax-Allocation Insured) California Department (AMBAC Insured) 5.000%, 7/1/24 $ 500 $ 551 of Health Services, 5.000%, 8/1/29 $ 500 $ 379 Los Angeles Unified School Richmond Lab Series B Ontario Redevelopment District, Series A-1 (XLCA Insured) Financing Authority (NATL Insured) 5.000%, 11/1/17 $ 460 $ 498 (NATL Insured) 4.500%, 1/1/28 500 507 Highway Patrol Series C 5.250%, 8/1/13 500 517 New Haven Unified School 5.250%, 11/1/20 500 506 San Diego Redevelopment District (AGM Insured) Department of General Agency (AMBAC Insured) 0.000%, 8/1/33 1,500 398 Services Buildings 8 & 9 Series B 5.350%, 9/1/24 1,000 1,006 Norwalk-La Mirada Unified Series A Series A 4.750%, 9/1/30 500 476 School District Series D 6.125%, 4/1/29 500 547 Santa Clara Redevelopment (AGM Insured) Various Capital Agency Tax Allocation 0.000%, 8/1/33 1,500 389 Projects Series G-1 (NATL Insured) Placer Union High School 5.750%, 10/1/30 500 536 5.000%, 6/1/22 1,000 1,012 District (AGM Insured) -------- -------- 0.000%, 8/1/32 1,500 411 9,350 3,390 Rancho Santiago Community -------- -------- College District (AGM Insured) HIGHER EDUCATION REVENUE--3.7% EDUCATION REVENUE--3.5% 0.000%, 9/1/27 1,200 487 California Educational North City West School San Rafael Elementary Facilities Authority Facilities Financing School Stanford University Authority, Series B District (NATL, FGIC 5.250%, 4/1/40 500 628 (AMBAC Insured) Insured) University of California 5.250%, 9/1/19 1,000 1,058 0.000%, 8/1/26 1,000 483 Series D Sweetwater Unified High Walnut Valley Unified (NATL, FGIC Insured) School District, Public School 5.000%, 5/15/28 500 539 Financing Authority, District, Series A Series G Series A (AGM Insured) (NATL Insured) (NATL, FGIC Insured) 5.000%, 9/1/29 1,000 1,019 0.000%, 8/1/19 3,095 1,728 4.750%, 5/15/35 525 532 -------- -------- Series B 2,077 8,978 4.750%, 5/15/38 500 506 -------- -------- -------- 2,205 GENERAL OBLIGATION--14.9% GENERAL REVENUE--15.6% -------- Antelope Valley Union High Anaheim Public Financing School District, Authority, Series C MEDICAL REVENUE--8.8% Series A (AGM Insured) California Health (NATL Insured) 6.000%, 9/1/16 1,600 1,877 Facilities Financing 5.000%, 2/1/27 1,000 1,034 Golden State Tobacco Authority, Stanford Brea Olinda Unified School Securitization Corp., Hospital and Clinics District, Series A Series A-1 Series A (NATL, FGIC Insured) 5.125%, 6/1/47 1,250 853 5.000%, 11/15/14 250 274 6.000%, 8/1/15 150 178 5.750%, 6/1/47 1,000 755 Cedars-Sinai Medical Butte-Glenn Community Los Angeles County Public Center College District, Works Financing 5.000%, 11/15/34 500 507 Series A (NATL Insured) Authority, Series A Providence Health & 5.500%, 8/1/19 1,000 1,077 (AGM Insured) Services Series C California State 5.500%, 10/1/18 390 439 6.500%, 10/1/38 300 340 5.250%, 6/1/16 65 66 Pomona, Certificates of Kaiser Permanente 5.500%, 3/1/26 500 547 Participation Series A 5.000%, 12/1/37 250 252 (AMBAC Insured) 5.250%, 4/1/39 500 505 California State Veterans 5.500%, 6/1/28 1,365 1,481 California State Public Bonds, Series CC San Diego County, Works Board, Department 4.500%, 12/1/37 330 307 Certificates of of Mental Gilroy Unified School Participation Health Series A District (NATL, FGIC (AMBAC Insured) 5.500%, 6/1/16 1,000 1,100 Insured) 5.250%, 11/1/15 960 963 California Statewide 5.000%, 8/1/27 500 520 South Bay Regional Public Communities Development Grossmont-Cuyamaca Communications Authority Authority, Kaiser Community College (ACA Insured) Permanente, Series B District Election of 4.750%, 1/1/31 635 513 5.000%, 3/1/41 500 494 2002 Series A South Coast Air Quality Sutter Health, Series B (NATL Insured) Management District 5.625%, 8/15/42 1,000 1,012 5.000%, 8/1/19 40 43 Building Corp. St. Joseph Health (AMBAC Insured) System (FGIC Insured) 6.000%, 8/1/11 380 382 5.750%, 7/1/47 500 520 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 49
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- MEDICAL REVENUE--CONTINUED WATER & SEWER REVENUE--10.9% San Joaquin General PRE-REFUNDED--CONTINUED California Statewide Hospital Project, Grossmont-Cuyamaca Communities Certificates of Community College Development Participation (NATL District Election of Authority, Insured) 2002 Series A Anheuser-Busch 5.250%, 9/1/12 $ 100 $ 101 Pre-refunded 8/1/13 @100 Project Santa Clara County (NATL Insured) 4.800%, 9/1/46 $ 1,000 $ 911 Financing Authority, 5.000%, 8/1/19 $ 210 $ 234 Delta Diablo Series A (AMBAC Huntington Park Sanitation Insured) Redevelopment Agency District, 7.750%, 11/15/11 400 432 Single Family Certificates of -------- Residential Mortgage, Participation 5,285 Series A (NATL Insured) -------- (FHA/VA/PRIV MTGS 0.000%, 12/1/16 1,070 820 Insured) El Dorado Irrigation MUNICIPAL UTILITY DISTRICT REVENUE--1.7% 8.000%, 12/1/19 (13) 2,400 3,491 District, East Bay Municipal Utility Los Angeles Harbor Certificates of District (NATL Insured) Department Participation, 5.000%, 6/1/35 500 528 7.600%, 10/1/18(13) 780 952 Series A (NATL, Sacramento Municipal M-S-R Public Power Agency FGIC Insured) Utilities District San Juan Project, 5.250%, 3/1/16 365 395 Financing Authority Series D (NATL Insured) Irvine Ranch Water (NATL Insured) 6.750%, 7/1/20 (13) 1,535 1,912 District, 4.750%, 7/1/26 500 515 Northern California Power Certificates of -------- Agency, Hydroelectric Participation 1,043 Project No.1 Series A 5.000%, 3/1/24 500 584 -------- Pre-refunded 7/1/21 Metropolitan Water @ 100 (AMBAC Insured) District of NATURAL GAS REVENUE--1.3% 7.500%, 7/1/23 195 273 Southern Roseville Natural Gas Riverside County California Water Financing Authority Redevelopment Agency, Works, Series B-1 5.000%, 2/15/24 750 762 Pre-refunded 10/01/11 (NATL, FGIC -------- @ 102 (AMBAC Insured) Insured) 5.250%, 10/1/17 250 267 5.000%, 10/1/36 1,000 1,033 POWER REVENUE--1.5% Riverside County Single Modesto Wastewater, Northern California Power Family Series B (GNMA Series A Agency, Hydroelectric Collateralized) (AGM Insured) Project No.1 Series A 8.625%, 5/1/16(13) 1,000 1,346 5.000%, 11/1/19 245 273 (NATL Insured) Series A (GNMA Mountain View 5.200%, 7/1/32 330 330 Collateralized) Shoreline Regional Southern California Public 7.800%, 5/1/21(13) 4,000 5,706 Park Community, Power Authority Windy Stockton Housing Facility, Series A Point/Windy Flats Series A Pre-refunded (NATL Insured) Project, Series 1, 9/20/17 @ 100 5.500%, 8/1/21 1,000 1,001 5.000%, 7/1/28 500 558 (GNMA Collateralized) Redlands Financing -------- 5.600%, 3/20/28 190 191 Authority, 888 -------- Series A (AGM -------- 16,169 Insured) -------- 5.000%, 9/1/17 1,000 1,012 PRE-REFUNDED--26.9% Westlands Water California Infrastructure & TRANSPORTATION REVENUE--3.5% District, Economic Development Alameda Corridor Certificates of Bank Pre-refunded Transportation Participation 7/1/26 @100 Authority, Series A (NATL Insured) (AMBAC Insured) (NATL Insured) 5.250%, 9/1/14 500 545 5.125%, 7/1/37 500 639 5.125%, 10/1/16 150 151 -------- Contra Costa County Home 5.125%, 10/1/17 125 126 6,574 Mortgage Bay Area Toll Authority, --------------------------------------- (GNMA Collateralized) San Francisco Bay Area TOTAL MUNICIPAL TAX-EXEMPT BONDS 7.500%, 5/1/14 (13) 500 620 Series F-1 (IDENTIFIED COST $55,584) 58,846 Cypress Single Family 5.000%, 4/1/34 500 534 --------------------------------------- Residential Mortgage, 5.125%, 4/1/39 500 534 TOTAL LONG-TERM INVESTMENTS--97.9% Series B Los Angeles International (IDENTIFIED COST $55,584) 58,846 (Private Mortgage Airport Series A --------------------------------------- Insurance) 5.000%, 5/15/40 500 521 7.250%, 1/1/12 (13) 200 217 San Diego County Regional SHARES Duarte Redevelopment Airport Authority, ---------- Agency Single Family Series A SHORT-TERM INVESTMENTS--1.5% Mortgage, Series A 5.000%, 7/1/40 250 259 (FNMA Collateralized) -------- MONEY MARKET MUTUAL FUNDS--1.5% 6.875%, 11/1/11 (13) 300 321 2,125 BlackRock Liquidity -------- Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.229%) 911,155 911 --------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $911) 911 --------------------------------------- TOTAL INVESTMENTS--99.4% (IDENTIFIED COST $56,495) 59,757(1) Other assets and liabilities, net--0.6% 357 -------- NET ASSETS--100.0% $ 60,114 ======== For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 50
VIRTUS CA TAX-EXEMPT BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) ABBREVIATIONS: ACA American Capital Access Financial Guarantee Corp. AGM Assured Guaranty Municipal Corp. AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company FHA Federal Housing Authority FNMA Federal National Mortgage Association ("Fannie Mae") GNMA Government National Mortgage Association ("Ginnie Mae") NATL National Public Finance Guarantee Corp. Priv Mtgs Private Mortgage Insurance VA U.S. Department of Veterans Affairs XLCA XL Capital Assurance The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Market Level 1 - Significant Value at Quoted Observable September 30, 2010 Prices Inputs ------------------ --------- ----------- INVESTMENTS IN SECURITIES: Debt Securities: Municipal Tax-Exempt Securities $58,846 $ -- $58,846 Equity Securities: Short-Term Investments 911 911 -- ------- ---- ------- Total Investments $59,757 $911 $58,846 ======= ==== ======= There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 51
VIRTUS GLOBAL INFRASTRUCTURE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- COMMON STOCKS--98.8% TELECOMMUNICATION SERVICES--CONTINUED UTILITIES--CONTINUED Telefonica S.A. Sponsored SevernTrent plc CONSUMER DISCRETIONARY--1.7% ADR (Spain) 27,090 $ 2,009 (United Kingdom) 24,195 $ 498 SES SA (Luxembourg) 50,100 $ 1,204 TELUS Corp. (Canada) 29,630 1,317 Southern Co. (The) -------- Verizon Communications, (United States) 21,470 800 Inc. (United States) 51,230 1,670 Tokyo Electric ENERGY--20.8% Vodafone Group plc Power Co., Inc. Enbridge, Inc. (Canada) 88,150 4,610 Sponsored ADR (The) (Japan) 30,440 743 Spectra Energy Corp. (United Kingdom) 136,160 3,378 Wisconsin Energy (United States) 145,510 3,282 Windstream Corp. Corp. TransCanada Corp. (United States) 94,870 1,166 (United States) 15,850 916 (Canada) 96,120 3,568 -------- Xcel Energy, Inc. Williams Cos., Inc. (The) 21,122 (United States) 36,180 831 (United States) 152,800 2,920 -------- -------- -------- 20,640 14,380 UTILITIES--29.9% --------------------------------------- -------- CenterPoint Energy, Inc. TOTAL COMMON STOCKS (United States) 50,590 795 (IDENTIFIED COST $63,108) 68,253 INDUSTRIALS--15.8% Centrica plc --------------------------------------- Abertis Infraestructuras (United Kingdom) 270,740 1,376 TOTAL LONG-TERM INVESTMENTS--98.8% S.A. Spain) 51,463 959 CMS Energy Corp. (IDENTIFIED COST $63,108) 68,253 Atlantia S.p.A. (Italy) 99,206 2,056 (United States) 47,240 851 --------------------------------------- Ferrovial SA (Spain) 71,980 673 DTE Energy Co. Fraport AG Frankfurt (United States) 13,780 633 SHORT-TERM INVESTMENTS--1.7% Airport Services E.ON AG (Germany) 22,450 662 Worldwide (Germany) 23,430 1,425 Energias de Portugal SA MONEY MARKET MUTUAL FUNDS--1.7% Hamburger Hafen Und (Portugal) 195,330 670 Dreyfus Cash Logistik AG (Germany) 19,990 778 Entergy Corp. Management Fund - Koninklijke Vopak NV (United States) 15,570 1,192 Institutional (Netherlands) 43,880 2,094 GDF Suez (France) 30,235 1,082 Shares Transurban Group ITC Holdings Corp. (seven-day (Australia) 425,120 2,042 (United States) 16,250 1,012 effective Vinci SA (France) 17,560 880 National Grid plc yield 0.210%) 1,158,726 1,159 -------- (United Kingdom) 87,750 744 --------------------------------------- 10,907 NextEra Energy, Inc. TOTAL SHORT-TERM INVESTMENTS -------- (United States) 25,800 1,403 (IDENTIFIED COST $1,159) 1,159 Northeast Utilities --------------------------------------- TELECOMMUNICATION SERVICES--30.6% (United States) 21,270 629 TOTAL INVESTMENTS--100.5% American Tower Corp. Northwest Natural Gas Co. (IDENTIFIED COST $64,267) 69,412(1) Class A (United (United States) 15,560 738 States)(2) 35,250 1,807 NSTAR (United States) 20,820 819 Other assets and AT&T, Inc. (United States) 127,840 3,656 NV Energy, Inc. liabilities, net--(0.5)% (364) Crown Castle International (United States) 52,990 697 -------- Corp. (United States)(2) 37,280 1,646 ONEOK, Inc. NET ASSETS--100.0% $ 69,048 France Telecom SA (United States) 13,570 611 ======== Sponsored ADR (France) 50,820 1,094 Public Service Enterprise Frontier Communications Group, Inc. ABBREVIATION: Corp. (United States) 92,827 758 (United States) 35,660 1,180 ADR American Depositary Receipt Koninklijke KPN N.V Questar Corp. (Netherlands) 60,680 938 (United States) 25,450 446 COUNTRY WEIGHTINGS as of 9/30/10+ Nippon Telegraph & Sempra Energy --------------------------------------- Telephone Corp. ADR (United States) 24,390 1,312 United States (Japan) 33,480 734 (includes short-term investments) 48% Singapore Canada 14 Telecommunications Ltd. United Kingdom 9 (Singapore) 397,400 949 Spain 5 France 4 Germany 4 Netherlands 4 Other 12 --------------------------------------- Total 100% --------------------------------------- + % of total investments as of September 30, 2010 --------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Total Market Level 1 - Value at Quoted September 30, 2010 Prices ------------------ --------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $68,253 $68,253 Short-Term Investments 1,159 1,159 ------- ------- Total Investments $69,412 $69,412 ======= ======= There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 52
VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- COMMON STOCKS--99.5% HEALTH CARE--10.9% SECURITIES LENDING COLLATERAL--2.8% Abbott Laboratories Dreyfus Cash CONSUMER DISCRETIONARY--6.0% (United States) 47,392 $ 2,476 Advantage Fund - Hero Honda Motors Ltd. Becton, Dickinson & Co. Institutional (India) 10,200 $ 422 (United States) 13,810 1,023 Shares (seven-day John Wiley & Sons, Inc. BioMerieux (France) 8,400 870 effective yield Class A (United States) 14,050 574 Covidien plc (Ireland) 24,200 973 0.250%)(15) 1,706,000 $ 1,706 McDonald's Corp. Novo Nordisk A/S Class B --------------------------------------- (United States) 36,089 2,689 (Denmark) 13,263 1,316 TOTAL SECURITIES LENDING COLLATERAL Norstar Founders Group -------- (IDENTIFIED COST $1,706) 1,706 Ltd. 6,658 --------------------------------------- (Cayman -------- TOTAL INVESTMENTS--102.9% Islands)(2)(6)(8) 272,000 0 (IDENTIFIED COST $50,240) 62,952(1) -------- INDUSTRIALS--3.0% 3,685 Bharat Heavy Electricals Other assets and liabilities, -------- Ltd. net--(2.9)% (1,764) (India) 22,070 1,217 -------- CONSUMER STAPLES--39.9% Capita Group plc (The) NET ASSETS--100.0% $ 61,188 Altria Group, Inc. (United Kingdom) 50,038 618 ======== (United States) 38,210 918 -------- British American Tobacco 1,835 COUNTRY WEIGHTINGS as of 9/30/10+ plc -------- --------------------------------------- (United Kingdom)(10) 114,009 4,252 United States (includes Coca-Cola Co. (The) INFORMATION TECHNOLOGY--23.5% short-term investments) 53% (United States) 46,932 2,746 Apple, Inc. India 16 Costco Wholesale Corp. (United States)(2) 11,200 3,178 United Kingdom 16 (United States) 7,625 492 Cognizant Technology Brazil 3 Imperial Tobacco Group plc Solutions Corp. Class A Switzerland 3 (United Kingdom) 80,324 2,394 (United States)(2) 25,225 1,626 Canada 2 ITC Ltd. (India) 256,610 1,018 Dolby Laboratories, Inc. Denmark 2 Mead Johnson Nutrition Co. Class A Other 5 (United States) 34,056 1,938 (United States)(2)(14) 17,500 994 --------------------------------------- Nestle India Ltd. (India) 12,325 928 Google, Inc. Class A Total 100% Nestle S.A. Registered (United States)(2) 4,813 2,531 --------------------------------------- Shares MasterCard, Inc. Class A + % of total investments as of (Switzerland) 35,538 1,893 (United States) 8,985 2,013 September 30, 2010 Philip Morris Microsoft Corp. --------------------------------------- International, (United States) 46,750 1,145 Inc. (United States) 76,135 4,265 Redecard SA (Brazil) 69,829 1,090 Reckitt Benckiser Group Visa, Inc. Class A plc (United States)(14) 24,421 1,814 (United Kingdom) 24,724 1,360 -------- Tesco plc (United Kingdom) 169,383 1,128 14,391 Woolworths Ltd. ------------------------------------------- (Australia) 38,337 1,069 TOTAL COMMON STOCKS -------- (IDENTIFIED COST $48,188) 60,900 24,401 ------------------------------------------- -------- TOTAL LONG-TERM INVESTMENTS--99.5% (IDENTIFIED COST $48,188) 60,900 ENERGY--4.4% ------------------------------------------- Canadian Natural Resources Ltd. (Canada) 44,920 1,554 SHORT-TERM INVESTMENTS--0.6% Exxon Mobil Corp. (United States) 18,600 1,149 MONEY MARKET MUTUAL FUNDS--0.6% -------- Dreyfus Cash Management 2,703 Fund - Institutional -------- Shares (seven-day effective yield 0.210%) 345,669 346 FINANCIALS--11.8% ------------------------------------------- CETIP SA - Balcao TOTAL SHORT-TERM INVESTMENTS Organizado de Ativos e (IDENTIFIED COST $346) 346 Derivativos ------------------------------------------- (Brazil)(2) 58,942 575 HDFC Bank Ltd. (India) 64,040 3,548 Housing Development Finance Corp. (India) 190,275 3,104 -------- 7,227 -------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 53
VIRTUS GLOBAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 (reported in thousands) At September 30, 2010, the Fund had entered into forward currency contracts as follows: Contracts In Exchange Settlement Unrealized to Receive for Counterparty Date Value Appreciation ---------- ----------- ------------ ---------- ------ ------------ BRL 685 USD 370 Citibank 12/02/10 $399 $29 CAD 823 USD 788 Citibank 11/30/10 799 11 CHF 426 USD 389 Citibank 11/19/10 434 45 EUR 202 USD 272 Citibank 2/14/11 275 3 --- $88 === Unrealized Contracts In Exchange Settlement Appreciation to Sell for Counterparty Date Value (Depreciation) ---------- ----------- ------------ ---------- ------ ------------- BRL 160 USD 84 Citibank 12/02/10 $ 93 $ (9) BRL 266 USD 140 Citibank 12/02/10 155 (15) BRL 260 USD 137 Citibank 12/02/10 152 (15) CAD 823 USD 782 Citibank 11/30/10 799 (17) CHF 426 USD 372 Citibank 11/19/10 434 (62) EUR 202 USD 262 Citibank 2/14/11 275 (13) GBP 2,333 USD 3,662 Citibank 2/14/11 3,661 1 ----- (130) ----- $ (42) ===== FOREIGN CURRENCIES: BRL Brazilian Real CAD Canadian Dollar CHF Swiss Franc EUR European Currency Unit GBP United Kingdom Pound Sterling USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2010 Prices Inputs Inputs ------------------ --------- ----------- ------------ INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $60,900 $60,900 $ -- $ 0+ Securities Lending Collateral 1,706 1,706 -- -- Short-Term Investments 346 346 -- -- ------- ------- ---- --- Total Investments $62,952 $62,952 $ -- $ 0+ ======= ======= ==== === Other Financial Instruments: Forward Currency Contracts(a) $ (42) $ -- $(42) $-- ======= ======= ==== === (a) Valued at the unrealized appreciation (depreciation) on the investment. + Level 3 Common Stock valued at zero at beginning and end of period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 54
VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- COMMON STOCKS--96.7% OFFICE REITS--CONTINUED RESIDENTIAL Corporate Office REITS--CONTINUED DIVERSIFIED REITS--12.0% Properties AvalonBay Beni Stabili SpA Trust (United States) 813 $ 30 Communities, Inc. (Italy)(2) 978 $ 1 Derwent London plc (United States) 410 $ 43 BGP Holdings plc (United Kingdom) 950 23 Boardwalk Real (Australia)(2)(6)(8) 13,566 0 Digital Realty Trust, Inc. Estate Investment British Land Co. plc (United States) 1,174 72 Trust (United Kingdom) 5,630 41 Duke Realty Corp. (Canada) 456 21 Canadian Real Estate (United States) 685 8 BRE Properties, Investment Trust Great Portland Estates plc Inc. (Canada) 960 29 (United Kingdom) 3,421 18 (United States) 186 8 Cominar Real Estate ING Office Fund Equity Lifestyle Investment Trust (Australia) 48,608 28 Properties, (Canada) 835 18 Japan Prime Realty Inc. Dexus Property Group Investment Corp. (Japan) 9 20 (United States) 469 25 (Australia) 49,140 41 Japan Real Estate Equity Residential First Capital Realty, Inc. Investment Corp. (Japan) 3 27 (United States) 2,273 108 (Canada) 1,085 16 Kilroy Realty Corp. Essex Property Fonciere Des Regions (United States) 432 14 Trust, Inc. (France) 174 18 Mack-Cali Realty Corp. (United States) 314 34 GPT Group (Australia) 10,700 30 (United States) 634 21 Home Properties, Kenedix Realty Investment Nippon Building Fund, Inc. Inc. Corp. (Japan) 6 23 (Japan) 3 26 (United States) 263 14 Land Securities Group plc Nomura Real Estate Office UDR, Inc. (United Kingdom) 6,125 62 Fund, Inc. (Japan) 2 11 (United States) 1,429 30 Liberty Property Trust SL Green Realty Corp. -------- (United States) 653 21 (United States) 556 35 333 Mapletree Logistics Trust Societe Immobiliere de -------- (Singapore) 13,455 9 Location Pour Vornado Realty Trust L'industrie Et Le RETAIL REITS--30.4% (United States) 1,205 103 Commerce (France) 220 28 CapitaMall Trust -------- -------- (Singapore) 2,450 4 412 559 CFS Retail Property -------- -------- Trust (Australia)(8) 6,200 11 INDUSTRIAL REITS--3.6% REAL ESTATE OPERATING COMPANIES--9.0% Corio N.V. AMB Property Corp. AEON Mall Co., Ltd. (Netherlands) 761 52 (United States) 991 26 (Japan) 1,370 33 Developers Ascendas Real Estate Brookfield Properties Diversified Investment Trust Corp. Realty Corp. (Singapore) 14,800 25 (Canada) 3,325 52 (United States) 2,524 28 Goodman Group Brookfield Properties Eurocommercial (Australia) 74,000 46 Corp. Properties N.V. SEGRO plc (United States) 355 6 (Italy) 580 27 (United Kingdom) 6,505 28 Castellum AB (Sweden) 2,125 28 Federal Realty -------- Citycon Oyj (Finland) 4,675 20 Investments 125 GAGFAH S.A. (Germany) 2,075 17 Trust -------- Hongkong Land Holdings (United States) 383 31 Ltd. (Bermuda) 11,500 71 Hammerson plc OFFICE REITS--16.3% Iguatemi Empresa de (United Kingdom) 5,040 31 Alexandria Real Estate Shopping Centers SA Kimco Realty Corp. Equities, Inc. (Brazil) 680 15 (United States) 3,490 55 (United States) 386 27 Multiplan Empreendimentos Klepierre (France) 1,520 59 Allied Properties Real Imobiliarios SA (Brazil) 345 7 Link (The) Estate Investment Trust Norwegian Property ASA (Hong Kong) 14,004 42 (Canada) 400 9 (Norway)(2) 9,900 17 Macerich Co. (The) BioMed Realty Trust, Inc. PSP Swiss Property AG (United States) 1,088 47 (United States) 1,270 23 (Switzerland)(2) 240 18 Regency Centers Boston Properties, Inc. Safestore Holdings plc Corp. (United States) 993 83 (United Kingdom) 12,776 25 (United States) 200 8 CapitaCommercial Trust -------- RioCan Real Estate (Singapore) 16,000 18 309 Investment Trust Champion Reit -------- (Canada) 2,232 50 (Hong Kong) 50,418 26 Simon Property Commonwealth Property RESIDENTIAL REITS--9.7% Group, Inc. Office Fund American Campus (United States) 2,156 200 (Australia) 13,000 12 Communities, Inc. Tanger Factory (United States) 888 27 Outlet Apartment Investment & Centers Management Co. (United States) 405 19 Class A (United States) 1,075 23 Taubman Centers, Inc. (United States) 460 21 Unibail-Rodamco (France)(2) 668 148 Weingarten Realty Investors (United States) 1,570 34 Westfield Group (Australia) 14,800 175 -------- 1,042 -------- SPECIALIZED REITS--15.7% Big Yellow Group plc (United Kingdom) 4,730 24 Entertainment Properties Trust (United States) 598 26 Extra Space Storage, Inc. (United States) 1,949 32 HCP, Inc. (United States) 1,734 62 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 55
VIRTUS GLOBAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE ABBREVIATION: ------- ------ ------- ------ REIT Real Estate Investment Trust SPECIALIZED REITS--CONTINUED RIGHTS--0.0% Health Care REIT, Inc. FOREIGN CURRENCIES: (United States) 1,333 $ 63 DIVERSIFIED REITS--0.0% EUR European Currency Unit Host Hotels & Resorts, Inc. Mapletree Logistics Trust SGD Singapore Dollar (United States) 5,738 83 Exercise price 0.815 SGD LaSalle Hotel Properties exp. 10/8/10(2)(8) 1,076 $ --(16) COUNTRY WEIGHTINGS as of 9/30/10+ (United States) 1,045 25 ----------------------------------------- ---------------------------------------- Nationwide Health TOTAL RIGHTS United States (includes short-term Properties, (IDENTIFIED COST $0) -- investments) 54% Inc. (United States) 1,115 43 ----------------------------------------- Australia 10 Public Storage (United TOTAL LONG-TERM INVESTMENTS--96.7% France 7 States) 940 91 (IDENTIFIED COST $2,212) 3,321 United Kingdom 7 Starwood Hotels & Resorts ----------------------------------------- Canada 6 Worldwide, Inc. Japan 4 (United States) 300 16 SHORT-TERM INVESTMENTS--3.2% Bermuda 2 Sunstone Hotel Investors, Inc. Other 10 (United States)(2) 1,110 10 MONEY MARKET MUTUAL FUNDS--3.2% ---------------------------------------- Ventas, Inc. Dreyfus Cash Total 100% (United States) 1,268 66 Management Fund - ---------------------------------------- ------ Institutional Shares + % of total investments as of 541 (seven-day effective September 30, 2010 - ----------------------------------------- yield 0.210%) 109,959 110 ---------------------------------------- TOTAL COMMON STOCKS ----------------------------------------- (IDENTIFIED COST $2,212) 3,321 TOTAL SHORT-TERM INVESTMENTS - ----------------------------------------- (IDENTIFIED COST $110) 110 ----------------------------------------- WARRANTS--0.0% TOTAL INVESTMENTS--99.9% DIVERSIFIED REITS--0.0% (IDENTIFIED COST $2,322) 3,431(1) Fonciere Des Regions Strike price 65.00 EUR Other assets and exp. 12/31/10(2) 10 --(16) liabilities, net--0.1% 1 ------ - ----------------------------------------- NET ASSETS--100.0% $3,432 TOTAL WARRANTS ====== (IDENTIFIED COST $0) -- - ----------------------------------------- The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2010 Prices Inputs ------------------ --------- ------------ INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $3,321 $3,321 $ 0(b) Warrants --(a) --(a) -- Rights --(a) -- --(a) Short-Term Investments 110(a) 110 -- ------ ------ ---- Total Investments $3,431 $3,431 $ --(a) ====== ====== ==== There are no Level 2 (significant observable inputs) priced securities. (a) Amount is less than $500. (b) Level 3 Common Stock valued at zero at the beginning and end of the period. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 56
VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ------- ------- COMMON STOCKS--96.5% CONSUMER STAPLES--CONTINUED INDUSTRIALS--10.2% Unilever Indonesia Tbk PT Beijing Enterprises Holdings CONSUMER DISCRETIONARY--7.7% (Indonesia) 89,200 $ 168 Ltd. (China) 23,075 $ 164 BEC World plc (Thailand) 54,700 $ 70 Unilever Pakistan Ltd. Bharat Electronics Ltd. Billabong International Ltd. (Pakistan) 1,900 89 (India) 2,067 80 (Australia) 11,805 91 Want Want China Holdings Bharat Heavy Electricals Ltd. Cox & Kings India Ltd. Ltd. (China) 91,100 85 (India) 2,200 121 (India) 7,600 96 Woolworths Ltd. (Australia) 11,023 307 Jain Irrigation Systems Ltd. Genting Malaysia Bhd Zhongpin, Inc. (China)(2) 4,845 79 (India) 3,900 103 (Malaysia) 99,600 109 -------- Jardine Matheson Holdings Hero Honda Motors Ltd. 3,744 Ltd. (Hong Kong) 2,800 127 (India) 3,200 132 -------- Jardine Strategic Holdings Ltd. Jubilant Foodworks Ltd. (Bermuda) 2,700 72 (India)(2) 900 10 ENERGY--2.4% Keells (John) Holdings plc Kangwon Land, Inc. (Korea) 7,940 173 CNOOC Ltd. (Hong Kong) 44,996 87 (Sri Lanka) 37,700 111 Super Cheap Auto Group Oil & Gas Development Co., Singapore Airport Terminal Ltd. (Australia) 19,508 123 Ltd. (Pakistan) 36,600 62 Services Ltd. (Singapore) 32,400 70 Woongjin Thinkbig Co., Ltd. PTT Exploration & Production Singapore Post Ltd. (South Korea) 1,920 42 plc (Thailand) 22,000 112 (Singapore) 93,500 87 -------- -------- Taiwan Secom Co., Ltd. 846 261 (Taiwan) 45,000 77 -------- -------- UGL Ltd. (Australia) 6,900 99 FINANCIALS--22.0% ------- CONSUMER STAPLES--34.2% Axis Bank Ltd. (India) 1,100 38 1,111 AmorePacific Corp. Bank Rakyat Indonesia ------- (South Korea) 164 165 (Indonesia) 31,700 35 British American Tobacco Commercial Bank of Ceylon INFORMATION TECHNOLOGY--6.5% Bangladesh Co., Ltd. plc (Sri Lanka) 42,350 107 Baidu.com, Inc. Sponsored (Bangladesh) 14,700 148 CRISIL Ltd. (India) 217 29 ADR (China)(2) 1,485 153 British American Tobacco Delta Brac Housing Finance Financial Technologies India Bhd (Malaysia) 7,800 123 Corp., Ltd. (Bangladesh) 2,200 89 Ltd. (India) 2,700 69 Ceylon Tobacco Co., Ltd. Gruh Finance Ltd. (India) 14,300 132 NetEase.Com, Inc. ADR (Sri Lanka)(8) 36,000 116 Hatton National Bank plc (China)(2) 4,751 187 Coca-Cola Amatil Ltd. (Sri Lanka) 17,060 59 NHN Corp. (Korea)(2) 671 115 (Australia) 20,527 238 HDFC Bank Ltd. (India)(10) 9,920 549 Taiwan Semiconductor Colgate Palmolive India Ltd. Hong Kong Exchanges & Manufacturing Co., Ltd. (India) 5,100 99 Clearing Ltd. (Hong Kong) 4,071 80 (Taiwan) 63,000 125 Dabur India Ltd. (India) 38,200 92 Housing Development Tencent Holdings Ltd. Dairy Farm International Finance Corp. (India) 29,594 483 (China) 2,600 57 Holdings Ltd. (Hong Kong) 13,100 100 Infrastructure Development ------- Distilleries Co. of Sri Finance Co., Ltd. (India) 31,900 144 706 Lanka Ltd. (Sri Lanka) 77,500 124 Jammu & Kashmir Bank Ltd. ------- Gudang Garam Tbk PT (India) 7,800 140 (Indonesia) 9,900 57 Mahindra & Mahindra MATERIALS--4.8% Guinness Anchor Bhd Financial Services (India) 6,100 88 Asian Paints Ltd. (India) 1,800 107 (Malaysia) 33,335 90 MCB Bank Ltd. (Pakistan) 7,637 17 Engro Corp., Ltd. Hengan International Group QBE Insurance Group Ltd. (Pakistan) 22,400 45 Co., Ltd. (China) 22,800 227 (Australia)(14) 12,826 214 Fauji Fertilizer Co., Ltd. ITC Ltd. (India) 99,175 394 Shriram Transport Finance (Pakistan) 45,500 55 LG Household & Health Care Co., Ltd. (India) 7,400 128 Semen Gresik (Persero) Ltd. (Korea) 300 111 Yes Bank Ltd. (India) 10,200 79 Tbk PT (Indonesia) 229,300 255 Marico Bangladesh Ltd. -------- Yingde Gases Group Co., Ltd. (Bangladesh) 8,250 82 2,411 (China)(2) 65,770 62 Nestle India Ltd. (India) 3,800 286 -------- ------- Nestle Malaysia Bhd 524 (Malaysia) 6,200 84 HEALTH CARE--5.2% ------- Nestle Pakistan Ltd. Cipla Ltd. (India) 9,820 70 (Pakistan) 3,695 81 Kalbe Farma Tbk PT TELECOMMUNICATION SERVICES--1.9% Pakistan Tobacco Co., Ltd. (Indonesia) 186,200 53 Philippine Long Distance (Pakistan)(8) 127,772 165 Lupin Ltd. (India) 10,500 91 Telephone Co. Sponsored Thai Beverage plc ResMed, Inc. (United ADR (Philippines) 2,260 135 (Thailand) 350,500 73 States)(2) 79,591 260 Telekomunikasi Indonesia Tsingtao Brewery Co., Ltd. Sun Pharmaceutical Tbk PT (Indonesia) 72,801 75 (China) 28,000 161 Industries Ltd. (India) 2,000 90 ------- -------- 210 564 ------- -------- UTILITIES--1.6% China Resources Gas Group Ltd. (Bermuda)(8) 34,300 51 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 57
VIRTUS GREATER ASIA EX JAPAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE ------- -------- UTILITIES--CONTINUED At September 30, 2010, the Fund had entered into forward currency contracts as HongKong Electric Holdings Ltd. follows (reported in thousands): (Hong Kong) 16,000 $ 97 NTPC Ltd. (India) 5,400 26 Contracts In Exchange Settlement Unrealized -------- to Receive for Counterparty Date Value Appreciation 174 ---------- ----------- ------------ ---------- ----- ------------ - ------------------------------------------- AUD 465 USD 420 Citibank 11/18/10 $447 $27 TOTAL COMMON STOCKS INR 4,686 USD 100 Citibank 11/18/10 103 3 (IDENTIFIED COST $8,140) 10,551 INR 4,357 USD 93 Citibank 11/18/10 96 3 - ------------------------------------------- INR 8,943 USD 189 Citibank 11/18/10 197 8 INR 6,393 USD 137 Citibank 11/18/10 141 4 MUTUAL FUNDS--0.6% --- Macquarie Korea $45 Infrastructure Fund 14,650 62 === - ------------------------------------------- TOTAL MUTUAL FUNDS Unrealized (IDENTIFIED COST $57) 62 Contracts In Exchange Settlement Appreciation - ------------------------------------------- to Sell for Counterparty Date Value (Depreciation) TOTAL LONG-TERM INVESTMENTS--97.1% ---------- ----------- ------------ ---------- ----- ------------- (IDENTIFIED COST $8,197) 10,613 AUD 342 USD 299 Citibank 11/18/10 $329 $(30) - ------------------------------------------- AUD 123 USD 102 Citibank 11/18/10 118 (16) INR 17,722 USD 383 Citibank 11/18/10 391 (8) SHORT-TERM INVESTMENTS--1.3% INR 6,657 USD 145 Citibank 11/18/10 147 (2) ---- MONEY MARKET MUTUAL FUNDS--1.3% (56) Dreyfus Cash Management ---- Fund - Institutional $(11) Shares (seven-day ==== effective yield 0.210%) 138,968 139 - ------------------------------------------- TOTAL SHORT-TERM INVESTMENTS FOREIGN CURRENCIES: (IDENTIFIED COST $139) 139 AUD Australian Dollar - ------------------------------------------- INR Indian Rupee USD United States Dollar SECURITIES LENDING COLLATERAL--0.0% Dreyfus Cash Advantage The following table provides a summary of inputs used to value the Fund's net assets Fund - Institutional Shares as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial (seven-day effective Statements). yield 0.250%)(15) 4,000 4 - ------------------------------------------- Level 2 - Level 3 - TOTAL SECURITIES LENDING COLLATERAL Total Value Level 1 - Significant Significant (IDENTIFIED COST $4) 4 at Quoted Observable Unobservable - ------------------------------------------- September 30, 2010 Prices Inputs Inputs TOTAL INVESTMENTS--98.4% ------------------ --------- ----------- ------------ (IDENTIFIED COST $8,340) 10,756(1) INVESTMENTS IN SECURITIES: Equity Securities: Other assets and Common Stocks $10,551 $10,297 $ -- $254 liabilities, net--1.6% 177 Mutual Funds 62 62 -- -- -------- Securities Lending NET ASSETS--100.0% $ 10,933 Collateral 4 4 -- -- ======== Short-Term Investments 139 139 -- -- ------- ------- ---- ---- ABBREVIATION: Total Investments $10,756 $10,502 $ -- $254 ADR American Depositary Receipt ======= ======= ==== ==== Other Financial Instruments: COUNTRY WEIGHTINGS as of 9/30/10+ Forward Currency - -------------------------------------------- Contracts(a) $ (11) $ -- $(11) $ -- India 34% ======= ======= ==== ==== China 11 Australia 10 (a) Valued at the unrealized appreciation (depreciation) on the investment. Indonesia 6 Pakistan 5 The following is a reconciliation of assets of the Fund, for Level 3 investments for Sri Lanka 5 which significant unobservable inputs were used to determine fair value: Malaysia 4 Other 25 Common Stocks - -------------------------------------------- ------------- Total 100% BALANCE AS OF SEPTEMBER 30, 2009: $ -- - -------------------------------------------- Accrued discounts (premiums) -- + % of total investments as of Realized gain (loss) -- September 30, 2010 Change in unrealized appreciation (depreciation) -- - -------------------------------------------- Net purchases (sales) -- Transfers in and/or out of Level 3(a) 254 ---- BALANCE AS OF SEPTEMBER 30, 2010: $254 ==== (a) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 58
VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- COMMON STOCKS--101.1% CONSUMER HEALTH CARE--17.2% SHORT-TERM INVESTMENTS--1.9% CONSUMER DISCRETIONARY--6.7% BioMerieux (France) 772 $ 80 Domino's Pizza plc Cie Generale D'optique MONEY MARKET MUTUAL FUNDS--1.9% (United Kingdom) 19,930 $ 147 Essilor International SA Dunelm Group plc (France) 1,734 119 Dreyfus Cash (United Kingdom) 7,732 47 Covidien plc (Ireland) 3,462 139 Management Fund - Pearson plc Fresenius Medical Care Institutional (United Kingdom) 5,658 88 AG & Co. KGaA Shares (seven-day SES SA (Luxembourg) 2,051 49 (Germany) 1,630 101 effective yield -------- Novartis AG Registered 0.210%) 92,179 $ 92 331 Shares (Switzerland) 1,178 68 --------------------------------------- -------- Novo Nordisk A/S Class B TOTAL SHORT-TERM INVESTMENTS (Denmark) 1,744 173 (IDENTIFIED COST $92) 92 CONSUMER STAPLES--36.3% Roche Holding AG Registered --------------------------------------- British American Tobacco Shares (Switzerland) 641 88 SECURITIES LENDING COLLATERAL--0.0% plc (United Kingdom)(10) 6,548 244 Synthes, Inc. (Switzerland) 686 79 Dreyfus Cash Colruyt SA (Belgium) 382 101 -------- Advantage Fund - Diageo plc 847 Institutional (United Kingdom) 7,944 137 -------- Shares (seven-day Imperial Tobacco Group plc effective yield (United Kingdom) 8,040 240 INDUSTRIALS--16.1% 0.250%)(15) 1,000 1 Lindt & Spruengli AG Andritz AG (Austria) 795 56 --------------------------------------- (Switzerland) 11 26 Bunzl plc (United Kingdom) 5,775 69 TOTAL SECURITIES LENDING COLLATERAL Nestle S.A. Registered Bureau Veritas SA (France) 1,699 119 (IDENTIFIED COST $1) 1 Shares (Switzerland) 4,393 234 Capita Group plc (The) --------------------------------------- Philip Morris (United Kingdom) 9,739 120 TOTAL INVESTMENTS--103.0% International, Inc. Cobham plc (United Kingdom) 17,800 64 (IDENTIFIED COST $3,982) 5,063(1) (United States) 4,529 254 De La Rue plc Other assets and Reckitt Benckiser Group (United Kingdom) 5,260 54 liabilities, net--(3.0)% (150) plc (United Kingdom) 2,865 158 Elbit Systems Ltd. (Israel) 1,030 55 -------- SABMiller plc G4S plc (United Kingdom) 29,949 120 NET ASSETS--100.0% $ 4,913 (United Kingdom) 2,786 89 Rational AG (Germany) 279 59 ======== Tesco plc Vossloh AG (Germany) 705 75 (United Kingdom) 28,754 191 -------- COUNTRY WEIGHTINGS as of 9/30/10+ Unilever N.V. 791 ---------------------------------------- (Netherlands)(14) 3,619 108 -------- United Kingdom 42% -------- France 12 1,782 INFORMATION Switzerland 10 -------- TECHNOLOGY--2.5% Germany 9 Accenture plc Class A United States (includes short-term ENERGY--4.7% (Ireland) 2,947 125 investments and securities lending BG Group plc -------- collateral) 7 (United Kingdom) 3,008 53 Ireland 5 Core Laboratories N.V. MATERIALS--2.3% Netherlands 4 (Netherlands) 1,104 97 Air Liquide SA (France) 932 114 Other 11 Total SA (France) 1,554 80 -------- ---------------------------------------- -------- Total 100% 230 UTILITIES--2.5% ---------------------------------------- -------- Scottish & Southern Energy plc (United Kingdom) 4,775 84 + % of total investments as of September FINANCIALS--12.8% Terna Rete Elettrica 30, 2010 Admiral Group plc Nazionale S.p.A. (Italy) 9,157 39 ----------------------------------------- (United Kingdom) 2,125 56 -------- Amlin plc (United Kingdom) 13,916 88 123 CNP Assurances (France) 4,422 82 ------------------------------------------- Deutsche Boerse AG TOTAL COMMON STOCKS (Germany) 1,147 76 (IDENTIFIED COST $3,889) 4,970 Muenchener ------------------------------------------- Rueckversicherungs- TOTAL LONG-TERM INVESTMENTS--101.1% Gesellschaft AG (IDENTIFIED COST $3,889) 4,970 Registered Shares ------------------------------------------- (Germany) 937 130 Reinet Investments SCA (Luxembourg)(2) 5,022 84 Standard Chartered plc (United Kingdom) 3,855 111 -------- 627 -------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 59
VIRTUS GREATER EUROPEAN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 (reported in thousands) At September 30, 2010, the Fund had entered into forward currency contracts as follows (reported in thousands): Unrealized Contracts In Exchange Settlement Appreciation to Receive for Counterparty Date Value (Depreciation) ---------- ----------- ------------ ---------- ------ -------------- CHF 223 USD 207 Citibank 12/10/10 $227 $ 20 CHF 222 USD 196 Citibank 12/10/10 226 30 EUR 415 USD 564 Citibank 2/14/11 565 1 EUR 265 USD 336 Citibank 12/10/10 361 25 EUR 474 USD 624 Citibank 12/10/10 646 22 EUR 213 USD 263 Citibank 12/10/10 290 27 GBP 543 USD 863 Citibank 11/04/10 853 (10) GBP 210 USD 318 Citibank 11/04/10 330 12 GBP 327 USD 484 Citibank 11/04/10 513 29 GBP 24 USD 34 Citibank 11/04/10 37 3 ----- $ 159 ===== Unrealized Contracts In Exchange Settlement Appreciation to Sell for Counterparty Date Value (Depreciation) ---------- ----------- ------------ ---------- ------ -------------- CHF 111 USD 100 Citibank 12/10/10 $ 113 $ (13) CHF 334 USD 288 Citibank 12/10/10 340 (52) EUR 415 USD 539 Citibank 2/14/11 565 (26) EUR 952 USD 1,137 Citibank 12/10/10 1,297 (160) GBP 537 USD 843 Citibank 2/14/11 843 --* GBP 606 USD 928 Citibank 11/04/10 952 (24) GBP 497 USD 734 Citibank 11/04/10 781 (47) ----- (322) ----- $(163) ===== FOREIGN CURRENCIES: CHF Swiss Franc EUR European Currency Unit GBP United Kingdom Pound Sterling USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Value Level 1 - Significant at Quoted Observable September 30, 2010 Prices Inputs ------------------ ---------- ------------ INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $4,970 $4,970 $ -- Securities Lending Collateral 1 1 -- Short-Term Investments 92 92 -- ------ ------ ----- Total Investments $5,063 $5,063 $ -- ====== ====== ===== Other Financial Instruments: Forward Currency Contracts(a) $ (163) $ -- $(163) ====== ====== ===== There are no Level 3 (significant unobservable inputs) priced securities. (a) Valued at the unrealized appreciation (depreciation) on the investment. * Amount less than $500. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 60
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- CORPORATE BONDS--87.9% CONSUMER DISCRETIONARY--CONTINUED ENERGY--6.8% Sinclair Broadcast Group, Aquilex Holdings CONSUMER DISCRETIONARY--23.3% Inc. LLC/Aquilex Affinion Group, Inc. 8.000%, 3/15/12 $ 605 $ 607 Finance Corp. 10.125%, 10/15/13 $ 645 $ 666 Sirius XM Radio, Inc. 144A 11.125%, 12/15/16 $ 545 $ 542 11.500%, 10/15/15 1,555 1,650 8.750%, 4/1/15 (4)(14) 1,100 1,174 Atlas Pipeline AMC Entertainment, Inc. Speedway Motorsports, Inc. Partners LP 8.000%, 3/1/14 675 684 6.750%, 6/1/13 620 629 8.125%, 12/15/15 1,395 1,416 AutoNation, Inc. Susser Holdings LLC/Susser Bristow Group, Inc. 6.750%, 4/15/18 105 108 Finance Corp. 6.125%, 6/15/13 880 895 Avis Budget Car Rental 8.500%, 5/15/16 330 345 Comstock Resources, LLC/Avis Budget United Artists Theatre Inc. Finance, Inc. Circuit, Inc. 8.375%, 10/15/17 5 5 7.625%, 5/15/14(14) 925 944 Series BE-9 Crosstex Energy Cablevision Systems Corp. 9.300%, 7/1/15(6)(8) 10 10 LP/Crosstex 8.000%, 4/15/20(14) 440 476 Series 95-A Energy Finance Cengage Learning 9.300%, 7/1/15(6)(8) 260 250 Corp. Acquisitions, Inc. 144A Series BD-1 8.875%, 2/15/18 340 358 13.250%, 7/15/15 (3)(4) 750 748 9.300%, 7/1/15(6)(8) 280 269 El Paso Corp. Cequel Communications Series AW-0 8.250%, 2/15/16 515 576 Holdings I LLC/Cequel 9.300%, 7/1/15(6)(8) 1 1 Linn Energy Capital Corp. 144A Unitymedia Hessen GmbH & LLC/Linn Energy 8.625%, 11/15/17 (4) 680 721 Co. KG/Unitymedia NRW Finance Corp. Cinemark USA, Inc. GmbH 144A 144A 8.625%, 8.625%, 6/15/19 685 733 8.125%, 12/1/17 (4) 835 873 4/15/20(4) 500 533 CSC Holdings LLC Videotron Ltee 144A 7.750%, 8.625%, 2/15/19 1,045 1,181 9.125%, 4/15/18 490 554 2/1/21(4) 500 507 Echostar DBS Corp. WMG Holdings Corp. Pioneer Natural 6.625%, 10/1/14 410 429 9.500%, 12/15/14(3)(14) 1,030 991 Resources Co. Education Management Wynn Las Vegas LLC/Wynn 6.650%, 3/15/17 100 107 LLC/Education Management Las Vegas Capital Corp. Plains Exploration Finance Corp. 144A & Production Co. 10.250%, 6/1/16 82 85 7.750%, 8/15/20 (4) 500 530 7.000%, 3/15/17 715 736 Goodyear Tire & Rubber Co. -------- 7.625%, 6/1/18 540 570 (The) 24,246 SandRidge Energy, 10.500%, 5/15/16 1,210 1,376 -------- Inc. 144A Hanesbrands, Inc. 8.750%, 8.000%, 12/15/16 305 324 CONSUMER STAPLES--10.0% 1/15/20 (4) 855 851 Intelsat Jackson Holdings Ingles Markets, Inc. -------- SA 144A 8.875%, 5/15/17 1,200 1,299 7,096 7.250%, 10/15/20 (4) 1,000 1,005 Alliance One -------- Jarden Corp. International, Inc. 7.500%, 5/1/17 425 442 10.000%, 7/15/16 1,365 1,485 FINANCIALS--8.8% Lamar Media Corp. Series C B&G Foods, Inc. Ally Financial, 6.625%, 8/15/15 635 646 7.625%, 1/15/18 300 313 Inc. Landry's Holdings, Inc. Beverages & More, Inc. 0.000%, 6/15/15 2,040 1,474 144A 144A CEDC Finance Corp. 11.500%, 6/1/14 (4) 1,000 935 9.625%, 10/1/14 (4) 1,000 1,010 International, Levi Strauss & Co. Bumble Bee Foods LLC Inc. 144A 8.875%, 4/1/16 755 802 7.750%, 12/15/15 306 329 9.125%, Mediacom Broadband C&S Group Enterprises LLC 12/1/16 (4) 690 745 LLC/Mediacom Broadband 144A CIT Group, Inc. Corp. 8.375%, 5/1/17 (4) 830 814 7.000%, 5/1/17(14) 1,250 1,230 8.500%, 10/15/15 50 51 Constellation Brands, Inc. Developers Nebraska Book Co., Inc. 7.250%, 9/1/16 805 860 Diversified 8.625%, 3/15/12 755 725 Dole Food Co., Inc. Realty Corp. Peninsula Gaming LLC 8.750%, 7/15/13 65 69 7.875%, 9/1/20 195 202 10.750%, 8/15/17(14) 910 966 144A 8.000%, 10/1/16(4) 340 357 Ford Motor Credit Sally Holdings LLC/Sally Michael Foods, Inc. 144A Co. LLC Capital, Inc. 9.750%, 7/15/18 (4) 500 538 7.500%, 8/1/12 1,435 1,524 10.500%, 11/15/16 720 792 Pantry, Inc. (The) 7.000%, 4/15/15 475 508 Scientific Games 7.750%, 2/15/14 895 902 Host Hotels & International, Inc. Stater Brothers Holdings, Resorts LP 9.250%, 6/15/19 1,120 1,196 Inc. Series O Service Corp. 7.750%, 4/15/15 565 582 6.375%, 3/15/15 200 206 International SUPERVALU, Inc. Icahn Enterprises 8.000%, 11/15/21 305 328 8.000%, 5/1/16(14) 930 942 LP/Icahn Tops Markets LLC 144A Enterprises 10.125%, 10/15/15 (4) 840 906 Finance Corp. -------- 8.000%, 1/15/18 535 540 10,406 ING Capital Funding -------- Trust III 8.439%, 12/31/49(3) 435 420 International Lease Finance Corp. 144A 8.625%, 9/15/15(4) 45 48 144A 8.750%, 3/15/17(4) 730 785 NBC Acquisition Corp. 11.000%, 3/15/13(3)(14) 1,245 1,123 UBS Preferred Funding Trust I 8.622%, 10/29/49(3) 245 245 Ventas Realty LP/Ventas Capital Corp. Series 1 6.500%, 6/1/16 155 162 -------- 9,212 -------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 61
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- --------- ------- HEALTH CARE--6.6% MATERIALS--CONTINUED UTILITIES--CONTINUED Biomet, Inc. Freeport-McMoRan Ferrellgas Partners LP 11.625%, 10/15/17 $ 2,120 $ 2,372 Copper & Gold, Inc. 9.125%, 10/1/17 $ 675 $ 735 Community Health Systems, 8.375%, 4/1/17 $ 625 $ 699 8.625%, 6/15/20 340 366 Inc. Huntsman International LLC NRG Energy, Inc. 8.875%, 7/15/15 1,205 1,283 7.875%, 11/15/14 490 511 7.375%, 1/15/17 695 714 DaVita, Inc. 8.625%, 3/15/20(14) 500 520 ------- 7.250%, 3/15/15 1,295 1,351 144A 2,073 HCA, Inc. 8.625%, 3/15/21(4) 500 520 ------------------------------------------ 9.250%, 11/15/16 1,405 1,524 Phibro Animal Health Corp. TOTAL CORPORATE BONDS 8.500%, 4/15/19 290 325 144A (IDENTIFIED COST $89,391) 91,554 -------- 9.250%, 7/1/18 (4) 100 104 ------------------------------------------ 6,855 Solutia, Inc. LOAN AGREEMENTS--2.5% -------- 7.875%, 3/15/20 940 1,009 CONSUMER STAPLES--0.5% INDUSTRIALS--7.1% Valmont Industries, Inc. Roundy's Supermarkets, ARAMARK Corp. 6.625%, 4/20/20 535 551 Inc. 8.500%, 2/1/15 780 815 -------- Tranche Casella Waste Systems, Inc. 5,932 10.000%, 4/16/16 500 510 9.750%, 2/1/13 1,495 1,514 -------- ------- Corrections Corp. of TELECOMMUNICATION FINANCIALS--0.4% America SERVICES--15.0% AGFS Funding Co. Tranche, 7.750%, 6/1/17 610 659 Cincinnati Bell, Inc. 7.250%, 4/21/15 410 413 Dycom Industries, Inc. 8.750%, 3/15/18(14) 890 872 ------- 8.125%, 10/15/15 985 1,012 Crown Castle International INDUSTRIALS--0.6% DynCorp International, Inc. Corp. Vertrue, Inc. Tranche, 144A 7.125%, 11/1/19 565 604 3.540%, 8/16/14 750 651 10.375%, 7/1/17 (4) 95 95 Frontier Communications ------- Gibraltar Industries, Inc. Corp. INFORMATION Series B 8.125%, 10/1/18 595 653 TECHNOLOGY--1.0% 8.000%, 12/1/15 780 764 GCI, Inc. Reynolds & Reynolds Co. Goodman Global Group, Inc. 8.625%, 11/15/19 1,640 1,759 (The) 0.000%, 12/15/14 1,330 858 Global Crossing Ltd. Tranche B, L-3 Communications Corp. 12.000%, 9/15/15 1,200 1,362 5.250%, 4/21/17 230 231 5.875%, 1/15/15 370 380 Hughes Network Systems Reynolds Group Travelport LLC LLC/Hughes Network 0.000%, 5/5/16 750 754 9.875%, 9/1/14 1,280 1,323 Systems Finance Corp. ------- -------- 9.500%, 4/15/14 1,770 1,841 985 7,420 ITC DeltaCom, Inc. ------------------------------------------ -------- 10.500%, 4/1/16 845 863 TOTAL LOAN AGREEMENTS INFORMATION Nextel Communications, Inc. (IDENTIFIED COST $2,527) 2,559 TECHNOLOGY--2.6% Series C ------------------------------------------ Jabil Circuit, Inc. 5.950%, 3/15/14 750 750 7.750%, 7/15/16 295 325 NII Capital Corp. SHARES Sanmina-SCI Corp. 144A 8.875%, 12/15/19 2,165 2,417 --------- 3.042%, 6/15/14 (3)(4) 655 620 PAETEC Holding Corp. COMMON STOCKS--0.0% SunGard Data Systems, Inc. 9.500%, 7/15/15 1,085 1,112 INDUSTRIALS--0.0% 9.125%, 8/15/13 655 672 Poland Telecom Finance BV ACG Holdings, Inc. 10.250%, 8/15/15 985 1,042 Series B (2)(7)(8) 76 0 Viasat, Inc. 8.875%, 14.000%, 12/1/07 ------------------------------------------ 9/15/16 45 49 (6)(8)(12) 4,942 62 TOTAL COMMON STOCKS -------- Telcordia Technologies, (IDENTIFIED COST $358) 0 2,708 Inc. ------------------------------------------ -------- 144A TOTAL LONG-TERM MATERIALS--5.7% 11.000%, 5/1/18 (4) 750 740 INVESTMENTS--90.4% Ardagh Packaging Finance Virgin Media Finance plc (IDENTIFIED COST $92,276) 94,113 plc 144A 8.375%, 10/15/19 695 766 ------------------------------------------ 7.375%, 10/15/17(4) 250 259 Windstream Corp. SHORT-TERM Ball Corp. 6.750%, 144A INVESTMENTS--9.0% 9/15/20 445 474 8.125%, 9/1/18(4) 95 99 MONEY MARKET MUTUAL Boise Paper Holdings 7.000%, 3/15/19 1,475 1,453 FUNDS--9.0% LLC/Boise Finance Co. 144A BlackRock Liquidity Funds 9.000%, 11/1/17 345 372 7.750%, 10/15/20(4) 250 253 TempFund Portfolio - 8.000%, 4/1/20 315 328 -------- Institutional Shares Cascades, Inc. 15,606 (seven-day effective 7.875%, 1/15/20 70 73 -------- yield 0.229%) 9,414,528 9,415 Celanese U.S. Holdings LLC UTILITIES--2.0% ------------------------------------------ 144A Calpine Corp. 144A TOTAL SHORT-TERM 6.625%, 10/15/18 (4) 500 512 7.875%, 7/31/20 (4) 250 258 INVESTMENTS (IDENTIFIED COST $9,415) 9,415 ------------------------------------------ For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 62
VIRTUS HIGH YIELD FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE --------- -------- SECURITIES LENDING COLLATERAL--6.6% BlackRock Institutional Money Market Trust (seven-day effective yield 0.309%)(15) 526,006 $ 526 BlackRock Liquidity Funds TempCash Portfolio - Institutional Shares (seven-day effective yield 0.240%)(15) 6,317,806 6,318 - ------------------------------------------- TOTAL SECURITIES LENDING COLLATERAL (IDENTIFIED COST $6,844) 6,844 - ------------------------------------------- TOTAL INVESTMENTS--106.0% (IDENTIFIED COST $108,535) 110,372(1) Other Assets and Liabilities--(6.0)% (6,264) -------- NET ASSETS--100.0% $104,108 ======== The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2010 Prices Inputs Inputs ------------------ --------- ----------- ------------ INVESTMENTS IN SECURITIES: Debt Securities: Corporate Bonds $ 91,554 $ -- $89,952 $1,602 Loan Agreements 2,559 -- 2,559 -- Equity Securities: Common Stock 0(e) -- -- 0(e) Securities Lending Collateral 6,844 6,318 526 -- Short-Term Investments 9,415 9,415 -- -- -------- ------- ------- ------ Total Investments $110,372 $15,733 $93,037 $1,602 ======== ======= ======= ====== 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 Bonds --------------- BALANCE AS OF SEPTEMBER 30, 2009: $ 634 Accrued discounts (premiums)(a) 3 Realized gain (loss)(b) -- Change in unrealized appreciation (depreciation)(b) 35 Net purchases (sales)(c) (80) Transfers in and/or out of Level 3(d) 1,010 ------ BALANCE AS OF SEPTEMBER 30, 2010: $1,602 ====== (a) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (b) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (c) INCLUDES PAYDOWNS, IF ANY. (d) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (e) LEVEL 3 COMMON STOCK HAS A BEGINNING AND ENDING VALUE OF ZERO. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 63
VIRTUS INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- COMMON STOCKS--33.0% HEALTH CARE--3.4% MATERIALS--CONTINUED GlaxoSmithKline plc Shin-Etsu Chemical CONSUMER (United Kingdom) 1,800 $ 35 Co., Ltd. DISCRETIONARY--1.9% Novartis AG Registered (Japan) 400 $ 19 British Sky Broadcasting Shares Syngenta AG Group plc (Switzerland) 1,070 61 Registered Shares (United Kingdom) 2,400 $ 27 Roche Holding AG (Switzerland) 100 25 Casio Computer Co., Ltd. (Switzerland) 480 66 -------- (Japan) 3,500 26 Sanofi-Aventis SA (France) 720 48 187 Compass Group plc Teva Pharmaceutical -------- (United Kingdom)(10) 1,000 8 Industries Ltd. (Israel) 635 35 TELECOMMUNICATION Reed Elsevier N.V. -------- SERVICES--4.3% (Netherlands) 3,720 47 245 Belgacom SA Sumitomo Rubber Industries -------- (Belgium) 830 32 Ltd. (Japan) 2,200 22 INDUSTRIALS--3.8% Bezeq Israeli Swatch Group AG (The) Asahi Holdings, Inc. Telecommunication (Switzerland) 33 12 (Japan) 500 11 Corp., Ltd. -------- Brambles Ltd. (Australia) 7,000 42 (Israel) 5,995 15 142 Deutsche Post AG Registered Koninklijke KPN N.V. -------- Shares (Germany) 2,660 48 (Netherlands) 3,120 48 CONSUMER STAPLES--4.3% Makita Corp. (Japan) 900 29 Singapore British American Tobacco Mitsubishi Electric Corp. Telecommunications plc (Japan) 2,000 17 Ltd. (Singapore) 9,000 22 (United Kingdom) 700 26 Panalpina Welttransport Telefonica S.A. Colruyt SA (Belgium) 180 47 Holding AG Registered (Spain) 2,620 65 Foster's Group Ltd. Shares (Switzerland)(2) 190 21 Telekom Malaysia Bhd (Australia) 7,000 41 PLUS Expressways Bhd (Malaysia) 17,000 19 Nestle S.A. Registered (Malaysia) 14,000 19 Telenor ASA (Norway) 1,600 25 Shares (Switzerland) 1,370 73 Rolls-Royce Group plc Telstra Corp., Ltd. Swedish Match AB (Sweden) 970 26 (United Kingdom)(2) 1,600 15 (Australia) 14,000 35 Tesco plc (United Singapore Post Ltd. Vodafone Group plc Kingdom) 3,700 25 (Singapore) 26,000 24 (United Kingdom) 19,700 49 Unilever N.V. TNT N.V. (Netherlands) 1,220 33 -------- (Netherlands) 827 25 Toyota Tsusho Corp. 310 Woolworths Ltd. (Japan) 1,400 21 -------- (Australia) 1,750 49 -------- UTILITIES--2.8% -------- 280 HongKong Electric 312 -------- Holdings Ltd. -------- INFORMATION (Hong Kong) 9,000 55 ENERGY--3.9% TECHNOLOGY--3.3% National Grid plc BP plc (United Kingdom) 4,100 28 ASM Pacific Technology (United Kingdom) 3,200 27 CNOOC Ltd. (Hong Kong) 18,000 35 Ltd. (Hong Kong) 3,100 28 RWE AG (Germany) 460 31 Royal Dutch Shell plc Keyence Corp. (Japan) 100 22 Scottish & Southern Class A Nintendo Co., Ltd. (Japan) 100 25 Energy plc (United Kingdom) 2,130 64 Nippon Electric Glass Co., (United Kingdom) 1,400 25 Royal Dutch Shell plc Ltd. (Japan) 1,000 13 Snam Rete Gas S.p.A. Class B SAP AG (Germany) 1,300 64 (Italy) 8,140 41 (United Kingdom) 1,200 35 Venture Corp., Ltd. United Utilities Straits Asia Resources Ltd. (Singapore) 2,000 15 Group plc (Singapore) 8,000 13 VTech Holdings Ltd. (United Kingdom) 2,900 26 Total SA (France) 1,530 79 (Hong Kong) 3,000 31 -------- Woodside Petroleum Ltd. Wincor Nixdorf AG 205 (Australia) 760 32 (Germany) 613 40 --------------------------------------- -------- -------- TOTAL COMMON STOCKS 286 238 (IDENTIFIED COST $2,362) 2,404 -------- -------- --------------------------------------- FINANCIALS--2.7% MATERIALS--2.6% EXCHANGE-TRADED FUNDS--1.0% Hang Seng Bank Ltd. Air Liquide SA (France) 330 40 iShares MSCI Taiwan (Hong Kong) 3,000 44 CRH plc (Ireland) 1,800 30 Index Fund 5,537 75 Hong Leong Finance Ltd. Fuchs Petrolub AG --------------------------------------- (Singapore) 3,000 7 (Germany) 145 17 TOTAL EXCHANGE-TRADED FUNDS Legal & General Group plc Givaudan SA Registered (IDENTIFIED COST $73) 75 (United Kingdom) 17,500 28 Shares (Switzerland) 15 15 --------------------------------------- Malayan Banking Bhd Lafarge Malayan Cement Bhd TOTAL LONG-TERM (Malaysia) 6,000 17 (Malaysia) 7,400 19 INVESTMENTS--34.0% QBE Insurance Group Ltd. Rio Tinto Ltd. (Australia) 290 22 (IDENTIFIED COST $2,435) 2,479 (Australia) 2,510 42 --------------------------------------- Tokyu Reit, Inc. (Japan) 3 16 SHORT-TERM United Overseas Bank Ltd. INVESTMENTS--0.9% (Singapore) 1,000 14 MONEY MARKET MUTUAL Zurich Financial Services FUNDS--0.9% AG Dreyfus Cash (Switzerland) 130 31 Management Fund - -------- Institutional 199 Shares (seven-day -------- effective yield 0.210%) 62,326 62 --------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $62) 62 --------------------------------------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 64
VIRTUS INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 (reported in thousands) VALUE -------- TOTAL INVESTMENTS--34.9% (IDENTIFIED COST $2,497) $ 2,541(1) Other assets and liabilities, net--65.1% 4,731 -------- NET ASSETS--100.0% $ 7,272 ======== ABBREVIATION: REIT Real Estate Investment Trust COUNTRY WEIGHTINGS as of 9/30/10+ - ---------------------------------------------- United Kingdom 16% Switzerland 12 Australia 10 Japan 9 Germany 8 Hong Kong 8 France 7 Other (includes short-term investments) 30 - ---------------------------------------------- Total 100% - ---------------------------------------------- + % of total investments as of September 30, 2010 - ---------------------------------------------- At September 30, 2010, the Fund had entered into forward currency contracts as follows: Unrealized Contracts In Exchange Settlement Appreciation to Receive for Counterparty Date Value (Depreciation) ---------- ----------- ------------------------------- ---------- ----- -------------- AUD 275 USD 258 State Street Bank and Trust Co. 11/23/10 $264 $(6) === FOREIGN CURRENCY: AUD Australian Dollar USD United States Dollar The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Total Value Level 1 - Significant at Quoted Observable September 30, 2010 Prices Inputs ------------------ --------- ----------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $2,404 $2,404 $-- Exchange-Traded Funds 75 75 -- Short-Term Investments 62 62 -- ------ ------ --- Total Investments $2,541 $2,541 $-- ====== ====== === Other Financial Instruments: Forward Currency Contracts $ (6) $ -- $(6) ====== ====== === There are no Level 3 (significant unobservable inputs) priced securities. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 65
VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- -------- -------- COMMON STOCKS--98.8% REAL ESTATE OPERATING COMPANIES--18.9% RIGHTS--0.0% AEON Mall Co., Ltd. DIVERSIFIED REITS--18.0% (Japan) 22,830 $ 555 DIVERSIFIED REITS--0.0% Beni Stabili SpA Brookfield Properties Mapletree Logistics (Italy)(2) 22,257 $ 21 Corp. (Canada) 55,550 868 Trust Exercise price BGP Holdings plc Castellum AB (Sweden) 29,866 397 0.815 SGD exp. (Australia)(2)(6)(8) 588,920 0 Citycon Oyj (Finland) 78,766 336 10/8/10(2)(8) 18,764 $ 1 British Land Co. plc GAGFAH S.A. (Germany) 27,076 216 ---------------------------------------- (United Kingdom) 96,075 702 Hongkong Land Holdings TOTAL RIGHTS Canadian Real Estate Ltd. (Hong Kong) 202,500 1,257 (IDENTIFIED COST $0) 1 Investment Trust Iguatemi Empresa de ---------------------------------------- (Canada) 15,120 459 Shopping Centers SA TOTAL LONG-TERM Cominar Real Estate (Brazil) 12,540 280 INVESTMENTS--98.8% Investment Trust Multiplan Empreendimentos (IDENTIFIED COST (Canada) 14,100 297 Imobiliarios SA $20,409) 26,706 Dexus Property Group (Brazil) 6,578 140 ---------------------------------------- (Australia) 839,415 694 Norwegian Property ASA SHORT-TERM First Capital Realty, (Norway)(2) 168,500 291 INVESTMENTS--0.8% Inc. (Canada) 18,260 275 PSP Swiss Property AG MONEY MARKET MUTUAL Fonciere Des Regions (Switzerland)(2) 4,741 350 FUNDS--0.8% (France) 2,570 274 Safestore Holdings plc Dreyfus Cash GPT Group (Australia) 201,900 574 (United Kingdom) 209,876 408 Management Fund - Kenedix Realty Investment -------- Institutional Corp. (Japan) 100 378 5,098 Shares (seven-day Land Securities Group plc -------- effective yield (United Kingdom) 104,273 1,049 0.210%) 206,825 207 Mapletree Logistics Trust RESIDENTIAL REITS--1.3% ---------------------------------------- (Singapore) 234,545 155 Boardwalk Real Estate TOTAL SHORT-TERM INVESTMENTS -------- Investment Trust (IDENTIFIED COST $207) 207 4,878 (Canada) 7,760 355 ---------------------------------------- -------- -------- TOTAL INVESTMENTS--99.6% (IDENTIFIED COST INDUSTRIAL REITS--6.4% RETAIL REITS--38.0% $20,616) 26,913(1) Ascendas Real Estate CapitaMall Trust Other assets and Investment Trust (Singapore) 44,650 73 liabilities, (Singapore) 285,200 475 CFS Retail Property Trust net--0.4% 107 Goodman Group (Australia)(8) 117,252 215 -------- (Australia) 1,280,280 798 Corio N.V. (Netherlands) 13,570 928 NET ASSETS--100.0% $ 27,020 SEGRO plc EuroCommercial Properties ======== (United Kingdom) 106,057 455 N.V. (Netherlands) 10,272 476 -------- Hammerson plc ABBREVIATIONS: 1,728 (United Kingdom) 85,009 527 REIT Real Estate Investment Trust -------- Klepierre (France) 21,374 824 Link (The) (Hong Kong) 267,941 794 FOREIGN CURRENCIES: OFFICE REITS--14.7% RioCan Real Estate SGD Singapore Dollar Allied Properties Real Investment Trust Estate Investment Trust (Canada) 36,250 807 COUNTRY WEIGHTINGS as of 9/30/10+ (Canada) 6,295 139 Unibail-Rodamco ------------------------------------------ CapitaCommercial Trust (France)(2) 11,315 2,509 Australia 22% (Singapore) 289,000 325 Westfield Group France 15 Champion Reit (Hong Kong) 878,576 453 (Australia) 262,673 3,113 United Kingdom 15 Commonwealth Property -------- Canada 12 Office Fund (Australia) 215,916 192 10,266 Japan 9 Derwent London plc -------- Bermuda 5 (United Kingdom) 13,646 322 SPECIALIZED REITS--1.5% Hong Kong 5 Great Portland Estates Big Yellow Group plc Other (includes short-term plc (United Kingdom) 46,718 251 (United Kingdom) 78,461 402 investments) 17 ING Office Fund ------------------------------------------- ------------------------------------------ (Australia) 762,950 442 TOTAL COMMON STOCKS Total 100% Japan Prime Realty (IDENTIFIED COST $20,409) 26,705 ------------------------------------------ Investment Corp. ------------------------------------------- + % of total investments as of September (Japan) 146 321 30, 2010 Japan Real Estate ------------------------------------------ Investment Corp. (Japan) 47 427 Nippon Building Fund, Inc. (Japan) 50 438 Nomura Real Estate Office Fund, Inc. (Japan) 34 189 Societe Immobiliere de Location Pour L'industrie Et Le Commerce (France) 3,707 479 -------- 3,978 -------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 66
VIRTUS INTERNATIONAL REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2010 Prices Inputs ------------------ --------- ------------ INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $26,705 $26,705 $--++ Rights 1 -- 1 Short-Term Investments 207 207 -- ------- ------- --- Total Investments $26,913 $26,912 $ 1 ======= ======= === There are no Level 2 (significant observable inputs) priced securities. ++ Level 3 Common Stock valued at zero at beginning and end of period. 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: Rights ------ BALANCE AS OF SEPTEMBER 30, 2009: $-- Accrued discounts (premiums) -- Realized gain (loss) -- Change in unrealized appreciation (depreciation) -- Net purchases (sales) -- Transfers in and/or out of Level 3(a) 1 --- BALANCE AS OF SEPTEMBER 30, 2010: $ 1 === (a) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 67
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ------- ------- COMMON STOCKS--88.8% CONSUMER STAPLES--CONTINUED HEALTH CARE--15.2% Nestle S.A. Registered Alexion Pharmaceuticals, CONSUMER DISCRETIONARY--19.0% Shares 9,500 $ 506 Inc.(2)(10) 3,650 $ 235 Abercrombie & Fitch Co. PepsiCo, Inc. 24,340 1,617 Allergan, Inc. 4,630 308 Class A(10) 20,200 $ 794 Philip Morris Allscripts-Misys AnnTaylor Stores International, Inc.(10) 21,570 1,208 Healthcare Solutions, Corp.(2)(10) 26,980 546 Procter & Gamble Co. (The) 7,530 452 Inc.(2) 37,060 685 Autoliv, Inc.(10) 6,790 444 Toyo Suisan Kaisha Ltd. 20,000 412 AMERIGROUP Corp.(2) 7,640 324 Carnival Corp. 14,400 550 Unilever N.V. 28,360 848 AmerisourceBergen Electrolux AB Series B 28,100 692 Whole Foods Market, Corp.(10) 9,380 288 Esprit Holdings Ltd. 34,753 189 Inc.(2)(10) 31,422 1,166 Amylin Pharmaceuticals, Ethan Allen Interiors, -------- Inc.(2) 51,910 1,082 Inc.(10) 24,630 430 14,967 ArthroCare Corp.(2) 4,840 132 Foschini Ltd. ADR(10) 16,120 384 -------- BioMarin Pharmaceutical, Great Wall Motor Co., Ltd. 210,500 570 ENERGY--5.5% Inc.(2) 10,940 245 Home Depot, Inc. (The)(10) 27,490 871 Anadarko Petroleum Celgene Corp.(2)(10) 4,260 245 Inchcape plc(2) 120,140 588 Corp.(10) 3,620 207 Cooper Companies, Inc. 10,560 488 Jack in the Box, Inc.(2) 14,520 311 Cameron International Covidien plc(10) 19,220 772 Johnson Controls, Inc. 9,010 275 Corp.(2) 18,860 810 Dendreon Corp.(2) 22,460 925 L'Occitane International Comstock Resources, Edwards Lifesciences SA(2) 156,500 436 Inc.(2) 14,190 319 Corp.(2) 3,160 212 Limited Brands, Inc. 18,030 483 Concho Resources, Emergency Medical Services Liz Claiborne, Inc.(2) 117,490 714 Inc.(2)(10) 13,950 923 Corp. Class A(2)(10) 5,030 268 LVMH Moet Hennessy Continental Resources, Emergent Biosolutions, Louis Vuitton S.A. 5,580 819 Inc.(2) 10,040 465 Inc.(2)(10) 26,100 450 Macy's, Inc. 22,490 519 Dockwise Ltd.(2) 8,850 220 Express Scripts, Inc.(2) 3,800 185 NetFlix, Inc.(2) 1,190 193 Ensco International plc Hanger Orthopedic Group, Newell Rubbermaid, Sponsored ADR 18,860 844 Inc.(2) 23,340 339 Inc.(10) 17,190 306 Halliburton Co.(10) 6,440 213 Hospira, Inc.(2)(10) 19,570 1,116 Nordstrom, Inc.(10) 12,640 470 LUKOIL O.A.O Sponsored Human Genome Sciences, OfficeMax, Inc.(2)(10) 71,560 937 ADR(10) 5,980 339 Inc.(2)(10) 10,650 317 Pier 1 Imports, Inc.(2) 56,950 466 Schlumberger Ltd. 3,800 234 ICON plc Sponsored ADR(2) 6,570 142 Ryland Group, Inc. (The) 20,120 361 Suncor Energy, Inc. 9,250 301 Illumina, Inc.(2) 5,190 255 Saks, Inc.(2)(10) 54,440 468 Tidewater, Inc. 4,530 203 Incyte Corp., Ltd.(2) 15,280 244 Sodexo 4,550 295 -------- King Pharmaceuticals, Staples, Inc.(10) 49,820 1,042 5,078 Inc.(2)(10) 66,410 661 Talbots, Inc.(2) 29,760 390 -------- MAP Pharmaceuticals, Target Corp.(10) 18,820 1,006 FINANCIALS--9.2% Inc.(2)(10) 8,000 122 Thomas Cook Group plc 246,710 666 Arch Capital Group Medco Health Solutions, Timberland Co. (The) Ltd.(2)(10) 7,250 608 Inc.(2) 3,880 202 Class A(2)(10) 32,730 648 Capital One Financial Merck & Co., Inc.(10) 4,040 149 Toyoda Gosei Co., Ltd. 10,400 229 Corp. 11,460 453 Onyx Pharmaceuticals, Williams-Sonoma, Inc.(10) 19,350 613 Citizens Republic Bancorp, Inc.(2) 13,980 369 -------- Inc.(2) 205,820 185 PerkinElmer, Inc.(10) 2,390 55 17,705 City National Corp.(10) 17,060 905 Pfizer, Inc.(10) 15,110 259 -------- Comerica, Inc. 12,310 457 Salix Pharmaceuticals CONSUMER STAPLES--16.1% Fidelity National Ltd.(2)(10) 8,560 340 Archer-Daniels-Midland Co. 17,600 562 Financial, Inc. Sanofi-Aventis SA 8,270 551 BJ's Wholesale Club, Class A(10) 51,050 802 Smith & Nephew plc 44,730 408 Inc.(2)(10) 21,640 898 First American Financial St. Jude Medical, Inc.(2) 23,710 933 British American Tobacco Corp.(10) 34,420 514 Thermo Fisher Scientific, plc Sponsored ADR 6,150 459 First Midwest Bancorp, Inc.(2)(10) 4,190 201 Clorox Co. (The)(10) 14,090 941 Inc. 24,850 287 United Therapeutics Diageo plc 14,999 258 Huntington Bancshares, Corp.(2)(10) 1,270 71 Energizer Holdings, Inc. 204,480 1,159 Universal Health Services, Inc.(2)(10) 10,580 711 IntercontinentalExchange, Inc. Class B(10) 3,230 126 Estee Lauder Cos., Inc. Inc.(2) 3,330 349 Warner Chilcott plc (The) Class A(10) 3,440 218 Investment Technology Class A 8,270 186 Fomento Economico Group, Inc.(2)(10) 31,086 442 Zimmer Holdings, Mexicano S.A.B. de C.V. MFA Financial, Inc.(10) 53,010 405 Inc.(2)(10) 4,160 218 Sponsored ADR 14,590 740 MGIC Investment Corp.(2) 26,640 246 ------- Imperial Tobacco Group plc 16,740 499 Muenchener 14,108 Kao Corp. 18,500 451 Rueckversicherungs- ------- Kirin Brewery Co., Ltd. 30,000 426 Gesellschaft AG INDUSTRIALS--9.9% Koninklijke Ahold N.V. 37,590 507 Registered Shares 2,600 360 Altra Holdings, Kraft Foods, Inc. Class A 24,930 769 Piper Jaffray Cos.(2)(10) 7,700 224 Inc.(2)(10) 31,344 462 Lance, Inc. 11,070 236 PrivateBancorp, Inc. 32,560 371 Babcock & Wilcox Metro AG 12,150 791 Radian Group, Inc. 22,410 175 Co.(2)(10) 6,360 135 Molson Coors Brewing Co. TD Ameritrade Holding BAE Systems plc 90,833 488 Class B 6,190 292 Corp.(2) 29,640 479 East Japan Railway Co. 4,300 260 Wilmington Trust Corp. 16,450 148 Finmeccanica SpA 46,510 553 ------ FTI Consulting, Inc.(2) 12,420 431 8,569 Harbin Power Equipment ------ Co., Ltd. 444,000 552 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 68
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- INDUSTRIALS--CONTINUED TELECOMMUNICATION SERVICES--CONTINUED CONSUMER DISCRETIONARY--CONTINUED ICF International, Inc.(2) 15,740 $ 395 MTN Group Ltd. Sponsored NIKE, Inc. Class B (13,200)$ (1,058) IDEX Corp.(10) 7,710 274 ADR 17,140 $ 314 O'Reilly Automotive, Kennametal, Inc.(10) 26,540 821 Telefonica Moviles Inc. (13,680) (728) Koninklijke Philips S.A.(2)(6)(8) 1,400 0 Panera Bread Co. Electronics N.V. 19,490 613 VimpelCom Ltd.(2) 18,670 277 Class A (6,240) (553) Lennox International, Inc. 7,830 326 -------- Penney (J.C.) Co., Navistar International 1,356 Inc. (21,660) (589) Corp.(2) 14,440 630 -------- Polo Ralph Lauren Robert Half International, UTILITIES--1.4% Corp. (3,650) (328) Inc. 20,220 526 Cia Paranaense de Energia Ross Stores, Inc. (12,010) (656) Roper Industries, Inc. 4,710 307 ADR 16,460 366 Starwood Hotels & Schneider Electric SA 4,333 549 Portland General Electric Resorts Snap-On, Inc.(10) 5,360 249 Co.(10) 23,130 469 Worldwide, Inc. (9,710) (510) Steelcase, Inc. Class A(10) 68,530 571 Public Service Enterprise Urban Outfitters, Teledyne Technologies, Group, Inc. 14,240 471 Inc. (33,230) (1,045) Inc.(2)(10) 4,727 188 -------- Woolworths Holdings Timken Co. (The)(10) 10,860 417 1,306 Ltd. GDR (10,650) (413) TNT N.V. 17,690 475 ------------------------------------------- -------- -------- TOTAL COMMON STOCKS (16,899) 9,222 (IDENTIFIED COST $70,594) 82,533 -------- -------- ------------------------------------------- INFORMATION TECHNOLOGY--8.4% TOTAL LONG-TERM INVESTMENTS--88.8% CONSUMER STAPLES--(16.9)% Akamai Technologies, (IDENTIFIED COST $70,594) 82,533 Asahi Breweries Ltd. (25,800) (516) Inc.(2) 3,700 186 ------------------------------------------- Campbell Soup Co. (36,990) (1,322) AOL, Inc.(2)(10) 9,977 247 SHORT-TERM INVESTMENTS--5.7% Carrefour SA (14,470) (778) Apple, Inc.(2) 1,290 366 Church & Dwight Co., AU Optronics Corp. MONEY MARKET MUTUAL FUNDS--5.7% Inc. (20,880) (1,356) Sponsored ADR(2) 36,560 382 BlackRock Liquidity Constellation Brands, DealerTrack Holdings, Funds TempFund Inc. Class A (28,000) (495) Inc.(2) 16,980 290 Portfolio - Institutional Flowers Foods, Inc. (40,850) (1,015) Dolby Laboratories, Inc. Shares (seven-day General Mills, Inc. (27,810) (1,016) Class A(2) 3,850 219 effective yield Green Mountain Google, Inc. Class A(2) 890 468 0.229%) 5,275,948 5,276 Coffee, Inc. (47,670) (1,487) Harris Corp. 13,740 608 ------------------------------------------- Hain Celestial Group, Informatica Corp.(2)(10) 5,050 194 TOTAL SHORT-TERM INVESTMENTS Inc. (The) (22,330) (535) International Business (IDENTIFIED COST $5,276) 5,276 Heinz (H.J.) Co. (29,890) (1,416) Machines Corp. 1,600 215 ------------------------------------------- Kimberly-Clark de Microsemi Corp.(2) 35,310 606 TOTAL INVESTMENTS--94.5% Mexico S.A.B. de Motorola, Inc.(2)(10) 105,030 896 (IDENTIFIED COST $75,870) 87,809(1) C.V. (12,380) (396) NetApp, Inc.(2) 3,880 193 SECURITIES SOLD SHORT--(88.9)% L'Oreal SA (6,250) (703) QUALCOMM, Inc. 8,630 389 (PROCEEDS ($75,713)) (82,637) Lindt & Spruengli AG (310) (743) Quest Software, Inc.(2)(10) 32,280 794 Other assets and liabilities, Pernod-Ricard SA (7,497) (626) Rovi Corp.(2)(10) 8,590 433 net--94.4% 87,737 Reckitt Benckiser Siliconware Precision -------- Group plc (9,850) (542) Industries Co. NET ASSETS--100.0% $ 92,909 SABMiller plc (8,570) (274) Sponsored ADR 72,000 391 ======== Seven & I Holdings Synopsys, Inc.(2) 17,660 437 SECURITIES SOLD SHORT--88.9% Co., Ltd. (19,200) (450) Teradata Corp.(2)(10) 6,280 242 Shiseido Co., Ltd. (20,500) (460) VMware, Inc. Class A(2) 3,250 276 COMMON STOCKS SOLD SHORT--(88.9)% Smucker (J.M.) Co. -------- (The) (7,636) (462) 7,832 CONSUMER DISCRETIONARY--(18.2)% Tyson Foods, Inc. -------- Advance Auto Parts, Inc. (9,070) (532) Class A (24,900) (399) MATERIALS--2.6% Bed Bath & Beyond, Inc. (10,600) (460) Wal-Mart de Mexico S.A.B. Atlas Iron Ltd.(2) 134,240 301 Brunswick Corp. (25,660) (390) de C.V. Sponsored Impala Platinum Holdings Byd Co., Ltd. (78,000) (627) ADR (16,170) (408) Ltd. Sponsored ADR(10) 10,800 280 Carpetright plc (45,740) (562) Walgreen Co. (9,750) (327) Kaneka Corp. 66,000 396 Compass Group plc (35,370) (295) -------- RTI International Metals, Crew (J.) Group, Inc. (45,430) (1,527) (15,726) Inc.(2)(10) 17,700 542 Family Dollar Stores, Inc. (17,410) (769) -------- Titanium Metals Corp.(2) 28,350 566 Garmin Ltd. (9,330) (283) Tokyo Ohka Kogyo Co., Ltd. 17,090 305 Genuine Parts Co. (15,060) (671) ENERGY--(5.2)% -------- Hermes International (4,190) (957) AMEC plc (39,950) (619) 2,390 Husqvarna AB (107,260) (794) Baker Hughes, Inc. (18,170) (774) -------- Intercontinental Hotels Berry Petroleum Co. TELECOMMUNICATION Group plc (31,450) (561) Class A (20,130) (639) SERVICES--1.5% Li & Fung Ltd. (60,000) (338) Cenovus Energy, Inc. (10,980) (316) Frontier Communications LKQ Corp. (42,729) (889) Devon Energy Corp. (3,260) (211) Corp. 93,620 765 Lululemon Athletica, Inc. (23,920) (1,070) Diamond Offshore NGK Spark Plug Co., Ltd. (22,000) (294) Drilling, Inc. (11,180) (757) Goodrich Petroleum Corp. (28,120) (410) Nabors Industries Ltd. (25,960) (469) PetroChina Co., Ltd. ADR (2,820) (328) Seadrill Ltd. (11,830) (343) -------- (4,866) -------- FINANCIALS--(7.1)% CBOE Holdings, Inc. (13,320) (267) Charles Schwab Corp. (The) (29,830) (415) FirstMerit Corp. (16,300) (299) For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 69
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE SHARES VALUE ------- -------- ------- -------- ---------- -------- FINANCIALS--CONTINUED INDUSTRIALS--CONTINUED UTILITIES--(1.4)% Hannover Rueckversicherung Huaneng Power AG Registered Shares (8,480)$ (390) GATX Corp. (26,320)$ (772) International, Inc. Prosperity Bancshares, Legrand SA (15,050) (509) Sponsored ADR (4,890)$ (121) Inc. (38,200) (1,240) Rolls-Royce Group plc (84,346) (799) NextEra Energy, Inc. (8,390) (456) TCF Financial Corp. (57,860) (937) Stericycle, Inc. (2,040) (142) PG&E Corp. (10,110) (459) Trustmark Corp. (12,160) (264) UniFirst Corp. (11,340) (501) Tractebel Energia SA Valley National Bancorp (56,448) (728) Vestas Wind Systems A/S (14,025) (528) Sponsored ADR (18,960) (281) Waddell & Reed Financial, Watsco, Inc. (9,800) (546) -------- Inc. Class A (12,400) (339) -------- (1,317) Washington Federal, Inc. (32,470) (495) (8,974) --------------------------------------- Westamerica Bancorp (23,080) (1,258) -------- TOTAL COMMON STOCKS SOLD SHORT--(88.9)% ------- INFORMATION TECHNOLOGY--(11.3)% (PROCEEDS ($75,713)) (82,637) (6,632) Advanced Semiconductor --------------------------------------- ------- Engineering, Inc. ADR (116,534) (479) TOTAL SECURITIES SOLD SHORT--(88.9)% HEALTH CARE--(14.6)% Altera Corp. (46,220) (1,394) (PROCEEDS ($75,713)) (82,637)(1) AMAG Pharmaceuticals, Inc. (6,710) (115) Amdocs Ltd. (4,680) (134) --------------------------------------- AstraZeneca plc Sponsored ANSYS, Inc. (13,120) (554) ADR (20,250) (1,027) Automatic Data Processing, ABBREVIATIONS: Auxilium Pharmaceuticals, Inc. (3,270) (137) ADR American Depositary Receipt Inc. (12,690) (314) CACI International, Inc. Bard (C.R.), Inc. (5,680) (462) Class A (7,860) (356) COUNTRY WEIGHTINGS - LONG as of 9/30/10+ Becton, Dickinson & Co. (11,180) (828) Finisar Corp. (36,830) (692) ----------------------------------------- Biogen Idec, Inc. (19,040) (1,068) LG Display Co., Ltd. ADR (24,970) (435) United States (includes short-term CareFusion Corp. (11,470) (285) Marvell Technology Group investments) 75% Charles River Laboratories Ltd. (18,990) (333) United Kingdom 5 International, Inc. (4,230) (140) MasterCard, Inc. Class A (3,460) (775) France 3 Conceptus, Inc. (12,560) (173) National Semiconductor Japan 3 Covance, Inc. (13,320) (623) Corp. (14,890) (190) Netherlands 3 DaVita, Inc. (2,670) (184) Neopost SA (6,729) (501) China 1 DENTSPLY International, QLogic Corp. (38,800) (684) Germany 1 Inc. (16,080) (514) SAP AG Sponsored ADR (9,200) (454) Other 9 Eisai Co., Ltd. (17,350) (607) Skyworks Solutions, Inc. (17,650) (365) ----------------------------------------- Eli Lilly & Co. (13,660) (499) Taiwan Semiconductor Total 100% Gen-Probe, Inc. (15,140) (734) Manufacturing Co., Ltd., ----------------------------------------- Haemonetics Corp. (10,070) (589) Sponsored ADR (33,350) (338) + % of total investments as of September Health Net, Inc. (7,710) (210) Texas Instruments, Inc. (14,570) (395) 30, 2010 Healthways, Inc. (26,950) (314) Visa, Inc. Class A (9,880) (734) ----------------------------------------- Integra LifeSciences Vishay Intertechnology, Holdings Corp. (12,330) (487) Inc. (37,770) (366) COUNTRY WEIGHTINGS - SHORT as of 9/30/10+ Intuitive Surgical, Inc. (2,520) (715) Xilinx, Inc. (14,690) (391) ----------------------------------------- Invacare Corp. (19,470) (516) Yahoo!, Inc. (33,160) (470) United States 71% Johnson & Johnson (2,980) (185) Zebra Technologies Corp. United Kingdom 6 Laboratory Corp. of America Class A (10,610) (357) France 5 Holdings (2,890) (227) -------- Japan 4 Lundbeck (H) A/S (23,040) (407) (10,534) Bermuda 2 Mylan, Inc. (25,360) (477) -------- China 2 NuVasive, Inc. (3,920) (138) MATERIALS--(3.1)% Denmark 1 Owens & Minor, Inc. (6,900) (196) Anglo Platinum Ltd. ADR (3,900) (367) Other 9 Techne Corp. (10,395) (642) OJI Paper Co., Ltd. (88,980) (393) ----------------------------------------- UCB SA (7,640) (265) OZ Minerals Ltd. (267,320) (376) Total 100% Vertex Pharmaceuticals, Sensient Technologies ----------------------------------------- Inc. (18,250) (631) Corp. (35,890) (1,094) + % of total investments as of September ------- Sigma-Aldrich Corp. (2,460) (148) 30, 2010 (13,572) Toray Industries, Inc. (80,370) (448) ----------------------------------------- ------- -------- INDUSTRIALS--(9.7)% (2,826) American Superconductor -------- Corp. (9,950) (309) TELECOMMUNICATION SERVICES--(1.4)% Baldor Electric Co. (33,960) (1,372) Indosat Tbk PT ADR (10,010) (305) Bucyrus International, Mobile TeleSystems OJSC Inc. (9,440) (655) Sponsored ADR (14,690) (312) Central Japan Railway Co. (34) (250) tw telecom, inc. (36,290) (674) Cobham plc (120,640) (438) -------- Con-way, Inc. (16,800) (521) (1,291) Donaldson Co., Inc. (19,970) (941) -------- Dongfang Electric Corp., Ltd. (147,200) (691) For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 70
VIRTUS MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 3 - Total Value Level 1 - Significant at Quoted Unobservable September 30, 2010 Prices Inputs ------------------ ---------- ------------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $ 82,533 $ 82,533 $ 0(a) Short-Term Investments 5,276 5,276 -- -------- -------- --- Total Investments $ 87,809 $ 87,809 $ 0(a) ======== ======== === Liabilities: Common Stocks Sold Short $(82,637) $(82,637) $-- ======== ======== === There are no Level 2 (significant observable inputs) priced securities. (a) Level 3 Common Stock has a beginning and ending value of $0. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 71
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ---------- ------- ---------- ------- ----- ------ U.S. GOVERNMENT SECURITIES--0.7% Series FR-30, NON-AGENCY--CONTINUED U.S. Treasury Bond 10.750%, 5/15/16 3,360,000IDR $ 436 GMAC Commercial 3.875%, 8/15/40 $ 1,500 $ 1,551 Republic of Korea Mortgage - ------------------------------------------------ Series 1112, Securities, Inc. TOTAL U.S. GOVERNMENT SECURITIES 4.750%, 12/10/11 1,427,500KRW 1,278 04-C2, A3 (IDENTIFIED COST $1,562) 1,551 Republic of Lithuania 5.134%, 8/10/38 $ 450 $ 480 - ------------------------------------------------ 144A 7.375%, Greenwich Capital 2/11/20(4) $ 500 559 Commercial MUNICIPAL BONDS--0.4% Republic of Poland Funding Series 0414, Corp. 04-GG1, A7 KENTUCKY--0.2% 5.750%, 4/25/14 2,945PLZ 1,037 5.317%, 6/10/36 550 603 State of Kentucky Republic of South JPMorgan Chase General Fund Taxable Africa Commercial 3.165%, 4/1/18 505 510 Series R-201 Mortgage ------- 8.750%, 12/21/14 5,285ZAR 798 Securities Corp. Republic of Sri 05-LDP2, AM MICHIGAN--0.1% Lanka 144A 4.780%, 7/15/42 775 775 Tobacco Settlement Finance 6.250%, 10/4/20(4) 450 456 06-CB17, AM Authority Taxable Series Republic of Turkey 5.464%, 12/12/43 600 571 06-A, 7.309%, 6/1/34 165 131 0.000%, 2/2/11 1,220TRY 823 05-LDP5, AM ------- Republic of Ukraine 5.405%, 12/15/44(3) 950 965 RegS 06-LDP7, A4 VIRGINIA--0.1% 6.580%, 11/21/16(5) 360 355 6.062%, 4/15/45(3) 1,000 1,109 Tobacco Settlement Russian Federation 06-LDP9, A3 Financing Corp. RegS 5.336%, 5/15/47 700 728 Taxable Series 07-A1, 7.500%, 07-LD12, A4 6.706%, 6/1/46 345 239 3/31/30(3)(5) 134 160 5.882%, 2/15/51 750 787 - ------------------------------------------------ ------------------------------------------- Lehman Brothers TOTAL MUNICIPAL BONDS TOTAL FOREIGN GOVERNMENT SECURITIES - UBS (IDENTIFIED COST $983) 880 (IDENTIFIED COST $21,485) 24,510 Commercial - ------------------------------------------------ ------------------------------------------- Mortgage Trust FOREIGN GOVERNMENT SECURITIES--11.7% MORTGAGE-BACKED SECURITIES--13.8% 07-C2, A3 5.430%, 2/15/40 1,100 1,151 Bolivarian Republic of NON-AGENCY--13.8% 07-C2, H 144A Venezuela American Tower Trust 6.212%, 8.500%, 10/8/14 1,210 1,022 07-1A, C 2/15/40(3)(4) 850 97 RegS 5.750%, 2/26/16(5) 705 493 144A 5.615%, 05-C3, AM 4.794%, 9.250%, 9/15/27 1,035 763 4/15/37(4) 750 799 7/15/40 350 352 9.375%, 1/13/34 950 651 Bear Stearns 07-C6, A4 5.858%, Commonwealth of Australia Commercial 7/15/40 700 730 Series 123, Mortgage 07-C7, A3 5.866%, 5.750%, 4/15/12 2,525AUD 2,476 Securities, Inc. 9/15/45 600 635 Commonwealth of Canada 06-PW12, A4 Lehman Brothers 2.750%, 12/1/10 2,704CAD 2,636 5.907%, 9/11/38(3) 790 882 Commercial 2.000%, 9/1/12 505CAD 497 06-PW12, AM Conduit Mortgage Commonwealth of New 5.946%, 9/11/38(3) 650 648 Trust Zealand Series 1111, 06-PW14, A4 07-C3, A4 6.152%, 6.000%, 11/15/11 2,170NZD 1,636 5.201%, 12/11/38 350 370 7/15/44(3) 500 526 Federative Republic of 05-PW10, A4 Merrill Lynch Brazil 5.405%, 12/11/40 950 1,032 Mortgage 12.500%, 1/5/22 1,125BRL 820 07-T28, A4 Trust 10.250%, 1/10/28 2,130BRL 1,412 5.742%, 9/11/42 800 888 06-C1, AM 5.838%, Kingdom of Norway 05-T20, A4A 5/12/39(3) 715 716 Series 469, 5.296%, 10/12/42(3) 600 663 Merrill Lynch- 6.000%, 5/16/11 2,760NOK 479 07-PW18, A4 Countrywide Kingdom of Sweden 5.700%, 6/13/50 750 807 Commercial Mortgage Series 1045, 07-PW18, AM Trust 5.250%, 3/15/11 3,250SEK 491 6.084%, 6/13/50 725 662 06-4, A3 5.172%, Republic of Argentina PIK Citigroup/Deutsche 12/12/49 650 673 Interest Capitalization Bank Morgan Stanley 8.280%, 12/31/33 2,692 2,252 Commercial Mortgage Capital I Series GDP 3.169%, Trust 05-HQ5, A3 5.007%, 12/15/35(3) 3,200 398 05-CD1, AM 1/14/42 197 203 Republic of Colombia 5.396%, 7/15/44(3) 610 620 06-IQ12, A4 12.000%, 10/22/15 925,000COP 676 07-CD4, A4 5.332%, 12/15/43 1,300 1,416 6.125%, 1/18/41 1,000 1,150 5.322%, 12/11/49 475 492 07-IQ14, A4 Republic of Indonesia Credit Suisse First 5.692%, 4/15/49 820 851 Series FR-23, 11.000%, Boston Residential Accredit 12/15/12 6,200,000IDR 756 Mortgage Securities Loans, Inc. Corp. 02-QS12, B1 04-C5, A3 6.250%, 9/25/32 321 65 4.499%, 11/15/37 825 842 Salomon Brothers Credit Suisse Mortgage Mortgage Capital Securities VII, Certificates Inc. 06-C1, A3 01-C1, D 5.711%, 2/15/39 (3) 650 696 6.831%, 12/18/35 650 660 GE Capital Commercial Timberstar Trust Mortgage Corp. 06-1A, 03-C1, C C 144A 4.975%, 1/10/38 595 625 5.884%, 10/15/36(4) 1,000 1,048 Wachovia Bank Commercial Mortgage Trust 04-C12, A4 5.484%, 7/15/41(3) 450 490 07-C30, A5 5.342%, 12/15/43 410 402 06-C29, A4 5.308%, 11/15/48 1,000 1,077 07-C33, A4 6.102%, 2/15/51(3) 550 574 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 72
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ---------- ------- ------- ------- ----- ----- NON-AGENCY--CONTINUED CONSUMER DISCRETIONARY--CONTINUED CONSUMER STAPLES--1.4% Washington Mutual Mortgage Harrah's Operating Co., BFF International Pass-Through Inc. Ltd. 144A Certificates 11.250%, 6/1/17 $ 425 $ 467 7.250%, 1/28/20(4) $ 150 $ 162 05-AR10, 1A2 144A 12.750%, 4/15/18(4) 90 84 Bunge Ltd. Finance Corp. 2.771%, 9/25/35 (3) $ 670 $ 604 Hyatt Hotels Corp. 144A 8.500%, 6/15/19 250 302 Wells Fargo Mortgage- 5.750%, 8/15/15(4) 100 108 Constellation Brands, Inc. Backed International Game 8.375%, 12/15/14 165 183 Securities Trust Technology Diversey, Inc. 07-16, 1A7 7.500%, 6/15/19 580 689 8.250%, 11/15/19 50 54 6.000%, 12/28/37 690 602 Landry's Holdings, Inc. Michael Foods, Inc. 144A - ------------------------------------------------ 144A 9.750%, 7/15/18(4) 275 296 TOTAL MORTGAGE-BACKED SECURITIES 11.500%, 6/1/14(4) 275 257 Reynolds American, Inc. (IDENTIFIED COST $25,862) 28,916 Landry's Restaurants, Inc. 7.625%, 6/1/16 375 440 - ------------------------------------------------ 11.625%, 12/1/15 200 212 Rite Aid Corp. 144A 144A 11.625%, 12/1/15(4) 45 48 8.000%, 8/15/20(4) 120 122 ASSET-BACKED SECURITIES--2.2% Libbey Glass, Inc. 144A Tyson Foods, Inc. Bombardier Capital 10.000%, 2/15/15(4) 50 54 7.350%, 4/1/16 650 722 Mortgage McJunkin Red Man Corp. Yankee Acquisition Corp. Securitization Corp. 144A 9.500%, 12/15/16(4) 360 319 Series B, 9.750%, 2/15/17 535 559 99-A, A3 Mediacom LLC/Mediacom ------ 5.980%, 1/15/18 711 647 Capital Corp. 2,840 Carmax Auto Owner 9.125%, 8/15/19 750 780 ------ Trust 07-2, MGM Resorts International, ENERGY--6.9% B 5.370%, 3/15/13 350 358 Inc. Anadarko Petroleum Corp. Conseco Finance 7.625%, 1/15/17 400 339 6.375%, 9/15/17 560 617 Securitizations 11.125%, 11/15/17 225 257 Antero Resources Finance Corp. 01-3, A4 Mobile Mini, Inc. Corp. 6.910%, 5/1/33 662 697 6.875%, 5/1/15 350 345 9.375%, 12/1/17 250 267 Dunkin Securitization/DB NCLCorp., Ltd. Coffeyville Resources LLC/ Master Finance LLC 11.750%, 11/15/16 500 562 Coffeyville Finance, 06-1, M1 Nebraska Book Co., Inc. Inc. 144A 8.285%, 6/20/31(4) 690 680 10.000%, 12/1/11 500 509 144A 10.875%, 4/1/17(4) 675 715 FMAC Loan Receivables Pinnacle Entertainment, Denbury Resources, Inc. Trust Inc. 7.500%, 12/15/15 510 532 98-CA, A2 8.750%, 5/15/20 200 198 Energy Transfer Equity LP 144A 6.660%, 9/15/20(4) 1 1 Pokagon Gaming Authority 7.500%, 10/15/20 75 79 Harley-Davidson Motorcycle 144A 10.375%, 6/15/14(4) 117 123 Expro Finance Luxembourg Trust 07-2, C QVC, Inc. 144A SCA 144A 8.500%, 5.410%, 8/15/15 565 588 7.500%, 10/1/19(4) 820 861 12/15/16(4) 750 718 IHOP Franchising LLC 07-3A River Rock Entertainment Gazprom International SA 144A 7.059%, 12/20/37(4) 800 798 Authority (The) 144A 7.201%, 2/1/20(4) 580 628 IndyMac Manufactured 9.750%, 11/1/11 250 227 Gazprom OAO (Gaz Housing Contract Royal Caribbean Cruises Capital SA) 98-1, A3 Ltd. 144A 6.212%, 11/22/16(4) 935 993 6.370%, 9/25/28 508 430 6.875%, 12/1/13 1,250 1,322 144A 8.146%, 4/11/18(4) 100 117 Popular ABS Mortgage Scientific Games 144A 6.510%, 3/7/22(4) 315 335 Pass-Through Trust International, Helix Energy Solutions 05-5, AF3 Inc. 9.250%, 6/15/19 170 181 Group, Inc. 5.086%, 11/25/35(3) 447 443 Seminole Hard Rock 144A 9.500%, 1/15/16(4) 200 204 - ------------------------------------------------ Entertainment, Inc. Hercules Offshore, TOTAL ASSET-BACKED SECURITIES /Seminole Inc. 144A (IDENTIFIED COST $4,555) 4,642 Hard Rock International 10.500%, 10/15/17(4) 225 188 - ------------------------------------------------ LLC Holly Corp. 9.875%, 6/15/17 88 94 144A 2.792%, 3/15/14 OPTI Canada, Inc. CORPORATE BONDS--54.5% (3)(4) 75 66 7.875%, 12/15/14 600 455 Seneca Gaming Corp. Petrohawk Energy Corp. CONSUMER DISCRETIONARY--5.6% Series B 10.500%, 8/1/14 475 540 Advance Auto Parts, Inc. 7.250%, 5/1/12 19 19 Petroleos de Venezuela SA 5.750%, 5/1/20 265 286 Toys R Us Property Co., 5.250%, 4/12/17 950 553 American Axle & LLC Petroleos Mexicanos 144A Manufacturing 144A 8.500%, 12/1/17(4) 600 637 6.000%, 3/5/20(4) 270 298 Holdings, Inc. 144A TRW Automotive, Inc. 144A Petropower I Funding Trust 9.250%, 1/15/17(4) 350 385 8.875%, 12/1/17(4) 140 154 144A 7.360%, 2/15/14(4) 406 412 Arcos Dorados B.V. 144A Universal City Development Pioneer Drilling Co. 144A 7.500%, 10/1/19(4) 375 408 Partners Ltd./Universal 9.875%, 3/15/18 (4) 110 113 Cengage Learning City Pride International, Inc. Acquisitions, Inc. 144A Development Partners 8.500%, 6/15/19 330 383 10.500%, 1/15/15(4) 400 400 Finance, Inc. QEP Resources, Inc. Cequel Communications 8.875%, 11/15/15 60 62 6.875%, 3/1/21 480 522 Holdings I LLC/Cequel 10.875%, 11/15/16 200 218 Rowan Cos., Inc. Capital Corp. 144A Videotron Ltee 5.000%, 9/1/17 485 501 8.625%, 11/15/17(4) 170 180 6.375%, 12/15/15 180 185 DigitalGlobe, Inc. 9.125%, 4/15/18 82 93 10.500%, 5/1/14 65 73 Wyndham Worldwide Corp. Eastman Kodak Co. 7.375%, 3/1/20 590 632 7.250%, 11/15/13 72 69 ------- 11,809 ------- For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 73
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- ------- ------- ------- ------ ------ ENERGY--CONTINUED FINANCIALS--CONTINUED INANCIALS--CONTINUED SEACOR Holdings, Inc. Blackstone Holdings Hertz Corp. (The) 7.375%, 10/1/19 $ 600 $ 654 Finance 10.500%, 1/1/16 $ 100 $ 107 Swift Energy Co. Co., LLC 144A Host Hotels & Resorts LP 8.875%, 1/15/20 500 523 6.625%, 8/15/19(4) $ 385 $ 409 9.000%, 5/15/17 125 140 TengizChevroil Finance Co. Brandywine Operating ICICI Bank Ltd. 144A S.A.R.L. 144A Partnership LP 6.375%, 4/30/22(3)(4) 375 377 6.124%, 11/15/14(4) 643 680 7.500%, 5/15/15 500 560 International Lease Tesoro Corp. 6.500%, Capital One Capital VI Finance Corp. 6/1/17 480 475 8.875%, 5/15/40 1,000 1,050 4.750%, 1/13/12 600 603 Transocean, Inc. Cemex Finance LLC 144A 5.300%, 5/1/12 625 630 6.500%, 11/15/20 725 790 9.500%, 12/14/16(4) 245 248 Jefferies Group, Inc. Series C Chubb Corp. 8.500%, 7/15/19 500 581 1.500%, 12/15/37 500 478 6.375%, 3/29/67(3) 680 670 JPMorgan Chase & Co. Venoco, Inc. CIT Group, Inc. Series 1, 11.500%, 10/1/17 600 638 7.000%, 5/1/13 600 606 7.900%, 12/31/49(3) 247 265 Weatherford International Citigroup, Inc. JPMorgan Chase Capital Ltd. 5.000%, 9/15/14 365 379 XXVII 9.625%, 3/1/19 318 415 4.875%, 5/7/15 845 877 Series AA 7.000%, Western Refining, Inc. 5.500%, 2/15/17 255 263 11/1/39 500 513 144A City National Corp. Kazkommerts Bank 11.250%, 6/15/17(4) 600 567 5.250%, 9/15/20 475 484 International BV ------- Comerica Capital Trust II RegS 8.500%, 4/16/13(5) 500 496 14,484 6.576%, 2/20/37(3) 750 750 RegS 8.000%, 11/3/15(5) 250 236 ------- Discover Bank Kimco Realty Corp. FINANCIALS--26.3% 8.700%, 11/18/19 250 295 6.875%, 10/1/19 550 640 ABH Financial Ltd. 7.000%, 4/15/20 700 762 Lincoln National Corp. (Alfa Markets Ltd.) 144A DuPont Fabros Technology 8.750%, 7/1/19 300 386 8.200%, 6/25/12(4) 150 159 LP 6.050%, 4/20/67(3) 300 265 ADCB Finance Cayman Ltd. 8.500%, 12/15/17 700 754 Lloyds Banking Group 144A 4.750%, 10/8/14(4) 560 570 Equity One, Inc. Capital AFLAC, Inc. 8.500%, 6.250%, 12/15/14 375 406 No.1 plc 144A 5/15/19 300 382 Fidelity National 7.875%, 11/1/20(4) 600 591 Agile Property Holdings Financial Lloyds TSB Bank plc 144A Ltd. Services, Inc. 6.500%, 9/14/20(4) 750 757 144A 10.000%, 6.600%, 5/15/17 750 774 Lukoil International 11/14/16(4) 240 263 Fifth Third Capital Finance Alfa Invest Ltd. 144A Trust IV BV 144A 7.250%, 9.250%, 6/24/13(4) 350 377 6.500%, 4/15/37(3) 800 763 11/5/19(4) 525 572 Allstate Corp. First Niagara Financial Macquarie Group Ltd. 144A 6.125%, 5/15/37(3) 680 632 Group, Inc. 7.625%, 8/13/19(4) 500 582 Ally Financial, Inc. 6.750%, 3/19/20 500 552 Morgan Stanley 6.875%, 9/15/11 253 262 First Tennessee Bank N.A. 6.000%, 5/13/14 165 181 American General Finance 5.050%, 1/15/15 725 719 5.750%, 10/18/16 280 303 Corp. First Tennessee Capital I 144A 10.090%, 5/3/17(4) 1,000BRL 565 5.400%, 12/1/15 750 608 Series A, 8.070%, 1/6/27 475 456 Petroplus Finance Ltd. AmSouth Bank N.A. Ford Motor Credit Co., LLC 144A Series AI 8.000%, 6/1/14 400 438 6.750%, 5/1/14(4) 375 345 4.850%, 4/1/13 825 831 8.700%, 10/1/14 125 140 Pinnacle Foods Finance AON Corp 5.000%, 9/30/20 430 439 6.625%, 8/15/17 255 272 LLC/ Atlantic Finance Ltd. 144A 8.125%, 1/15/20 650 748 Pinnacle Foods Finance 9.750%, 5/27/14(4) 450 491 Genworth Financial, Inc. Corp. Banco Bilbao Vizcaya 5.750%, 6/15/14 500 518 144A 9.250%, 4/1/15(4) 175 183 Argentaria S.A. 6.515%, 5/22/18 700 714 PNC Financial Services International Glen Meadow Pass-Through Group, Inc. Preferred S.A. Trust 144A 8.250%, 5/29/49(3) 350 372 Unipersonal 6.505%, 2/12/67(3)(4) 770 616 Principal Financial 5.919%, 12/31/49(3) 675 584 Glencore Funding LLC 144A Group, Inc. Banco Bradesco SA 144A 6.000%, 4/15/14(4) 1,000 1,037 8.875%, 5/15/19 850 1,119 5.900%, 1/16/21 (4) 750 761 GMAC LLC ProLogis Banco do Brasil SA 7.250%, 3/2/11 633 647 7.625%, 8/15/14 500 540 144A 5.375%, 1/15/21(4) 600 596 6.000%, 12/15/11 633 653 6.625%, 5/15/18 185 182 144A 8.500%, 10/29/49(4) 600 705 Goldman Sachs Group, Inc. 6.875%, 3/15/20 400 393 Banco Votorantim SA 144A (The) Prudential Financial, Inc. 7.375%, 1/21/20(4) 550 586 5.950%, 1/18/18 300 329 8.875%, 6/15/38(3) 450 502 Bank of America Corp. 7.500%, 2/15/19 365 434 Regions Financial Corp. 5.420%, 3/15/17 700 717 HBOs plc 144A 7.750%, 11/10/14 200 217 8.000%, 12/29/49(3) 375 387 6.750%, 5/21/18(4) 115 116 5.750%, 6/15/15 210 214 Bank of America Corp. Health Care REIT, Inc. Resona Bank Ltd. 144A Capital 4.700%, 9/15/17 700 707 5.850%, 9/29/49(3)(4) 750 748 Trust XI 6.625%, 5/23/36 525 549 Royal Bank of Scotland Barclays Bank plc Group plc (The) 144A 6.050%, 12/4/17(4) 435 472 6.400%, 10/21/19 370 403 144A 5.926%, 7.648%, 8/29/49(3) 550 529 9/29/49(3)(4) 600 561 Bear Stearns Cos., Inc. LLC (The) 7.250%, 2/1/18 700 853 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 74
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- FINANCIALS--CONTINUED HEALTH CARE--CONTINUED MATERIALS--5.0% Royal Bank of Scotland plc UHS Escrow Corp. 144A ABI Escrow Corp. (The) 7.000%, 10/1/18 (4) $ 140 $ 145 144A 4.875%, 3/16/15 $ 285 $ 300 Valeant Pharmaceuticals 10.250%, 10/15/18 3.950%, 9/21/15 205 207 International (4) $ 550 $ 562 5.625%, 8/24/20 750 786 8.375%, 6/15/16 35 41 Allegheny Russian Agricultural Bank -------- Technologies, OJSC (RSHB Capital SA) 2,688 Inc. 144A 9.000%, 6/11/14(4) 100 115 -------- 9.375%, 6/1/19 590 713 144A 6.299%, 5/15/17(4) 380 396 Catalyst Paper Santander US Debt S.A. INDUSTRIALS--3.7% Corp. Unipersonal (Banco America West Airlines 7.375%, 3/1/14 750 313 Santander S.A.) 144A 00-1G Celanese U.S. 3.781%, 10/7/15 (4) 800 794 8.057%, 7/2/20 523 547 Holdings LLC SLM Corp. American Airlines, Inc. 144A 6.625%, 5.450%, 4/25/11 300 303 01-1, 10/15/18 (4) 45 46 5.375%, 5/15/14 200 195 6.977%, 5/23/21 297 253 Commercial Metals 8.450%, 6/15/18 1,050 1,061 CHC Helicopter SA 144A Co. Societe Generale 144A 9.250%, 10/15/20 (4) 325 330 7.350%, 8/15/18 730 791 5.922%, 4/29/49 (3)(4) 650 616 Continental Airlines, Inc. Edgen Murray Corp Sovereign Bank 98-1A, 12.250%, 1/15/15 650 473 8.750%, 5/30/18 400 462 6.648%, 9/15/17 354 362 Georgia-Pacific LLC SunTrust Bank DRS Technologies, Inc. 144A 5.400%, 4/1/20 500 518 6.625%, 2/1/16 500 513 7.125%, 1/15/17 TNK-BP Finance S.A. 144A Esco Corp. 144A (4) 475 505 7.500%, 3/13/13 (4) 325 354 8.625%, 12/15/13 (4) 600 618 Gerdau Holdings, TNK-BP Finance SA 144A General Cable Corp. Inc. 144A 7.250%, 2/2/20 (4) 100 109 7.125%, 4/1/17 500 510 7.000%, 1/20/20 Unum Group 7.125%, 9/30/16 450 519 Global Aviation Holdings (4) 250 279 UOB Cayman Ltd. 144A Ltd. Graham Packaging Co 5.796%, 12/29/49 (3)(4) 500 514 144A 14.000%, 8/15/13 LP/GPC Capital Wachovia Bank NA (4) 800 860 Corp I 144A 5.000%, 8/15/15 250 276 Liberty Tire Recycling 8.250%, 10/1/18 Webster Financial Corp. 144A (4) 140 143 5.125%, 4/15/14 205 201 11.000%, 10/1/16 (4) 170 173 Huntsman Willis North America, Inc. Marquette Transportation International LLC 7.000%, 9/29/19 500 550 Co./ 144A 8.625%, Woori Bank 144A Marquette Transportation 3/15/21 (4) 125 130 6.125%, 5/3/16 (3)(4) 1,000 1,013 Finance Corp. 144A Ineos Group Zions Bancorp 10.875%, 1/15/17 (4) 125 128 Holdings plc 7.750%, 9/23/14 225 238 Moog, Inc. 7.250%, 6/15/18 100 102 144A 8.500%, -------- Noble Group Ltd. 144A 2/15/16 (4) 1,550 1,319 54,995 6.750%, 1/29/20 (4) 880 948 International -------- Owens Corning, Inc. Paper Co. 6.500%, 12/1/16 595 644 9.375%, 5/15/19 508 659 HEALTH CARE--1.3% PharmaNet Development Lyondell Chemical Healthsouth Corp. Group, Inc. 144A Co. 7.250%, 10/1/18 410 419 10.875%, 4/15/17 (4) 305 316 11.000%, 5/1/18 250 278 Inventiv Health, Inc. 144A Teekay Corp. 8.500%, Nova Chemicals 10.000%, 8/15/18 (4) 400 398 1/15/20 300 328 Corp. Mylan, Inc. 144A United Rentals North 3.748%, 7.625%, 7/15/17 (4) 113 121 America, Inc. 11/15/13(3) 1,000 961 Omnicare, Inc. 10.875%, 6/15/16 198 224 Owens-Brockway 7.750%, 6/1/20 240 247 USG Corp. 144A Glass Container, Patheon, Inc. 144A 9.750%, 8/1/14 (4) 100 105 Inc. 8.625%, 4/15/17 (4) 110 113 Voto-Votorantim Ltd. 144A 7.375%, 5/15/16 475 514 Psychiatric Solutions, 6.750%, 4/5/21 (4) 750 795 Plastipak Holdings, Inc. -------- Inc. Series 1, 7.750%, 7,756 144A 8.500%, 7/15/15 375 392 -------- 12/15/15 (4) 500 520 Rotech Healthcare, Inc. Ryerson, Inc. 144A INFORMATION TECHNOLOGY--1.2% 12.000%, 11/1/15 600 621 10.750%, 10/15/15 (4) 75 75 Broadridge Financial Steel Dynamics, Inc. Select Medical Corp. Solutions, Inc. 7.375%, 11/1/12 225 242 7.625%, 2/1/15 425 417 6.125%, 6/1/17 525 564 Vedanta Resources U.S. Oncology, Inc. Crown Castle Holdings GS V plc 144A 9.125%, 8/15/17 300 320 LLC/Crown Castle GS III 9.500%, 7/18/18 Corp. (4) 375 407 144A 7.750%, 5/1/17 (4) 400 442 Verso Paper Freescale Semiconductor, Holdings LLC/ Inc. Verso Paper, Inc. 10.125%, 12/15/16 350 320 11.500%, 7/1/14 300 330 Jabil Circuit, Inc. Series B, 8.250%, 3/15/18 600 674 11.375%, 8/1/16 750 678 Sorenson Communications, -------- Inc. 10,484 144A 10.500%, 2/1/15 (4) 500 295 -------- SunGard Data Systems, Inc. 9.125%, 8/15/13 225 231 TELECOMMUNICATION SERVICES--2.7% -------- Axtel SAB de C.V. 2,526 144A -------- 9.000%, 9/22/19 (4) 200 186 Cincinnati Bell, Inc. 8.250%, 10/15/17 180 183 Clearwire Communications LLC/Clearwire Finance, Inc. 144A 12.000%, 12/1/15(4) 200 217 144A 12.000%, 12/1/15(4) 200 217 Frontier Communications Corp. 7.875%, 4/15/15 325 353 8.125%, 10/1/18 275 302 ITC DeltaCom, Inc. 10.500%, 4/1/16 400 408 Nextel Communications, Inc. Series E 6.875%, 10/31/13 175 177 Series D 7.375%, 8/1/15 650 656 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 75
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- TELECOMMUNICATION SERVICES--CONTINUED CONSUMER DISCRETIONARY--CONTINUED FINANCIALS--0.6% Qwest Corp. Getty Images, Inc. Tranche AGFS Funding Co. 8.375%, 5/1/16 $ 200 $ 236 B, Tranche, 6.500%, 6/1/17 215 235 6.250%, 7/2/15 $ 393 $ 396 7.250%, 4/21/15 $ 420 $ 423 Telecom Italia Capital SA Harrah's Operating Co., Agile Property 6.999%, 6/4/18 350 402 Inc. Holdings Ltd. 7.175%, 6/18/19 500 587 Tranche B-2, Tranche, 3.000%, Telemar Norte Leste SA 3.498%, 1/28/15 346 299 1/25/13 315 290 144A Tranche B-4, Synatech Holdings, 5.500%, 10/23/20 (4) 305 309 9.500%, 10/31/16 213 219 Inc. Virgin Media Finance plc HHI Group Holdings LLC Tranche, 2.290%, Series 1, 9.500%, Tranche, 10.500%, 4/2/14 449 384 8/15/16 410 465 3/30/15 195 198 Universal City West Corp. 144A Intelsat Jackson Holding Development 8.625%, 10/1/18 (4) 150 153 Ltd. Tranche, Partners, Ltd. Wind Acquisition Finance 3.533%, 2/1/14 575 541 Tranche B, SA Landry's Restaurant, 5.500%, 11/6/14 74 75 144A 11.750%, 7/15/17 Inc. -------- (4) 350 394 Tranche, 8.000%, 1,172 Windstream Corp. 11/30/13 175 176 -------- 7.000%, 3/15/19 250 246 Las Vegas Sands LLC -------- Tranche B, HEALTH CARE--1.0% 5,726 3.030%, 11/23/16 298 271 Ardent Health -------- Tranche DD-I, Services, Inc. 3.030%, 11/23/16 60 55 Tranche, 6.500%, UTILITIES--0.4% Michaels Stores, Inc. 9/15/15 498 490 Centrais Eletricas Tranche B-2, Inventiv Health, Brasileiras SA 4.906%, 7/31/16 550 540 Inc. Tranche, 144A 6.875%, 7/30/19 (4) 100 118 Nielsen Finance LLC 6.500%, 8/4/16 299 300 Israel Electric Corp., Tranche A, 2.257%, Medical Card Ltd. 144A 8/9/13 352 338 Systems, Inc. 7.250%, 1/15/19 (4) 200 226 Tranche B, 4.008%, Tranche, 12.000%, Midwest Generation LLC 5/1/16 205 199 9/17/15 370 363 Series B 8.560%, 1/2/16 101 100 RCN Corp. Tranche, Psychiatric Suburban Propane Partners 6.500%, 8/26/16 475 474 Solutions, Inc. LP/Suburban Energy Sinclair Television Group, Tranche B, Finance Inc. 2.167%, 7/1/12 140 139 Corp. 7.375%, 3/15/20 180 192 Tranche B, RehabCare Group, Texas Competitive Electric 5.500%, 10/29/15 164 165 Inc. Holdings Co. LLC Series United Components, Inc. Tranche B, A Tranche, 6.250%, 3/23/17 225 227 6.000%, 11/24/15 194 194 10.250%, 11/1/15 200 132 Univision Communications, Rotech Healthcare, -------- Inc. Tranche B, Inc. PIK 768 2.506%, 9/29/14 1,071 944 Interest - ------------------------------------------- Visant Corp. Tranche B, Capitalization, TOTAL CORPORATE BONDS 7.000%, 12/22/16 110 111 6.475%, 9/26/11 300 297 (IDENTIFIED COST $106,938) 114,076 Vision Solutions, Inc. Select Medical - ------------------------------------------- Tranche, Corp. 7.750%, 7/23/16 500 492 Tranche B-1, LOAN AGREEMENTS(3)--15.0% -------- 4.089%, 8/22/14 208 206 10,743 Warner Chilcott Co. CONSUMER DISCRETIONARY--5.1% -------- LLC Advantage Sales & Tranche B-4, Marketing, CONSUMER STAPLES--0.7% 6.500%, 2/22/16 15 15 Inc. Tranche, 8.500%, Revlon Consumer Products Tranche B-3, 5/5/17 385 385 Corp. Tranche, 6.500%, 2/22/16 48 48 Alliance Laundry Holdings, 6.167%, 3/11/15 701 700 -------- Inc. Reynolds Group Holdings 2,052 Tranche B, 0.000%, Ltd. -------- 9/30/16 650 655 Tranche, 5.750%, 5/5/16 199 200 AMF Bowling Worldwide, Tranche, 6.250%, 5/5/16 198 199 INDUSTRIALS--1.6% Inc. Spectrum Brands, Inc. Harland Clarke Tranche B, 2.761%, Tranche, 8.188%, 6/16/16 333 339 Holdings Corp. 6/7/13 483 423 -------- Tranche B, Atrium Cos., Inc. Tranche, 1,438 2.777%, 6/30/14 986 867 7.000%, 4/30/16 500 484 -------- Hawker Beechcraft Bourland & Leverich Supply Acquisition Co. ENERGY--0.4% Co. LLC Letter of Tranche, 11.000%, Big West Oil LLC Tranche, Credit, 8/19/15 370 363 12.000%, 7/23/15 226 230 2.100%, 3/26/14 34 27 Cengage Learning Hercules Offshore LLC Tranche, 2.256%, Acquisitions, Tranche B, 6.000%, 3/26/14 561 455 Inc. Tranche, 2.540%, 7/11/13 495 427 Holdings Gaming 7/3/14 788 709 Venoco, Inc. Tranche C, Borrower Ceridian Corp. Tranche, 4.313%, 5/7/14 210 198 LP Tranche B-1, 3.256%, 11/9/14 937 844 -------- 12.000%, 6/30/15 159 160 Charter Communications 855 Interactive Data Operating LLC Tranche -------- Corp. B-1, Tranche B, 2.260%, 3/6/14 79 78 6.750%, 1/29/17 200 202 Tranche C, 3.540%, Ozburn-Hessey 9/6/16 645 630 Holding Co. Clear Channel LLC Tranche B, Communications, Inc. 7.500%, 4/8/16 398 403 Tranche B, Protection One, 3.906%, 1/29/16 250 197 Inc. Ford Motor Co. Tranche Tranche B, B-1, 6.000%, 6/4/16 229 230 3.023%, 12/15/13 337 330 Trans Union LLC Tranche B, 6.750%, 6/15/17 329 334 Transaction Network Services, Inc. Tranche, 6.000%, 11/18/15 223 224 Vertrue, Inc. Tranche, 3.290%, 8/16/14 196 170 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 76
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR SHARES VALUE VALUE VALUE VALUE VALUE ---------- -------- ------- -------- ------- -------- SHORT-TERM INVESTMENTS--1.9% INDUSTRIALS--CONTINUED TELECOMMUNICATION SERVICES--CONTINUED Zuffa LLC Tranche B, Level 3 Communications, MONEY MARKET MUTUAL 7.500%, 6/19/15 $ 210 $ 213 Inc. FUNDS--1.9% -------- Tranche A, BlackRock 3,285 2.643%, 3/13/14 $ 525 $ 480 Liquidity Funds -------- Tranche B, TempFund 11.500%, 3/13/14 130 140 Portfolio - INFORMATION TECHNOLOGY--3.0% Securus Technologies, Inc. Institutional Airvana Network Solutions, Tranche, 8.000%, Shares Inc. 10/31/14 488 490 (seven-day Tranche, 11.000%, U.S. TelePacific Corp. effective 8/27/14 453 449 Tranche B, 9.250%, yield 0.229%) 4,001,772 $ 4,002 Allen Systems Group, Inc. 8/17/15 597 600 --------------------------------------- Tranche, 8.500%, -------- TOTAL SHORT-TERM INVESTMENTS 10/18/13 520 523 2,212 (IDENTIFIED COST $4,002) 4,002 Tranche, 6.500%, 4/18/14 255 254 -------- --------------------------------------- Avaya, Inc. Tranche B-1, 3.058%, 10/24/14 740 658 UTILITIES--0.6% TOTAL INVESTMENTS--100.7% Dresser, Inc. Tranche B, New Development Holdings (IDENTIFIED COST $197,695) 210,957(1) 6.112%, 5/4/15 834 809 LLC Tranche, DynCorp International LLC 7.000%, 7/3/17 459 467 Other Assets and Tranche B, 6.250%, NRG Energy, Inc. Liabilities--(0.7)% (1,558) 7/7/16 390 392 Tranche B, 1.767%, -------- First Data Corp. 2/1/13 33 32 NET ASSETS--100.0% $209,399 Tranche B-3, Letter of Credit ======== 3.006%, 9/24/14 598 527 1.789%, 2/1/13 437 426 Tranche B-1, Texas Competitive Electric ABBREVIATIONS: 3.006%, 9/24/14 375 331 Holdings Co. LLC FNMA Federal National Mortgage Freescale Semiconductor, Tranche B-3, Association Inc. 3.774%, 10/10/14 136 106 ("Fannie Mae") Tranche, 4.509%, 12/1/16 394 361 Tranche B-2, PIK Payment-in-Kind Security Infor Enterprise Solutions 3.843%, 10/10/14 257 200 REIT Real Estate Investment Trust Holdings, Inc. -------- Tranche DD, 6.506%, 1,231 FOREIGN CURRENCIES: 3/2/14 174 116 ------------------------------------------- AUD Australian Dollar Tranche, 6.506%, 3/2/14 301 199 TOTAL LOAN AGREEMENTS BRL Brazilian Real Knology, Inc. Tranche B, (IDENTIFIED COST $30,780) 31,313 CAD Canadian Dollar 0.000%, 9/30/16 325 322 ------------------------------------------- COP Colombian Peso Reynolds & Reynolds Co. IDR Indonesian Rupiah (The) SHARES KRW Korean Won Tranche B, 5.250%, ------- NOK Norwegian Krone 4/21/17 133 134 PREFERRED STOCK--0.3% NZD New Zealand Dollar SonicWALL, Inc. Tranche, PLZ Polish Zloty 8.250%, 1/23/16 500 501 FINANCIALS--0.3% SEK Swedish Krona Spansion LLC Tranche B, Citigroup Capital XII TRY New Turkish Lira 7.500%, 2/9/15 537 542 7.875% 10,650 266 ZAR South African Rand Springboard Finance LLC FNMA 8.250% 38,000 16 Tranche, 7.000%, 2/23/15 210 211 GMAC, Inc. (Ally) COUNTRY WEIGHTINGS as of 9/30/10+ -------- 7.00% 144A(4) 321 289 ---------------------------------------- 6,329 ------------------------------------------- United States (includes short-term -------- TOTAL PREFERRED STOCK investments) 72% (IDENTIFIED COST $1,023) 571 United Kingdom 4 MATERIALS--0.9% ------------------------------------------- Brazil 3 Anchor Glass Container Canada 2 Corp. COMMON STOCKS--0.0% Russia 2 Tranche, 10.000%, 9/2/16 760 752 Venezuela 2 Gentek Holding LLC CONSUMER DISCRETIONARY--0.0% Argentina 1 Tranche, Mark IV Industries 117 4 Other 14 7.000%, 10/29/14 136 136 ------------------------------------------- ---------------------------------------- Hoffmaster Group, Inc. TOTAL COMMON STOCKS Total 100% Tranche, (IDENTIFIED COST $1) 4 ---------------------------------------- 7.063%, 5/12/16 395 385 ------------------------------------------- + % of total investments as of Nalco Co. September 30, 2010 Tranche B, 6.500%, EXCHANGE-TRADED ---------------------------------------- 5/13/16 119 119 FUNDS--0.2% Tranche B-1, iShares FTSE/Xinhua 0.000%, 10/5/17 90 90 China 25 Index Fund 11,500 492 New Sunward Holding BV ------------------------------------------- Tranche B, TOTAL EXCHANGE-TRADED FUNDS 3.195%, 2/14/14 335 298 (IDENTIFIED COST $504) 492 Smurfit-Stone Container ------------------------------------------- Enterprise Tranche B, TOTAL LONG-TERM INVESTMENTS--98.8% 6.750%, 2/22/16 214 216 (IDENTIFIED COST $193,693) 206,955 -------- ------------------------------------------- 1,996 -------- TELECOMMUNICATION SERVICES--1.1% Cincinnati Bell, Inc. Tranche B, 6.625%, 6/11/17 498 502 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 77
VIRTUS MULTI-SECTOR FIXED INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements). Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2010 Prices Inputs Inputs ------------------ --------- ----------- ------------ INVESTMENTS IN SECURITIES: Debt Securities: Asset-Backed Securities $ 4,642 $ -- $ 4,642 $ -- Corporate Bonds 114,076 -- 114,076 -- Foreign Government Securities 24,510 -- 24,510 -- Loan Agreements 31,313 -- 31,023 290 Mortgage-Backed Securities 28,916 -- 28,916 -- Municipal Bonds 880 -- 880 -- U.S. Government Securities 1,551 -- 1,551 -- Equity Securities: Common Stocks 4 -- -- 4 Exchange-Traded Funds 492 492 -- -- Preferred Stocks 571 571 -- -- Short-Term Investments 4,002 4,002 -- -- -------- ------ -------- ---- Total Investments $210,957 $5,065 $205,598 $294 ======== ====== ======== ==== The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value: Mortgage-Backed Asset-Backed Corporate Loan Common Total Securities Securities Bonds Agreements Stocks ------- ---------------- ------------ --------- ---------- ------ BALANCE AS OF SEPTEMBER 30, 2009: $ 1,598 $ 890 $ 54 $ 505 $149 $ --(e) Accrued discounts (premiums)(a) 3 -- 1 -- 2 -- Realized gain (loss)(b) (606) -- (1) -- --(f) (605) Change in unrealized appreciation (depreciation)(b) 786 158 5 7 11 605 Net purchases (sales)(c) (159) -- (58) (100) (1) -- Transfers in and/or out of level 3(d) (1,328) (1,048) (1) (412) 129 4 ------- ------- ---- ----- ---- ----- BALANCE AS OF SEPTEMBER 30, 2010: $ 294 $ -- $ -- $ -- $290 $ 4 ======= ======= ==== ===== ==== ===== (a) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (b) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (c) INCLUDES PAYDOWNS, IF ANY. (d) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (e) LEVEL 3 COMMON STOCKS HAVE A BEGINNING VALUE OF $0. (f) AMOUNT IS LESS THAN $500. See Notes to Financial Statements 78
VIRTUS PREMIUM ALPHASECTOR(TM) FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE The following table provides a summary of inputs used to value the Fund's net ------- --------- assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to EXCHANGE-TRADED FUNDS--96.7% Financial Statements). Consumer Discretionary Select Sector SPDR Fund 595,879 $ 19,908 Total Value Level 1 - Level 2 - Consumer Staples Select at Quoted Significant Sector SPDR Fund 708,605 19,749 September 30,2010 Prices Observable Inputs Financial Select Sector ----------------- --------- ----------------- SPDR Fund(14) 1,338,275 19,204 INVESTMENTS IN SECURITIES: Industrial Select Sector Equity Securities: SPDR Fund(14) 635,015 19,863 Exchange-Traded Funds $138,633 $ 138,633 $ -- Materials Select Sector Securities Lending Collateral 36,123 33,347 2,776 SPDR Fund(14) 596,620 19,557 Short-Term Investments 1,876 1,876 -- Technology Select Sector -------- --------- ------ SPDR Fund 887,200 20,424 Total Investments $176,632 $ 173,856 $2,776 Utilities Select Sector ======== ========= ====== SPDR Fund 635,655 19,928 - ----------------------------------------------- There are no Level 3 (significant unobservable inputs) priced securities. TOTAL EXCHANGE-TRADED FUNDS (IDENTIFIED COST $134,431) 138,633 - ----------------------------------------------- TOTAL LONG-TERM INVESTMENTS--96.7% (IDENTIFIED COST $134,431) 138,633 - ----------------------------------------------- SHORT-TERM INVESTMENTS--1.3% MONEY MARKET MUTUAL FUNDS--1.3% BlackRock Liquidity Funds TempFund Portfolio - Institutional Shares (seven-day effective yield 0.229%) 1,876,172 1,876 - ----------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $1,876) 1,876 - ----------------------------------------------- SECURITIES LENDING COLLATERAL--25.2% MONEY MARKET MUTUAL FUNDS--25.2% BlackRock Institutional Money Market Trust (seven-day effective yield 0.309%)(15) 2,776,406 2,776 BlackRock Liquidity Funds TempCash Portfolio - Institutional Shares (seven-day effective yield 0.240%) 33,347,115 33,347 - ----------------------------------------------- TOTAL SECURITIES LENDING COLLATERAL (IDENTIFIED COST $36,123) 36,123 - ----------------------------------------------- TOTAL INVESTMENTS--123.2% (IDENTIFIED COST $172,430) 176,632(1) Other assets and liabilities, net--(23.2)% (33,303) --------- NET ASSETS--100.0% $ 143,329 ========= ABBREVIATION: SPDR S&P Depositary Receipt See Notes to Financial Statements 79
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- FOREIGN GOVERNMENT SECURITIES--0.9% FINANCIALS--0.7% TELECOMMUNICATION SERVICES--1.4% Bolivarian Republic of Ford Motor Credit Co., LLC Clearwire Venezuela RegS 8.700%, 10/1/14 $ 140 $ 157 Communications 5.750%, 2/26/16(5) $ 1,500 $ 1,048 6.625%, 8/15/17 205 218 LLC/Clearwire Republic of Argentina PIK International Lease Finance, Inc. Interest Capitalization Finance Corp. 144A 12.000%, 8.280%, 12/31/33 482 403 4.750%, 1/13/12 350 352 12/1/15(4) $ 750 $ 814 - ------------------------------------------- SLM Corp. 8.450%, 6/15/18 475 480 144A 12.000%, TOTAL FOREIGN GOVERNMENT SECURITIES -------- 12/1/15(4) 200 216 (IDENTIFIED COST $1,495) 1,451 1,207 ITC DeltaCom, Inc. - ------------------------------------------- -------- 10.500%, 4/1/16 700 715 Level 3 Financing, ASSET-BACKED SECURITIES--0.1% HEALTH CARE--0.5% Inc. Harley-Davidson Motorcycle Inventiv Health, Inc. 144A 4.344%, 2/15/15(3) 200 163 Trust 07-2, C 10.000%, 8/15/18(4) 270 269 Nextel 5.410%, 8/15/15 170 177 Rotech Healthcare, Inc. Communications, - ------------------------------------------- 144A Inc. Series D TOTAL ASSET-BACKED SECURITIES 10.750%, 10/15/15(4) 100 99 7.375%, 8/1/15 300 303 (IDENTIFIED COST $135) 177 Select Medical Corp. -------- - ------------------------------------------- 7.625%, 2/1/15 450 442 2,211 -------- --------------------------------------- CORPORATE BONDS--9.0% 810 TOTAL CORPORATE BONDS -------- (IDENTIFIED COST $ 14,226) 14,610 CONSUMER DISCRETIONARY--1.9% --------------------------------------- American Axle & INDUSTRIALS--1.4% Manufacturing Holdings, Global Aviation Holdings LOAN AGREEMENTS(3)--86.2% Inc. 144A Ltd. 144A 9.250%, 1/15/17(4) 350 385 14.000%, 8/15/13(4) 730 785 CONSUMER DISCRETIONARY--26.4% Cengage Learning Kratos Defense & Security 24 Hour Fitness Acquisitions, Inc. 144A Solutions, Inc. Worldwide, Inc. 10.500%, 1/15/15(4) 450 449 10.000%, 6/1/17 350 373 Tranche B, Eastman Kodak Co. Liberty Tire Recycling 6.750%, 4/22/16 998 956 7.250%, 11/15/13 55 53 144A Advantage Sales & Harrah's Operating Co., Inc. 11.000%, 10/1/16(4) 165 168 Marketing, Inc. 11.250%, 6/1/17 140 154 PharmaNet Development Tranche, 5.000%, 144A 12.750%, 4/15/18(4) 80 75 Group, Inc. 144A 5/5/16 741 740 Landry's Holdings, Inc. 10.875%, 4/15/17(4) 415 431 Tranche, 8.500%, 144A TransDigm, Inc. 5/5/17 615 615 11.500%, 6/1/14(4) 200 187 7.750%, 7/15/14 500 508 Alliance Laundry Landry's Restaurants,Inc. -------- Holdings, Inc. 11.625%, 12/1/15 166 176 2,265 Tranche B, Libbey Glass, Inc. 144A -------- 0.000%, 9/30/16 750 756 10.000%, 2/15/15(4) 75 81 AMF Bowling MGM Resorts International, INFORMATION TECHNOLOGY--0.5% Worldwide, Inc. Inc. Freescale Semiconductor, Tranche B, 10.375%, 5/15/14 47 53 Inc. 2.757%, 6/7/13 571 500 Nebraska Book Co., Inc. 10.125%, 12/15/16 450 412 Atrium Cos., Inc. 10.000%, 12/1/11 615 626 Sorenson Communications, Tranche, Seneca Gaming Corp. Inc. 144A 7.000%, 4/30/16 1,000 969 Series B 10.500%, 2/1/15(4) 750 442 Bourland & Leverich 7.250%, 5/1/12 400 396 -------- Supply Co. Universal City Development 854 Tranche, Partners Ltd./Universal City -------- 11.000%, 8/19/15 330 323 Development Partners Carmike Cinemas, Finance, Inc. MATERIALS--1.8% Inc. Tranche, 8.875%, 11/15/15 45 47 ABI Escrow Corp. 144A 5.500%, 1/27/16 898 902 10.875%, 11/15/16 300 326 10.250%, 10/15/18(4) 350 358 CDW LLC Tranche B, -------- Ardagh Packaging Finance 4.257%, 10/10/14 992 916 3,008 plc 144A Cengage Learning -------- 7.375%, 10/15/17(4) 250 258 Acquisitions, Catalyst Paper Corp. Inc. Tranche, ENERGY--0.8% 7.375%, 3/1/14 300 125 2.540%, 7/3/14 897 807 Coffeyville Resources Ineos Group Holdings Ceridian Corp. LLC/Coffeyville Finance, plc 144A Tranche, Inc. 144A 8.500%, 2/15/16(4) 750 638 3.256%, 11/9/14 1,551 1,398 10.875%, 4/1/17(4) 700 742 Lyondell Chemical Co. Charter Hercules Offshore, Inc. 11.000%, 5/1/18 499 555 Communications 144A Verso Paper Holdings Operating LLC 10.500%, 10/15/17(4) 275 230 LLC/Verso Paper, Inc. Tranche B-1, Western Refining, Inc. 11.500%, 7/1/14 365 402 2.260%, 3/6/14 157 154 144A Series B, 4.216%, Tranche C, 10.750%, 6/15/14(3)(4) 325 310 8/1/14(3) 500 447 3.540%, 9/6/16 1,276 1,247 -------- Series B, 11.375%, Clear Channel 1,282 8/1/16 210 190 Communications, -------- -------- Inc. Tranche B, 2,973 3.906%, 1/29/16 520 410 -------- CSC Holdings, LLC Tranche B-2, 0.000%, 3/29/16 804 792 Cumulus Media, Inc. Tranche, 4.006%, 6/11/14 745 675 Dana Holding Corp. Tranche, 4.883%, 1/30/15 936 928 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 80
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- CONSUMER DISCRETIONARY--CONTINUED CONSUMER DISCRETIONARY--CONTINUED CONSUMER STAPLES--CONTINUED Dave & Busters, Inc. Nielsen Finance LLC Yankee Candle Co., Tranche, Tranche A, 2.258%, Inc. Tranche, 6.000%, 6/1/16 $ 998 $ 996 8/9/13 $ 649 $ 624 2.260%, 2/6/14 $ 454 $ 436 Emmis Operating Co. Tranche B, 4.008%, -------- Tranche B, 5/1/16 604 585 5,748 4.281%, 11/1/13 1,189 1,007 OSI Restaurant Partners, -------- Ford Motor Co. Tranche B-1, LLC 3.023%, 12/15/13 973 954 Tranche RC, ENERGY--1.9% Getty Images, Inc. 1.767%, 6/14/13 83 76 Big West Oil LLC Tranche B, Tranche B, Tranche, 6.250%, 7/2/15 952 960 2.625%, 6/14/14 914 841 12.000%, 7/23/15 510 520 Harrah's Operating Co., Pilot Travel Centers LLC Helix Energy Inc. Tranche B, Solutions Group, Tranche B-2, 5.250%, 6/30/16 280 284 Inc. Tranche, 3.498%, 1/28/15 1,030 890 RCN Corp. Tranche, 2.507%, 7/1/13 635 610 Tranche B-4, 0.000%, 8/26/16 1,025 1,022 Hercules Offshore 9.500%, 10/31/16 581 597 Sabre, Inc. Tranche, LLC Tranche B, HHI Group Holdings LLC 2.366%, 9/30/14 991 919 6.000%, 7/11/13 1,110 960 Tranche, Sinclair Television Group, Venoco, Inc. 0.000%, 3/30/15 585 594 Inc. Tranche B, Tranche C, Intelsat Jackson Holding 5.500%, 10/29/15 470 473 4.313%, 5/7/14 1,005 944 Ltd. Tranche, Six Flags Theme Parks, Inc. -------- 3.533%, 2/1/14 1,000 942 Tranche B, 3,034 Intelstat Corp. 6.000%, 6/30/16 1,693 1,703 -------- Tranche B-2-A, Tenneco, Inc. Tranche B, 3.033%, 1/3/14 188 182 5.039%, 6/3/16 499 500 FINANCIALS--8.2% Tranche B-2-B, Toys "R" Us, Inc. AGFS Funding Co. 3.033%, 1/3/14 188 182 Tranche B, Tranche, Tranche B-2-C, 6.000%, 9/1/16 520 521 7.250%, 4/21/15 1,450 1,460 3.033%, 1/3/14 188 182 Travelport LLC Tranche DD, Agile Property Isle of Capri Casinos, Inc. 2.760%, 8/23/13 1,089 1,049 Holdings Ltd. Tranche, United Components, Inc. Tranche, 5.000%, 11/25/13 393 376 Tranche, 6.250%, 3/23/17 315 317 3.006%, 1/25/13 375 345 Tranche DD-B, Univision Communications, Bass Pro Group LLC 5.000%, 11/25/13 157 150 Inc. Tranche B, Tranche B Tranche DD-A, 2.506%, 9/29/14 1,999 1,762 5.188%, 4/10/15 498 499 5.000%, 11/25/13 138 132 Visant Corp. Tranche B, CB Richard Ellis Lamar Media Corp. 0.000%, 12/22/16 340 342 Group, Inc. Tranche B, Vision Solutions, Inc. Tranche A-2, 4.200%, 12/30/16 1,493 1,502 Tranche, 7.750%, 7/23/16 500 492 5.250%, 6/24/13 500 500 Landry's Restaurant, Inc. VML U.S. Finance LLC Tranche B-1, Tranche, Tranche DD-B, 6.000%, 12/20/15 1,029 1,032 0.000%, 11/30/13 825 832 4.780%, 5/25/12 152 151 CIT Group, Inc. Las Vegas Sands LLC Tranche B, Tranche DD-3 Tranche B, 4.780%, 5/27/13 513 507 6.115%, 8/11/15 870 879 3.030%, 11/23/16 622 567 VWR Funding, Inc. Tranche, Delos Aircraft, Inc. Tranche DD-I, 2.756%, 6/30/14 738 694 Tranche B-2, 3.030%, 11/23/16 126 114 -------- 7.000%, 3/17/16 727 739 MCC Iowa LLC Tranche F, 42,661 Fortress Invest 4.500%, 10/23/17 998 988 -------- Group Tranche, Mediacom Illinois LLC 0.000%, 10/7/15 155 155 Tranche D, CONSUMER STAPLES--3.5% Green Tree Credit 5.500%, 3/31/17 347 344 Dean Foods Co. Tranche B, Solutions Tranche, MGM MIRAGE 3.290%, 4/2/16 998 993 8.000%, 12/18/15 526 520 Tranche D, Michael Foods, Inc. Hertz Corp. 6.000%, 10/3/11 500 485 Tranche B, Letter of Credit Tranche E, 6.250%, 6/29/16 569 574 0.339%, 12/21/12 115 113 7.000%, 2/21/14 500 429 Revlon Consumer Products Tranche B, Michaels Stores, Inc. Corp. Tranche, 2.010%, 12/21/12 621 610 Tranche B-2, 6.167%, 3/11/15 1,025 1,022 International Lease 4.906%, 7/31/16 923 906 Reynolds Group Holdings Finance Corp. Midcontinent Ltd. Tranche B-1, Communications Tranche, 5.750%, 5/5/16 576 580 6.750%, 3/17/15 838 854 Tranche B, Tranche, 6.250%, 5/5/16 538 542 Nuveen Investments, 6.250%, 12/31/16 820 824 Rite Aid Corp. Tranche 3, Inc. Tranche B, Neiman-Marcus Group, Inc. 6.000%, 6/4/14 1,288 1,261 3.385%, 11/13/14 1,475 1,330 (The) Tranche, Spectrum Brands, Inc. Pinnacle Foods 2.276%, 4/6/13 1,624 1,576 Tranche, Finance 8.188%, 6/16/16 334 340 LLC/Pinnacle Food Finance Corp. Tranche B, 2.758%, 4/2/14 1,080 1,047 Re/Max International, Inc. Tranche, 5.500%, 4/16/16 995 995 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 81
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- FINANCIALS--CONTINUED HEALTH CARE--CONTINUED INDUSTRIALS--CONTINUED Synatech Holdings, Inc. RehabCare Group, Inc. Interactive Data Tranche, Tranche B, Corp. Tranche B, 2.260%, 4/2/14 $ 794 $ 679 6.000%, 11/24/15 $ 479 $ 479 6.750%, 1/29/17 $ 833 $ 844 Universal City Development Rotech Healthcare, Inc. Live Nation Partners, Ltd. Tranche B, PIK Interest Entertainment, 5.500%, 11/6/14 583 586 Capitalization, Inc. Tranche B, Vanguard Health Holding 6.475%, 9/26/11 400 396 4.500%, 11/7/16 498 493 Co., II LLC Tranche B, Select Medical Corp. Manitowoc Co., Inc. 5.000%, 1/29/16 868 863 Tranche B-1, (The) Tranche B, -------- 4.089%, 8/22/14 766 760 8.000%, 11/6/14 983 990 13,206 Universal Health Services, Ozburn-Hessey -------- Inc. Tranche B, Holding Co. LLC 0.000%, 10/17/16 825 830 Tranche B, HEALTH CARE--8.9% Valeant Pharmaceuticals 7.500%, 4/8/16 896 908 Ardent Health Services, Tranche DD, Protection One, Inc. Inc. Tranche, 0.000%, 9/27/16 200 202 Tranche B, 6.500%, 9/15/15 896 883 Tranche B, 6.000%, 6/4/16 1,017 1,020 Aveta, Inc. Tranche B, 0.000%, 9/27/16 800 808 Quad Graphics, Inc. 8.000%, 4/14/15 241 235 Warner Chilcott Co. LLC Tranche B, Bausch & Lomb, Inc. Tranche B-4, 5.500%, 4/20/16 998 983 Tranche DD, 6.500%, 2/22/16 10 10 ServiceMaster Co. 3.506%, 4/24/15 94 91 Tranche B-3, (The) Tranche, 6.500%, 2/22/16 32 32 Tranche DD, 3.517%, 4/24/15 389 374 Warner Chilcott plc 2.760%, 7/24/14 173 164 Butler Animal Health Tranche A, Tranche B, Supply LLC Tranche, 6.000%, 10/30/14 314 310 2.773%, 7/24/14 1,739 1,641 5.500%, 12/31/15 744 746 Tranche B-1 Trans Union LLC Catalent Pharma Solutions, 6.250%, 4/30/15 151 152 Tranche B, Inc. Tranche, Tranche B-2 6.750%, 6/15/17 623 632 2.506%, 4/10/14 992 916 6.250%, 4/30/15 252 253 Transaction Network Community Health Systems, -------- Services, Inc. 14,318 Inc. Tranche, Tranche B, -------- 6.000%, 11/18/15 301 302 2.549%, 7/25/14 1,168 1,110 Vertrue, Inc. Tranche DD, INDUSTRIALS--10.2% Tranche, 2.549%, 7/25/14 60 57 Advanced Disposal Services, 3.290%, 8/16/14 587 510 CRC Health Corp. Tranche, Inc. Tranche B, Zuffa LLC Tranche B, 2.539%, 2/6/13 488 457 6.000%, 1/14/15 1,489 1,496 7.500%, 6/19/15 1,027 1,039 Generic Drug Holdings, Inc. Altegrity, Inc. Tranche, -------- Tranche, 3.292%, 2/21/15 1,588 1,447 16,555 6.500%, 4/8/16 857 827 ARAMARK Corp. -------- Tranche DD, Letter of Credit 1, 6.500%, 4/8/16 118 114 0.106%, 1/26/14 18 17 INFORMATION TECHNOLOGY--13.1% HCA, Inc. Tranche A-1, Tranche, Airvana Network 1.789%, 11/16/12 826 798 2.164%, 1/26/14 225 215 Solutions, Inc. Health Management Letter of Credit 2, Tranche, Associates, Inc. 0.106%, 7/26/16 33 32 11.000%, 8/27/14 498 494 Tranche B, Tranche, Allen Systems Group, 2.039%, 2/28/14 316 298 3.539%, 7/26/16 496 488 Inc. Tranche, HealthSouth Corp. Bucyrus International, Inc. 8.500%, 10/18/13 337 339 Tranche 1, 2.650%, Tranche C, Tranche, 3/10/13 539 537 4.500%, 2/19/16 798 806 0.000%, 4/18/14 153 152 Tranche 2, 4.150%, Harland Clarke Holdings Aspect Software, 9/10/15 444 444 Corp. Tranche B, Inc. Tranche B, Inventiv Health, Inc. 2.776%, 6/30/14 1,459 1,282 6.250%, 5/7/16 995 994 Tranche, Hawker Beechcraft Avaya, Inc. Tranche 6.500%, 8/4/16 275 276 Acquisition Co. LLC B-1, Medical Card Systems, Inc. Letter of Credit, 3.058%, 10/24/14 1,482 1,318 Tranche, 2.100%, 3/26/14 81 66 CommScope, Inc. 12.000%, 9/17/15 260 255 Tranche, Tranche B, MMM Holdings, Inc. 2.273%, 3/26/14 1,357 1,100 2.773%, 12/26/14 490 486 Tranche B, Holdings Gaming Borrower Dresser, Inc. 8.000%, 4/14/15 241 235 LP Tranche B-1, Tranche B, Multiplan, Inc. Tranche B, 12.000%, 6/30/15 80 80 2.612%, 5/4/14 248 239 0.000%, 8/26/17 498 499 Tranche B, NBTY, Inc. Tranche B, 6.111%, 5/4/15 1,400 1,358 0.000%, 10/1/17 265 268 DynCorp Psychiatric Solutions, Inc. International LLC Tranche B, Tranche B, 2.167%, 7/1/12 670 666 6.250%, 7/7/16 1,025 1,031 Fidelity National Information Services, Inc. Tranche B, 5.250%, 7/18/16 280 283 First Data Corp. Tranche B-3, 3.006%, 9/24/14 1,824 1,607 Freescale Semiconductor, Inc. Tranche, 4.509%, 12/1/16 1,107 1,013 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 82
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR PAR PAR VALUE VALUE VALUE VALUE VALUE VALUE ------- -------- ------- -------- ---------- -------- INFORMATION TECHNOLOGY--CONTINUED MATERIALS--CONTINUED TELECOMMUNICATION SERVICES--CONTINUED Infor Enterprise Solutions Hexion Specialty Chemicals U.S. TelePacific Holdings, Inc. Tranche Corp. Tranche B, Tranche, 6.506%, 3/2/14 $ 348 $ 231 4.063%, 5/5/15 $ 177 $ 169 9.250%, 8/17/15 $ 597 $ 600 Tranche DD, 6.506%, Tranche -------- 3/2/14 202 134 4.313%, 5/5/15 399 383 6,141 Tranche, 6.010%, 7/28/15 510 477 Hoffmaster Group, Inc. -------- Tranche B, 6.010%, Tranche, 7/28/15 978 914 7.063%, 5/12/16 988 963 UTILITIES--1.4% Knology, Inc. Tranche B, Huntsman International Calpine Corp. 0.000%, 9/30/16 425 421 LLC Tranche C, Tranche, MSCI, Inc. Tranche, 2.515%, 6/30/16 855 822 3.165%, 3/29/14 267 261 4.750%, 6/1/16 185 186 Ineos Holdings Ltd. New Development NuSil Technology LLC Tranche B-2, Holdings LLC Tranche B, 7.500%, 12/16/13 368 369 Tranche, 6.000%, 2/18/15 366 367 Tranche C-2, 7.000%, 7/3/17 529 538 RedPrairie Corp. Tranche, 8.000%, 12/16/14 421 424 NRG Energy, Inc. 6.000%, 3/24/16 1,244 1,238 JohnsonDiversey, Inc. Tranche B, Reynolds & Reynolds Co. Tranche B, 1.773%, 2/1/13 460 448 (The) Tranche B, 5.500%, 11/24/15 235 236 Letter of Credit 5.250%, 4/21/17 706 708 Lyondell Chemical Co. 1.789%, 2/1/13 306 298 Sensata Technologies BV Tranche, Texas Competitive Tranche B, 5.500%, 4/8/16 873 881 Electric Holdings 2.231%, 4/27/13 1,231 1,195 Momentive Performance Co. LLC SkillSoft Corp. Tranche, Materials, Inc. Tranche B-3, 6.500%, 5/30/17 938 946 Tranche B-1 3.774%, 10/10/14 986 765 SonicWALL, Inc. Tranche, 2.563%, 12/4/13 995 954 -------- 8.250%, 1/23/16 550 551 New Sunward Holding BV 2,310 Spansion LLC Tranche B, Tranche B, --------------------------------------- 7.500%, 2/9/15 1,274 1,284 4.792%, 2/14/14 719 640 Springboard Finance LLC Noranda Aluminum, Inc. TOTAL LOAN AGREEMENTS Tranche, Tranche B, (IDENTIFIED COST $136,478) 139,232 7.000%, 2/23/15 829 834 2.046%, 5/18/14 611 578 --------------------------------------- Sungard Data Systems, Inc. Pinafore LLC Tranche B, TOTAL LONG-TERM INVESTMENTS--96.2% Tranche A, 2.008%, 6.750%, 9/29/16 150 151 (IDENTIFIED COST $152,334) 155,470 2/28/14 22 22 PQ Corp. Tranche --------------------------------------- Tranche B, 4.007%, 3.620%, 7/30/14 995 928 2/28/16 1,234 1,215 Smurfit-Stone Container SHARES Towerco Finance LLC Enterprise Tranche B, ---------- Tranche, 6.750%, 2/22/16 1,446 1,456 6.000%, 11/24/14 496 500 Solutia, Inc. Tranche, SHORT-TERM INVESTMENTS--6.4% Vertafore, Inc. Tranche 4.750%, 3/17/17 592 595 6.750%, 7/29/16 569 571 -------- MONEY MARKET MUTUAL FUNDS--6.4% -------- 14,151 BlackRock Liquidity 21,108 -------- Funds TempFund -------- Portfolio - TELECOMMUNICATION SERVICES--3.8% Institutional MATERIALS--8.8% Cincinnati Bell, Inc. Shares (seven-day Anchor Glass Container Tranche B, effective Corp. 6.880%, 6/11/17 1,219 1,229 yield 0.229%) 10,277,357 10,277 Tranche, 6.000%, 3/2/16 576 576 Level 3 Communications, --------------------------------------- Tranche, 10.000%, Inc. TOTAL SHORT-TERM INVESTMENTS 9/2/16 715 708 Tranche A, (IDENTIFIED COST $10,277) 10,277 Berry Plastics Group, Inc. 2.642%, 3/13/14 1,450 1,325 --------------------------------------- Tranche C, Tranche B, TOTAL INVESTMENTS--102.6% 2.376%, 4/3/15 1,241 1,138 11.500%, 3/13/14 70 76 (IDENTIFIED COST $162,611) 165,747(1) Building Materials Holding MetroPCS Wireless, Inc. Corp. of America Tranche B, Other Assets and Tranche B, 2.563%, 11/3/13 409 401 Liabilities--(2.6)% (4,162) 3.063%, 2/22/14 131 129 nTelos, Inc. Tranche B, -------- Celanese U.S. Holdings LLC 5.750%, 8/7/15 1,469 1,475 NET ASSETS--100.0% $161,585 Tranche Securus Technologies, Inc. ======== 3.534%, 10/31/16 307 302 Tranche, Chemtura Corp. 8.000%, 10/31/14 577 580 ABBREVIATION: Tranche A, Time Warner Telecom 5.500%, 2/11/11 500 505 Holdings, Inc. PIK Payment-in-Kind Security Tranche Tranche B, 6.000%, 8/29/16 500 503 2.010%, 1/7/13 460 455 COUNTRY WEIGHTINGS as of 9/30/10+ Gentek Holding LLC ---------------------------------------- Tranche, United States (includes short-term 7.000%, 10/29/14 235 236 investments) 88% Graham Packaging Japan 2 6.000%, 9/23/16 500 505 United Kingdom 2 Canada 1 Germany 1 South Korea 1 Switzerland 1 Other 4 ---------------------------------------- Total 100% ---------------------------------------- + % of total investments as of September 30, 2010 For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 83
VIRTUS SENIOR FLOATING RATE FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements).
Level 2 - Level 3 - Total Value Level 1 - Significant Significant at Quoted Observable Unobservable September 30, 2010 Prices Inputs Inputs ------------------ ---------- ----------- ------------ INVESTMENT IN SECURITIES: Debt Securities: Asset-Backed Securities $ 177 $ -- $ 177 $ -- Corporate Bonds 14,610 -- 14,610 -- Foreign Government Securities 1,451 -- 1,451 -- Loan Agreements 139,232 -- 138,887 345 Equity Securities: Short-Term Investments 10,277 10,277 -- -- ----------- ---------- ----------- ------ Total Investments $ 165,747 $ 10,277 $ 155,125 $ 345 =========== ========== =========== ======
The following is a reconciliation of assets of the Fund, for Level 3 investments for which significant unobservable inputs were used to determine fair value:
($ reported in thousands) Loan Agreements --------------- BALANCE AS OF SEPTEMBER 30, 2009: $ 74 Accrued discounts (premiums)(a) 1 Realized gain (loss)(b) --(e) Change in unrealized appreciation (depreciation)(b) 5 Net purchases (sales)(d) --(e) Transfers in and/or out of Level 3(c) 265 --------- BALANCE AS OF SEPTEMBER 30, 2010: $ 345 =========
(a) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER INTEREST INCOME. (b) DISCLOSED IN THE STATEMENT OF OPERATIONS UNDER NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS. (c) "TRANSFERS IN AND/OR OUT" REPRESENT THE ENDING VALUE AS OF SEPTEMBER 30, 2010, FOR ANY INVESTMENT SECURITY WHERE A CHANGE IN THE PRICING LEVEL OCCURRED FROM THE BEGINNING TO THE END OF THE PERIOD. (d) INCLUDES PAYDOWNS, IF ANY. (e) AMOUNT IS LESS THAN $500. For information regarding the footnotes, see the Key Investment Terms and Footnote Legend starting on page 5. See Notes to Financial Statements 84 THIS PAGE INTENTIONALLY BLANK. VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2010 (Amounts reported in thousands except shares and per share amounts)
ALPHASECTOR(TM) ALPHASECTOR(TM) ALTERNATIVES ALLOCATION FUND ROTATION FUND DIVERSIFIER FUND BOND FUND --------------- --------------- ---------------- ------------ ASSETS Investment in securities at value(1)(2) ............. $ 37,071 $ 549,600 $ 81,990 $ 204,623 Investments in affiliated funds at value(3) ......... 9,871 -- 149,573 -- Receivables Investment securities sold ....................... -- 2,278 1,803 8,217 Fund shares sold ................................. 95 3,307 666 295 Receivable from adviser .......................... -- -- 48 -- Dividends and interest receivable ................ 1 20 --(5) 1,931 Trustee retainer .................................... --(5) 3 1 1 Prepaid expenses .................................... 20 54 17 24 ------------ ------------ ------------ ------------ Total assets ............................... 47,058 555,262 234,098 215,091 ------------ ------------ ------------ ------------ LIABILITIES Cash overdraft ...................................... -- 1,162 -- -- Payables Fund shares repurchased .......................... 113 1,592 1,688 1,021 Investment securities purchased .................. 392 -- -- 11,017 Collateral on securities loaned .................. 7,105 114,027 -- 3,806 Investment advisory fee .......................... 12 159 -- 41 Distribution and service fees .................... 18 147 94 23 Administration fee ............................... 5 51 28 24 Transfer agent fees and expenses ................. 7 86 100 28 Professional fee ................................. 18 23 26 31 Other accrued expenses ........................... 3 55 19 19 ------------ ------------ ------------ ------------ Total liabilities ........................... 7,673 117,302 1,955 16,010 ------------ ------------ ------------ ------------ NET ASSETS .......................................... $ 39,385 $ 437,960 $ 232,143 $ 199,081 ============ ============ ============ ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest ....................................... $ 43,046 $ 444,088 $ 314,212 $ 205,742 Accumulated undistributed net investment income (loss) ......................................... 288 2,565 638 145 Accumulated undistributed net realized gain (loss) ......................................... (6,860) (34,758) (87,990) (18,825) Net unrealized appreciation (depreciation) on investments .................................... 2,911 26,065 5,283 12,019 ------------ ------------ ------------ ------------ NET ASSETS .......................................... $ 39,385 $ 437,960 $ 232,143 $ 199,081 ============ ============ ============ ============ CLASS A Net asset value (net assets/shares outstanding) per share ......................................... $ 10.35 $ 10.18 $ 10.05 $ 11.18 Maximum offering price per share NAV/(1 - 4.75%) .... $ -- $ -- $ -- $ 11.74 Maximum offering price per share NAV/(1 - 5.75%) .... $ 10.98 $ 10.80 $ 10.66 $ -- Shares of beneficial interest outstanding, unlimited authorization(4) .................................. 1,961,116 18,890,140 11,454,557 6,008,359 Net Assets .......................................... $ 20,295 $ 192,375 $ 115,081 $ 67,147 CLASS B Net asset value (net assets/shares outstanding) and offering price per share .......................... $ -- $ -- $ -- $ 10.93 Shares of beneficial interest outstanding, unlimited authorization(4) .................................. -- -- -- 257,270 Net Assets .......................................... $ -- $ -- $ -- $ 2,812 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .......................... $ 10.33 $ 10.09 $ 9.95 $ 10.96 Shares of beneficial interest outstanding, unlimited authorization(4) .................................. 1,652,008 13,228,221 8,579,681 790,262 Net Assets .......................................... $ 17,066 $ 133,453 $ 85,330 $ 8,663 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .......................... $ 10.36 $ 10.18 $ 10.06 $ 11.30 Shares of beneficial interest outstanding, unlimited authorization(4) .................................. 195,347 11,009,926 3,155,202 10,658,114 Net Assets .......................................... $ 2,024 $ 112,132 $ 31,732 $ 120,459 (1) Investment in securities at cost ................ $ 34,859 $ 523,535 $ 84,589 $ 192,604 (2) Market value of securities on loan .............. 6,810 109,088 -- 3,671 (3) Investments in affiliated funds at cost ......... 9,172 -- 141,691 -- (4) All Funds except the Bond Fund have no par value. The Bond Fund has a par value of $1.00. (5) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 86 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2010 (Amounts reported in thousands except shares and per share amounts)
CA TAX-EXEMPT GLOBAL GLOBAL GLOBAL REAL ESTATE BOND FUND INFRASTRUCTURE FUND OPPORTUNITIES FUND SECURITIES FUND ------------- ------------------- ------------------ ------------------- ASSETS Investment in securities at value(1)(2) ......... $ 59,757 $ 69,412 $ 62,952 $ 3,431 Foreign currency at value (3) .................. -- -- --(4) --(4) Receivables Investment securities sold .................. -- 954 -- 13 Fund shares sold ............................ 12 36 2 39 Receivable from adviser ..................... -- -- -- 2 Dividends and interest receivable ........... 831 133 209 9 Tax reclaims ................................ -- 40 91 --(4) Trustee retainer ................................ --(4) --(4) --(4) --(4) Prepaid expenses ................................ 11 11 17 9 Unrealized appreciation on forward currency contracts ..................................... -- -- 88 -- ----------- ------------ ------------ ------------ Total assets ........................... 60,611 70,586 63,359 3,503 ----------- ------------ ------------ ------------ LIABILITIES Payables Fund shares repurchased ..................... 64 335 18 -- Investment securities purchased ............. 258 1,092 -- 40 Collateral on securities loaned ............. -- -- 1,706 -- Foreign capital gain taxes payable .......... -- -- 207 -- Dividend distributions ...................... 110 -- -- -- Investment advisory fee ..................... 12 37 32 -- Distribution and service fees ............... 7 11 13 1 Administration fee .......................... 7 8 7 --(4) Transfer agent fees and expenses ............ 5 20 22 --(4) Professional fee ............................ 29 29 29 29 Other accrued expenses ...................... 5 6 7 1 Unrealized depreciation on forward currency contracts ....................................... -- -- 130 -- ----------- ------------ ------------ ------------ Total liabilities ...................... 497 1,538 2,171 71 ----------- ------------ ------------ ------------ NET ASSETS ...................................... $ 60,114 $ 69,048 $ 61,188 $ 3,432 =========== ============ ============ ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................................. $ 57,160 $ 78,024 $ 76,826 $ 2,307 Accumulated undistributed net investment income (loss) ............................. 58 116 1,210 (72) Accumulated undistributed net realized gain (loss) .................................... (366) (14,233) (29,319) 88 Net unrealized appreciation (depreciation) on investments ............................... 3,262 5,141 12,471 1,109 ----------- ------------ ------------ ------------ NET ASSETS ...................................... $ 60,114 $ 69,048 $ 61,188 $ 3,432 =========== ============ ============ ============ CLASS A Net asset value (net assets/shares outstanding) per share ..................................... $ 12.34 $ 10.71 $ 7.79 $ 19.84 Maximum offering price per share NAV/(1-4.75%)... $ 12.96 $ -- $ -- $ -- Maximum offering price per share NAV/(1-5.75%)... $ -- $ 11.36 $ 8.27 $ 21.05 Shares of beneficial interest outstanding, no par value, unlimited authorization ................ 2,587,796 2,314,147 7,586,476 125,556 Net Assets ...................................... $ 31,945 $ 24,794 $ 59,088 $ 2,492 CLASS B Net asset value (net assets/shares outstanding) and offering price per share .................. $ -- $ -- $ 6.97 $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization ................ -- -- 185,566 -- Net Assets ...................................... $ -- $ -- $ 1,294 $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share .................. $ -- $ 10.69 $ 6.93 $ 19.67 Shares of beneficial interest outstanding, no par value, unlimited authorization ................ -- 669,576 116,161 13,338 Net Assets ...................................... $ -- $ 7,160 $ 806 $ 262 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .................. $ 12.33 $ 10.72 $ -- $ 19.91 Shares of beneficial interest outstanding, no par value, unlimited authorization ................ 2,283,727 3,461,699 -- 34,060 Net Assets ...................................... $ 28,169 $ 37,094 $ -- $ 678 (1) Investment in securities at cost ............ $ 56,495 $ 64,267 $ 50,240 $ 2,322 (2) Market value of securities on loan .......... -- -- 1,630 -- (3) Foreign currency at cost .................... -- -- --(4) --(4) (4) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 87 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2010 (Amounts reported in thousands except shares and per share amounts)
GREATER ASIA GREATER INTERNATIONAL EX JAPAN EUROPEAN HIGH YIELD INTERNATIONAL REAL ESTATE OPPORTUNITIES FUND OPPORTUNITIES FUND FUND EQUITY FUND SECURITIES FUND ------------------ ------------------ ------------- ------------- --------------- ASSETS Investment in securities at value(1)(2) ..... $ 10,756 $ 5,063 $ 110,372 $ 2,541 $ 26,913 Foreign currency at value(3) ................ 19 -- -- -- -- Cash ........................................ -- --(4) -- -- -- Receivables Investment securities sold ............... 410 -- 1,877 5 27 Fund shares sold ......................... 49 -- 2 4,730 -- Receivable from adviser .................. -- 2 -- 16 -- Dividends and interest receivable......... 19 19 1,972 2 85 Tax reclaims ............................. --(4) 15 -- --(4) 30 Trustee retainer ............................ --(4) --(4) 1 -- --(4) Prepaid expenses ............................ 12 9 14 -- 21 Unrealized appreciation on forward currency contracts ........................ 45 169 -- -- -- ------------- -------------- ------------- ----------- ---------- Total assets ..................... 11,310 5,277 114,238 7,294 27,076 ------------- -------------- ------------- ----------- ---------- LIABILITIES Payables Fund shares repurchased .................. 4 -- 38 -- 1 Investment securities purchased .......... 169 -- 3,087 -- -- Collateral on securities loaned .......... 4 1 6,844 -- -- Foreign capital gain taxes payable ....... 97 -- -- -- -- Investment advisory fee .................. 5 -- 53 -- 17 Distribution and service fees ............ 2 1 22 --(4) 1 Administration fee ....................... 1 1 12 --(4) 3 Transfer agent fees and expenses ......... 1 --(4) 30 --(4) 2 Trustees' fee and expenses ............... -- -- -- --(4) -- Professional fee ......................... 29 29 35 14 28 Other accrued expenses ................... 9 --(4) 9 2 4 Unrealized depreciation on forward currency contracts .......................... 56 332 -- 6 -- ------------- -------------- ------------- ----------- ---------- Total liabilities ................ 377 364 10,130 22 56 ------------- -------------- ------------- ----------- ---------- NET ASSETS .................................. $ 10,933 $ 4,913 $ 104,108 $ 7,272 $ 27,020 ============= ============== ============= =========== ========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................... $ 7,158 $ 3,345 $ 150,352 $ 7,230 $ 46,789 Accumulated undistributed net investment income (loss) ............... 204 69 135 3 (750) Accumulated undistributed net realized gain (loss) ............................ 1,263 580 (48,216) 1 (25,317) Net unrealized appreciation (depreciation) on investments ......... 2,308 919 1,837 38 6,298 ------------- -------------- ------------- ----------- ---------- NET ASSETS .................................. $ 10,933 $ 4,913 $ 104,108 $ 7,272 $ 27,020 ============= ============== ============= =========== ========== CLASS A Net asset value (net assets/shares outstanding) per share .................... $ 16.89 $ 13.56 $ 4.17 $ 10.17 $ 6.30 Maximum offering price per share NAV/(1 - 4.75%) ........................... $ -- $ -- $ 4.38 $ -- $ -- Maximum offering price per share NAV/(1 - 5.75%) ........................... $ 17.92 $ 14.39 $ -- $ 10.79 $ 6.68 Shares of beneficial interest outstanding, no par value, unlimited authorization ..... 609,952 341,422 24,327,783 10,000 392,514 Net Assets .................................. $ 10,305 $ 4,629 $ 101,326 $ 102 $ 2,474 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ..................................... $ -- $ -- $ 4.08 $ -- $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization ..... -- -- 162,484 -- -- Net Assets .................................. $ -- $ -- $ 663 $ -- $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ..................................... $ 16.77 $ 13.45 $ 4.11 $ 10.16 $ 6.26 Shares of beneficial interest outstanding, no par value, unlimited authorization ....... 25,635 10,570 515,259 10,000 78,959 Net Assets .................................. $ 430 $ 142 $ 2,119 $ 102 $ 494 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ..................................... $ 16.94 $ 13.60 $ -- $ 10.18 $ 6.31 Shares of beneficial interest outstanding, no par value, unlimited authorization ..... 11,706 10,459 -- 694,222 3,812,109 Net Assets .................................. $ 198 $ 142 $ -- $ 7,068 $ 24,052 (1) Investment in securities at cost ........ $ 8,340 $ 3,982 $ 108,535 $ 2,497 $ 20,616 (2) Market value of securities on loan ...... 4 1 6,583 -- -- (3) Foreign currency at cost ................ 19 -- -- -- -- (4) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 88 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) SEPTEMBER 30, 2010 (Amounts reported in thousands except shares and per share amounts)
MULTI-SECTOR PREMIUM SENIOR MARKET FIXED INCOME ALPHASECTOR(TM) FLOATING RATE NEUTRAL FUND FUND FUND FUND ------------ ------------ --------------- ------------- ASSETS Investment in securities at value(1)(4) .......................... $ 87,809 $ 210,957 $ 176,632 $ 165,747 Foreign currency at value (2) .................................... 220 -- -- -- Cash ............................................................. -- -- -- 24 Deposits with broker for securities sold short ................... 85,007 -- -- -- Receivables Investment securities sold .................................... 7,151 291 -- 19 Fund shares sold .............................................. 210 1,084 9,484 1,036 Dividends and interest receivable ............................. 73 3,078 5 809 Tax reclaims .................................................. 7 -- -- -- Trustee retainer ................................................. --(5) 1 --(5) 1 Prepaid expenses ................................................. 25 20 49 21 ----------- ------------ --------------- ------------- Total assets ............................................... 180,502 215,431 186,170 167,657 ----------- ------------ --------------- ------------- LIABILITIES Securities sold short at value(3) ................................ 82,637 -- -- -- Payables Fund shares repurchased ....................................... 99 302 546 543 Investment securities purchased ............................... 4,546 5,070 6,027 5,177 Collateral on securities loaned ............................... -- -- 36,123 -- Dividend distributions ........................................ -- 362 -- 142 Dividends on short sales ...................................... 138 -- -- -- Investment advisory fee ....................................... 90 91 74 79 Distribution and service fees ................................. 8 85 32 43 Administration fee ............................................ 11 24 9 19 Transfer agent fees and expenses .............................. 15 42 5 14 Professional fee .............................................. 36 35 12 35 Other accrued expenses ........................................ 13 21 13 20 ----------- ------------ --------------- ------------- Total liabilities .......................................... 87,593 6,032 42,841 6,072 ----------- ------------ --------------- ------------- NET ASSETS ....................................................... $ 92,909 $ 209,399 $ 143,329 $ 161,585 =========== ============ =============== ============= NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .............. $ 106,179 $ 201,866 $ 138,740 $ 156,456 Accumulated undistributed net investment income (loss) ........ (7) 1,031 604 306 Accumulated undistributed net realized gain (loss) ............ (18,296) (6,775) (217) 1,687 Net unrealized appreciation (depreciation) on investments ..... 11,955 13,277 4,202 3,136 Net unrealized appreciation (depreciation) on securities sold short .................................................... (6,922) -- -- -- ----------- ------------ --------------- ------------- NET ASSETS ....................................................... $ 92,909 $ 209,399 $ 143,329 $ 161,585 =========== ============ =============== ============= CLASS A Net asset value (net assets/shares outstanding) per share ........ $ 10.57 $ 10.77 $ 11.17 $ 9.80 Maximum offering price per share NAV/(1-4.75%) ................... $ -- $ 11.31 $ -- $ 10.29 Maximum offering price per share NAV/(1-5.75%) ................... $ 11.21 $ -- $ 11.85 $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization......................................... 1,660,608 11,697,801 7,958,250 10,076,012 Net Assets ....................................................... $ 17,556 $ 125,962 $ 88,916 $ 98,790 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ....................................... $ 10.04 $ 10.75 $ -- $ -- Shares of beneficial interest outstanding, no par value, unlimited authorization ........................................ 66,667 1,264,023 -- -- Net Assets ....................................................... $ 670 $ 13,590 $ -- $ -- CLASS C Net asset value (net assets/shares outstanding) and offering price per share ....................................... $ 10.00 $ 10.84 $ 11.15 $ 9.81 Shares of beneficial interest outstanding, no par value, unlimited authorization ................................. 424,938 5,740,651 2,679,413 3,069,042 Net Assets ....................................................... $ 4,249 $ 62,214 $ 29,864 $ 30,116 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ....................................... $ 10.58 $ 10.76 $ 11.17 $ 9.80 Shares of beneficial interest outstanding, no par value, unlimited authorization ................................. 6,654,430 709,162 2,197,010 3,334,838 Net Assets ....................................................... $ 70,434 $ 7,633 $ 24,549 $ 32,679 (1) Investment in securities at cost ............................. $ 75,870 $ 197,695 $ 172,430 $ 162,611 (2) Foreign currency at cost ..................................... 202 -- -- -- (3) Proceeds from securities sold short .......................... 75,713 -- -- -- (4) Market value of securities on loan ........................... -- -- 34,494 -- (5) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements 89 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2010 ($ Reported in thousands)
ALPHASECTOR(TM) ALPHASECTOR(TM) ALTERNATIVES ALLOCATION FUND ROTATION FUND DIVERSIFIER FUND BOND FUND --------------- --------------- ---------------- ---------- INVESTMENT INCOME Dividends ........................................... $ 633 $ 7,107 $ 281 $ 10 Dividend income from affiliated funds ............... 417 -- 5,460 -- Interest ............................................ -- -- -- 10,674 Security lending .................................... 7 106 -- 4 --------------- --------------- ---------------- ---------- Total investment income .......................... 1,057 7,213 5,741 10,688 --------------- --------------- ---------------- ---------- EXPENSES Investment advisory fees ............................ 169 1,271 253 944 Service fees, Class A ............................... 49 342 324 165 Distribution and service fees, Class B .............. -- -- -- 34 Distribution and service fees, Class C .............. 171 911 934 80 Administration fees ................................. 43 355 284 234 Transfer agent fee and expenses ..................... 47 409 533 190 Custodian fees ...................................... 3 13 6 16 Printing fees and expenses .......................... 13 85 49 17 Professional fees ................................... 19 25 33 24 Registration fees ................................... 43 92 59 52 Trustees' fee and expenses .......................... 3 21 22 18 Miscellaneous expenses .............................. 7 30 38 35 --------------- --------------- ---------------- ---------- Total expenses .................................. 567 3,554 2,535 1,809 Less expenses reimbursed and/or waived by investment adviser .............................. (33) -- (770) (293) --------------- --------------- ---------------- ---------- Net expenses .................................. 534 3,554 1,765 1,516 --------------- --------------- ---------------- ---------- NET INVESTMENT INCOME (LOSS) ........................ 523 3,659 3,976 9,172 --------------- --------------- ---------------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............. (84) (16,759) (5,333) 7,573 Net realized gain (loss) on affiliated funds ........ 11 -- (8,488) -- Capital gain distributions from affiliated funds..... -- -- 539 -- Net change in unrealized appreciation (depreciation) on investments ....................... 2,940 26,684 29,546 4,062 --------------- --------------- ---------------- ---------- NET GAIN (LOSS) ON INVESTMENTS ........................ 2,867 9,925 16,264 11,635 --------------- --------------- ---------------- ---------- Net increase (decrease) in net assets resulting from operations ..................................... $ 3,390 $ 13,584 $ 20,240 $ 20,807 =============== =============== ================ ==========
See Notes to Financial Statements 90 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED SEPTEMBER 30, 2010 ($ Reported in thousands)
GLOBAL GLOBAL CA TAX-EXEMPT GLOBAL OPPORTUNITIES REAL ESTATE BOND FUND INFRASTRUCTURE FUND FUND SECURITIES FUND ------------- ------------------- ------------- --------------- INVESTMENT INCOME Dividends ..................................... $ 2 $ 3,411 $ 1,641 $ 97 Interest ...................................... 2,800 --(1) --(1) --(1) Security lending .............................. -- -- --(1) -- Foreign taxes withheld ........................ -- (241) (25) (3) ------------- ------------------- ------------- --------------- Total investment income ..................... 2,802 3,170 1,616 94 ------------- ------------------- ------------- --------------- EXPENSES Investment advisory fees ...................... 264 513 493 22 Service fees, Class A ......................... 80 81 140 4 Distribution and service fees, Class B ........ -- -- 13 -- Distribution and service fees, Class C ........ -- 71 8 2 Administration fees ........................... 66 87 65 3 Transfer agent fee and expenses ............... 36 144 141 2 Custodian fees ................................ 3 11 20 8 Printing fees and expenses .................... 8 16 11 1 Professional fees ............................. 37 31 33 32 Registration fees ............................. 28 41 37 51 Trustees' fee and expenses .................... 5 7 5 --(1) Miscellaneous expenses ........................ 10 13 10 2 ------------- ------------------- ------------- --------------- Total expenses .............................. 537 1,015 976 127 Less expenses reimbursed and/or waived by investment adviser ........................... (106) -- (48) (91) ------------- ------------------- ------------- --------------- Net expenses ................................ 431 1,015 928 36 ------------- ------------------- ------------- --------------- NET INVESTMENT INCOME (LOSS) .................. 2,371 2,155 688 58 ------------- ------------------- ------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ....... (137) (3,925) 5,782(2) 112 Net realized gain (loss) on foreign currency transactions ....................... -- 3 (2) --(1) Net change in unrealized appreciation (depreciation) on investments ................ 418 9,507 3,414 378 Net change in unrealized appreciation (depreciation) on foreign currency translation .............. -- (6) (46) --(1) Net change in foreign taxes on unrealized capital gains ................................ -- -- (207) -- ------------- ------------------- ------------- --------------- NET GAIN (LOSS) ON INVESTMENTS ................ 281 5,579 8,941 490 ------------- ------------------- ------------- --------------- Net increase (decrease) in net assets resulting from operations ................................. $ 2,652 $ 7,734 $ 9,629 $ 548 ============= =================== ============= ===============
(1) Amount is less than $500 (not reported in thousands). (2) Net of foreign capital gain taxes withheld of $7. See Notes to Financial Statements 91 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED SEPTEMBER 30, 2010 ($ Reported in thousands)
GREATER ASIA GREATER EX JAPAN EUROPEAN INTERNATIONAL OPPORTUNITIES OPPORTUNITIES HIGH YIELD INTERNATIONAL REAL ESTATE FUND FUND FUND EQUITY FUND(1) SECURITIES FUND ------------- ------------- ---------- -------------- --------------- INVESTMENT INCOME Dividends ..................................... $ 240 $ 200 $ 5 $ 3 $ 1,331 Interest ...................................... --(2) --(2) 8,404 --(2) --(2) Security lending .............................. --(2) --(2) 5 -- -- Foreign taxes withheld ........................ (18) (14) -- --(2) (70) ------------- ------------- ---------- -------------- --------------- Total investment income ................... 222 186 8,414 3 1,261 ------------- ------------- ---------- -------------- --------------- EXPENSES Investment advisory fees ...................... 79 52 605 1 281 Service fees, Class A ......................... 19 14 226 --(2) 6 Distribution and service fees, Class B ........ -- -- 8 -- -- Distribution and service fees, Class C ........ 2 2 19 --(2) 4 Administration fees ........................... 9 7 105 --(2) 32 Transfer agent fee and expenses ............... 2 --(2) 195 --(2) 19 Custodian fees ................................ 47 12 5 --(2) 15 Printing fees and expenses .................... 2 2 16 --(2) 4 Professional fees ............................. 31 30 36 14 31 Registration fees ............................. 48 47 40 2 35 Trustees' fee and expenses .................... 1 --(2) 8 --(2) 1 Miscellaneous expenses ........................ 3 2 15 --(2) 6 ------------- ------------- ---------- -------------- --------------- Total expenses ............................ 243 168 1,278 17 434 Less expenses reimbursed and/or waived by investment adviser ........................ (99) (79) -- (16) (73) ------------- ------------- ---------- -------------- --------------- Net expenses .............................. 144 89 1,278 1 361 ------------- ------------- ---------- -------------- --------------- NET INVESTMENT INCOME (LOSS) .................. 78 97 7,136 2 900 ------------- ------------- ---------- -------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ...... 1,492 390 5,255 1 (460) Net realized gain (loss) on foreign currency transactions ....................... (63) 325 -- 1 12 Net change in unrealized appreciation (depreciation on investments ................ 1,071 (287) 1,031 44 3,167 Net change in unrealized appreciation (depreciation) on foreign currency translation .. .................... (96) (162) -- (6) (33) ------------- ------------- ---------- -------------- --------------- NET GAIN (LOSS) ON INVESTMENTS 2,404 266 6,286 40 2,686 ------------- ------------- ---------- -------------- --------------- Net increase (decrease) in net assets resulting from operations ............................... $ 2,482 $ 363 $ 13,422 $ 42 $ 3,586 ============= ============= ========== ============== ===============
(1) Inception date is September 16, 2010. (2) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 92 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF OPERATIONS (CONTINUED) YEAR ENDED SEPTEMBER 30, 2010 ($ Reported in thousands)
MULTI-SECTOR PREMIUM SENIOR MARKET NEUTRAL FIXED INCOME ALPHASECTOR(TM) FLOATING RATE FUND FUND FUND(1) FUND -------------- ------------ --------------- ------------- INVESTMENT INCOME Dividends ...................................................... $ 1,366 $ 44 $ 854 $ 18 Interest ....................................................... --(2) 15,155 -- 9,220 Security lending ............................................... -- -- 7 -- Foreign taxes withheld ......................................... (48) (18) -- -- -------------- ------------ --------------- ------------- Total investment income .................................... 1,318 15,181 861 9,238 -------------- ------------ --------------- ------------- EXPENSES Investment advisory fees ....................................... 1,347 1,095 154 759(3) Service fees, Class A .......................................... 43 289 23 179 Distribution and service fees, Class B ......................... 10 137 -- -- Distribution and service fees, Class C ......................... 44 522 31 154 Administration fees ............................................ 102 228 17 141 Transfer agent fee and expenses ................................ 92 271 10 76 Custodian fees ................................................. 33 25 1 7 Printing fees and expenses ..................................... 15 30 8 17 Professional fees .............................................. 40 40 18 37 Registration fees .............................................. 57 65 16 40 Trustees' fee and expenses ..................................... 8 17 1 9 Miscellaneous expenses ......................................... 14 36 2 24 -------------- ------------ --------------- ------------- Total expenses ............................................. 1,805 2,755 281 1,443 Dividends on short sales ....................................... 1,451 -- -- -- Interest expense on short sales ................................ 364 -- -- -- Less expenses reimbursed and/or waived by investment adviser ... (255) -- (24) -- -------------- ------------ --------------- ------------- Net expenses ............................................... 3,365 2,755 257 1,443 -------------- ------------ --------------- ------------- NET INVESTMENT INCOME (LOSS) ............................... (2,047) 12,426 604 7,795 -------------- ------------ --------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .......... Net realized gain (loss) on investments ........................ 16,192 4,754 (217) 2,075 Net realized gain (loss) on securities sold short .............. (7,742) -- -- -- Net realized gain (loss) on foreign currency transactions ...... (7) (16) -- -- Net change in unrealized appreciation (depreciation) on investments ............................................... (4,264) 10,182 4,202 (1,224) Net change in unrealized appreciation (depreciation) on securities sold short ..................................... (1,522) -- -- -- Net change in unrealized appreciation (depreciation) on foreign currency translation .............................. 18 (8) -- -- -------------- ------------ --------------- ------------- NET GAIN (LOSS) ON INVESTMENTS ................................. 2,675 14,912 3,985 851 -------------- ------------ --------------- ------------- Net increase (decrease) in net assets resulting from operations ............................................... $ 628 $ 27,338 $ 4,589 $ 8,646 ============== ============ =============== =============
(1) Inception date is July 1, 2010. (2) Amount is less than $500 (not reported in thousands). (3) Includes expense reimbursement recapture of $ 58. See Note 3C in the Notes to Financial Statements. See Notes to Financial Statements 93 VIRTUS OPPORTUNITIES TRUST STATEMENT OF CHANGES IN NET ASSETS ($ Reported in thousands)
ALPHASECTOR(TM) ALLOCATION FUND ALPHASECTOR(TM) ROTATION FUND ------------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2009 2010 2009 ------------- -------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .................................. $ 523 $ 816 $ 3,659 $ 1,022 Net realized gain (loss) ...................................... (73) (6,354) (16,759) (17,763) Net change in unrealized appreciation (depreciation) .......... 2,940 4,618 26,684 13,479 ------------- -------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... 3,390 (920) 13,584 (3,262) ------------- -------------- ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ................................ (314) (590) (805) (670) Net investment income, Class B ................................ -- -- -- -- Net investment income, Class C ................................ (142) (387) (97) (424) Net investment income, Class I ................................ (17) -- (520) -- Net realized long-term gains, Class A ......................... -- (76) -- (558) Net realized long-term gains, Class C ......................... -- (69) -- (625) Net realized long-term gains, Class I ......................... -- -- -- -- ------------- -------------- ------------- ------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ..... (473) (1,122) (1,422) (2,277) ------------- -------------- ------------- ------------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ......... (263) (3,417) 149,521 (1,731) Change in net assets from share transactions, Class B ......... -- -- -- -- Change in net assets from share transactions, Class C ......... (972) (4,112) 88,764 (6,293) Change in net assets from share transactions, Class I ......... 1,979 -- 109,673 -- ------------- -------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ..... 744 (7,529) 347,958 (8,024) ------------- -------------- ------------- ------------- CAPITAL CONTRIBUTIONS Fair funds settlement(1) ...................................... -- -- -- -- ------------- -------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS ......................... 3,661 (9,571) 360,120 (13,563) NET ASSETS Beginning of period ........................................... 35,724 45,295 77,840 91,403 ------------- -------------- ------------- ------------- END OF PERIOD ................................................. $ 39,385 $ 35,724 $ 437,960 $ 77,840 ============= ============== ============= ============= Accumulated undistributed net investment income (loss) at end of period ................................................... $ 288 $ 238 $ 2,565 $ 328
(1) The Fund was a recipient of a portion of a distribution from a Fair Fund settlement established by the United States Securities and Exchange Commission. The proceeds received were a part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 94
ALTERNATIVES DIVERSIFIER FUND BOND FUND CA TAX-EXEMPT BOND FUND - ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2009 2010 2009 2010 2009 - ------------- ------------- ------------- ------------- ------------- ------------- $ 3,976 $ 3,586 $ 9,172 $ 7,987 $ 2,371 $ 2,437 (13,282) (58,276) 7,573 (2,547) (137) (140) 29,546 (2,181) 4,062 17,869 418 4,403 - ------------- ------------- ------------- ------------- ------------- ------------- 20,240 (56,871) 20,807 23,309 2,652 6,700 - ------------- ------------- ------------- ------------- ------------- ------------- (3,206) (2,270) (2,839) (1,659) (1,264) (1,359) -- -- (122) (149) -- -- (1,519) (546) (289) (179) -- -- (561) -- (5,837) (5,993) (1,100) (1,097) -- -- -- -- -- (21) -- -- -- -- -- -- -- -- -- -- -- (15) - ------------- ------------- ------------- ------------- ------------- ------------- (5,286) (2,816) (9,087) (7,980) (2,364) (2,492) - ------------- ------------- ------------- ------------- ------------- ------------- (59,963) (58,940) (2,777) 38,228 (1,898) (2,877) -- -- (1,582) (197) -- -- (21,365) (18,076) 164 4,714 -- -- 29,962 -- (31,771) (7,351) 2,372 (4,081) - ------------- ------------- ------------- ------------- ------------- ------------- (51,366) (77,016) (35,966) 35,394 474 (6,958) - ------------- ------------- ------------- ------------- ------------- ------------- -- -- -- 37 -- 12 - ------------- ------------- ------------- ------------- ------------- ------------- (36,412) (136,703) (24,246) 50,760 762 (2,738) 268,555 405,258 223,327 172,567 59,352 62,090 - ------------- ------------- ------------- ------------- ------------- ------------- $ 232,143 $ 268,555 $ 199,081 $ 223,327 $ 60,114 $ 59,352 ============= ============= ============= ============= ============= ============= $ 638 $ 1,804 $ 145 $ 82 $ 58 $ 51
See Notes to Financial Statements 95 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
GLOBAL INFRASTRUCTURE FUND GLOBAL OPPORTUNITIES FUND ------------------------------ ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2009 2010 2009 ------------- ------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .................................. $ 2,155 $ 2,363 $ 688 $ 600 Net realized gain (loss) ...................................... (3,922) (10,235) 5,780 (31,976) Net change in unrealized appreciation (depreciation) .......... 9,501 6,299 3,161 19,640 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... 7,734 (1,573) 9,629 (11,736) ------------- ------------- ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ................................ (855) (2,172) (614) (729) Net investment income, Class B ................................ -- -- (11) (16) Net investment income, Class C ................................ (148) (103) (6) (9) Net investment income, Class I ................................ (1,200) (8) -- -- Net realized short-term gains, Class A ........................ -- -- -- -- Net realized short-term gains, Class C ........................ -- -- -- -- Net realized short-term gains, Class I ........................ -- -- -- -- Net realized long-term gains, Class A ......................... -- (448) -- -- Net realized long-term gains, Class C ......................... -- (12) -- -- Net realized long-term gains, Class I ......................... -- (1) -- -- ------------- ------------- ------------- ------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ..... (2,203) (2,744) (631) (754) ------------- ------------- ------------- ------------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ......... (53,591) 6,209 (3,220) (7,674) Change in net assets from share transactions, Class B ......... -- -- (288) (572) Change in net assets from share transactions, Class C ......... 499 3,849 (91) (163) Change in net assets from share transactions, Class I ......... 33,028 238 -- -- ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ..... (20,064) 10,296 (3,599) (8,409) ------------- ------------- ------------- ------------- CAPITAL CONTRIBUTIONS Fair funds settlement(2) ...................................... -- -- -- 157 ------------- ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS ......................... (14,533) 5,979 5,399 (20,742) NET ASSETS Beginning of period ........................................... 83,581 77,602 55,789 76,531 ------------- ------------- ------------- ------------- END OF PERIOD ................................................. $ 69,048 $ 83,581 $ 61,188 $ 55,789 ============= ============= ============= ============= Accumulated undistributed net investment income (loss) at end of period ................................................... $ 116 $ 161 $ 1,210 $ 528
(1) Amount is less than $500 (not reported in thousands). (2) The Fund was a recipient of a portion of a distribution from a Fair Fund settlement established by the United States Securities and Exchange Commission. The proceeds received were a part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 96
GLOBAL REAL ESTATE GREATER ASIA EX JAPAN GREATER EUROPEAN SECURITIES FUND OPPORTUNITIES FUND OPPORTUNITIES FUND HIGH YIELD FUND - ------------------------------- -------------------------------- -------------------------------- ---------------------------- FROM FROM FROM INCEPTION INCEPTION INCEPTION YEAR ENDED MARCH 2, 2009 TO YEAR ENDED APRIL 21, 2009 TO YEAR ENDED APRIL 21, 2009 TO YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2009 2010 2009 2010 2009 2010 2009 - ------------- ---------------- ------------- ----------------- ------------- ----------------- ------------- ------------- $ 58 $ 30 $ 78 $ 48 $ 97 $ 61 $ 7,136 $ 7,387 112 94 1,429 146 715 65 5,255 (18,245) 378 731 975 1,333 (449) 1,368 1,031 16,375 --------- --------- --------- --------- --------- --------- --------- --------- 548 855 2,482 1,527 363 1,494 13,422 5,517 --------- --------- --------- --------- --------- --------- --------- --------- (136) -- (66) -- (71) -- (6,934) (7,268) -- -- -- -- -- -- (57) (81) (16) -- (1) -- (2) -- (131) (102) (44) -- (2) -- (2) -- -- -- (54) -- (159) -- (203) -- -- -- (7) -- (3) -- (7) -- -- -- (17) -- (3) -- (4) -- -- -- (3) -- -- -- -- -- -- -- --(1) -- -- -- -- -- -- -- (1) -- -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- --------- --------- (278) -- (234) -- (289) -- (7,122) (7,451) --------- --------- --------- --------- --------- --------- --------- --------- 717 899 1,746 4,964 (1,673) 4,809 4,645 (524) -- -- -- -- -- -- (410) (271) 47 109 224 100 (56) 159 409 155 435 100 24 100 6 100 -- -- --------- --------- --------- --------- --------- --------- --------- --------- 1,199 1,108 1,994 5,164 (1,723) 5,068 4,644 (640) --------- --------- --------- --------- --------- --------- --------- --------- -- -- -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- --------- --------- 1,469 1,963 4,242 6,691 (1,649) 6,562 10,944 (2,574) 1,963 -- 6,691 -- 6,562 -- 93,164 95,738 --------- --------- --------- --------- --------- --------- --------- --------- $ 3,432 $ 1,963 $ 10,933 $ 6,691 $ 4,913 $ 6,562 $ 104,108 $ 93,164 ========= ========= ========= ========= ========= ========= ========= ========= $ (72) $ 42 $ 204 $ 69 $ 69 $ 46 $ 135 $ 122
See Notes to Financial Statements 97 VIRTUS OPPORTUNITIES TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ($ Reported in thousands)
INTERNATIONAL INTERNATIONAL REAL ESTATE EQUITY FUND SECURITIES FUND -------------- ----------------------------- FROM INCEPTION SEPTEMBER 16, 2010 TO YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2010 2009 -------------- ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) .................................. $ 2 $ 900 $ 1,719 Net realized gain (loss) ...................................... 2 (448) (23,503) Net change in unrealized appreciation (depreciation) .......... 38 3,134 11,782 -------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... 42 3,586 (10,002) -------------- ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ................................ -- (145) (1,995) Net investment income, Class B ................................ -- -- -- Net investment income, Class C ................................ -- (35) (15) Net investment income, Class I ................................ -- (2,179) (3) Net realized short-term gains, Class A ........................ -- -- -- Net realized short-term gains, Class C ........................ -- -- -- Net realized short-term gains, Class I ........................ -- -- -- -------------- ------------- ------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ..... -- (2,359) (2,013) -------------- ------------- ------------- FROM SHARE TRANSACTIONS (SEE NOTE 5) Change in net assets from share transactions, Class A ......... 100 (28,793) (16,660) Change in net assets from share transactions, Class B ......... -- -- -- Change in net assets from share transactions, Class C ......... 100 64 212 Change in net assets from share transactions, Class I ......... 7,030 21,860 8 -------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ..... 7,230 (6,869) (16,440) -------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS ......................... 7,272 (5,642) (28,455) NET ASSETS Beginning of period ........................................... -- 32,662 61,117 -------------- ------------- ------------- END OF PERIOD ................................................. $ 7,272 $ 27,020 $ 32,662 ============== ============= ============= Accumulated undistributed net investment income (loss) at end of period ................................................... $ 3 $ (750) $ 207
See Notes to Financial Statements 98
PREMIUM MARKET NEUTRAL FUND MULTI-SECTOR FIXED INCOME FUND ALPHASECTOR(TM) FUND SENIOR FLOATING RATE FUND - ------------------------------ ------------------------------ -------------------- ------------------------------ FROM INCEPTION YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JULY 1, 2010 TO YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2010 2009 2010 2009 2010 2010 2009 - ------------- ------------- ------------- ------------- -------------------- ------------- ------------- $ (2,047) $ (2,043) $ 12,426 $ 7,746 $ 604 $ 7,795 $ 1,958 8,443 (795) 4,738 (9,528) (217) 2,075 923 (5,768) 8,585 10,174 24,573 4,202 (1,224) 5,291 --------- --------- --------- --------- --------- --------- --------- 628 5,747 27,338 22,791 4,589 8,646 8,172 --------- --------- --------- --------- --------- --------- --------- -- -- (7,296) (6,623) -- (4,573) (1,919) -- -- (762) (854) -- -- -- -- -- (2,891) (1,656) -- (897) (51) -- -- (1,149) -- -- (2,034) (18) -- -- -- -- -- (551) (56) -- -- -- -- -- (103) (2) -- -- -- -- -- (552) (1) --------- --------- --------- --------- --------- --------- --------- -- -- (12,098) (9,133) -- (8,710) (2,047) --------- --------- --------- --------- --------- --------- --------- (57,358) (50,048) (4,905) 25,286 86,114 45,570 32,707 (765) (336) (745) 169 -- -- -- (182) (793) 16,774 19,964 28,722 27,500 2,212 69,968 -- 6,417 -- 23,904 32,458 137 --------- --------- --------- --------- --------- --------- --------- 11,663 (51,177) 17,541 45,419 138,740 105,528 35,056 --------- --------- --------- --------- --------- --------- --------- 12,291 (45,430) 32,781 59,077 143,329 105,464 41,181 80,618 126,048 176,618 117,541 -- 56,121 14,940 --------- --------- --------- --------- --------- --------- --------- $ 92,909 $ 80,618 $ 209,399 $ 176,618 $ 143,329 $ 161,585 $ 56,121 ========= ========= ========= ========= ========= ========= ========= $ (7) $ (3) $ 1,031 $ 223 $ 604 $ 306 $ --
See Notes to Financial Statements 99 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CAPITAL GAIN NET DISTRIBUTIONS REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET RECEIVED AND TOTAL FROM FROM VALUE, INVESTMENT FROM UNREALIZED FROM NET NET BEGINNING INCOME AFFILIATED GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) FUNDS(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ------------------------------------------------------------------------------------------------------- - -------------------------- ALPHASECTOR(TM) ALLOCATION FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 $ 9.56 0.17 -- 0.78 0.95 (0.16) -- (0.16) 10/1/08 to 9/30/09 9.78 0.23 -- (0.15) 0.08 (0.27) (0.03) (0.30) 10/1/07 to 9/30/08 12.01 0.26 0.19 (2.32) (1.87) (0.26) (0.10) (0.36) 8/1/07 to 9/30/07 12.02 0.02 -- 0.40 0.42 (0.05) (0.38) (0.43) 8/1/06 to 7/31/07 11.31 0.27 0.46 0.59 1.32 (0.43) (0.18) (0.61) 8/1/05 to 7/31/06 11.61 0.22 0.10 0.18 0.50 (0.23) (0.57) (0.80) CLASS C 10/1/09 to 9/30/10 $ 9.54 0.09 -- 0.78 0.87 (0.08) -- (0.08) 10/1/08 to 9/30/09 9.75 0.16 -- (0.14) 0.02 (0.20) (0.03) (0.23) 10/1/07 to 9/30/08 11.98 0.18 0.20 (2.33) (1.95) (0.18) (0.10) (0.28) 8/1/07 to 9/30/07 12.00 0.01 -- 0.40 0.41 (0.05) (0.38) (0.43) 8/1/06 to 7/31/07 11.30 0.18 0.46 0.58 1.22 (0.34) (0.18) (0.52) 8/1/05 to 7/31/06 11.60 0.12 0.10 0.19 0.41 (0.14) (0.57) (0.71) CLASS I 10/1/09(6) to 9/30/10 $ 9.39 0.24 -- 0.91 1.15 (0.18) -- (0.18) - -------------------------- ALPHASECTOR(TM) ROTATION FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 $ 9.34 0.14 -- 0.76 0.90 (0.06) -- (0.06) 10/1/08 to 9/30/09 9.95 0.15 -- (0.48) (0.33) (0.15) (0.13) (0.28) 10/1/07 to 9/30/08 12.81 0.18 0.29 (2.92) (2.45) (0.24) (0.17) (0.41) 8/1/07 to 9/30/07 12.91 0.02 -- 0.53 0.55 (0.03) (0.62) (0.65) 8/1/06 to 7/31/07 11.89 0.20 0.60 0.86 1.66 (0.42) (0.22) (0.64) 8/1/05 to 7/31/06 12.07 0.15 0.12 0.40 0.67 (0.16) (0.69) (0.85) CLASS C 10/1/09 to 9/30/10 $ 9.29 0.07 -- 0.75 0.82 (0.02) -- (0.02) 10/1/08 to 9/30/09 9.88 0.08 -- (0.45) (0.37) (0.09) (0.13) (0.22) 10/1/07 to 9/30/08 12.74 0.09 0.30 (2.92) (2.53) (0.16) (0.17) (0.33) 8/1/07 to 9/30/07 12.85 --(5) -- 0.54 0.54 (0.03) (0.62) (0.65) 8/1/06 to 7/31/07 11.84 0.10 0.60 0.86 1.56 (0.33) (0.22) (0.55) 8/1/05 to 7/31/06 12.02 0.06 0.12 0.40 0.58 (0.07) (0.69) (0.76) CLASS I 10/1/09(6) to 9/30/10 $ 9.11 0.20 -- 0.94 1.14 (0.07) -- (0.07) RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) -------------------------------------------------------------------------------- - -------------------------- ALPHASECTOR(TM) ALLOCATION FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 0.79 $10.35 10.02% $ 20,295 1.08% 1.17% 10/1/08 to 9/30/09 (0.22) 9.56 1.33 18,989 0.59 0.59 10/1/07 to 9/30/08 (2.23) 9.78 (15.94) 23,358 0.22(7) 0.47 8/1/07 to 9/30/07 (0.01) 12.01 3.48(4) 29,742 0.27(3) 0.48(3) 8/1/06 to 7/31/07 0.71 12.02 11.82 29,304 0.05 0.46 8/1/05 to 7/31/06 (0.30) 11.31 4.43 24,768 0.26(7) 0.56 CLASS C 10/1/09 to 9/30/10 0.79 $10.33 9.20% $ 17,066 1.83% 1.92% 10/1/08 to 9/30/09 (0.21) 9.54 0.59 16,735 1.34 1.34 10/1/07 to 9/30/08 (2.23) 9.75 (16.59) 21,937 0.97(7) 1.22 8/1/07 to 9/30/07 (0.02) 11.98 3.40(4) 32,320 1.01(3) 1.23(3) 8/1/06 to 7/31/07 0.70 12.00 10.90 32,286 0.80 1.21 8/1/05 to 7/31/06 (0.30) 11.30 3.63 33,776 1.03(7) 1.31 CLASS I 10/1/09(6) to 9/30/10 0.97 $10.36 12.34%(4) $ 2,024 0.89%(3) 0.97%(3) - -------------------------- ALPHASECTOR(TM) ROTATION FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 0.84 $10.18 9.63% $192,375 1.06% 1.06% 10/1/08 to 9/30/09 (0.61) 9.34 (2.81) 37,722 0.64 0.64 10/1/07 to 9/30/08 (2.86) 9.95 (19.66) 41,396 0.21(7) 0.45 8/1/07 to 9/30/07 (0.10) 12.81 4.23(4) 58,663 0.26(3) 0.49(3) 8/1/06 to 7/31/07 1.02 12.91 14.16 56,857 0.06 0.45 8/1/05 to 7/31/06 (0.18) 11.89 5.76 51,755 0.20(7) 0.45 CLASS C 10/1/09 to 9/30/10 0.80 $10.09 8.79% $133,453 1.81% 1.81% 10/1/08 to 9/30/09 (0.59) 9.29 (3.41) 40,118 1.38 1.38 10/1/07 to 9/30/08 (2.86) 9.88 (20.35) 50,007 0.96(7) 1.20 8/1/07 to 9/30/07 (0.11) 12.74 4.17(4) 77,181 1.01(3) 1.24(3) 8/1/06 to 7/31/07 1.01 12.85 13.29 76,049 0.80 1.20 8/1/05 to 7/31/06 (0.18) 11.84 4.99 75,168 0.96(7) 1.19 CLASS I 10/1/09(6) to 9/30/10 1.07 $10.18 12.63%(4) $112,132 0.83%(3) 0.83%(3) RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE -------------------------- - -------------------------- ALPHASECTOR(TM) ALLOCATION FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 1.73% 147% 10/1/08 to 9/30/09 2.71 111 10/1/07 to 9/30/08 2.36 24 8/1/07 to 9/30/07 1.15(3) 2(4) 8/1/06 to 7/31/07 2.28 41 8/1/05 to 7/31/06 1.92 67 CLASS C 10/1/09 to 9/30/10 0.95% 147% 10/1/08 to 9/30/09 1.92 111 10/1/07 to 9/30/08 1.64 24 8/1/07 to 9/30/07 0.39(3) 2(4) 8/1/06 to 7/31/07 1.53 41 8/1/05 to 7/31/06 1.08 67 CLASS I 10/1/09(6) to 9/30/10 2.44%(3) 147% - ------------------------- ALPHASECTOR(TM) ROTATION FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 1.41% 245% 10/1/08 to 9/30/09 1.80 131 10/1/07 to 9/30/08 1.57 23 8/1/07 to 9/30/07 0.72(3) 2(4) 8/1/06 to 7/31/07 1.54 43 8/1/05 to 7/31/06 1.25 74 CLASS C 10/1/09 to 9/30/10 0.68% 245% 10/1/08 to 9/30/09 1.03 131 10/1/07 to 9/30/08 0.81 23 8/1/07 to 9/30/07 (0.03)(3) 2(4) 8/1/06 to 7/31/07 0.79 43 8/1/05 to 7/31/06 0.48 74 CLASS I 10/1/09(6) to 9/30/10 2.04%(3) 245%
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 100 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CAPITAL GAIN NET DISTRIBUTIONS REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET RECEIVED AND TOTAL FROM FROM VALUE, INVESTMENT FROM UNREALIZED FROM NET NET BEGINNING INCOME AFFILIATED GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) FUNDS (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ------------------------------------------------------------------------------------------------- - ------------------------ ALTERNATIVES DIVERSIFIER FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 $ 9.43 0.18 0.02(2) 0.64 0.84 (0.22) -- (0.22) 10/1/08 to 9/30/09 10.62 0.13 0.01(2) (1.22) (1.08) (0.11) -- (0.11) 10/1/07 to 9/30/08 11.80 0.10 0.11(2) (1.25) (1.04) (0.14) -- (0.14) 8/1/07 to 9/30/07 11.15 0.03 -- 0.69 0.72 (0.01) (0.06) (0.07) 8/1/06 to 7/31/07 10.63 0.18 0.13(2) 0.41(9) 0.72 (0.20) --(5) (0.20) 11/30/05(6) to 7/31/06 10.00 0.08 0.02(2) 0.57 0.67 (0.04) -- (0.04) CLASS C 10/1/09 to 9/30/10 $ 9.34 0.10 0.02(2) 0.64 0.76 (0.15) -- (0.15) 10/1/08 to 9/30/09 10.50 0.07 0.01(2) (1.19) (1.11) (0.05) -- (0.05) 10/1/07 to 9/30/08 11.70 0.02 0.12(2) (1.27) (1.13) (0.07) -- (0.07) 8/1/07 to 9/30/07 11.07 0.02 -- 0.68 0.70 (0.01) (0.06) (0.07) 8/1/06 to 7/31/07 10.58 0.11 0.14(2) 0.38(9) 0.63 (0.14) --(5) (0.14) 11/30/05(6) to 7/31/06 10.00 0.03 0.04(2) 0.54 0.61 (0.03) -- (0.03) CLASS I 10/1/09(6) to 9/30/10 $ 9.27 0.18 0.01(2) 0.84 1.03 (0.24) -- (0.24) - --------- BOND FUND - --------- CLASS A 10/1/09 to 9/30/10 $10.57 0.46 -- 0.62 1.08 (0.47) -- (0.47) 10/1/08 to 9/30/09 9.75 0.42 -- 0.82 1.24 (0.42) -- (0.42) 10/1/07 to 9/30/08 10.21 0.42 -- (0.45) (0.03) (0.43) -- (0.43) 10/1/06 to 9/30/07 10.27 0.44 -- (0.05) 0.39 (0.45) -- (0.45) 10/1/05 to 9/30/06 10.46 0.43 -- (0.06) 0.37 (0.41) (0.15) (0.56) CLASS B 10/1/09 to 9/30/10 $10.34 0.37 -- 0.60 0.97 (0.38) -- (0.38) 10/1/08 to 9/30/09 9.55 0.34 -- 0.80 1.14 (0.35) -- (0.35) 10/1/07 to 9/30/08 10.01 0.33 -- (0.43) (0.10) (0.36) -- (0.36) 10/1/06 to 9/30/07 10.07 0.35 -- (0.04) 0.31 (0.37) -- (0.37) 10/1/05 to 9/30/06 10.28 0.34 -- (0.06) 0.28 (0.34) (0.15) (0.49) CLASS C 10/1/09 to 9/30/10 $10.37 0.37 -- 0.60 0.97 (0.38) -- (0.38) 10/1/08 to 9/30/09 9.58 0.34 -- 0.80 1.14 (0.35) -- (0.35) 10/1/07 to 9/30/08 10.04 0.31 -- (0.41) (0.10) (0.36) -- (0.36) 10/1/06 to 9/30/07 10.09 0.35 -- (0.03) 0.32 (0.37) -- (0.37) 10/1/05 to 9/30/06 10.30 0.34 -- (0.06) 0.28 (0.34) (0.15) (0.49) CLASS I 10/1/09 to 9/30/10 $10.68 0.49 -- 0.62 1.11 (0.49) -- (0.49) 10/1/08 to 9/30/09 9.86 0.45 -- 0.83 1.28 (0.46) -- (0.46) 10/1/07 to 9/30/08 10.32 0.53 -- (0.54) (0.01) (0.45) -- (0.45) 10/1/06 to 9/30/07 10.36 0.46 -- (0.02) 0.44 (0.48) -- (0.48) 10/1/05 to 9/30/06 10.56 0.47 -- (0.08) 0.39 (0.44) (0.15) (0.59) RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) -------------------------------------------------------------------------------- - ------------------------ ALTERNATIVES DIVERSIFIER FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 0.62 $10.05 8.91% $115,081 0.45% 0.75% 10/1/08 to 9/30/09 (1.19) 9.43 (10.00) 167,472 0.29 0.58 10/1/07 to 9/30/08 (1.18) 10.62 (8.94) 267,294 0.31 0.52 8/1/07 to 9/30/07 0.65 11.80 6.45(4) 109,620 0.34(3) 0.54(3) 8/1/06 to 7/31/07 0.52 11.15 6.76 95,230 0.26 0.51 11/30/05(6) to 7/31/06 0.63 10.63 6.72(4) 1,231 0.20(3) 31.52(3) CLASS C 10/1/09 to 9/30/10 0.61 $ 9.95 8.06% $ 85,330 1.20% 1.50% 10/1/08 to 9/30/09 (1.16) 9.34 (10.55) 101,083 1.04 1.33 10/1/07 to 9/30/08 (1.20) 10.50 (9.71) 137,964 1.06 1.27 8/1/07 to 9/30/07 0.63 11.70 6.32(4) 68,343 1.09(3) 1.29(3) 8/1/06 to 7/31/07 0.49 11.07 6.01 60,669 1.01 1.26 11/30/05(6) to 7/31/06 0.58 10.58 6.16(4) 581 0.95(3) 46.88(3) CLASS I 10/1/09(6) to 9/30/10 0.79 $10.06 11.11%(4) $ 31,732 0.20%(3) 0.51%(3) - --------- BOND FUND - --------- CLASS A 10/1/09 to 9/30/10 0.61 $11.18 10.42% $ 67,147 0.84%(11) 0.98% 10/1/08 to 9/30/09 0.82 10.57 13.12 66,232 0.85 1.01 10/1/07 to 9/30/08 (0.46) 9.75 (0.49) 23,823 1.12(7) 1.17 10/1/06 to 9/30/07 (0.06) 10.21 4.09 29,077 1.12 1.12 10/1/05 to 9/30/06 (0.19) 10.27 3.51 28,022 1.11 1.15 CLASS B 10/1/09 to 9/30/10 0.59 $10.93 9.60% $ 2,812 1.59%(11) 1.72% 10/1/08 to 9/30/09 0.79 10.34 12.23 4,212 1.59 1.75 10/1/07 to 9/30/08 (0.46) 9.55 (1.23) 4,075 1.87(7) 1.92 10/1/06 to 9/30/07 (0.06) 10.01 3.26 4,294 1.87 1.87 10/1/05 to 9/30/06 (0.21) 10.07 2.80 5,459 1.88 2.30 CLASS C 10/1/09 to 9/30/10 0.59 $10.96 9.57% $ 8,663 1.59%(11) 1.73% 10/1/08 to 9/30/09 0.79 10.37 12.19 8,048 1.59 1.75 10/1/07 to 9/30/08 (0.46) 9.58 (1.14) 2,839 1.86(7) 1.92 10/1/06 to 9/30/07 (0.05) 10.04 3.25 1,534 1.87 1.87 10/1/05 to 9/30/06 (0.21) 10.09 2.79 1,401 1.88 3.44 CLASS I 10/1/09 to 9/30/10 0.62 $11.30 10.65% $120,459 0.59%(11) 0.73% 10/1/08 to 9/30/09 0.82 10.68 13.34 144,835 0.59 0.75 10/1/07 to 9/30/08 (0.46) 9.86 (0.16) 141,830 0.76(7) 0.85 10/1/06 to 9/30/07 (0.04) 10.32 4.32 52,044 0.87 0.87 10/1/05 to 9/30/06 (0.20) 10.36 3.84 63,156 0.82 0.82 RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE -------------------------- - ------------------------- ALTERNATIVES DIVERSIFIER FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 1.87% 4% 10/1/08 to 9/30/09 1.62 20 10/1/07 to 9/30/08 0.89 32 8/1/07 to 9/30/07 1.74(3) 18(4) 8/1/06 to 7/31/07 1.61 11 11/30/05(6) to 7/31/06 1.11(3) 81(4) CLASS C 10/1/09 to 9/30/10 1.07% 4% 10/1/08 to 9/30/09 0.91 20 10/1/07 to 9/30/08 0.14 32 8/1/07 to 9/30/07 0.99(3) 18(4) 8/1/06 to 7/31/07 0.93 11 11/30/05(6) to 7/31/06 0.38(3) 81(4) CLASS I 10/1/09(6) to 9/30/10 1.83%(3) 4% - --------- BOND FUND - --------- CLASS A 10/1/09 to 9/30/10 4.26% 160% 10/1/08 to 9/30/09 4.15 274 10/1/07 to 9/30/08 4.10 325 10/1/06 to 9/30/07 4.25 266 10/1/05 to 9/30/06 4.21 275 CLASS B 10/1/09 to 9/30/10 3.50% 160% 10/1/08 to 9/30/09 3.52 274 10/1/07 to 9/30/08 3.35 325 10/1/06 to 9/30/07 3.49 266 10/1/05 to 9/30/06 3.43 275 CLASS C 10/1/09 to 9/30/10 3.50% 160% 10/1/08 to 9/30/09 3.43 274 10/1/07 to 9/30/08 3.33 325 10/1/06 to 9/30/07 3.50 266 10/1/05 to 9/30/06 3.41 275 CLASS I 10/1/09 to 9/30/10 4.51% 160% 10/1/08 to 9/30/09 4.52 274 10/1/07 to 9/30/08 4.38 325 10/1/06 to 9/30/07 4.49 266 10/1/05 to 9/30/06 4.59 275
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 101 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ---------------------------------------------------------------------------------------- - ----------------------- CA TAX-EXEMPT BOND FUND - ----------------------- CLASS A 10/1/09 to 9/30/10 $12.29 0.48 0.04 0.52 (0.47) -- (0.47) 10/1/08 to 9/30/09 11.41 0.47 0.90 1.37 (0.48) (0.01) (0.49) 10/1/07 to 9/30/08 12.09 0.46 (0.68) (0.22) (0.46) -- (0.46) 5/1/07 to 9/30/07 12.26 0.19 (0.17) 0.02 (0.18) (0.01) (0.19) 5/1/06 to 4/30/07 12.19 0.47 0.18 0.65 (0.48) (0.10) (0.58) 5/1/05 to 4/30/06 12.71 0.49 (0.39) 0.10 (0.49) (0.13) (0.62) CLASS I 10/1/09 to 9/30/10 $ 12.28 0.51 0.04 0.55 (0.50) -- (0.50) 10/1/08 to 9/30/09 11.41 0.50 0.88 1.38 (0.50) (0.01) (0.51) 10/1/07 to 9/30/08 12.08 0.49 (0.67) (0.18) (0.49) -- (0.49) 5/1/07 to 9/30/07 12.25 0.20 (0.17) 0.03 (0.19) (0.01) (0.20) 9/29/06(6) to 4/30/07 12.43 0.28 (0.06) 0.22 (0.30) (0.10) (0.40) - -------------------------- GLOBAL INFRASTRUCTURE FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 $ 9.97 0.26 0.77 1.03 (0.29) -- (0.29) 10/1/08 to 9/30/09 10.91 0.31 (0.87) (0.56) (0.30) (0.08) (0.38) 10/1/07 to 9/30/08 13.70 0.31 (2.31) (2.00) (0.28) (0.51) (0.79) 5/1/07 to 9/30/07 13.66 0.18 0.23 0.41 (0.23) (0.14) (0.37) 5/1/06 to 4/30/07 10.60 0.44 3.03 3.47 (0.41) -- (0.41) 5/1/05 to 4/30/06 10.13 0.42 0.44 0.86 (0.39) -- (0.39) CLASS C 10/1/09 to 9/30/10 $ 9.95 0.20 0.75 0.95 (0.21) -- (0.21) 10/1/08 to 9/30/09 10.89 0.26 (0.89) (0.63) (0.23) (0.08) (0.31) 10/1/07 to 9/30/08 13.66 0.23 (2.31) (2.08) (0.18) (0.51) (0.69) 5/1/07 to 9/30/07 13.62 0.14 0.22 0.36 (0.18) (0.14) (0.32) 5/1/06 to 4/30/07 10.57 0.37 3.01 3.38 (0.33) -- (0.33) 5/1/05 to 4/30/06 10.12 0.35 0.43 0.78 (0.33) -- (0.33) CLASS I 10/1/09 to 9/30/10 $ 9.96 0.31 0.76 1.07 (0.31) -- (0.31) 10/1/08 to 9/30/09 10.90 0.34 (0.87) (0.53) (0.33) (0.08) (0.41) 6/6/08(6) to 9/30/08 13.41 0.07 (2.40) (2.33) (0.18) -- (0.18) - ------------------------- GLOBAL OPPORTUNITIES FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 $ 6.67 0.09 1.11 1.20 (0.08) -- (0.08) 10/1/08 to 9/30/09 7.82 0.07 (1.14) (1.07) (0.08) -- (0.08) 10/1/07 to 9/30/08 11.59 0.13 (3.59) (3.46) (0.09) (0.22) (0.31) 7/1/07 to 9/30/07 12.15 0.02 0.20 0.22 (0.08) (0.70) (0.78) 7/1/06 to 6/30/07 9.86 0.11 2.30 2.41 (0.12) -- (0.12) 7/1/05 to 6/30/06 8.38 0.07 1.51 1.58 (0.10) -- (0.10) RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ---------------------------------------------------------------------------------------- - ----------------------- CA TAX-EXEMPT BOND FUND - ----------------------- CLASS A 10/1/09 to 9/30/10 0.05 $12.34 4.43% $ 31,945 0.85% 1.03% 10/1/08 to 9/30/09 0.88 12.29 12.31 33,728 0.85 1.02 10/1/07 to 9/30/08 (0.68) 11.41 (1.94) 34,197 0.85 1.01 5/1/07 to 9/30/07 (0.17) 12.09 0.18(4) 39,094 0.88(3) 1.05(3) 5/1/06 to 4/30/07 0.07 12.26 5.40 42,243 0.87 1.10 5/1/05 to 4/30/06 (0.52) 12.19 0.71 46,214 1.02(7) 1.28 CLASS I 10/1/09 to 9/30/10 0.05 $12.33 4.69% $ 28,169 0.60% 0.78% 10/1/08 to 9/30/09 0.87 12.28 12.50 25,624 0.60 0.77 10/1/07 to 9/30/08 (0.67) 11.41 (1.61) 27,893 0.60 0.76 5/1/07 to 9/30/07 (0.17) 12.08 0.30(4) 28,277 0.64(3) 0.80(3) 9/29/06(6) to 4/30/07 (0.18) 12.25 1.79(4) 28,952 0.64(3) 0.79(3) - -------------------------- GLOBAL INFRASTRUCTURE FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 0.74 $10.71 10.48% $ 24,794 1.33% 1.33% 10/1/08 to 9/30/09 (0.94) 9.97 (4.76) 77,049 1.31 1.33 10/1/07 to 9/30/08 (2.79) 10.91 (15.63) 75,664 1.15 1.22 5/1/07 to 9/30/07 0.04 13.70 3.02(4) 57,938 1.19(3) 1.25(3) 5/1/06 to 4/30/07 3.06 13.66 33.74 51,190 1.17 1.40 5/1/05 to 4/30/06 0.47 10.60 8.66 14,298 1.15 2.72 CLASS C 10/1/09 to 9/30/10 0.74 $10.69 9.70% $ 7,160 2.10% 2.10% 10/1/08 to 9/30/09 (0.94) 9.95 (5.49) 6,188 2.09 2.10 10/1/07 to 9/30/08 (2.77) 10.89 (16.18) 1,856 1.90 1.97 5/1/07 to 9/30/07 0.04 13.66 2.72(4) 1,964 1.95(3) 2.00(3) 5/1/06 to 4/30/07 3.05 13.62 32.55 1,769 1.91 2.19 5/1/05 to 4/30/06 0.45 10.57 7.87 1,108 1.90 3.54 CLASS I 10/1/09 to 9/30/10 0.76 $10.72 10.96% $ 37,094 1.10% 1.10% 10/1/08 to 9/30/09 (0.94) 9.96 (4.54) 344 1.09 1.10 6/6/08(6) to 9/30/08 (2.51) 10.90 (17.51)(4) 82 0.90(3) 1.01(3) - ------------------------- GLOBAL OPPORTUNITIES FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 1.12 $ 7.79 18.09% $ 59,088 1.57%(7) 1.66% 10/1/08 to 9/30/09 (1.15) 6.67 (13.53) 53,644 1.86 1.86 10/1/07 to 9/30/08 (3.77) 7.82 (30.50) 73,003 1.65 1.65 7/1/07 to 9/30/07 (0.56) 11.59 1.93(4) 116,983 1.60(3) 1.60(3) 7/1/06 to 6/30/07 2.29 12.15 24.61 117,709 1.61 1.64 7/1/05 to 6/30/06 1.48 9.86 18.90 102,783 1.60 1.70 RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE ------------------------------- - ------------------------ CA TAX-EXEMPT BOND FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 3.94% 10% 10/1/08 to 9/30/09 4.10 8 10/1/07 to 9/30/08 3.82 10 5/1/07 to 9/30/07 3.74(3) 4(4) 5/1/06 to 4/30/07 3.81 19 5/1/05 to 4/30/06 3.89 8 CLASS I 10/1/09 to 9/30/10 4.19% 10% 10/1/08 to 9/30/09 4.35 8 10/1/07 to 9/30/08 4.07 10 5/1/07 to 9/30/07 3.99(3) 4(4) 9/29/06(6) to 4/30/07 3.90(3) 19(4) - -------------------------- GLOBAL INFRASTRUCTURE FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 2.51% 22% 10/1/08 to 9/30/09 3.50 46 10/1/07 to 9/30/08 2.39 60 5/1/07 to 9/30/07 3.23(3) 29(4) 5/1/06 to 4/30/07 3.64 21 5/1/05 to 4/30/06 4.06 40 CLASS C 10/1/09 to 9/30/10 1.98% 22% 10/1/08 to 9/30/09 2.85 46 10/1/07 to 9/30/08 1.72 60 5/1/07 to 9/30/07 2.47(3) 29(4) 5/1/06 to 4/30/07 3.11 21 5/1/05 to 4/30/06 3.38 40 CLASS I 10/1/09 to 9/30/10 3.04% 22% 10/1/08 to 9/30/09 3.80 46 6/6/08(6) to 9/30/08 1.83(3) 60(4) - ------------------------- GLOBAL OPPORTUNITIES FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 1.21% 78% 10/1/08 to 9/30/09 1.16 168 10/1/07 to 9/30/08 1.31 62 7/1/07 to 9/30/07 0.59(3) 15(4) 7/1/06 to 6/30/07 1.01 74 7/1/05 to 6/30/06 0.76 124
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 102 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ---------------------------------------------------------------------------------------- - ------------------------- GLOBAL OPPORTUNITIES FUND (CONTINUED) - ------------------------- CLASS B 10/1/09 to 9/30/10 $ 6.00 0.03 0.99 1.02 (0.05) -- (0.05) 10/1/08 to 9/30/09 7.06 0.02 (1.02) (1.00) (0.06) -- (0.06) 10/1/07 to 9/30/08 10.48 0.04 (3.22) (3.18) (0.02) (0.22) (0.24) 7/1/07 to 9/30/07 11.04 --(5) 0.18 0.18 (0.04) (0.70) (0.74) 7/1/06 to 6/30/07 8.98 0.02 2.10 2.12 (0.06) -- (0.06) 7/1/05 to 6/30/06 7.65 --(5) 1.37 1.37 (0.04) -- (0.04) CLASS C 10/1/09 to 9/30/10 $ 5.97 0.03 0.98 1.01 (0.05) -- (0.05) 10/1/08 to 9/30/09 7.03 0.02 (1.02) (1.00) (0.06) -- (0.06) 10/1/07 to 9/30/08 10.44 0.05 (3.22) (3.17) (0.02) (0.22) (0.24) 7/1/07 to 9/30/07 11.01 --(5) 0.17 0.17 (0.04) (0.70) (0.74) 7/1/06 to 6/30/07 8.95 0.02 2.10 2.12 (0.06) -- (0.06) 7/1/05 to 6/30/06 7.62 --(5) 1.37 1.37 (0.04) -- (0.04) - ----------------------------- GLOBAL REAL ESTATE SECURITIES FUND - ----------------------------- CLASS A 10/1/09 to 9/30/10 $18.33 0.40 3.31 3.71 (1.55) (0.65) (2.20) 3/2/09(6) to 9/30/09 10.00 0.30 8.03 8.33 -- -- -- CLASS C 10/1/09 to 9/30/10 $18.25 0.27 3.29 3.56 (1.49) (0.65) (2.14) 3/2/09(6) to 9/30/09 10.00 0.24 8.01 8.25 -- -- -- CLASS I 10/1/09 to 9/30/10 $18.36 0.47 3.30 3.77 (1.57) (0.65) (2.22) 3/2/09(6) to 9/30/09 10.00 0.32 8.04 8.36 -- -- -- - --------------------- GREATER ASIA EX JAPAN OPPORTUNITIES FUND - --------------------- CLASS A 10/1/09 to 9/30/10 $13.01 0.14 4.19 4.33 (0.13) (0.32) (0.45) 4/21/09(6) to 9/30/09 10.00 0.10 2.91 3.01 -- -- -- CLASS C 10/1/09 to 9/30/10 $12.96 0.07 4.16 4.23 (0.10) (0.32) (0.42) 4/21/09(6) to 9/30/09 10.00 0.06 2.90 2.96 -- -- -- CLASS I 10/1/09 to 9/30/10 $13.02 0.18 4.21 4.39 (0.15) (0.32) (0.47) 4/21/09(6) to 9/30/09 10.00 0.11 2.91 3.02 -- -- -- RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ---------------------------------------------------------------------------------------------- - ------------------------- GLOBAL OPPORTUNITIES FUND (CONTINUED) - ------------------------- CLASS B 10/1/09 to 9/30/10 0.97 $ 6.97 17.09% $ 1,294 2.32%(7) 2.41% 10/1/08 to 9/30/09 (1.06) 6.00 (14.10) 1,369 2.61 2.61 10/1/07 to 9/30/08 (3.42) 7.06 (30.93) 2,379 2.39 2.39 7/1/07 to 9/30/07 (0.56) 10.48 1.65(4) 4,945 2.35(3) 2.35(3) 7/1/06 to 6/30/07 2.06 11.04 23.76 5,074 2.36 2.39 7/1/05 to 6/30/06 1.33 8.98 17.92 5,395 2.35 2.45 CLASS C 10/1/09 to 9/30/10 0.96 $ 6.93 17.01% $ 806 2.32%(7) 2.41% 10/1/08 to 9/30/09 (1.06) 5.97 (14.16) 776 2.62 2.62 10/1/07 to 9/30/08 (3.41) 7.03 (30.95) 1,149 2.40 2.40 7/1/07 to 9/30/07 (0.57) 10.44 1.67(4) 1,857 2.35(3) 2.35(3) 7/1/06 to 6/30/07 2.06 11.01 23.74 1,838 2.36 2.38 7/1/05 to 6/30/06 1.33 8.95 17.99 2,826 2.35 2.45 - ----------------------------- GLOBAL REAL ESTATE SECURITIES FUND - ----------------------------- CLASS A 10/1/09 to 9/30/10 1.51 $19.84 22.42% $ 2,492 1.40% 4.07% 3/2/09(6) to 9/30/09 8.33 18.33 83.30(4) 1,586 1.40(3) 9.62(3) CLASS C 10/1/09 to 9/30/10 1.42 $19.67 21.55% $ 262 2.15% 4.83% 3/2/09(6) to 9/30/09 8.25 18.25 82.50(4) 194 2.15(3) 10.45(3) CLASS I 10/1/09 to 9/30/10 1.55 $19.91 22.77% $ 678 1.15% 3.90% 3/2/09(6) to 9/30/09 8.36 18.36 83.60(4) 183 1.15(3) 6.04(3) - --------------------- GREATER ASIA EX JAPAN OPPORTUNITIES FUND - --------------------- CLASS A 10/1/09 to 9/30/10 3.88 $16.89 34.27% $10,305 1.80% 3.05% 4/21/09(6) to 9/30/09 3.01 13.01 30.10(4) 6,431 1.80(3) 3.78(3) CLASS C 10/1/09 to 9/30/10 3.81 $16.77 33.39% $ 430 2.55% 3.83% 4/21/09(6) to 9/30/09 2.96 12.96 29.60(4) 130 2.55(3) 4.54(3) CLASS I 10/1/09 to 9/30/10 3.92 $16.94 34.69% $ 198 1.55% 2.80% 4/21/09(6) to 9/30/09 3.02 13.02 30.20(4) 130 1.55(3) 3.54(3) RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE ------------------------------ - ------------------------- GLOBAL OPPORTUNITIES FUND (CONTINUED) - ------------------------- CLASS B 10/1/09 to 9/30/10 0.43% 78% 10/1/08 to 9/30/09 0.35 168 10/1/07 to 9/30/08 0.49 62 7/1/07 to 9/30/07 (0.15)(3) 15(4) 7/1/06 to 6/30/07 0.22 74 7/1/05 to 6/30/06 0.01 124 CLASS C 10/1/09 to 9/30/10 0.48% 78% 10/1/08 to 9/30/09 0.37 168 10/1/07 to 9/30/08 0.55 62 7/1/07 to 9/30/07 (0.15)(3) 15(4) 7/1/06 to 6/30/07 0.23 74 7/1/05 to 6/30/06 (0.03) 124 - ----------------------------- GLOBAL REAL ESTATE SECURITIES FUND - ----------------------------- CLASS A 10/1/09 to 9/30/10 2.21% 28% 3/2/09(6) to 9/30/09 3.68(3) 29(4) CLASS C 10/1/09 to 9/30/10 1.50% 28% 3/2/09(6) to 9/30/09 2.94(3) 29(4) CLASS I 10/1/09 to 9/30/10 2.63% 28% 3/2/09(6) to 9/30/09 3.93(3) 29(4) - --------------------- GREATER ASIA EX JAPAN OPPORTUNITIES FUND - --------------------- CLASS A 10/1/09 to 9/30/10 1.00% 78% 4/21/09(6) to 9/30/09 1.88(3) 26(4) CLASS C 10/1/09 to 9/30/10 0.46% 78% 4/21/09(6) to 9/30/09 1.12(3) 26(4) CLASS I 10/1/09 to 9/30/10 1.25% 78% 4/21/09(6) to 9/30/09 2.11(3) 26(4)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 103 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS --------------------------------------------------------------------------------------------- - ------------------- GREATER EUROPEAN OPPORTUNITIES FUND - ------------------- CLASS A 10/1/09 to 9/30/10 $12.97 0.21 0.95 1.16 (0.15) (0.42) (0.57) 4/21/09(6) to 9/30/09 10.00 0.12 2.85 2.97 -- -- -- CLASS C 10/1/09 to 9/30/10 $12.93 0.07 0.98 1.05 (0.11) (0.42) (0.53) 4/21/09(6) to 9/30/09 10.00 0.07 2.86 2.93 -- -- -- CLASS I 10/1/09 to 9/30/10 $12.98 0.24 0.96 1.20 (0.16) (0.42) (0.58) 4/21/09(6) to 9/30/09 10.00 0.14 2.84 2.98 -- -- -- - --------------- HIGH YIELD FUND - --------------- CLASS A 10/1/09 to 9/30/10 $ 3.89 0.31 0.28 0.59 (0.31) -- (0.31) 10/1/08 to 9/30/09 3.98 0.31 (0.08) 0.23 (0.32) -- (0.32) 10/1/07 to 9/30/08 4.89 0.34 (0.90) (0.56) (0.35) -- (0.35) 11/1/06 to 9/30/07 4.91 0.30 (0.01) 0.29 (0.31) -- (0.31) 11/1/05 to 10/31/06 4.88 0.31 0.05 0.36 (0.33) -- (0.33) 11/1/04 to 10/31/05 5.11 0.31 (0.19) 0.12 (0.35) -- (0.35) CLASS B 10/1/09 to 9/30/10 $ 3.82 0.27 0.27 0.54 (0.28) -- (0.28) 10/1/08 to 9/30/09 3.92 0.28 (0.09) 0.19 (0.29) -- (0.29) 10/1/07 to 9/30/08 4.81 0.30 (0.88) (0.58) (0.31) -- (0.31) 11/1/06 to 9/30/07 4.84 0.26 (0.01) 0.25 (0.28) -- (0.28) 11/1/05 to 10/31/06 4.81 0.26 0.06 0.32 (0.29) -- (0.29) 11/1/04 to 10/31/05 5.05 0.27 (0.20) 0.07 (0.31) -- (0.31) CLASS C 10/1/09 to 9/30/10 $ 3.85 0.27 0.27 0.54 (0.28) -- (0.28) 10/1/08 to 9/30/09 3.94 0.28 (0.08) 0.20 (0.29) -- (0.29) 10/1/07 to 9/30/08 4.84 0.30 (0.89) (0.59) (0.31) -- (0.31) 11/1/06 to 9/30/07 4.87 0.26 (0.01) 0.25 (0.28) -- (0.28) 11/1/05 to 10/31/06 4.84 0.27 0.05 0.32 (0.29) -- (0.29) 11/1/04 to 10/31/05 5.07 0.27 (0.19) 0.08 (0.31) -- (0.31) - ------------------------- INTERNATIONAL EQUITY FUND - ------------------------- CLASS A 9/16/10(6) to 9/30/10 $10.00 --(5) 0.17 0.17 -- -- -- CLASS C 9/16/10(6) to 9/30/10 $10.00 --(5) 0.16 0.16 -- -- -- CLASS I 9/16/10(6) to 9/30/10 $10.00 0.01 0.17 0.18 -- -- -- RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ------------------------------------------------------------------------------------------------- - ------------------ GREATER EUROPEAN OPPORTUNITIES FUND - ------------------ CLASS A 10/1/09 to 9/30/10 0.59 $13.56 9.14% $ 4,629 1.45% 2.75% 4/21/09(6) to 9/30/09 2.97 12.97 29.70(4) 6,236 1.45(3) 3.60(3) CLASS C 10/1/09 to 9/30/10 0.52 $13.45 8.28% $ 142 2.20% 3.50% 4/21/09(6) to 9/30/09 2.93 12.93 29.30(4) 196 2.20(3) 4.27(3) CLASS I 10/1/09 to 9/30/10 0.62 $13.60 9.48% $ 142 1.20% 2.56% 4/21/09(6) to 9/30/09 2.98 12.98 29.80(4) 130 1.20(3) 3.34(3) - --------------- HIGH YIELD FUND - --------------- CLASS A 10/1/09 to 9/30/10 0.28 $ 4.17 15.43% $101,326 1.35% 1.35%(3) 10/1/08 to 9/30/09 (0.09) 3.89 7.02 90,560 1.37 1.37 10/1/07 to 9/30/08 (0.91) 3.98 (12.10) 92,907 1.34 1.34 11/1/06 to 9/30/07 (0.02) 4.89 6.06(4) 125,200 1.39(3) 1.39(3) 11/1/05 to 10/31/06 0.03 4.91 7.52 132,408 1.37 1.37 11/1/04 to 10/31/05 (0.23) 4.88 2.37 144,060 1.36 1.36 CLASS B 10/1/09 to 9/30/10 0.26 $ 4.08 14.65% $ 663 2.10% 2.10%(3) 10/1/08 to 9/30/09 (0.10) 3.82 6.13 1,019 2.12 2.12 10/1/07 to 9/30/08 (0.89) 3.92 (12.59) 1,366 2.08 2.08 11/1/06 to 9/30/07 (0.03) 4.81 5.22(4) 2,597 2.13(3) 2.13(3) 11/1/05 to 10/31/06 0.03 4.84 6.83 4,595 2.12 2.12 11/1/04 to 10/31/05 (0.24) 4.81 1.46 7,791 2.11 2.11 CLASS C 10/1/09 to 9/30/10 0.26 $ 4.11 14.53% $ 2,119 2.10% 2.10%(3) 10/1/08 to 9/30/09 (0.09) 3.85 6.36 1,585 2.12 2.12 10/1/07 to 9/30/08 (0.90) 3.94 (12.72) 1,465 2.09 2.09 11/1/06 to 9/30/07 (0.03) 4.84 5.20(4) 2,081 2.14(3) 2.14(3) 11/1/05 to 10/31/06 0.03 4.87 6.80 1,585 2.12 2.12 11/1/04 to 10/31/05 (0.23) 4.84 1.66 1,758 2.11 2.11 - ------------------------- INTERNATIONAL EQUITY FUND - ------------------------- CLASS A 9/16/10(6) to 9/30/10 0.17 $10.17 1.70%(4) $ 102 1.50%(3) 19.64%(3) CLASS C 9/16/10(6) to 9/30/10 0.16 $10.16 1.60%(4) $ 102 2.25%(3) 20.39%(3) CLASS I 9/16/10(6) to 9/30/10 0.18 $10.18 1.70%(4) $ 7,068 1.25%(3) 19.39%(3) RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE -------------------------------- - ------------------ GREATER EUROPEAN OPPORTUNITIES FUND - ------------------ CLASS A 10/1/09 to 9/30/10 1.60% 48% 4/21/09(6) to 9/30/09 2.38(3) 14(4) CLASS C 10/1/09 to 9/30/10 0.56% 48% 4/21/09(6) to 9/30/09 1.31(3) 14(4) CLASS I 10/1/09 to 9/30/10 1.83% 48% 4/21/09(6) to 9/30/09 2.63(3) 14(4) - --------------- HIGH YIELD FUND - --------------- CLASS A 10/1/09 to 9/30/10 7.69% 92% 10/1/08 to 9/30/09 8.88 134 10/1/07 to 9/30/08 7.41 100 11/1/06 to 9/30/07 6.59(3) 102(4) 11/1/05 to 10/31/06 6.25 161 11/1/04 to 10/31/05 6.23 59 CLASS B 10/1/09 to 9/30/10 6.95% 92% 10/1/08 to 9/30/09 8.21 134 10/1/07 to 9/30/08 6.63 100 11/1/06 to 9/30/07 5.78(3) 102(4) 11/1/05 to 10/31/06 5.46 161 11/1/04 to 10/31/05 5.47 59 CLASS C 10/1/09 to 9/30/10 6.93% 92% 10/1/08 to 9/30/09 8.06 134 10/1/07 to 9/30/08 6.66 100 11/1/06 to 9/30/07 5.89(3) 102(4) 11/1/05 to 10/31/06 5.48 161 11/1/04 to 10/31/05 5.48 59 - ------------------------- INTERNATIONAL EQUITY FUND - ------------------------- CLASS A 9/16/10(6) to 9/30/10 1.36%(3) --%(4) CLASS C 9/16/10(6) to 9/30/10 0.61%(3) --%(4) CLASS I 9/16/10(6) to 9/30/10 1.62%(3) --%(4)
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 104 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ------------------------------------------------------------------------------------------------ - ------------------------- INTERNATIONAL REAL ESTATE SECURITIES FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 $ 6.00 0.13 0.65 0.78 (0.48) -- (0.48) 10/1/08 to 9/30/09 6.72 0.21 (0.66) (0.45) (0.27) -- (0.27) 10/1/07(6) to 9/30/08 10.00 0.21 (3.32) (3.11) (0.17) -- (0.17) CLASS C 10/1/09 to 9/30/10 $ 6.00 0.13 0.61 0.74 (0.48) -- (0.48) 10/1/08 to 9/30/09 6.70 0.19 (0.67) (0.48) (0.22) -- (0.22) 10/1/07(6) to 9/30/08 10.00 0.20 (3.38) (3.18) (0.12) -- (0.12) CLASS I 10/1/09 to 9/30/10 $ 5.99 0.19 0.61 0.80 (0.48) -- (0.48) 10/1/08 to 9/30/09 6.72 0.23 (0.67) (0.44) (0.29) -- (0.29) 10/1/07(6) to 9/30/08 10.00 0.25 (3.35) (3.10) (0.18) -- (0.18) RATIO OF RATIO OF GROSS NET EXPENSES OPERATING TO AVERAGE NET ASSET NET ASSETS, EXPENSES TO NET ASSETS CHANGE IN VALUE, END OF AVERAGE (BEFORE NET ASSET END TOTAL PERIOD NET WAIVERS AND VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) REIMBURSEMENTS)(8) ---------------------------------------------------------------------------------------- - -------------------------- INTERNATIONAL REAL ESTATE SECURITIES FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 0.30 $6.30 14.44% $ 2,474 1.50% 1.70% 10/1/08 to 9/30/09 (0.72) 6.00 (5.59) 32,178 1.50 1.66 10/1/07(6) to 9/30/08 (3.28) 6.72 (31.46) 60,907 1.50 2.11 CLASS C 10/1/09 to 9/30/10 0.26 $6.26 13.73% $ 494 2.25% 2.51% 10/1/08 to 9/30/09 (0.70) 6.00 (6.30) 413 2.25 2.40 10/1/07(6) to 9/30/08 (3.30) 6.70 (32.09) 141 2.23 3.00 CLASS I 10/1/09 to 9/30/10 0.32 $6.31 14.83% $24,052 1.25% 1.51%(3) 10/1/08 to 9/30/09 (0.73) 5.99 (5.43) 71 1.25 1.41 10/1/07(6) to 9/30/08 (3.28) 6.72 (31.32) 69 1.24 2.16 RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE ------------------------------ - -------------------------- INTERNATIONAL REAL ESTATE SECURITIES FUND - -------------------------- CLASS A 10/1/09 to 9/30/10 2.21% 20% 10/1/08 to 9/30/09 4.71 54 10/1/07(6) to 9/30/08 2.74 8 CLASS C 10/1/09 to 9/30/10 2.28% 20% 10/1/08 to 9/30/09 4.21 54 10/1/07(6) to 9/30/08 2.52 8 CLASS I 10/1/09 to 9/30/10 3.31% 20% 10/1/08 to 9/30/09 4.87 54 10/1/07(6) to 9/30/08 3.00 8
NET REALIZED DIVIDENDS NET ASSET NET AND TOTAL FROM VALUE, INVESTMENT UNREALIZED FROM NET CHANGE IN BEGINNING INCOME GAIN INVESTMENT INVESTMENT TOTAL NET ASSET OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME DISTRIBUTIONS VALUE -------------------------------------------------------------------------------------------- - -------------------- MARKET NEUTRAL FUND - -------------------- CLASS A 10/1/09 to 9/30/10 $10.50 (0.25) 0.32 0.07 -- -- 0.07 10/1/08 to 9/30/09 9.81 (0.01) 0.70 0.69 -- -- 0.69 10/1/07 to 9/30/08 10.53 (0.09) (0.47) (0.56) (0.16) (0.16) (0.72) 11/1/06 to 9/30/07 11.19 0.14 (0.58) (0.44) (0.22) (0.22) (0.66) 11/1/05 to 10/31/06 11.87 0.12 (0.80) (0.68) -- -- (0.68) 11/1/04 to 10/31/05 11.51 (0.03) 0.39 0.36 -- -- 0.36 CLASS B 10/1/09 to 9/30/10 $10.06 (0.32) 0.30 (0.02) -- -- (0.02) 10/1/08 to 9/30/09 9.47 (0.08) 0.67 0.59 -- -- 0.59 10/1/07 to 9/30/08 10.17 (0.12) (0.49) (0.61) (0.09) (0.09) (0.70) 11/1/06 to 9/30/07 10.80 0.08 (0.57) (0.49) (0.14) (0.14) (0.63) 11/1/05 to 10/31/06 11.55 0.02 (0.77) (0.75) -- -- (0.75) 11/1/04 to 10/31/05 11.28 (0.13) 0.40 0.27 -- -- 0.27 RATIO OF RATIO OF EXPENSES EXPENSES (EXCLUDING (INCLUDING DIVIDENDS AND DIVIDENDS AND INTEREST ON INTEREST ON SHORT SALES SHORT SALES AFTER EXPENSE AFTER EXPENSE NET ASSET NET ASSETS, WAIVERS AND WAIVERS AND VALUE, END OF REIMBURSEMENTS)(8) REIMBURSEMENTS)(8) END TOTAL PERIOD TO AVERAGE TO AVERAGE OF PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS NET ASSETS ------------------------------------------------------------------------------ - -------------------- MARKET NEUTRAL FUND - -------------------- CLASS A 10/1/09 to 9/30/10 $10.57 0.67% $ 17,556 1.82%(7) 3.76%(7) 10/1/08 to 9/30/09 10.50 7.03 74,749 1.77 4.04 10/1/07 to 9/30/08 9.81 (5.36) 119,387 1.81 3.49 11/1/06 to 9/30/07 10.53 (3.86)(4) 54,630 1.91(3) 3.56(3) 11/1/05 to 10/31/06 11.19 (5.81) 89,054 2.19 3.63 11/1/04 to 10/31/05 11.87 3.13 111,133 2.20 3.65 CLASS B 10/1/09 to 9/30/10 $10.04 (0.20)% $ 670 2.60%(7) 4.55%(7) 10/1/08 to 9/30/09 10.06 6.23 1,435 2.52 4.83 10/1/07 to 9/30/08 9.47 (6.04) 1,678 2.55 4.19 11/1/06 to 9/30/07 10.17 (4.64)(4) 2,651 2.67(3) 4.22(3) 11/1/05 to 10/31/06 10.80 (6.41) 4,338 2.91 4.39 11/1/04 to 10/31/05 11.55 2.39 7,859 2.90 4.36 RATIO OF EXPENSES (INCLUDING DIVIDENDS AND INTEREST ON SHORT SALES RATIO OF BEFORE EXPENSE NET INVESTMENT WAIVERS AND INCOME REIMBURSEMENTS)(8) (LOSS) PORTFOLIO TO AVERAGE TO AVERAGE TURNOVER NET ASSETS NET ASSETS RATE ------------------------------------------------ - -------------------- MARKET NEUTRAL FUND - -------------------- CLASS A 10/1/09 to 9/30/10 4.04% (2.33)% 155% 10/1/08 to 9/30/09 4.23 (0.08) 253 10/1/07 to 9/30/08 3.84 (0.85) 285 11/1/06 to 9/30/07 3.95(3) 1.45(3) 394(4) 11/1/05 to 10/31/06 3.63 1.04 285 11/1/04 to 10/31/05 3.65 (0.26) 177 CLASS B 10/1/09 to 9/30/10 4.83% (3.15)% 155% 10/1/08 to 9/30/09 5.02 (0.79) 253 10/1/07 to 9/30/08 4.55 (1.19) 285 11/1/06 to 9/30/07 4.63(3) 0.82(3) 394(4) 11/1/05 to 10/31/06 4.39 0.22 285 11/1/04 to 10/31/05 4.36 (1.14) 177
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 105 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS NET ASSET NET AND TOTAL FROM VALUE, INVESTMENT UNREALIZED FROM NET CHANGE IN BEGINNING INCOME GAIN INVESTMENT INVESTMENT TOTAL NET ASSET OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME DISTRIBUTIONS VALUE --------------------------------------------------------------------------------------------- - ------------------- MARKET NEUTRAL FUND (CONTINUED) - ------------------- CLASS C 10/1/09 to 9/30/10 $10.02 (0.32) 0.30 (0.02) -- -- (0.02) 10/1/08 to 9/30/09 9.43 (0.07) 0.66 0.59 -- -- 0.59 10/1/07 to 9/30/08 10.12 (0.12) (0.49) (0.61) (0.08) (0.08) (0.69) 11/1/06 to 9/30/07 10.75 0.07 (0.56) (0.49) (0.14) (0.14) (0.63) 11/1/05 to 10/31/06 11.49 0.02 (0.76) (0.74) -- -- (0.74) 11/1/04 to 10/31/05 11.22 (0.11) 0.38 0.27 -- -- 0.27 CLASS I 10/1/09(6) to 9/30/10 $10.49 (0.23) 0.32 0.09 -- -- 0.09 RATIO OF RATIO OF RATIO OF EXPENSES EXPENSES EXPENSES (EXCLUDING (INCLUDING (INCLUDING DIVIDENDS AND DIVIDENDS AND DIVIDENDS AND INTEREST ON INTEREST ON INTEREST ON SHORT SALES SHORT SALES SHORT SALES AFTER EXPENSE AFTER EXPENSE BEFORE EXPENSE NET ASSET NET ASSETS, WAIVERS AND WAIVERS AND WAIVERS AND VALUE, END OF REIMBURSEMENTS)(8) REIMBURSEMENTS)(8) REIMBURSEMENTS)(8) END TOTAL PERIOD TO AVERAGE TO AVERAGE TO AVERAGE OF PERIOD RETURN(1) (IN THOUSANDS) NET ASSETS NET ASSETS NET ASSETS ----------------------------------------------------------------------------------------------- - ------------------- MARKET NEUTRAL FUND (CONTINUED) - ------------------- CLASS C 10/1/09 to 9/30/10 $10.00 (0.20)% $ 4,249 2.62%(7) 4.62%(7) 4.90% 10/1/08 to 9/30/09 10.02 6.26 4,434 2.52 4.84 5.03 10/1/07 to 9/30/08 9.43 (6.04) 4,983 2.55 4.19 4.55 11/1/06 to 9/30/07 10.12 (4.57)(4) 7,187 2.68(3) 4.27(3) 4.68(3) 11/1/05 to 10/31/06 10.75 (6.44) 18,377 2.92 4.41 4.41 11/1/04 to 10/31/05 11.49 2.41 40,584 2.90 4.35 4.35 CLASS I 10/1/09(6) to 9/30/10 $10.58 0.95%(4) $70,434 1.64%(3)(7) 3.69%(3)(7) 3.97%(3) RATIO OF NET INVESTMENT INCOME (LOSS) PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE -------------------------------- - ------------------- MARKET NEUTRAL FUND (CONTINUED) - ------------------- CLASS C 10/1/09 to 9/30/10 (3.17)% 155% 10/1/08 to 9/30/09 (0.77) 253 10/1/07 to 9/30/08 (1.21) 285 11/1/06 to 9/30/07 0.76(3) 394(4) 11/1/05 to 10/31/06 0.19 285 11/1/04 to 10/31/05 (0.97) 177 CLASS I 10/1/09(6) to 9/30/10 (2.20)%(3) 155%
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ----------------------------------------------------------------------------------------------- - ------------------ MULTI-SECTOR FIXED INCOME FUND - ------------------ CLASS A 10/1/09 to 9/30/10 $ 9.96 0.67 0.79 1.46 (0.65) -- (0.65) 10/1/08 to 9/30/09 9.23 0.59 0.85 1.44 (0.71) -- (0.71) 10/1/07 to 9/30/08 10.89 0.68 (1.66) (0.98) (0.68) -- (0.68) 11/1/06 to 9/30/07 10.88 0.56 (0.03) 0.53 (0.52) -- (0.52) 11/1/05 to 10/31/06 10.63 0.59 0.21 0.80 (0.55) -- (0.55) 11/1/04 to 10/31/05 11.16 0.59 (0.40) 0.19 (0.72) -- (0.72) CLASS B 10/1/09 to 9/30/10 $ 9.95 0.59 0.79 1.38 (0.58) -- (0.58) 10/1/08 to 9/30/09 9.22 0.53 0.84 1.37 (0.64) -- (0.64) 10/1/07 to 9/30/08 10.88 0.60 (1.66) (1.06) (0.60) -- (0.60) 11/1/06 to 9/30/07 10.87 0.48 (0.02) 0.46 (0.45) -- (0.45) 11/1/05 to 10/31/06 10.61 0.51 0.22 0.73 (0.47) -- (0.47) 11/1/04 to 10/31/05 11.13 0.50 (0.40) 0.10 (0.62) -- (0.62) RATIO OF NET RATIO OF NET ASSET NET ASSETS, EXPENSES GROSS CHANGE IN VALUE, END OF TO AVERAGE EXPENSES NET ASSET END TOTAL PERIOD NET TO AVERAGE VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) NET ASSETS(8) -------------------------------------------------------------------------------------- - ------------------ MULTI-SECTOR FIXED INCOME FUND - ------------------ CLASS A 10/1/09 to 9/30/10 0.81 $10.77 15.14% $125,962 1.16% 1.16% 10/1/08 to 9/30/09 0.73 9.96 17.34 121,968 1.16 1.16 10/1/07 to 9/30/08 (1.66) 9.23 (9.46) 88,744 1.15 1.15 11/1/06 to 9/30/07 0.01 10.89 4.95(4) 113,458 1.19(3) 1.19(3) 11/1/05 to 10/31/06 0.25 10.88 7.74 113,362 1.17 1.17 11/1/04 to 10/31/05 (0.53) 10.63 1.73 113,885 1.20 1.20 CLASS B 10/1/09 to 9/30/10 0.80 $10.75 14.20% $ 13,590 1.91% 1.91% 10/1/08 to 9/30/09 0.73 9.95 16.47 13,276 1.91 1.91 10/1/07 to 9/30/08 (1.66) 9.22 (10.16) 11,969 1.90 1.90 11/1/06 to 9/30/07 0.01 10.88 4.25(4) 14,205 1.94(3) 1.94(3) 11/1/05 to 10/31/06 0.26 10.87 7.05 14,147 1.92 1.92 11/1/04 to 10/31/05 (0.52) 10.61 0.91 16,879 1.95 1.95 RATIO OF NET INVESTMENT INCOME PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE -------------------------------- - ------------------ MULTI-SECTOR FIXED INCOME FUND - ------------------ CLASS A 10/1/09 to 9/30/10 6.46% 74% 10/1/08 to 9/30/09 6.90 85 10/1/07 to 9/30/08 6.54 91 11/1/06 to 9/30/07 5.55(3) 92(4) 11/1/05 to 10/31/06 5.52 96 11/1/04 to 10/31/05 5.36 136 CLASS B 10/1/09 to 9/30/10 5.72% 74% 10/1/08 to 9/30/09 6.18 85 10/1/07 to 9/30/08 5.80 91 11/1/06 to 9/30/07 4.80(3) 92(4) 11/1/05 to 10/31/06 4.78 96 11/1/04 to 10/31/05 4.61 136
The footnote legend is at the end of the financial highlights. See Notes to Financial Statements 106 VIRTUS OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET NET AND TOTAL FROM FROM VALUE, INVESTMENT UNREALIZED FROM NET NET BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL OF PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS ---------------------------------------------------------------------------------------------- - ----------------------- MULTI-SECTOR FIXED INCOME FUND (CONTINUED) - ----------------------- CLASS C 10/1/09 to 9/30/10 $10.02 0.59 0.80 1.39 (0.57) -- (0.57) 10/1/08 to 9/30/09 9.27 0.52 0.87 1.39 (0.64) -- (0.64) 10/1/07 to 9/30/08 10.94 0.61 (1.68) (1.07) (0.60) -- (0.60) 11/1/06 to 9/30/07 10.93 0.48 (0.02) 0.46 (0.45) -- (0.45) 11/1/05 to 10/31/06 10.67 0.51 0.22 0.73 (0.47) -- (0.47) 11/1/04 to 10/31/05 11.18 0.51 (0.40) 0.11 (0.62) -- (0.62) CLASS I 10/1/09(6) to 9/30/10 $ 9.95 0.70 0.79 1.49 (0.68) -- (0.68) - ---------------------------- PREMIUM ALPHASECTOR(TM) FUND - ---------------------------- CLASS A 7/1/10(6) to 9/30/10 $10.00 0.12 1.05 1.17 -- -- -- CLASS C 7/1/10(6) to 9/30/10 $10.00 0.09 1.06 1.15 -- -- -- CLASS I 7/1/10(6) to 9/30/10 $10.00 0.11 1.06 1.17 -- -- -- - ------------------------- SENIOR FLOATING RATE FUND - ------------------------- CLASS A 10/1/09 to 9/30/10 $ 9.87 0.67 0.09 0.76 (0.64) (0.19) (0.83) 10/1/08 to 9/30/09 9.41 0.54 0.47 1.01 (0.55) --(5) (0.55) 1/31/08(6) to 9/30/08 10.00 0.41 (0.61) (0.20) (0.39) -- (0.39) CLASS C 10/1/09 to 9/30/10 $ 9.87 0.59 0.10 0.69 (0.56) (0.19) (0.75) 10/1/08 to 9/30/09 9.41 0.44 0.51 0.95 (0.49) --(5) (0.49) 1/31/08(6) to 9/30/08 10.00 0.37 (0.61) (0.24) (0.35) -- (0.35) CLASS I 10/1/09 to 9/30/10 $ 9.86 0.64 0.15 0.79 (0.66) (0.19) (0.85) 10/1/08 to 9/30/09 9.41 0.58 0.45 1.03 (0.58) --(5) (0.58) 1/31/08(6) to 9/30/08 10.00 0.43 (0.61) (0.18) (0.41) -- (0.41) RATIO OF NET NET ASSET NET ASSETS, EXPENSES TO CHANGE IN VALUE, END OF AVERAGE NET ASSET END TOTAL PERIOD NET VALUE OF PERIOD RETURN(1) (IN THOUSANDS) ASSETS(8) ---------------------------------------------------------------------------------------- - ----------------------- MULTI-SECTOR FIXED INCOME FUND (CONTINUED) - ----------------------- CLASS C 10/1/09 to 9/30/10 0.82 $10.84 14.29% $ 62,214 1.91% 10/1/08 to 9/30/09 0.75 10.02 16.59 41,374 1.90 10/1/07 to 9/30/08 (1.67) 9.27 (10.20) 16,828 1.90 11/1/06 to 9/30/07 0.01 10.94 4.22(4) 20,677 1.94(3) 11/1/05 to 10/31/06 0.26 10.93 7.00 17,222 1.91 11/1/04 to 10/31/05 (0.51) 10.67 0.99 15,175 1.95 CLASS I 10/1/09(6) to 9/30/10 0.81 $10.76 15.41%(4) $ 7,633 0.91%(3) - --------------------------- PREMIUM ALPHASECTOR(TM) FUND - --------------------------- CLASS A 7/1/10(6) to 9/30/10 1.17 $11.17 11.70%(4) $ 88,916 1.70%(3) CLASS C 7/1/10(6) to 9/30/10 1.15 $11.15 11.50%(4) $ 29,864 2.45%(3) CLASS I 7/1/10(6) to 9/30/10 1.17 $11.17 11.70%(4) $ 24,549 1.45%(3) - ------------------------ SENIOR FLOATING RATE FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 (0.07) $ 9.80 8.05% $ 98,790 1.20%(10) 10/1/08 to 9/30/09 0.46 9.87 11.74 52,987 1.20 1/31/08(6) to 9/30/08 (0.59) 9.41 (2.12)(4) 14,349 1.20(3) CLASS C 10/1/09 to 9/30/10 (0.06) $ 9.81 7.35% $ 30,116 1.95%(10) 10/1/08 to 9/30/09 0.46 9.87 10.94 2,740 1.95 1/31/08(6) to 9/30/08 (0.59) 9.41 (2.59)(4) 359 1.95(3) CLASS I 10/1/09 to 9/30/10 (0.06) $ 9.80 8.44% $ 32,679 0.95%(10) 10/1/08 to 9/30/09 0.45 9.86 11.94 394 0.95 1/31/08(6) to 9/30/08 (0.59) 9.41 (1.96)(4) 232 0.95(3) RATIO OF RATIO OF GROSS NET INVESTMENT EXPENSES INCOME PORTFOLIO TO AVERAGE TO AVERAGE TURNOVER NET ASSETS(8) NET ASSETS RATE ------------------------------------------------ - ----------------------- MULTI-SECTOR FIXED INCOME FUND (CONTINUED) - ----------------------- CLASS C 10/1/09 to 9/30/10 1.91% 5.71% 74% 10/1/08 to 9/30/09 1.90 5.93 85 10/1/07 to 9/30/08 1.90 5.80 91 11/1/06 to 9/30/07 1.94(3) 4.81(3) 92(4) 11/1/05 to 10/31/06 1.91 4.77 96 11/1/04 to 10/31/05 1.95 4.62 136 CLASS I 10/1/09(6) to 9/30/10 0.91%(3) 6.78%(3) 74% - --------------------------- PREMIUM ALPHASECTOR(TM) FUND - --------------------------- CLASS A 7/1/10(6) to 9/30/10 1.83%(3) 4.64%(3) 47%(4) CLASS C 7/1/10(6) to 9/30/10 2.67%(3) 3.51%(3) 47%(4) CLASS I 7/1/10(6) to 9/30/10 1.75%(3) 4.02%(3) 47%(4) - ------------------------ SENIOR FLOATING RATE FUND - ------------------------ CLASS A 10/1/09 to 9/30/10 1.15%(10) 6.86% 41% 10/1/08 to 9/30/09 1.33 6.00 63 1/31/08(6) to 9/30/08 1.80(3) 6.25(3) 27(4) CLASS C 10/1/09 to 9/30/10 1.92%(10) 6.02% 41% 10/1/08 to 9/30/09 2.05 4.82 63 1/31/08(6) to 9/30/08 2.57(3) 5.58(3) 27(4) CLASS I 10/1/09 to 9/30/10 0.89%(10) 6.56% 41% 10/1/08 to 9/30/09 1.13 6.54 63 1/31/08(6) to 9/30/08 1.56(3) 6.51(3) 27(4)
FOOTNOTE LEGEND (1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Computed using average shares outstanding. (3) Annualized. (4) Not annualized. (5) Amount is less than $0.005. (6) Inception date. (7) Due to a change in expense ratio, the ratio shown is a blended expense ratio. (8) The Funds will also indirectly bear their prorated share of expenses of the underlying funds in which they invest. Such expenses are not included in the calculation of this ratio. (9) The amount shown for a share outstanding throughout the period does not accord with the aggregate net loss on investments for the period because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. (10) See Note 3C in the Notes to Financial Statements for information on recapture of expenses previously waived. (11) Includes extraordinary expenses. See Notes to Financial Statements 107 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 1. ORGANIZATION Virtus Opportunities Trust (the "Trust") is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940 ("1940 Act"), as amended, as an open-end management investment company. As of the date of this report, 20 funds are offered for sale (each a "Fund"), of which 17 are reported in this annual report. Each Fund's investment objective is outlined on the respective Fund's summary page. All the Funds offer Class A and Class C shares with the exception of the CA Tax-Exempt Bond Fund which does not offer Class C shares. All Funds with the exception of the Global Opportunities Fund and the High Yield Fund, offer Class I shares. Effective December 1, 2009, Class B shares were no longer available for purchase by new or existing shareholders, except for existing shareholders through Qualifying Transactions (for more information regarding Qualifying Transactions, refer to the prospectus). Class A shares of the Bond Fund, CA Tax-Exempt Bond Fund, High Yield Fund, Multi-Sector Fixed Income Fund and Senior Floating Rate Fund are sold with a front-end sales charge of up to 4.75% with some exceptions. Class A shares of the remaining Funds are sold with a front-end sales charge of up to 5.75% with some exceptions. Generally, Class A shares are not subject to any charges by the Funds when redeemed; however, a 0.50% - 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the funds was modified to be 18 months. In each case, the CDSC period begins on the last day of the month preceding the month in which the purchase was made. Class B shares were generally sold with a CDSC, which declines from 5% to zero depending on the period of time the shares are held. Class C shares are generally sold with a 1% (1.25% for the Market Neutral Fund) CDSC if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC. 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 fees under a Board approved 12b-1 and shareholder servicing plan and has exclusive voting rights with respect to this plan. Class I shares are not subject to a 12b-1 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 Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: 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 description of the valuation techniques applied to the Funds' major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the advisor, are generally categorized as Level 3 in the hierarchy. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the New York Stock Exchange ("NYSE")) that may impact the value of securities traded in these foreign markets. In such cases the funds fair value foreign securities using an independent pricing service which considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, Financial Futures, Exchange Traded Funds, and certain indexes as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing which considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the advisor are generally categorized as Level 3 in the hierarchy. 108 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (OTC) derivative contracts, which include forward currency contracts and equity linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing net asset value determined as of the close of business of the NYSE (generally 4:00 p.m. Eastern time) each business day and are categorized as Level 1 in the hierarchy. The Funds value their investments in the BlackRock Institutional Money Market Trust ("IMM Trust") at fair value, which is based upon the net asset value of the IMM Trust, calculated each day that the NYSE is open for business. Investments held by the IMM Trust are valued using amortized cost and the IMM Trust intends to comply with relevant maturity, portfolio quality and diversification requirements set forth in Rule 2a-7 ("2a-7"), as well as monitoring procedures called for by 2a-7. The IMM Trust is not registered under the 1940 Act, and is categorized as Level 2 in the hierarchy. Short-term Notes having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. A summary of the inputs used to value the Funds' net assets by each major security type is disclosed at the end of the Schedule of Investments for each Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. Each Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. Dividend income is recorded using management's estimate of the income included in distributions received from the REIT investments. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Trust may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Each Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Funds have adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Funds to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Funds have determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Funds do not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Funds file tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2006 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by each Fund on the ex-dividend date. For the CA Tax-Exempt Fund and the Multi-Sector Fixed Income Fund income distributions are declared and recorded daily and distributed monthly. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more appropriately made. In addition to the Net Annual Operating Expenses that the Funds bear directly, the shareholders of the Funds indirectly bear the pro-rata expenses of the underlying mutual funds in which certain funds invest. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other foreign assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. 109 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 G. DERIVATIVE FINANCIAL INSTRUMENTS: Disclosures on derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Summarized below are the specific types of derivative instruments used by the Funds. FORWARD CURRENCY CONTRACTS: A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by each Fund as an unrealized gain or loss in the Statement of Operations. When the contract is closed or offset with the same counterparty, on settlement date, the Fund records a realized gain or loss equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. This is presented in the Statement of Operations as net realized gain (loss) from foreign currency transactions. Funds enter into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. The Funds also, from time to time, hedge the currency exposure of foreign denominated securities, held in the portfolio, back to U.S. dollars during perceived times of U.S. dollar strength. This is done in order to protect U.S. dollar value of the portfolio. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. WARRANTS AND RIGHTS: Certain Funds hold warrants and rights acquired either through a direct purchase, including as part of private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Fund until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board of Trustees' approved fair valuation procedures. EQUITY-LINKED INSTRUMENTS: Equity-linked instruments are investments of various types issued by financial institutions or special purpose entities located in foreign countries. They provide investors with the synthetic economic performance of a referenced equity security including benefits from dividends and other corporate actions, but they do not have certain rights of direct investment in the referenced securities, e.g.: voting rights. In addition to the market and other risks of the referenced equity security, investments in equity-linked instruments expose the Funds to counterparty risk, which includes the risk that the issuing entity may not be able to honor its financial commitment to the Fund. Equity-linked instruments have no guaranteed return of principal and may experience a return different from the referenced equity security. Typically, when the Funds invest in equity-linked instruments they do so in order to obtain exposure to certain countries in which the Funds do not have local accounts. At September 30, 2010, the Funds did not hold any Equity-Linked Certificates. The following is a summary of the Funds' derivative instrument holdings categorized by primary risk exposure as of September 30, 2010 ($ reported in thousands):
LOCATION ON THE STATEMENTS OF ASSETS AND LIABILITIES --------------------------------------------------------------------------- DERIVATIVE TYPE** ASSET DERIVATIVES LIABILITY DERIVATIVES - -------------------------- ----------------------------------- ---------------------------------- EQUITY CONTRACTS Investment in securities at value -- FOREIGN EXCHANGE CONTRACTS Unrealized appreciation on forward Unrealized depreciation on forward currency contracts currency contracts
ASSET DERIVATIVE FAIR VALUE ------------------------------------------------------------ TOTAL VALUE AT FOREIGN EXCHANGE SEPTEMBER 30, 2010 EQUITY CONTRACTS CONTRACTS ------------------ ---------------- ---------------- Global Opportunities Fund $ 89 $ -- $ 89 Global Real Estate Securities Fund --(1) --(1) -- Greater Asia ex Japan Opportunities Fund 45 -- 45 Greater European Opportunities Fund 169 -- 169 International Real Estate Securities Fund 1 1 --
(1) Amount is less than $500.
LIABILITY DERIVATIVE FAIR VALUE ------------------------------------------------------------ TOTAL VALUE AT FOREIGN EXCHANGE SEPTEMBER 30, 2010 EQUITY CONTRACTS CONTRACTS ------------------ ---------------- ---------------- Global Opportunities Fund $ (131) $ -- $ (131) Greater Asia ex Japan Opportunities Fund (56) -- (56) Greater European Opportunities Fund (332) -- (332) International Equity Fund (6) -- (6)
** FOR OPEN DERIVATIVES AS OF SEPTEMBER 30, 2010 SEE THE SCHEDULES OF INVESTMENTS, WHICH IS ALSO INDICATIVE OF ACTIVITY FOR THE PERIOD ENDED SEPTEMBER 30, 2010. 110 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010
DERIVATIVE TYPE LOCATION ON THE STATEMENTS OF OPERATIONS - ----------------------------- ------------------------------------------------------------------------------------ EQUITY CONTRACTS Net realized gain (loss) on investments Net change in unrealized appreciation (depreciation) on investments FOREIGN EXCHANGE CONTRACTS Net realized gain (loss) on foreign currency transactions Net change in unrealized appreciation (depreciation) on foreign currency translation
REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS ------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE SEPTEMBER 30, 2010 EQUITY CONTRACTS CONTRACTS ------------------ ---------------- ----------------- Global Opportunities Fund $ 2,573 $ 2,438 $ 135 Greater Asia ex Japan Opportunities Fund (36) -- (36) Greater European Opportunities Fund 332 -- 332
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS -------------------------------------------------------------------------- TOTAL VALUE AT FOREIGN EXCHANGE SEPTEMBER 30, 2010 EQUITY CONTRACTS CONTRACTS ------------------ ---------------- ------------------ Global Opportunities Fund $ (1,076) $ (1,022) $ (54) Global Real Estate Securities Fund --(1) --(1) -- Greater Asia ex Japan Opportunities Fund (212) (205) (7) Greater European Opportunities Fund (163) -- (163) International Equity Fund (6) -- (6) International Real Estate Securities Fund 1 1 --
(1) Amount is less than $500. H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: Certain Funds may engage in when-issued or delayed delivery transactions. Each Fund records when-issued and delayed delivery securities on the trade date. Each Fund maintains collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date. I. LOAN AGREEMENTS: Certain Funds may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the lender) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due. The funds currently hold assignment loans. J. SHORT SALES: ($ REPORTED IN THOUSANDS) Certain funds may sell securities short. A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in market price. To sell a security short, the Fund must borrow the security. The Fund's obligation to replace the security borrowed and sold short will be fully collateralized at all times by the proceeds from the short sale retained by the broker and by cash and securities deposited in a segregated account with the Fund's custodian. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will realize a loss, and if the price declines during the period, the Fund will realize a gain. Any realized gain will be decreased, and any realized loss increased, by the amount of transaction costs. On ex-dividend date, dividends on short sales are recorded as an expense to the Fund. At September 30, 2010, the value of securities sold short in the Market Neutral Fund amounted to $(82,637) against which collateral of $115,652 was provided. The collateral includes the deposits with broker for securities sold short and the market value of segregated investments held long, as footnoted in the Schedule of Investments and Securities Sold Short. Short selling used in the management of the Fund may accelerate the velocity of potential losses if the prices of securities sold short appreciate quickly. Stocks purchased may decline in value at the same time stocks sold short appreciate in value, thereby increasing potential losses. In accordance with the terms of its prime brokerage agreements, the Market Neutral Fund may receive rebate income or be charged a fee on borrowed securities. Such income or fee is calculated on a daily basis based upon the market value of each borrowed security and a variable rate that is dependent upon the availability of such security. The Fund records these prime broker charges on a net basis as interest income or interest expense. For the year ended September 30, 2010, the Fund had net charges of $364 on borrowed securities. Such amounts are included in Interest expense on short sales on the statement of operations. 111 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 K. SECURITY LENDING: Certain Funds may loan securities to qualified brokers through an agreement with Bank of New York Mellon ("BNY Mellon") or PFPC Trust Company ("PFPC"). Under the terms of agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash and securities issued by the U.S. Government. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by BNY Mellon or PFPC for their services as securities lending agents and in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the declining value of the collateral. At September 30, 2010, the following Funds had securities on loan (reported in thousands):
MARKET VALUE CASH COLLATERAL ------------ --------------- AlphaSector(TM) Allocation Fund ................ $ 6,810 $ 7,105 AlphaSector(TM) Rotation Fund .................. 109,088 114,027 Bond Fund ...................................... 3,671 3,806 Global Opportunities Fund ...................... 1,630 1,706 Greater Asia ex Japan Opportunities Fund ....... 4 4 Greater European Opportunities Fund ............ 1 1 High Yield Fund ................................ 6,583 6,844 Premium AlphaSector(TM) Fund ................... 34,494 36,123
L. REPURCHASE AGREEMENTS: Certain Funds may invest in repurchase agreements. A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited. At September 30, 2010, the Funds had no open repurchase agreements. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the Adviser to the Trust. For managing, or directing the management of, the investments of each Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund:
1ST $1 BILLION OVER $1 BILLION -------------- --------------- AlphaSector(TM) Allocation Fund .................... 0.45%** 0.40%** AlphaSector(TM) Rotation Fund ...................... 0.45 0.40 Bond Fund+ ......................................... 0.45 0.40 Greater Asia ex Japan Opportunities Fund ........... 1.00 0.95 Greater European Opportunities Fund ................ 0.85 0.80 Market Neutral Fund*+ .............................. 1.50 1.40
1ST $1 BILLION $1+ BILLION - $2 BILLION $2+ BILLION -------------- ------------------------ ----------- CA Tax-Exempt Bond Fund ........................... 0.45% 0.40% 0.35% Global Infrastructure Fund ........................ 0.65 0.60 0.55 Global Opportunities Fund ......................... 0.85 0.80 0.75 Global Real Estate Securities Fund ................ 0.85 0.80 0.75 High Yield Fund ................................... 0.65 0.60 0.55 International Real Estate Securities Fund ......... 1.00 0.95 0.90 Multi-Sector Fixed Income Fund .................... 0.55 0.50 0.45 Senior Floating Rate Fund ......................... 0.60 0.55 0.50
1ST $2 BILLION $2+ BILLION - $4 BILLION $4+ BILLION -------------- ------------------------ ----------- International Equity Fund ......................... 0.85% 0.80% 0.75% For the Funds shown below the individual rates are as follows: Alternatives Diversifier Fund ..................... 0.10% Premium AlphaSector(TM) Fund ...................... 1.10
The Adviser manages the Funds' investment programs and general operations of the Funds, including oversight of the Funds' subadvisers. * THE ADVISER HAD VOLUNTARILY AGREED TO WAIVE 0.15% OF ITS MANAGEMENT FEE. THE WAIVER WAS DISCONTINUED ON MARCH 15, 2010. ** THE ADVISER HAS VOLUNTARILY AGREED TO WAIVE 0.09% OF ITS MANAGEMENT FEE ASSOCIATED WITH THE FUND'S FIXED INCOME PORTFOLIO. + EFFECTIVE JANUARY 1, 2010, BREAKPOINTS WERE ADDED TO THE MANAGEMENT FEE STRUCTURE FOR AVERAGE DAILY NET ASSETS OVER $1 BILLION. 112 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 B. SUBADVISER: The subadvisers manage the investments of the Funds for which they are paid a fee by the Adviser. The subadvisers with respect to the Funds they serve are as follows:
FUND SUBADVISER FUND SUBADVISER ---- ---------- ---- ---------- AlphaSector(TM) Allocation Fund F-Squared(4)(9) Bond Fund SCM(7)(10) AlphaSector(TM) Rotation Fund F-Squared(4)(9) Global Infrastructure Fund DPIM(2)(10) Global Opportunities Fund Vontobel(6) International Real Estate Securities Fund DPIM(2)(10) Global Real Estate Securities Fund DPIM(2)(10) Market Neutral Fund TBCAM(1) Greater Asia ex Japan Opportunities Fund Vontobel(6) Multi-Sector Fixed Income Fund Goodwin(3) Greater European Opportunities Fund Vontobel(6) Premium AlphaSector(TM) Fund F-Squared LLC(5)(9) High Yield Fund SCM(7)(10) Senior Floating Rate Fund Goodwin(3) International Equity Fund Pyrford(8)
(1) The Boston Company Asset Management LLC (2) Duff & Phelps Investment Management Co. (3) Goodwin Capital Advisers, Inc. (4) F-Squared Investments, Inc. ("F-Squared"). (5) F-Squared Institutional Advisors, LLC ("F-Squared LLC") (6) Vontobel Asset Management, Inc. (7) SCM Advisors, LLC (8) Pyrford International Ltd. (An indirect wholly-owned subsidiary of the Bank of Montreal ("BoM"). BoM is a minority investor of Virtus). (9) F-Squared and/or F-Squared LLC provides VIA with a proposed asset allocation among ETFs. Final allocations and trading for the funds is conducted by VIA based on F-Squared's recommendations. (10) DPIM and SCM are indirect, wholly-owned subsidiaries of Virtus. C. EXPENSE LIMITS AND FEE WAIVERS: The Adviser has voluntarily agreed to limit each Fund's total operating expenses (excluding taxes and extraordinary expenses), so that such expenses do not exceed the below percentages of the average daily net asset values for the following funds. The Adviser may discontinue these voluntary expense caps at any time.
CLASS A CLASS B CLASS C CLASS I ------- ------- ------- ------- Alternatives Diversifier Fund(2) ............... 0.20% -- 0.20% 0.20% Bond Fund ...................................... 0.85 1.60% 1.60 0.60 CA Tax-Exempt Bond Fund ........................ 0.85 -- -- 0.60 Global Opportunities Fund(4) ................... 1.55 2.30 2.30 -- Global Real Estate Securities Fund(5) .......... 1.40 -- 2.15 1.15 Greater Asia ex Japan Opportunities Fund(5) .... 1.80 -- 2.55 1.55 Greater European Opportunities Fund(5) ......... 1.45 -- 2.20 1.20 International Real Estate Securities Fund ...... 1.50 -- 2.25 1.25 Market Neutral Fund(1) ......................... 1.90 2.65 2.65 1.65 Senior Floating Rate Fund(3) ................... 1.20 -- 1.95 0.95
The Adviser has contractually agreed to limit the following Funds total operating expenses (excluding interest, taxes, and extraordinary expenses).
THROUGH CLASS A CLASS C CLASS I DATE ------- ------- ------- -------- International Equity Fund ....................... 1.50% 2.25% 1.25% 9/30/11 Premium AlphaSector(TM) Fund .................... 1.70 2.45 1.45 6/30/11
(1) Excluding dividends on short sales and prime brokerage interest expenses, effective January 1, 2010, the Fund's expense ratios were increased. (2) Excluding 12b-1 fees and acquired Fund fees and expenses. (3) Excluding leverage expenses, if any. (4) Effective January 1, 2010. Prior to that, there was no expense limitation. (5) Prior to April 1, 2010, the waiver was contractual. 113 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under this arrangement, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. Each Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with applicable expense limitations. All or a portion of the following Adviser reimbursed expenses may be recaptured by the fiscal year ending.
EXPIRATION DATE ----------------------------------- 2011 2012 2013 TOTAL ------- ------ ------ ------- AlphaSector(TM) Allocation Fund+....................... $ 137 $ -- $ -- $ 137 AlphaSector(TM) Rotation Fund+......................... 274 -- -- 274 Alternatives Diversifier Fund.......................... 571 775 770 2,116 Bond Fund.............................................. 95 281 293 669 CA Tax-Exempt Bond Fund................................ 109 96 106 311 Global Infrastructure Fund+............................ 51 13 -- 64 Global Opportunities Fund.............................. -- -- 48 48 Global Real Estate Securities Fund..................... -- 66 91 157 Greater Asia ex Japan Opportunities Fund............... -- 51 99 150 Greater European Opportunities Fund.................... -- 55 79 134 International Equity Fund.............................. -- -- 16 16 International Real Estate Securities Fund.............. 126 57 73 256 Market Neutral Fund.................................... 191 164 195 550 Premium AlphaSector(TM) Fund........................... -- -- 24 24 Senior Floating Rate Fund*............................. 3 42 -- 45
* ADVISER IS CURRENTLY RECAPTURING PREVIOUSLY WAIVED OR REIMBURSED EXPENSES. THE AMOUNTS IN THE ABOVE TABLE REFLECT THE AMOUNTS CURRENTLY AVAILABLE FOR RECAPTURE. + DURING THE CURRENT FISCAL YEAR, THE EXPENSE RATIO HAS NOT FALLEN BELOW THE RATES REQUIRED FOR RECAPTURE. 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 (the "period") ended September 30, 2010, it retained Class A net commissions of $456 and deferred sales charges of $0; Class B deferred sales charges of $17; and Class C deferred sales charges of $83. In addition, each Fund pays VP Distributors distribution and/or service fees under Board approved 12b-1 and shareholder service plans as a percentage of the average daily net assets of each respective class at the annual rates as follows: Class A shares 0.25%(1); Class B shares 1.00%; Class C shares 1.00%; Class I shares are not subject to a 12b-1 plan. Effective October 5, 2009, the distribution and/or service fees for the AlphaSector(TM) Allocation, AlphaSector(TM) Rotation and Alternatives Diversifier Funds were increased. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a CDSC fee, the CDSC schedule of the original shares purchased continues to apply. (1) THE ALPHASECTOR(TM) ALLOCATION FUND, ALPHASECTOR(TM) ROTATION FUND AND ALTERNATIVES DIVERSIFIER FUND INVEST IN ETFS. THE FUNDS BEAR THEIR PROPORTIONATE SHARE OF ANY DISTRIBUTION AND SHAREHOLDER SERVICING FEES OF THE ETFS. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Trust. For the period ended September 30, 2010, VP Distributors received administration fees totaling $1,177 which are included in the Statement of Operations. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2010, VP Distributors received transfer agent fees totaling $1,498 which are included in the Statements of Operations. A portion of these fees are paid to outside entities that also provide service to the Funds. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Trust effective immediately. 114 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 F. AFFILIATED SHAREHOLDERS: At September 30, 2010, Virtus and its affiliates including BoM (a minority investor in Virtus) and its affiliates and the retirement plans of Virtus and its affiliates held shares of the funds which may be redeemed at any time that aggregated the following:
AGGREGATE SHARES NET ASSET VALUE ----------------- ----------------- AlphaSector(TM) Allocation Fund, Class I..................................... 10,844 $ 112 AlphaSector(TM) Rotation Fund, Class I..................................... 11,064 113 Alternatives Diversifier Fund, Class I..................................... 11,056 111 Bond Fund, Class I..................................... 1,323,608 14,957 Global Infrastructure Fund, Class I..................................... 3,236,152 34,692 Global Real Estate Securities Fund, Class A..................................... 90,482 1,795 Class C..................................... 11,277 222 Class I..................................... 11,321 225 Greater Asian ex Japan Opportunities Fund, Class A..................................... 10 --* Class C..................................... 10 --* Class I..................................... 10 --* Greater European Opportunities Fund, Class A..................................... 10 --* Class C..................................... 10 --* Class I..................................... 10 --* International Equity Fund, Class A..................................... 10,000 102 Class C..................................... 240,000 2,438 International Real Estate Securities Fund, Class A..................................... 231,388 1,458 Class C..................................... 11,561 72 Class I..................................... 3,790,753 23,920 Market Neutral Fund, Class I..................................... 4,287,161 45,358 Multi-Sector Fixed Income Fund, Class I..................................... 10,726 115 Senior Floating Rate Fund, Class I..................................... 2,325,461 22,790
* Amount is less than $500 (not reported in thousands). G. INVESTMENTS IN AFFILIATES: ($ REPORTED IN THOUSANDS) A summary of the Fund of Fund's total long-term and short-term purchases and sales of the shares of the underlying Funds during the period ended September 30, 2010 is as follows:
BALANCE BALANCE DISTRIBUTIONS AT AT DIVIDEND OF REALIZED 9/30/09 PURCHASES(1) SALES PROCEEDS 9/30/10 INCOME GAINS --------- ------------ -------------- --------- --------- ------------- ALPHASECTOR(TM) ALLOCATION FUND Bond Fund...................................... $ 8,891 $ 2,627 $ 2,175 $ 9,870 $ 417 $ 0 --------- ---------- ------------- -------- -------- ---------- ................................................ $ 8,891 $ 2,627 $ 2,175 $ 9,870 $ 417 $ 0 ========= ========== ============= ======== ======== ========== ALTERNATIVES DIVERSIFIER FUND Global Infrastructure Fund(2).................. $ 41,383 $ 1,144 $ 10,468 $ 34,692 $ 1,144 $ 0 International Real Estate Securities Fund(2)... 30,436 2,171 8,591 23,845 2,171 0 Market Neutral Fund(2)......................... 49,991 1,175 6,172 45,358 -- 0 Real Estate Securities Fund(2)................. 30,661 422 13,856 22,889 422 0 Senior Floating Rate Fund(2)................... 27,088 2,263 6,376 22,789 1,723 540 --------- ---------- ------------- -------- -------- ---------- $ 179,559 $ 7,175 $ 45,493 $149,573 $ 5,460 $ 540 ========= ========== ============= ======== ======== ==========
(1) Includes reinvested dividends from income and capital gains distributions. (2) Class A shares exchanged for Class I shares on October 5, 2009. 115 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities (excluding U.S. Government securities and agency securities, forward currency contracts, futures and short-term securities) during the period ended September 30, 2010, were as follows:
PURCHASES SALES ------------ ------------ AlphaSector(TM) Allocation Fund......................... $ 54,959 $ 54,516 AlphaSector(TM) Rotation Fund........................... 1,021,257 674,399 Alternatives Diversifier Fund........................... 10,423 62,904 Bond Fund............................................... 177,121 169,703 CA Tax-Exempt Bond Fund................................. 6,669 5,566 Global Infrastructure Fund.............................. 16,507 35,621 Global Opportunities Fund............................... 44,130 48,126 Global Real Estate Securities Fund...................... 1,611 690 Greater Asia ex Japan Opportunities Fund................ 7,825 6,011 Greater European Opportunities Fund..................... 2,815 4,486 High Yield Fund......................................... 81,501 82,507 International Equity Fund............................... 2,439 5 International Real Estate Securities Fund............... 5,433 13,173 Market Neutral Fund..................................... 115,244 122,293 Multi-Sector Fixed Income Fund.......................... 148,429 130,721 Premium AlphaSector(TM) Fund............................ 163,238 28,591 Senior Floating Rate Fund............................... 143,252 46,745
PURCHASES SHORT SALES TO COVER SHORTS ------------ ---------------- Market Neutral Fund..................................... $ 131,026 $ 134,549
Purchases and sales of long term U.S. Government and agency securities for the Funds during the period ended September 30, 2010, were as follows:
PURCHASES SALES ------------ ------------ Bond Fund.............................................. $ 148,068 $ 183,049 High Yield Fund........................................ 534 529 Multi-Sector Fixed Income Fund......................... 13,656 14,070
116 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 5. CAPITAL SHARE TRANSACTIONS (REPORTED IN THOUSANDS) Transactions in shares of capital stock, during the periods ended as indicated below, were as follows:
ALPHASECTOR(TM) ALLOCATION FUND ALPHASECTOR(TM) ROTATION FUND -------------------------------------------- ---------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 ------------------ -------------------- ---------------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- -------- ---------- ------ --------- CLASS A Sale of shares 587 $ 5,835 248 $ 2,071 23,021 $ 229,246 336 $ 2,733 Reinvestment of distributions 27 260 71 582 78 733 132 1,049 Plan of Reorganization (See Note 10) -- -- -- -- -- -- 673 4,920 Shares repurchased (640) (6,358) (720) (6,070) (8,246) (80,458) (1,267) (10,433) ----- -------- ------ -------- ------- ---------- ------ -------- Net Increase / (Decrease) (26) $ (263) (401) $ (3,417) 14,853 $ 149,521 (126) $ (1,731) ===== ======== ====== ======== ======= ========== ====== ======== CLASS C Sale of shares 319 $ 3,226 94 $ 772 11,903 $ 117,490 291 $ 2,307 Reinvestment of distributions 8 77 27 220 5 54 63 495 Plan of Reorganization (See Note 10) -- -- -- -- -- -- 326 2,368 Shares repurchased (429) (4,275) (616) (5,104) (3,000) (28,780) (1,421) (11,463) ----- -------- ------ -------- ------- ---------- ------ -------- Net Increase / (Decrease) (102) $ (972) (495) $ (4,112) 8,908 $ 88,764 (741) $ (6,293) ===== ======== ====== ======== ======= ========== ====== ======== CLASS I(2) Sale of shares 254 $ 2,569 -- $ -- 12,711 126,049 -- $ -- Reinvestment of distributions --(1) 2 -- -- 19 176 -- -- Shares repurchased (59) (592) -- -- (1,720) (16,552) -- -- ----- -------- ------ -------- ------- ---------- ------ -------- Net Increase / (Decrease) 195 $ 1,979 -- $ -- 11,010 $ 109,673 -- $ -- ===== ======== ====== ======== ======= ========== ====== ========
ALTERNATIVES DIVERSIFIER FUND BOND FUND -------------------------------------------- ---------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 ------------------ -------------------- ---------------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- -------- ---------- ------ -------- CLASS A Sale of shares 4,042 $ 39,056 9,545 $ 79,842 499 $ 5,402 799 $ 7,932 Reinvestment of distributions 295 2,845 208 1,695 189 2,042 136 1,365 Plan of Reorganization (See Note 10) -- -- -- -- -- -- 5,242 52,917 Shares repurchased (10,636) (101,864) (17,177) (140,477) (948) (10,221) (2,352) 23,986) ------- --------- ------- --------- -------- ---------- ------ -------- Net Increase / (Decrease) (6,299) $ (59,963) (7,424) $ (58,940) (260) $ (2,777) 3,825 $ 38,228 ======= ========= ======= ========= ======== ========== ====== ======== CLASS B Sale of shares -- $ -- -- $ -- 13 $ 141 105 $ 1,008 Reinvestment of distributions -- -- -- -- 7 74 8 79 Plan of Reorganization (See Note 10) -- -- -- -- -- -- 95 940 Shares repurchased -- -- -- -- (171) (1,797) (227) (2,224) ------- --------- ------- --------- -------- ---------- ------ -------- Net Increase / (Decrease) -- $ -- -- $ -- (151) $ (1,582) (19) $ (197) ======= ========= ======= ========= ======== ========== ====== ======== CLASS C Sale of shares 1,406 $ 13,424 2,585 $ 21,666 256 $ 2,721 463 $ 4,507 Reinvestment of distributions 96 927 40 318 20 216 14 137 Plan of Reorganization (See Note 10) -- -- -- -- -- -- 201 1,994 Shares repurchased (3,747) (35,716) (4,935) (40,060) (262) (2,773) (199) (1,924) ------- --------- ------- --------- -------- ---------- ------ -------- Net Increase / (Decrease) (2,245) $ (21,365) (2,310) $ (18,076) 14 $ 164 479 $ 4,714 ======= ========= ======= ========= ======== ========== ====== ======== CLASS I(2) Sale of shares 4,673 $ 44,596 -- $ -- 930 10,188 1,802 $ 18,627 Reinvestment of distributions 9 84 -- -- 498 5,440 533 5,339 Shares repurchased (1,527) (14,718) -- -- (4,335) (47,399) (3,159) (31,317) ------- --------- ------- --------- -------- ---------- ------ -------- Net Increase / (Decrease) 3,155 $ 29,962 -- $ -- (2,907) $ (31,771) (824) $ (7,351) ======= ========= ======= ========= ======== ========== ====== ========
(1) Amount less than 500. (2) Inception date for AlphaSector(TM) Allocation, AlphaSector(TM) Rotation and the Alternatives Diversifier Funds' Class I is October 1, 2009. 117 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010
CA TAX-EXEMPT BOND FUND GLOBAL INFRASTRUCTURE FUND ----------------------------------------------- ------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 --------------------- --------------------- -------------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- -------- -------- --------- ------- --------- -------- --------- CLASS A Sale of shares 21 $ 249 84 $ 955 1,285 $ 13,099 3,481 $30,659 Reinvestment of distributions 61 732 69 792 76 783 275 2,518 Shares repurchased (239) (2,879) (403) (4,624) (6,776) (67,473) (2,961) (26,968) ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) (157) $(1,898) (250) $(2,877) (5,415) $(53,591) 795 $ 6,209 ======= ======= ======= ======== ======= ======== ====== ======= CLASS C Sale of shares -- $ -- -- $ -- 200 $ 2,042 547 $ 4,742 Reinvestment of distributions -- -- -- -- 8 80 8 74 Shares repurchased -- -- -- -- (160) (1,623) (103) (967) ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) -- $ -- -- $ -- 48 $ 499 452 $ 3,849 ======= ======= ======= ======== ======= ======== ====== ======= CLASS I Sale of shares 325 $ 3,912 417 $ 4,764 4,422 43,104 36 $ 317 Reinvestment of distributions 26 316 32 363 114 1,166 1 9 Shares repurchased (154) (1,856) (807) (9,208) (1,108) (11,242) (10) (88) ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) 197 $ 2,372 (358) $(4,081) 3,428 $ 33,028 27 $ 238 ======= ======= ======= ======== ======= ======== ====== =======
GLOBAL OPPORTUNITIES FUND GLOBAL REAL ESTATE SECURITIES FUND ----------------------------------------------- ------------------------------------------- FROM INCEPTION YEAR ENDED YEAR ENDED YEAR ENDED MARCH 2, 2009 TO SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 --------------------- --------------------- ------------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- -------- -------- --------- ------- -------- -------- --------- CLASS A Sale of shares 455 $ 3,222 253 $ 1,470 31 $ 588 87 $ 906 Reinvestment of distributions 78 547 110 642 11 193 -- -- Shares repurchased (989) (6,989) (1,652) (9,786) (4) (64) --(1) (7) ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) (456) $(3,220) (1,289) $ (7,674) 38 $ 717 87 $ 899 ======= ======= ======= ======== ======= ======== ====== ======= CLASS B Sale of shares 43 $ 263 59 $ 314 -- $ -- -- $ -- Reinvestment of distributions 2 10 3 15 -- -- -- -- Shares repurchased (87) (561) (170) (901) -- -- -- -- ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) (42) $ (288) (108) $ (572) -- $ -- -- $ -- ======= ======= ======= ======== ======= ======== ====== ======= CLASS C Sale of shares 17 $ 107 20 $ 103 1 $ 24 11 $ 109 Reinvestment of distributions 1 5 1 7 1 23 -- -- Shares repurchased (32) (203) (55) (273) --(1) --(1) -- -- ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) (14) $ (91) (34) $ (163) 2 $ 47 11 $ 109 ======= ======= ======= ======== ======= ======== ====== ======= CLASS I Sale of shares -- $ -- -- $ -- 26 $ 477 10 $ 104 Reinvestment of distributions -- -- -- -- 4 62 -- -- Shares repurchased -- -- -- -- (6) (104) --(1) (4) ------- ------- ------- -------- ------- -------- ------ ------- Net Increase / (Decrease) -- $ -- -- $ -- 24 $ 435 10 $ 100 ======= ======= ======= ======== ======= ======== ====== =======
(1) Amount less than 500. 118 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010
GREATER ASIA EX JAPAN OPPORTUNITIES FUND GREATER EUROPEAN OPPORTUNITIES FUND ----------------------------------------- ---------------------------------------------- FROM INCEPTION FROM INCEPTION YEAR ENDED APRIL 21, 2009 TO YEAR ENDED APRIL 21, 2009 TO SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 -------------------- ------------------ -------------------- --------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------- -------- ------- -------- ------- --------- CLASS A Sale of shares 276 $ 3,920 496 $ 4,977 20 $ 258 481 $ 4,809 Reinvestment of distributions 17 225 -- -- 21 274 -- -- Shares repurchased (177) (2,399) (1) (13) (181) (2,205) -- -- ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) 116 $ 1,746 495 $ 4,964 (140) $ (1,673) 481 $ 4,809 ====== ========= ======= ======== ======= ======== ======= ========= CLASS C Sale of shares 15 $ 220 10 $ 100 --(1) $ 2 15 $ 159 Reinvestment of distributions --(1) 4 -- -- 1 8 -- -- Shares repurchased -- -- -- -- (5) (66) --(1) --(1) ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) 15 $ 224 10 $ 100 (4) $ (56) 15 $ 159 ====== ========= ======= ======== ======= ======== ======= ========= CLASS I Sale of shares 1 $ 19 10 $ 100 -- $ -- 10 $ 100 Reinvestment of distributions --(1) 5 -- -- --(1) 6 -- -- ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) 1 $ 24 10 $ 100 --(1) $ 6 10 $ 100 ====== ========= ======= ======== ======= ======== ======= =========
(1) Amount less than 500.
HIGH YIELD FUND INTERNATIONAL EQUITY FUND ---------------------------------------------- ------------------------- FROM INCEPTION YEAR ENDED YEAR ENDED SEPTEMBER 15, 2010 TO SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 -------------------- --------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------- --------- --------- ----------- CLASS A Sale of shares 4,666 $ 19,037 2,754 $ 9,302 10 $ 100 Reinvestment of distributions 1,190 4,767 1,398 4,860 -- -- Shares repurchased (4,790) (19,159) (4,232) (14,686) -- -- ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) 1,066 $ 4,645 (80) $ (524) 10 $ 100 ======= ========= ======= ========= ========= =========== CLASS B Sale of shares 12 $ 47 49 $ 177 -- $ -- Reinvestment of distributions 9 35 14 48 -- -- Shares repurchased (125) (492) (145) (496) -- -- ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) (104) $ (410) (82) $ (271) -- $ -- ======= ========= ======= ========= ========= =========== CLASS C Sale of shares 148 $ 586 160 $ 564 10 $ 100 Reinvestment of distributions 18 71 17 59 -- -- Shares repurchased (62) (248) (137) (468) -- -- ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) 104 $ 409 40 $ 155 10 $ 100 ======= ========= ======= ========= ========= =========== CLASS I Sale of shares -- $ -- -- $ -- 694 $ 7,030 ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) -- $ -- -- $ -- 694 $ 7,030 ======= ========= ======= ========= ========= ===========
119 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010
INTERNATIONAL REAL ESTATE SECURITIES FUND MARKET NEUTRAL FUND ----------------------------------------- ---------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 -------------------- ------------------ -------------------- --------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------- -------- ------- -------- ------- --------- CLASS A Sale of shares 110 $ 588 1,367 $ 5,970 1,029 $ 10,853 3,947 $ 40,379 Reinvestment of distributions 27 145 420 1,993 -- -- -- -- Shares repurchased (5,108) (29,526) (5,485) (24,623) (6,485) (68,211) (8,995) (90,427) ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) (4,971) $ (28,793) (3,698) $(16,660) (5,456) $(57,358) (5,048) $ (50,048) ====== ========= ======= ======== ======= ======== ======= ========= CLASS B Sale of shares -- $ -- -- $ -- 10 $ 104 31 $ 302 Shares repurchased -- -- -- -- (86) (869) (65) (638) ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) -- $ -- -- $ -- (76) $ (765) (34) $ (336) ====== ========= ======= ======== ======= ======== ======= ========= CLASS C Sale of shares 16 $ 91 92 $ 428 110 $ 1,099 137 $ 1,345 Reinvestment of distributions 5 29 3 13 -- -- -- -- Shares repurchased (11) (56) (47) (229) (128) (1,281) (223) (2,138) ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) 10 $ 64 48 $ 212 (18) $ (182) (86) $ (793) ====== ========= ======= ======== ======= ======== ======= ========= CLASS I(1) Sale of shares 4,901 $ 28,283 1 $ 5 7,462 $ 78,497 -- $ -- Reinvestment of distributions 407 2,177 1 3 -- -- -- -- Shares repurchased (1,507) (8,600) -- -- (808) (8,529) -- -- ------ --------- ------- -------- ------- -------- ------- --------- Net Increase / (Decrease) 3,801 $ 21,860 2 $ 8 6,654 $ 69,968 -- $ -- ====== ========= ======= ======== ======= ======== ======= =========
(1) Inception date for the Market Neutral Fund's Class I is October 1, 2009.
MULTI-SECTOR FIXED INCOME FUND PREMIUM ALPHASECTOR(TM) FUND ---------------------------------------------- ---------------------------- FROM INCEPTION YEAR ENDED YEAR ENDED JULY 1, 2010 TO SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 SEPTEMBER 30, 2010 -------------------- --------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------- --------- --------- ------------ CLASS A Sale of shares 4,402 $ 45,541 5,597 $ 49,548 8,409 $ 90,954 Reinvestment of distributions 517 5,368 514 4,358 -- -- Shares repurchased (5,467) (55,814) (3,479) (28,620) (451) (4,840) ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) (548) $ (4,905) 2,632 $ 25,286 7,958 $ 86,114 ======= ========= ======= ========= ========= =========== CLASS B Sale of shares 78 $ 791 258 $ 2,120 -- $ -- Reinvestment of distributions 39 405 54 453 -- -- Shares repurchased (188) (1,941) (276) (2,404) -- -- ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) (71) $ (745) 36 $ 169 -- $ -- ======= ========= ======= ========= ========= =========== CLASS C Sale of shares 2,420 $ 25,154 3,161 $ 27,293 2,697 $ 28,909 Reinvestment of distributions 134 1,408 96 830 -- -- Shares repurchased (944) (9,788) (942) (8,159) (17) (187) ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) 1,610 $ 16,774 2,315 $ 19,964 2,680 $ 28,722 ======= ========= ======= ========= ========= =========== CLASS I(1) Sale of shares 3,199 $ 32,392 -- $ -- 2,291 $ 24,912 Reinvestment of distributions 4 45 -- -- -- -- Shares repurchased (2,494) (26,020) -- -- (94) (1,008) ------- --------- ------- --------- --------- ----------- Net Increase / (Decrease) 709 $ 6,417 -- $ -- 2,197 $ 23,904 ======= ========= ======= ========= ========= ===========
(1) Inception date for the Multi-Sector Fixed Income Fund's Class I is October 1, 2009. 120 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010
SENIOR FLOATING RATE FUND ------------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2010 SEPTEMBER 30, 2009 --------------------- ---------------------- SHARES AMOUNT SHARES AMOUNT -------- --------- -------- --------- CLASS A Sale of shares 9,581 $ 93,658 3,998 $ 34,119 Reinvestment of distributions 287 2,805 205 1,836 Shares repurchased (5,162) (50,893) (357) (3,248) -------- --------- -------- --------- Net Increase / (Decrease) 4,706 $ 45,570 3,846 $ 32,707 ======== ========= ======== ========= CLASS C Sale of shares 2,849 $ 28,061 249 $ 2,289 Reinvestment of distributions 65 631 4 38 Shares repurchased (122) (1,192) (13) (115) -------- --------- -------- --------- Net Increase / (Decrease) 2,792 $ 27,500 240 $ 2,212 ======== ========= ======== ========= CLASS I Sale of shares 3,981 $ 39,129 40 $ 365 Reinvestment of distributions 245 2,393 2 18 Shares repurchased (932) (9,064) (27) (246) -------- --------- -------- --------- Net Increase / (Decrease) 3,294 $ 32,458 15 $ 137 ======== ========= ======== =========
121 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 6. 10% SHAREHOLDERS As of September 30, 2010, certain Funds had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below.
% OF SHARES NUMBER OF OUTSTANDING ACCOUNTS ----------- --------- AlphaSector(TM) Allocation Fund............... 18% 1 AlphaSector(TM) Rotation Fund................. 25 2 Alternatives Diversifier Fund+................ 24 2 CA Tax-Exempt Bond Fund....................... 33 2 Global Infrastructure Fund+................... 51 1* Global Real Estate Securities Fund............ 64 2* Greater Asia ex Japan Opportunities Fund...... 70 2 Greater European Opportunities Fund........... 89 1 International Equity Fund..................... 94 3* International Real Estate Securities Fund+.... 88 1 Market Neutral Fund+.......................... 75 2* Premium AlphaSector(TM) Fund.................. 18 1 Senior Floating Rate Fund+.................... 57 3*
* Includes affiliated shareholder accounts. + The Alternatives Diversifier Fund does not invest in the underlying funds for the purpose of exercising management or control; however, investments made by the Fund within each of its principal investment strategies may represent a significant portion of an underlying fund's net assets. At September 30, 2010, the Fund was the owner of record of approximately 88% of the International Real Estate Securities Fund, 49% of the Market Neutral Fund, 50% of the Global Infrastructure Fund, and 14% of the Senior Floating Rate Fund. 7. ILLIQUID AND RESTRICTED SECURITIES ($ REPORTED IN THOUSANDS) Investments are generally considered illiquid if they cannot be disposed of within seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining liquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are footnoted as such at the end of each Fund's Schedule of Investments where applicable. Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933. Generally, 144A securities are excluded from this category, except where defined as illiquid. At September 30, 2010, the Funds held the following illiquid and restricted securities:
MARKET VALUE % OF ACQUISITION ACQUISITION AT NET ASSETS AT DATE COST 9/30/10 9/30/10 ----------- ----------- ------------ ------------- BOND FUND - --------- DLJ Mortgage Acceptance Corp. 96-M, 1 (Principal Only) 144A 0.000%, 9/18/11............................. 4/28/04 $ 1 $ 1 0.00% HIGH YIELD FUND - --------------- Poland Telecom Finance BV Series B 14%, 12/1/07........................ 11/24/97 5,000 62 0.00% ACG Holdings, Inc. .................... 12/4/93 358 0 0.00% MARKET NEUTRAL FUND - ------------------- Telefonica Moviles S.A. ............... 12/20/01 0 0 0.00%
The Funds will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 8. CREDIT RISK AND ASSET CONCENTRATION In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. 122 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. Since the Market Neutral Fund does not clear its own short selling transactions, it has established accounts with its broker for this purpose. This results in concentration of credit risk with the brokerage firm. Such risk, however, is mitigated by the broker's obligation to comply with rules and regulations governing their business activities. These rules and regulations generally require maintenance of net capital and segregation of customer's funds and securities from holdings of the firm. In the event that the clearing broker becomes insolvent, recovery of segregated funds may be limited to a pro rata share of all customer-segregated funds available. In such an instance, the Fund could incur losses to the extent that the recovery amount is less than the total cash and other securities deposited with the clearing broker. Certain Funds may invest a high percentage of their assets in specific sectors of the market in their pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on a Fund, positive or negative, than if a Fund did not concentrate its investments in such sectors. At September 30, 2010, certain Funds held securities issued by various companies in specific sectors or countries as detailed below:
PERCENTAGE OF TOTAL FUND SECTOR INVESTMENTS - ------------------------------------------- -------------------------- ------------------- Global Infrastructure Fund Telecommunication Services 30% Utilities 30 Global Opportunities Fund Consumer Staples 39 Global Real Estate Securities Fund Retail REITs 30 Greater Asia ex Japan Opportunities Fund Consumer Staples 35 Greater European Opportunities Fund Consumer Staples 35 International Real Estate Securities Fund Retail REITs 38
9. INDEMNIFICATIONS Under the Funds' organizational documents, their trustees and officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, the Funds enter into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these arrangements. 10. PLANS OF REORGANIZATION (ALL AMOUNTS EXCEPT FOR PER SHARE AMOUNTS ARE REPORTED IN THOUSANDS) On May 29, 2009, the Bond Fund acquired all of the net assets of the Virtus Core Bond Fund ("Core Bond Fund") of the Virtus Opportunities Trust pursuant to an Agreement and Plan of Reorganization approved by the Core Bond Fund's Board of Trustees on February 25, 2009. The acquisition was accomplished by a tax-free exchange of 5,242 Class A shares, 95 Class B shares, and 201 Class C shares of the Bond Fund outstanding on May 29, 2009, (valued at $52,917, $940 and $1,994, respectively) for 6,851 Class A shares, 123 Class B shares, and 259 Class C shares of the Core Bond Fund outstanding on May 29, 2009. The Core Bond Fund had net assets on that date of $55,851 including $3,274 of net depreciation, which were combined with those of the Bond Fund. The aggregate net assets of Bond Fund immediately after the merger were $221,885 (which included Class I net assets of $131,924 which were not included in the exchange). The shareholders of each Class of the Core Bond Fund received for each share owned approximately 0.76, 0.77 and 0.78 share, respectively, of Class A, Class B, and Class C shares of the Bond Fund. On November 21, 2008, the AlphaSector(TM) Rotation Fund (formerly the Wealth Builder Fund) acquired all of the net assets of the Virtus Wealth Accumulator Fund ("Wealth Accumulator Fund") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees of the Virtus Opportunities Trust on August 20, 2008. The acquisition was accomplished by a tax-free exchange of 673 Class A shares and 326 Class C shares of the AlphaSector(TM) Rotation Fund outstanding on November 21, 2008 (valued at $4,920 and $2,368, respectively) for 773 Class A shares and 376 Class C shares of the Wealth Accumulator Fund outstanding on November 21, 2008. The Wealth Accumulator Fund had net assets on that date of $7,288 including $5,266 of net depreciation, which were combined with those of the Fund. The aggregate net assets of the Fund immediately after the merger were $70,731. The shareholders of the Wealth Accumulator Fund received for each share owned approximately 0.87 and 0.87, respectively, of Class A and Class C shares of the same class of the AlphaSector(TM) Rotation Fund. 11. EXEMPTIVE ORDER On June 5, 2006, the SEC issued an order under Section 12(d) (1) (J) of the Investment Company Act ("1940 Act") granting an exemption from Sections 12(d) (1) (A) and (B) of the 1940 Act and under Sections 6(c) and 17(b) of the 1940 Act granting an exemption from Section 17(a) of the 1940 Act, which permits the Trust to invest in other affiliated and unaffiliated funds, including exchange-traded funds. 123 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 12. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2010, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the funds were as follows:
NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION FUND TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) - -------------------------------------------- ----------- --------------- ---------------- ------------------ AlphaSector(TM) Allocation Fund............. $ 44,426 $ 2,550 $ (34) $ 2,516 AlphaSector(TM) Rotation Fund............... 534,397 15,709 (506) 15,203 Alternatives Diversifier Fund............... 245,387 30,859 (44,683) (13,824) Bond Fund................................... 193,004 11,741 (122) 11,619 CA Tax-Exempt Bond Fund..................... 56,495 4,228 (966) 3,262 Global Infrastructure Fund.................. 64,845 7,467 (2,900) 4,567 Global Opportunities Fund................... 51,146 12,081 (275) 11,806 Global Real Estate Securities Fund.......... 2,481 955 (5) 950 Greater Asia ex Japan Opportunities Fund.... 8,609 2,195 (48) 2,147 Greater European Opportunities Fund......... 4,040 1,053 (30) 1,023 High Yield Fund............................. 108,586 7,041 (5,255) 1,786 International Equity Fund................... 2,497 59 (15) 44 International Real Estate Securities Fund... 27,401 2,128 (2,616) (488) Market Neutral Fund (Long positions)........ 77,791 12,279 (2,261) 10,018 Market Neutral Fund (Short positions)....... (76,704) 3,133 (9,066) (5,933) Multi-Sector Fixed Income Fund.............. 197,820 17,084 (3,947) 13,137 Premium AlphaSector(TM) Fund................ 172,752 4,037 (156) 3,881 Senior Floating Rate Fund................... 162,612 4,639 (1,504) 3,135
The Funds have capital loss carryovers which may be used to offset future capital gains, as follows:
EXPIRATION YEAR ------------------------------------------------------------------------------------------------ 2011 2012 2013 2014 2015 2016 2017 2018 TOTAL -------- ------ ------- ------- ------- ------- -------- -------- -------- AlphaSector(TM) Allocation Fund.................... $ -- $ -- $ -- $ -- $ -- $ -- $ 402 $ 6,064 $ 6,466 AlphaSector(TM) Rotation Fund.................... -- -- -- -- -- -- 687 17,328 18,015 Alternatives Diversifier Fund.................... -- -- -- -- 443 1,961 2,258 63,092 67,754 Bond Fund.................... 2,634 273 6,243 41 4,355 1,080 3,798 -- 18,424 CA Tax-Exempt Bond........... -- -- -- -- -- -- -- 280 280 Global Infrastructure Fund.................... -- -- -- -- -- -- 1,264 8,762 10,026 Global Opportunities Fund.................... -- -- -- -- -- -- 8,384 20,795 29,179 High Yield Fund.............. 21,888 -- -- 143 -- -- 17,034 9,151 48,216 International Equity Fund.................... -- -- -- -- -- -- -- 5 5 International Real Estate Securities Fund......... -- -- -- -- -- -- 231 19,858 20,089 Market Neutral Fund.......... 3,612 -- -- 7,527 6,744 24 -- -- 17,907 Multi-Sector Fixed Income Fund............. -- -- -- -- -- -- 1,961 4,689 6,650
The Trust may not realize the benefit of these losses to the extent each Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. For the period ended September 30, 2010, the Funds utilized losses deferred in prior years against current year capital gains as follows: Bond Fund $ 3,383 Market Neutral Fund 3,612
The following Funds had capital loss carryovers which expired in 2010: AlphaSector(TM) Rotation Fund $ 741 High Yield Fund 70,135 Market Neutral Fund 2,630 Multi-Sector Fixed Income Fund 13,774
124 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2010, the Funds deferred and recognized post-October losses as follows:
CAPITAL LOSS CAPITAL LOSS CURRENCY LOSS CURRENCY LOSS DEFERRED RECOGNIZED DEFERRED RECOGNIZED --------------- -------------- -------------- ------------- AlphaSector(TM) Allocation Fund . . . . . . . . $ -- $ 6,243 $ -- $ -- AlphaSector(TM) Rotation Fund . . . . . . . . . 5,881 17,830 -- -- Alternatives Diversifier Fund . . . . . . . . . 1,129 61,797 -- -- Bond Fund . . . . . . . . . . . . . . . . . . . -- 3,803 -- -- CA Tax-Exempt Bond . . . . . . . . . . . . . .. 86 229 -- -- Global Infrastructure Fund . . . . . . . . . .. 3,629 8,244 -- -- Global Opportunities Fund . . . . . . . . . . . -- 25,820 134 90 Greater Asia ex Japan Opportunities Fund . . .. -- -- 27 -- Greater European Opportunities Fund . . . . . . -- -- 6 -- High Yield Fund . . . . . . . . . . . . . . . . -- 14,140 -- -- International Real Estate Securities Fund . . . 835 19,188 -- 18 Market Neutral Fund . . . . . . . . . . . . . . -- 177 7 3 Multi-Sector Fixed Income Fund . . . . . . . .. -- 8,922 -- 51 Senior Floating Rate Fund . . . . . . . . . . . -- 327 -- --
The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which are disclosed in the Schedules of Investments) consist of the following:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM TAX-EXEMPT INCOME CAPITAL GAINS INCOME ------------------ --------------- ------------- AlphaSector(TM) Allocation Fund . . . . . . . .. $ 289 $ -- $ -- AlphaSector(TM) Rotation Fund . . . . . . . . .. 2,565 -- -- Alternatives Diversifier Fund . . . . . . . . .. 638 -- -- Bond Fund . . . . . . . . . . . . . . . . . . .. 145 -- -- CA Tax-Exempt Bond . . . . . . . . . . . . . ... -- -- 57 Global Infrastructure Fund . . . . . . . . . ... 116 -- -- Global Opportunities Fund . . . . . . . . . .... 2,068 -- -- Global Real Estate Securities Fund . . . . . ... 148 28 -- Greater Asia ex Japan Opportunities Fund . . . . 1,510 233 -- Greater European Opportunities Fund . . . . . .. 205 345 -- High Yield Fund . . . . . . . . . . . . . . . .. 135 -- -- International Equity Fund . . . . . . . . . ... 4 -- -- International Real Estate Securities Fund . . .. 1,642 -- -- Market Neutral Fund . . . . . . . . . . . . . .. -- 2,522 -- Multi-Sector Fixed Income Fund . . . . . . . ... 1,030 -- -- Premium AlphaSector(TM) Fund . . . . . . . . ... 709 -- -- Senior Floating Rate Fund . . . . . . . . . . .. 1,928 65 --
For the period ended September 30, 2010, the CA Tax-Exempt Bond Fund distributed $2,362 of exempt interest dividends. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 125 VIRTUS OPPORTUNITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 13. RECLASSIFICATION OF CAPITAL ACCOUNTS For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Funds. As of September 30, 2010, the Funds recorded reclassifications to increase (decrease) the accounts as listed below ($ reported in thousands):
CAPITAL PAID IN UNDISTRIBUTED ACCUMULATED ON SHARES OF NET INVESTMENT NET REALIZED BENEFICIAL INTEREST INCOME (LOSS) GAIN (LOSS) -------------------- ---------------- -------------- AlphaSector(TM) Rotation Fund $ (741) $ -- $ 741 Alternatives Diversifier Fund 247 144 (391) Bond Fund 12 (22) 10 Global Infrastructure Fund -- 3 (3) Global Opportunities Fund -- 625 (625) Global Real Estate Securities Fund -- 24 (24) Greater Asia ex Japan Opportunities Fund -- 126 (126) Greater European Opportunities Fund -- 1 (1) High Yield Fund (70,098) (1) 70,099 International Equity Fund -- 1 (1) International Real Estate Securities Fund -- 502 (502) Market Neutral Fund (4,671) 2,043 2,628 Multi-Sector Fixed Income Fund (13,774) 480 13,294 Senior Floating Rate Fund -- 15 (15)
14. RECENT ACCOUNTING PRONOUNCEMENT In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2010-06, "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined. 15. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available for issuance, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements. 126 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [PRICEWATERHOUSECOOPERS LOGO] To the Board of Trustees of Virtus Opportunities Trust and Shareholders of the Funds, as defined: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments of Virtus AlphaSector(TM) Allocation Fund, Virtus AlphaSector(TM) Rotation Fund, Virtus Alternatives Diversifier Fund, Virtus Bond Fund, Virtus CA Tax-Exempt Bond Fund, Virtus Global Infrastructure Fund, Virtus Global Opportunities Fund, Virtus Global Real Estate Securities Fund, Virtus Greater Asia ex Japan Opportunities Fund, Virtus Greater European Opportunities Fund, Virtus High Yield Fund, Virtus International Equity Fund, Virtus International Real Estate Securities Fund, Virtus Multi-Sector Fixed Income Fund, Virtus Premium AlphaSector(TM) Fund and Virtus Senior Floating Rate Fund and the schedule of investments and securities sold short of Virtus Market Neutral Fund, each a series of Virtus Opportunities Trust, (the "Funds"), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Funds at September 30, 2010, the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2010 by correspondence with the custodian, brokers and underlying funds' transfer agent, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP Philadelphia, Pennsylvania November 22, 2010 127 VIRTUS OPPORTUNITIES TRUST TAX INFORMATION NOTICE SEPTEMBER 30, 2010 (UNAUDITED) For the fiscal year ended September 30, 2010, the Funds make the following disclosures for federal income tax purposes. Below is listed the percentages, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Funds which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The Funds designate the amounts below as long-term capital gains dividends ("LTCG") ($ reported in thousands), or if subsequently different, the amounts will be designated in the next annual report. The actual percentage for the calendar year will be designated in year-end tax statements.
FUND QDI DRD LTCG - ------------------------------------------------- ----------------------- ------------------ --------- AlphaSector(TM) Allocation Fund 100% 100% $ -- AlphaSector(TM) Rotation Fund 100 100 -- Alternatives Diversifier Fund 49 25 -- Global Infrastructure Fund 100 64 -- Global Opportunities Fund 73 34 -- Global Real Estate Securities Fund 21 0 28 Greater Asia ex Japan Opportunities Fund 12 0 233 Greater European Opportunities Fund 56 4 345 International Equity Fund 73 -- -- International Real Estate Securities Fund 40 -- -- Market Neutral Fund -- -- 2,522 Premium AlphaSector(TM) Fund 83 78 -- Senior Floating Rate Fund -- -- 65
For the period ended September 30, 2010, the Funds are disclosing the following information pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder ($ reported in thousands).
FOREIGN SOURCE FOREIGN TAXES INCOME PAID ON FOREIGN RECOGNIZED SOURCE INCOME ------------------ ------------------ Global Infrastructure Fund . . . . . . . . . . . . . . . .. $ 1,898 $ 241 Global Opportunities Fund . . . . . . . . . . . . . . . .. -- -- Global Real Estate Securities Fund . . . . . . . . . . . . . -- -- Greater Asia ex Japan Opportunities Fund . . . . . . . . .. 230 18 Greater European Opportunities Fund . . . . . . . . . . ... 185 14 International Equity Fund . . . . . . . . . . . . . . . .. 3 1 International Real Estate Securities Fund . . . . . . . . .. 1,331 70
For federal income tax purposes, 100% of the income dividends paid by the CA Tax-Exempt Fund qualify as exempt-interest dividends. 128 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS PREMIUM ALPHASECTOR(TM) FUND (THE "FUND") BY THE BOARD OF TRUSTEES The Board of Trustees of Virtus Opportunities Trust (the "Trust"), along with the Boards of Trustees of the other trusts in the Virtus family of funds (collectively, the "Board"), is responsible for determining whether to approve the entering into and continuation of each investment advisory and subadvisory agreement (each, an "Agreement") for the Virtus Mutual Funds. At a meeting held on June 1-3, 2010, the Board, including a majority of the Trustees who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940 (the "1940 Act"), considered and approved each Agreement for the Fund, as further discussed below. In approving each Agreement, the Board determined that the retention of the adviser and subadviser was in the best interests of the Fund and its shareholders. In reaching their decisions, the Board considered information for other Virtus Mutual Funds furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the approval review process. During the approval review process, the Board received assistance and advice from and met separately with independent legal counsel. The Board's determination contemplated a number of factors that the Trustees believed to be relevant. Some of the factors that the Board considered are described below, although the Trustees did not identify any particular information or factor as controlling, but, instead, the Board considered the Agreements in the totality of the circumstances. Each individual Trustee may have evaluated the information presented differently, giving different weights to different factors. NATURE, EXTENT AND QUALITY OF SERVICES The Fund would be managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of the Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and for making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. Therefore, in considering the Agreement with VIA as adviser, the Trustees considered VIA's existing process for supervising and managing the other Virtus Mutual Fund subadvisers, including (a) VIA's ability to select and monitor the subadvisers; (b) VIA's ability to provide the services necessary to monitor the subadvisers' compliance with the Funds' respective investment objectives, policies and restrictions as well as provide other oversight activities; and (c) VIA's ability and willingness to identify instances in which a subadviser should be replaced and to carry out the required changes. The Trustees also considered: (d) the experience, capability and integrity of VIA's management and other personnel; (e) the financial position of VIA; (f) the quality of VIA's own regulatory and legal compliance policies, procedures and systems; (g) the nature, extent and quality of administrative and other services provided by VIA to the Virtus Mutual Funds; and (h) VIA's supervision of the Virtus Mutual Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Virtus Mutual Fund shareholders as a result of being part of the Virtus family of funds, including the right to exchange investments between the same class of Virtus Mutual Funds without a sales charge, the ability to reinvest Virtus Mutual Fund dividends into other Virtus Mutual Funds and the right to combine holdings in other Virtus Mutual Funds to obtain a reduced sales charge. With respect to the limited services subadvisory Agreement, the Board noted that F-Squared Investments, Inc. (the "Subadviser") provided information with respect to portfolio management, compliance with the Fund's investment policies and procedures, and compliance with applicable securities laws and assurances thereof. In considering the approval of the subadvisory Agreement, the Board considered the Subadviser's investment management process, including (a) the experience, capability and integrity of the Subadviser's management and other personnel committed by the Subadviser to manage the Fund; (b) the quality and commitment of the Subadviser's regulatory and legal compliance policies, procedures and systems and (c) the Subadviser's brokerage and trading practices. After considering all of the information provided to them, the Trustees concluded that the nature, extent and quality of the services provided by VIA and the Subadviser were reasonable and beneficial to the Fund and its shareholders. INVESTMENT PERFORMANCE Because the Fund had not commenced operations, the Board could not evaluate prior investment performance for the Fund. The Board reviewed and was satisfied with the Subadviser's investment approach and the investment performance of the historical investment returns of the AlphaSector Premium Index as published by the Subadviser, as compared with certain broad market indexes. PROFITABILITY The Board also considered certain information relating to profitability that had been provided by VIA, noting VIA's intention to cap the Fund's total expenses during the startup phase. The Board noted that the profitability appeared reasonable and concluded that the profitability to VIA was reasonable in light of the quality of all services rendered to the Fund by VIA and its affiliates and the expense caps to be implemented. The Board did not separately review profitability information for the Subadviser, noting that the subadvisory fees are paid by VIA rather than by the Fund. MANAGEMENT FEES AND TOTAL EXPENSES In evaluating the management fees and total expenses of the Fund, the Board reviewed information provided by VIA and comparisons to other funds in the Fund's peer group. As noted above, the Board also noted the reimbursements that would be provided to the Fund in order to limit the total expenses incurred by the Fund and its shareholders. Based upon the information presented by VIA, the Trustees determined that the management fees charged by VIA and the total expenses of the Fund were reasonable. The Board acknowledged that the subadvisory fees to be paid would be paid by VIA and not by the Fund. The Board noted that the subadvisory fee appeared to be reasonable in light of the quality of services to be rendered by the Subadviser. 129 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS PREMIUM ALPHASECTOR(TM) FUND (THE "FUND") BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE The Board noted that reimbursements would be in place for the Fund. The Board determined that VIA and the Fund likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and shareholders of the Fund would have an opportunity to benefit from these economies of scale. In considering the subadvisory Agreement, the Board also considered the existence of any economies of scale and whether they would be passed along to the Fund's shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the Subadviser level. After considering the information presented, the Board ultimately concluded that it should approve the Agreements. SUBSEQUENT ASSIGNMENT AND ASSUMPTION OF SUBADVISORY AGREEMENT Subsequent to the June 1-3, 2010 approval of the Subadvisory Agreement for the Fund, the Subadviser requested to transfer the Subadvisory Agreement for the Fund to a new entity named F-Squared Institutional Advisors, LLC (the "New Subadviser"). In order to effect this change, the Subadviser secured an opinion letter under the 1940 Act from the law firm Kirkpatrick & Lockhart which opined that the change in investment [sub]advisers would not be considered to be an "assignment" under the 1940 Act because both subadvisers had identical management and a common controlling shareholder. Because of these commonalities, the Board was not required to participate in a Section 15(c) review under the 1940 Act to approve the subadvisory agreement with the New Subadviser. However, the board approved certain required items of the New Subadviser, namely, its policies and procedures and its Code of Ethics. An Assignment and Assumption Agreement was executed as of August 25, 2010 whereupon the New Subadviser acquired and assumed all of the duties and obligations of the Subadviser under the Subadvisory Agreement with respect to the Fund. 130 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS INTERNATIONAL EQUITY FUND (THE "FUND") BY THE BOARD OF TRUSTEES The Board of Trustees of Virtus Opportunities Trust (the "Trust"), along with the Boards of Trustees of the other trusts in the Virtus family of funds (collectively, the "Board"), is responsible for determining whether to approve the entering into and continuation of each investment advisory and subadvisory agreement (each, an "Agreement") for the Virtus Mutual Funds. At a meeting held on June 1-3, 2010, the Board, including a majority of the Trustees who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940 (the "1940 Act"), considered and approved each Agreement for the Fund, as further discussed below. In approving each Agreement, the Board determined that the retention of the adviser and subadviser was in the best interests of the Fund and its shareholders. In reaching their decisions, the Board considered information for other Virtus Mutual Funds furnished throughout the year at regular Board meetings as well as information prepared specifically in connection with the approval review process. During the approval review process, the Board received assistance and advice from and met separately with independent legal counsel. The Board's determination contemplated a number of factors that the Trustees believed to be relevant. Some of the factors that the Board considered are described below, although the Trustees did not identify any particular information or factor as controlling, but, instead, the Board considered the Agreements in the totality of the circumstances. Each individual Trustee may have evaluated the information presented differently, giving different weights to different factors. NATURE, EXTENT AND QUALITY OF SERVICES The Fund would be managed using a "manager of managers" structure that generally involves the use of one or more subadvisers to manage some or all of the Fund's portfolio. Under this structure, Virtus Investment Advisers, Inc. ("VIA") is responsible for evaluating and selecting subadvisers on an ongoing basis and for making any recommendations to the Board regarding hiring, retaining or replacing subadvisers. Therefore, in considering the Agreement with VIA as adviser, the Trustees considered VIA's existing process for supervising and managing the other Virtus Mutual Fund subadvisers, including (a) VIA's ability to select and monitor the subadvisers; (b) VIA's ability to provide the services necessary to monitor the subadvisers' compliance with the Funds' respective investment objectives, policies and restrictions as well as provide other oversight activities; and (c) VIA's ability and willingness to identify instances in which a subadviser should be replaced and to carry out the required changes. The Trustees also considered: (d) the experience, capability and integrity of VIA's management and other personnel; (e) the financial position of VIA; (f) the quality of VIA's own regulatory and legal compliance policies, procedures and systems; (g) the nature, extent and quality of administrative and other services provided by VIA to the Virtus Mutual Funds; and (h) VIA's supervision of the Virtus Mutual Funds' other service providers. Finally, the Board also noted the extent of benefits that are provided to Virtus Mutual Fund shareholders as a result of being part of the Virtus family of funds, including the right to exchange investments between the same class of Virtus Mutual Funds without a sales charge, the ability to reinvest Virtus Mutual Fund dividends into other Virtus Mutual Funds and the right to combine holdings in other Virtus Mutual Funds to obtain a reduced sales charge. With respect to the subadvisory Agreement, the Board noted that Pyrford International Ltd. (the "Subadviser") provided information with respect to portfolio management, compliance with the Fund's investment policies and procedures, and compliance with applicable securities laws and assurances thereof. In considering the approval of the subadvisory Agreement, the Board considered the Subadviser's investment management process, including (a) the experience, capability and integrity of the Subadviser's management and other personnel committed by the Subadviser to manage the Fund; (b) the quality and commitment of the Subadviser's regulatory and legal compliance policies, procedures and systems and (c) the Subadviser's brokerage and trading practices. After considering all of the information provided to them, the Trustees concluded that the nature, extent and quality of the services provided by VIA and the Subadviser were reasonable and beneficial to the Fund and its shareholders. INVESTMENT PERFORMANCE Because the Fund had not commenced operations, the Board could not evaluate prior investment performance for the Fund. The Board reviewed and was satisfied with the Subadviser's investment approach and the investment performance of the historical investment returns of a composite made up of comparable accounts as compared to the MSCI EAFE Index. PROFITABILITY The Board also considered certain information relating to profitability that had been provided by VIA, noting VIA's and the Subadviser's intentions to cap the Fund's total expenses during the startup phase. The Board noted that the profitability appeared reasonable and concluded that the profitability to VIA was reasonable in light of the quality of all services rendered to the Fund by VIA and its affiliates and the expense caps to be implemented. The Board did not separately review profitability information for the Subadviser, noting that the subadvisory fees are paid by VIA rather than by the Fund. MANAGEMENT FEES AND TOTAL EXPENSES In evaluating the management fees and total expenses of the Fund, the Board reviewed information provided by VIA and comparisons to other funds in the Fund's peer group. As noted above, the Board also noted the reimbursements that would be provided to the Fund in order to limit the total expenses incurred by the Fund and its shareholders. Based upon the information presented by VIA, the Trustees determined that the management fees charged by VIA and the total expenses of the Fund were reasonable. The Board acknowledged that the subadvisory fees to be paid would be paid by VIA and not by the Fund. The Board noted that the subadvisory fee appeared to be reasonable in light of the quality of services to be rendered by the Subadviser. 131 CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS FOR VIRTUS INTERNATIONAL EQUITY FUND (THE "FUND") BY THE BOARD OF TRUSTEES (CONTINUED) ECONOMIES OF SCALE The Board noted that the management fees for the Fund included breakpoints based on assets under management, and that reimbursements would be in place for the Fund. The Board determined that VIA and the Fund likely would achieve certain economies of scale, particularly in relationship to certain fixed costs, and shareholders of the Fund would have an opportunity to benefit from these economies of scale. In considering the subadvisory Agreement, the Board also considered the existence of any economies of scale and whether they would be passed along to the Fund's shareholders, but noted that any such economies would likely be generated at the Fund level rather than at the Subadviser level. After considering the information presented, the Board ultimately concluded that it should approve the Agreements. 132 FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2010, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES
NAME, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(s) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------ ---------------------------------------------------------------------------------------------------- Leroy Keith, Jr. Chairman, Bloc Global Services Group, LLC (commodities business) (2010 to present). Managing YOB: 1939 Director, Almanac Capital Management (commodities business) (2007 to 2008). Partner, Stonington 44 Funds Partners, Inc. (private equity fund)(2001 to 2007). Director/Trustee, Evergreen Funds (88 portfolios)(1989 to present). Philip R. McLoughlin Managing Director, SeaCap Asset Management Fund I, L.P. (2009 to present) and SeaCap Partners, LLC Chairman (investment management) (2009 to present). Partner, Cross Pond Partners, LLC (strategy consulting YOB: 1946 firm) (2006 to present). Director, World Trust Fund (1991 to present). Chairman and Trustee, Virtus 47 Funds Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (2003 to present). Director, DTF Tax-Free Income Fund, Inc. (1996 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (1996 to present); and DNP Select Income Fund Inc. (2009 to present). Director, Argo Group International Holdings, Inc. and its predecessor, PXRE Corporation (insurance) (1986 to 2009). Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (1982 to 2006). Director, DTF Tax-Free YOB: 1951 Income Fund, Inc. (2003 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (2003 to 47 Funds present); and DNP Select Income Fund Inc. (2009 to present). James M. Oates Managing Director, Wydown Group (consulting firm) (1994 to present). Chairman and Trustee, John YOB: 1946 Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios) (2005 to present). Director, 44 Funds Stifel Financial (1996 to present). Director, Connecticut River Bank (1999 to present) and Connecticut River Bancorp (1998 to present). Chairman, Emerson Investment Management, Inc. (2000 to present). Director, Trust Company of New Hampshire (2002 to present). Director, Beaumont Financial Partners, LLC (2000 to present). President of the Board (1999 to present) and Director (1985 to present), Middlesex School. Chairman (1997 to 2006) and Non-Executive Chairman (2007 to present), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services). Director, Investors Bank and Trust Co. and Investors Financial Services Corporation (1995 to 2007). Trustee, John Hancock Funds III (2005 to 2006). Richard E. Segerson Managing Director, Northway Management Company (1998 to present). YOB: 1946 44 Funds Ferdinand L.J. Verdonck Director, The J.P. Morgan Continental European Investment Trust (1998 to present). Director, Groupe YOB: 1942 SNEF (electric and electronic installations) (1998 to present). Director, Galapagos N.V. 44 Funds (biotechnology) (2005 to present). Chairman, Amsterdam Molecular Therapeutics N.V. (biotechnology) (2007 to present). Director, Movetis N.V. (biotechnology) (2008 to present). Director, Borje Berlin A.G. (stock exchange) (2008 to 2009). Chairman, EASDAQ (stock exchange) (2001 to 2007). Chairman, Banco Urquijo (1998 to 2006).
133 FUND MANAGEMENT TABLES (CONTINUED) (UNAUDITED) INTERESTED TRUSTEE The individual listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
NAME, YEAR OF BIRTH, YEAR ELECTED AND PRINCIPAL OCCUPATION(s) NUMBER OF FUNDS DURING PAST 5 YEARS AND OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - --------------------------- -------------------------------------------------------------------------------------------------- George R. Aylward(1) Director, President and Chief Executive Officer (2008 to present), Director and President (2006 to President 2008), Chief Operating Officer (2004 to 2006), Vice President, Finance, (2001 to 2002), Virtus YOB: 1964 Investment Partners, Inc. and/or certain of its subsidiaries. Various senior officer positions 46 Funds with Virtus affiliates (2008 to present). Senior Executive Vice President and President, Asset Management (2007 to 2008), Senior Vice President and Chief Operating Officer, Asset Management (2004 to 2007), Vice President and Chief of Staff (2001 to 2004), The Phoenix Companies, Inc. Various senior officer positions with Phoenix affiliates (2005 to 2008). President (2006 to present), Executive Vice President (2004 to 2006), the Virtus Mutual Funds Family. President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Chairman, President and Chief Executive Officer, The Zweig Funds (2 portfolios) (2006-present).
(1) Mr. Aylward is an "interested person," as defined in the 1940 Act, by reason of his position as President, and Chief Executive Officer of Virtus Investment Partners, Inc. ("Virtus"), the ultimate parent company of the Adviser, and various positions with its affiliates including the Adviser. OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
POSITION(s) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(s) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ---------------------------- -------------------------------- ----------------------------------------------------------- Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (2009 YOB: 1962 since 2008. to present), Senior Vice President, Asset Management Product Development (2008 to 2009), Senior Vice President, Asset Management Product Development (2005 to 2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Senior Vice President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Director (2008 to 2009), Director and President (2006 to 2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (2008 to present). Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC c/o Zweig-DiMenna Chief Compliance Officer (1989 to present). Vice President, The Zweig Funds (2 Associates, LLC since 2004. portfolios) (2004 to present). Independent Chief Compliance 900 Third Avenue Officer, Virtus Variable Insurance Trust (f/k/a, The New York, NY 10022 Phoenix Edge Series Fund) (8 portfolios) (2004 to present). YOB: 1945 President and Director of Watermark Securities, Inc. (1991 to present). Assistant Secretary, Gotham Advisors Inc. (1990 to 2005). W. Patrick Bradley Chief Financial Officer and Senior Vice President, Fund Administration (2009 to YOB: 1972 Treasurer since 2005. present), Vice President, Fund Administration (2007 to 2009), Second Vice President, Fund Control & Tax (2004 to 2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Chief Financial Officer and Treasurer (2006 to present), Vice President and Principal Accounting Officer (2006 to 2010), Assistant Treasurer (2004 to 2006), Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios). Chief Financial Officer and Treasurer (2005 to present), Assistant Treasurer (2004 to 2006), certain funds within the Virtus Mutual Funds Family. Kevin J. Carr Vice President, Chief Legal Senior Vice President (2009 to present), Counsel and YOB: 1954 Officer, Counsel and Secretary Secretary (2008 to present) and Vice President (2008 to since 2005. 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Vice President, Chief Legal Officer, Counsel and Secretary, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Vice President and Counsel, Phoenix Life Insurance Company (2005 to 2008). Compliance Officer of Investments and Counsel, Travelers Life and Annuity Company (January 2005 to May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995 to 2005).
134 VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668
TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Francis G. Waltman, Senior Vice President VP Distributors, Inc. Marc Baltuch, Vice President and 100 Pearl Street Chief Compliance Officer Hartford, CT 06103-4506 W. Patrick Bradley, Chief Financial Officer and Treasurer CUSTODIANS Kevin J. Carr, Vice President, Chief Legal The Bank of New York Mellon Officer, Counsel and Secretary One Wall Street New York, NY 10286 PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19153-3111 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Adviser Consulting Group 1-800-243-4361 Telephone Orders 1-800-367-5877 Text Telephone 1-800-243-1926 Web site VIRTUS.COM
IMPORTANT NOTICE TO SHAREHOLDERS The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-243-1574. VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 IMPORTANT NOTICE TO INVESTORS Effective January 1, 2011, Virtus Mutual Funds will make changes to the minimum purchase requirements for all funds, except Virtus International Equity Fund and Virtus Premium AlphaSector Fund. Additionally, beginning in 2011, Virtus Mutual Funds will impose an annual fee on accounts having balances of less than $2,500. Also effective January 1, 2011, the Class A Sales charge and dealer commission schedules for Virtus fixed income funds will be modified. MINIMUM PURCHASE REQUIREMENTS Effective January 1, 2011, Virtus Mutual Funds will implement revised purchase minimums. Accordingly, effective January 1, 2011, the table entitled "Purchase Minimums" under the heading "Purchase and Sale of Fund Shares" in each fund's Prospectus is replaced with the following: PURCHASE MINIMUMS (EXCEPT CLASS I SHARES) - --------------------------------------------------------------------------------------------------------------------- Minimum Initial Purchase $2,500 - --------------------------------------------------------------------------------------------------------------------- Individual Retirement Accounts (IRAs), systematic purchase, or systematic exchange accounts $100 - --------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum - --------------------------------------------------------------------------------------------------------------------- Minimum Additional Purchase $100 - --------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum - ---------------------------------------------------------------------------------------------------------------------
Also, the description of minimum initial and subsequent investment amounts appearing in the section "Step 1" under the heading "Your Account" is amended to reflect the information shown in the above table. Minimums shown above currently apply to Virtus International Equity Fund and Virtus Premium AlphaSector Fund. ANNUAL FEE ASSESSMENT FOR CERTAIN ACCOUNTS Due to the high cost of maintaining small accounts, effective January 1, 2011, Virtus Mutual Funds will begin assessing an annual fee of $25 per direct account for account balances under $2,500. Accordingly, effective January 1, 2011, the following disclosure is added under the heading "Account Policies" in each fund's prospectus: ANNUAL FEE ON SMALL ACCOUNTS To help offset the costs associated with maintaining small accounts, Virtus Mutual Funds reserve the right to assess an annual $25 small account fee on fund accounts with a balance below $2,500. The small account fee may be waived in certain circumstances, such as for accounts that have elected electronic delivery of statements/regulatory documents and accounts owned by shareholders having multiple accounts with a combined value of over $25,000. The small account fee does not apply to accounts held through a financial intermediary. The small account fee will be collected through the automatic sale of shares in your account. We will send you written notice before we charge the $25 fee so that you may increase your account balance above the minimum, sign up for electronic delivery, consolidate your accounts or liquidate your account. You may take these actions at any time by contacting your investment professional or the Transfer Agent. CLASS A SALES CHARGES -- APPLICABLE TO VIRTUS FIXED INCOME FUNDS Effective January 1, 2011, Virtus Mutual Funds will implement changes to the sales charge and dealer commission schedules applicable to purchases of Class A Shares of Virtus fixed income funds. Accordingly, the Virtus Opportunities Trust Prospectus will be revised as described below. VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 (Continued) The following information replaces the second table under the heading "Sales Charges You May Pay to Purchase Class A Shares" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND
AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - ------------------------------- ----------------- ----------------- Under $50,000 2.75% 2.83% $50,000 but under $100,000 2.25 2.30 $100,000 but under $250,000 1.75 1.78 $250,000 but under $500,000 1.25 1.27 $500,000 but under $1,000,000 1.00 1.01 $1,000,000 or more None None
VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND
AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - ------------------------------- ----------------- ----------------- Under $50,000 3.75% 3.90% $50,000 but under $100,000 3.50 3.63 $100,000 but under $250,000 3.25 3.36 $250,000 but under $500,000 2.25 2.30 $500,000 but under $1,000,000 1.75 1.78 $1,000,000 or more None None
The following information replaces the second table under the heading "Compensation to Dealers" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND
AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A DEALER DISCOUNT AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ------------------------------- ----------------- ----------------- -------------------- Under $50,000 2.75% 2.83% 2.25% $50,000 but under $100,000 2.25 2.30 2.00 $100,000 but under $250,000 1.75 1.78 1.50 $250,000 but under $500,000 1.25 1.27 1.00 $500,000 but under $1,000,000 1.00 1.01 1.00 $1,000,000 or more None None None
VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND
AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A DEALER DISCOUNT AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ------------------------------- ----------------- ----------------- -------------------- Under $50,000 3.75% 3.90% 3.25% $50,000 but under $100,000 3.50 3.63 3.00 $100,000 but under $250,000 3.25 3.36 2.75 $250,000 but under $500,000 2.25 2.30 2.00 $500,000 but under $1,000,000 1.75 1.78 1.50 $1,000,000 or more None None None
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUSES FOR FUTURE REFERENCE. VOT 8020/Minimums&FISalesCharges (11/10) THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. THIS PAGE INTENTIONALLY BLANK. PRSRT STD U.S. POSTAGE PAID LANCASTER, PA PERMIT 1793 [VIRTUS LOGO] c/o State Street Bank and Trust Company P.O. Box 8301 Boston, MA 02266-8301 For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM. 8022 10-10 ANNUAL REPORT (VIRTUS MUTUAL FUNDS LOGO) - ------------------------------------------------------------------------------------------------------------------------------------ Virtus Foreign Opportunities Fund * Prospectus Supplement applicable to the Fund appears at the back of this Annual Report. - ------------------------------------------------------------------------------------------------------------------------------------ TRUST NAME: September 30, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST eDelivery at Virtus.com (GRAPHIC) NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS VIRTUS FOREIGN OPPORTUNITIES FUND ("Foreign Opportunities Fund") Message to Shareholders ....................................................................................................... 1 Disclosure of Fund Expenses ................................................................................................... 2 Fund Summary .................................................................................................................. 4 Schedule of Investments ....................................................................................................... 7 Statement of Assets and Liabilities ........................................................................................... 11 Statement of Operations ....................................................................................................... 12 Statement of Changes in Net Assets ............................................................................................ 13 Financial Highlights .......................................................................................................... 14 Notes to Financial Statements ................................................................................................. 15 Report of Independent Registered Public Accounting Firm ....................................................................... 23 Tax Information Notice ........................................................................................................ 24 Fund Management Tables ........................................................................................................ 25 - ------------------------------------------------------------------------------------------------------------------------------------ PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2010, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the Fund with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. - ------------------------------------------------------------------------------------------------------------------------------------ This report is not authorized for distribution to prospective investors in the Virtus Foreign Opportunities Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, the Fund's record and other pertinent information.
MESSAGE TO SHAREHOLDERS Dear Fellow Shareholders of Virtus Mutual Funds: In September 2010, the National Bureau of Economic Research concluded that the "Great Recession" had ended more than a year earlier. Good news? Undoubtedly. The sign that all is right with the economy? Hardly. (PHOTO OF GEORGE R. AYLWARD) While the recession was technically over, the economy has been stalled between tentative growth and a temptation to fall back into recession -- the feared "double dip." The economy certainly has improved since the lows of early 2009, but retail sales have remained weak and the housing market is still depressed, with few signs it has plumbed the bottom of the trough. With the unemployment rate continuing to hover near 10 percent, pessimism remains prevalent and consumer confidence in the economy remains challenged. Are there opportunities for investors in these situations? Absolutely. The broader financial markets have seen overall gains for three of the past four quarters. July 2010 was the best month for stocks in a year, and then September 2010 topped July with returns not seen in 71 years. The Federal Reserve demonstrated its concern about persistently high unemployment rates and the long-term impact of the recession by saying it was prepared to do whatever was necessary to prevent deflation or the double dip. At the start of the 2010 fourth quarter, the Fed was preparing another round of quantitative easing through large-scale purchases of Treasuries and mortgage-backed securities, and the financial markets responded positively. These factors are another reminder that during periods of market volatility, vigilance is the key for the investor, the financial advisor, and the professional money manager alike. Your fund's management team provides details of its approach to these markets in the enclosed commentary, and I encourage you to read this material carefully. We also suggest you rely on the experience of your personal financial advisor, who can review your investment objectives and your portfolio and, when appropriate, recommend adjustments to fit your current financial needs and your tolerance for risk. The wide range of equity and fixed income investments available from the Virtus Mutual Funds allows you to design a portfolio tailored to your individual needs. Information about your investments is always available on our website, www.virtus.com, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will continue do our very best to meet your expectations. On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, (GEORGE R. AYLWARD) George R. Aylward President, Virtus Mutual Funds NOVEMBER 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT WWW.VIRTUS.COM OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 1-800-243-1574. PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 1
VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 We believe it is important for you to understand the impact HYPOTHETICAL EXAMPLE FOR of costs on your investment. All mutual funds have operating COMPARISON PURPOSES expenses. As a shareholder of the Virtus Foreign Opportunities Fund (the "Fund") you may incur two types of costs: (1) The second section of the accompanying table provides transaction costs, including sales charges on purchases of information about hypothetical account values and hypothetical Class A shares and contingent deferred sales charges on Class C expenses based on the Fund's actual expense ratio and an assumed shares; and (2) ongoing costs, including investment advisory rate of return of 5% per year before expenses, which is not your fees; distribution and service fees; and other expenses. Class Fund's actual return. The hypothetical account values and expenses I shares are sold without a sales charge and do not incur may not be used to estimate the actual ending account balance or distribution and service fees. These examples are intended to expenses you paid for the period. You may use this information to help you understand your ongoing costs (in dollars) of compare the ongoing costs of investing in your Fund and other investing in the Fund and to compare these costs with the funds. To do so, compare these 5% hypothetical examples with the ongoing costs of investing in other mutual funds. These 5% hypothetical examples that appear in the shareholder reports of examples are based on an investment of $1,000 invested at the the other funds. beginning of the period and held for the entire six-month period. The following Expense Table illustrates your fund's Please note that the expenses shown in the accompanying table costs in two ways. are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or contingent ACTUAL EXPENSES deferred sales charges. Therefore, the second section of the accompanying table is useful in comparing ongoing costs only, and The first section of the accompanying table provides will not help you determine the relative total costs of owning information about actual account values and actual expenses. different funds. In addition, if these transactional costs were You may use the information in this section, together with the included, your costs would have been higher. The calculations amount you invested, to estimate the expenses that you paid assume no shares were bought or sold during the period. Your over the period. Simply divide your account value by $1,000 actual costs may have been higher or lower, depending on the (for example, an $8,600 account value divided by $1,000 = 8.6), amount of your investment and the timing of any purchases or then multiply the result by the number given for your fund redemptions. under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. 2
VIRTUS FOREIGN OPPORTUNITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 EXPENSE TABLE - ------------------------------------------------------------------------------------------------------------------------------------ Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2010 September 30, 2010 Ratio Period* - ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL Class A $1,000.00 $1,061.60 1.49% $ 7.70 Class C 1,000.00 1,057.20 2.24 11.55 Class I 1,000.00 1,062.50 1.24 6.41 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.51 1.49 7.56 Class C 1,000.00 1,013.70 2.24 11.37 Class I 1,000.00 1,018.78 1.24 6.29 * Expenses are equal to the Fund's annualized expense ratio which includes waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 365 days to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 3
VIRTUS FOREIGN OPPORTUNITIES FUND TICKER SYMBOLS: Class A: JVIAX Class C: JVICX Class I: JVXIX [ ] FOREIGN OPPORTUNITIES FUND (the "Fund") is diversified and over the longer term. We continue, as always, to carefully has an investment objective to seek long-term capital monitor the situation and adjust our risk exposures around appreciation. THERE IS NO GUARANTEE THAT THE FUND WILL the world accordingly. ACHIEVE ITS OBJECTIVE. [ ] Tremendous uncertainty remains at the macroeconomic level. [ ] For the fiscal year ended September 30, 2010, the Fund's Globally, concerns about a double-dip recession, deflation, Class A shares at NAV returned 15.34%, Class C shares consumer deleveraging and government deficits persist. It returned 14.42% and Class I shares returned 15.60%. For the appears that it may take some time before markets regain same period, the S&P 500(R) Index, a broad-based equity solid ground and business confidence gains a strong footing. index, returned 10.16% and the MSCI EAFE(R) Index (Net), the Fund's style-specific index appropriate for comparison, WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL returned 3.27%. YEAR? ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF DISTRIBUTION [ ] The Fund has sizeable positions in large, multi-national AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS corporations. In general, their multiples remain fairly NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY attractive. The companies are growing, but their valuations BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. do not always reflect that growth. As a result, despite the Fund's fiscal year's outperformance, we believe that many of HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? the Fund's large holdings are relatively less expensive than they were last year. The Fund is growing faster than the [ ] World economies are stabilizing, and financial conditions Index while trading at similar valuations. are improving, albeit unevenly, across the world. Emerging countries had fewer structural issues than developed [ ] The Fund was significantly underweight in Japan, which countries, and have recovered from the crisis more quickly, helped absolute and relative performance during the Fund's in general. We anticipate that these countries will continue fiscal year. to show strength, although growth rates may be slower as demand for goods among consumers in developed countries [ ] The United Kingdom's BAT and Switzerland's Philip Morris remains muted. If domestic demand grows quickly enough in International Inc., two of the Fund's largest positions in emerging countries, it could help sustain growth rates at the international developed markets, were also positive higher levels. contributors to performance during the Fund's fiscal year. [ ] The United States economy seems to have stabilized, and the [ ] The Fund's out-of-index holdings in India made attractive country is further along in cleaning up its financial system contributions to relative and absolute performance during than are many other countries. However, headwinds remain. the Fund's fiscal year. HDFC Bank, Housing Development Unemployment is very high. Consumer spending is muted, Finance, and ITC made attractive performance contributions although saving more and spending less may be good for the during the fiscal year. Emerging countries continued to have economy fewer structural issues than developed countries. 4
VIRTUS FOREIGN OPPORTUNITIES FUND (CONTINUED) [ ] The Fund's positions in Brazil, which also are out-of-index ASSET ALLOCATIONS positions, made attractive contributions to relative and absolute performance during the Fund's fiscal year. Souza The following table presents the portfolio holdings within Cruz and Ambev also made positive contributions to relative certain sectors as a percentage of total investments at September and absolute performance. 30, 2010. [ ] Strong stock selection helped make Financials the best Consumer Staples 42% performing sector in the Fund during the Fund's fiscal year. Financials 20 Specifically, India's HDFC Bank and Housing Development Health Care 13 Finance, and United Kingdom's HSBC Holdings, were top Industrials 8 performers during the Fund's fiscal year. Energy 4 Utilities 4 [ ] Consumer Staples companies were also top performers during Consumer Discretionary 3 the fiscal year, as the sector made strong contributions to Information Technology 2 absolute and relative performance. ITC, BAT, and Souza Cruz Other (includes short-term investments helped relative performance. and securities lending collateral) 4 --- INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS, Total 100% 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 MSCI EAFE(R) INDEX (NET) THAT SECTOR'S PERFORMANCE MORE THAN A FUND WITH BROADER A free float-adjusted market capitalization index that measures SECTOR DIVERSIFICATION. developed foreign market equity performance, excluding the U.S. and Canada. The index is calculated on a total return basis with gross dividends reinvested. SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT) An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. Sponsored ADRs generally carry the same rights normally given to stockholders, such as voting rights. ADRs must be sponsored to be able to trade on a major KEY INVESTMENT TERMS U.S. exchange such as the NYSE. ADR (AMERICAN DEPOSITARY RECEIPT) S&P 500(R) INDEX Represents shares of foreign companies traded in U.S. dollars on The S&P 500(R) Index is a free-float market U.S. exchanges that are held by a U.S. bank or trust. Foreign capitalization-weighted index of 500 of the largest U.S. companies use ADRs in order to make it easier for Americans to companies. The index is calculated on a total return basis with buy their shares. dividends reinvested. THE INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 5
VIRTUS FOREIGN OPPORTUNITIES FUND (CONTINUED) AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ---------------------------------------------------------------------------------------------------------------------------- Inception 1 5 10 to Inception Year Years Years 9/30/10 Date - ---------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES AT NAV (2) 15.34% 4.92% 3.95% -- -- - ---------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3, 4) 8.71 3.68 3.34 -- -- - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES AT NAV (2) AND WITH CDSC(4) 14.42 4.11 -- 9.48% 10/10/03 - ---------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES AT NAV 15.60 -- -- 1.69 5/15/06 - ---------------------------------------------------------------------------------------------------------------------------- S&P 500(R) INDEX 10.16 0.64 -0.43 NOTE 5 NOTE 5 - ---------------------------------------------------------------------------------------------------------------------------- MSCI EAFE(R) INDEX (NET) 3.27 1.97 2.55 NOTE 6 NOTE 6 - ---------------------------------------------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES: 1.48%; C SHARES: 2.23%; I SHARES: 1.23%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASES IN WHICH A FINDER'S FEE WAS PAID AND ALL CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 3.75% FOR CLASS C (SINCE 10/10/03) AND -0.73% FOR CLASS I (SINCE 5/15/06). (6) INDEX PERFORMANCE IS 6.88% FOR CLASS C (SINCE 10/10/03) AND -1.85% FOR CLASS I (SINCE 5/15/06). (7) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 for periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000 for Class A shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) Share Class A(1)(3)(4) MSCI EAFE(R) Index (Net) S&P 500(R) Index 9/29/2000 $ 9,425 $10,000 $10,000 9/28/2001 6,146 7,135 7,337 9/30/2002 5,690 6,027 5,834 9/30/2003 6,807 7,595 7,259 9/30/2004 8,351 9,272 8,266 9/30/2005 10,923 11,663 9,277 9/29/2006 13,592 13,898 10,279 9/28/2007 17,166 17,354 11,968 9/30/2008 12,621 12,060 9,338 9/30/2009 12,040 12,450 8,693 9/30/2010 13,887 12,857 9,577 For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 5. 6
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- ---------- ---------- --------- CONSUMER STAPLES--CONTINUED PREFERRED STOCK--3.4% Woolworths Ltd. CONSUMER STAPLES--2.1% (Australia) 1,221,013 $ 34,036 Companhia de Bebidas --------- das Americas ADR 487,227 (Brazil) 2.94% 201,862 $ 24,987 --------- ---------- ENERGY--4.4% UTILITIES--1.3% Canadian Natural AES Tiete SA Resources Ltd. (Brazil) 10.59% 1,118,515 14,847 (Canada) 727,962 25,180 - -------------------------------------------------- Core Laboratories N.V. TOTAL PREFERRED STOCK (Netherlands)(4) 299,940 26,407 (IDENTIFIED COST $22,259) 39,834 --------- - -------------------------------------------------- 51,587 COMMON STOCKS--95.3% --------- CONSUMER DISCRETIONARY--3.3% FINANCIALS--20.5% Domino's Pizza plc Admiral Group plc (United Kingdom) 941,572 6,946 (United Kingdom) 482,114 12,618 Hero Honda Motors Ltd. Amlin plc (United (India) 171,800 7,104 Kingdom) 2,490,523 15,700 Nitori Co., Ltd. (Japan) 301,550 25,213 CETIP SA - Balcao ---------- Organizado de Ativos 39,263 e Derivativos (Brazil)(2) 814,514 7,943 ---------- HDFC Bank Ltd. (India) 1,354,550 75,041 CONSUMER STAPLES--41.3% Housing Development British American Tobacco Finance Corp. plc (United Kingdom) 1,748,955 65,238 (India)(3) 4,053,570 66,142 Coca-Cola Amatil Ltd. Muenchener (Australia) 1,231,288 14,258 Rueckversicherungs- Colruyt SA (Belgium)(4) 67,344 17,801 Gesellschaft AG Diageo plc (United Registered Shares Kingdom) 1,433,623 24,683 (Germany) 125,657 17,404 Imperial Tobacco Group QBE Insurance Group plc (United Kingdom) 1,643,577 48,978 Ltd. (Australia)(4) 1,238,423 20,660 ITC Ltd. (India) 7,886,478 31,293 Standard Chartered plc Nestle India Ltd. (India) 145,788 10,973 (United Kingdom) 950,588 27,267 Nestle S.A. Registered --------- Shares (Switzerland) 1,021,300 54,409 242,775 Philip Morris --------- International, Inc. HEALTH CARE--13.4% (United States) 1,138,072 63,755 BioMerieux (France) 167,149 17,320 Reckitt Benckiser Group Cie Generale D'optique plc (United Kingdom) 637,417 35,056 Essilor International SABMiller plc (United SA (France)(4) 326,354 22,454 Kingdom) 622,514 19,905 Cipla Ltd. (India) 1,042,347 7,478 Souza Cruz SA (Brazil) 467,140 23,600 Covidien plc (Ireland) 835,230 33,568 Tesco plc (United Novartis AG Registered Kingdom) 6,492,236 43,242 Shares (Switzerland) 328,048 18,812 Novo Nordisk A/S Class B (Denmark) 498,717 49,490 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 7
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE --------- ---------- ---------- ---------- HEALTH CARE--CONTINUED SHORT-TERM INVESTMENTS--1.7% Roche Holding AG MONEY MARKET MUTUAL FUNDS--1.7% Registered Shares Dreyfus Cash Management (Switzerland) 63,963 $ 8,735 Fund - Institutional ---------- Shares (seven-day 157,857 effective yield ---------- 0.210%) 20,483,611 $ 20,484 INDUSTRIALS--7.9% ----------------------------------------------------- Bharat Heavy Electricals TOTAL SHORT-TERM INVESTMENTS Ltd. (India) 222,836 12,291 (IDENTIFIED COST $20,484) 20,484 Bunzl plc (United ----------------------------------------------------- Kingdom) 775,200 9,243 Bureau Veritas SA SECURITIES LENDING COLLATERAL--2.3% (France) 203,103 14,182 Dreyfus Cash Advantage Capita Group plc (The) Fund - Institutional (United Kingdom) 1,733,953 21,409 Shares (seven-day De La Rue plc (United effective yield Kingdom) 707,631 7,342 0.250%)(5) 27,027,000 27,027 G4S plc (United ----------------------------------------------------- Kingdom) 2,613,284 10,452 TOTAL SECURITIES LENDING COLLATERAL Secom Co., Ltd. (Japan) 409,400 18,489 (IDENTIFIED COST $27,027) 27,027 ---------- ----------------------------------------------------- 93,408 ---------- TOTAL INVESTMENTS--102.7% INFORMATION TECHNOLOGY--2.2% (IDENTIFIED COST $924,517) 1,212,880(1) Cielo SA (Brazil) 1,461,500 12,611 Other assets and liabilities, net--(2.7)% (31,964) Redecard SA (Brazil) 883,860 13,801 ---------- ---------- NET ASSETS--100.0% $1,180,916 26,412 ========== ---------- UTILITIES--2.3% COUNTRY WEIGHTINGS as of September 30, 2010+ CPFL Energia SA (Brazil) 531,100 12,210 ----------------------------------------------------- Scottish & Southern United Kingdom 30% Energy plc (United India 17 Kingdom) 842,460 14,796 Brazil 9 ---------- United States (includes short-term investments 27,006 and securities lending collateral) 9 - -------------------------------------------------- Switzerland 7 TOTAL COMMON STOCKS Australia 6 (IDENTIFIED COST $854,747) 1,125,535 France 4 - -------------------------------------------------- Other 18 TOTAL LONG-TERM INVESTMENTS--98.7% ----------------------------------------------------- (IDENTIFIED COST $877,006) 1,165,369 Total 100% - -------------------------------------------------- ----------------------------------------------------- + % of total investments as of September 30, 2010. FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2010, see Note 8, Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. (3) All or a portion of the security is segregated as collateral. (4) All or a portion of security is on loan. (5) Represents security purchased with cash collateral received for securities on loan. See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 8
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 At September 30, 2010, the Fund had entered into forward currency contracts as follows (reported in 000's): Contracts In Exchange Settlement Unrealized to Receive Counterparty for Date Value Appreciation - ------------- ------------ ----------- ---------- -------- -------------- AUD 45,238 Citibank USD 40,837 11/19/10 $43,452 $ 2,615 BRL 43,652 Citibank USD 23,579 12/02/10 25,454 1,875 CAD 16,242 Citibank USD 15,563 11/30/10 15,763 200 CHF 24,350 Citibank USD 22,220 11/19/10 24,792 2,572 EUR 32,141 Citibank USD 40,756 12/10/10 43,791 3,035 EUR 14,827 Citibank USD 18,353 12/10/10 20,201 1,848 EUR 26,339 Citibank USD 35,431 2/14/11 35,866 435 INR 142,148 Citibank USD 30,126 11/18/10 31,349 1,223 INR 1,016,172 Citibank USD 21,764 11/18/10 22,411 647 INR 744,878 Citibank USD 15,951 11/18/10 16,428 477 INR 692,532 Citibank USD 14,777 11/18/10 15,273 496 ------- $15,423 ======= Unrealized Contracts In Exchange Settlement Appreciation to Sell Counterparty for Date Value (Depreciation) - ------------- ------------ ----------- ---------- -------- -------------- AUD 36,645 Citibank USD 31,399 11/19/10 $ 35,199 $ (3,800) AUD 8,593 Citibank USD 7,126 11/19/10 8,254 (1,128) BRL 16,641 Citibank USD 8,752 12/02/10 9,703 (951) BRL 9,978 Citibank USD 5,241 12/02/10 5,818 (577) BRL 43,652 Citibank USD 8,976 12/02/10 9,932 (956) CAD 16,242 Citibank USD 15,425 11/30/10 15,763 (338) CHF 1,231 Citibank USD 10,841 11/19/10 12,538 (1,697) CHF 13,036 Citibank USD 10,509 11/19/10 12,255 (1,746) EUR 46,968 Citibank USD 56,339 12/10/10 63,993 (7,654) EUR 26,339 Citibank USD 34,208 2/14/11 35,866 (1,658) GBP 91,749 Citibank USD 144,034 2/14/11 143,989 45 INR 3,875,056 Citibank USD 84,272 11/18/10 85,461 (1,189) ------- (21,649) ------- $ (6,226) ======== FOREIGN CURRENCIES: AUD Australian Dollar BRL Brazilian Real CAD Canadian Dollar CHF Swiss Franc EUR European Currency Unit GBP United Kingdom Pound Sterling INR Indian Rupee USD United States Dollar See Notes to Financial Statements 9
VIRTUS FOREIGN OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 1A in the Notes to Financial Statements): Total Value Level 2 - at Level 1 - Significant September 30, Quoted Observable 2010 Prices Inputs ------------- ---------- ----------- INVESTMENTS IN SECURITIES: Equity Securities: Common Stocks $ 1,125,535 $1,125,535 $ -- Preferred Stocks 39,834 39,834 -- Securities Lending Collateral 27,027 27,027 -- Short-Term Investments 20,484 20,484 -- ----------- ---------- ------- Total Investments $ 1,212,880 $1,212,880 $ -- =========== ========== ======= Other Financial Instruments: Forward Currency Contracts(1) $ (6,226) $ -- $(6,226) =========== ========== ======= There are no Level 3 (significant unobservable inputs) priced securities. (1) Valued at the unrealized appreciation (depreciation) on the investment. See Notes to Financial Statements 10
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2010 (Amounts reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1)(2) ................................................................... $ 1,212,880 Foreign currency at value(3) .............................................................................. 40 Receivables Investment securities sold ............................................................................. 1,357 Fund shares sold ....................................................................................... 1,665 Dividends and interest receivable ...................................................................... 6,315 Tax reclaims ........................................................................................... 2,040 Trustee retainer .......................................................................................... 6 Prepaid expenses .......................................................................................... 59 Unrealized appreciation on forward currency contracts ..................................................... 15,468 ----------- Total assets ........................................................................................ 1,239,830 ----------- LIABILITIES Payables Fund shares repurchased ................................................................................ 8,660 Collateral on securities loaned ........................................................................ 27,027 Investment advisory fee ................................................................................ 803 Distribution and service fees .......................................................................... 152 Administration fee ..................................................................................... 138 Transfer agent fees and expenses ....................................................................... 304 Professional fee ....................................................................................... 35 Other accrued expenses .................................................................................... 101 Unrealized depreciation on forward currency contracts ..................................................... 21,694 ----------- Total liabilities ................................................................................... 58,914 ----------- NET ASSETS ................................................................................................ $ 1,180,916 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .......................................................... $ 1,285,349 Accumulated undistributed net investment income (loss) .................................................... 16,962 Accumulated undistributed net realized gain (loss) ........................................................ (403,812) Net unrealized appreciation (depreciation) on investments ................................................. 282,417 ----------- NET ASSETS ................................................................................................ $ 1,180,916 =========== CLASS A Net asset value (net assets/shares outstanding) per share ................................................. $ 22.06 Maximum offering price per share NAV/(1-5.75%) ............................................................ $ 23.41 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ...................... 22,353,610 Net Assets ................................................................................................ $ 493,214 CLASS C Net asset value (net assets/shares outstanding) and offering price per share .............................. $ 21.81 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ...................... 2,956,211 Net Assets ................................................................................................ $ 64,480 CLASS I Net asset value (net assets/shares outstanding) and offering price per share .............................. $ 22.12 Shares of beneficial interest outstanding, $0.001 par value, unlimited authorization ...................... 28,174,905 Net Assets ................................................................................................ $ 623,222 (1) Investment in securities at cost ...................................................................... $ 924,517 (2) Market value of securities on loan .................................................................... 25,958 (3) Foreign currency at cost .............................................................................. 39 See Notes to Financial Statements 11
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2010 ($ Reported in thousands) INVESTMENT INCOME Dividends .............................................................................................. $ 39,870 Security lending ....................................................................................... 38 Foreign taxes withheld ................................................................................. (1,806) -------- Total investment income ............................................................................. 38,102 -------- EXPENSES Investment advisory fees ............................................................................... 9,848 Service fees, Class A .................................................................................. 1,229 Distribution and service fees, Class C ................................................................. 670 Administration fees .................................................................................... 1,310 Transfer agent fee and expenses ........................................................................ 1,849 Custodian fees ......................................................................................... 484 Printing fees and expenses ............................................................................. 140 Registration fees ...................................................................................... 139 Professional fees ...................................................................................... 68 Trustees' fee and expenses ............................................................................. 98 Miscellaneous expenses ................................................................................. 156 -------- Total expenses ...................................................................................... 15,991 -------- NET INVESTMENT INCOME (LOSS) .............................................................................. 22,111 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ................................................................ (20,302)(1) Net realized gain (loss) on foreign currency transactions .............................................. 10,283 Net change in unrealized appreciation (depreciation) on investments .................................... 153,276 Net change in unrealized appreciation (depreciation) on foreign currency translation ................... (2,518) -------- NET GAIN (LOSS) ON INVESTMENTS ............................................................................ 140,739 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................... $162,850 ======== (1) Net of foreign capital gains taxes withheld of $212. See Notes to Financial Statements 12
VIRTUS FOREIGN OPPORTUNITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands) Year Ended Year Ended September 30, 2010 September 30, 2009 ------------------ ------------------ FROM OPERATIONS Net investment income (loss) .......................................................... $ 22,111 $ 19,216 Net realized gain (loss) .............................................................. (10,019) (276,330) Net change in unrealized appreciation (depreciation) .................................. 150,758 206,917 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. 162,850 (50,197) ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................................ (6,262) (5,015) Net investment income, Class C ........................................................ (470) -- Net investment income, Class I ........................................................ (8,996) (4,811) Net realized short-term gains, Class A ................................................ -- (259) Net realized short-term gains, Class C ................................................ -- (40) Net realized short-term gains, Class I ................................................ -- (184) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................................ (15,728) (10,309) ---------- ---------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (6,955 and 11,828 shares, respectively) ....................................... 139,306 191,967 Class C (389 and 724 shares, respectively) ............................................ 7,732 11,630 Class I (6,263 and 17,113 shares, respectively) ....................................... 125,220 289,001 REINVESTMENT OF DISTRIBUTIONS Class A (286 and 293 shares, respectively) ............................................ 5,659 4,739 Class C (17 and 2 shares, respectively) ............................................... 341 29 Class I (402 and 249 shares, respectively) ............................................ 7,956 4,026 SHARES REPURCHASED Class A (10,912 and 16,329 shares, respectively) ...................................... (218,783) (265,401) Class C (1,104 and 1,783 shares, respectively) ........................................ (21,975) (28,718) Class I (7,031 and 8,248 shares, respectively) ........................................ (141,846) (133,887) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................................ (96,390) 73,386 CAPITAL CONTRIBUTIONS Fair Funds settlement(1) .............................................................. -- 931 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... 50,732 13,811 NET ASSETS Beginning of period ...................................................................... 1,130,184 1,116,373 ---------- ---------- END OF PERIOD ............................................................................ $1,180,916 $1,130,184 ========== ========== Accumulated undistributed net investment income (loss) at end of period .................. 16,962 12,245 (1) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 13
VIRTUS FOREIGN OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET NET ASSET REALIZED DIVIDENDS DISTRIBUTIONS VALUE, NET AND TOTAL FROM FROM BEGINNING INVESTMENT UNREALIZED FROM NET NET OF INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL PERIOD (LOSS)(1) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS --------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 $19.40 0.37(4) 2.54 2.91 (0.25) -- (0.25) 10/1/08 to 9/30/09 20.54 0.34(4) (1.29) (0.95) (0.18) (0.01) (0.19) 10/1/07 to 9/30/08 28.58 0.20(4) (7.59) (7.39) (0.17) (0.48) (0.65) 3/1/07 to 9/30/07 25.00 0.22(4) 3.46 3.68 (0.06) (0.04) (0.10) 3/1/06 to 2/28/07 21.47 0.21(4) 4.08 4.29 (0.17) (0.59) (0.76) 3/1/05 to 2/28/06 19.02 0.17(4) 3.85 4.02 (0.22) (1.35) (1.57) CLASS C 10/1/09 to 9/30/10 $19.21 0.21(4) 2.52 2.73 (0.13) -- (0.13) 10/1/08 to 9/30/09 20.27 0.22(4) (1.27) (1.05) -- (0.01) (0.01) 10/1/07 to 9/30/08 28.31 0.01(4) (7.52) (7.51) (0.05) (0.48) (0.53) 3/1/07 to 9/30/07 24.85 0.10(4) 3.44 3.54 (0.04) (0.04) (0.08) 3/1/06 to 2/28/07 21.41 (0.01)(4) 4.11 4.10 (0.07) (0.59) (0.66) 3/1/05 to 2/28/06 19.11 (0.06)(4) 3.92 3.86 (0.21) (1.35) (1.56) CLASS I 10/1/09 to 9/30/10 $19.45 0.42(4) 2.54 2.96 (0.29) -- (0.29) 10/1/08 to 9/30/09 20.58 0.40(4) (1.28) (0.88) (0.24) (0.01) (0.25) 10/1/07 to 9/30/08 28.61 0.27(4) (7.61) (7.34) (0.21) (0.48) (0.69) 3/1/07 to 9/30/07 25.00 0.25(4) 3.47 3.72 (0.07) (0.04) (0.11) 5/15/06(6) to 2/28/07 22.54 0.13(4) 3.14 3.27 (0.22) (0.59) (0.81) RATIO OF RATIO OF GROSS NET RATIO OF EXPENSES INVESTMENT NET NET NET TO AVERAGE INCOME CHANGE IN ASSET ASSETS, EXPENSES NET ASSETS (LOSS) NET VALUE, END OF TO AVERAGE (BEFORE TO AVERAGE PORTFOLIO ASSET END TOTAL PERIOD NET WAIVERS AND NET TURNOVER VALUE OF PERIOD RETURN(1) (000'S) ASSETS(7) REIMBURSEMENTS)(7) ASSETS RATE -------------------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 10/1/08 to 2.66 $ 22.06 15.34% $493,214 1.47% 1.47% 1.82% 34% 9/30/09 10/1/07 to (1.14) 19.40 (4.41) 505,009 1.48 1.48 2.09 63 9/30/08 3/1/07 to (8.04) 20.54 (26.48) 620,952 1.37(5) 1.39 0.78 129 9/30/07 3/1/06 to 3.58 28.58 14.72(3) 667,719 1.36(2) 1.40(2) 1.44(2) 49(3) 2/28/07 3/1/05 to 3.53 25.00 20.39 360,822 1.37 1.43 0.88 57 2/28/06 CLASS C 2.45 21.47 21.82 128,991 1.25 1.62 0.85 52 10/1/09 to 9/30/10 10/1/08 to 2.60 $ 21.81 14.42% $ 64,480 2.22% 2.21% 1.04% 34% 9/30/09 10/1/07 to (1.06) 19.21 (5.18) 70,201 2.23 2.23 1.33 63 9/30/08 3/1/07 to (8.04) 20.27 (27.04) 95,523 2.12(5) 2.15 0.03 129 9/30/07 3/1/06 to 3.46 28.31 14.24(3) 106,847 2.11(2) 2.16(2) 0.64(2) 49(3) 2/28/07 3/1/05 to 3.44 24.85 19.46 45,154 2.13 2.17 (0.06) 57 2/28/06 CLASS I 2.30 21.41 20.96 6,019 2.00 2.35 (0.29) 52 10/1/09 to 9/30/10 10/1/08 to 2.67 $ 22.12 15.60% $623,222 1.22% 1.22% 2.08% 34% 9/30/09 10/1/07 to (1.13) 19.45 (4.03) 554,974 1.23 1.23 2.42 63 9/30/08 3/1/07 to (8.03) 20.58 (26.31) 399,898 1.12(5) 1.15 1.01 129 9/30/07 5/15/06(6) 3.61 28.61 14.88(3) 431,985 1.11(2) 1.15(2) 1.59(2) 49(3) to 2/28/07 2.46 25.00 14.84(3) 83,938 1.13(2) 1.17(2) 0.71(2) 57(3) (1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Annualized. (3) Not annualized. (4) Computed using average shares outstanding. (5) Blended net expense ratio. (6) Inception date. (7) The Fund may invest in other funds, and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds. See Notes to Financial Statements 14
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 1. ORGANIZATION Virtus Opportunities Trust, (the "Trust"), is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940 ("1940 Act"), as amended, as an open-end management investment company. As of the date of this report, 20 funds are offered for sale, of which the Foreign Opportunities Fund is reported in this annual report. The Fund's investment objective is outlined on the Fund summary page. The Fund offers Class A shares, Class C shares and Class I shares. Class A shares are sold with a front-end sales charge of up to 5.75% with some exceptions. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month preceding the month in which the purchase was made. Class C shares are generally sold with a 1% CDSC, if applicable, if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC. 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 fees under a Board approved 12b-1 and shareholder service plan and has exclusive voting rights with respect to this plan. Class I shares are not subject to a 12b-1 plan. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) 15
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 A description of the valuation techniques applied to the Fund's major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the advisor, are generally categorized as Level 3 in the hierarchy. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the New York Stock Exchange ("NYSE")) that may impact the value of securities traded in these foreign markets. In such cases the Fund fair values foreign securities using an independent pricing service which considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange traded funds, and certain indexes as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (OTC) derivative contracts, which include forward currency contracts and equity linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing net asset value determined as of the close of business of the NYSE (generally 4:00 p.m. Eastern time) each business day and are categorized as Level 1 in the hierarchy. Short-term Notes having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. 16
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately made. F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other foreign assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. DERIVATIVE FINANCIAL INSTRUMENTS: ($ REPORTED IN THOUSANDS) Disclosures on derivative instruments and hedging activities are intended to improve financial reporting for derivative instruments by enhanced disclosure that enables the 17
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund's results of operations and financial position. Summarized below are the specific types of derivative instruments used by the Fund. FORWARD CURRENCY CONTRACTS: A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss in the Statement of Operations. When the contract is closed or offset with the same counterparty, on settlement date, the Fund records a realized gain or loss equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. This is presented in the Statement of Operations as net realized gain (loss) from foreign currency transactions. The Fund enters into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. The Fund also from time to time hedges the currency exposure of foreign denominated securities held in the portfolio, back to U.S. dollars during perceived times of U.S. dollar strength. This is done in order to protect U.S. dollar value of the portfolio. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. The following is a summary of the Fund's derivative instrument holdings categorized by primary risk exposure as of September 30, 2010: ASSET DERIVATIVES LIABILITY DERIVATIVES -------------------------- -------------------------- BALANCE SHEET FAIR BALANCE SHEET FAIR LOCATION VALUE LOCATION VALUE ---------------- ------- ---------------- ------- Foreign Unrealized Unrealized exchange appreciation on depreciation on contracts forward currency forward currency contracts $15,468 contracts $21,694 For open derivative instruments as of September 30, 2010, see the Schedule of Investments, which is also indicative of activity for the period ended September 30, 2010. REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS --------------------------------------------------- Foreign exchange contracts(1) $12,177 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN RESULTS FROM OPERATIONS --------------------------------------------------- Foreign exchange contracts(2) $(6,573) (1) Located within Net realized gain (loss) on foreign currency transactions on the Statement of Operations. (2) Located within Net change in unrealized appreciation (depreciation) on foreign currency translation on the Statement of Operations. 18
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 H. SECURITIES LENDING ($ REPORTED IN THOUSANDS): The Fund may loan securities to qualified brokers through an agreement with The Bank of New York Mellon ("BNY Mellon"). Under the terms of the agreement, the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan. Collateral may consist of cash, or securities issued or guaranteed by the U.S. Government or its agencies. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged by BNY Mellon for its services as securities lending agent and in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the foreclosure on collateral. At September 30, 2010, the Fund had securities on loan with a market value of $25,958 and received cash collateral of $27,027. 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the Adviser to the Fund. For managing, or directing the management of, the investments of the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund 0.85% of 1st $2 billion; 0.80% $2+ billion through $4 billion; and 0.75% $4+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Vontobel Asset Management, Inc. ("Vontobel") serves as the Fund's subadviser. C. EXPENSE RECAPTURE: Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under arrangements previously in effect, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. The Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with any applicable expense limitations. All or a portion of reimbursed expenses may be recaptured by the fiscal years ended as follows: 2011 2012 2013 TOTAL ------ ------ ------ ------- $341 $ -- $ -- $341 During the current fiscal year, the expense ratio has not fallen below the rate required for recapture. 19
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 D. DISTRIBUTOR: As the distributor of the Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Fund that for the fiscal year (the "period") ended September 30, 2010, it retained Class A net commissions of $13 and Class C deferred sales charges of $14. In addition, the Fund pays VP Distributors distribution and/or service fees under Board approved 12b-1 and shareholder service plans, at the annual rate of 0.25% for Class A shares, and 1.00% for Class C shares applied to the average daily net assets of each respective class. Class I shares are not subject to a 12b-1 plan. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a CDSC, the CDSC schedule of the original shares purchased continues to apply. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2010, VP Distributors received administration fees totaling $899 which are included in the Statement of Operations. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2010, VP Distributors received transfer agent fees totaling $1,518 which are included in the Statement of Operations. A portion of these fees is paid to outside entities that also provide service to the Fund. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Fund effective immediately. F. AFFILIATED SHAREHOLDERS: At September 30, 2010, Virtus and its affiliates including Bank of Montreal (a minority investor in Virtus) and the retirement plans of Virtus and its affiliates held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE ---------- -------- Class A shares ......................... 5,731 $ 126 Class I shares ......................... 1,175,003 25,991 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities and agency securities, forward currency contracts and short-term securities) during the period ended September 30, 2010, were as follows: PURCHASES SALES --------- --------- $379,397 $458,436 There were no purchases or sales of long-term U.S. Government and agency securities. 20
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 5. 10% SHAREHOLDERS As of September 30, 2010, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below. The shareholder is not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- --------- 27% 1 6. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. At September 30, 2010, the Fund held securities issued by various companies in the consumer staples sector, representing 42% of the total investments of the Fund. 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2010, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows: NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) -------- ------------ ------------ -------------- $975,294 $248,660 $(11,074) $237,586 The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: EXPIRATION YEAR ---------------------------------- 2017 2018 TOTAL -------- -------- -------- $153,055 $224,240 $377,295 21
VIRTUS FOREIGN OPPORTUNITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 The Fund may not realize the benefit of these losses to the extent the Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. The Fund's capital loss carryover may include losses acquired in connection with prior year mergers. Utilization of these capital loss carryovers is subject to annual limitations. The Fund had capital loss carryover of $379 which expired in 2010. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2010, the Fund deferred capital losses of $19,865, currency losses of $1,684, and recognized post-October capital losses of $224,503, and currency losses of $3,446. The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $54,890 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 9. RECLASSIFICATIONS OF CAPITAL ACCOUNTS ($ REPORTED IN THOUSANDS) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Fund. As of September 30, 2010, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON SHARES OF UNDISTRIBUTED ACCUMULATED BENEFICIAL NET INVESTMENT NET REALIZED INTEREST INCOME (LOSS) GAIN (LOSS) ----------- -------------- ------------ $(379) $(1,666) $2,045 10. RECENT ACCOUNTING PRONOUNCEMENT In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2010-06, "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined. 11. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available for issuance, and has determined that there are no subsequent events requiring recognition or disclosure in the financial statements. 22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PRICEWATERHOUSECOOPERS LOGO) To the Board of Trustees of Virtus Opportunities Trust and Shareholders of Virtus Foreign Opportunities Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Foreign Opportunities Fund, (the "Fund"), a series of Virtus Opportunities Trust, at September 30, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit, which included confirmation of securities at September 30, 2010 by correspondence with the custodian, broker and transfer agent, provides a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS) Philadelphia, Pennsylvania November 22, 2010 23
VIRTUS FOREIGN OPPORTUNITIES FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2010 (UNAUDITED) For the fiscal year ended September 30, 2010, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG ------------- -------------- -------------- 60% 5% $ -- For the fiscal year ended September 30, 2010, the Fund recognized $37,019 ($ reported in thousands), of foreign source income on which the Fund paid foreign taxes of $1,805 ($ reported in thousands). This information is being furnished to you pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. 24
FUND MANAGEMENT TABLES Information pertaining to the Trustees and officers of the Trust as of September 30, 2010, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ NAME,YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Leroy Keith, Jr. Chairman, Bloc Global Services Group, LLC (commodities business) (2010 to present). Managing Director, YOB: 1939 Almanac Capital Management (commodities business) (2007 to 2008). Partner, Stonington Partners, Inc. 44 Funds (private equity fund) (2001 to 2007). Director/Trustee, Evergreen Funds (88 portfolios) (1989 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Philip R. McLoughlin Managing Director, SeaCap Asset Management Fund I, L.P. (2009 to present) and SeaCap Partners, LLC Chairman (investment management) (2009 to present). Partner, Cross Pond Partners, LLC (strategy consulting firm) YOB: 1946 (2006 to present). Director, World Trust Fund (1991 to present). Chairman and Trustee, Virtus Variable 47 Funds Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (2003 to present). Director, DTF Tax-Free Income Fund, Inc. (1996 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (1996 to present); and DNP Select Income Fund Inc. (2009 to present). Director, Argo Group International Holdings, Inc. and its predecessor, PXRE Corporation (insurance) (1986 to 2009). - ------------------------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (1982 to 2006). Director, DTF Tax-Free Income YOB: 1951 Fund, Inc. (2003 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (2003 to present); and 47 Funds DNP Select Income Fund Inc. (2009 to present). - ------------------------------------------------------------------------------------------------------------------------------------ James M. Oates Managing Director, Wydown Group (consulting firm) (1994 to present). Chairman and Trustee, John Hancock YOB: 1946 Trust (93 portfolios) and John Hancock Funds II (74 portfolios) (2005 to present). Director, Stifel 44 Funds Financial (1996 to present). Director, Connecticut River Bank (1999 to present) and Connecticut River Bancorp (1998 to present). Chairman, Emerson Investment Management, Inc. (2000 to present). Director, Trust Company of New Hampshire (2002 to present). Director, Beaumont Financial Partners, LLC (2000 to present). President of the Board (1999 to present) and Director (1985 to present), Middlesex School. Chairman (1997 to 2006) and Non-Executive Chairman (2007 to present), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services). Director, Investors Bank and Trust Co. and Investors Financial Services Corporation (1995 to 2007). Trustee, John Hancock Funds III (2005 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Segerson Managing Director, Northway Management Company (1998 to present). YOB: 1946 44 Funds - ------------------------------------------------------------------------------------------------------------------------------------ Ferdinand L.J. Verdonck Director, The J.P. Morgan Continental European Investment Trust (1998 to present). Director, Groupe SNEF YOB: 1942 (electric and electronic installations) (1998 to present). Director, Galapagos N.V. (biotechnology) (2005 44 Funds to present). Chairman, Amsterdam Molecular Therapeutics N.V. (biotechnology) (2007 to present). Director, Movetis N.V. (biotechnology) (2008 to present). Director, Borje Berlin A.G. (stock exchange) (2008 to 2009). Chairman, EASDAQ (stock exchange) (2001 to 2007). Chairman, Banco Urquijo (1998 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ 25
FUND MANAGEMENT TABLES (CONTINUED) INTERESTED TRUSTEE Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. - ------------------------------------------------------------------------------------------------------------------------------------ NAME,YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ George R. Aylward(1) Director, President and Chief Executive Officer (2008 to present), Director and President (2006 to 2008), YOB: 1964 Chief Operating Officer (2004 to 2006), Vice President, Finance, (2001 to 2002), Virtus Investment 46 Funds Partners, Inc. and/or certain of its subsidiaries. Various senior officer positions with Virtus affiliates (2008 to present). Senior Executive Vice President and President, Asset Management (2007 to 2008), Senior Vice President and Chief Operating Officer, Asset Management (2004 to 2007), Vice President and Chief of Staff (2001 to 2004), The Phoenix Companies, Inc. Various senior officer positions with Phoenix affiliates (2005 to 2008). President (2006 to present), Executive Vice President (2004 to 2006), the Virtus Mutual Funds Family. President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Chairman, President and Chief Executive Officer, The Zweig Funds (2 portfolios) (2006 to present). - ------------------------------------------------------------------------------------------------------------------------------------ (1) Mr. Aylward is an "interested person," as defined in the 1940 Act, by reason of his position as President and Chief Executive Officer of Virtus Investment Partners, Inc. ("Virtus"), the ultimate parent company of the Adviser, and various positions with its affiliates including the Adviser. 26
FUND MANAGEMENT TABLES (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (2009 to YOB: 1962 since 2008. present), Senior Vice President, Asset Management Product Development (2008 to 2009), Senior Vice President, Asset Management Product Development (2005 to 2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Senior Vice President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Director (2008 to 2009), Director and President (2006 to 2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (2008 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC (1989 to c/o Zweig-DiMenna Chief Compliance Officer present). Vice President, The Zweig Funds (2 portfolios) (2004 to Associates, LLC since 2004. present). Independent Chief Compliance Officer, Virtus Variable 900 Third Avenue Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) New York, NY 10022 (2004 to present). President and Director of Watermark Securities, YOB: 1945 Inc. (1991 to present). Assistant Secretary, Gotham Advisors Inc. (1990 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer and Senior Vice President, Fund Administration (2009 to present), Vice YOB: 1972 Treasurer since 2005. President, Fund Administration (2007 to 2009), Second Vice President, Fund Control & Tax (2004 to 2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Chief Financial Officer and Treasurer (2006-present), Vice President and Principal Accounting Officer (2006 to 2010), Assistant Treasurer (2004 to 2006), Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios). Chief Financial Officer and Treasurer (2005 to present), Assistant Treasurer (2004 to 2006), certain funds within the Virtus Mutual Funds Family. - ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Senior Vice President (2009 to present), Counsel and Secretary (2008 YOB: 1954 Officer, Counsel and Secretary to present) and Vice President (2008 to 2009), Virtus Investment since 2005. Partners, Inc. and/or certain of its subsidiaries. Vice President, Chief Legal Officer, Counsel and Secretary, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Vice President and Counsel, Phoenix Life Insurance Company (2005 to 2008). Compliance Officer of Investments and Counsel, Travelers Life and Annuity Company (January 2005 to May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ 27
VIRTUS OPPORTUNITIES TRUST INVESTMENT ADVISER 101 Munson Street Virtus Investment Advisers, Inc. Greenfield, MA 01301-9668 100 Pearl Street Hartford, CT 06103-4506 TRUSTEES PRINCIPAL UNDERWRITER George R. Aylward VP Distributors, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates TRANSFER AGENT Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President CUSTODIAN Francis G. Waltman, Senior Vice President The Bank of New York Mellon Marc Baltuch, Vice President and One Wall Street Chief Compliance Officer New York, NY 10286 W. Patrick Bradley, Chief Financial Officer and Treasurer INDEPENDENT REGISTERED PUBLIC Kevin J. Carr, Vice President, Chief Legal ACCOUNTING FIRM Officer, Counsel and Secretary 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. - ------------------------------------------------------------------------------------------------------------------------------------
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 IMPORTANT NOTICE TO INVESTORS Effective January 1, 2011, Virtus Mutual Funds will make changes to the minimum purchase requirements for all funds, except Virtus International Equity Fund and Virtus Premium AlphaSector Fund. Additionally, beginning in 2011, Virtus Mutual Funds will impose an annual fee on accounts having balances of less than $2,500. Also effective January 1, 2011, the Class A Sales charge and dealer commission schedules for Virtus fixed income funds will be modified. MINIMUM PURCHASE REQUIREMENTS Effective January 1, 2011, Virtus Mutual Funds will implement revised purchase minimums. Accordingly, effective January 1, 2011, the table entitled "Purchase Minimums" under the heading "Purchase and Sale of Fund Shares" in each fund's prospectus is replaced with the following: ------------------------------------------------------------------------------------------------------------------------------- PURCHASE MINIMUMS (EXCEPT CLASS I SHARES) ------------------------------------------------------------------------------------------------------------------------------- Minimum Initial Purchase $2,500 ------------------------------------------------------------------------------------------------------------------------------- Individual Retirement Accounts (IRAs), systematic purchase, or systematic exchange accounts $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Minimum Additional Purchase $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Also, the description of minimum initial and subsequent investment amounts appearing in the section "Step 1" under the heading "Your Account" is amended to reflect the information shown in the above table. Minimums shown above currently apply to Virtus International Equity Fund and Virtus Premium AlphaSector Fund. ANNUAL FEE ASSESSMENT FOR CERTAIN ACCOUNTS Due to the high cost of maintaining small accounts, effective January 1, 2011, Virtus Mutual Funds will begin assessing an annual fee of $25 per direct account for account balances under $2,500. Accordingly, effective January 1, 2011, the following disclosure is added under the heading "Account Policies" in each fund's prospectus: ANNUAL FEE ON SMALL ACCOUNTS To help offset the costs associated with maintaining small accounts, Virtus Mutual Funds reserve the right to assess an annual $25 small account fee on fund accounts with a balance below $2,500. The small account fee may be waived in certain circumstances, such as for accounts that have elected electronic delivery of statements/regulatory documents and accounts owned by shareholders having multiple accounts with a combined value of over $25,000. The small account fee does not apply to accounts held through a financial intermediary. The small account fee will be collected through the automatic sale of shares in your account. We will send you written notice before we charge the $25 fee so that you may increase your account balance above the minimum, sign up for electronic delivery, consolidate your accounts or liquidate your account. You may take these actions at any time by contacting your investment professional or the Transfer Agent. CLASS A SALES CHARGES -- APPLICABLE TO VIRTUS FIXED INCOME FUNDS Effective January 1, 2011, Virtus Mutual Funds will implement changes to the sales charge and dealer commission schedules applicable to purchases of Class A Shares of Virtus fixed income funds. Accordingly, the Virtus Opportunities Trust Prospectus will be revised as described below.
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 (Continued) The following information replaces the second table under the heading "Sales Charges You May Pay to Purchase Class A Shares" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - -------------------------------------- -------------------------------------- -------------------------------------------------- Under $50,000 2.75% 2.83% $50,000 but under $100,000 2.25 2.30 $100,000 but under $250,000 1.75 1.78 $250,000 but under $500,000 1.25 1.27 $500,000 but under $1,000,000 1.00 1.01 $1,000,000 or more None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - -------------------------------------- -------------------------------------- -------------------------------------------------- Under $50,000 3.75% 3.90% $50,000 but under $100,000 3.50 3.63 $100,000 but under $250,000 3.25 3.36 $250,000 but under $500,000 2.25 2.30 $500,000 but under $1,000,000 1.75 1.78 $1,000,000 or more None None The following information replaces the second table under the heading "Compensation to Dealers" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - -------------------------------------- --------------------- ---------------------- ------------------------------------------ Under $50,000 2.75% 2.83% 2.25% $50,000 but under $100,000 2.25 2.30 2.00 $100,000 but under $250,000 1.75 1.78 1.50 $250,000 but under $500,000 1.25 1.27 1.00 $500,000 but under $1,000,000 1.00 1.01 1.00 $1,000,000 or more None None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - -------------------------------------- --------------------- ---------------------- ------------------------------------------ Under $50,000 3.75% 3.90% 3.25% $50,000 but under $100,000 3.50 3.63 3.00 $100,000 but under $250,000 3.25 3.36 2.75 $250,000 but under $500,000 2.25 2.30 2.00 $500,000 but under $1,000,000 1.75 1.78 1.50 $1,000,000 or more None None None INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUSES FOR FUTURE REFERENCE. VOT 8020/Minimums&FISalesCharges (11/10)
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------------ (VIRTUS MUTUAL FUNDS LOGO) PRSRT STD U.S. POSTAGE c/o State Street Bank and Trust Company PAID P.O. Box 8301 LANCASTER, Boston, MA 02266-8301 PA PERMIT 1793 ------------ For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or VIRTUS.COM 8025 10-10
ANNUAL REPORT (VIRTUS MUTUAL FUNDS LOGO) - ------------------------------------------------------------------------------------------------------------------------------------ Virtus Multi-Sector Short Term Bond Fund Prospectus Supplement applicable to the Fund appears at the back of this Annual Report. - ------------------------------------------------------------------------------------------------------------------------------------ TRUST NAME: September 30, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST eDelivery at Virtus.com (GRAPHIC) NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS VIRTUS MULTI-SECTOR SHORT TERM BOND FUND ("Multi-Sector Short Term Bond Fund") Message to Shareholders ....................................................................................................... 1 Disclosure of Fund Expenses ................................................................................................... 2 Fund Summary .................................................................................................................. 4 Schedule of Investments ....................................................................................................... 7 Statement of Assets and Liabilities ........................................................................................... 28 Statement of Operations ....................................................................................................... 29 Statement of Changes in Net Assets ............................................................................................ 30 Financial Highlights .......................................................................................................... 31 Notes to Financial Statements ................................................................................................. 33 Report of Independent Registered Public Accounting Firm ....................................................................... 41 Tax Information Notice ........................................................................................................ 42 Fund Management Tables ........................................................................................................ 43 - ------------------------------------------------------------------------------------------------------------------------------------ PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2010, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the Fund with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. - ------------------------------------------------------------------------------------------------------------------------------------ This report is not authorized for distribution to prospective investors in the Virtus Multi-Sector Short Term Bond Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information.
MESSAGE TO SHAREHOLDERS Dear Fellow Shareholders of Virtus Mutual Funds: (PHOTO OF GEORGE R. AYLWARD) In September 2010, the National Bureau of Economic Research concluded that the "Great Recession" had ended more than a year earlier. Good news? Undoubtedly. The sign that all is right with the economy? Hardly. While the recession was technically over, the economy has been stalled between tentative growth and a temptation to fall back into recession -- the feared "double dip." The economy certainly has improved since the lows of early 2009, but retail sales have remained weak and the housing market is still depressed, with few signs it has plumbed the bottom of the trough. With the unemployment rate continuing to hover near 10 percent, pessimism remains prevalent and consumer confidence in the economy remains challenged. Are there opportunities for investors in these situations? Absolutely. The broader financial markets have seen overall gains for three of the past four quarters. July 2010 was the best month for stocks in a year, and then September 2010 topped July with returns not seen in 71 years. The Federal Reserve demonstrated its concern about persistently high unemployment rates and the long-term impact of the recession by saying it was prepared to do whatever was necessary to prevent deflation or the double dip. At the start of the 2010 fourth quarter, the Fed was preparing another round of quantitative easing through large-scale purchases of Treasuries and mortgage-backed securities, and the financial markets responded positively. These factors are another reminder that during periods of market volatility, vigilance is the key for the investor, the financial advisor, and the professional money manager alike. Your fund's management team provides details of its approach to these markets in the enclosed commentary, and I encourage you to read this material carefully. We also suggest you rely on the experience of your personal financial advisor, who can review your investment objectives and your portfolio and, when appropriate, recommend adjustments to fit your current financial needs and your tolerance for risk. The wide range of equity and fixed income investments available from the Virtus Mutual Funds allows you to design a portfolio tailored to your individual needs. Information about your investments is always available on our website, www.virtus.com, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will continue do our very best to meet your expectations. On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 1-800-243-1574. PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 1
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 We believe it is important for you to understand the impact HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES of costs on your investment. All mutual funds have operating The second section of the accompanying table provides expenses. As a shareholder of the Virtus Multi-Sector Short information about hypothetical account values and hypothetical Term Bond Fund (the "Fund") you may incur two types of costs: expenses based on the Fund's actual expense ratio and an (1) transaction costs, including sales charges on purchases of assumed rate of return of 5% per year before expenses, which is Class A shares and contingent deferred sales charges on Class B not your Fund's actual return. The hypothetical account values and Class T shares; and (2) ongoing costs, including investment and expenses may not be used to estimate the actual ending advisory fees; distribution and service fees; and other account balance or expenses you paid for the period. You may expenses. Class C shares are sold without a sales charge. Class use this information to compare the ongoing costs of investing I shares are sold without a sales charge and do not incur in your Fund and other funds. To do so, compare these 5% distribution and service fees. These examples are intended to hypothetical examples with the 5% hypothetical examples that help you understand your ongoing costs (in dollars) of appear in the shareholder reports of the other funds. investing in the Fund and to compare these costs with the Please note that the expenses shown in the accompanying ongoing costs of investing in other mutual funds. These table are meant to highlight your ongoing costs only and do not examples are based on an investment of $1,000 invested at the reflect any transactional costs, such as sales charges or beginning of the period and held for the entire six-month contingent deferred sales charges. Therefore, the second period. The following Expense Table illustrates your fund's section of the accompanying table is useful in comparing costs in two ways. ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if ACTUAL EXPENSES those transactional costs were included, your costs would have The first section of the accompanying table provides been higher. The calculations assume no shares were bought or information about actual account values and actual expenses. sold during the period. Your actual costs may have been higher You may use the information in this section, together with the or lower, depending on the amount of your investment and the amount you invested, to estimate the expenses that you paid timing of any purchases or redemptions. 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. 2
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 EXPENSE TABLE - ------------------------------------------------------------------------------------------------------------------------------------ Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2010 September 30, 2010 Ratio Period* - ------------------------------------------------------------------------------------------------------------------------------------ MULTI-SECTOR SHORT TERM BOND FUND - ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL Class A $1,000.00 $1,050.20 1.09% $5.60 Class B 1,000.00 1,047.80 1.59 8.11 Class C 1,000.00 1,048.30 1.34 6.88 Class T 1,000.00 1,045.80 1.84 9.44 Class I 1,000.00 1,051.40 0.84 4.32 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,019.54 1.09 5.53 Class B 1,000.00 1,017.05 1.59 8.02 Class C 1,000.00 1,018.27 1.34 6.80 Class T 1,000.00 1,015.73 1.84 9.34 Class I 1,000.00 1,020.81 0.84 4.26 * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 365 days to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 3
TICKER SYMBOLS: VIRTUS MULTI-SECTOR SHORT TERM BOND FUND Class A: NARAX Class B: PBARX Class C: PSTCX Class T: PMSTX Class I: PIMSX [ ] MULTI-SECTOR SHORT TERM BOND FUND (THE "FUND") is [ ] Conditions in the fixed income market remain greatly diversified and has an investment objective to seek to improved as compared to the credit crunch during 2008 and provide high current income while attempting to limit the beginning of 2009. changes in the Fund's net asset value per share caused by interest rate changes. THERE IS NO GUARANTEE THAT THE FUND [ ] The flight to quality of 2008 continued to reverse over WILL ACHIEVE ITS OBJECTIVE. the last 12 months. U.S. Treasuries underperformed spread sectors during this time period as the economy showed [ ] For the fiscal year ended September 30, 2010, the Fund's signs of improvement, liquidity increased in the markets, Class A shares at NAV returned 11.65%; Class B shares and investors were less risk averse. returned 11.16%; Class C shares returned 11.49%; Class T shares returned 10.96%; and Class I shares returned WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL 12.16%. For the same period, the Barclays Capital U.S. YEAR? Aggregate Bond Index, a broad-based fixed income index, returned 8.16%; and the Bank of America Merrill Lynch [ ] The significant outperformance of fixed income spread 1-2.99 Year Medium Quality Corporate Bonds Index, the sectors relative to U.S. Treasuries and agency debentures Fund's style-specific index appropriate for comparison, was the key driver of the funds' strong performance for returned 6.71%. the fiscal year. The Fund benefited from its overweight to spread product and lack of exposure to U.S. Treasuries and ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF agency debentures. DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND [ ] The fund's underweight to Agency Mortgage Backed CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE Securities also benefited performance. PERFORMANCE SHOWN. [ ] Among fixed income sectors, the fund's overweight to HOW DID THE BOND MARKETS PERFORM DURING THE FUND'S FISCAL YEAR? corporate high yield, commercial mortgage backed securities, asset backed securities, and corporate high [ ] The broad U.S. fixed income market, as represented by the quality were all significant positive contributors to Barclays Capital Aggregate Bond Index returned 8.16% for performance for the fiscal year. the fiscal year ended September 30, 2010. [ ] The fund's higher quality bias to corporate high yield [ ] In the 8 meetings during the fiscal year the Federal detracted from performance during the fiscal year as lower Reserve left rates unchanged at 0-0.25%. In the first 5 quality within the sector outperformed. meetings citing that economic activity continues to pick up however risks to growth still exist. In the last 3 AS INTEREST RATES RISE, EXISTING BOND PRICES FALL AND CAN meetings citing the economic activity surrounding CAUSE THE VALUE OF AN INVESTMENT IN THE FUND TO DECLINE. employment and output had slowed and was expected to be CHANGES IN INTEREST RATES WILL AFFECT THE VALUE OF more modest in the near term than was previously LONGER-TERM FIXED INCOME SECURITIES MORE THAN SHORTER-TERM anticipated. SECURITIES. THE FUND MAY INVEST IN HIGH YIELD BONDS, WHICH MAY BE SUBJECT TO GREATER CREDIT AND MARKET RISKS. [ ] Over the last 12 months yields declined across the U.S. INVESTING INTERNATIONALLY, ESPECIALLY IN EMERGING MARKETS Treasury curve, with a flattening of the curve between 2 INVOLVES ADDITIONAL RISKS SUCH AS CURRENCY, POLITICAL, and 10 year Treasuries and a steepening of the curve ACCOUNTING, ECONOMIC AND MARKET RISK. between 10 and 30 year Treasuries. 4
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND (CONTINUED) ------------------------------------------------------- ASSET ALLOCATIONS The following table presents the portfolio holdings within certain sectors as a percentage of total investments as of September 30, 2010. Domestic Corporate Bonds 35% Mortgage-Backed Securities 27 Asset-Backed Securities 13 Foreign Government Securities 11 Loan Agreements 10 U.S. Government Securities 2 Other (includes short-term investments) 2 --- Total 100% === ------------------------------------------------------- KEY INVESTMENT TERMS BANK OF AMERICA MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY PIK (PAYMENT-IN-KIND SECURITY) CORPORATE BONDS INDEX A bond which pays some or all interest in the form of The Bank of America Merrill Lynch 1-2.99 Year Medium Quality additional bonds, or preferred stock which pays dividends in Corporate Bonds Index measures performance of U.S. investment the form of additional preferred stock. grade corporate bond issues rated "BBB" and "A" by Standard & Poor's/Moody's with maturities between one and three years. The REIT (REAL ESTATE INVESTMENT TRUST) index is calculated on a total return basis. A publicly traded company that owns, develops and operates income-producing real estate such as apartments, office BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX buildings, hotels, shopping centers and other commercial The Barclays Capital U.S. Aggregate Bond Index measures the properties. U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS Securities purchased on a when-issued or forward commitment FEDERAL RESERVE (THE "FED") basis are also known as delayed delivery transactions. Delayed The central bank of the United States, responsible for delivery transactions involve a commitment by a Fund to controlling the money supply, interest rates and credit with purchase or sell a security at a future date, ordinarily up to the goal of keeping the U.S. economy and currency stable. 90 days later. When-issued or forward commitments enable a Fund Governed by a seven-member board, the system includes 12 to lock in what is believed to be an attractive price or yield regional Federal Reserve Banks, 25 branches and all national on a particular security for a period of time, regardless of and state banks that are part of the system. 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. 5
AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ 1 5 10 Inception to Inception Year Years Years 9/30/10 Date CLASS A SHARES AT NAV(2) 11.65% 5.80% 6.15% -- -- ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES AT POP(3, 4) 9.14 5.32 5.91 -- -- CLASS B SHARES AT NAV(2) 11.16 5.26 5.62 -- -- ------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES WITH CDSC(4) 9.66 5.26 5.62 -- -- CLASS C SHARES AT NAV(2) 11.49 5.53 5.95 -- -- ------------------------------------------------------------------------------------------------------------------------------- CLASS T SHARES AT NAV(2) AND WITH CDSC(4) 10.96 5.02 -- 4.45% 6/2/03 CLASS I SHARES AT NAV 12.16 -- -- 9.19 6/6/08 ------------------------------------------------------------------------------------------------------------------------------- BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 8.16 6.20 6.41 NOTE 5 NOTE 5 ------------------------------------------------------------------------------------------------------------------------------- BANK OF AMERICA MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX 6.71 5.27 5.27 NOTE 6 NOTE 6 ------------------------------------------------------------------------------------------------------------------------------- FUND EXPENSE RATIOS(7): A SHARES: GROSS 1.12%, NET 1.10%; B SHARES: GROSS 1.62%, NET 1.60%; C SHARES: GROSS 1.37%, NET 1.35%; T SHARES: GROSS 1.87%, NET 1.85%; I SHARES: GROSS 0.87%, NET 0.85%. ------------------------------------------------------------------------------------------------------------------------------- ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 2.25% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CLASS B SHARES DECLINE FROM 2% TO 0% OVER A THREE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES MADE WITHIN 18 MONTHS OF PURCHASE IN WHICH A FINDER'S FEE WAS PAID AND ALL REDEMPTIONS OF CLASS T SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 5.08% FOR CLASS T (SINCE 6/2/03) AND 7.61% FOR CLASS I (SINCE 6/6/08). (6) INDEX PERFORMANCE IS 4.26% FOR CLASS T (SINCE 6/2/03) AND 5.78% FOR CLASS I (SINCE 6/6/08). (7) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSE: EXPENSES REDUCED BY VOLUNTARY FEE WAIVER WHICH MAY BE DISCONTINUED AT ANY TIME. GROSS EXPENSE: DOES NOT REFLECT THE EFFECT OF THE VOLUNTARY FEE WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 for periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A, Class B and Class C shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFROMANCE GRAPH) Bank of America Merrill Lynch Virtus Virtus Virtus Barclays 1-2.99 Year Multi-Sector Multi-Sector Multi-Sector Capital U.S. Medium Quality Short Term Bond Short Term Bond Short Term Bond Aggregate Bond Corporate Bonds Fund Class A Fund Class B Fund Class C Index Index 9/29/2000 $9,775 $10,000 $10,000 $10,000 $10,000 9/28/2001 10,562 10,731 10,801 11,295 11,069 9/30/2002 11,285 11,409 11,508 12,266 11,569 9/30/2003 12,414 12,493 12,651 12,930 12,449 9/30/2004 13,012 13,057 13,277 13,406 12,730 9/30/2005 13,398 13,377 13,633 13,781 12,926 9/29/2006 13,929 13,811 14,134 14,286 13,467 9/28/2007 14,584 14,391 14,727 15,020 14,153 9/30/2008 13,845 13,589 13,949 15,569 13,843 9/30/2009 15,910 15,548 16,007 17,212 15,656 9/30/2010 17,764 17,282 17,846 18,617 16,707 For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 5. 6
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- U.S. GOVERNMENT SECURITIES--2.2% Federative Republic of Brazil U.S. Treasury Note 12.500%, 1/5/16 44,484 BRL $ 30,432 1.375%, 5/15/13 $ 20,000 $ 20,419 Kingdom of Norway 2.500%, 4/30/15 23,000 24,383 Series 469 1.750%, 7/31/15 5,000 5,120 6.000%, 5/16/11 113,710 NOK 19,746 1.250%, 9/30/15 22,000 21,966 Kingdom of Sweden - ----------------------------------------------------------------- Series 1045, TOTAL U.S. GOVERNMENT SECURITIES 5.250%, 3/15/11 80,825 SEK 12,218 (IDENTIFIED COST $70,640) 71,888 Republic of Argentina - ----------------------------------------------------------------- PIK Interest Capitalization 8.280%, 12/31/33 $ 12,893 10,785 MUNICIPAL BONDS--0.4% Series GDP 3.169%, 12/15/35(3) 44,890 5,589 CONNECTICUT--0.1% Republic of Colombia Mashantucket Western 12.000%, 10/22/15 9,935,000 COP 7,262 Pequot Tribe Taxable Republic of Indonesia Series A, 144A Series FR-23, (NATL Insured) 11.000%, 12/15/12 26,600,000 IDR 3,245 6.910%, 9/1/12(4) 1,715 1,415 Series FR-30, ---------- 10.750%, 5/15/16 40,550,000 IDR 5,260 Republic of Korea KENTUCKY--0.2% Series 1112, State of Kentucky General 4.750%, 12/10/11 23,141,000 KRW 20,712 Fund Taxable Republic of Lithuania 144A 3.165%, 4/1/18 7,100 7,174 6.750%, 1/15/15(4) 4,000 4,336 ---------- Republic of Poland Series 0414, VIRGINIA--0.1% 5.750%, 4/25/14 44,145 PLZ 15,549 Tobacco Settlement Financing 3.875%, 7/16/15 1,950 2,028 Corp. Taxable Series 07-A1, Republic of South Africa 6.706%, 6/1/46 4,850 3,358 Series R-201 - ----------------------------------------------------------------- 8.750%, 12/21/14 55,865 ZAR 8,439 TOTAL MUNICIPAL BONDS Republic of Turkey (IDENTIFIED COST $13,282) 11,947 0.000%, 2/2/11 22,335 TRY 15,068 - ----------------------------------------------------------------- Republic of Ukraine RegS 6.580%, 11/21/16(5) 2,400 2,368 FOREIGN GOVERNMENT SECURITIES--10.6% Russian Federation Bolivarian Republic of Venezuela RegS 7.500%, 3/31/30(3)(5) 1,790 2,138 10.750%, 9/19/13 4,920 4,662 -------------------------------------------------------------- 8.500%, 10/8/14 17,860 15,092 TOTAL FOREIGN GOVERNMENT SECURITIES RegS 5.750%, 2/26/16(5) 13,405 9,368 (IDENTIFIED COST $322,178) 341,903 RegS 7.000%, 12/1/18(5) 3,230 2,148 -------------------------------------------------------------- Commonwealth of Australia Series 123, MORTGAGE-BACKED SECURITIES--26.8% 5.750%, 4/15/12 45,017 AUD 44,136 Commonwealth of Canada AGENCY--1.4% 2.750%, 12/1/10 64,487 CAD 62,855 FHLMC 2.000%, 9/1/12 7,960 CAD 7,828 6.000%, 8/1/34 1,296 1,413 Commonwealth of New Zealand Series 1111, 6.000%, 11/15/11 40,637 NZD 30,639 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 7
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- AGENCY--CONTINUED NON-AGENCY--CONTINUED FNMA Banc of America Alternative 5.500%, 1/1/17 $ 401 $ 434 Loan Trust 03-10, 2A1 6.000%, 5/1/17 119 129 6.000%, 12/25/33 $ 7,805 $ 8,103 5.500%, 8/1/17 85 92 Banc of America Commercial 4.500%, 4/1/18 836 888 Mortgage, Inc. 05-6, AM 5.000%, 10/1/19 1,633 1,744 5.346%, 9/10/47(3) 1,630 1,669 5.500%, 2/1/20 729 787 Banc of America Funding 5.500%, 3/1/20 725 783 Corp. 06-5, 4A4 5.500%, 3/1/20 197 213 6.000%, 9/25/36 12,414 12,193 5.500%, 3/1/20 757 818 Bear Stearns Commercial 5.500%, 3/1/20 1,317 1,423 Mortgage Securities, Inc. 5.500%, 4/1/20 1,055 1,140 06-PW12, A4 5.000%, 6/1/20 2,968 3,166 5.907%, 9/11/38(3) 10,025 11,192 6.000%, 12/1/32 193 212 06-PW12, AM 5.500%, 2/1/33 460 494 5.946%, 9/11/38(3) 8,600 8,571 5.500%, 5/1/34 1,825 1,958 06-PW14, A4 6.000%, 8/1/34 1,255 1,376 5.201%, 12/11/38 7,400 7,813 6.000%, 10/1/34 702 767 05-PW10, A4 6.000%, 10/1/34 1,380 1,507 5.405%, 12/11/40 13,270 14,414 5.500%, 11/1/34 2,528 2,712 04-PWR3, A4 5.500%, 11/1/34 1,543 1,654 4.715%, 2/11/41 6,500 6,948 6.000%, 11/1/34 1,537 1,678 05-PWR8, A4 5.500%, 12/1/34 975 1,046 4.674%, 6/11/41 7,100 7,566 5.500%, 1/1/35 2,426 2,602 04-PWR5, A5 6.000%, 1/1/37 2,288 2,471 4.978%, 7/11/42 3,925 4,269 6.000%, 1/1/37 1,434 1,549 07-T28, A4 5.500%, 7/1/37 11 12 5.742%, 9/11/42 3,360 3,728 6.000%, 7/1/37 592 637 07-PW18, A4 6.000%, 12/1/37 2,922 3,144 5.700%, 6/13/50 6,500 6,995 6.000%, 4/1/38 2,180 2,346 Chase Mortgage Finance 5.500%, 9/1/38 2,157 2,295 Corp. 05-S1, A10 5.500%, 12/1/38 2,571 2,736 5.500%, 5/25/35 8,808 8,951 GNMA Citicorp Mortgage 6.500%, 7/15/31 32 35 Securities, Inc. 6.500%, 8/15/31 83 93 03-11, 2A10 6.500%, 11/15/31 60 68 5.500%, 12/25/33 13,540 13,556 6.500%, 2/15/32 27 30 04-4, A6 6.500%, 4/15/32 108 121 5.500%, 6/25/34 14,091 14,594 6.500%, 4/15/32 106 119 Citigroup/Deutsche Bank ---------- Commercial Mortgage Trust 44,692 05-CD1, AM ---------- 5.396%, 7/15/44(3) 6,410 6,514 05-CD1, A4 NON-AGENCY--25.4% 5.396%, 7/15/44(3) 5,000 5,505 American Tower Trust 07-CD4, A4 07-1A, C 144A 5.322%, 12/11/49 6,465 6,700 5.615%, 4/15/37(4) 3,685 3,927 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 8
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- NON-AGENCY--CONTINUED NON-AGENCY--CONTINUED Commercial Mortgage 04-C2, A4 Pass-Through Certificates 5.301%, 8/10/38 $ 8,178 $ 8,945 01-J2A, A2 144A 04-C3, A4 6.096%, 7/16/34(4) $ 7,000 $ 7,297 4.547%, 12/10/41 4,820 4,929 Countrywide Home Loan Goldman Sachs Mortgage Mortgage Pass-Through Trust Securities Corp. II 02-34, B2 07-EOP, G 144A 5.750%, 1/25/33 1,132 943 0.777%, 3/6/20(3)(4) 5,840 5,134 02-36, B2 07-EOP, H 144A 6.000%, 1/25/33 1,151 954 0.908%, 3/6/20(3)(4) 1,850 1,613 04-9, A6 04-GG2, A4 5.250%, 6/25/34 4,971 5,089 4.964%, 8/10/38 6,900 7,221 Credit Suisse First Boston 07-GG10, A4 Mortgage Securities Corp. 6.002%, 8/10/45(3) 10,550 11,025 03-CPN1, C Greenwich Capital Commercial 4.763%, 3/15/35 7,964 7,997 Funding Corp. 02-CKS4, B 04-GG1, A7 5.333%, 11/15/36 5,000 5,209 5.317%, 6/10/36 7,950 8,713 02-CKS4, C GSR Mortgage Loan Trust 5.394%, 11/15/36 5,000 5,129 05-5F, 2A8 04-C5, A3 5.500%, 6/25/35 9,820 9,932 4.499%, 11/15/37 2,990 3,053 05-AR6, 3A1 Credit Suisse Mortgage 2.844%, 9/25/35(3) 8,712 7,960 Capital Certificates Heller Financial Commercial 06-C1, A3 Mortgage Asset 5.711%, 2/15/39(3) 9,977 10,685 00-PH1, G 144A 06-C1, AM 6.750%, 1/17/34(4) 2,925 2,933 5.728%, 2/15/39(3) 4,745 4,703 JPMorgan Chase Commercial Entertainment Properties Trust Mortgage Securities Corp. 03-EPR, A2 144A 04-C1, A3 5.244%, 2/15/18(4) 7,854 8,318 4.719%, 1/15/38 5,565 5,944 First Union National Bank 05-LDP2, AM Commercial Mortgage 4.780%, 7/15/42 8,380 8,385 01-C3, G 144A 06-CB17, AM 7.299%, 8/15/33(4) 10,282 10,533 5.464%, 12/12/43 8,825 8,392 GE Capital Commercial 05-LDP5, AM Mortgage Corp. 5.405%, 12/15/44(3) 2,822 2,868 03-C1, C 06-LDP7, A4 4.975%, 1/10/38 4,332 4,551 6.062%, 4/15/45(3) 9,997 11,083 04-C3, A4 06-LDP7, AM 5.189%, 7/10/39 13,500 14,606 6.062%, 4/15/45(3) 6,825 6,786 GMAC Commercial Mortgage 06-LDP9, A3 Securities, Inc. 5.336%, 5/15/47 12,175 12,662 4.283%, 5/10/36 10,000 9,954 07-LD12, A4 04-C2, A3 5.882%, 2/15/51 8,029 8,420 5.134%, 8/10/38 1,200 1,281 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 9
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- NON-AGENCY--CONTINUED NON-AGENCY--CONTINUED JPMorgan Chase Commercial 06-3, 2A1 Mortgage Securities Trust 6.067%, 10/25/36(3) $ 2,911 $ 2,733 09-IWST, A1 144A Merrill Lynch Mortgage Trust 4.314%, 12/5/27(4) $ 9,405 $ 10,166 06-C1, AM JPMorgan Mortgage Trust 5.838%, 5/12/39(3) 7,520 7,525 03-A2, 3A1 04-KEY2, A3 4.071%, 11/25/33(3) 16,843 16,836 4.615%, 8/12/39 12,250 13,096 05-A1, 4A1 Merrill Lynch-Countrywide 4.779%, 2/25/35(3) 5,623 5,753 Commercial Mortgage Trust 05-A4, 3A1 06-3, A4 5.159%, 7/25/35(3) 9,133 8,809 5.414%, 7/12/46 4,700 4,996 06-A1, B1 06-4, A3 5.085%, 2/25/36(3) 7,615 582 5.172%, 12/12/49 9,500 9,841 Lehman Brothers - UBS Morgan Stanley Capital I Commercial Mortgage Trust 04-IQ7, C 01-C3, A2 5.538%, 6/15/38(3) 6,654 6,089 6.365%, 12/15/28 7,000 7,172 06-T23, A4 04-C7, A6 5.981%, 8/12/41(3) 11,115 12,442 4.786%, 10/15/29 10,536 11,206 06-IQ12, A4 01-C2, C 5.332%, 12/15/43 14,500 15,797 6.975%, 9/15/34 6,500 6,612 07-IQ14, A4 06-C3, AM 5.692%, 4/15/49 9,720 10,090 5.712%, 3/15/39 960 887 Morgan Stanley Mortgage 06-C6, A4 Loan Trust 5.372%, 9/15/39 11,830 12,871 04-2AR, 3A 06-06, AM 3.431%, 2/25/34(3) 4,425 4,489 5.413%, 9/15/39 10,000 9,908 04-2AR, 4A 07-C2, A2 4.761%, 2/25/34(3) 11,205 11,527 5.303%, 2/15/40 10,411 10,816 05-5AR, 4A1 07-C2, A3 5.428%, 9/25/35(3) 1,746 1,325 5.430%, 2/15/40 6,830 7,144 Prudential Commercial 05-C3, AM Mortgage Trust 4.794%, 7/15/40 7,460 7,502 03-PWR1, D 144A 07-C6, A2 4.775%, 2/11/36(4) 4,950 4,839 5.845%, 7/15/40 11,064 11,586 Prudential Securities Secured 07-C6, A4 Financing Corp. 5.858%, 7/15/40 4,950 5,164 99-NRF1, F 144A 07-C7, A3 6.074%, 11/1/31(4) 2,142 2,146 5.866%, 9/15/45 10,300 10,896 Residential Accredit Loans, Merrill Lynch Floating Trust Inc. 03-QS6, A4 08-LAQA, A1 144A 4.250%, 3/25/33 9,818 9,999 0.796%, 7/9/21(3)(4) 14,897 13,855 Residential Asset Mortgage Merrill Lynch Mortgage Products, Inc. 04-SL1, A8 Investors, Inc. 6.500%, 11/25/31 7,563 7,528 98-C1, B 6.750%, 11/15/26 10,000 11,037 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 10
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- NON-AGENCY--CONTINUED NON-AGENCY--CONTINUED Residential Asset Securitization 05-AR10, 1A2 Trust 04-A4, A5 2.771%, 9/25/35(3) $ 13,335 $ 12,019 5.500%, 8/25/34 $ 6,149 $ 6,130 06-AR16, 1A1 Residential Funding Mortgage 5.432%, 12/25/36(3) 4,859 3,659 Securities I 06-S12, 1A1 Wells Fargo Mortgage-Backed 5.500%, 12/25/21 5,748 5,885 Securities Trust Residential Funding Mortgage 03-6, 1A1 Securities I, Inc. 5.000%, 6/25/18 2,983 3,088 06-S4, A2 06-17, A1 6.000%, 4/25/36 3,957 3,556 5.500%, 11/25/21 1,453 1,464 Salomon Brothers Mortgage 04-R, 2A1 Securities VII, Inc. 2.874%, 9/25/34(3) 2,741 2,667 01-C1, C 04-EE, 2A3 6.729%, 12/18/35 2,189 2,226 2.883%, 12/25/34(3) 1,351 1,121 01-C1, D 04-CC, A1 6.831%, 12/18/35 2,290 2,324 4.901%, 1/25/35(3) 3,985 3,875 Structured Asset Securities Corp. 05-AR4, 2A1 03-21, 2A2 2.953%, 4/25/35(3) 2,848 2,618 5.250%, 8/25/33 6,344 6,374 05-6, A1 Timberstar Trust 5.250%, 8/25/35 4,299 4,289 06-1A, A 144A 05-9, 2A11 5.668%, 10/15/36(4) 2,240 2,500 5.250%, 10/25/35 1,151 1,108 Wachovia Bank Commercial 05-9,1A6 Mortgage Trust 5.500%, 10/25/35 929 929 04-C12, A2 06-AR2, B1 5.001%, 7/15/41 5,314 5,404 4.577%, 3/25/36(3) 10,540 209 04-C12, A4 06-9, 1A15 5.484%, 7/15/41(3) 10,145 11,046 6.000%, 8/25/36 3,034 2,947 05-C20, AMFX 06-12, A2 5.179%, 7/15/42 6,000 6,162 6.000%, 10/25/36 5,265 5,079 07-C30, A5 07-16, 1A7 5.342%, 12/15/43 6,935 6,805 6.000%, 12/28/37 10,834 9,458 05-C22, AM ---------- 5.487%, 12/15/44(3) 7,900 7,923 824,088 07-C33, A4 -------------------------------------------------------------- 6.102%, 2/15/51(3) 8,940 9,333 TOTAL MORTGAGE-BACKED SECURITIES Wachovia Mortgage Loan (IDENTIFIED COST $828,911) 868,780 Trust LLC 06-A, B1 -------------------------------------------------------------- 5.067%, 5/20/36 3,069 99 ASSET-BACKED SECURITIES--13.4% Washington Mutual 1st Financial Bank USA Commercial Mortgage 09-C, C 144A Securities Trust 9.000%, 10/15/15(4) 5,000 5,004 07-SL3, A 144A 10-B, A 144A 6.109%, 3/23/45(3)(4) 8,321 8,222 3.000%, 7/17/17(4) 5,000 4,826 Washington Mutual Mortgage 10-C, B 144A Pass-Through Certificates 5.190%, 9/17/18(4) 5,000 5,000 04-CB1, 5A Accredited Mortgage Loan Trust 5.000%, 6/25/19 5,657 5,850 0.346%, 2/25/37(3) 693 664 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 11
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- American General Mortgage Chase Funding Mortgage Loan Trust 10-1A, A1 144A Loan Asset-Backed 5.150%, 3/25/58(4) $ 12,048 $ 12,377 Certificates 04-1,1A4 06-1, A2 144A 4.111%, 8/25/30 $ 1,267 $ 1,277 5.750%, 12/25/35(4) 1,474 1,482 Chrysler Financial Auto 09-1, A6 144A Securitization Trust 5.750%, 9/25/48(4) 11,850 12,291 10-A, D AmeriCredit Automobile 3.520%, 8/8/16 7,000 7,015 Receivables Trust CIT Equipment Collateral 10-1, B 10-VT1A, B 144A 3.720%, 11/17/14 9,825 10,246 3.880%, 9/16/13(4) 5,900 6,015 10-1, C Citicorp Residential Mortgage 5.190%, 8/17/15 3,925 4,129 Securities, Inc. Ameriquest Mortgage 07-1, A3 Securities, Inc. 5.667%, 3/25/37 3,000 2,998 03-10, AF6 07-2, A4 4.710%, 11/25/33 8,182 8,326 6.538%, 6/25/37 7,000 6,483 Avis Budget Rental Car Conseco Finance Funding AESOP LLC Securitizations Corp. 09-2A, A 144A 01-3, A4 5.680%, 2/20/14(4) 9,825 10,511 6.910%, 5/1/33 10,604 11,160 Banc of America Mortgage Conseco Financial Corp. Securities, Inc. 94-1, A5 05-1, 1A22 7.650%, 4/15/19 1,205 1,261 5.250%, 2/25/35 8,513 7,963 Credit-Based Asset Banc of America Securities Servicing & Securitization LLC Auto Trust 06-G1, B 05-CB6, A3 5.340%, 2/18/11 89 89 5.120%, 7/25/35 1,671 1,544 Bay View Auto Trust Daimler Chrysler Auto 05-LJ1, A4 Trust 08-B, A4A 4.090%, 5/25/12 513 522 5.320%, 11/10/14 9,620 10,100 Bayview Financial Acquisition Dominos Pizza Master Trust 06-B, 1A2 Issuer LLC 07-1, A2 144A 5.800%, 4/28/36 3,097 2,915 5.261%, 4/25/37(4) 22,000 22,000 Bombardier Capital Mortgage DT Auto Owner Trust Securitization Corp. 10-1A, C, 144A 99-A, A3 3.460%, 1/15/14(4) 3,500 3,500 5.980%, 1/15/18 2,699 2,456 09-1, B, 144A Capital Auto Receivables 5.920%, 10/15/15(4) 3,500 3,515 Asset Trust 07-1, C Dunkin Securitization/DB 5.380%, 11/15/12 6,080 6,342 Master Finance LLC Carmax Auto Owner Trust 06-1, A2 144A 07-2, B 5.779%, 6/20/31(4) 16,715 16,815 5.370%, 3/15/13 11,525 11,798 06-1, M1 144A 09-2, A4 8.285%, 6/20/31(4) 6,345 6,256 2.820%, 12/15/14 11,750 12,247 Ellington Loan Acquisition Trust 144A 1.056%, 5/27/37(3)(4) 6,627 5,917 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 12
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- FFCA Secured Lending Corp. MASTR Alternative Loans 99-2, WA1C 144A Trust 7.850%, 5/18/26(4) $ 4,792 $ 4,365 04-7, 4A1 FMAC Loan Receivables 4.500%, 7/25/19 $ 13,987 $ 14,413 Trust 98-CA, A2 144A Merrill Auto Trust 6.660%, 9/15/20(4) 22 22 Securitization 07-1, B Ford Credit Auto Owner 5.790%, 12/15/13 1,735 1,756 Trust 09-E, D 144A Navistar Financial Corp. 5.530%, 5/15/16(4) 17,750 18,892 Owner Trust 10-A, B 144A Ford Credit Floorplan 4.170%, 10/20/14(4) 7,000 7,150 Master Owner Trust Popular ABS Mortgage 10-3, A1 144A Pass-Through Trust 4.200%, 2/15/17(4) 11,800 12,820 05-5, AF3 GMAC Mortgage Corp. 5.086%, 11/25/35(3) 20,169 19,992 Loan Trust 06-HE2, A3 RAAC 05-SP1, 2A2 6.320%, 5/25/36 10,437 5,015 5.250%, 9/25/34 6,784 6,957 Great America Leasing Renaissance Home Equity Receivables 09-1, B 144A Loan Trust 4.520%, 11/15/14(4) 3,000 3,126 05-3, AF4 GreenTree Financial Corp. 5.140%, 11/25/35 5,380 4,810 08-MH1, A1 144A 2,406 2,461 Residential Funding Mortgage 7.000%, 4/25/38(4) Securities II, Inc. GSR Mortgage Loan Trust 04-HI3, A5 04-6F, 1A1 5.480%, 6/25/34 5,259 3,783 5.000%, 5/25/34 7,334 7,342 06-HI2, A3 Harley-Davidson Motorcycle Trust 5.790%, 2/25/36 4,510 4,150 09-4, B 07-HI1, A2 3.190%, 9/15/14 9,000 9,162 5.640%, 3/25/37 7,500 7,214 07-2, C Saxon Asset Securities Trust 5.410%, 8/15/15 6,750 7,020 06-3 A2 Hertz Vehicle Financing LLC 0.366%, 10/25/46(3) 4,621 4,373 09-2A, A1, 144A SVO MOI Mortgage Corp. 4.260%, 3/25/14(4) 5,000 5,246 10-AA, A 144A IHOP Franchising LLC 3.650%, 7/20/27(4) 8,681 8,681 07-3A 144A Tidewater Auto Receivables 7.059%, 12/20/37(4) 11,350 11,316 Trust 10-A, A 144A IndyMac Manufactured 5.920%, 5/15/17(4) 4,499 4,505 Housing Contract 98-1, A3 Wachovia Auto Loan 6.370%, 9/25/28 1,755 1,484 Owner Trust Lehman ABS Manufactured 07-1, D Housing Contract Trust 5.650%, 2/20/13 11,083 11,221 01-B, A4 06-2A, E 144A 5.270%, 9/15/18 5,765 5,844 7.050%, 5/20/14(4) 15,000 15,274 Long Grove Collateral -------------------------------------------------------------- Loan Obligation Ltd. TOTAL ASSET-BACKED SECURITIES 04-1A, C 144A (IDENTIFIED COST $430,045) 434,604 2.718%, 5/25/16(3)(4)(7) 1,600 988 -------------------------------------------------------------- 04-1A, D 144A 7.068%, 5/25/16(3)(4)(7) 424 178 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 13
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- CORPORATE BONDS--34.8% CONSUMER DISCRETIONARY--CONTINUED CONSUMER DISCRETIONARY--2.1% Scientific Games AutoZone, Inc. International, Inc. 5.750%, 1/15/15 $ 4,420 $ 5,013 9.250%, 6/15/19 $ 1,570 $ 1,676 Cequel Communications Seminole Hard Rock Holdings I LLC/Cequel Entertainment, Inc./ Capital Corp. 144A Seminole Hard Rock 8.625%, 11/15/17(4) 1,600 1,696 International LLC 144A COX Communications, Inc. 2.792%, 3/15/14(3)(4) 767 677 4.625%, 6/1/13 5,620 6,062 Seneca Gaming Corp. Series B Daimler Finance North 7.250%, 5/1/12 731 724 America LLC Staples, Inc. 6.500%, 11/15/13 3,390 3,878 9.750%, 1/15/14 905 1,121 DigitalGlobe, Inc. Starwood Hotels & Resort 10.500%, 5/1/14 700 782 Worldwide, Inc. DIRECTV Holdings LLC/ 6.250%, 2/15/13 2,815 3,008 DIRECTV Financing TRW Automotive, Inc. 144A Co., Inc. 8.875%, 12/1/17(4) 780 858 6.375%, 6/15/15 6,740 6,976 Universal City Development Hyatt Hotels Corp. 144A Partners Ltd./Universal City 5.750%, 8/15/15(4) 900 970 Development Partners Hyundai Capital America 144A Finance, Inc. 3.750%, 4/6/16(4) 500 499 8.875%, 11/15/15 820 850 International Game Technology Videotron Ltee 7.500%, 6/15/19 1,115 1,325 6.375%, 12/15/15 3,500 3,596 Korea Expressway Corp. Wyndham Worldwide Corp. 4.500%, 3/23/15 2,670 2,814 6.000%, 12/1/16 3,905 4,079 Landry's Restaurants, Inc. 5.750%, 2/1/18 1,660 1,668 11.625%, 12/1/15 2,226 2,360 ---------- 144A 67,877 11.625%, 12/1/15(4) 625 662 ---------- Libbey Glass, Inc. 144A CONSUMER STAPLES--0.5% 10.000%, 2/15/15(4) 375 405 Altria Group, Inc. McJunkin Red Man Corp. 8.500%, 11/10/13 2,775 3,323 144A 9.500%, 12/15/16(4) 2,590 2,292 BAT International Finance MGM Resorts International, Inc. plc 144A 10.375%, 5/15/14 160 179 9.500%, 11/15/18(4) 1,410 1,917 Mobile Mini, Inc. Cargill, Inc. 144A 6.875%, 5/1/15 540 532 5.600%, 9/15/12(4) 4,845 5,236 Pinnacle Entertainment, Inc. Diversey, Inc. 8.750%, 5/15/20 800 792 8.250%, 11/15/19 435 468 QVC, Inc. Tyson Foods, Inc. 144A 7.125%, 4/15/17(4) 4,550 4,732 10.500%, 3/1/14 940 1,136 144A 7.500%, 10/1/19(4) 2,710 2,845 Yankee Acquisition Corp. Royal Caribbean Cruises Ltd. Series B, 7.000%, 6/15/13 4,550 4,806 8.500%, 2/15/15 5,320 5,520 ---------- 17,600 ---------- See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 14
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- ENERGY--3.7% ENERGY--CONTINUED Anadarko Petroleum Corp. Rowan Cos., Inc. 6.375%, 9/15/17 $ 12,050 $ 13,279 5.000%, 9/1/17 $ 6,195 $ 6,400 8.700%, 3/15/19 2,925 3,557 SEACOR Holdings, Inc. Buckeye Partners LP 7.375%, 10/1/19 2,200 2,399 6.050%, 1/15/18 854 963 Tesoro Corp. Cenovus Energy, Inc. 6.250%, 11/1/12 4,340 4,524 4.500%, 9/15/14 1,968 2,167 Transocean, Inc. Cloud Peak Energy Resources 4.950%, 11/15/15 3,955 4,113 LLC/Cloud Peak Energy Valero Energy Corp. Finance Corp. 4.500%, 2/1/15 800 855 8.250%, 12/15/17 2,920 3,099 Weatherford International Ltd. Denbury Resources, Inc. 9.625%, 3/1/19 4,110 5,362 7.500%, 12/15/15 4,952 5,162 Western Refining, Inc. Expro Finance Luxembourg 144A 10.750%, 6/15/14(3)(4) 3,285 3,137 SCA 144A 144A 11.250%, 6/15/17(4) 2,465 2,329 8.500%, 12/15/16(4) 3,395 3,251 XTO Energy, Inc. Gaz Capital SA 144A 5.900%, 8/1/12 1,980 2,161 7.343%, 4/11/13(4) 2,000 2,180 5.750%, 12/15/13 5,910 6,794 Gazprom International SA ---------- 144A 7.201%, 2/1/20(4) 1,739 1,883 121,263 Gazprom OAO (Gaz Capital SA) ---------- 144A 6.212%, 11/22/16(4) 10,405 11,055 FINANCIALS--19.4% 144A 6.510%, 3/7/22(4) 3,235 3,441 ADCB Finance Cayman Ltd. Helix Energy Solutions 144A 4.750%, 10/8/14(4) 5,290 5,389 Group, Inc. 144A AFLAC, Inc. 9.500%, 1/15/16(4) 692 704 8.500%, 5/15/19 1,059 1,348 Holly Corp. Agile Property Holdings Ltd. 9.875%, 6/15/17 3,000 3,191 144A 10.000%, 11/14/16(4) 1,660 1,818 KazMunaiGaz Finance Akbank TAS 144A Sub BV 144A 5.125%, 7/22/15(4) 4,000 4,004 8.375%, 7/2/13(4) 3,900 4,310 Alfa Invest Ltd. 144A Kinder Morgan Energy 9.250%, 6/24/13(4) 4,940 5,323 Partners LP Allstate Corp. 6.850%, 2/15/20 2,545 3,034 6.125%, 5/15/37(3) 4,730 4,399 Korea National Oil Corp. 144A American Express Credit Corp. 5.375%, 7/30/14(4) 4,345 4,732 5.875%, 5/2/13 4,805 5,288 NAK Naftogaz Ukraine Series C, 9.500%, 9/30/14 2,900 3,151 7.300%, 8/20/13 2,600 2,989 OPTI Canada, Inc. 144A American General Finance Corp. 9.000%, 12/15/12(4) 6,525 6,639 5.400%, 12/1/15 3,000 2,430 Petro-Canada American Honda Finance 6.050%, 5/15/18 1,200 1,397 Corp. 144A Pioneer Drilling Co. 144A 6.700%, 10/1/13(4) 4,850 5,540 9.875%, 3/15/18(4) 1,245 1,279 AmSouth Bank N.A. Pride International, Inc. Series AI 8.500%, 6/15/19 4,065 4,715 4.850%, 4/1/13 7,275 7,327 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 15
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- FINANCIALS--CONTINUED FINANCIALS--CONTINUED AON Corp. CME Group, Inc. 3.500%, 9/30/15 $ 1,980 $ 2,017 5.400%, 8/1/13 $ 2,450 $ 2,740 Assurant, Inc. CNA Financial Corp. 5.625%, 2/15/14 4,060 4,333 5.850%, 12/15/14 7,575 8,119 Atlantic Finance Ltd. 144A Colonial Realty LP 9.750%, 5/27/14(4) 4,800 5,241 4.800%, 4/1/11 1,442 1,432 Avalonbay Communities, Inc. Comerica Bank 5.700%, 3/15/17 2,950 3,319 5.700%, 6/1/14 1,900 2,084 Banco Bilbao Vizcaya 5.750%, 11/21/16 5,940 6,667 Argentaria S.A. International Comerica, Inc. Preferred S.A. Unipersonal 4.800%, 5/1/15 1,828 1,938 5.919%, 12/31/49(3) 5,835 5,044 Commonwealth Bank of Banco do Brasil SA 144A Australia 144A 8.500%, 10/29/49(4) 700 823 3.750%, 10/15/14(4) 3,000 3,206 Banco Santander Chile 144A Corporacion Andina de 3.750%, 9/22/15(4) 800 811 Fomento Bank of America Corp. 5.200%, 5/21/13 1,000 1,062 5.420%, 3/15/17 3,700 3,789 Countrywide Financial Corp. Barclays Bank plc 6.250%, 5/15/16 7,000 7,534 5.200%, 7/10/14 1,610 1,785 Credit Suisse New York 144A 6.050%, 12/4/17(4) 4,130 4,479 5.000%, 5/15/13 4,335 4,723 144A 7.375%, 6/29/49(3)(4) 6,900 6,935 Crown Castle Towers LLC 144A 5.926%, 9/29/49(3)(4) 3,773 3,528 144A 4.523%, 1/15/15(4) 4,925 5,204 Bear Stearns Cos., Inc. 144A 3.214%, 8/15/15(4) 4,950 5,008 LLC (The) 144A 5.495%, 1/15/17(4) 5,915 6,444 7.250%, 2/1/18 4,365 5,317 Deutsche Bank Financial LLC Bosphorus Financial Services 5.375%, 3/2/15 2,933 3,234 Ltd. 144A Discover Bank 2.176%, 2/15/12(3)(4) 750 737 8.700%, 11/18/19 1,750 2,065 Brandywine Operating DuPont Fabros Partnership LP Technology LP 7.500%, 5/15/15 4,305 4,826 8.500%, 12/15/17 5,025 5,414 Capital One Financial Corp. Equity One, Inc. 6.150%, 9/1/16 4,300 4,714 6.250%, 12/15/14 2,485 2,693 Cemex Finance LLC 144A ERAC USA Finance Co. 144A 9.500%, 12/14/16(4) 1,430 1,446 5.800%, 10/15/12(4) 805 869 Chubb Corp. Export-Import Bank of Korea 6.375%, 3/29/67(3) 4,730 4,659 8.125%, 1/21/14 1,480 1,737 CIT Group, Inc. 5.875%, 1/14/15 4,625 5,169 7.000%, 5/1/13 3,206 3,238 4.125%, 9/9/15 4,000 4,201 7.000%, 5/1/14 459 460 Fidelity National Financial 7.000%, 5/1/15 459 458 Services, Inc. 7.000%, 5/1/16 765 757 6.600%, 5/15/17 6,475 6,682 Citigroup, Inc. Fifth Third Bancorp 5.000%, 9/15/14 3,200 3,324 6.250%, 5/1/13 1,770 1,938 4.875%, 5/7/15 12,075 12,529 4.750%, 2/1/15 750 793 5.500%, 2/15/17 3,635 3,753 4.500%, 6/1/18 6,745 6,673 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 16
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- FINANCIALS--CONTINUED FINANCIALS--CONTINUED First Horizon National Corp. JPMorgan Chase & Co. 4.500%, 5/15/13 $ 1,950 $ 1,952 5.750%, 1/2/13 $ 4,945 $ 5,383 First Tennessee Bank N.A. 6.125%, 6/27/17 3,550 4,018 5.050%, 1/15/15 7,875 7,812 Series 1, 5.650%, 4/1/16 2,220 2,215 7.900%, 12/31/49(3) 3,360 3,601 Ford Motor Credit Co., LLC Kazkommerts Bank 9.875%, 8/10/11 3,480 3,687 International BV RegS 3.277%, 1/13/12(3) 2,000 2,001 8.000%, 11/3/15(5) 1,000 943 8.000%, 6/1/14 4,865 5,324 KeyBank NA 8.700%, 10/1/14 735 825 5.700%, 8/15/12 1,800 1,904 6.625%, 8/15/17 2,335 2,491 5.800%, 7/1/14 1,450 1,581 General Electric Capital Corp. 7.413%, 5/6/15 3,000 3,366 3.750%, 11/14/14 3,940 4,172 4.950%, 9/15/15 1,295 1,375 0.815%, 5/5/26(3) 8,000 6,243 KeyCorp Genworth Financial, Inc. 6.500%, 5/14/13 2,925 3,206 5.750%, 6/15/14 6,890 7,133 Kimco Realty Corp. 6.515%, 5/22/18 3,275 3,340 4.820%, 8/15/11 1,945 1,992 Glen Meadow Pass-Through Kookmin Bank 144A Trust 144A 7.250%, 5/14/14(4) 5,700 6,612 6.505%, 2/12/67(3)(4) 7,545 6,036 Korea Development Bank GMAC LLC 5.300%, 1/17/13 1,113 1,189 6.875%, 9/15/11 2,662 2,758 4.375%, 8/10/15 2,525 2,678 6.750%, 12/1/14 552 581 Lincoln National Corp. Goldman Sachs Group, Inc. (The) 8.750%, 7/1/19 2,340 3,010 5.350%, 1/15/16 3,225 3,546 6.050%, 4/20/67(3) 2,885 2,546 5.625%, 1/15/17 2,800 2,965 Lloyds TSB Bank plc 144A 7.500%, 2/15/19 2,451 2,916 4.375%, 1/12/15(4) 2,900 2,970 Hana Bank 144A Lukoil International Finance 4.500%, 10/30/15(4) 6,000 6,272 BV 144A HBOS plc 144A 6.375%, 11/5/14(4) 4,900 5,206 6.750%, 5/21/18(4) 685 688 Manufacturers & Traders Health Care REIT, Inc. Trust Co. 4.700%, 9/15/17 8,565 8,655 2.033%, 4/1/13(3) 3,175 3,141 Healthcare Realty Trust, Inc. Marshall & Ilsley Bank 6.500%, 1/17/17 3,000 3,250 5.000%, 1/17/17 3,500 3,335 Host Hotels & Resorts LP Mercantile Bankshares Corp. 9.000%, 5/15/17 875 981 Series B, Huntington National Bank (The) 4.625%, 4/15/13 4,708 4,914 4.900%, 1/15/14 1,400 1,417 Merrill Lynch & Co., Inc. Hyundai Capital Services, Inc. 6.150%, 4/25/13 3,925 4,289 144A 6.000%, 5/5/15(4) 4,975 5,430 MetLife, Inc. ICICI Bank Ltd. 6.750%, 6/1/16 910 1,086 144A 5.750%, 11/16/10(4) 4,775 4,805 Metropolitan Life Global 144A 5.500%, 3/25/15(4) 3,000 3,165 Funding I 144A International Lease Finance Corp. 5.125%, 6/10/14(4) 1,160 1,287 4.750%, 1/13/12 5,820 5,849 5.300%, 5/1/12 5,375 5,415 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 17
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- FINANCIALS--CONTINUED FINANCIALS--CONTINUED Morgan Stanley Santander US Debt S.A. 6.000%, 5/13/14 $ 1,970 $ 2,163 Unipersonal (Banco 5.750%, 10/18/16 3,455 3,735 Santander S.A.) 144A 144A 10.090%, 5/3/17(4) 10,525 BRL 5,947 3.781%, 10/7/15(4) $ 8,100 $ 8,043 National Australia Bank Ltd. Simon Property Group LP 144A 5.350%, 6/12/13(4) 6,000 6,574 4.200%, 2/1/15 700 751 Nationwide Health SLM Corp. Properties, Inc. 5.375%, 5/15/14 14,700 14,304 6.250%, 2/1/13 4,825 5,234 Societe Generale Nissan Motor Acceptance Corp. 144A 3.100%, 9/14/15(4) 2,900 2,919 144A 4.500%, 1/30/15(4) 8,620 9,166 144A 5.922%, 4/29/49(3)(4) 6,800 6,443 Northern Trust Corp. Sovereign Bank 5.500%, 8/15/13 2,775 3,120 5.125%, 3/15/13 7,000 7,333 OJSC AK Transneft SunTrust Banks, Inc. (TransCapitalInvest Ltd.) 6.000%, 9/11/17 4,925 5,334 144A 5.670%, 3/5/14(4) 5,715 5,978 Textron Financial Corp. Petroplus Finance Ltd. 5.125%, 11/1/10 3,865 3,872 144A 6.750%, 5/1/14(4) 4,215 3,878 TNK-BP Finance S.A. PNC Funding Corp. 144A 7.500%, 3/13/13(4) 1,750 1,908 5.625%, 2/1/17 3,130 3,418 144A 6.250%, 2/2/15(4) 500 529 Principal Financial Group, Inc. TNK-BP Finance SA RegS 7.875%, 5/15/14 2,595 3,074 6.125%, 3/20/12(5) 4,210 4,389 Principal Life Global Unum Group Funding I 144A 7.125%, 9/30/16 6,620 7,640 4.400%, 10/1/10(4) 1,500 1,500 Vnesheconombank Via ProLogis (VEB Finance Ltd.) 144A 7.625%, 8/15/14 5,275 5,701 6.902%, 7/9/20(4) 7,345 8,033 6.625%, 5/15/18 1,110 1,094 VTB Capital SA 144A Prudential Financial, Inc. 6.465%, 3/4/15(4) 6,000 6,210 4.750%, 9/17/15 4,770 5,159 Wachovia Bank NA 8.875%, 6/15/38(3) 4,200 4,683 5.000%, 8/15/15 2,600 2,875 Regions Financial Corp. Wachovia Corp. 7.750%, 11/10/14 2,525 2,735 5.250%, 8/1/14 5,000 5,435 5.750%, 6/15/15 2,535 2,579 WEA Finance LLC/ Royal Bank of Scotland WT Finance Australia 144A Group plc (The) 5.750%, 9/2/15(4) 5,425 6,057 6.400%, 10/21/19 3,130 3,406 Webster Financial Corp. Royal Bank of Scotland 5.125%, 4/15/14 2,500 2,454 plc (The) Wells Fargo & Co. 3.400%, 8/23/13 7,000 7,176 4.375%, 1/31/13 800 854 4.875%, 3/16/15 3,230 3,398 Westpac Banking Corp. 3.950%, 9/21/15 3,860 3,900 4.200%, 2/27/15 4,920 5,288 Russian Agricultural Bank Woori Bank OJSC (RSHB Capital SA) 144A 7.000%, 2/2/15(4) 4,000 4,554 144A 9.000%, 6/11/14(4) 780 895 144A 4.750%, 1/20/16(4) 4,725 4,920 144A 6.299%, 5/15/17(4) 2,905 3,028 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 18
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE --------- -------- --------- -------- FINANCIALS--CONTINUED INDUSTRIALS--CONTINUED XL Capital Ltd. Noble Group Ltd. 144A 5.250%, 9/15/14 $ 4,335 $ 4,619 6.750%, 1/29/20(4) $ 4,420 $ 4,760 Zions Bancorp Owens Corning, Inc. 7.750%, 9/23/14 1,880 1,992 6.500%, 12/1/16 3,150 3,408 -------- Ryder System, Inc. 627,659 3.600%, 3/1/16 3,120 3,168 -------- Smiths Group plc 144A HEALTH CARE--0.3% 7.200%, 5/15/19(4) 1,700 2,029 CareFusion Corp. Steelcase, Inc. 5.125%, 8/1/14 2,940 3,243 6.500%, 8/15/11 2,825 2,908 Medco Health Solutions, Inc. Toledo Edison Co. (The) 7.250%, 8/15/13 1,000 1,155 7.250%, 5/1/20 1,360 1,713 Patheon, Inc. 144A Tyco International Finance SA 8.625%, 4/15/17(4) 720 741 4.125%, 10/15/14 1,000 1,089 Select Medical Corp. U.S. Airways 99-1A 7.625%, 2/1/15 4,270 4,190 Pass-Through Trust U.S. Oncology, Inc. 8.360%, 1/20/19 936 957 9.125%, 8/15/17 1,263 1,345 United Rentals North Valeant Pharmaceuticals America, Inc. International 10.875%, 6/15/16 1,772 2,009 8.375%, 6/15/16 417 486 USG Corp. 144A -------- 9.750%, 8/1/14(4) 701 734 11,160 -------- -------- 76,158 INDUSTRIALS--2.4% -------- America West Airlines INFORMATION TECHNOLOGY--0.9% 98-1A, 6.870%, 1/2/17 2,715 2,552 Agilent Technologies, Inc. 99-1G, 7.930%, 1/2/19 10,794 10,902 5.500%, 9/14/15 2,185 2,457 00-1G 8.057%, 7/2/20 8,316 8,691 Crown Castle Holdings American Airlines, Inc. GS V LLC/Crown Castle 01-1, 6.977%, 5/23/21 4,872 4,141 GS III Corp. 144A Continental Airlines, Inc. 7.750%, 5/1/17(4) 4,375 4,834 98-1A, 6.648%, 9/15/17 4,370 4,468 Intuit, Inc. Esco Corp. 144A 5.750%, 3/15/17 1,334 1,511 8.625%, 12/15/13(4) 1,725 1,777 Jabil Circuit, Inc. GATX Corp. 7.750%, 7/15/16 2,952 3,251 4.750%, 5/15/15 4,940 5,282 National Semiconductor Corp. General Cable Corp. 6.600%, 6/15/17 3,330 3,882 2.908%, 4/1/15(3) 3,375 3,147 Sorenson Communications, Inc. Hutchison Whampoa 144A 10.500%, 2/1/15(4) 3,400 2,006 International Ltd. 144A Stats Chippac Ltd. 144A 4.625%, 9/11/15(4) 3,900 4,178 7.500%, 8/12/15(4) 875 947 Kratos Defense & Security Xerox Corp. Solutions, Inc. 5.650%, 5/15/13 4,345 4,759 10.000%, 6/1/17 7,020 7,476 4.250%, 2/15/15 4,000 4,295 Marquette Transportation Co./ -------- Marquette Transportation 27,942 Finance Corp. 144A -------- 10.875%, 1/15/17(4) 750 769 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 19
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE --------- -------- --------- -------- MATERIALS--CONTINUED MATERIALS--3.0% Verso Paper Holdings LLC/ Allegheny Technologies, Inc. Verso Paper, Inc. 9.375%, 6/1/19 $ 7,245 $ 8,756 11.500%, 7/1/14 $ 3,650 $ 4,015 Anglo American Capital plc Series B, 144A 9.375%, 4/8/19(4) 1,950 2,629 4.216%, 8/1/14(3) 2,570 2,300 ArcelorMittal -------- 5.375%, 6/1/13 4,825 5,181 96,173 9.000%, 2/15/15 2,560 3,089 -------- Barrick Gold Financeco LLC TELECOMMUNICATION SERVICES--1.6% 6.125%, 9/15/13 4,500 5,123 Axtel SAB de C.V. 144A Bemis Co., Inc. 9.000%, 9/22/19(4) 750 696 5.650%, 8/1/14 980 1,108 Cincinnati Bell, Inc. Catalyst Paper Corp. 8.250%, 10/15/17 3,760 3,816 7.375%, 3/1/14 1,055 440 Clearwire Communications 144A 11.000%, 12/15/16(4) 3,520 2,878 LLC/Clearwire Finance, Inc. Commercial Metals Co. 144A 12.000%, 12/1/15(4) 4,000 4,340 7.350%, 8/15/18 7,760 8,410 144A 12.000%, 12/1/15(4) 2,795 3,026 CRH America, Inc. Embarq Corp. 5.625%, 9/30/11 3,500 3,644 6.738%, 6/1/13 2,385 2,611 8.125%, 7/15/18 4,770 5,752 Nextel Communications, Inc. Domtar Corp. Series E 7.125%, 8/15/15 547 593 6.875%, 10/31/13 5,590 5,653 Dow Chemical Co. (The) Series D 7.600%, 5/15/14 2,950 3,446 7.375%, 8/1/15 2,095 2,116 5.900%, 2/15/15 3,950 4,404 OJSC Vimpel Communications Georgia-Pacific LLC (VIP Finance Ireland Ltd.) 7.700%, 6/15/15 4,820 5,362 144A 8.375%, 4/30/13(4) 1,400 1,517 144A 7.125%, 1/15/17(4) 3,525 3,750 Qwest Corp. Gerdau Holdings, Inc. 144A 7.875%, 9/1/11 5,220 5,527 7.000%, 1/20/20(4) 1,950 2,179 SBA Tower Trust 144A Ineos Finance plc 144A 4.254%, 4/15/15(4) 8,660 9,208 9.000%, 5/15/15(4) 4,200 4,405 Telecom Italia Capital SA International Paper Co. 6.175%, 6/18/14 4,900 5,404 9.375%, 5/15/19 5,330 6,914 Verizon Wireless Capital LLC Nalco Co. 5.550%, 2/1/14 4,090 4,625 8.875%, 11/15/13 1,630 1,675 Wind Acquisition Finance SA Oxea Finance/Cy SCA 144A 144A 11.750%, 7/15/17(4) 2,450 2,758 9.500%, 7/15/17(4) 1,645 1,781 Windstream Corp. Sappi Pappier Holding AG 7.875%, 11/1/17 2,000 2,095 144A 6.750%, 6/15/12(4) 3,000 3,026 -------- Steel Dynamics, Inc. 53,392 7.375%, 11/1/12 1,528 1,641 -------- Vedanta Resources plc 144A UTILITIES--0.9% 8.750%, 1/15/14(4) 3,400 3,672 Allegheny Energy Supply Co. LLC 144A 8.250%, 4/15/12(4) 1,860 2,009 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 20
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE --------- ---------- --------- --------- UTILITIES--CONTINUED CONSUMER DISCRETIONARY--CONTINUED AmeriGas Partners LP AMF Bowling Worldwide, Inc. 7.250%, 5/20/15 $ 860 $ 894 Tranche B, Enel Finance International 2.757%, 6/7/13 $ 2,114 $ 1,851 SA 144A Cengage Learning Acquisitions, 3.875%, 10/7/14(4) 2,000 2,096 Inc. Tranche, Israel Electric Corp., Ltd. 144A 2.540%, 7/3/14 7,031 6,326 7.250%, 1/15/19(4) 2,285 2,586 Ceridian Corp. Tranche, Korea Electric Power Corp. 3.325%, 11/9/14 6,592 5,939 144A 5.500%, 7/21/14(4) 3,420 3,754 Charter Communications Korea Gas Corp. 144A Operating LLC 6.000%, 7/15/14(4) 2,000 2,220 Tranche B-1, Korea Hydro & Nuclear 2.260%, 3/6/14 527 515 Power Co., Ltd. 144A Tranche C, 3.125%, 9/16/15(4) 1,000 999 3.540%, 9/6/16 4,278 4,180 Midwest Generation LLC CSC Holdings, LLC Series B Tranche B-2, 8.560%, 1/2/16 1,326 1,311 1.754%, 3/29/16 10 10 NiSource Finance Corp. Ford Motor Co. Tranche B-1, 7.875%, 11/15/10 3,440 3,464 3.020%, 12/15/13 4,161 4,081 Northeast Utilities Getty Images, Inc. Tranche B, 5.650%, 6/1/13 3,950 4,279 6.250%, 7/2/15 3,219 3,245 ONEOK Partners LP Harrah's Operating Co., Inc. 5.900%, 4/1/12 980 1,045 Tranche B-2, Sempra Energy 3.498%, 1/28/15 1,577 1,363 6.500%, 6/1/16 1,760 2,106 Tranche B-4, TransAlta Corp. 9.500%, 10/31/16 2,154 2,213 4.750%, 1/15/15 2,220 2,408 Intelsat Jackson Holding Ltd. ---------- Tranche, 29,171 3.533%, 2/1/14 2,335 2,199 - ------------------------------------------------------ Intelstat Corp. TOTAL CORPORATE BONDS Tranche B-2-A, (IDENTIFIED COST $1,043,723) 1,128,395 3.033%, 1/3/14 1,671 1,613 - ------------------------------------------------------ Tranche B-2-B, CREDIT LINKED NOTES--0.3% 3.033%, 1/3/14 1,672 1,614 Helios Finance LP Tranche B-2-C, 07-S1, B2 144A 3.033%, 1/3/14 1,672 1,614 2.607%, 10/20/14(4) 9,522 9,236 Isle of Capri Casinos, Inc. - ------------------------------------------------------ Tranche DD-A, TOTAL CREDIT LINKED NOTES 5.000%, 11/25/13 654 626 (IDENTIFIED COST $9,093) 9,236 Tranche, - ------------------------------------------------------ 5.000%, 11/25/13 1,860 1,780 LOAN AGREEMENTS(3)--10.2% Tranche DD-B, CONSUMER DISCRETIONARY--2.8% 5.000%, 11/25/13 744 712 Advantage Sales & Marketing, Landry's Restaurant, Inc. Inc. Tranche, Tranche, 5.000%, 5/5/16 2,085 2,080 8.000%, 11/30/13 2,624 2,645 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 21
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- CONSUMER DISCRETIONARY--CONTINUED FINANCIALS--0.8% Las Vegas Sands LLC AGFS Funding Co. Tranche, Tranche B, 7.250%, 4/21/15 $ 5,525 $ 5,564 3.030%, 11/23/16 $ 1,760 $ 1,604 Agile Property Holdings Ltd. Tranche DD-I, Tranche, 3.030%, 11/23/16 356 324 3.006%, 1/25/13 3,750 3,450 Mediacom Illinois LLC CIT Group, Inc. Tranche DD-3 Tranche D, 6.115%, 8/11/15 580 586 5.500%, 3/31/17 4,729 4,696 Delos Aircraft, Inc. Neiman-Marcus Group, Tranche B-2, Inc. (The) Tranche, 7.000%, 3/17/16 243 247 2.276%, 4/6/13 8,143 7,902 Fortress Invest Group Nielsen Finance LLC Tranche, Tranche A, 0.000%, 10/7/15 3,310 3,310 2.257%, 8/9/13 3,943 3,787 Green Tree Credit Solutions Tranche B, Tranche, 4.008%, 5/1/16 3,341 3,236 8.000%, 12/18/15 1,447 1,429 Pilot Travel Centers LLC Hertz Corp. Tranche B, Letter of Credit 5.250%, 6/30/16 4,033 4,081 1.045%, 12/21/12 479 471 Sinclair Television Group, Inc. Tranche B, Tranche B, 2.010%, 12/21/12 2,368 2,328 5.500%, 10/29/15 1,248 1,256 International Lease Finance Corp. Six Flags Theme Parks, Inc. Tranche B-1, Tranche B, 6.750%, 3/17/15 332 338 6.000%, 6/30/16 5,104 5,134 Nuveen Investments, Inc. Toys "R" Us, Inc. Tranche B, Tranche B, 6.000%, 9/1/16 4,430 4,439 3.385%, 11/13/14 2,700 2,434 Univision Communications, Pinnacle Foods Finance LLC/ Inc. Tranche B, Pinnacle Food Finance Corp. 2.506%, 9/29/14 6,053 5,333 Tranche B, Visant Corp. Tranche B, 2.757%, 4/2/14 2,402 2,329 7.000%, 12/22/16 1,605 1,614 Universal City Development VWR Funding, Inc. Tranche, Partners, Ltd. Tranche B, 2.756%, 6/30/14 3,245 3,051 5.500%, 11/6/14 736 740 ---------- Vanguard Health Holding 91,063 Co., II LLC Tranche B, ---------- 5.000%, 1/29/16 2,080 2,068 CONSUMER STAPLES--0.5% ---------- Michael Foods, Inc. Tranche B, 25,294 6.250%, 6/29/16 3,421 3,454 ---------- Revlon Consumer Products HEALTH CARE--0.8% Corp. Tranche, Butler Animal Health 6.167%, 3/11/15 5,985 5,970 Supply LLC Tranche, Reynolds Group Holdings Ltd. 5.500%, 12/31/15 1,241 1,243 Tranche, 5.750%, 5/5/16 5,684 5,715 HCA, Inc. Tranche, 6.250%, 5/5/16 1,466 1,477 Tranche B-1, ---------- 2.539%, 11/18/13 537 517 16,616 Tranche B-2, ---------- 3.539%, 3/31/17 1,287 1,249 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 22
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- HEALTH CARE--CONTINUED INDUSTRIALS--CONTINUED Health Management Associates, Ozburn-Hessey Holding Co. Inc. Tranche B, LLC Tranche B, 2.039%, 2/28/14 $ 1,134 $ 1,071 7.500%, 4/8/16 $ 1,368 $ 1,387 HealthSouth Corp. Tranche 2, Protection One, Inc. 4.150%, 9/10/15 1,614 1,614 Tranche B, Inventiv Health, Inc. Tranche, 6.000%, 6/4/16 3,042 3,050 6.500%, 8/4/16 3,166 3,175 ServiceMaster Co. (The) Multiplan, Inc. Tranche B, Tranche DD, 6.500%, 8/26/17 3,457 3,463 2.760%, 7/24/14 788 744 NBTY, Inc. Tranche B, Tranche B, 0.000%, 10/1/17 2,710 2,740 2.773%, 7/24/14 7,911 7,468 RehabCare Group, Inc. Trans Union LLC Tranche B, Tranche B, 6.750%, 6/15/17 3,716 3,766 6.000%, 11/24/15 3,660 3,662 Transaction Network Services, Select Medical Corp. Inc. Tranche, Tranche B-1, 6.000%, 11/18/15 2,573 2,585 4.089%, 8/22/14 1,537 1,524 ---------- Universal Health Services, Inc. 36,204 Tranche B, ---------- 0.000%, 10/17/16 5,175 5,209 INFORMATION TECHNOLOGY--1.8% Warner Chilcott Co. LLC Allen Systems Group, Inc. Tranche B-4, Tranche, 6.500%, 2/22/16 205 206 8.500%, 10/18/13 3,388 3,407 Tranche B-3, Avaya, Inc. Tranche B-1, 6.500%, 2/22/16 632 636 3.058%, 10/24/14 4,679 4,160 ---------- Dresser, Inc. Tranche B, 26,309 6.112%, 5/4/15 3,605 3,496 ---------- DynCorp International LLC INDUSTRIALS--1.1% Tranche B, Advanced Disposal 6.250%, 7/7/16 4,460 4,484 Services, Inc. Tranche B, Fidelity National Information 6.000%, 1/14/15 496 499 Services, Inc. Tranche B, Altegrity, Inc. Tranche, 5.250%, 7/18/16 1,220 1,231 3.292%, 2/21/15 1,466 1,336 First Data Corp. Bucyrus International, Inc. Tranche B-2, Tranche C, 3.006%, 9/24/14 466 411 4.500%, 2/19/16 2,833 2,862 Tranche B-3, Harland Clarke Holdings Corp. 3.006%, 9/24/14 6,526 5,753 Tranche B, Tranche B-1, 2.776%, 6/30/14 6,263 5,506 3.006%, 9/24/14 1,873 1,653 Holdings Gaming Borrower LP Freescale Semiconductor, Tranche B-1, Inc. Tranche, 12.000%, 6/30/15 1,428 1,438 4.509%, 12/1/16 7,341 6,719 Interactive Data Corp. Infor Enterprise Solutions Tranche B, Holdings, Inc. 6.750%, 1/29/17 5,492 5,563 Tranche B, 6.010%, 7/28/15 4,564 4,266 Tranche, 6.010%, 7/28/15 2,381 2,226 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 23
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE PAR VALUE VALUE ----------- ---------- ----------- ---------- INFORMATION TECHNOLOGY--CONTINUED MATERIALS--CONTINUED MSCI, Inc. Tranche, Momentive Performance 4.750%, 6/1/16 $ 813 $ 818 Materials, Inc. Tranche B-1 NuSil Technology LLC 2.563%, 12/4/13 $ 3,979 $ 3,816 Tranche B, Nalco Co. 6.000%, 2/18/15 2,377 2,383 Tranche B, Reynolds & Reynolds Co. (The) 6.500%, 5/13/16 1,610 1,610 Tranche B, Tranche B-1, 5.250%, 4/21/17 1,302 1,306 0.000%, 10/5/17 1,223 1,217 SkillSoft Corp. Tranche, New Sunward Holding BV 6.500%, 5/30/17 3,052 3,081 Tranche B, Spansion LLC Tranche B, 3.195%, 2/14/14 3,600 3,204 7.500%, 2/9/15 6,607 6,662 Pinafore LLC Tranche B, Springboard Finance LLC 0.000%, 9/29/16 850 858 Tranche, Smurfit-Stone Container 7.000%, 2/23/15 3,837 3,861 Enterprise Tranche B, Towerco Finance LLC Tranche, 3.625%, 2/22/16 1,621 1,632 6.000%, 11/24/14 2,481 2,501 Solutia, Inc. Tranche, ---------- 4.750%, 3/17/17 1,925 1,935 58,418 ---------- ---------- 36,893 MATERIALS--1.1% ---------- Anchor Glass Container Corp. TELECOMMUNICATION SERVICES--0.7% Tranche, Cincinnati Bell, Inc. 6.000%, 3/2/16 3,715 3,720 Tranche B, Tranche, 6.625%, 6/11/17 3,209 3,237 10.000%, 9/2/16 3,975 3,935 Level 3 Communications, Inc. Berry Plastics Group, Inc. Tranche A, Tranche C, 2.642%, 3/13/14 8,362 7,643 2.376%, 4/3/15 3,644 3,341 Tranche B, Building Materials Holding 11.500%, 3/13/14 1,044 1,131 Corp. of America Tranche B, nTelos, Inc. Tranche B, 3.063%, 2/22/14 392 388 5.750%, 8/7/15 5,271 5,293 Building Materials Holdings U.S. TelePacific Corp. Corp. Tranche B, Tranche B, 3.000%, 1/5/15(6) 1,257 1,006 9.250%, 8/17/15 3,483 3,500 Gentek Holding LLC Tranche, ---------- 7.000%, 10/29/14 5,015 5,021 20,804 Huntsman International LLC ---------- Tranche B, UTILITIES--0.6% 1.877%, 4/19/14 2,106 2,020 New Development Holdings Ineos Holdings Ltd. LLC Tranche, Tranche B-2, 7.000%, 7/3/17 4,943 5,026 7.501%, 12/16/13 1,175 1,177 NRG Energy, Inc. Tranche C-2, Tranche B, 4.000%, 12/16/14 1,343 1,352 1.767%, 2/1/13 5,742 5,598 JohnsonDiversey, Inc. Letter of Credit Tranche B, 1.789%, 2/1/13 2,863 2,791 5.500%, 11/24/15 658 661 See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 24
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) PAR VALUE VALUE SHARES VALUE ----------- ---------- ----------- ---------- UTILITIES--CONTINUED COMMON STOCKS--0.0% Texas Competitive Electric FINANCIALS--0.0% Holdings Co. LLC CIT Group, Inc.(2) 26,344 $ 1,076 Tranche B-3, MATERIALS--0.0% 3.774%, 10/10/14 $ 3,964 $ 3,078 Building Materials Tranche B-2, Holding Corp.(6) 677,817 495 3.843%, 10/10/14 2,233 1,740 -------------------------------------------------------------- ---------- TOTAL COMMON STOCKS 18,233 (IDENTIFIED COST $1,988) 1,571 - ----------------------------------------------------------------- -------------------------------------------------------------- TOTAL LOAN AGREEMENTS TOTAL LONG-TERM INVESTMENTS--98.8% (IDENTIFIED COST $324,196) 329,834 (IDENTIFIED COST $3,047,296) 3,201,740 - ----------------------------------------------------------------- -------------------------------------------------------------- SHARES SHORT-TERM INVESTMENTS--0.6% ----------- MONEY MARKET MUTUAL FUNDS--0.6% PREFERRED STOCK--0.0% BlackRock Liquidity Funds FINANCIALS--0.0% TempFund Portfolio - GMAC, Inc. Series G Pfd. 144A Institutional Shares 7.00%(4) 702 632 (seven-day effective - ----------------------------------------------------------------- yield 0.229%) 18,602,117 18,602 TOTAL PREFERRED STOCK -------------------------------------------------------------- (IDENTIFIED COST $221) 632 TOTAL SHORT-TERM INVESTMENTS - ----------------------------------------------------------------- (IDENTIFIED COST $18,602) 18,602 EXCHANGE-TRADED FUNDS--0.1% -------------------------------------------------------------- iShares FTSE/Xinhua TOTAL INVESTMENTS--99.4% China 25 Index Fund 68,900 2,950 (IDENTIFIED COST $3,065,898) 3,220,342(1) - ----------------------------------------------------------------- Other Assets and Liabilities--0.6% 20,363 TOTAL EXCHANGE-TRADED FUNDS ---------- (IDENTIFIED COST $3,019) 2,950 NET ASSETS--100.0% $3,240,705 - ----------------------------------------------------------------- ========== See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 25
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ABBREVIATIONS: COUNTRY WEIGHTINGS as of September 30, 2010+ FHLMC Federal Home Loan Mortgage ------------------------------------------------------ Corporation ("Freddie Mac") United States FNMA Federal National Mortgage Association (includes short-term investments) 79% ("Fannie Mae") Canada 3 GNMA Government National Mortgage South Korea 3 Association ("Ginnie Mae") Australia 2 NATL National Public Finance Guarantee Corp. Brazil 1 PIK Payment-in-Kind Security Russia 1 REIT Real Estate Investment Trust United Kingdom 1 Other 10 FOREIGN CURRENCIES: ------------------------------------------------------ AUD Australian Dollar Total 100% BRL Brazilian Real ------------------------------------------------------ CAD Canadian Dollar + % of total investments as of September 30, 2010. COP Colombian Peso IDR Indonesian Rupiah KRW Korean Won NOK Norwegian Krone NZD New Zealand Dollar PLZ Polish Zloty SEK Swedish Krona TRY New Turkish Lira ZAR South African Rand FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2010, see Note 9, Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. (3) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (4) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2010, these securities amounted to a value of $653,526 or 20.2% of net assets. (5) Regulation S security. Security is offered and sold outside of the United States; therefore, it is exempt from registration with the SEC under rules 903 and 904 of the Securities Act of 1933. (6) Illiquid security. (7) Illiquid and restricted security. For acquisition information, see Note 7, "Illiquid and Restricted Securities" in the Notes to Financial Statements. See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 26
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ Reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Level 2 - Level 3 - Value at Level 1 - Significant Significant September 30, Quoted Observable Unobservable 2010 Prices Inputs Inputs ------------- --------- ----------- ------------- INVESTMENT IN SECURITIES: Debt Securities: Asset-Backed Securities $ 434,604 $ -- $ 433,438 $ 1,166 Corporate Bonds 1,128,395 -- 1,128,395 -- Credit Linked Notes 9,236 -- -- 9,236 Foreign Government Securities 341,903 -- 341,903 -- Loan Agreements 329,834 -- 325,378 4,456 Mortgage-Backed Securities 868,780 -- 868,780 -- Municipal Bonds 11,947 -- 11,947 -- U.S. Government Securities 71,888 -- 71,888 -- Equity Securities: Common Stocks 1,571 1,076 -- 495 Exchange-Traded Funds 2,950 2,950 -- -- Preferred Stocks 632 632 -- -- Short-Term Investments 18,602 18,602 -- -- ---------- ------- ---------- ------- Total Investments $3,220,342 $23,260 $3,181,729 $15,353 ========== ======= ========== ======= 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- Asset- Credit Backed Backed Corporate Linked Loan Common Total Securities Securities Bonds Notes Agreements Stocks --------- ---------- ---------- --------- ------ ---------- ------ INVESTMENT IN SECURITIES: BALANCE AS OF SEPTEMBER 30, 2009 $ 36,849 $10,982 $ 15,912 $ 8,620 $ -- $1,335 $ -- Accrued discounts/(premiums)(a) 127 18 (34) 128 -- 15 -- Realized gain (loss)(b) (6,751) (4,741) (2,262) 252 -- -- -- Change in unrealized appreciation (depreciation)(b) 11,341 5,863 4,861 521 -- 96 -- Net purchases/(sales)(c) (756) (2,875) 8,496 (6,370) -- (7) -- Transfers in and/or (out) of level 3(d) (25,457) (9,247) (25,807) (3,151) 9,236 3,017 495 -------- ------- -------- ------- ------ ------ ---- BALANCE AS OF SEPTEMBER 30, 2010 $ 15,353 $ -- $ 1,166 $ -- $9,236 $4,456 $495 ======== ======= ======== ======= ====== ====== ==== (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, if any. (d) "Transfers in and/or out" represent the ending value as of September 30, 2010, for any investment security where a change in the pricing level occurred from the beginning to the end of the period. See Notes to Financial Statements 27
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2010 (Reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) .............................................................................. $ 3,220,342 Receivables Investment securities sold ..................................................................................... 32,783 Fund shares sold ............................................................................................... 18,919 Dividends and interest receivable .............................................................................. 30,805 Trustee retainer .................................................................................................. 17 Prepaid expenses .................................................................................................. 162 ------------ Total assets ................................................................................................ 3,303,028 ------------ LIABILITIES Payables Fund shares repurchased ........................................................................................ 6,962 Investment securities purchased ................................................................................ 48,864 Dividend distributions ......................................................................................... 2,950 Investment advisory fee ........................................................................................ 1,291 Distribution and service fees .................................................................................. 895 Administration fee ............................................................................................. 373 Transfer agent fees and expenses ............................................................................... 700 Professional fee ............................................................................................... 52 Other accrued expenses ......................................................................................... 236 ------------ Total liabilities ........................................................................................... 62,323 ------------ NET ASSETS ........................................................................................................ $ 3,240,705 ============ NET ASSETS CONSIST OF: ............................................................................................ -- Capital paid in on shares of beneficial interest .................................................................. $ 3,198,043 Accumulated undistributed net investment income (loss) ............................................................ 2,638 Accumulated undistributed net realized gain (loss) ................................................................ (114,614) Net unrealized appreciation (depreciation) on investments ......................................................... 154,638 ------------ NET ASSETS ........................................................................................................ $ 3,240,705 ============ CLASS A Net asset value (net assets/shares outstanding) per share ......................................................... $ 4.80 Maximum offering price per share NAV/(1-2.25%) .................................................................... $ 4.91 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 395,315,129 Net Assets ........................................................................................................ $ 1,897,491 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 4.78 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 1,974,792 Net Assets ........................................................................................................ $ 9,435 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 4.85 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 97,236,133 Net Assets ........................................................................................................ $ 471,332 CLASS T Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 4.84 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 81,475,381 Net Assets ........................................................................................................ $ 394,183 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 4.81 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 97,441,024 Net Assets ........................................................................................................ $ 468,264 (1) Investment in securities at cost .............................................................................. $ 3,065,898 See Notes to Financial Statements 28
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2010 ($ reported in thousands) INVESTMENT INCOME Interest ........................................................................................................... $165,304 Dividends .......................................................................................................... 162 Foreign taxes withheld ............................................................................................. (369) -------- Total investment income ......................................................................................... 165,097 -------- EXPENSES Investment advisory fees ........................................................................................... 13,165 Service fees, Class A .............................................................................................. 4,064 Distribution and service fees, Class B ............................................................................. 84 Distribution and service fees, Class C ............................................................................. 1,814 Distribution and service fees, Class T ............................................................................. 3,056 Administration fees ................................................................................................ 3,036 Transfer agent fee and expenses .................................................................................... 3,573 Custodian fees ..................................................................................................... 184 Printing fees and expenses ......................................................................................... 215 Professional fees .................................................................................................. 110 Registration fees .................................................................................................. 266 Trustees' fee and expenses ......................................................................................... 213 Miscellaneous expenses ............................................................................................. 431 -------- Total expenses .................................................................................................. 30,211 -------- NET INVESTMENT INCOME (LOSS) .......................................................................................... 134,886 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............................................................................ 24,742 Net realized gain (loss) on foreign currency transactions .......................................................... (492) Net change in unrealized appreciation (depreciation) on investments................................................. 126,483 Net change in unrealized appreciation (depreciation) on foreign currency translation ............................................................................................ 465 -------- NET GAIN (LOSS) ON INVESTMENTS ........................................................................................ 151,198 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ....................................................... $286,084 ======== See Notes to Financial Statements 29
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands) Year Ended Year Ended September 30, 2010 September 30, 2009 ------------------ ------------------ INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS Net investment income (loss) ......................................................... $ 134,886 $ 85,992 Net realized gain (loss) ............................................................. 24,250 (99,539) Net change in unrealized appreciation (depreciation) ................................. 126,948 217,809 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. 286,084 204,262 ---------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ....................................................... (88,301) (73,817) Net investment income, Class B ....................................................... (561) (754) Net investment income, Class C ....................................................... (18,460) (9,218) Net investment income, Class T ....................................................... (14,085) (7,849) Net investment income, Class I ....................................................... (16,037) (55) ---------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ............................... (137,444) (91,693) ---------- ---------- FROM SHARE TRANSACTIONS: SALE OF SHARES Class A (205,603 and 141,615 shares, respectively) ................................... 956,348 580,327 Class B (227 and 508 shares, respectively) ........................................... 1,045 2,073 Class C (65,468 and 25,625 shares, respectively) ..................................... 307,830 109,150 Class T (42,955 and 25,531 shares, respectively) ..................................... 201,526 106,114 Class I (109,379 and 4,545 shares, respectively) ..................................... 508,675 20,355 REINVESTMENT OF DISTRIBUTIONS Class A (15,453 and 14,292 shares, respectively) ..................................... 72,115 57,416 Class B (91 and 130 shares, respectively) ............................................ 422 518 Class C (2,882 and 1,671 shares, respectively) ....................................... 13,586 6,812 Class T (1,499 and 871 shares, respectively) ......................................... 7,054 3,566 Class I (1,119 and 8 shares, respectively) ........................................... 5,252 32 SHARES REPURCHASED Class A (141,888 and 167,066 shares, respectively) ................................... (658,236) (662,579) Class B (1,167 and 1,612 shares, respectively) ....................................... (5,400) (6,391) Class C (23,847 and 12,692 shares, respectively) ..................................... (112,249) (51,062) Class T (11,024 and 11,685 shares, respectively) ..................................... (51,787) (46,913) Class I (17,582 and 51 shares, respectively) ......................................... (82,189) (202) ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ............................... 1,163,992 119,216 ---------- ---------- CAPITAL CONTRIBUTIONS Fair Funds settlement(1) ............................................................. -- 2 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ................................................ 1,312,632 231,787 NET ASSETS Beginning of period ..................................................................... 1,928,073 1,696,286 ---------- ---------- END OF PERIOD ........................................................................... $3,240,705 $1,928,073 ========== ========== Accumulated undistributed net investment income (loss) at end of period ..................................................................... $ 2,638 $ 1,004 (1) The Fund was a recipient of a portion of a distribution from a Fair Fund established by the United States Securities and Exchange Commission. The proceeds received were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc. settlements. See Notes to Financial Statements 30
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET REALIZED NET ASSET NET AND DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET FROM NET RETURN BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED OF TOTAL OF PERIOD (LOSS) (LOSS) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS ------------------------------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 $4.54 0.25(2) 0.26 0.51 (0.25) -- -- (0.25) 10/1/08 to 9/30/09 4.21 0.24(2) 0.35 0.59 (0.26) -- -- (0.26) 10/1/07 to 9/30/08 4.70 0.25(2) (0.48) (0.23) (0.26) -- -- (0.26) 11/1/06 to 9/30/07 4.74 0.21(2) (0.03) 0.18 (0.22) -- -- (0.22) 11/1/05 to 10/31/06 4.70 0.22(2) 0.03 0.25 (0.21) -- -- (0.21) 11/1/04 to 10/31/05 4.83 0.20(2) (0.12) 0.08 (0.19) --(5) (0.02) (0.21) CLASS B 10/1/09 to 9/30/10 $4.52 0.23(2) 0.26 0.49 (0.23) -- -- (0.23) 10/1/08 to 9/30/09 4.19 0.22(2) 0.35 0.57 (0.24) -- -- (0.24) 10/1/07 to 9/30/08 4.68 0.23(2) (0.48) (0.25) (0.24) -- -- (0.24) 11/1/06 to 9/30/07 4.72 0.19(2) (0.03) 0.16 (0.20) -- -- (0.20) 11/1/05 to 10/31/06 4.68 0.20(2) 0.02 0.22 (0.18) -- -- (0.18) 11/1/04 to 10/31/05 4.82 0.18(2) (0.14) 0.04 (0.16) --(5) (0.02) (0.18) CLASS C 10/1/09 to 9/30/10 $4.58 0.24(2) 0.27 0.51 (0.24) -- -- (0.24) 10/1/08 to 9/30/09 4.24 0.23(2) 0.36 0.59 (0.25) -- -- (0.25) 10/1/07 to 9/30/08 4.73 0.24(2) (0.48) (0.24) (0.25) -- -- (0.25) 11/1/06 to 9/30/07 4.77 0.20(2) (0.03) 0.17 (0.21) -- -- (0.21) 11/1/05 to 10/31/06 4.73 0.21(2) 0.02 0.23 (0.19) -- -- (0.19) 11/1/04 to 10/31/05 4.87 0.19(2) (0.13) 0.06 (0.18) --(5) (0.02) (0.20) RATIO OF NET NET RATIO OF NET CHANGE ASSET ASSETS, EXPENSES INVESTMENT IN NET VALUE, END OF TO AVERAGE INCOME PORTFOLIO ASSET END OF TOTAL PERIOD NET TO AVERAGE TURNOVER VALUE PERIOD RETURN(1) (000'S) ASSETS(7)(8) NET ASSETS RATE -------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 0.26 $4.80 11.65% $1,897,491 1.07% 5.31% 49% 10/1/08 to 9/30/09 0.33 4.54 14.91 1,433,927 1.12 5.93 88 10/1/07 to 9/30/08 (0.49) 4.21 (5.07) 1,377,371 1.08 5.54 83 11/1/06 to 9/30/07 (0.04) 4.70 3.84(4) 1,435,415 1.11(3) 4.93(3) 57(4) 11/1/05 to 10/31/06 0.04 4.74 5.37 1,062,479 1.04 4.75 93 11/1/04 to 10/31/05 (0.13) 4.70 1.64 819,283 1.02 4.24 83 CLASS B 10/1/09 to 9/30/10 0.26 $4.78 11.16% $ 9,435 1.56% 4.86% 49% 10/1/08 to 9/30/09 0.33 4.52 14.41 12,753 1.62 5.47 88 10/1/07 to 9/30/08 (0.49) 4.19 (5.57) 15,919 1.57 5.03 83 11/1/06 to 9/30/07 (0.04) 4.68 3.38(4) 21,487 1.61(3) 4.40(3) 57(4) 11/1/05 to 10/31/06 0.04 4.72 4.64 27,845 1.54 4.24 93 11/1/04 to 10/31/05 (0.14) 4.68 1.12 33,003 1.51 3.72 83 CLASS C 10/1/09 to 9/30/10 0.27 $4.85 11.49% $ 471,332 1.32% 5.04% 49% 10/1/08 to 9/30/09 0.34 4.58 14.75 241,339 1.36 5.63 88 10/1/07 to 9/30/08 (0.49) 4.24 (5.28) 161,770 1.33 5.28 83 11/1/06 to 9/30/07 (0.04) 4.73 3.57(4) 179,222 1.36(3) 4.66(3) 57(4) 11/1/05 to 10/31/06 0.04 4.77 5.07 205,385 1.28 4.48 93 11/1/04 to 10/31/05 (0.14) 4.73 1.15 295,926 1.26 3.98 83 See Notes to Financial Statements 31
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET REALIZED NET ASSET NET AND DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET FROM NET RETURN BEGINNING INCOME GAIN INVESTMENT INVESTMENT REALIZED OF TOTAL OF PERIOD (LOSS) (LOSS) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS ------------------------------------------------------------------------------------------------------- CLASS T 10/1/09 to 9/30/10 $4.57 0.21(2) 0.28 0.49 (0.22) -- -- (0.22) 10/1/08 to 9/30/09 4.23 0.21(2) 0.36 0.57 (0.23) -- -- (0.23) 10/1/07 to 9/30/08 4.72 0.22(2) (0.48) (0.26) (0.23) -- -- (0.23) 11/1/06 to 9/30/07 4.76 0.18(2) (0.03) 0.15 (0.19) -- -- (0.19) 11/1/05 to 10/31/06 4.73 0.19(2) 0.01 0.20 (0.17) -- -- (0.17) 11/1/04 to 10/31/05 4.86 0.17(2) (0.13) 0.04 (0.15) --(5) (0.02) (0.17) CLASS I 10/1/09 to 9/30/10 $4.54 0.26(2) 0.28 0.54 (0.27) -- -- (0.27) 10/1/08 to 9/30/09 4.21 0.28(2) 0.32 0.60 (0.27) -- -- (0.27) 6/6/08(6) to 9/30/08 4.53 0.08(2) (0.31) (0.23) (0.09) -- -- (0.09) RATIO OF NET NET RATIO OF NET CHANGE ASSET ASSETS, EXPENSES INVESTMENT IN NET VALUE, END OF TO AVERAGE INCOME PORTFOLIO ASSET END OF TOTAL PERIOD NET TO AVERAGE TURNOVER VALUE PERIOD RETURN(1) (000'S) ASSETS(7)(8) NET ASSETS RATE -------------------------------------------------------------------------------- CLASS T 10/1/09 to 9/30/10 0.27 $4.84 10.96% $394,183 1.82% 4.54% 49% 10/1/08 to 9/30/09 0.34 4.57 14.21 219,501 1.86 5.11 88 10/1/07 to 9/30/08 (0.49) 4.23 (5.78) 141,131 1.83 4.79 83 11/1/06 to 9/30/07 (0.04) 4.72 3.11(4) 155,450 1.86(3) 4.17(3) 57(4) 11/1/05 to 10/31/06 0.03 4.76 4.34 153,395 1.79 3.98 93 11/1/04 to 10/31/05 (0.13) 4.73 0.84 195,830 1.76 3.48 83 CLASS I 10/1/09 to 9/30/10 0.27 $4.81 12.16% $468,264 0.83% 5.51% 49% 10/1/08 to 9/30/09 0.33 4.54 15.20 20,553 1.03 6.47 88 6/6/08(6) to 9/30/08 (0.32) 4.21 (5.11)(4) 95 0.89(3) 5.85(3) 83(4) (1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Computed using average shares outstanding. (3) Annualized. (4) Not annualized. (5) Amount is less than $0.005. (6) Inception date. (7) The Fund may invest in other funds and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds. (8) For more information regarding expenses see Note 3C in the Notes to Financial Statements. See Notes to Financial Statements 32
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 1. ORGANIZATION Virtus Opportunities Trust, (the "Trust"), is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940 ("1940 Act"), as amended, as an open-end management investment company. As of the date of this report, 20 funds are offered for sale, of which the Virtus Multi-Sector Short Term Bond Fund (the "Fund") is reported in this annual report. The Fund's investment objective is outlined in the Fund Summary Page. The Fund offers Class A shares, Class C shares, Class T shares and Class I shares. Effective December 31, 2009 (the "Closing Date") Class B shares are no longer available for purchase by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions refer to the Trust's prospectus). Class A shares are sold with a front-end sales charge of up to 2.25%. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 0.50% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, a 1% CDSC fee was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010 the period for which such CDSC applies to the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month preceding the month in which the purchase was made. Class B shares were sold with a CDSC which declines from 2% to zero depending on the period of time the shares are held. Class C shares are sold without a sales charge. Class T shares of the Fund are sold with a 1% contingent deferred sales charge, if applicable, if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC. 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 fees under a Board approved 12b-1 and shareholder service plan and has exclusive voting rights with respect to this plan. Class I shares are not subject to a 12b-1 plan. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) 33
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A description of the valuation techniques applied to the Fund's major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the advisor, are generally categorized as Level 3 in the hierarchy. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the New York Stock Exchange ("NYSE")) that may impact the value of securities traded in these foreign markets. In such cases the Fund fair values foreign securities using an independent pricing service which considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange traded funds, and certain indexes as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing which considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the advisor are generally categorized as Level 3 in the hierarchy. Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (OTC) derivative contracts, which include forward currency contracts and equity linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing net asset value determined as of the close of business of the NYSE (generally 4:00 p.m. Eastern time) each business day and are categorized as Level 1 in the hierarchy. Short-term Notes having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. 34
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income distributions are recorded daily. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more appropriately made. 35
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 F. FOREIGN CURRENCY TRANSLATION: Foreign securities and other foreign assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Trust does not isolate that portion of the results of operations arising from changes in exchange rates or from fluctuations which arise due to changes in the market prices of securities. G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS: The Fund may engage in when-issued or delayed delivery transactions. Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed delivery transactions involve a commitment by a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. The Fund records when-issued and delayed delivery securities on the trade date. The Fund maintains collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date. H. LOAN AGREEMENTS: The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the lender) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due. Currently, the Fund only holds assignment loans. I. CREDIT LINKED NOTES: The Fund may invest in credit linked notes which are usually issued by a special purpose vehicle that is selling credit protection through a credit default swap. The performance of the notes is linked to the performance of the underlying reference obligation. The special purpose vehicle invests the proceeds from the notes to cover its contingent obligation. Credit linked notes may also have risks with default by the referenced obligation, currency and/or interest rates. 36
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus") is the Adviser to the Fund. For managing, or directing the management of, the investments of the Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund 0.55% of the first $1 billion; 0.50% of $1 billion to $2 billion; 0.45% of $2+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Goodwin Capital Advisers, Inc. ("Goodwin") serves as the Fund's subadviser. C. EXPENSE LIMITATIONS: Effective April 14, 2010, the Adviser agreed to voluntarily limit the Fund's total operating expenses (excluding interest, taxes and extraordinary expenses) to 1.10% for Class A shares, 1.60% for Class B shares, 1.35% for Class C shares, 1.85% for Class T shares and 0.85% for Class I shares. This voluntary expense limitation may be modified or discontinued at any time. 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 for the fiscal year (the "period") ended September 30, 2010, it retained Class A net commissions of $119 and deferred sales charges of $46; Class B deferred sales charges of $4; Class C deferred sales charges of $1; and Class T deferred sales charges of $128. In addition, the Fund pays VP Distributors distribution and/or service fees under Board approved 12b-1 and shareholder service plans, at the annual rate of 0.25% for Class A shares, 0.75% for Class B shares, 0.50% for Class C shares, and 1.00% for Class T shares applied to the average daily net assets of each respective class. Class I shares are not subject to a 12b-1 plan. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry CDSC, the CDSC schedule of the original shares purchased continues to apply. E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2010, VP Distributors received administration fees totaling $2,079 which are included in the Statement of Operations. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2010, VP Distributors received transfer agent fees totaling $2,533 which are included in the Statement of Operations. A portion of these fees is paid to outside entities that also provide service to the Fund. 37
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Fund effective immediately. F. AFFILIATED SHAREHOLDERS: At September 30, 2010, Virtus and its affiliates and the retirement plans of Virtus and its affiliates held shares of the Fund which may be redeemed at any time that aggregated the following: NET ASSET AGGREGATE VALUE SHARES (000'S) --------- ---------- Class I shares 25,491 $123 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities and agency securities, forward currency contracts, and short-term securities) during the period ended September 30, 2010, were as follows: PURCHASES SALES ---------- ---------- $2,208,746 $1,018,226 Purchases and sales of long-term U.S. Government and agency securities for the Fund during the period ended September 30, 2010, were as follows: PURCHASES SALES ---------- -------- $214,526 $242,442 5. 10% SHAREHOLDERS As of September 30, 2010, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the fund as detailed below. The shareholder is not affiliated with Virtus. % OF SHARES NUMBER OF OUTSTANDING ACCOUNTS ----------- --------- 20% 1 6. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a Fund's ability to repatriate such amounts. High yield/high risk securities typically entail greater price volatility and/or principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the adviser and/or subadviser to accurately predict risk. The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 38
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 7. ILLIQUID AND RESTRICTED SECURITIES ($ REPORTED IN THOUSANDS) Investments generally are considered illiquid if they cannot be disposed of in seven days in the ordinary course of business at the approximate amount at which such securities have been valued by the Fund. Additionally, the following information is also considered in determining illiquidity: the frequency of trades and quotes for the investment, whether the investment is listed for trading on a recognized domestic exchange and/or whether two or more brokers are willing to purchase or sell the security at a comparable price, the extent of market making activity in the investment and the nature of the market for investment. Illiquid securities are footnoted as such at the end of the Fund's Schedule of Investments where applicable. Restricted securities are illiquid securities, as defined above, not registered under the Securities Act of 1933. Generally, 144A securities are excluded from this category, except where defined as illiquid. At September 30, 2010, the Fund held the following illiquid and restricted securities: ACQUISITION ACQUISITION MARKET VALUE % OF NET ASSETS DATE COST AT 9/30/10 AT 9/30/10 ----------- ----------- ------------ --------------- Long Grove Collateral Loan Obligation Ltd. PIK Interest Capitalization 04-1A, C 144A 2.718%, 5/25/16 5/12/04 $1,589 $988 0.0% 04-1A, D 144A 7.068%, 5/25/16 5/12/04 418 178 0.0 The Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities. 8. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 9. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2010, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows: NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ---------- ------------ -------------- -------------- $3,066,893 $200,464 $(47,015) $153,449 The Fund has capital loss carryovers which may be used to offset future capital gains, as follows: EXPIRATION YEAR -------------------------------------------- 2014 2016 2017 2018 TOTAL ------ ---- ------- ------- -------- $5,307 $575 $32,373 $75,397 $113,652 39
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 The Fund may not realize the benefit of these losses to the extent the Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2010, the Fund deferred capital losses of $41 and recognized post-October capital losses of $95,721. The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $2,712 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 10. RECLASSIFICATION OF CAPITAL ACCOUNTS ($ REPORTED IN THOUSANDS) For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset value of the Fund. As of September 30, 2010, the Fund recorded reclassifications to increase (decrease) the accounts as listed below: CAPITAL PAID IN ON SHARES OF UNDISTRIBUTED ACCUMULATED BENEFICIAL NET INVESTMENT NET REALIZED INTEREST INCOME (LOSS) GAIN (LOSS) --------------- -------------- ------------ $ -- $4,192 $(4,192) 11. RECENT ACCOUNTING PRONOUNCEMENT In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2010-06, "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined. 12. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available for issuance, and has determined that there were no subsequent events that require recognition or disclosure in the financial statements. 40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PRICEWATERHOUSECOOPERS LOGO) To the Board of Trustees of Virtus Opportunities Trust and Shareholders of Virtus Multi-Sector Short Term Bond Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Multi-Sector Short Term Bond Fund, (the "Fund"), a series of Virtus Opportunities Trust, at September 30, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit, which included confirmation of securities at September 30, 2010 by correspondence with the custodian, brokers and transfer agent, provides a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS LLP) Philadelphia, Pennsylvania November 22, 2010 41
VIRTUS MULTI-SECTOR SHORT TERM BOND FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2010 (UNAUDITED) For the fiscal year ended September 30, 2010, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG ----- ----- ------ 0% 0% $ -- 42
FUND MANAGEMENT TABLES (UNAUDITED) Information pertaining to the Trustees and officers of the Trust as of September 30, 2010 is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ NAME, YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Leroy Keith, Jr. Chairman, Bloc Global Services Group, LLC (commodities business) (2010 to present). Managing YOB: 1939 Director, Almanac Capital Management (commodities business) (2007 to 2008). Partner, Stonington 44 Funds Partners, Inc. (private equity fund) (2001 to 2007). Director/Trustee, Evergreen Funds (88 portfolios) (1989 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Philip R. McLoughlin Managing Director, SeaCap Asset Management Fund I, L.P. (2009 to present) and SeaCap Partners, LLC Chairman (investment management) (2009 to present). Partner, Cross Pond Partners, LLC (strategy consulting YOB: 1946 firm) (2006 to present). Director, World Trust Fund (1991 to present). Chairman and Trustee, Virtus 47 Funds Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (2003 to present). Director, DTF Tax-Free Income Fund, Inc. (1996 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (1996 to present); and DNP Select Income Fund Inc. (2009 to present). Director, Argo Group International Holdings, Inc. and its predecessor, PXRE Corporation (insurance) (1986 to 2009). - ------------------------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (1982 to 2006). Director, DTF Tax-Free YOB: 1951 Income Fund, Inc. (2003 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (2003 to 47 Funds present); and DNP Select Income Fund Inc. (2009 to present). - ------------------------------------------------------------------------------------------------------------------------------------ James M. Oates Managing Director, Wydown Group (consulting firm) (1994 to present). Chairman and Trustee, John YOB: 1946 Hancock Trust (93 portfolios) and John Hancock Funds II (74 portfolios) (2005 to present). Director, 44 Funds Stifel Financial (1996 to present). Director, Connecticut River Bank (1999 to present) and Connecticut River Bancorp (1998 to present). Chairman, Emerson Investment Management, Inc. (2000 to present). Director, Trust Company of New Hampshire (2002 to present). Director, Beaumont Financial Partners, LLC (2000 to present). President of the Board (1999 to present) and Director (1985 to present), Middlesex School. Chairman (1997 to 2006) and Non-Executive Chairman (2007 to present), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services). Director, Investors Bank and Trust Co. and Investors Financial Services Corporation (1995 to 2007). Trustee, John Hancock Funds III (2005 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Segerson Managing Director, Northway Management Company (1998 to present). YOB: 1946 44 Funds - ------------------------------------------------------------------------------------------------------------------------------------ Ferdinand L.J. Verdonck Director, The J.P. Morgan Continental European Investment Trust (1998 to present). Director, Groupe YOB: 1942 SNEF (electric and electronic installations) (1998 to present). Director, Galapagos N.V. 44 Funds (biotechnology) (2005 to present). Chairman, Amsterdam Molecular Therapeutics N.V. (biotechnology) (2007 to present). Director, Movetis N.V. (biotechnology) (2008 to present). Director, Borje Berlin A.G. (stock exchange) (2008 to 2009). Chairman, EASDAQ (stock exchange) (2001 to 2007). Chairman, Banco Urquijo (1998 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ 43
FUND MANAGEMENT TABLES (CONTINUED) INTERESTED TRUSTEE Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. - ------------------------------------------------------------------------------------------------------------------------------------ NAME,YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ George R. Aylward(1) Director, President and Chief Executive Officer (2008 to present), Director and President (2006 to YOB: 1964 2008), Chief Operating Officer (2004 to 2006), Vice President, Finance, (2001 to 2002), Virtus 46 Funds Investment Partners, Inc. and/or certain of its sub-sidiaries. Various senior officer positions with Virtus affiliates (2008 to present). Senior Executive Vice President and President, Asset Management (2007 to 2008), Senior Vice President and Chief Operating Officer, Asset Management (2004 to 2007), Vice President and Chief of Staff (2001 to 2004), The Phoenix Companies, Inc. Various senior officer positions with Phoenix affiliates (2005 to 2008). President (2006 to present), Executive Vice President (2004 to 2006), the Virtus Mutual Funds Family. President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Chairman, President and Chief Executive Officer, The Zweig Funds (2 portfolios) (2006 to present). - ------------------------------------------------------------------------------------------------------------------------------------ (1) Mr. Aylward is an "interested person," as defined in the 1940 Act, by reason of his position as President, and Chief Executive Officer of Virtus Investment Partners, Inc. ("Virtus"), the ultimate parent company of the Adviser, and various positions with its affiliates including the Adviser. 44
FUND MANAGEMENT TABLES (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (2009 to YOB: 1962 since 2008. present), Senior Vice President, Asset Management Product Development (2008 to 2009), Senior Vice President, Asset Management Product Development (2005 to 2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Senior Vice President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Director (2008 to 2009), Director and President (2006 to 2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (2008 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC (1989 to c/o Zweig-DiMenna Chief Compliance Officer present). Vice President, The Zweig Funds (2 portfolios) (2004 to Associates, LLC since 2004. present). Independent Chief Compliance Officer, Virtus Variable 900 Third Avenue Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) New York, NY 10022 (2004 to present). President and Director of Watermark Securities, YOB: 1945 Inc. (1991 to present). Assistant Secretary, Gotham Advisors Inc. (1990 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer and Senior Vice President, Fund Administration (2009 to present), Vice YOB: 1972 Treasurer since 2005. President, Fund Administration (2007 to 2009), Second Vice President, Fund Control & Tax (2004 to 2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Chief Financial Officer and Treasurer (2006-present), Vice President and Principal Accounting Officer (2006 to 2010), Assistant Treasurer (2004 to 2006), Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios). Chief Financial Officer and Treasurer (2005 to present), Assistant Treasurer (2004 to 2006), certain funds within the Virtus Mutual Funds Family. - ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Senior Vice President (2009 to present), Counsel and Secretary YOB: 1954 Officer, Counsel and Secretary (2008 to present) and Vice President (2008 to 2009), Virtus since 2005. Investment Partners, Inc. and/or certain of its subsidiaries. Vice President, Chief Legal Officer, Counsel and Secretary, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Vice President and Counsel, Phoenix Life Insurance Company (2005 to 2008). Compliance Officer of Investments and Counsel, Travelers Life and Annuity Company (January 2005 to May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ 45
VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Francis G. Waltman, Senior Vice President VP Distributors, Inc. Marc Baltuch, Vice President and 100 Pearl Street Chief Compliance Officer Hartford, CT 06103-4506 W. Patrick Bradley, Chief Financial Officer and Treasurer CUSTODIAN Kevin J. Carr, Vice President, Chief Legal PFPC Trust Company Officer, Counsel and Secretary 8800 Tinicum Boulevard Philadelphia, PA 19153-3111 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. - ------------------------------------------------------------------------------------------------------------------------------------
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 IMPORTANT NOTICE TO INVESTORS Effective January 1, 2011, Virtus Mutual Funds will make changes to the minimum purchase requirements for all funds, except Virtus International Equity Fund and Virtus Premium AlphaSector Fund. Additionally, beginning in 2011, Virtus Mutual Funds will impose an annual fee on accounts having balances of less than $2,500. Also effective January 1, 2011, the Class A Sales charge and dealer commission schedules for Virtus fixed income funds will be modified. MINIMUM PURCHASE REQUIREMENTS Effective January 1, 2011, Virtus Mutual Funds will implement revised purchase minimums. Accordingly, effective January 1, 2011, the table entitled "Purchase Minimums" under the heading "Purchase and Sale of Fund Shares" in each fund's prospectus is replaced with the following: ------------------------------------------------------------------------------------------------------------------------------- PURCHASE MINIMUMS (EXCEPT CLASS I SHARES) ------------------------------------------------------------------------------------------------------------------------------- Minimum Initial Purchase $2,500 ------------------------------------------------------------------------------------------------------------------------------- Individual Retirement Accounts (IRAs), systematic purchase, or systematic exchange accounts $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Minimum Additional Purchase $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Also, the description of minimum initial and subsequent investment amounts appearing in the section "Step 1" under the heading "Your Account" is amended to reflect the information shown in the above table. Minimums shown above currently apply to Virtus International Equity Fund and Virtus Premium AlphaSector Fund. ANNUAL FEE ASSESSMENT FOR CERTAIN ACCOUNTS Due to the high cost of maintaining small accounts, effective January 1, 2011, Virtus Mutual Funds will begin assessing an annual fee of $25 per direct account for account balances under $2,500. Accordingly, effective January 1, 2011, the following disclosure is added under the heading "Account Policies" in each fund's prospectus: ANNUAL FEE ON SMALL ACCOUNTS To help offset the costs associated with maintaining small accounts, Virtus Mutual Funds reserve the right to assess an annual $25 small account fee on fund accounts with a balance below $2,500. The small account fee may be waived in certain circumstances, such as for accounts that have elected electronic delivery of statements/regulatory documents and accounts owned by shareholders having multiple accounts with a combined value of over $25,000. The small account fee does not apply to accounts held through a financial intermediary. The small account fee will be collected through the automatic sale of shares in your account. We will send you written notice before we charge the $25 fee so that you may increase your account balance above the minimum, sign up for electronic delivery, consolidate your accounts or liquidate your account. You may take these actions at any time by contacting your investment professional or the Transfer Agent. CLASS A SALES CHARGES -- APPLICABLE TO VIRTUS FIXED INCOME FUNDS Effective January 1, 2011, Virtus Mutual Funds will implement changes to the sales charge and dealer commission schedules applicable to purchases of Class A Shares of Virtus fixed income funds. Accordingly, the Virtus Opportunities Trust Prospectus will be revised as described below.
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 (Continued) The following information replaces the second table under the heading "Sales Charges You May Pay to Purchase Class A Shares" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - ---------------------------------------- ----------------- ----------------- Under $50,000 2.75% 2.83% $50,000 but under $100,000 2.25 2.30 $100,000 but under $250,000 1.75 1.78 $250,000 but under $500,000 1.25 1.27 $500,000 but under $1,000,000 1.00 1.01 $1,000,000 or more None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - ---------------------------------------- ----------------- ----------------- Under $50,000 3.75% 3.90% $50,000 but under $100,000 3.50 3.63 $100,000 but under $250,000 3.25 3.36 $250,000 but under $500,000 2.25 2.30 $500,000 but under $1,000,000 1.75 1.78 $1,000,000 or more None None The following information replaces the second table under the heading "Compensation to Dealers" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ---------------------------------------- -------------- --------------- --------------- Under $50,000 2.75% 2.83% 2.25% $50,000 but under $100,000 2.25 2.30 2.00 $100,000 but under $250,000 1.75 1.78 1.50 $250,000 but under $500,000 1.25 1.27 1.00 $500,000 but under $1,000,000 1.00 1.01 1.00 $1,000,000 or more None None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ---------------------------------------- -------------- --------------- --------------- Under $50,000 3.75% 3.90% 3.25% $50,000 but under $100,000 3.50 3.63 3.00 $100,000 but under $250,000 3.25 3.36 2.75 $250,000 but under $500,000 2.25 2.30 2.00 $500,000 but under $1,000,000 1.75 1.78 1.50 $1,000,000 or more None None None INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUSES FOR FUTURE REFERENCE. VOT 8020/Minimums&FISalesCharges (11/10)
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(VIRTUS MUTUAL FUNDS LOGO) |--------------| | PRSRT STD | c/o State Street Bank and Trust Company | U.S. POSTAGE | P.O. Box 8301 | PAID | Boston, MA 02266-8301 | LANCASTER, | | PA | | PERMIT 1793 | |--------------| For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or virtus.com 8024 10-10
(VIRTUS MUTUAL FUNDS LOGO) ANNUAL REPORT - ------------------------------------------------------------------------------------------------------------------------------------ Virtus Real Estate Securities Fund * Prospectus Supplement applicable to the Fund appears at the back of this Annual Report. - ------------------------------------------------------------------------------------------------------------------------------------ TRUST NAME: September 30, 2010 Eligible VIRTUS shareholders can OPPORTUNITIES sign up for TRUST eDelivery at Virtus.com (GRAPHIC) NO BANK GUARANTEE NOT FDIC INSURED MAY LOSE VALUE
TABLE OF CONTENTS VIRTUS REAL ESTATE SECURITIES FUND ("Real Estate Securities Fund") Message to Shareholders ....................................................................................................... 1 Disclosure of Fund Expenses ................................................................................................... 2 Fund Summary .................................................................................................................. 4 Schedule of Investments ....................................................................................................... 7 Statement of Assets and Liabilities ........................................................................................... 10 Statement of Operations ....................................................................................................... 11 Statement of Changes in Net Assets ............................................................................................ 12 Financial Highlights .......................................................................................................... 13 Notes to Financial Statements ................................................................................................. 15 Report of Independent Registered Public Accounting Firm ....................................................................... 21 Tax Information Notice ........................................................................................................ 22 Fund Management Tables ........................................................................................................ 23 - ------------------------------------------------------------------------------------------------------------------------------------ PROXY VOTING PROCEDURES (FORM N-PX) The adviser and subadviser vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, 2010, free of charge, by calling toll-free 1-800-243-1574. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. FORM N-Q INFORMATION The Trust files a complete schedule of portfolio holdings for the fund with the Securities and Exchange Commission (the "SEC") for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the SEC's Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330. - ------------------------------------------------------------------------------------------------------------------------------------ This report is not authorized for distribution to prospective investors in the Virtus Real Estate Securities Fund unless preceded or accompanied by an effective prospectus which includes information concerning the sales charge, each Fund's record and other pertinent information.
MESSAGE TO SHAREHOLDERS Dear Fellow Shareholders of Virtus Mutual Funds: (PHOTO GEORGE R. AYLWARD) In September 2010, the National Bureau of Economic Research concluded that the "Great Recession" had ended more than a year earlier. Good news? Undoubtedly. The sign that all is right with the economy? Hardly. While the recession was technically over, the economy has been stalled between tentative growth and a temptation to fall back into recession -- the feared "double dip." The economy certainly has improved since the lows of early 2009, but retail sales have remained weak and the housing market is still depressed, with few signs it has plumbed the bottom of the trough. With the unemployment rate continuing to hover near 10 percent, pessimism remains prevalent and consumer confidence in the economy remains challenged. Are there opportunities for investors in these situations? Absolutely. The broader financial markets have seen overall gains for three of the past four quarters. July 2010 was the best month for stocks in a year, and then September 2010 topped July with returns not seen in 71 years. The Federal Reserve demonstrated its concern about persistently high unemployment rates and the long-term impact of the recession by saying it was prepared to do whatever was necessary to prevent deflation or the double dip. At the start of the 2010 fourth quarter, the Fed was preparing another round of quantitative easing through large-scale purchases of Treasuries and mortgage-backed securities, and the financial markets responded positively. These factors are another reminder that during periods of market volatility, vigilance is the key for the investor, the financial advisor, and the professional money manager alike. Your fund's management team provides details of its approach to these markets in the enclosed commentary, and I encourage you to read this material carefully. We also suggest you rely on the experience of your personal financial advisor, who can review your investment objectives and your portfolio and, when appropriate, recommend adjustments to fit your current financial needs and your tolerance for risk. The wide range of equity and fixed income investments available from the Virtus Mutual Funds allows you to design a portfolio tailored to your individual needs. Information about your investments is always available on our website, www.virtus.com, and from our customer service staff at 1-800-243-1574. While there are no guarantees in the world of investing, I can assure you that we will continue do our very best to meet your expectations. On behalf of the entire team at Virtus Investment Partners, I thank you for entrusting your financial assets to us. Sincerely, /s/ George R. Aylward George R. Aylward President, Virtus Mutual Funds NOVEMBER 2010 WHENEVER YOU HAVE QUESTIONS ABOUT YOUR ACCOUNT, OR REQUIRE ADDITIONAL INFORMATION, PLEASE VISIT US ON THE WEB AT www.virtus.com OR CALL OUR SHAREOWNER SERVICE GROUP TOLL-FREE AT 1-800-243-1574. PERFORMANCE DATA QUOTED REPRESENTS PAST RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN ABOVE. 1
VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 We believe it is important for you to understand the impact HYPOTHETICAL EXAMPLE FOR of costs on your investment. All mutual funds have operating COMPARISON PURPOSES expenses. As a shareholder of the Virtus Real Estate Securities Fund (the "Fund"), you may incur two types of costs: (1) The second section of the accompanying table provides transaction costs, including sales charges on purchases of Class information about hypothetical account values and hypothetical A shares and contingent deferred sales charges on Class B and expenses based on the Fund's actual expense ratio and an assumed Class C shares; and (2) ongoing costs, including investment rate of return of 5% per year before expenses, which is not your advisory fees; distribution and service fees; and other Fund's actual return. The hypothetical account values and expenses. Class I shares are sold without a sales charge and do expenses may not be used to estimate the actual ending account not incur distribution and service fees. These examples are balance or expenses you paid for the period. You may use this intended to help you understand your ongoing costs (in dollars) information to compare the ongoing costs of investing in your of investing in the Fund and to compare these costs with the Fund and other funds. To do so, compare these 5% hypothetical ongoing costs of investing in other mutual funds. These examples examples with the 5% hypothetical examples that appear in the are based on an investment of $1,000 invested at the beginning shareholder reports of the other funds. of the period and held for the entire six-month period. The following Expense Table illustrates your Fund's costs in two Please note that the expenses shown in the accompanying ways. table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or ACTUAL EXPENSES contingent deferred sales charges. Therefore, the second line of the accompanying table is useful in comparing ongoing costs only, The first section of the accompanying table provides and will not help you determine the relative total costs of information about actual account values and actual expenses. You owning different funds. In addition, if these transactional costs may use the information in this line, together with the amount were included, your costs would have been higher. The you invested, to estimate the expenses that you paid over the calculations assume no shares were bought or sold during the period. Simply divide your account value by $1,000 (for example, period. Your actual costs may have been higher or lower depending an $8,600 account value divided by $1,000 = 8.6), then multiply on the amount of your investments and timing of any purchases or the result by the number in the first section under the heading redemptions. entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 2
VIRTUS REAL ESTATE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED) FOR THE SIX-MONTH PERIOD OF APRIL 1, 2010 TO SEPTEMBER 30, 2010 EXPENSE TABLE - ------------------------------------------------------------------------------------------------------------------------------------ Beginning Ending Expenses Account Account Annualized Paid Value Value Expense During April 1, 2010 September 30, 2010 Ratio Period* - ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL Class A $1,000.00 $1,092.60 1.49% $ 7.82 Class B 1,000.00 1,089.00 2.24 11.73 Class C 1,000.00 1,088.30 2.24 11.73 Class I 1,000.00 1,094.00 1.24 6.51 HYPOTHETICAL (5% RETURN BEFORE EXPENSES) Class A 1,000.00 1,017.51 1.49 7.56 Class B 1,000.00 1,013.70 2.24 11.37 Class C 1,000.00 1,013.70 2.24 11.37 Class I 1,000.00 1,018.78 1.24 6.29 * Expenses are equal to the Fund's annualized expense ratio, which is net of waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (183) expenses were accrued in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Fund may invest in other funds, and the annualized expense ratios noted above do not reflect fees and expenses associated with the underlying funds. If such fees and expenses were included, the expenses would have been higher. You can find more information about the Fund's expenses in the Financial Statements section that follows. For additional information on operating expenses and other shareholder costs, refer to the prospectus. 3
TICKER SYMBOLS: VIRTUS REAL ESTATE SECURITIES FUND Class A: PHRAX Class B: PHRBX Class C: PHRCX Class I: PHRIX [ ] REAL ESTATE SECURITIES FUND (the "Fund") is ongoing European sovereign debt crisis was a key question. A non-diversified and has an investment objective of capital flight to quality ensued and was followed by a large package appreciation and income with approximately equal emphasis. of financial assistance by the European Union in coordination THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS WITH THE International Monetary Fund and the European Central OBJECTIVE. Bank. The U.S. dollar's rally peaked in June, yet the S&P 500 kept declining until early July, reaching new lows on the [ ] For the fiscal year ended September 30, 2010, the Fund's fiscal year. Fortunately, the FTSE NAREIT Equity REITs Index Class A shares at NAV returned 30.93%, Class B shares did not hit new lows on the year in early July, but found a returned 30.01%, Class C shares returned 29.95% and Class floor and recovered to prior intra-year highs by the end of I shares returned 31.27%. For the same period, the S&P September. 500(R) Index, a broad-based equity index, returned 10.16%, and the FTSE NAREIT Equity REITs Index, the Fund's style-specific index appropriate for comparison, returned WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL 30.28%. YEAR? ALL PERFORMANCE FIGURES ASSUME REINVESTMENT OF [ ] Both stock selection and property sector allocation helped DISTRIBUTIONS AND EXCLUDE THE EFFECT OF SALES CHARGES. the Fund outperform its benchmark in the fiscal year. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE [ ] With the return of liquidity to the real estate financing PERFORMANCE SHOWN ABOVE. markets, the transaction market for real estate assets improved markedly in 2010 and capital values increased across HOW DID THE MARKET PERFORM DURING THE FUND'S FISCAL YEAR? most markets, particularly for prime assets. Given the capital intensive nature of the real estate industry, the [ ] Positively, intertwined and responsive with quite a move material reduction in capital costs during the fiscal year over half way through. U.S. equity markets were higher, has been a significant factor behind the performance of the the U.S. dollar gained slightly and the 10 Year U.S. securities within the Fund. Treasury Note appreciated on a year-over year basis. The U.S. dollar rallied from November to June and then gave [ ] Moreover, publicly traded real estate companies have back most of its increase. The 10 Year Treasury Note fell demonstrated a clear cost of capital advantage over their to early April with its yield rising from less than 3.25% private real estate brethren. to 4% on perceptions of more robust economic growth, before rallying to the fiscal year-end and seeing its [ ] The unsecured and secured debt markets are allowing REITs to yield drop to less than 2.5%. obtain inexpensive rates while extending their maturity schedules. [ ] The S&P 500 and real estate securities, as measured by our benchmark, the FTSE NAREIT Equity REITs Index, reached a [ ] The recapitalization of global real estate security balance mid-year peak in late April to early May before beginning sheets has largely played out and many companies have been a significant decline. The catalyst for the move in executing external growth strategies. Real estate equities, bonds and the U.S. dollar? Uncertainty transaction activity will increase as in-place secured debt surrounding global economic growth and the financial on overleveraged assets matures or defaults, and equity needs situations across several southern European countries to be injected. We expect the return of once privatized real (i.e., Italy, Greece and Spain). Whether or not the estate companies in the future. European Union and its healthier members were going to act to stabilize the [ ] A favorable supply outlook will allow land-lords to increase occupancy and achieve pricing power at a faster rate than they otherwise would in a recovery. 4
VIRTUS REAL ESTATE SECURITIES FUND (CONTINUED) [ ] In our opinion, REITs can demonstrate above average Asset Allocations dividend growth over the next few years based on below average historical dividend payout ratios, ample access to attractively priced capital and a recovering economy. At The following table presents asset allocations within certain the end of the fiscal year, the benchmark's dividend yield sectors as a percentage of total investments at September 30, was in excess of its historical average spread versus the 2010. 10 Year U.S. Treasury Note. [ ] An environment of modest growth and low interest rates is Apartments 16% positive for real estate securities and the increased Regional Malls 14 appetite for yield alternatives has definitely been a Health Care 13 large driver behind returns for real estate securities Office 12 during the fiscal year. Should these conditions remain in Shopping Centers 9 place, we could see further capital appreciation in real Specialty 8 estate shares over the balance of 2010 and into 2011. Self Storage 7 However, to sustain the recent healthy moves in valuations Lodging/Resorts 7 over the medium-term, additional reductions in the cost of Other (includes short-term investments) 14 capital and/or further progress in space market --- fundamentals, and ultimately cash flow growth, will be Total 100% needed. === [ ] Long-term fundamental investors with a Growth at a KEY INVESTMENT TERMS Reasonable Price ("GARP") focus, such as Duff & Phelps, should be well positioned in the upcoming environment. FTSE NAREIT EQUITY REITS INDEX CONCENTRATING INVESTMENTS IN REITS INVOLVES CERTAIN RISKS The FTSE NAREIT Equity REITs Index is a free-float market SUCH AS REFINANCING, PROPERTY VALUE CHANGES AND MANAGEMENT capitalization index measuring equity tax-qualified real estate SKILL. INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED investment trusts, which meet minimum size and liquidity criteria, COMPANIES INVOLVES GREATER RISKS AND PRICE VOLATILITY THAN that are listed on the New York Stock Exchange, the American Stock LARGER, MORE ESTABLISHED COMPANIES. A NON-DIVERSIFIED FUND Exchange and the NASDAQ National Market System. The index is MAY BE MORE SUSCEPTIBLE TO ANY SINGLE ECONOMIC, POLITICAL calculated on a total return basis with dividends reinvested. OR REGULATORY EVENT AFFECTING AN ISSUER THAN A DIVERSIFIED FUND. REIT (REAL ESTATE INVESTMENT TRUST) A publicly traded company that owns, develops and operates income-producing real estate such as apartments, office buildings, hotels, shopping centers and other commercial properties. S&P 500(R) INDEX The S&P 500(R) Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. THE INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH ACTIVE MANAGEMENT OF AN ACTUAL PORTFOLIO. 5
AVERAGE ANNUAL TOTAL RETURNS(1) for periods ended 9/30/10 - ------------------------------------------------------------------------------------------------------------------------------------ Inception 1 5 10 to Inception Year Years Years 9/30/10 Date - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT NAV(2) 30.93% 2.71% 10.86% -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES AT POP(3, 4) 23.40 1.50 10.20 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES AT NAV(2) 30.01 1.93 10.02 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES WITH CDSC(4) 26.01 1.93 10.02 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES AT NAV(2) AND WITH CDSC(4) 29.95 1.94 -- 8.91% 7/25/03 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES AT NAV 31.27 -- -- -5.45 12/29/06 - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500(R) INDEX 10.16 0.64 -0.43 NOTE 5 NOTE 5 - ------------------------------------------------------------------------------------------------------------------------------------ FTSE NAREIT EQUITY REITS INDEX 30.28 1.88 10.37 NOTE 6 NOTE 6 - ------------------------------------------------------------------------------------------------------------------------------------ FUND EXPENSE RATIOS(7): A SHARES: 1.59%, B SHARES: 2.34%, C SHARES: 2.34%, I SHARES: 1.34%. ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PLEASE VISIT VIRTUS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END. (1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. (2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES CHARGE. (3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE MAXIMUM FRONT-END 5.75% SALES CHARGE. (4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF PURCHASE. CDSC CHARGES FOR CLASS B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR PERIOD. CDSC CHARGES FOR CERTAIN REDEMPTIONS OF CLASS A SHARES AND ALL REDEMPTIONS OF CLASS C SHARES ARE 1% WITHIN THE FIRST YEAR AND 0% THEREAFTER. (5) INDEX PERFORMANCE IS 3.94% FOR CLASS C (SINCE 7/25/03) AND -3.55% FOR CLASS I (SINCE 12/29/06). (6) INDEX PERFORMANCE IS 8.74% FOR CLASS C (SINCE 7/25/03) AND -5.76% FOR CLASS I (SINCE 12/29/06). (7) THE EXPENSE RATIOS OF THE FUND ARE SET FORTH ACCORDING TO THE PROSPECTUS FOR THE FUND EFFECTIVE JANUARY 31, 2010, AND AS SUPPLEMENTED AND REVISED SEPTEMBER 14, 2010, AND MAY DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT EXPENSE RATIOS. GROWTH OF $10,000 for periods ended 9/30 - ------------------------------------------------------------------------------------------------------------------------------------ This chart assumes an initial investment of $10,000 made on September 30, 2000, for Class A and Class B shares including any applicable sales charges or fees. Performance assumes reinvestment of dividends and capital gain distributions. (PERFORMANCE GRAPH) VIRTUS REAL VIRTUS REAL ESTATE ESTATE FTSE SECURITIES SECURITIES NAREIT EQUITY S&P 500(R) FUND CLASS A FUND CLASS B REITS INDEX INDEX 9/29/2000 9,425 10,000 10,000 10,000 9/28/2001 10,124 10,656 11,256 7,337 9/30/2002 11,374 11,885 12,217 5,834 9/30/2003 14,292 14,821 15,299 7,259 9/30/2004 18,120 18,649 19,210 8,266 9/30/2005 23,113 23,616 24,450 9,277 9/29/2006 30,034 30,449 30,630 10,279 9/28/2007 31,389 31,592 32,369 11,968 9/30/2008 28,268 28,229 28,763 9,338 9/30/2009 20,182 19,988 20,594 8,693 9/30/2010 26,424 25,986 26,831 9,577 For information regarding the indexes and certain investment terms, see the Key Investment Terms on page 5. 6
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE ---------- -------- ---------- -------- COMMON STOCKS--98.6% LODGING/RESORTS--7.0% Host Hotels & Resorts, REAL ESTATE INVESTMENT TRUSTS--98.6% Inc. 2,986,652 $ 43,247 LaSalle Hotel Properties 466,511 10,912 DIVERSIFIED--5.6% Starwood Hotels & Vornado Realty Trust 622,997 $ 53,285 Resorts Worldwide, Inc. 150,360 7,901 - ----------------------------------------------------------------- Sunstone Hotel TOTAL DIVERSIFIED 53,285 Investors, Inc.(2) 463,930 4,208 - ----------------------------------------------------------------- ----------------------------------------------------------------- HEALTH CARE--12.9% TOTAL LODGING/RESORTS 66,268 ----------------------------------------------------------------- HCP, Inc. 900,307 32,393 RESIDENTIAL--17.6% Health Care REIT, Inc. 711,429 33,679 Nationwide Health APARTMENTS--16.2% Properties, Inc. 557,806 21,570 American Campus Ventas, Inc. 664,624 34,275 Communities, Inc. 279,519 8,509 - ----------------------------------------------------------------- Apartment Investment & TOTAL HEALTH CARE 121,917 Management Co. - ----------------------------------------------------------------- Class A 597,157 12,767 INDUSTRIAL/OFFICE--17.1% AvalonBay Communities, Inc. 240,156 24,959 INDUSTRIAL--3.0% BRE Properties, Inc. 112,063 4,651 AMB Property Corp. 504,388 13,351 Equity Residential 1,167,443 55,535 ProLogis 1,262,483 14,872 Essex Property Trust, -------- Inc. 196,952 21,554 28,223 Home Properties, Inc. 147,904 7,824 -------- UDR, Inc. 821,664 17,354 MIXED--1.5% -------- Duke Realty Corp. 292,292 3,388 153,153 Liberty Property Trust 329,130 10,499 -------- -------- MANUFACTURED HOMES--1.4% 13,887 Equity Lifestyle Properties, -------- Inc. 242,331 13,202 OFFICE--12.6% ----------------------------------------------------------------- Alexandria Real Estate TOTAL RESIDENTIAL 166,355 Equities, Inc. 196,925 13,785 ----------------------------------------------------------------- BioMed Realty Trust, Inc. 684,181 12,261 RETAIL--23.6% Boston Properties, Inc. 518,183 43,071 Corporate Office REGIONAL MALLS--14.1% Properties Trust 400,925 14,958 Macerich Co. (The) 537,975 23,106 Kilroy Realty Corp. 210,137 6,964 Simon Property Group, Mack-Cali Realty Corp. 314,836 10,298 Inc. 1,096,626 101,701 SL Green Realty Corp. 288,691 18,283 Taubman Centers, Inc. 194,680 8,685 -------- -------- 119,620 133,492 - ----------------------------------------------------------------- -------- TOTAL INDUSTRIAL/OFFICE 161,730 - ----------------------------------------------------------------- See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 7
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) SHARES VALUE SHARES VALUE --------- -------- --------- -------- SHOPPING CENTERS--9.5% SHORT-TERM INVESTMENTS--2.4% Developers Diversified Realty Corp. 1,339,817 $ 15,033 MONEY MARKET MUTUAL FUNDS--2.4% Federal Realty Investment BlackRock Liquidity Funds Trust 197,530 16,130 TempFund Portfolio - Kimco Realty Corp. 1,840,865 28,993 Institutional Shares Regency Centers Corp. 61,240 2,417 (seven-day effective Tanger Factory Outlet yield 0.229%) 22,897,199 $ 22,897 Centers 214,020 10,089 -------------------------------------------------------------- Weingarten Realty TOTAL SHORT-TERM INVESTMENTS Investors 786,470 17,161 (IDENTIFIED COST $22,897) 22,897 -------- -------------------------------------------------------------- 89,823 TOTAL INVESTMENTS--101.0% - ----------------------------------------------------------------- (IDENTIFIED COST $628,716) 956,693(1) TOTAL RETAIL 223,315 Other assets and liabilities, net--(1.0)% (9,876) - ----------------------------------------------------------------- -------- SELF STORAGE--6.8% NET ASSETS--100.0% $946,817 Extra Space Storage, Inc. 1,080,012 17,324 ======== Public Storage 486,523 47,212 - ----------------------------------------------------------------- TOTAL SELF STORAGE 64,536 - ----------------------------------------------------------------- SPECIALTY--8.0% Digital Realty Trust, Inc. 605,715 37,372 Entertainment Properties Trust 271,529 11,725 Plum Creek Timber Co., Inc. 319,961 11,295 Rayonier, Inc. 319,190 15,998 - ----------------------------------------------------------------- TOTAL SPECIALTY 76,390 - ----------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $605,819) 933,796 - ----------------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS--98.6% (IDENTIFIED COST $605,819) 933,796 - ----------------------------------------------------------------- FOOTNOTE LEGEND (1) Federal Income Tax Information: For tax information at September 30, 2010, see Note 8, Federal Income Tax Information in the Notes to Financial Statements. (2) Non-income producing. See Notes to Financial Statements For information regarding certain investment terms, see the Key Investment Terms on page 5. 8
VIRTUS REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2010 ($ reported in thousands) The following table provides a summary of inputs used to value the Fund's net assets as of September 30, 2010 (see Security Valuation Note 2A in the Notes to Financial Statements): Total Value at Level 1 - September 30, 2010 Quoted Prices ------------------ ------------- INVESTMENT SECURITIES: Common Stocks: Real Estate Investment Trusts $933,796 $933,796 Short-Term Investments 22,897 22,897 -------- -------- Total Investments $956,693 $956,693 ======== ======== There are no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities. See Notes to Financial Statements 9
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2010 (Reported in thousands except shares and per share amounts) ASSETS Investment in securities at value(1) .............................................................................. $ 956,693 Receivables Investment securities sold ..................................................................................... 6,888 Fund shares sold ............................................................................................... 4,838 Dividends and interest receivable .............................................................................. 2,192 Trustee retainer .................................................................................................. 5 Prepaid expenses .................................................................................................. 55 ----------- Total assets ................................................................................................ 970,671 ----------- LIABILITIES Payables Fund shares repurchased ........................................................................................ 12,861 Investment securities purchased ................................................................................ 9,546 Investment advisory fee ........................................................................................ 592 Distribution and service fees .................................................................................. 174 Administration fee ............................................................................................. 113 Transfer agent fees and expenses ............................................................................... 457 Professional fee ............................................................................................... 33 Other accrued expenses ......................................................................................... 78 ----------- Total liabilities ........................................................................................... 23,854 ----------- NET ASSETS ........................................................................................................ $ 946,817 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest .................................................................. $ 806,110 Accumulated undistributed net investment income (loss) ............................................................ 23 Accumulated undistributed net realized gain (loss) ................................................................ (187,293) Net unrealized appreciation (depreciation) on investments ......................................................... 327,977 ----------- NET ASSETS ........................................................................................................ $ 946,817 =========== CLASS A Net asset value (net assets/shares outstanding) per share ......................................................... $ 26.10 Maximum offering price per share NAV/(1-5.75%) .................................................................... $ 27.69 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 22,096,608 Net Assets ........................................................................................................ $ 576,760 CLASS B Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 25.76 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 644,261 Net Assets ........................................................................................................ $ 16,595 CLASS C Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 26.06 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 1,792,539 Net Assets ........................................................................................................ $ 46,722 CLASS I Net asset value (net assets/shares outstanding) and offering price per share ...................................... $ 26.08 Shares of beneficial interest outstanding, no par value, unlimited authorization .................................. 11,759,411 Net Assets ........................................................................................................ $ 306,740 (1) Investment in securities at cost .............................................................................. $ 628,716 See Notes to Financial Statements 10
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2010 ($ reported in thousands) INVESTMENT INCOME Dividends ...................................................................................................... $ 25,374 -------- Total investment income ..................................................................................... 25,374 -------- EXPENSES Investment advisory fees ....................................................................................... 6,642 Service fees, Class A .......................................................................................... 1,356 Distribution and service fees, Class B ......................................................................... 171 Distribution and service fees, Class C ......................................................................... 446 Administration fees ............................................................................................ 1,023 Transfer agent fee and expenses ................................................................................ 2,681 Custodian fees ................................................................................................. 36 Printing fees and expenses ..................................................................................... 161 Professional fees .............................................................................................. 57 Registration fees .............................................................................................. 108 Trustees' fee and expenses ..................................................................................... 75 Miscellaneous expenses ......................................................................................... 111 -------- Total expenses .............................................................................................. 12,867 Less expenses reimbursed and/or waived by investment adviser ................................................... --(1) -------- Net expenses ................................................................................................ 12,867 -------- NET INVESTMENT INCOME (LOSS) ...................................................................................... 12,507 -------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ........................................................................ 39,494 Net change in unrealized appreciation (depreciation) on investments ............................................ 185,836 -------- NET GAIN (LOSS) ON INVESTMENTS .................................................................................... 225,330 -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................................... $237,837 ======== (1) Amount is less than $500 (not reported in thousands). See Notes to Financial Statements 11
VIRTUS REAL ESTATE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (Reported in thousands) Year Ended Year Ended September 30, 2010 September 30, 2009 ------------------ ------------------ INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS Net investment income (loss) .......................................................... $ 12,507 $ 17,623 Net realized gain (loss) .............................................................. 39,494 (218,412) Net change in unrealized appreciation (depreciation) .................................. 185,836 (97,517) --------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. 237,837 (298,306) --------- ---------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class A ........................................................ (7,668) (13,091) Net investment income, Class B ........................................................ (121) (348) Net investment income, Class C ........................................................ (311) (720) Net investment income, Class I ........................................................ (4,625) (3,219) --------- ---------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ................................ (12,725) (17,378) --------- ---------- FROM SHARE TRANSACTIONS SALE OF SHARES Class A (8,024 and 13,818 shares, respectively) ....................................... 189,394 221,839 Class B (5 and 53 shares, respectively) ............................................... 112 888 Class C (261 and 418 shares, respectively) ............................................ 6,044 6,721 Class I (5,484 and 8,180 shares, respectively) ........................................ 117,414 135,413 REINVESTMENT OF DISTRIBUTIONS Class A (283 and 757 shares, respectively) ............................................ 6,776 11,294 Class B (4 and 20 shares, respectively) ............................................... 99 282 Class C (11 and 40 shares, respectively) .............................................. 252 585 Class I (171 and 187 shares, respectively) ............................................ 4,098 2,869 SHARES REPURCHASED Class A (13,553 and 16,768 shares, respectively) ...................................... (305,363) (272,522) Class B (249 and 415 shares, respectively) ............................................ (5,597) (6,803) Class C (550 and 831 shares, respectively) ............................................ (12,723) (13,231) Class I (4,122 and 1,779 shares, respectively) ........................................ (97,259) (28,068) --------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS ................................ (96,753) 59,267 --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS .................................................... 128,359 (256,417) NET ASSETS Beginning of period ...................................................................... 818,458 1,074,875 --------- ---------- END OF PERIOD ............................................................................ $ 946,817 $ 818,458 ========= ========== Accumulated undistributed net investment income (loss) at end of period ............................................................................. $ 23 $ 241 See Notes to Financial Statements 12
VIRTUS REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET NET ASSET REALIZED DIVIDENDS DISTRIBUTIONS VALUE, NET AND TOTAL FROM FROM BEGINNING INVESTMENT UNREALIZED FROM NET NET OF INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS --------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 $20.21 0.32 5.90 6.22 (0.33) -- (0.33) 10/1/08 to 9/30/09 29.19 0.47 (8.99) (8.52) (0.46) -- (0.46) 10/1/07 to 9/30/08 34.10 0.45 (3.88) (3.43) (0.47) (1.01) (1.48) 12/1/06 to 9/30/07 38.18 0.32 (2.59) (2.27) (0.32) (1.49) (1.81) 12/1/05 to 11/30/06 28.15 0.30 10.73 11.03 (0.37) (0.63) (1.00) 12/1/04 to 11/30/05 25.46 0.43 4.08 4.51 (0.42) (1.40) (1.82) CLASS B 10/1/09 to 9/30/10 $19.95 0.16 5.81 5.97 (0.16) -- (0.16) 10/1/08 to 9/30/09 28.85 0.35 (8.91) (8.56) (0.34) -- (0.34) 10/1/07 to 9/30/08 33.72 0.22 (3.83) (3.61) (0.25) (1.01) (1.26) 12/1/06 to 9/30/07 37.74 0.10 (2.56) (2.46) (0.07) (1.49) (1.56) 12/1/05 to 11/30/06 27.86 0.07 10.59 10.66 (0.15) (0.63) (0.78) 12/1/04 to 11/30/05 25.21 0.23 4.05 4.28 (0.23) (1.40) (1.63) CLASS C 10/1/09 to 9/30/10 $20.19 0.15 5.88 6.03 (0.16) -- (0.16) 10/1/08 to 9/30/09 29.17 0.35 (8.99) (8.64) (0.34) -- (0.34) 10/1/07 to 9/30/08 34.07 0.23 (3.88) (3.65) (0.24) (1.01) (1.25) 12/1/06 to 9/30/07 38.11 0.10 (2.59) (2.49) (0.06) (1.49) (1.55) 12/1/05 to 11/30/06 28.12 0.06 10.71 10.77 (0.15) (0.63) (0.78) 12/1/04 to 11/30/05 25.43 0.25 4.07 4.32 (0.23) (1.40) (1.63) RATIO OF RATIO OF GROSS NET RATIO OF EXPENSES INVESTMENT NET NET NET TO AVERAGE INCOME CHANGE IN ASSET ASSETS, EXPENSES NET ASSETS (LOSS) NET VALUE, END OF TO AVERAGE (BEFORE TO AVERAGE PORTFOLIO ASSET END TOTAL PERIOD NET WAIVERS AND NET TURNOVER VALUE OF PERIOD RETURN(1) (000'S) ASSETS(7) REIMBURSEMENTS)(7) ASSETS RATE -------------------------------------------------------------------------------------------- CLASS A 10/1/09 to 9/30/10 5.89 $26.10 30.93% $ 576,760 1.48% 1.48% 1.39% 35% 10/1/08 to 9/30/09 (8.98) 20.21 (28.61) 552,518 1.59 1.59 2.88 48 10/1/07 to 9/30/08 (4.91) 29.19 (9.94) 862,062 1.37(5) 1.45 1.51 32 12/1/06 to 9/30/07 (4.08) 34.10 (6.14)(4) 1,136,923 1.32(3) 1.39(3) 1.06(3) 25(4) 12/1/05 to 11/30/06 10.03 38.18 40.37 1,289,007 1.30 1.30 0.94 24 12/1/04 to 11/30/05 2.69 28.15 18.67 737,744 1.30 1.30 1.68 22 CLASS B 10/1/09 to 9/30/10 5.81 $25.76 30.01% $ 16,595 2.23% 2.23% 0.70% 35% 10/1/08 to 9/30/09 (8.90) 19.95 (29.20) 17,648 2.34 2.34 2.16 48 10/1/07 to 9/30/08 (4.87) 28.85 (10.65) 35,376 2.12(5) 2.20 0.76 32 12/1/06 to 9/30/07 (4.02) 33.72 (6.72)(4) 49,964 2.07(3) 2.13(3) 0.32(3) 25(4) 12/1/05 to 11/30/06 9.88 37.74 39.29 71,240 2.05 2.05 0.24 24 12/1/04 to 11/30/05 2.65 27.86 17.81 59,042 2.05 2.05 0.93 22 CLASS C 10/1/09 to 9/30/10 5.87 $26.06 29.95% $ 46,722 2.23% 2.23% 0.65% 35% 10/1/08 to 9/30/09 (8.98) 20.19 (29.17) 41,818 2.34 2.34 2.12 48 10/1/07 to 9/30/08 (4.90) 29.17 (10.63) 71,278 2.12(5) 2.20 0.76 32 12/1/06 to 9/30/07 (4.04) 34.07 (6.71)(4) 100,321 2.07(3) 2.14(3) 0.32(3) 25(4) 12/1/05 to 11/30/06 9.99 38.11 39.32 112,794 2.05 2.05 0.19 24 12/1/04 to 11/30/05 2.69 28.12 17.80 67,764 2.05 2.05 0.97 22 See Notes to Financial Statements 13
VIRTUS REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NET NET ASSET REALIZED DIVIDENDS DISTRIBUTIONS VALUE, NET AND TOTAL FROM FROM BEGINNING INVESTMENT UNREALIZED FROM NET NET OF INCOME GAIN INVESTMENT INVESTMENT REALIZED TOTAL PERIOD (LOSS)(2) (LOSS) OPERATIONS INCOME GAINS DISTRIBUTIONS --------------------------------------------------------------------------------- CLASS I 10/1/09 to 9/30/10 $20.19 0.38 5.90 6.28 (0.39) -- (0.39) 10/1/08 to 9/30/09 29.17 0.49 (8.97) (8.48) (0.50) -- (0.50) 10/1/07 to 9/30/08 34.08 0.62 (3.98) (3.36) (0.54) (1.01) (1.55) 12/29/06(6) to 9/30/07 35.99 0.28 (1.87) (1.59) (0.31) (0.01) (0.32) RATIO OF RATIO OF GROSS NET RATIO OF EXPENSES INVESTMENT NET NET NET TO AVERAGE INCOME CHANGE IN ASSET ASSETS, EXPENSES NET ASSETS (LOSS) NET VALUE, END OF TO AVERAGE (BEFORE TO AVERAGE PORTFOLIO ASSET END TOTAL PERIOD NET WAIVERS AND NET TURNOVER VALUE OF PERIOD RETURN(1) (000'S) ASSETS(7) REIMBURSEMENTS)(7) ASSETS RATE -------------------------------------------------------------------------------------------- CLASS I 10/1/09 to 9/30/10 5.89 $26.08 31.27% $ 306,740 1.23% 1.23% 1.63% 35% 10/1/08 to 9/30/09 (8.98) 20.19 (28.45) 206,474 1.32 1.32 3.00 48 10/1/07 to 9/30/08 (4.91) 29.17 (9.71) 106,159 1.12(5) 1.20 2.11 32 12/29/06(6) to 9/30/07 (1.91) 34.08 (4.44)(4) 32,887 1.11(3) 1.23(3) 1.09(3) 25(4) (1) Sales charges, where applicable, are not reflected in the total return calculation. (2) Computed using average shares outstanding. (3) Annualized. (4) Not annualized. (5) Blended net expense ratio. (6) Inception date. (7) The Fund may invest in other funds, and the annualized expense ratios do not reflect fees and expenses associated with the underlying funds. See Notes to Financial Statements 14
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 1. ORGANIZATION Virtus Opportunities Trust (the "Trust"), is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940 ("1940 Act"), as amended, as an open-end management investment company. As of the date of this report, 20 funds are offered for sale, of which the Real Estate Securities Fund (the "Fund") is reported in this annual report. The Fund's investment objective is outlined in the Fund Summary page. The Fund offers Class A shares, Class C shares and Class I shares for sale. Effective December 1, 2009 (the "Closing Date"), Class B shares are no longer available for by new or existing shareholders, except by existing shareholders through Qualifying Transactions (for information regarding Qualifying Transactions, refer to the Trust's prospectus). Class A shares are sold with a front-end sales charge of up to 5.75% with some exceptions. Generally, Class A shares are not subject to any charges by the Fund when redeemed; however, a 1% contingent deferred sales charge ("CDSC") may be imposed on certain redemptions made within a certain period following purchases on which a finder's fee has been paid. Prior to January 29, 2010, the CDSC was imposed on certain redemptions made within one year following purchases on which a finder's fee had been paid. As of January 29, 2010, the period for which such CDSC applies for the Fund was modified to be 18 months. In each case, the CDSC period begins on the last day of the month preceding the month in which the purchase was made. Class B shares were sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class C shares are generally sold with a 1% CDSC, if applicable, if redeemed within one year of purchase. Class I shares are sold without a front-end sales charge or CDSC. 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 fees under a Board approved 12b-1 and shareholder service plan and has exclusive voting rights with respect to this plan. Class I shares are not subject to a 12b-1 plan. Income and other expenses and realized and unrealized gains and losses of the Fund are borne pro rata by the holders of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and those differences could be significant. A. SECURITY VALUATION: The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. o Level 1 - quoted prices in active markets for identical securities 15
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 o Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) A description of the valuation techniques applied to the Fund's major categories of assets and liabilities measured at fair value on a recurring basis is as follows: Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity securities and private placements that are not widely traded, are illiquid or are internally fair valued by the advisor, are generally categorized as Level 3 in the hierarchy. Certain foreign securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that foreign markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (generally, the close of the New York Stock Exchange ("NYSE")) that may impact the value of securities traded in these foreign markets. In such cases the Fund fair values foreign securities using an independent pricing service which considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American depositary receipts, financial futures, exchange traded funds, and certain indexes as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain foreign common stocks may occur on a frequent basis. Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over the counter (OTC) derivative contracts, which include forward currency contracts and equity linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing net asset value determined as of the close of business of the NYSE (generally 4:00 p.m. Eastern time) each business day and are categorized as Level 1 in the hierarchy. Short-term Notes having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market. A summary of the inputs used to value the Fund's net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund 16
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. Dividend income is recorded using management's estimate of the income included in distributions received from the REIT investments. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts. C. INCOME TAXES: The Fund is treated as a separate taxable entity. It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. The Fund has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Fund to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Fund has determined that there was no effect on the financial statements from the adoption of this authoritative guidance. The Fund does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Funds are subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2006 forward (with limited exceptions). D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital paid in on shares of beneficial interest. E. EXPENSES: Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately made. 17
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS ($ REPORTED IN THOUSANDS EXCEPT AS NOTED) A. ADVISER: Virtus Investment Advisers, Inc. ("VIA," the "Adviser"), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. ("Virtus"), is the Adviser to the Fund. For managing, or directing the management of, the investments of each Fund, the Adviser is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of the Fund: 0.75% of 1st $1 billion; 0.70% $1+ billion through $2 billion and 0.65% $2+ billion. The Adviser manages the Fund's investment program and general operations of the Fund, including oversight of the Fund's subadviser. B. SUBADVISER: The subadviser manages the investments of the Fund for which it is paid a fee by the Adviser. Duff & Phelps Investment Management Co. ("Duff & Phelps") serves as the Fund's subadviser. Duff & Phelps is an indirect, wholly-owned subsidiary of Virtus. C. EXPENSE RECAPTURE: Effective August 23, 2007, the Adviser may recapture operating expenses waived or reimbursed under arrangements previously in effect, within three fiscal years following the end of the fiscal year in which such waiver or reimbursement occurred. The Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with any applicable expense limitations at the time the fees were waived. All or a portion of the following Adviser reimbursed expenses may be recaptured by the fiscal years ended as follows: EXPIRATION DATE ---------------------------------- 2011 2012 2013 TOTAL ------ ------ ------ ------- $832 $ -- $ -- $832 During the current fiscal year, the expense ratio has not fallen below the rate required for recapture. D. DISTRIBUTOR: As the distributor of the Fund's shares, VP Distributors, Inc. ("VP Distributors"), an indirect wholly-owned subsidiary of Virtus, has advised the Fund that for the fiscal year (the "period") ended September 30, 2010, it retained Class A net commissions of $31; Class B deferred sales charges of $31; and Class C deferred sales charges of $5. In addition, the Fund pays VP Distributors distribution and/or service fees under Board approved 12b-1 and shareholder service plans, at the annual rate of 0.25% for Class A shares, 1.00% for Class B shares, and 1.00% for Class C shares applied to the average daily net assets of each respective class. Class I shares are not subject to a 12b-1 plan. Under certain circumstances, shares of certain Virtus Mutual Funds may be exchanged for shares of the same class of certain other Virtus Mutual Funds on the basis of the relative net asset values per share at the time of the exchange. On exchanges with share classes that carry a CDSC, the CDSC schedule of the original shares purchased continues to apply. 18
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 E. ADMINISTRATION AND TRANSFER AGENT SERVICES: VP Distributors serves as the Administrator to the Fund. For the period ended September 30, 2010, VP Distributors received administration fees totaling $697 which are included in the Statement of Operations. VP Distributors also serves as the Trust's transfer agent. For the period ended September 30, 2010, VP Distributors received transfer agent fees totaling $2,124 which are included in the Statement of Operations. A portion of these fees is paid to outside entities that also provide service to the Fund. On April 14, 2010, the Board of Trustees approved an increase in the rate of fees paid to VP Distributors in its role as administrator and transfer agent to the Fund effective immediately. F. AFFILIATED SHAREHOLDERS: At September 30, 2010, Virtus and its affiliates and the retirement plans of Virtus and its affiliates held shares of the Fund which may be redeemed at any time that aggregated the following: AGGREGATE NET ASSET SHARES VALUE ---------- --------- Class I shares ..................... 877,629 $22,889 4. PURCHASES AND SALES OF SECURITIES ($ REPORTED IN THOUSANDS) Purchases and sales of investment securities for the Fund (excluding U.S. Government securities or agency securities and short-term securities) during the period ended September 30, 2010, were as follows: LONG-TERM -------------------- PURCHASES SALES --------- -------- $304,004 $389,906 There were no purchases or sales of long-term U.S. Government or agency securities. 5. 10% SHAREHOLDERS As of September 30, 2010, the Fund had individual shareholder accounts and/or omnibus shareholder accounts (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the Fund as detailed below. The shareholders are not affiliated with Virtus. % OF NUMBER SHARES OF OUTSTANDING ACCOUNTS ----------- -------- 27% 2 6. CREDIT RISK AND ASSET CONCENTRATIONS The Fund may invest a high percentage of its assets in specific sectors of the market in its pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors. 19
VIRTUS REAL ESTATE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2010 7. INDEMNIFICATIONS Under the Fund's organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, the Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these arrangements. 8. FEDERAL INCOME TAX INFORMATION ($ REPORTED IN THOUSANDS) At September 30, 2010, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held by the Fund were as follows: NET UNREALIZED FEDERAL UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) -------- ------------ -------------- -------------- $674,131 $284,104 $(1,542) $282,562 The Fund has capital loss carryovers which may be used to offset future capital gains as follows: 2017 2018 TOTAL ------- -------- -------- $34,344 $107,534 $141,878 The Fund may not realize the benefit of these losses to the extent the Fund does not realize gains on investments prior to the expiration of the capital loss carryovers. Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended September 30, 2010, the Fund deferred capital loss of $0 and recognized post-October capital losses of $141,813. The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedules of Investments) consist of undistributed ordinary income of $23 and undistributed long-term capital gains of $0. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statements of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes. 9. RECENT ACCOUNTING PRONOUNCEMENT In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2010-06, "Improving Disclosures about Fair Value Measurements." ASU No. 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined. 10. SUBSEQUENT EVENT EVALUATIONS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available for issuance, and has determined that there are no subsequent events that require recognition or disclosure in the financial statements. 20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PRICEWATERHOUSECOOPERS LOGO) To the Board of Trustees of Virtus Opportunities Trust and Shareholders of Virtus Real Estate Securities Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Virtus Real Estate Securities Fund ("Fund"), a series of Virtus Opportunities Trust, at September 30, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit, which included confirmation of securities at September 30, 2010 by correspondence with the custodian, brokers and transfer agent, provides a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS LLP) Philadelphia, Pennsylvania November 22, 2010 21
VIRTUS REAL ESTATE SECURITIES FUND TAX INFORMATION NOTICE SEPTEMBER 30, 2010 (UNAUDITED) For the fiscal year ended September 30, 2010, the Fund makes the following disclosures for federal income tax purposes. Below is listed the percentage, or the maximum amount allowable, of its ordinary income dividends ("QDI") to qualify for the lower tax rates applicable to individual shareholders, and the percentage of ordinary income dividends earned by the Fund which qualifies for the dividends received deduction ("DRD") for corporate shareholders. The actual percentage of QDI and DRD for the calendar year will be designated in year-end tax statements. The Fund designates the amount below, or if subsequently different, as long-term capital gains dividends ("LTCG") ($ reported in thousands). QDI DRD LTCG --- --- ---- 0% 0% $-- 22
FUND MANAGEMENT TABLES Information pertaining to the Trustees and officers of the Trust as of September 30, 2010, is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 243-4361. The address of each individual, unless otherwise noted, is 100 Pearl Street, Hartford, CT 06103-4506. There is no stated term of office for Trustees of the Trust. INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ NAME,YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Leroy Keith, Jr. Chairman, Bloc Global Services Group, LLC (commodities business) (2010 to present). Managing Director, YOB: 1939 Almanac Capital Management (commodities business) (2007 to 2008). Partner, Stonington Partners, Inc. 44 Funds (private equity fund) (2001 to 2007). Director/Trustee, Evergreen Funds (88 portfolios) (1989 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Philip R. McLoughlin Managing Director, SeaCap Asset Management Fund I, L.P. (2009 to present) and SeaCap Partners, LLC Chairman (investment management) (2009 to present). Partner, Cross Pond Partners, LLC (strategy consulting firm) YOB: 1946 (2006 to present). Director, World Trust Fund (1991 to present). Chairman and Trustee, Virtus Variable 47 Funds Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (2003 to present). Director, DTF Tax-Free Income Fund, Inc. (1996 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (1996 to present); and DNP Select Income Fund Inc. (2009 to present). Director, Argo Group International Holdings, Inc. and its predecessor, PXRE Corporation (insurance) (1986 to 2009). - ------------------------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara Retired. Managing Director, U.S. Trust Company of New York (1982 to 2006). Director, DTF Tax-Free Income YOB: 1951 Fund, Inc. (2003 to present); Duff & Phelps Utility and Corporate Bond Trust, Inc. (2003 to present); and 47 Funds DNP Select Income Fund Inc. (2009 to present). - ------------------------------------------------------------------------------------------------------------------------------------ James M. Oates Managing Director, Wydown Group (consulting firm) (1994 to present). Chairman and Trustee, John Hancock YOB: 1946 Trust (93 portfolios) and John Hancock Funds II (74 portfolios) (2005 to present). Director, Stifel 44 Funds Financial (1996 to present). Director, Connecticut River Bank (1999 to present) and Connecticut River Bancorp (1998 to present). Chairman, Emerson Investment Management, Inc. (2000 to present). Director, Trust Company of New Hampshire (2002 to present). Director, Beaumont Financial Partners, LLC (2000 to present). President of the Board (1999 to present) and Director (1985 to present), Middlesex School. Chairman (1997 to 2006) and Non-Executive Chairman (2007 to present), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services). Director, Investors Bank and Trust Co. and Investors Financial Services Corporation (1995 to 2007). Trustee, John Hancock Funds III (2005 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Segerson Managing Director, Northway Management Company (1998 to present). YOB: 1946 44 Funds - ------------------------------------------------------------------------------------------------------------------------------------ Ferdinand L.J. Verdonck Director, The J.P. Morgan Continental European Investment Trust (1998 to present). Director, Groupe SNEF YOB: 1942 (electric and electronic installations) (1998 to present). Director, Galapagos N.V. (biotechnology) (2005 44 Funds to present). Chairman, Amsterdam Molecular Therapeutics N.V. (biotechnology) (2007 to present). Director, Movetis N.V. (biotechnology) (2008 to present). Director, Borje Berlin A.G. (stock exchange) (2008 to 2009). Chairman, EASDAQ (stock exchange) (2001 to 2007). Chairman, Banco Urquijo (1998 to 2006). - ------------------------------------------------------------------------------------------------------------------------------------ 23
FUND MANAGEMENT TABLES (CONTINUED) INTERESTED TRUSTEE Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. - ------------------------------------------------------------------------------------------------------------------------------------ NAME,YEAR OF BIRTH, PRINCIPAL OCCUPATION(S) YEAR ELECTED AND DURING PAST 5 YEARS AND NUMBER OF FUNDS OVERSEEN OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ George R. Aylward(1) Director, President and Chief Executive Officer (2008 to present), Director and President (2006 to 2008), YOB: 1964 Chief Operating Officer (2004 to 2006), Vice President, Finance, (2001 to 2002), Virtus Investment 46 Funds Partners, Inc. and/or certain of its subsidiaries. Various senior officer positions with Virtus affiliates (2008 to present). Senior Executive Vice President and President, Asset Management (2007 to 2008), Senior Vice President and Chief Operating Officer, Asset Management (2004 to 2007), Vice President and Chief of Staff (2001 to 2004), The Phoenix Companies, Inc. Various senior officer positions with Phoenix affiliates (2005 to 2008). President (2006 to present), Executive Vice President (2004 to 2006), the Virtus Mutual Funds Family. President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Chairman, President and Chief Executive Officer, The Zweig Funds (2 portfolios) (2006 to present). - ------------------------------------------------------------------------------------------------------------------------------------ (1) Mr. Aylward is an "interested person," as defined in the 1940 Act, by reason of his position as President and Chief Executive Officer of Virtus Investment Partners, Inc. ("Virtus"), the ultimate parent company of the Adviser, and various positions with its affiliates including the Adviser. 24
FUND MANAGEMENT TABLES (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------------ POSITION(S) HELD WITH NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) YEAR OF BIRTH TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Francis G. Waltman Senior Vice President Executive Vice President, Head of Product Management (2009 to present), Senior YOB: 1962 since 2008. Vice President, Asset Management Product Development (2008 to 2009), Senior Vice President, Asset Management Product Development (2005 to 2007), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Senior Vice President, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Director (2008 to 2009), Director and President (2006 to 2007), VP Distributors, Inc. (f/k/a Phoenix Equity Planning Corporation). Director and Senior Vice President, Virtus Investment Advisers, Inc. (2008 to present). - ------------------------------------------------------------------------------------------------------------------------------------ Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC (1989 to present). Vice c/o Zweig-DiMenna Chief Compliance Officer President, The Zweig Funds (2 portfolios) (2004 to present). Independent Chief Associates, LLC since 2004. Compliance Officer, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge 900 Third Avenue Series Fund) (8 portfolios) (2004 to present). President and Director of New York, NY 10022 Watermark Securities, Inc. (1991 to present). Assistant Secretary, Gotham YOB: 1945 Advisors Inc. (1990 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ W. Patrick Bradley Chief Financial Officer and Senior Vice President, Fund Administration (2009 to present), Vice President, YOB: 1972 Treasurer since 2005. Fund Administration (2007 to 2009), Second Vice President, Fund Control & Tax (2004 to 2006), Virtus Investment Partners, Inc. and/or certain of its subsidiaries. Chief Financial Officer and Treasurer (2006- present), Vice President and Principal Accounting Officer (2006 to 2010), Assistant Treasurer (2004 to 2006), Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios). Chief Financial Officer and Treasurer (2005 to present), Assistant Treasurer (2004 to 2006), certain funds within the Virtus Mutual Funds Family. - ------------------------------------------------------------------------------------------------------------------------------------ Kevin J. Carr Vice President, Chief Legal Senior Vice President (2009 to present), Counsel and Secretary (2008 to YOB: 1954 Officer, Counsel and Secretary present) and Vice President (2008 to 2009), Virtus Investment Partners, Inc. since 2005. and/or certain of its subsidiaries. Vice President, Chief Legal Officer, Counsel and Secretary, Virtus Variable Insurance Trust (f/k/a The Phoenix Edge Series Fund) (8 portfolios) (since 2010). Vice President and Counsel, Phoenix Life Insurance Company (2005 to 2008). Compliance Officer of Investments and Counsel, Travelers Life and Annuity Company (January 2005 to May 2005). Assistant General Counsel and certain other positions, The Hartford Financial Services Group (1995 to 2005). - ------------------------------------------------------------------------------------------------------------------------------------ 25
VIRTUS OPPORTUNITIES TRUST 101 Munson Street Greenfield, MA 01301-9668 TRUSTEES INVESTMENT ADVISER George R. Aylward Virtus Investment Advisers, Inc. Leroy Keith, Jr. 100 Pearl Street Philip R. McLoughlin, Chairman Hartford, CT 06103-4506 Geraldine M. McNamara James M. Oates PRINCIPAL UNDERWRITER Richard E. Segerson VP Distributors, Inc. Ferdinand L.J. Verdonck 100 Pearl Street Hartford, CT 06103-4506 OFFICERS George R. Aylward, President TRANSFER AGENT Francis G. Waltman, Senior Vice President VP Distributors, Inc. Marc Baltuch, Vice President and 100 Pearl Street Chief Compliance Officer Hartford, CT 06103-4506 W. Patrick Bradley, Chief Financial Officer and Treasurer CUSTODIAN Kevin J. Carr, Vice President, Chief Legal PFPC Trust Company Officer, Counsel and Secretary 8800 Tinicum Boulevard Philadelphia, PA 19153-3111 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. - ------------------------------------------------------------------------------------------------------------------------------------
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 IMPORTANT NOTICE TO INVESTORS Effective January 1, 2011, Virtus Mutual Funds will make changes to the minimum purchase requirements for all funds, except Virtus International Equity Fund and Virtus Premium AlphaSector Fund. Additionally, beginning in 2011, Virtus Mutual Funds will impose an annual fee on accounts having balances of less than $2,500. Also effective January 1, 2011, the Class A Sales charge and dealer commission schedules for Virtus fixed income funds will be modified. MINIMUM PURCHASE REQUIREMENTS Effective January 1, 2011, Virtus Mutual Funds will implement revised purchase minimums. Accordingly, effective January 1, 2011, the table entitled "Purchase Minimums" under the heading "Purchase and Sale of Fund Shares" in each fund's prospectus is replaced with the following: ------------------------------------------------------------------------------------------------------------------------------- PURCHASE MINIMUMS (EXCEPT CLASS I SHARES) ------------------------------------------------------------------------------------------------------------------------------- Minimum Initial Purchase $2,500 ------------------------------------------------------------------------------------------------------------------------------- Individual Retirement Accounts (IRAs), systematic purchase, or systematic exchange accounts $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Minimum Additional Purchase $100 ------------------------------------------------------------------------------------------------------------------------------- Defined contribution plans, asset-based fee programs, profit-sharing plans, or employee benefit plans No minimum ------------------------------------------------------------------------------------------------------------------------------- Also, the description of minimum initial and subsequent investment amounts appearing in the section "Step 1" under the heading "Your Account" is amended to reflect the information shown in the above table. Minimums shown above currently apply to Virtus International Equity Fund and Virtus Premium AlphaSector Fund. ANNUAL FEE ASSESSMENT FOR CERTAIN ACCOUNTS Due to the high cost of maintaining small accounts, effective January 1, 2011, Virtus Mutual Funds will begin assessing an annual fee of $25 per direct account for account balances under $2,500. Accordingly, effective January 1, 2011, the following disclosure is added under the heading "Account Policies" in each fund's prospectus: ANNUAL FEE ON SMALL ACCOUNTS To help offset the costs associated with maintaining small accounts, Virtus Mutual Funds reserve the right to assess an annual $25 small account fee on fund accounts with a balance below $2,500. The small account fee may be waived in certain circumstances, such as for accounts that have elected electronic delivery of statements/regulatory documents and accounts owned by shareholders having multiple accounts with a combined value of over $25,000. The small account fee does not apply to accounts held through a financial intermediary. The small account fee will be collected through the automatic sale of shares in your account. We will send you written notice before we charge the $25 fee so that you may increase your account balance above the minimum, sign up for electronic delivery, consolidate your accounts or liquidate your account. You may take these actions at any time by contacting your investment professional or the Transfer Agent. CLASS A SALES CHARGES -- APPLICABLE TO VIRTUS FIXED INCOME FUNDS Effective January 1, 2011, Virtus Mutual Funds will implement changes to the sales charge and dealer commission schedules applicable to purchases of Class A Shares of Virtus fixed income funds. Accordingly, the Virtus Opportunities Trust Prospectus will be revised as described below.
VIRTUS OPPORTUNITIES TRUST Supplement dated November 29, 2010 to the Prospectuses dated January 31, 2010, as supplemented and revised September 14, 2010 (Continued) The following information replaces the second table under the heading "Sales Charges You May Pay to Purchase Class A Shares" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - --------------------------------- ------------------ ----------------- Under $50,000 2.75% 2.83% $50,000 but under $100,000 2.25 2.30 $100,000 but under $250,000 1.75 1.78 $250,000 but under $500,000 1.25 1.27 $500,000 but under $1,000,000 1.00 1.01 $1,000,000 or more None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND AMOUNT OF SALES CHARGE AS A SALES CHARGE AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED - --------------------------------- ------------------ ----------------- Under $50,000 3.75% 3.90% $50,000 but under $100,000 3.50 3.63 $100,000 but under $250,000 3.25 3.36 $250,000 but under $500,000 2.25 2.30 $500,000 but under $1,000,000 1.75 1.78 $1,000,000 or more None None The following information replaces the second table under the heading "Compensation to Dealers" in the section "Sales Charges" in the Virtus Opportunities Trust Prospectus. VIRTUS CA TAX-EXEMPT BOND FUND AND VIRTUS SENIOR FLOATING RATE FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - --------------------------------- -------------- --------------- --------------- Under $50,000 2.75% 2.83% 2.25% $50,000 but under $100,000 2.25 2.30 2.00 $100,000 but under $250,000 1.75 1.78 1.50 $250,000 but under $500,000 1.25 1.27 1.00 $500,000 but under $1,000,000 1.00 1.01 1.00 $1,000,000 or more None None None VIRTUS BOND FUND, VIRTUS HIGH YIELD FUND AND VIRTUS MULTI-SECTOR FIXED INCOME FUND SALES CHARGE SALES CHARGE DEALER DISCOUNT AMOUNT OF AS A AS A AS A TRANSACTION AT PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - --------------------------------- -------------- --------------- --------------- Under $50,000 3.75% 3.90% 3.25% $50,000 but under $100,000 3.50 3.63 3.00 $100,000 but under $250,000 3.25 3.36 2.75 $250,000 but under $500,000 2.25 2.30 2.00 $500,000 but under $1,000,000 1.75 1.78 1.50 $1,000,000 or more None None None INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUSES FOR FUTURE REFERENCE. VOT 8020/Minimums&FISalesCharges (11/10)
(VIRTUS MUTUAL FUNDS LOGO) |--------------| | PRSRT STD | c/o State Street Bank and Trust Company | U.S. POSTAGE | P.O. Box 8301 | PAID | Boston, MA 02266-8301 | LANCASTER, | | PA | | PERMIT 1793 | |--------------| For more information about Virtus mutual funds, please call your financial representative, contact us at 1-800-243-1574 or virtus.com 8024 10-10
ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics described in Item 2(b) of the instructions for completion of Form N-CSR. (d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of the instructions for completion of this Item. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has determined that the Registrant has an "audit committee financial expert" serving on its Audit Committee. (a)(2) James M. Oates has been determined by the Registrant to possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert." Mr. Oates is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. (a)(3) Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $412,280 for 2009 and $371,620 for 2010. 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 $39,179 for 2009 and $45,200 for 2010. Such audit-related fees were cross fund fees. TAX FEES (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $86,086 for 2009 and $65,775 for 2010. "Tax Fees" are those primarily associated with review of the Trust's tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust's financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund's federal income returns. ALL OTHER FEES (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2009 and $0 for 2010. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. The Virtus Opportunities Trust (the "Fund") Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. Audit, audit-related and tax compliance services provided to the Fund on an annual basis require specific pre-approval by the Board. As noted above, the Board must also approve other non-audit services provided to the Fund and those non-audit services provided to the Fund's Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund. Certain of these non-audit services that the Board believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent auditors may be approved by the Board without consideration on a specific case-by-case basis ("general pre-approval"). The Audit Committee has determined that James M. Oates, Chair of the Audit Committee, may provide pre-approval for such services that meet the above requirements in the event such approval is sought between regularly scheduled meetings. In any event, the Board is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) 0% for 2009 and 2010 (c) 0% for 2009 and 2010 (d) Not applicable for 2009 and 2010 (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 $818,945 for 2009 and $289,629 for 2010. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Virtus Opportunities Trust By (Signature and Title)* /s/ George R. Aylward ------------------------------------- George R. Aylward, President (principal executive officer) Date December 3, 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 December 3, 2010 By (Signature and Title)* /s/ W. Patrick Bradley ------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) Date December 3, 2010 * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 g06773exv99wcodeeth.txt EX-99.CODE ETH EXHIBIT 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: - - the Investment Company Act of 1940, as amended, and the rules and regulation promulgated thereunder by the Securities and Exchange Commission (the "1940 ACT"); - - the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder by the Securities and Exchange Commission (the "ADVISERS ACT"); - - 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) Vitus 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 - - 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"); - - 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 - - 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: - - act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Additional Conflict Rules; - - 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 - - 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 Tab 2 2 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). 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: - - 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; - - 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 - - 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 - - familiarize himself or herself with the disclosure requirements applicable to the Fund as well as the business and financial operations of the Fund; and - - 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: - - the Chief Compliance Officer will take all appropriate action to investigate any actual or potential violations reported to him or her; - - violations and potential violations will be reported to the applicable Fund Board after such investigation; - - if the Fund Board determines that a violation has occurred, it will take all appropriate disciplinary or preventive action; and - - 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 Tab 2 4 shall take all action he or she considers appropriate to investigate any actual or potential violations reported under this Code of Ethics. The Chief Compliance Officer is authorized to consult, as appropriate, with the chair of the Fund Board and with counsel to the Fund, the Adviser, 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: - - that provided the basis for any amendment or waiver to this Code of Ethics; and - - 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. (Approved August 23, 2006 by the Virtus Mutual Funds Board of Trustees) Tab 2 5 EX-99.CERT 3 g06773exv99wcert.txt EX-99.CERT EXHIBIT 99.CERT CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, George R. Aylward, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 3, 2010 /s/ George R. Aylward ---------------------------------------- George R. Aylward, President (principal executive officer) EXHIBIT 99.CERT CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, W. Patrick Bradley, certify that: 1. I have reviewed this report on Form N-CSR of Virtus Opportunities Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 3, 2010 /s/ W. Patrick Bradley ---------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) EX-99.906CERT 4 g06773exv99w906cert.txt EX-99.906CERT EXHIBIT 99.906CERT CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, George R. Aylward, President of Virtus Opportunities Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: December 3, 2010 /s/ George R. Aylward ---------------------------------------- George R. Aylward, President (principal executive officer) I, W. Patrick Bradley, Chief Financial Officer and Treasurer of Virtus Opportunities Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant containing the financial statements (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: December 3, 2010 /s/ W. Patrick Bradley ---------------------------------------- W. Patrick Bradley, Chief Financial Officer and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----